The former employee's complaint, filed with the U.S. Attorney's Office for the Western District of Texas in November, 2010, alleged that the company's promotional practices cost the U.S. government about $20 million in damages.

Off-label promotion refers to the practice of prescribing a drug or a medical device for uses it has not been approved for by health regulators.

The complaint formed the basis of a June 2011 investigation brought by the attorney's office, under which the authority sought documents, particularly those related to Vascular Solutions' Vari-Lase Short Kit, which treats perforator veins.

The product has been selling in the United States since 2007 and had U.S. sales of about $410,000 through December 31, 2011, contributing to less than 1 percent of the company's total U.S. sales, Vascular said in a regulatory filing.

"We have complied and we intend to continue to comply with the U.S. Attorney's investigation, but we're defending the litigation as something that's factually inaccurate and without merit," Chief Executive Howard Root told Reuters.

Shares of the Minnesota-based company were off 25 cents at $13.50 in Thursday afternoon trade on the Nasdaq.

(Reporting by Zeba Siddiqui in Bangalore; Editing by Saumyadeb Chakrabarty)

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