Looks Like a Long Year For Medtronic –Infuse Settlements Getting Started
Tags: approved use, Infuse, law suits, Medtronic, off-label uses, settlements
Without admitting any wrongdoing, Medtronic has agreed to a settlement based on allegations that the company made false and misleading statements about its Infuse Bone Graft product. The settlement was reached with a group of pension fund management entities (i.e. the Minneapolis Firefighters Relief Association, the Oklahoma Teachers’ Retirement System, the Oklahoma Firefighters Pension Fund and the Westmoreland County Employee Retirement System) for the tidy sum of $85 million.
Here’s a portion of the complaint:
- Specifically, the Defendants (Medtronic) misled shareholders regarding a near decade-long campaign to illegally promote its Infuse bone graft product for uses not approved by the Food and Drug Administration, or so-called “off-label uses,” and concealed from shareholders the fact that the reported sales and future growth of this business line and its associated revenues was driven by misconduct that invited, and ultimately brought about, the scrutiny of federal regulators and an abrupt decline in sales.
Unfortunately for Medtronic, this settlement looks more like the beginning of a long stream of similar shareholder and personal injury lawsuits –not the end. Lawsuits are stacking up from people who are seriously injured based on off-label uses and it’s hard to imagine other pension fund managers not wanting to collect against the precedent that was just set.
Malpractice attorneys make their living suing medical companies for unknown side effects when the drug or device uses are FDA approved, so when people suffer injuries and death, as a result of off-label uses, well, that’s a very bad thing. The FDA approved Infuse, which is made with a genetically engineered material called rhBMP-2 (recombinant human Bone Morphogenetic Protein-2), for use in just one type of spine surgery called anterior approach lumbar fusion and two types of dental surgeries. To date, estimates suggest that 85% of Infuse’s applications and a huge percentage of its revenues have been off-label. Even worse, it is also alleged that the company actively marketed off-label uses –a big no no.
The closer you look, the worse it gets.
Even the integrity of the approval process for Infuse has been called into question. It has been alleged that scientists tasked with basic research responsibilities were either paid by Medtronic as consultants, bribed to keep quiet and/or encouraged to “massage” pertinent information about negative and identified potential side-effects. For example, a Medtronic-funded study published in 2004 reported that 75% of patients who got Infuse developed ectopic bone, outside the targeted fusion area. The authors of the study, several of whom had financial ties to Medtronic, concluded that “although not desirable” the bone formation in the spinal canal did not appear to have an ill effect on patients. Supposedly, last year alone three of this study’s four authors got about $4 million in various royalty payments from Medtronic. Yikes!
If you’re an options trader, August puts sound about right. In all seriousness, Medtronic’s stock price actually closed up a few cents in after hours trading after this first settlement was announced late last week, so who knows. If history is a good teacher, companies the size of Medtronic ultimately view the settlements and fines as a cost of doing business and their stock prices go largely unaffected. C’est la vie.