Medtronic settles DOJ claims against acquired companies for $50.9M

Medtronic has agreed to pay the U.S. Department of Justice (DOJ) a total of $50.9 million to settle three claims against Covidien and ev3, two companies Medtronic acquired in 2015.

One payment is for $13 million and relates to the DOJ’s investigation of the STRATIS Registry, which was designed to assess clinical outcomes of Covidien’s neurothrombectomy devices. Another $20 million settlement is to resolve “a matter concerning various market-development and physician engagement activities conducted by legacy Covidien and ev3 Peripheral Vascular and endoVenous businesses,” Medtronic announced in a statement released Dec. 4.

In both of those cases, Medtronic said the settlements were “a compromise of disputed claims and Medtronic makes no admission that any of these activities were improper or unlawful.”

However, the final payment of $17.9 million was accompanied by ev3 pleading guilty to a misdemeanor offense in violation of the Food, Drug and Cosmetic Act, which included a criminal fine of $11.9 million and the forfeiture of $6 million.

The charges related to the distribution of the company’s Onyx Liquid Embolic Protection System, which was approved by the FDA to be injected into blood vessels to block circulation to arteriovenous malformations in the brain. However, the FDA only approved the product for use inside the brain, and the DOJ alleged ev3 sales representatives encouraged surgeons to use large quantities of Onyx for “unproven and potentially dangerous surgical uses outside the brain.”

The DOJ also said the company’s management set up a system of sales quotas and bonuses which incentivized sales reps to push Onyx for unapproved uses, and trained them on how to instruct physicians on these unapproved uses.

“When medical device companies take shortcuts in order to boost profits, it erodes public confidence in the health care system, compromises patient safety, and wastes taxpayer funds intended for healthcare programs that help the most vulnerable members of society,” Phillip Coyne, special agent in charge at the HHS Office of Inspector General, said in the DOJ announcement. “We will continue to investigate allegations of fraud in close cooperation with our law enforcement partners.”

The DOJ investigation included activity at ev3 from 2005 to 2009, before it was purchased by Covidien in 2010. Medtronic then acquired Covidien in 2015, assuming control of both companies.  

“The government acknowledges that Medtronic and Covidien had no prior knowledge or involvement with any of the conduct that formed the basis of the charge,” Medtronic said in its statement. “Medtronic is committed to maintaining the highest standards of ethical conduct and compliance with all applicable regulatory guidelines.”

According to the DOJ, Medtronic has agreed to conduct compliance monitoring related to the sales and marketing of Onyx, and will implement new payment structures to ensure sales representatives aren’t incentivized to tout the product for unapproved indications.