Did Synthes, its Norian subsidiary, and four senior company executives conspire to conduct an illegal clinical trial, promote off-label use of a bone void filler and lie to the FDA about what they had done?
U.S. Attorney Michael LevyMichael Levy, the U.S. Attorney in Philadelphia, thinks so and has convinced a federal grand jury that there is enough evidence available of criminal activity to let a jury decide.
The grand jury returned a 58-page criminal indictment on June 16 against Synthes, Inc., Norian Corporation and four Synthes executives: Mike Huggins, Tom Higgins, Richard Bohner, and John Walsh.
Huggins was the President of Synthes North America during the time of the alleged felonies, and in February 2004 he became the President of Synthes Spine.
Higgins was the President of Synthes Spine and reported to Huggins. He left that position in February 2004 to become Synthes’ Senior Vice President of Global Strategy.
Bohner was Synthes’ Vice President of Operations and reported to Huggins.
Walsh started as Synthes’ Director of Regulatory and Clinical Affairs, Spine Division in 2003 and reported to Bohner and later Huggins.
The Charges
The defendants are being charged with conducting clinical trials without authorization of the FDA which, prosecutors say, resulted in the deaths of three patients.
Norian is charged with a total of 52 felony counts: one count of conspiracy to impair and impede the lawful function of the FDA and to commit crimes against the U.S., seven counts of making false statements in connection with an FDA inspection, and 44 counts of shipping adulterated and misbranded Norian XR in interstate commerce with intent to defraud.
The parent company, Synthes, is charged with 44 misdemeanor counts of shipping adulterated and misbranded Norian XR in interstate commerce.
The four executives are each charged with one misdemeanor count of shipping adulterated and misbranded Norian XR in interstate commerce.
The Investigation
Synthes received a grand jury subpoena in early 2006 regarding off-label use of Norian XR. The indictments resulted from the nearly three-year-long investigation.
The case was investigated by the United States Food and Drug Administration (FDA) Office of Criminal Investigations; the United States Department of Health and Human Services (HHS) Office of Inspector General (OIG); the Department of Defense Criminal Investigative Service (DCIS), and the Veterans Administration OIG.
U.S. Attorney Michael Levy in announcing the indictments said, “The defendants charged today bypassed the [FDA] process, with the knowledge that the product that they were marketing posed potentially significant risks. When predictable bad results occurred, they lied to the FDA investigators. They put their profits ahead of responsible business practices and the truth.”
The HHS’ OIG Office of Investigations Special Agent-in-Charge Patrick Doyle said, “It is never acceptable for the health care industry to place the profit motive over people’s wellbeing…. Should these companies and executives ultimately be found guilty, they will have to pay a price for placing at risk the very people for whom they purported to provide relief.”
The U.S. Department of Veterans Affairs was involved in the investigation because some of the procedures were performed at VA hospitals. Officials did not release the names of the hospitals.
“The Department of Defense is outraged by a company that potentially puts our military personnel, their family members, and veterans at undue risk for serious medical complications or even death, just to increase their corporate bottom line, ” Assistant Special Agent-in-Charge Kenneth Maupin, of the Defense Criminal Investigative Service, said in a statement.
Synthes Responds
Indictments are always one side of the story.
Prosecutors get to make their case public while the accused usually have to hold their powder dry and wait to defend themselves in court. However, Synthes spokesperson Gilgian Eisner told OTW on June 19 that the picture painted by the Department of Justice is very distorted and has misled the media and the public.
He says Synthes will dispute many of the facts alleged by the government and the indictment is full of statements with which the company disagrees.
Synthes is particularly adamant that there is no conclusive evidence either way that the use of its bone filler product contributed in any way to the deaths of the three patients. Eisner says Synthes will defend itself vigorously to the charges of conducting an unauthorized clinical trial and promoting the off-label use of a device that was not approved or cleared by the FDA for the uses described in the indictment.
This is the third widely publicized biologic bone product that has attracted the attention of federal prosecutors and officials. The U.S. Attorney in Boston filed criminal charges against Stryker this past year over the marketing of its OP-1 product, and Medtronic continues to be pestered by Senator Charles Grassley’s ongoing investigation of the off-label use of Medtronic’s InFuse® product and the company’s relationship with surgeon consultants.
What is notable in these cases is that they are bringing criminal indictments instead of civil suits. It is one thing to get sued and quite another to tell your shareholders that prosecutors think you are a possible criminal.
Norian Bone Cements
Norian System (Bone Cement)Synthes acquired Norian Corporation in July 1999. Before that, Synthes did not have a presence in osteobiologic products to go along with its wide array of mechanical implant devices and instruments.
Prior to its acquisition by Synthes, Norian had developed, manufactured and sold two calcium phosphate bone cements, called Norian Cranial Repair System (CRS) and Norian Skeletal Repair System (SRS).
The cranial product was a Class II device and had been cleared by the FDA to be marketed for filling defects in the skull. SRS was a Class III device that had been approved by the FDA to be marketed for use in the distal radius, a long bone in the arm.
From the beginning, says Levy, the intended market for the successor product of CRS, Norian XR, was the unapproved use in surgeries to treat vertebral compression fractures (VCFs).
New Uses and Markets
In the spring of 2000, say prosecutors, Synthes Spine’s product development team interviewed orthopedic surgeons and others who used PMMA (polymethylmethacrylate) off-label to treat VCFs, inquiring as to whether they had used SRS in such surgeries. Prosecutors say the purpose of those interviews was to create a market for the SRS with radiopaque barium sulfate. This product was eventually brought to market as Norian XR.
In June 2000, company employees, at the direction of Tom Higgins, summarized the results of the interviews in an Executive Summary distributed to Synthes management. The Summary, according to prosecutors, stated that there was “excitement about using Norian for vertebroplasties” among the surgeons and the market potential for Synthes was considerable.
By late summer 2000, Synthes began development of the Synthes Vertebroplasty System for treating VCFs. The system consisted of SRS-R and a group of Class I instruments to inject the SRS-R.
Norian XR was cleared for sale by the FDA in 2002 as a medical device to treat bone voids or defects in the skeletal system. Synthes marketed Norian XR from 2002 to 2004, only selling approximately 200 units and realizing total net sales of approximately $400, 000.
The marketing clearance by the FDA made it clear that Norian XR was not intended for use in the spine. Prosecutors say that Synthes always had its eye on obtaining an indication for use in the spine.
IDE or “Test Market”
The indictment says that the company recognized early on that there were two possible solutions to accomplish this strategy:
First, the legal solution, which was to disclose to the FDA the intended use of the product and then to try to secure FDA approval of XR for use in surgeries to treat VCFs after obtaining an investigational device exemption (“IDE”) to investigate the safety and efficacy of the product. Or,
Second, the illegal solution, which was to promote XR for use in VCFs through a limited so-called “test market, ” during which the company would evaluate the safety and efficacy of the product in unapproved clinical trials and judge the success according to its own standards. The indictment charges that the company and its coconspirators consciously and deliberately chose the illegal solution.
Starting as soon as late summer 2002, the company allegedly approached selected spine surgeons and asked them to use the predecessor device, SRS, in VCF procedures as part of an initial Synthes “test market” for SRS.
While the FDA had approved Norian XR for some uses, the agency insisted in its clearance to treat bone voids and defects, that Synthes needed to conduct clinical trials if it wanted to expand the uses of Norian XR to treat spinal fractures.
However, a company executive identified in the indictment as “Person No. 7” decided not to conduct clinical trials. Instead, No. 7 said the company should “get a few sites to perform 60–80 procedures and help them publish their clinical results, ” according to the indictment.
The indictment does not identify “Person No. 7, ” but it says he was the chief executive officer and a large shareholder. The Philadelphia Inquirer reported on June 17 that a company spokesman identified Hansjörg Wyss as the CEO while the tests occurred.
Synthes did not confirm or deny to OTW that Wyss was Person No. 7.
The “Test Market” Campaign
According to the indictment, the company conducted two XR “Test Market Kick-Off” surgeon meetings, and one surgeon forum from August 2003 through mid-January 2004, training approximately 52 spine surgeons how to use Norian XR to treat VCFs.
Huggins, Higgins and Bohner attended the first surgeon meeting on August 15 and 16, 2003, held in San Diego with spine surgeons selected by Synthes. Surgeon travel expenses were paid by Synthes. It’s alleged in the indictment that lectures and PowerPoint presentations were given concerning the use of Norian XR in vertebroplasty to treat VCFs, and that a lab was held during which the surgeons injected Norian XR into the vertebral bodies of cadavers.
A second training meeting was held in Charlotte, North Carolina, on September 19 and 20, 2003.
Brent Constantz, the founder and former CEO of Norian, told us during a phone interview on June 18 that the San Diego meeting showed the “most blatant disregard for FDA regulations in promoting off-label use” he had ever seen.
Patient Deaths
The indictment charges that after the death of a third person (this time on January 22, 2004) during a surgery in which a Norian cement was used to treat VCFs, the company cancelled future surgeon forums.
The two previous deaths also occurred on the operating table with patients suffering from a rapid drop of blood pressure. Synthes sales reps were present at each surgery. No definitive evidence was presented to determine whether or not the Synthes device was the cause of death.
The indictment alleges that the company considered, but rejected, the idea of recalling or removing XR from the market. Either action would have required Synthes to notify the FDA of the patient deaths.
FDA Inspection
But the FDA was already watching and conducted an unannounced inspection at the Norian plant in West Chester, Pennsylvania, from May 11 through June 18, 2004.
The inspection focused on whether or not Norian and Synthes had conducted an unauthorized clinical trial of XR. The indictment alleges that a number of Synthes employees, including Huggins, Bohner and Walsh, made materially false and misleading statements to the FDA investigator during that inspection period.
The indictment says that on May 19, 2004, Norian and Synthes made false and fraudulent statements to the FDA investigator by stating that, in August 2003, Synthes did not have a vertebroplasty system. Another Synthes employee allegedly made a false statement on May 27, 2004, by characterizing the summer 2002 “test market” for SRS in the spine as surgeons mixing SRS with barium sulfate “on their own.”
On June 16, 2004, say prosecutors, Bohner told the investigator that he knew nothing about a vertebroplasty “test market” for SRS. Bohner also told the FDA that the 34 “test market” cases discussed at a July 18, 2003, safety meeting involved only data that Synthes had collected from what surgeons were doing on their own, rather than a test market conducted by Synthes.
Prosecutors say that the July 18, 2003, “safety meeting” detailed the adverse events and first death. They say Huggins, Higgins and Bohner decided to continue the illegal XR “test market” that had begun in the summer of 2002 with SRS-R, in order to assess whether the level of risk from using Norian XR was acceptable or too high.
The indictment states that the following month, Huggins noted that Synthes had a “poor record of PMA approvals” and Huggins and Higgins directed that the “test market” would continue.
FDA Observations
At the close of the inspection, the investigator for the FDA issued the agency’s observations to Norian. Among other things, the FDA observed that Norian:
- Did not submit an IDE application to the FDA prior to initiating the Norian XR “test market.”
- Shipped Norian XR for the purpose of use in vertebroplasty and kyphoplasty procedures to treat fractures of the vertebrae, an indication for which Norian XR had not been cleared or approved by the FDA.
Final Warnings
The criminal indictment is filled with lists and transcripts of meetings, emails and grand jury testimony that paint a disturbing picture of Synthes executives suppressing and ignoring warnings from physicians and employees that the company needed to pursue a different regulatory track.
For example, on September 26, 2003, prosecutors say a spine surgeon told Synthes that, because the Norian XR “test market” was collecting information from surgeons performing vertebroplasty and kyphoplasty surgeries to treat VCFs, he believed that Synthes was required to go to each IRB of each hospital participating in the “test market.” He also told them that, in his view, Synthes had risk management problems and needed more oversight of its clinical and compliance issues.
A month later, Huggins, Higgins and Bohner allegedly received an email from a Synthes employee with an attachment of Synthes’ initial proposal for obtaining an IDE from the FDA that was never submitted.
“Synthes is at an increased legal risk.”
The IDE proposal (which is detailed in the indictment) discussed the Norian XR “test market” and the fact that two patient deaths had occurred. The proposal went on to state:
“Currently, Norian XR is being used off-label to treat VCFs. The FDA has been very conservative regarding the treatment of VCFs and has issued numerous statements…cautioning companies…that the use of any material in vertebroplasty/kyphoplasty is off-label. The present state of the approved indication of Norian XR and the FDA bulletin puts Synthes in a compromising position. Synthes is at an increased legal risk with regards to product liability and medical malpractice…. We recommend that Synthes pursue an IDE for the usage of Norian XR in treating VCFs….”
Synthes’ Reputation on Trial
The financial impact of this indictment on Synthes is likely to be small.
“We believe even if Synthes is held liable for off-label promotion, it would probably only apply to a small number of these patients which would make the potential economic exposure quite manageable for a company with $1 billion in cash on its balance sheet, ” Kepler Capital Markets analyst Florian Gaiser told Reuters on June 17.
“Synthes and the [U.S.] attorney might settle the case for between $1 million and $10 million, or 0.1% to 1.0% of estimated 2010 group profit, ” said Vontobel analyst Christoph Gubler. “The realized sales are extremely small. The court case will probably take several years to conclude, ” continued Gubler.
While the financial impact on Synthes may be small relative to its size, the company’s reputation, which is founded in the oldest orthopedic traditions of Europe, is clearly at stake. It’s hard to believe that the company would risk its reputation on a relatively small market niche. Perhaps this was simply a horrendous strategic blunder in getting a new product on the market or a case of rogue employees who acted outside company guidelines.
Or, perhaps this is another case of a company caught in the murky and confusing FDA regulatory scheme regarding the off-label use of devices.
Whether this indictment will find its way to a jury is unknown. Whatever happens, we hope the resolution of this case is transparent, informative and will serve to offer a guide to companies who want to bring new devices to the market.
