Stryker Corporation announced on December 8, 2014 that it is going to pay almost $80 million to settle a civil and criminal investigation of actions by OtisMed Corp. prior to Stryker’s acquisition of the company in November 2009. OtisMed was formed in 2005.
When Stryker acquired OtisMed in 2009, the company did not disclose how much it paid for the knee company. It only disclosed that it paid $103 million in upfront, potential future milestone and royalty payments for OtisMed and two other unrelated companies, Mutho Co. Ltd., and Synergetics USA, Inc.
Stryker’s Innocence
The U.S. Department of Justice made note that it acknowledged that OtisMed’s “criminal conduct occurred…without Stryker’s prior knowledge or acquiescence.”
Former CEO and OtisMed Admit Guilt
The U.S. Attorney in New Jersey (Chris Christie’s former office) announced that OtisMed and its former CEO admitted to “intentionally distributing knee replacement surgery cutting guides after their application for marketing clearance had been rejected by the Food and Drug Administration (FDA).”
The CEO, Charlie Chi, of San Francisco, pleaded guilty in a Newark federal court. “OtisMed pleaded guilty before U.S. District Judge Claire C. Cecchi to an information charging it with distributing, with the intent to defraud and mislead, adulterated medical devices into interstate commerce in violation of the Food, Drug, and Cosmetic Act (FDCA), ” according to the press release from the U.S. Attorney’s Office.
Whistleblower Strikes Again
The settlement stems from a whistleblower qui tam lawsuit (of course) filed by Richard Adrian, accusing OtisMed of falsely billing public payers for the devices.
The agreement states that the settlement is “made in compromise of disputed claims, ” and OtisMed denies certain of the government’s allegations. “This Settlement Agreement is neither an admission of liability by Defendants, nor a concession by the United States that its claims are not well founded.”
We will bring you the full details of the 23-page settlement agreement and details of the whistleblowers accusations next week.
