Medtronic will not pursue shareholder complaints over marketing of Infuse

A committee formed by Medtronic's ($MDT) Board of Directors has concluded that it is not in the company's best interest to pursue shareholders' claims that high-ranking company officials violated their fiduciary duty by encouraging or allowing off-label promotion of the Infuse Bone Graft, a June 10 SEC filing states. The committee will move to dismiss two lawsuits against Medtronic officers and directors.

Medtronic CEO Omar Ishrak

A total of 21 Medtronic current and former board members and officers were named in one or more of the 6 complaints, including former CEO Arthur D. Collins, Jr., current CEO Omar Ishrak and CFO Gary Ellis.

"The SLC was mindful that it would ultimately have to decide, with respect to the demand letters, whether Medtronic should accept or reject, in whole or in part, the demands for legal and other remedial action, or whether it should start its own legal action or seek other remedies," the filing states. "It would also have to decide whether Medtronic should intervene in and take over the prosecution of the derivative actions, seek dismissals, or simply abstain and allow the plaintiffs to proceed derivatively on Medtronic's behalf."

University of Minnesota law professor John Matheson and Minnesota District Court Judge George McGunnigle form the Special Litigation Committee. Their decision appears final.

Infuse Bone Graft/LT-Cage Lumbar Tapered Fusion Device

Infuse has long been a source of controversy. In 2012 Medtronic agreed to pay $85 million to settle a shareholder class action lawsuit brought forth by the Minneapolis Firefighters' Relief Association, alleging that the company failed to reveal a large proportion of the bone graft's sales came from off-label uses.

The Senate Finance Committee also got involved. It issued an October 2012 report which found "without public disclosure of their roles, Medtronic employees collaborated with physician authors to edit--and in some cases, write--segments of published studies on its bone-growth product Infuse."

To counter safety concerns, Medtronic agreed to submit Infuse data to the Yale University Open Data Access project, which examined the results of 17 trials on more than 2,000 patients in two separate reviews. But the company didn't get the results it wanted. The reviews found the spinal implant performs no better than traditional bone grafts and carries an increased risk of cancer, sterility and other side effects.

Today's decision marks another chapter in the product's saga, but not the ending. Health insurance company Humana recently filed a lawsuit against Medtronic for providing misleading information about the product.

Still, the Special Litigation Committee wrote that "it is important to clearly state this finding: it has not found support for and rejects the core proposition of the demand letters and derivative complaints--that Medtronic, with the knowledge and complicity of the defendants, designed and executed a scheme to evade the FDA's prohibition against off-label promotion in order to increase the sales of Infuse."

Infuse can be used in the treatment of degenerative disc disease in the spine, tibia fractures and dental procedures, according to Medtronic, which says it has been used by more than one million patients since attaining FDA approval in 2002.

- read the SEC filing

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