The American unit of multinational devicemaker Synthes has agreed to divest its Norian subsidiary as part of a settlement related to the conduct of a clinical trial for a bone cement product.
The West Chester, PA-based Synthes unit specializes in trauma products to treat damaged human bone, while its Norian subsidiary manufacturers osteobiologic medical devices. However, according to the government, between May 2002 and Fall 2004, Norian conspired to conduct unauthorized clinical trials of Synthes' Norian XR in surgeries to treat vertebral compression fractures of the spine. These surgeries were allegedly performed despite a warning on the FDA-cleared label for Norian XR against this use. Pilot studies had demonstrated that the bone cement reacted chemically with human blood in a test tube to cause blood clots. The research also showed, in a pig, that such cement-caused clots became lodged in the lungs.
Despite knowing this, the company marketed the product for VCFs without putting it through required testing. The company failed to stop marketing the product until after a third patient had died on the operating table. And even after the third death, the companies didn't recall Norian XR from the market, but instead made false statements to the FDA during an official inspection in May and June 2004, the government maintains.
Subject to court approval, Synthes will pay $808,000 in settlement, fines and forfeiture payments for a single misdemeanor violation of the U.S. Food, Drug and Cosmetic Act. Norian will pay fines and forfeitures of approximately $23.5 million for one felony and numerous misdemeanor violations of the Act. Following the Norian divestiture, Synthes and the buyer will ensure continued delivery of Norian's current products for the benefit of physicians and patients.
The divestiture agreement is unprecedented in a healthcare fraud case, says Gregory Demske, assistant inspector general for legal affairs with the HHS, according to the New York Times. "In the past a lot of these cases have been resolved with the conviction of basically a shell subsidiary where our exclusion had no impact on the company's business," he said in an interview. "We didn't allow the parent company to essentially shift operations of the convicted entity to another part of the corporate family."
"It is a reasonably good outcome," Synthes spokesman Gilgian Eisner tells Bloomberg. "It permits us to focus on the business that we have."
ALSO: ELA Medical, a subsidiary of Italian medical device maker Sorin Group, reaches a tentative, $10 million settlement with the U.S. Justice Dept. over charges that it ran a kickbacks scheme to drive pacemaker sales. Article