Medical Device Maker ev3 to Plead Guilty and Pay $17.9 Million for Distributing Adulterated Device; Covidien Paid $13 Million to Resolve Civil Liability for Second Device
Minnesota-based medical device manufacturer ev3 Inc. has agreed to plead guilty to charges related to its neurovascular medical device, Onyx Liquid Embolic System, and pay $17.9 million, the Department of Justice announced today. Covidien LP, whose parent acquired ev3, separately paid $13 million to resolve False Claims Act allegations resulting from its alleged payment of kickbacks in connection with another medical device, the Solitaire mechanical thrombectomy device.
“The Department of Justice will hold corporations accountable when they violate laws designed to protect consumers and protect public funds,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “This resolution demonstrates the Department’s continued commitment to protect taxpayer dollars and deter companies from putting profits before patient safety.”
Pursuant to a criminal information filed today in U.S. District Court for the District of Massachusetts, ev3 will plead guilty to a misdemeanor charge in connection with the company’s distribution of adulterated Onyx, in violation of the Food, Drug and Cosmetic Act. As part of the criminal resolution, ev3 will pay a criminal fine of $11.9 million and will forfeit $6 million.
According to the plea agreement, Onyx was approved by the U.S. Food and Drug Administration (FDA) as a liquid embolization device that is surgically injected into blood vessels to block blood flow to arteriovenous malformations in the brain. The FDA has approved Onyx only for use inside the brain. Despite the FDA’s limited approval of Onyx, from 2005 to 2009, ev3 sales representatives encouraged surgeons to use Onyx in large quantities for unproven and potentially dangerous surgical uses outside the brain. The company’s sales force continued to tout unapproved and potentially dangerous uses of Onyx even after FDA officials told ev3 executives that they had specific safety concerns regarding uses of Onyx outside the brain at a 2008 meeting. FDA officials told ev3 executives that a study would be required to gain approval for uses of Onyx outside the brain and to ensure that the benefits of the device outweighed the risks.
Rather than conduct a study to ensure the safety and effectiveness of Onyx for uses outside the brain, ev3’s sales representatives sometimes attended surgical procedures and provided explicit instructions to surgeons regarding how to use Onyx for unapproved surgical procedures outside the brain, including in quantities far larger than what would be used in the brain. According to the criminal information, ev3’s management also set-up a system of sales quotas and bonuses that incentivized sales representatives to sell Onyx for unapproved uses and trained the sales force how to instruct physicians on unapproved uses of the device.
Covidien acquired ev3 in 2010, subsequent to the course of criminal conduct covered by the plea agreement. Covidien was acquired by Medtronic in 2015. Although Medtronic played no role in the criminal conduct, the company has agreed as part of the ev3 criminal resolution to implement new compensation structures to ensure the sales force responsible for marketing Onyx is not incentivized to sell the device for unapproved uses. Medtronic has also agreed to conduct compliance monitoring related to the Onyx sales and marketing components.
“ev3 disregarded laws designed to protect patient safety,” said United States Attorney Andrew E. Lelling for the District of Massachusetts. “The U.S. Attorney’s Office is committed to protecting patients and the integrity of federal health care programs, and we will continue to use our criminal authority to ensure that medical device manufacturers play by the rules that protect the public and ensure quality of care.”
“Unnecessarily putting patients at risk to increase profits, as the government alleged in this case, will not be tolerated,” said Christian J. Schrank, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services. “We will continue to work with our federal partners and hold accountable companies that use deceptive practices to increase their bottom line.”
“Consumers rely on the FDA to ensure that there’s a reasonable assurance of safety and effectiveness for the approved uses of medical devices. When manufacturers ignore the FDA’s regulatory authority, they undermine these crucial assurances and put lives at risk. Our Office of Criminal Investigations investigated a bad actor who marketed their device for unapproved uses, potentially harming patients,” said FDA Commissioner Scott Gottlieb, M.D. “The ev3 agreement to plead guilty announced by the U.S. Department of Justice today is an example of the FDA’s comprehensive commitment to ensuring the safety of medical devices and investigating companies that put patients at risk. A key part of our overall efforts to promote safe and effective innovation and protect patients is our enforcement work related to unsafe practices and bad actors. In addition to investigating such activities, we’re advancing other new policies to assure post-market device safety, as we recently outlined in our Medical Device Safety Action Plan. The FDA is also committed to fully implementing a new active surveillance system that will enable the agency to harness real-world evidence from medical records and patient registries to more swiftly identify device safety issues and enable more informed decision-making.”
Covidien separately has agreed to pay $13 million to resolve its civil liability for allegedly paying kickbacks to induce the use of its Solitaire mechanical thrombectomy device. The Solitaire device is intended to restore blood flow and retrieve a blood clot in certain stroke patients.
The United States alleged that Covidien caused false claims to be submitted to Medicare and Medicaid by paying kickbacks to hospitals and institutions to induce them to use Covidien’s Solitaire device. Specifically, the United States alleged that after receiving FDA clearance for the Solitaire device, Covidien launched a registry to pay hospitals and institutions to collect data about user experiences with the device. For about two years beginning in August 2014, Covidien paid a fee to hospitals and institutions that participated in a registry each time they used a new Solitaire device and reported certain clinical data about their practices for treating stroke patients to Covidien. Covidien solicited certain hospitals and institutions for the registry in order to convert their business from the competitor’s product and/or persuade them to continue using Covidien products, and knowingly and willfully used the registry as a means of increasing device sales.
The civil lawsuit was filed by Jeffrey Faatz, who worked for Covidien from 2012 to 2014, under the qui tam, or whistleblower, provisions of the False Claims Act. The Act allows private parties to sue on behalf of the government for false claims and to share in any recovery. As part of today’s resolution, Mr. Faatz will receive $2,015,000. The case is captioned United States ex rel. Doe v. Covidien PLC et al., Civil Action No. 8:15-cv-01796 AG (JCGx) (C.D. Cal.).
“Illegal kickbacks bring fraud and abuse into the Medicare system,” said U.S. Attorney Nicola T. Hanna for the Central District of California. “As part of an aggressive marketing campaign for its medical device, Covidien allegedly found a way to subsidize facilities that agreed to use its product – often convincing them not to use devices sold by another manufacturer. Patients deserve to know that their medical providers are offering the best possible treatments and are not making decisions based on increasing the bottom line for health care providers.”
The plea agreement was the result of a coordinated effort among the U.S. Attorney’s Office for the District of Massachusetts and the Civil Division’s Consumer Protection Branch, with assistance from the FDA’s Office of Chief Counsel. The criminal investigation was conducted by the FDA’s Office of Criminal Investigations, HHS’s Office of the Inspector General, the Department of Veteran’s Affairs, Office of the Inspector General, and the Federal Bureau of Investigations.
The civil settlement was the result of an investigation by the Justice Department’s Civil Division, Commercial Litigation Branch, the U.S. Attorney’s Office for the Central District of California, and the Office of Inspector General at the U.S. Department of Health and Human Services. The False Claims Act claims resolved by the settlement are allegations only and there has been no determination of liability.
For more information about the Consumer Protection Branch, the Commercial Litigation Branch, Fraud Section, and their enforcement efforts, visit their websites at www.justice.gov/civil/consumer-protection-branch and www.justice.gov/civil/fraud-section.