Medical Device Company Exactech, Inc. Agrees to Pay $8 Million for Selling Allegedly Defective Knee Implant Devices

BIRMINGHAM, Alabama - Exactech Inc., a medical device company based in Gainesville, Florida, has agreed to pay $8 million to resolve allegations that the company violated the federal False Claims Act by knowingly submitting or causing the submission of false claims for payment to Medicare, Medicaid, and the United States Department of Veterans Affairs in connection with defective knee replacement devices.

The settlement relates to two separate components of Exactech’s total knee replacement systems.  First, the settlement resolves allegations that as early as January 2008, Exactech was aware that its finned tibial tray (a metal component of its knee replacement system that fits into a patient’s tibia) failed prematurely at a higher than acceptable rate and therefore was not reasonable and necessary for use during total-knee replacement surgeries performed on Medicare, Medicaid, and VA beneficiaries. Exactech nonetheless continued to market and sell that component for surgeries between January 1, 2008, and December 31, 2018. Second, the settlement also resolves allegations that, as early as January 2019, Exactech was aware that the polyethylene component in certain Logic and Truliant knee replacement systems failed prematurely at a higher than acceptable rate and therefore was not reasonable and necessary for use during total-knee replacement surgeries performed on government beneficiaries. Exactech nonetheless continued to market and sell the Logic and Truliant knee systems with these defective polyethylene components for use during total-knee replacement surgeries between January 1, 2019, and February 7, 2022. 

“Today’s resolution reaffirms our commitment to protect the health and safety of patients,” said Prim F. Escalona, U.S. Attorney for the Northern District of Alabama. “Medical device manufacturers must ensure their medical devices, which may be implanted in patients’ bodies, meet the necessary standards of safety and effectiveness at all times.”

“Patients who need a medical device to enjoy their lives rely on device manufacturers to put patient safety first. When a manufacturer learns that its device is defective, it must promptly and transparently address the problem,” Hayes said. “We will hold companies accountable who knowingly sell defective devices.”

Under the terms of the settlement, Exactech will pay a total of $8 million, of which $7,640,000 is the federal share. The states will enter into separate agreements with Exactech relating to the $360,000 state share. The settlement is based on Exactech’s financial condition.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Brooks Wallace, Robert Farley and Dr. Manuel Fuentes in a case captioned United States ex rel. Wallace v. Exactech, Inc., No. 7:18-cv-1010 (N.D. Ala.) (the “Alabama Action”) and by Dr. Pasquale Petrera in a case captioned United States ex rel. Petrera v. Exactech, Inc., Civil No. 21-3325-SAG (D. Md.) (the “Maryland Action”). Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery.  The settlement in this case provides for the Alabama whistleblowers to receive a $1,329,360 share of the settlement amount and the Maryland whistleblower to receive a $565,360 share of the settlement amount. 

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the United States Attorney’s Offices for the Northern District of Alabama and the District of Maryland, with assistance from the U.S. Department of Health and Human Services Office of Inspector General.

The investigation and resolution of this matter illustrates the United States’ emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

The matter was handled by Assistant U.S. Attorney Don Long in the U.S. Attorney’s Office for the Northern District of Alabama, Assistant U.S. Attorney Matthew Haven in the U.S. Attorney’s Office for the District of Maryland, and Senior Trial Counsel Michael Hoffman of the Civil Division’s Commercial Litigation Branch, Fraud Section.

The claims resolved by the settlement are allegations only. There has been no determination of liability.