A Medical Device Daily

Stryker Biotech (Hopkinton, Massachusetts) and its former president, Mark Philip of Lexington, Massachusetts, and its current sales managers, William Heppner of Illinois, David Ard of California, and Jeff Whitaker of North Carolina, were charged this week in federal court with participating in a fraudulent marketing scheme of medical devices used during invasive spinal and long bone surgeries.

The company and the employees connected with the scheme were charged in an indictment with five counts of wire fraud and one count of conspiracy. The company, Ard and Whitaker were also charged with misbranding. Stryker and Phillip were also charged with making false statements to the FDA.

If convicted of the wire fraud, conspiracy, misbranding or false statements charges, the company faces fines of the greater of $500,000 or twice the gross gain or loss from the offense, on each count.

Stryker (Kalamazoo, Michigan) said it is "disappointed with this action and still hopes to be able to reach a fair and just resolution of this matter." The company added that conviction of these charges could result in "significant monetary fines" and Stryker Biotech's exclusion from participating in federal and state healthcare programs, which could have a material affect on the unit's business.

The indictment alleges that all of the defendants participated in an illegal marketing scheme to promote medical devices used during invasive surgeries, and in doing so have defrauded medical professionals and the FDA. In particular, the defendants are alleged to have promoted devices known as OP-1 Implant and OP-1 Putty. These devices were used to stimulate bone growth in long bones and the spine.

The FDA approved these devices only pursuant to a highly restrictive Humanitarian Device Exemption. One of the restrictions was that the device could only treat a condition that affected fewer than 4,000 patients in the U.S., and could not be sold for a profit. The indictment charges that the defendants promoted the use of these devices in a manner that was different from its FDA approved use; namely they promoted a combination of the devices with a bone void filler, called Calstrux, and in furtherance of that promotion provided "recipes" to surgeons, medical technicians and others as to how to mix the OP-1 products with Calstrux. It is alleged that some of these untested "recipes" called for medical personnel to mold the combined product into "cigars," "tootsie rolls" or "vienna sausages." The indictment charges that the defendants knew that such a combination had never been studied in a clinical trial and had never been presented to or approved by the FDA. It is alleged that the reason the defendants promoted the OP-1 products in a mixture with Calstrux was because without a mixing agent, the OP-1 products were at a competitive disadvantage with other legal products. The indictment also alleges that serious medical problems arose in a number of patients from this untested mix of products.

The indictment also charges that Stryker Biotech and Philip made false statements to the FDA about the number of patients that the company was treating on an annual basis with OP-1 Putty.

If convicted on the wire fraud charges, Philip, Heppner, Ard and Whitaker each face up to 20 years in prison, to be followed by three years of supervised release and a fine of the greater of $250,000 or twice the gross gain or loss from the offense, on each count. If convicted on the conspiracy charges, Philip, Heppner, Ard and Whitaker each face up to five years in prison, to be followed by three years of supervised release and fine of the greater of $250,000 or twice the gross gain or loss from the offense, on each count.

If convicted on the misbranding charges, Ard and Whitaker each face up to three years in prison, to be followed by one year of supervised release and fine of the greater of $250,000 or twice the gross gain or loss from the offense on each charge. If convicted on the false statement charge, Philip faces up to five years in prison, to be followed by three years supervised release and fine of the greater of $250,000 or twice the gross gain or loss from the offense.

Stryker Biotech has been in hot water over this issue since early this year. Another former employee of the company, Shane Doyle, pled guilty in April to charges of felony misbranding of OP-1 Putty in a case prosecuted by the U.S. Attorney's Office for the District of Massachusetts (Medical Device Daily, April 21, 2009). Two other Stryker employees, Justin Demming and Darnell Martin, also pleaded their cases out to similar charges (MDD, Feb. 13, 2009).

In other legalities, Xenomics (New York), a developer of trans-renal molecular diagnostic technologies, said it has filed a complaint against Sequenom (San Diego) in the Supreme Court of the State of New York alleging that Sequenom fraudulently misrepresented to Xenomics the status of its testing for Down syndrome and based upon such conduct, the company was induced to enter into a license agreement with Sequenom thereby giving up "valuable" patent rights. In addition, Xenomics is alleging that Sequenom breached the agreement by fraudulently misrepresenting the status of Sequenom.

Xenomics said it is seeking money damages together with punitive damages for up to $300 million as well as the termination of the license agreement between the companies. Last month Sequenom reported that the FBI and U.S. Attorney's office were investigating it with respect to its Down syndrome test (MDD, Sept. 30, 2009). In May the company said that the expected launch of its SEQureDx Down syndrome test had been delayed as a result of employee mishandling of R&D test data and results.