A Medical Device Daily

A U.S. District Judge for the Northern District of Alabama has entered a final judgment for Weston Smith, who formerly served as CFO of HealthSouth (Birmingham, Alabama).

Smith was ordered to pay disgorgement of $4,897,124 and prejudgment interest of $2,021,211, provided that $1.5 million of the disgorgement and prejudgment interest is deemed satisfied by forfeiture and restitution ordered against him in the related criminal proceeding. The judgment waived the remainder and did not order Smith to pay a civil penalty based on his sworn representations in his statement of financial condition.

In the related criminal proceeding, Smith was sentenced to serve 27 months incarceration.

The judgment enjoins Smith from future violations of securities rules, and he is permanently barred from serving as an officer or director of a public company.

The complaint, filed on March 31, 2003, charged that Smith made or directed HealthSouth employees to make false accounting entries to inflate reported operating results in order to meet or exceed Wall Street expectations.

Smith consented to the entry of the judgment without admitting or denying any of the allegations.

In other legalities:

• Cyberonics (Houston) reported that the U.S. District Court for the Southern District of Texas dismissed the plaintiffs' consolidated complaint against the company and certain officers and directors in the securities class action lawsuit Cyberonics, Inc. Securities Litigation.

The court ruled that the complaint failed to allege material misstatements with particularity, failed to allege facts sufficient to raise a strong inference of intent or severe recklessness, and failed to allege sufficiently the causal connection between the plaintiffs' loss and the defendants' actions.

The court said that “the deficiencies in plaintiffs' complaint might well extend beyond the point of cure” but granted plaintiffs the right to amend their complaint, and the plaintiffs will have 30 days to file a further amended complaint in an attempt to cure the deficiencies.

• The Federal Trade Commission has reported a decision to challenge the Puerto Rico Association of Endodontists (PRAE) for, it said, carrying out agreements among its 30 members to set the prices they would charge dental insurance plans, and to refuse to deal with plans that would not accept the collectively determined prices.

The FTC complaint charges that PRAE's actions led to higher costs for consumers by hindering competition and restraining trade. In settling the FTC's charges, PRAE will refrain from engaging in future anticompetitive conduct.

“Competing healthcare providers cannot collectively bargain or refuse to deal with health insurance plans that reject their terms,” said Jeffrey Schmidt, director of the FTC's Bureau of Competition. “By challenging these kinds of anticompetitive practices, the FTC ensures that essential healthcare services will be available to consumers at prices established in an open, competitive market.”

The FTC's complaint alleges that in 2003, PRAE's bargaining resulted in at least five dental plans increasing the fees they paid to PRAE members' and it alleges that in 2004, PRAE asked the dental insurers to allow PRAE members to “balance bill” patients for the difference between agreed-upon rates paid by the dental plans and the endodontists' desired rates. For cost-containment, healthcare plans typically prohibit balance billing by healthcare providers who contract to provide care for their policyholders.

According to the complaint, PRAE's actions were not reasonably related to any financial risk-sharing or efficiency-enhancing integration of its members' practices that would lead to better quality or reduced costs.

The commission's consent order is designed to remedy the effects of the anticompetitive conduct and prohibit PRAE from entering into agreements among endodontists to negotiate with any payor on any member's behalf; to deal, refuse to deal, or threaten to refuse to deal with any payor regarding any term upon which any member deals, or is willing to deal, with any payor; and not to deal individually with any payor or through any arrangement other than PRAE.

The commission said it is accepting public comment on the order until Aug. 18, after which it will decide whether to make it final.

• Roche Diagnostics (Pleasanton, California) reported that a district judge in New York has ruled in its favor on certain aspects of patent infringement allegations brought by Enzo Biochem (Farmingdale, New York). The litigation, filed in 2002, concerns products and techniques for detecting genetic information in biological samples, such as blood.

Roche said that the court adopted “virtually all” of the interpretations proposed by Roche Diagnostics and its co-parties relating to seven Enzo patents covered by the order. The judge's ruling followed a week-long hearing in July 2005 and legal briefs by the parties.

“This order will allow us to request a further ruling from the court, declaring that Roche does not infringe on this patent,” said Melinda Griffith, senior vice president and general counsel of Roche Molecular Diagnostics. “We look forward to the successful conclusion of this litigation.”

Enzo contends that Roche's AmpliChip CYP450 test infringes Enzo's U.S. patent No. 4,994,373.

The judge's order “rejected Enzo's interpretations of both the testing format and the 'soluble signal' claimed by this patent, and instead agreed with interpretations by Roche Diagnostics and its co-parties,” Roche said.