A Medical Device Daily

Odyssey HealthCare (Dallas), which calls itself the second-largest provider of hospice care in the U.S., reported entering into agreements with the U.S. Department of Justice and the Department of Health and Human Services, Office of Inspector General (OIG) to resolve previously disclosed federal investigations arising from two whistleblower actions filed under the federal civil False Claims Act.

Without being required to acknowledge any wrongdoing, the company has agreed to pay $13 million and will record that charge in 4Q06.

Odyssey said it “worked closely with the OIG to negotiate a corporate integrity agreement (CIA) that will enhance the company's already robust compliance program.“ The CIA, it said, “will incorporate a first-of-its kind clinical review protocol“ to be administered by Odyssey's clinical affairs and compliance personnel and findings will be verified by an Independent Verification Organization.

The company said that to its knowledge, the Odyssey CIA “is the first time the OIG has permitted the use of an IVO verification review in lieu of a review by an Independent Review Organization.“

CEO and President Robert Lefton said, “While we continue to believe that our programs and caregivers are compliant with Medicare guidelines, we welcome the opportunity to work with the OIG to further enhance our already extensive compliance program.“

Odyssey operates 82 Medicare-certified hospice programs in 30 states.

Aksys eyeing litigation over supply agreement cancellation

In what may – or may not – be a dispute ending up in court, Aksys (Lincolnshire, Illinois), the troubled developer of home dialysis systems, yesterday said that it is “prepared to defend itself in litigation“ after receiving a letter notifying it that one of its suppliers has cancelled a manufacturing agreement.

The company reported receiving a letter from Delphi Medical Systems (Troy, Michigan), informing it that the contract manufacturing agreement between the firms has been terminated due, according to Aksys, “to nonpayment of amounts which Delphi alleges it is owed under the contract.“

The manufacturing agreement was entered into by Aksys and a predecessor in interest to Delphi in February 2003 and covers the manufacture of Aksys' product, the Personal Hemodialysis (PHD) System, as well as the sale of spare parts related to the system.

While the company suggested in a statement that it might proceed with litigation, it also said it is interested in resolving the dispute “on a timely basis.“

However, if it is not resolved, Aksys said it has sufficient inventory of new machines and spare parts to continue operations “for several months“ without further shipments from Delphi.

Perhaps deepening its problems Aksys also reported yesterday that it had received notice from the Nasdaq that it has failed to maintain listing compliance in accordance with the requirement of $35 million of listed securities for 10 consecutive days.

The letter said the company's securities will be de-listed unless it requests a hearing to review the determination. Aksys said it would request such a hearing and that it is pursuing “strategies“ for maintaining compliance.

A key problem for Aksys has been the placement of its home dialysis PHD system, an effort depending largely on the large dialysis providers recommending its use. These providers, however, are unlikely to want to reduce their own client numbers, and have argued that the more frequent dialysis by a home system has not been proven to provide improved results.

In December, the company cut nearly one-third of its staff in a “rightsizing“ initiative (MDD, Dec. 7, 2005), and it has since required additional infusions of equity.

Among the company's other problems, Aksys last month received a warning letter from the FDA regarding marketing of the PHD system (MDD, June 27, 2006). The letter cited “a modified treatment length that exceeds the treatment length provided in the company's premarket 510(k) notification for the system,“ cleared in 2002.

In reporting the warning, Aksys said it was working with the agency concerning the issue and was “undertaking a review of other modifications“ made to the PHD System since its initial clearance.

— Don Long, Managing Editor