A Medical Device Daily

A whistle-blower lawsuit has been filed alleging that Medtronic (Minneapolis) improperly paid millions of dollars to more than a dozen doctors around the U.S., encouraging them to perform unnecessary spinal surgeries and otherwise affecting their judgment.

One surgeon was allegedly paid $400,000 for eight days of consulting per year. Another surgeon received $1.39 million from 2001 through May 2005, according to the lawsuit filed by Jacqueline Kay Poteet, a former employee of subsidiary Medtronic Sofamor Danek (Memphis, Tennessee), which makes spinal implants.

Poteet, who made travel arrangements for doctors to what she described as “lavish“ company conferences, also charges that payments were used to induce the doctors named in the lawsuit and others to use Medtronic products and to recruit other doctors to do the same.

The lawsuit said, “These bribes and kickbacks distorted and continue to distort the defendants' medical decision-making, [and] cause unnecessary back and neck surgeries . . . “

Poteet sued in December 2003 in U.S. District Court in Memphis. Like most lawsuits filed under the federal False Claims Act, it was initially sealed. It was amended three times before it was opened Jan. 13. The New York Times reported on the documents earlier this week.

Rob Clark, a Medtronic spokesman, told The Times he could not comment on pending litigation but said the company has a strict code of conduct for how it handles contracts with doctors to improve and develop the company's products. “We do not tolerate conduct that is illegal or unethical,“ he said.

Clark said contracts between medical device companies and surgeons are common in the industry. He said the compensation was based on the fair market value of the doctors' time and expertise.

“These consulting relationships are critical,“ he said. “The fact that some of these amounts regarding consulting and royalties are large does not imply that the payments were inappropriate or illegal.“

Poteet claims the system, which dates back to at least 1995, had resulted in “tens of thousands“ of improper Medicare claims.

If Medtronic settles with the Justice Department, Poteet, who left her job because of disability in 2003, will get a percentage of the settlement. The Justice Department has not yet formally intervened in the lawsuit, although The Times said Medtronic has offered a $40 million settlement.

Poteet's lawyer, Andrew Carr Jr. of the firm of Bateman Gibson in Memphis, has objected to the proposed settlement offer as too low.

In other court-related news:

• Cytogen (Princeton, New Jersey) reported that it has filed a lawsuit against Advanced Magnetics (Cambridge, Massachusetts) for breach of contract, fraud, unjust enrichment and breach of the implied covenant of good faith and fair dealing.

The lawsuit, filed in Massachusetts Superior Court, is in connection with the license agreement established between the two companies in 2000, for both Combidex and ferumoxytol, previously Code 7228.

The complaint seeks damages along with a request to require Advanced Magnetics to take steps to secure FDA approval of Combidex in compliance with the terms of the licensing agreement.

Combidex is an investigational molecular imaging agent consisting of iron oxide nanoparticles for use in conjunction with MRI procedures to aid in differentiating cancerous from non-cancerous lymph nodes.

Cytogen said it “remains interested“ in discussing with Advanced Magnetics an amicable resolution. However, the company said it intends to protect its rights “whether through litigation or negotiation.“