A Medical Device Daily

Fresenius Medical Care (Bad Homburg, Germany), which bills itself as the world's largest provider of dialysis products and services, said that its wholly owned subsidiary, Fresenius Medical Care Holdings (New York), recently received a subpoena from the U.S. Department of Justice (DoJ), Eastern District of Missouri, requiring production of a range of documents.

The documents sought, Fresenius said, relate to clinical quality programs, business development, medical director compensation and physician relations, joint ventures and an anemia management program. The subpoena covers the period Dec. 1, 1996, to the present.

Fresenius acknowledged that the subpoena was issued in connection with a joint civil and criminal investigation of the company by the DoJ.

Fresenius said it intends to cooperate with the investigation. But it added that it is aware of no legal proceedings initiated against it "at this time," or when the investigation may be concluded.

Company counsel, it said, had "an initial conversation" with the U.S. Attorney's Office, Eastern District of Missouri, this week to begin discussions concerning the investigation and that it intends to meet with representatives of the government "to review the government's priorities and the production of responsive documents."

Ben Lipps, CEO of Fresenius Medical Care, said, "In light of our system of internal controls and the procedures we follow under our corporate compliance program and the Corporate Integrity Agreement, I am confident of our position on these issues and other regulatory compliance matters." He added that the company looks forward to reviewing its compliance processes.

Fresenius Medical Care operates a network of around 1,610 dialysis clinics in North America, Europe, Latin America, Asia-Pacific and Africa.

In other legalities:

• HealthSouth (Birmingham, Illinois) has filed suit against its former outside auditor, Ernst & Young, charging that the firm, either intentionally or negligently, failed to disclose the accounting fraud at the company.

The suit, filed in Jefferson County, Alabama, circuit court, is a response to the suit filed against HealthSouth by Ernst & Young (New York), claiming that HealthSouth had hidden the accounting fraud, thus damaging the auditing firm's reputation and exposing it to legal actions.

A new executive team at HealthSouth filed the suit, which, in turn, charges that Ernst & Young was guilty of breaching its contractual responsibilities when it failed to uncover the accounting irregularities.

Both suits come during the trial of HealthSouth's founder and former CEO, Richard Scrushy, accused under Oxley-Sarbanes rules of masterminding the fraud.

Scrushy's trial was highlighted this week with the judge's reprimand of a prosecutor, who, the judge said, was making suggestive comparisons between HealthSouth and two other fraud-ridden companies, Enron and WorldCom.

Gen-Probe (San Diego) reported that it has received what it described as "a tentative award" in its arbitration with Bayer HealthCare (Tarrytown, New York), concerning the parties' collaboration for the development and sale of nucleic acid diagnostic tests for viral organisms.

Edward Wallin, of Judicial Arbitration & Mediation Service (JAMS; Boston/Atlanta), ruled that Gen-Probe is entitled to a co-exclusive right to distribute qualitative TMA assays to detect the hepatitis C virus and HIV-1. Bayer previously held the exclusive rights to market these products.

Bayer also will be required to reimburse Gen-Probe $2 million for its legal fees and expenses related to the arbitration.

Wallin determined that the collaboration agreement should be terminated, as requested by Gen-Probe. As a result, Gen-Probe will have the right to develop and market future viral assays that had been previously reserved for Bayer. Bayer will retain co-exclusive rights to distribute two products that it currently markets. The arbitrator rejected Bayer's multimillion-dollar counterclaim for damages.

The decision is subject to further proceedings related to implementation of the decision. Gen-Probe said it expects the decision "to remain substantially unchanged."

Gen-Probe initiated the arbitration in November 2002; Bayer filed its counterclaims in November 2003.

A separate patent infringement action filed by Gen-Probe vs. Bayer remains pending.

Gen-Probe is a developer of rapid nucleic acid tests used to diagnose human diseases and screen donated human blood.