A Medical Device Daily

The U.S. Department of Justice (DoJ) subpoenaed Abbott Laboratories (Abbott Park, Illinois) last month in connection with the marketing and sales of the company's biliary stents.

The government is investigating whether the company violated civil or criminal laws in connection with Medicare and Medicaid reimbursements paid to third parties, Abbott said in a Securities and Exchange Commission filing. According to a Bloomberg report, the company said it doesn't anticipate a "material adverse effect" on company finances.

The FDA warned about illegal sales of stents when it met in March 2007 with the companies that make the devices, among them Alveolus (Charlotte, North Carolina), Boston Scientific (Natick, Massachusetts) and Johnson & Johnson (New Brunswick, New Jersey). Boston Scientific said in February that the DoJ was investigating whether the company and other suppliers were illegally promoting the devices for unapproved uses.

"We're cooperating with the investigation," Abbott spokesman Scott Stoffel said in a telephone interview with Bloomberg. The bile-duct stents "represent a nominal portion" of the $1.67 billion in sales last year for Abbott's division related to blood vessels, Stoffel said. He declined to comment further on the investigation.

Biliary stents are larger than those inserted to prop open diseased coronary arteries. The products had a U.S. market of about $40 million in 2007 for approved uses, according to Millenium Research Group (Toronto).

Reports to the FDA earlier this year indicated that unapproved uses of such stents may be injuring patients.

In other legalities:

The law firm of Klafter & Olsen (Washington) has filed a class-action lawsuit against ArthroCare (Austin, Texas) and certain of its officers in the U.S. District Court for the Western District of Texas on behalf of all persons or entities who purchased the common stock of the company from Jan. 24-July 18 of this year and all persons or entities who purchased call options or sold put options in ArthroCare common stock from Oct. 27, 2006, through July 18 of this year.

ArthroCare is a maker of minimally invasive surgical products. Before the market opened on July 21, the company said it would be restating its previously reported financial results from 3Q06 through 1Q08 because it improperly recognized revenue from DiscoCare, State of the Art Medical Products, Boracchia & Associates and Clinical Technology Inc.

As a result, the company indicated that it expects reported revenue in 2006 will be reduced by $4 million to $7 million; for 2007, by $20 million to $25 million; and for 1Q08 by $2 million to $5 million. It also said that the restatement will result in "material reductions in operating income and net income for the annual and quarterly periods being restated."

The law firm said that upon that announcement, shares of ArthroCare plummeted from its close of $40.03 on July 18 to a close of $23.21 on July 21, the next day of trading a drop of more than 42%. During the period covered by the restatement, ArthroCare's officers and directors sold nearly $12 million worth of their personal holdings in the company's common stock.

The complaint alleges that the defendants falsely reported ArthroCare's financial results for the quarter ended Sept. 30, 2006, through the first quarter ended March 31, 2008; falsely stated that the company's financial statements were prepared in accordance with generally accepted accounting principles; and falsely stated that the company had adequate internal and financial controls.

Inverness Medical Innovations (IMI; Waltham, Massachusetts), a provider of rapid diagnostic products and health management services, said it has received a decision from an arbitration tribunal regarding the company's Binax (Scarborough, Maine) subsidiary.

The panel's decision awards Binax's distributor in Spain and Portugal roughly $13.8 million, including interest and arbitration-related expenses.

While IMI said it is evaluating its next steps, it noted that the terms of the distribution agreement in question provide "limited remedies" to the company.

Inverness said it will record an after-tax charge of about $8.6 million or 10 cents a diluted share for 2Q08.

IMI acquired Binax, a developer of rapid diagnostic products, primarily related to the respiratory system back in 2005 in exchange for 1,433,333 shares of its common stock and additional consideration of $8.6 million in cash at closing (Medical Device Daily, Feb. 10, 2005).