In September 2009, a shipment of 218 OtisMed devices were sent to surgeons throughout the United States.
The problem was that the FDA denied the company’s 510(k) application for permission to market the devices, after refusing to find that the implant was substantially equivalent to another device already on the market.
The CEO of OtisMed, Charlie Chi, pled guilty to three misdemeanor charges of fraud and one felony count of distributing misbranded medical devices with the intent to defraud. He faces as long as three years in prison.
In a conference call on September 9, 2009, Chi talked about ways to hide the shipments from the FDA, including taking them to an off-site location, using Chi’s personal FedEx account, and backdating shipping, according to Bloomberg.
OtisMed must pay $40 million in criminal fines and forfeitures and another $41.2 million in civil liability for making false claims to Medicare and insurers.
The investigation began after a whistleblower complaint was filed by Richard Adrian under the False Claims Act, which allows citizens to file lawsuits on behalf of the federal government and share in any financial recovery. Adrian, a former executive at Stryker, will receive $7 million.
OtisMed was purchased by Stryker in 2009. In 2013, the OtisMed ShapeMatch Cutting Guide was the subject of regulatory action. Health officials warned:
“[Use of the cutting guides] can lead to patients experiencing a range of problems, including joint instability, loss of mobility, and loss of motion or osteolysis. If these occur, the patient may require revision surgery.”
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