BY BRENDAN PIERSON
(Reuters) – Medical device maker Stryker Corp will pay the U.S. government $80 million to settle criminal and civil charges that its OtisMed Corp subsidiary sold devices used in knee replacement surgery without approval from the U.S. Food and Drug Administration.
OtisMed and its chief executive officer, Charlie Chi, 45, pleaded guilty to selling unapproved medical devices in federal court in Newark, New Jersey, on Monday, according to the New Jersey U.S. attorney’s office. Chi is scheduled to be sentenced March 18.
Kalamazoo, Michigan-based Stryker will pay a fine of $34.4 million, criminal forfeiture of $5.16 million and a civil settlement of $40 million, according to the U.S. attorney’s office. OtisMed’s illegal sales took place before Stryker bought the company in November 2009.
The company sold more than 18,000 OtisKnee cutting guides – which are designed to help surgeons make accurate bone cuts in knee replacement surgeries – between May 2006 and September 2009, bringing in more than $27 million in revenue, according to a criminal information filed Monday in U.S. District Court in New Jersey. It did not apply for FDA approval for the devices until October 2008, according to the information.
When the FDA denied OtisMed’s application for approval in September 2009, according to the information, the company quickly shipped over 200 OtisKnee devices anyway.
Stryker said in a press release that OtisMed’s conduct occurred without its knowledge.
The cases are United States v. OtisMed Corp, and United States v, Chi, U.S. District Court, District of New Jersey.