8 Big Medtech Controversies of 2017

From accusations of insider trading to a sexual harassment scandal, we saw quite a few controversies in the medtech universe during 2017. Here are eight that really stood out.

  • AngioDynamics got fed up with competitor C.R. Bard's sales practices this year. In May, the Albany, NY-based company sued Bard for allegedly violating federal antitrust laws by tying the sale of its tip confirmation system to its own line of peripherally inserted central catheters (PICCs).

    This puts AngioDynamics at a competitive disadvantage, the company said, because customers who want to buy Bard's tip location system must also buy Bard's PICCs. AngioDynamics sells the BioFlo PICCs. Tip location systems are designed to aid clinicians in the bedside placement of a PICC.

  • Balloon-based devices designed to treat obesity came under FDA scrutiny this year after a string of patient deaths were tied to the technology.

    FDA alerted gastrointestinal surgeons in August that at least four patients died after receiving the Orbera Intragastric Balloon System made by Austin, TX-based Apollo Endosurgery, and at least one patient died after receiving the ReShape Integrated Dual Balloon System made by San Clemente, CA-based ReShape Medical.

    Both balloon systems were among a rash of devices FDA approved in 2015 aimed at tackling the obesity epidemic.

    FDA said in a letter to healthcare providers that all five reported deaths occurred from 2016 to present within a month of balloon placement, and three occurred as soon as one to three days after the procedure. The agency said two additional patients died in the same time period from apparent complications associated with the balloon treatment - one gastric perforation with the Orbera system and one esophageal perforation with the ReShape device.

    And yet, FDA said it does not know the root cause or incidence rate of patient death, nor has the agency been able to "definitively attribute" the deaths to the devices or the procedures for these devices.

    ReShape Medical
  • In May, FDA began investigating a problem related to Magellan Diagnostics' lead tests after data indicated that the tests may provide inaccurately low results when performed on blood drawn from a vein. 

    In July the agency issued a report, followed by an official warning letter in late October, that suggested the company had known about the problem since August 2014 but waited almost a year before alerting FDA. Magellan is owned by Cincinnati, OH-based Meridian Bioscience Inc.

    The company also failed to notify FDA about at least two customer complaints involving a total of 13 patients who received inaccurate test results. 

    “The FDA has serious concerns about Magellan Diagnostics’ actions after learning about inaccuracies in results using its blood lead testing devices – tests that the American people depend on,” said Donald St. Pierre, acting director of the Office of In Vitro Diagnostics and Radiological Health and deputy director of new product evaluation in the Center for Devices and Radiological Health. “The evidence uncovered during the inspection shows that the company put patients at risk after it recognized that its tests could provide inaccurate results and failed to take appropriate steps to report this issue and work through a strategy to effectively mitigate problems with the FDA."

  • A former medtech executive pleaded guilty in May to stealing trade secrets and giving them to his new employer.

    Christopher Barry, 46, of Medina, MN, entered the guilty plea in U.S. District Court in St. Paul. According to the plea agreement, Barry was vice president of research at Lutonix Inc., a subsidiary of C.R. Bard and maker of the Lutonix 035 DCB, a drug-coated angioplasty balloon catheter.

    Barry began working at Lutonix in 2007 and left in May 2015 following a disagreement with the company's president, the plea agreement says. He accepted the position of CEO of Urotronic, a startup that was founded by a former Lutonix employee and was developing drug-coated balloons for urologic treatment purposes.

    Barry was responsible for all R&D, quality assurance, and manufacturing at Lutonix. He was also directly involved in developing the confidential process for coating the Lutonix 035 DCB, which generated most of the company's 2015 sales of $50 million, the agreement noted.

    Before he left Lutonix, Barry downloaded "numerous trade secret files" to his Lutonix computer, transferred them to a USB drive, and then to a personal portable hard drive. Ultimately, he transferred them to his Urotronic work computer. Barry is now working as a consultant, according to his attorney, Jim Volling of Faegre Baker Daniels in Minneapolis.

  • The Israel Securities Authority is investigating the CEO of Mazor Robotics concerning accusations of insider trading, according to a report in Calcalist, an Israel-based publication. The probe is connected to a May 2016 distribution agreement with Medtronic, according to the report, which cites documents reviewed by Calcalist.

    Caesarea, Israel-based Mazor gave Medtronic U.S. distribution rights for its spinal surgery systems. Earlier this year, Mazor gave Medtronic worldwide distribution of the systems and agreed to pay Mazor $40 million, bringing its overall investment to $74 million.

  • Things got ugly this year between spine device rivals NuVasive and Alphatec.

    NuVasive filed a lawsuit in October against its ex-vice chairman, Patrick Miles, who is now executive chairman at Alphatec. The lawsuit claims that Miles schemed for more than a year to take business from NuVasive, but Alphatec denounced the complaint as a "frivolous PR stunt" and an attempt to damage the reputations of both it and Miles.

    According to NuVasive, the company was contacted in January 2016 by UBS Financial Services to explore a potential acquisition of Alphatec. Miles was NuVasive's president and COO at the time, and he advised the company that pursuing the acquisition was "a waste of time," and that Alphatec had an "aged, undifferentiated portfolio." The company decided to pass on the opportunity.

    Then, on March 22, 2017, Miles reportedly executed a securities purchase agreement for $500,000 of Alphatec stock in a private placement and concealed the investment by purchasing them through an entity called "MOM" and failing to disclose that he was the beneficial owner of the shares, NuVasive said in the complaint.

    Miles abruptly resigned from NuVasive on Oct. 1, at which time he told the company he planned to begin working for Alphatec the following day. NuVasive said that this, along with his subsequent actions to solicit NuVasive customers and recruit its employees, violated a contract he had previously signed. Also, the company noted, as part of his employment agreement with Alphatec, he received 1,000,000 restricted stock units valued at $3.22 million as of Oct. 2, and he agreed to another share purchase that amounted to a $2,938,000 investment and will be granted warrants to buy up to 1.3 million additional shares at closing. This means he could potentially own up to 23% of Alphatec's outstanding stock.

  • Just days before Time named the "silence breakers" as the magazine's Person of the Year, recognizing the women who stepped forward in 2017 to share stories of sexual harassment and abuse through the #MeToo campaign, STAT published an investigative piece that brought the topic close to home.

    According to STAT's report, OrbiMed founder and managing partner Sam Isaly harassed and demeaned female employees for years. OrbiMed is one of the industry's largest hedge funds.

    Former employees reportedly told STAT that Isaly routinely subjected young female assistants to pornography in the workplace, lewd jokes, and sexist comments. Five people who once worked at the firm described how Isaly would often handle a set of breast implants that he kept on his desk, palpating them during conversations with employees as though they were stress balls.

    According to STAT, moments after publishing the story Tuesday evening OrbiMed issued a statement calling the alleged incidents "concerning" and said it has retained an independent law firm to investigate the matter. "OrbiMed takes gender equality seriously and wishes to encourage a supportive work environment and equal opportunity for all employees," the firm noted in the statement.

    STAT also said that earlier on Tuesday, prior to publishing the story, OrbiMed partner Carter Neild said in an email to STAT that, "If this article proceeds I hope that you will be fair and focus on the person responsible, not the entire firm."

    The article also states that Isaly denied the allegations during a 90-minute interview with STAT on Monday at OrbiMed's headquarters, during which he was surrounded by three colleagues and a crisis management consultant.

    STAT said it spoke with five former OrbiMed employees, four women and one man, who worked at the firm between 2000 and 2015. All four women were executive assistants, and the man was an investment professional, the article noted. One of the women, Delilah Burke, spoke on the record, while the other four spoke on condition of anonymity, saying they had signed nondisclosure agreements and feared reprisals from Isaly. Burke worked as Isaly's assistant for about 18 months beginning in 2009.

  • Two Indianapolis-based Roche units accused several pharmacies and medical supply companies of exploiting the price differences of blood glucose test strips sold to people covered by durable medical equipment (DME) plans and those covered by pharmacy benefits plans.

    Test strips paid for by pharmacy plans have a much higher list price and a higher insurance reimbursement rate than those paid for by DME plans, but pharmacy plans get significant rebates from Roche that DME plans do not receive.

    A lawsuit filed by Roche Diagnostics Corp. and Roche Diabetes Care accused the defendants of buying Roche test strips at the lower DME list price and diverting them to sale in channels where they would be reimbursed at the much higher pharmacy plan rate. In doing so, Roche claims the defendants and their "co-conspirators" made millions of dollars in illicit profits, costing Roche as much as $89 million in wrongful rebates and legitimate sales.

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