Creative or Fraudulent? How Acclarent Made Sinus Balloon Tech Worth $785M

In a legally murky but highly lucrative environment, former Acclarent execs were growing the company into a company that would become attractive enough that Johnson & Johnson would acquire it for $785 million. Based on history, it was probably hard for them to imagine that they would personally face criminal charges over their actions.

Qmed Staff

The government's case alleges that former Acclarent CEO William Facteau and the firm's VP of sales Patrick Fabian plotted a fraudulent scheme to promote the Relieva Stratus Microflow spacer for off label use to deliver drugs, thus driving up its revenues and stock valuation, enabling the VC-backed company to exit with a handsome profit. Five years ago, Acclarent was viewed as a proverbial Silicon Valley medtech success story. The company was able to overcome long odds and the skepticism of many prominent ENT physicians regarding balloon sinuplasty. Despite these hurdles, the company was able to get significant traction in the market for a single-use disposable product with an $1800 price tag.

A 2010 press release from Acclarent released announcing J&J's acquisition quotes the company's co-founder as stating "The visionary leadership of Bill Facteau was as instrumental to Acclarent's success as the technology." It continues: "He built a fantastic team that has delivered on every financial milestone that was promised at the time of the first investment. Bill broadened the mission of Acclarent and put in place the organization and processes to realize enterprise success for patients, physicians, and stockholders."

The company's Stratus device won FDA clearance on August 22, 2006 for use as a postoperative spacer in the sinus cavity for treating chronic rhinosinusitis. The device, containing a reservoir of hundreds of micropores, worked something like a leaky balloon. Although it could be theoretically used to deliver any therapeutic agent to the sinuses, it was cleared by FDA for use only with saline.

A warning on the product's label states: "This device is not intended for use with an active drug substance" and adds that "use with steroids might result in serious adverse events due to high local and/or systemic concentrations."

A 2006 patent awarded to the inventors of the device describe implantable devices and methods "for delivering drugs and other substances to locations within the body of a human or animal subject to treat or diagnose sinusitis and a variety of other disorders." The abstract continues: "In some embodiments the delivery devices may be loaded with one or more desired substance before their introduction into the body. In other embodiments the delivery devices are loaded and/or reloaded with a desired substance after the delivery device has been introduced into the body." The intellectual property filed for the device describes an array of drugs including antibiotics, steroids, antiviral compounds, and other substances that can potentially be used with the device

After its FDA clearance, the company worked to expand the label indication to include steroids. "Acclarent's ultimate (and transparent) goal in developing Stratus was to market a product that could deliver a variety of drugs to a particularly difficult-to-reach sinus," explains a recent memo filed in the case by Facteau's and Fabian's attorneys.

In 2006, Acclarent began planning a study to test the device with the steroid known as Kenalog-40, which it hoped to use to ultimately expand its indication to include eluting steroids and other drugs. FDA responded that the study could represent "significant risk." Acclarent redesigned the study and achieved conditional approval to proceed in 2008--the same year the product underwent a full commercial launch. The majority of doctors using the device at this time period used it with fluids other than saline.

Before its full commercial launch, Acclarent obtained legal counsel that advised that the company sell the product for use with therapeutic fluids including steroids but not promote the product for that application until it had convinced FDA to expand its indication.

"Off-label use is fully legal," says Michael Drues, PhD, president of Vascular Sciences (Boston).. "And off-label promotion of products happens all of the time. A lot of regulatory folks think you cannot promote the off label use of a product, but that is not true." The FDA has put out three guidance documents related to the subject and is working on another detailing how to advertise a product off-label. "Part of the lack of clarity around the issue relates to how you define the word 'advertise,'" Drues notes.

Melayna Lokosky, a former sales rep for Acclarent, however, maintains that Acclarent's management manipulated its sales reps to promote this off-use to doctors. Further, she questions the company's plan to promote the use of the Stratus to deliver the steroid Kenalog when that drug is indicated only for injections.

In her lawsuit, State of California ex rel. Melayna Lokosky vs. Acclarent, Inc.; Ethicon, Inc.; and Johnson & Johnson, Lokosky maintains that Acclarent had set up to deceive FDA about the intended use of the device since the beginning. Further, Lokosky alleges that was an ineffective device for delivery any compound. "Stratus didn't work with saline, Kenalog-40, or any substance. We, as reps, unknowingly sold a 100% useless device to our surgeons who in turn implanted them in their patients," she says.

The Reckoning

Ultimately, however, Acclarent agreed to pull Stratus from the market in 2013 after it had informed FDA that the product had been used for widespread off-label uses in 2011. Nevertheless, FDA witnesses had testified that they were unaware of any serious adverse events related to off-label uses of the Stratus device, and FDA had not taken any enforcement actions against the company for off-label promotion at the time Fabian and Facteau were indicted.  

When the company was founded in 2004, it was not common for healthcare company executives to be held liable for their role in promoting off-label uses of products. But according to the Star Tribune, the Justice Department has collected at least $8 billion from settlements and plea agreements related to illegal promotion since 2010.  

What bothers me is that there is often a significant difference between how a device is used in the real world compared to what is described on the label. In my opinion, we should be focusing more on what happens in the real world as opposed to the theoretical world of labeling and regulatory affairs," he says.

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