Stryker has agreed to pay $79.6 million plus interest to the Department of Justice for legal violations of a company it acquired back in 2009.
The Kalamazoo, Mich. company announced Monday that it is settling with the Justice Department "in connection with the DOJ's civil and criminal investigations into the sales and marketing of the OtisKnee prior to Stryker's acquisition of OtisMed in November 2009."
A news release from the DOJ reveals that OtisMed and its CEO, Charlie Chi, admitted to selling knee replacement surgery cutting guides even after the FDA rejected the application for clearance. Chi pleaded guilty to to three counts of shipping adulterated medical devices in interstate commerce.
The DOJ notes Stryker executives were not aware that unapproved cutting guides were being sold by the company in September 2009 and acknowledged that the company has cooperated through the entire investigation.
As part of the settlement, Stryker agreed to some compliance measures to prevent a recurrence of such misconduct, while OtisMed is to be excluded from all federal healthcare programs for 20 years.
“It is vital that products like the OtisKnee are subjected to the appropriate level of scrutiny,” U.S. Attorney Paul J. Fishman said in the DOJ news release. “Patients seeking medical care are vulnerable; they are often afraid, and in pain. They should be able to trust their doctors. And they should be entitled to trust that the devices their doctors are using are safe, effective, tested, and approved. OtisMed and Charlie Chi betrayed that trust.”
At the time Stryker bought OtisMed in November 2009, it also bought another company, and the combined deal was worth $67 million in upfront payments with the potential for an additional $36 million in milestone and royalty payments.