Sometimes acquiring other companies means taking the bad with the good. In Medtronic's case, that means settling multiple Department of Justice claims against ev3, a business Medtronic owns by way of its Covidien acquisition.
Covidien bought ev3 in 2010 and Medtronic finalized its $49.9 billion Covidien deal in early 2015. Now, Medtronic is paying the price for activities that ev3 allegedly conducted between 2005 and 2009 involving the Onyx Liquid Embolic System.
FDA approved the device in 2005 as a liquid embolization device that is surgically injected into blood vessels to block blood flow to arteriovenous malformations in the brain. Although the device was only approved for use inside the brain, the DOJ claims ev3 sales reps encouraged surgeons to use Onyx in large quantities for procedures outside the brain.
FDA officials reportedly raised concern in 2008 about the use of Onyx outside the brain and told ev3 it would have to conduct a study to gain approval for outside-the-brain procedures. Investigators say that instead of conducting such a study, ev3 reps attended surgical procedures and provided explicit instructions to surgeons about how to use the device for unapproved procedures outside the brain, including in greater quantities than would be used in the brain. The company also allegedly set up a system of sales quotas and bonuses that incentivized reps to sell Onyx for unapproved uses and trained its sales force on how to instruct surgeons on unapproved uses of the device.
The government said that although Medtronic played no role in the alleged criminal conduct, the company has agreed to implement new compensation structures to ensure the sales force responsible for marketing Onyx is not incentivized to sell the device for unapproved uses. Medtronic has also agreed to conduct compliance monitoring related to Onyx sales and marketing.
Medtronic also agreed to pay $17.9 million to resolve the claims against ev3. That includes a fine of $11.9 million and the forfeiture of $6 million.
The Dublin, Ireland-based company also agreed to pay $20 million to resolve claims concerning various market-development and physician engagement activities conducted by Covidien and ev3 Peripheral Vascular and endoVenous businesses. Medtronic said the settlement is "a compromise of disputed claims" and the company "makes no admission that any of these activities were improper or unlawful."
A third settlement involves a registry of real-world data on Medtronic's Solitaire stent retriever. Medtronic said it agreed to pay $13 million to resolve the Justice Department's investigation of the Systematic Evaluation of Patients Treated With Stroke Devices for Acute Ischemic Stroke (STRATIS) registry, but again the company called the settlement a compromise of disputed claims and admitted no fault.
In 2017 the company reported that real-world data from the STRATIS registry showed that the Solitaire stent retriever in patients suffering acute ischemic stroke shows the device can perform just as well in the real world as it did in four separate clinical trials.
Medtronic said the plea agreement and settlements all concern matters that took place "largely or entirely prior to Medtronic acquiring the businesses in which the activities took place."
"Medtronic has made significant investments in ensuring that it fulfills its obligations to all of its stakeholders and to do business the right way," the company said in a press release.
Medtronic also noted that after it acquired Covidien and ev3 it initiated additional compliance measures to prevent potential violations of the Food, Drug, and Cosmetics Act by ev3 and its employees.
"Medtronic cooperated fully with the Department of Justice during its investigation, and we believe our ongoing, rigorous compliance programs and ethical practices enabled us to reach a fair resolution of these cases," the company said.