Medical Device Manufacturer Agrees to Pay $80 Million to Settle Civil and Criminal Charges

The maker of a surgical cutting guide intended for use in total knee replacement surgeries has agreed to an $80 million settlement with the U.S. Department of Justice for selling an adulterated medical device. According to the government complaint, OtisMed defrauded doctors and circumvented the FDA medical device approval process for its OtisKnee surgical knee replacement guide, risking the health and safety of thousands of knee replacement surgery patients.

OtisMed did apply for approval of its OtisKnee device, although it classified the device as a Class I medical device, indicating it belonged to the class of devices with the lowest risk of danger to a patient’s health, in the same category with enema kits and elastic bandages. Ninety-five percent of Class I devices are even exempt from the regulatory process.

OtisMed didn’t wait to find out if its OtisKnee would receive FDA approval before it started selling them, though. Between 2006 and 2009, the company sold about 18,000 unapproved devices, netting more than $27 million in revenue on the sales. But the FDA didn’t approve the device. Instead it found that the device did not in fact meet government standards for safety and efficacy.

That didn’t stop OtisMed, though. Even after their application was rejected, the company continued to ship 200 more devices. It was then that a whistleblower stepped forward and alerted the government to OtisMed’s activities, leading to civil and criminal complaints and the resulting $80 million settlement.