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FDA-Rejected Knee Replacement Device Used in Thousands of Surgeries

Feds: More than 18,000 OtisKnee cutting guides were sold without FDA approval.

OtisMed Corp. and its former CEO admitted to distributing knee replacement surgery cutting guides after the FDA had rejected their application for marketing clearance, the U.S. Department of Justice announced. OtisMed — now a subsidiary of Stryker — and its CEO Charlie Chi agreed to pay more than $80 million to resolve its related criminal and civil liability, says the Justice Department.

 

Between May 2006 and September 2009, OtisMed sold more than 18,000 cutting guides, generating revenue of approximately $27.1 million. The devices may have been responsible for complications, including early failure of implants, in several dozen patients, according to a report by The New York Times.

OtisMed was founded in 2005 to sell the OtisKnee device. The OtisKnee was marketed as a time-saver for surgeons and a way to preserve more of a patient’s bone and ligaments. Using an MRI of the patient’s knee, 3-D software created guides that surgeons could use to make bone cuts during knee replacement.

OtisMed worked with Stryker to market the device, since many of Stryker’s knee replacement components worked with the OtisKnee. Stryker then became interested in acquiring the company and asked OtisMed to apply for FDA clearance, investigators say, which it filed for in late 2008.

In September 2009, the FDA rejected the OtisKnee because the company did not prove it was safe and told OtisMed it could not distribute the OtisKnee any further without approval. The company’s board of directors unanimously voted to halt all shipments, but Mr. Chi directed employees to ship a batch of the devices that had been previously purchased. Two months later, Stryker’s acquisition of OtisMed went through, though Stryker was unaware of any illegal activity, investigators say.

Shortly after the illegal shipment, a Stryker employee filed a whistleblower case accusing OtisMed for selling the unapproved devices. In December 2014, OtisMed and Mr. Chi pled guilty to charges stemming from the sales. OtisMed was ordered to pay $80 million in criminal and civil fines as part of a settlement, according to the federal government. Mr. Chi will be sentenced on March 18 and faces up to 3 years in prison and $300,000 in fines.

Mr. Chi and other representatives of OtisMed were unable to be reached for comment. In a statement, Stryker notes that investigators determined that any criminal conduct “occurred prior to Stryker’s acquisition of OtisMed and without Stryker’s prior knowledge or acquiescence.” In the settlement, Stryker also agreed to audit all of its medical devices to ensure they meet FDA regulations.