Biotech Firm Charged in Marketing Scheme - Healthcare * US * News * Story

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Biotech Firm, Execs Charged With Medical Device Fraud

Published: Wednesday, 28 Oct 2009 | 6:10 PM ET

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By: Reuters

Medical device maker Stryker Biotech and top management were charged with conducting a fraudulent marketing scheme for bone-growth products, the U.S. Justice Department said on Wednesday.

Stryker Biotech, based in Hopkinton, Massachusetts, is a division of Stryker [SYK Loading... () ] of Kalamazoo, Michigan, a maker of orthopedic devices and other hospital products.

Fallout from a conviction — including significant fines and a possible exclusion from participating in federal and state health care programs — "could have a material affect on Stryker Biotech's business," the company said.

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"The company is disappointed with this action and still hopes to be able to reach a fair and just resolution," Stryker's statement said.

The indictment charged Stryker Biotech, its former president, Mark Philip, and three current sales managers with a scheme that involved devices used during invasive spinal and long bone surgeries.

Philip and the company were also charged with making false statements to the U.S. Food and Drug Administration. Stryker had said in March it was the target of a federal grand jury probe related to its bone growth products. The enquiry began in 2008, the company said at the time.

Stryker and its executives promoted devices known as OP-1 Implant and OP-1 Putty for use in a manner that was different from the use approved by the FDA, authorities said.

The company had a federal exemption that authorized it to sell only limited quantities of the bone-growth products for "humanitarian" reasons to treat a rare condition.

Instead, they promoted a combination of the devices with a bone void filler, called Calstrux, and provided "recipes" of how to mix the OP-1 products with Calstrux in ways never presented to or approved by the FDA, authorities said.

"It is alleged that some of these untested 'recipes' called for medical personnel to mold the combined products into 'cigars,' 'tootsie rolls' or 'vienna sausages."'

If convicted on all charges, Stryker Biotech faces fines of $500,000 or twice the gross gain or loss from the offense, on each count.

Philip, along with sales managers William Heppner, David Ard and Jeff Whitaker, face lengthy jail terms if convicted of wire fraud conspiracy and misbranding chargers.

Stryker shares fell to $45.86 in extended trading from their New York Stock Exchange close of $46.00.