Shareholder Class-Action Lawsuit Over Medtronic BMP Infuse Proceeds

U.S. District Judge John Tunheim, a federal judge in Minneapolis has allowed a shareholder lawsuit to proceed against Medtronic Inc.’s Infuse bone growth product that could scupper the company’s $43 billion acquisition of Covidien, an Irish medical device company.

According to the lawsuit there was a coverup of Infuse’s bad side effects by Medtronic officials and doctors the company paid to do research. Off-label use of Infuse has allegedly injured thousands of patients.

Lawsuit: Medtronic CEO Hid Key Facts

Plaintiffs in the investors’ class action lawsuit allege that former Medtronic CEO William Hawkins purposely hid the fact that the Food and Drug Administration had refused to approve the next version of Infuse, called Amplify and downplayed the side effects of Infuse.

If the investors’ case gets to a jury that believes company officials knew of Infuse’s problems but tried to hide them, the federal pre-emption legal shield that Medtronic has used to avoid thousands of personal injury claims might be pierced.

The issue is whether Medtronic intentionally misled investors by falsifying Infuse research done by paid medical experts that the company paid $210 million from 1996 to 2010. According to the shareholders suit, Medtronic edited results of studies to tout the usefulness of Infuse in patients recovering from spinal surgery while downplaying harmful side effects, predominately abnormal bone growth into nerves.

Medtronic Actions Manipulated Stock Price

It is alleged Medtronic’s interference in the research propped up Medtronic share prices, while the disclosure dropped share prices, costing investors tens of millions of dollars. Tunheim denied Medtronic’s motion to dismiss, and found that the company “scheme to downplay risks in the clinical studies led to increased usage of Infuse and ‘explosive’ sales and revenue growth.” At its peak, Infuse generated almost a $1 billion a year in sales.

The judge also found that Medtronic produced “multiple … investor-aimed publications” that relied on “reports on the efficacy and safety of Infuse,” when it allegedly knew that the product was neither safe nor effective. Tunheim ruled, “these pleadings adequately allege that investors would have relied on the strength of the early Infuse studies in choosing to invest in Medtronic.”

What is Medtronic BMP Infuse?

Medtronic Infuse is a new type of bio-engineered bone graft product that has been promoted as an alternative to traditional spinal fusions, where bone is harvested from another area of the body or used from a cadaver.

The FDA approved Infuse recombinant human bone morphogenetic protein (rhBMP-2) for limited use during spinal fusion procedures where the lumbar spine is approached through the front (anteriorly) and the product is applied to an absorbable collagen sponge that is placed within an “LT-Cage” that is implanted to encourage bone growth and fuse the gaps between the vertebrae.

It is alleged that Medtronic  illegally promoted the device for non-approved uses, with most sales of Infuse involving procedures that were never approved by the FDA, for example the posterior approach for spinal fusion, cervical neck fusion and use in the jaw and long bone fractures.

Medronic Quietly Settles Some BMP Infuse Lawsuits

In May, a month before it announced plans to acquire Covidien, Medtronic settled 950 Infuse suits for $22 million and announced plans to hold $120 million to $140 million in reserve to settle 3,800 outstanding suits.

Medtronic Infuse Hiding Behind Federal Pre-Emption Shield

Many injured patients alleging side effects from Infuse have been blocked from doing so by a legal shield called pre-emption that limits the ability to bring personal injury suits against makers of FDA-approved devices without specific allegations of fraud.

According to experts, if Medtronic settles the current shareholders’ suit without admitting wrongdoing, the chances of injured Infuse patients proving fraud becomes very difficult.

It is ironic that injured patients’ road to the courthouse is blocked, while Medtronic has paid millions in settlements over the Infuse product to shareholders, whistle blowers, and the federal government. Shareholders who sued Medtronic over Infuse in 2008 received an $85 million settlement in 2012. Medtronic admitted no wrongdoing.

New Shareholder Law Suit

The new shareholders case, brought in 2013 by the West Virginia Pipe Trades Health and Welfare Fund, the Hawaii state Employees’ Retirement System, and Union Asset Management Holding AG, relies heavily on disclosures in a 2012 report by the U.S. Senate Finance Committee, a 2011 issue of the Spine Journal and a 2013 reinterpretation of Infuse research data by the Yale University Open Data Access Project.

All of these studies reveal that Infuse was no better or safer than traditional forms of treatment, despite research that claimed otherwise by doctors who had been paid millions by Medtronic. In addition, the Senate found that some studies had been selectively edited at times by Medtronic’s marketing department to downplay problems.