Stryker to pay $80 million in OtisMed claims

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Medical device manufacturer Stryker and its subsidiary OtisMed Corporation will pay more than $80 million to resolve criminal and civil liability claims related to knee replacements, the Food and Drug Administration announced Monday.

OtisMed Corporation and its former chief executive officer, Charlie Chi, pleaded guilty in federal court Monday. Stryker bought OtisMed Corp. in late 2009 and has said it had no knowledge of misconduct at the time. It participated in inquiries from the FDA's Office of Criminal Investigations and Department of Health and Human Services' Office of the Inspector General, according to local reports.

OtisMed was accused of “distributing adulterated medical devices,” called OtisKnee, to surgeons performing total knee arthroplasty. OtisMed marketed the OtisKnee cutting guide as a tool for surgeons to make accurate bone cuts specific to knee replacement patients. But the FDA says the company's device or its claims were never approved by the agency. Yet the company created advertisements and promotional material anyway. Prosecutors said Chi ordered devices shipped after the FDA said OtisMed couldn't distribute them in the U.S.

OtisMed sold more than 18,000 OtisKnee devices over three years, creating revenue of around $27.1 million.

"Companies and individuals put the public health at risk by not complying with FDA regulatory requirements for the pre-market review of medical devices," said Philip J. Walsky, acting director of the FDA's Office of Criminal Investigations.

Chi faces a maximum potential penalty of a year in prison and a $100,000 fine. Sentencing is set for March.