Federal Judge Certifies Medtronic Infuse Shareholder Class Action Lawsuit

Federal Judge Certifies Medtronic Infuse Shareholder Class Action LawsuitA shareholder lawsuit alleging Medtronic Inc. illegally promoted the off-label use of its Infuse bone growth product has been granted class action status by U.S. District Judge Paul Magnuson of Minnesota. According to a report from Law360.com, the Medtronic Infuse off-label promotion lawsuit was filed by several institutional investors on behalf of Medtronic shareholders who purchased or acquired the company’s stock between November 2006 and November 2008 and suffered financial losses.

Medtronic’s Infuse bone graft is made from a genetically engineered material called rhBMP-2 (recombinant human Bone Morphogenetic Protein-2), which stimulates bone growth. Infuse was approved by the U.S. Food and Drug Administration (FDA) in 2002 for use in one type of spine surgery called anterior approach lumbar fusion. Later, it was approved for use in two types of dental surgeries. Many patients, however, have undergone spinal fusion surgeries and were implanted with the Infuse bone graft via methods not approved by the FDA, or in parts of their spine for which use of Infuse was never approved by the agency (off-label use). In July 2008, the FDA warned that Infuse and similar bone growth products had caused serious problems when used in off-label in spinal procedures.

In November 2008, Medtronic disclosed that it had received a subpoena from the U.S. Justice Department inquiring about possible off-label promotion of infuse. While doctors are permitted to use FDA-approved medical products in any way they see fit, it is illegal manufacturers to promote or market products based on such uses.

In August 2009, Minneapolis Firefighters’ Relief Association and other institutional investors alleged in an amended complaint that Medtronic had deliberately promoted the Infuse system for off-label uses and failed to disclose that its sales were largely dependent on unapproved uses. According to Law360.com, Medtronic stock plunged 13 percent after it was forced to reveal that the U.S. Department of Justice was investigating the alleged off-label promotion of Infuse.

In certifying the class, Judge Magnuson rejected Medtronic’s contention that Plaintiffs’ counsel was inadequate and that the Plaintiffs had misrepresented witness statements, Law360.com reported.

“It may be that the depositions of these witnesses will reveal that what defendants say is true: plaintiffs’ counsel misinterpreted what the witnesses told them,” he said. “But without the benefit of deposition testimony, the court cannot and will not make that assumption about an officer of the court.”

Judge Magnuson also rejected Medtronic’s opposition to the definition of the class and refused to strip the class of its lead plaintiff.

News that the Medtronic Infuse shareholder lawsuit has been certified as a class action comes just as the controversy surrounding the bone growth product has gained momentum. Over the summer, Medtronic was accused of downplaying the serious side effects associated with Infuse, and most recently, a prominent researcher warned that Infuse may be associated with a higher risk of developing cancer.

In its most recent 10-Q filing with the U.S. Securities and Exchange Commission (SEC), Medtronic disclosed that the California Attorney General’s Office had issued it a subpoena in October as part of an investigation involving Infuse.

In addition to the U.S. Justice Department Probe, Infuse is also the subject of an investigation being conducted by the U.S. Senate Finance Committee.

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