Medtronic Agrees to Settle Infuse Shareholder Class Action Lawsuit

Medtronic Inc. says it will shell out $85 million to settle a shareholder class action lawsuit stemming from its marketing of the controversial Infuse Bone Graft product. The lawsuit was filed in 2008 in Minneapolis federal court by institutional investors, including the Minneapolis Firefighters’ Relief Association, and alleged that Medtronic officers and executives made false and misleading public statements about Infuse, which then artificially inflated the company’s stock price.

In announcing the settlement Friday, Medtronic denied that it made any misrepresentations or omissions or that it otherwise engaged in any wrongdoing, according to a report from the Minneapolis Star Tribune. The proposed Medtronic Infuse shareholder lawsuit settlement is subject to completion of final documentation and court approval.

Approved in 2002, 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. It was only cleared by the U.S. Food and Drug Administration (FDA) for use in one type of spine surgery called anterior approach lumbar fusion, and two types of dental surgeries. However, some estimates say that as many as 85% of Infuse procedures involve uses not approved by the FDA (known as off-label use). While doctors are free to use approved medical devices in anyway they see fit, it is illegal for device makers to promote those uses.

In July 2008, the FDA warned that Infuse and similar bone growth products had caused serious, sometimes life threatening complications, when used in off-label in spinal procedures. That same year, the U.S. Justice Department began investigating Medtronic’s marketing of Infuse.

The plaintiffs in the Medtronic Infuse shareholder lawsuit had alleged that the company 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 the complaint, Medtronic stock plunged 13 percent after it was forced to reveal that the Justice Department was investigating the alleged off-label promotion of Infuse.

The shareholder complaint is just one of several lawsuits Medtronic faces over Infuse, which has been mired in controversy for the past several years. Over the summer, The Spine Journal raised serious questions about the validity of the research that was used to gain FDA approval of Infuse. In November, a prominent researcher warned that Infuse may be associated with a higher risk of developing cancer. In addition to the U.S. Justice Department, the U.S. Senate Finance Committee and the California attorney general are also investigating Infuse.

According to a report from The Wall Street Journal, Medtronic’s revenue from Infuse fell about 30% in the last quarter, largely in part to the controversy surrounding the product. Medtronic has commissioned Yale University to conduct an independent review of Infuse in an effort to salvage its reputation. Results of that review are expected sometime this year.

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