Medtronic Facing Federal Probe Over Insulin Pumps, New Round of Layoffs

Medtronic Inc. is still having a tough go of it, according to two separate reports published by MassDevice.com.  Medtronic may be facing yet another federal investigation over its insulin pump replacements for Medicare beneficiaries.  The company also has plans to eliminate another 500 employees as part of its 2012 restructuring plan.

According to MassDevice.com, Medtronic isn’t saying much about the insulin pump investigation beyond the disclosure of its existence that was contained in the company’s latest financial report.  But as the report points out, this isn’t Medtronic’s first run-in with the feds.  Last year, it agreed to pay $23.5 million to resolve charges levied by the U.S. Department of Justice (DOJ) that it offered illegal kickbacks to encourage doctors to use its implantable pacemakers and defibrillators.  Earlier this year, Medtronic received word that the DOJ wouldn’t pursue charges that it illegally marketed and concealed dangerous side effects associated with its Infuse Bone Graft product

Various controversies surrounding the Medtronic Infuse Bone Graft product helped prompt the restructuring that has sparked layoffs at the company.  Medtronic Infuse is a synthetic form of recombinant human Bone Morphogenetic Protein (rhBMP-2) that is approved for use in a certain type of spinal surgery.  Over the last several years, the safety of Infuse has been called into question, as has Medtronic’s marketing of the product.   Among other things, a critical analysis published by the Spine Journal last summer charged that 13 Medtronic sponsored Infuse clinical trials failed to report serious complications, including uncontrolled bone growth, male sterility, retrograde ejaculation, and cancer.

While it dodged federal charges related to Infuse marketing, Medtronic is still facing personal injury lawsuits filed by patients who claim the company illegally marketed Infuse for off-label uses.  According to MassDevice.com, its also been named in whistleblower lawsuit filed in May that accused Medtronic of installing a “crony” at the Journal of Spinal Disorders and Techniques to promote positive data on Infuse.  In March, Medtronic agreed to pay $85 million to resolve a federal lawsuit brought by shareholders that alleged the company’s officers and executives made false and misleading public statements about Infuse, which then artificially inflated the company’s stock price.

All of those controversies have taken a toll on sales of Infuse.   According to the company’s first quarterly report for Fiscal Year 2013, Infuse sales shrank to $141 million, down from $174 million from the same time last year, a slide of 19%.  The Infuse decline weighed on Medtronic’s core spinal business, which saw sales fall to $645 million in the first quarter, down from $651 million last year.

According to Mass Device, the company announced a restructuring plan that call for 1000 layoffs in May, partly in response to declining sales in its core spinal business.  An initial 500 positions were cut by the end of July.   The remaining 500 jobs will be gone by the end of the fourth quarter for 2013.

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