More Medtronic Shareholders Head to Court in Lawsuit Over Infuse Marketing

Another group of Medtronic Inc. shareholders has filed a lawsuit over the way the company marketed its Infuse bone growth product. According to a report from Mass Device, the plaintiffs in the lawsuit accuse the company’s offices and directors of falsely inflating the value of Medtronic stock through off-label promotion of Infuse.

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. Many patients, however, have received Infuse in ways that were not FDA-approved (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.

Infuse has been the subject of controversy since roughly 2008. In December, Medtronic settled a U.S. Department of Justice lawsuit over Infuse for $23.5 million without admitting wrongdoing. The U.S. Senate Finance Committee and the California attorney general are also investigating Medtronic over its marketing of the bone growth product. Over the summer, The Spine Journal raised serious questions about the validity of the research that was used to gain FDA approval of Infuse. Medtronic Infuse injuries reported by The Spine Journal include ectopic or uncontrolled bone growth at or near the site of the surgery; ongoing or chronic radiating pain in the legs or arms; male sterility, retrograde ejaculation, or other uro-genital injuries; nerve injuries causing severe and chronic pain; and even cancer. In cervical spine surgeries some Infuse patients have experienced acute severe neck swelling several days after surgery resulting in death or permanent injury.

In November, Edward Carragee a prominent researcher and editor of The Spine Journal, warned that Infuse may be associated with a higher risk of developing cancer.

According to Mass Device, this latest shareholder complaint names former Medtronic CEO Bill Hawkins and current CEO Omar Ishrak as defendants. They, along with other company officers and directors, are accused of making misleading public statements to conceal that Medtronic was actively promoting off-label use of Infuse.

“Unbeknownst to shareholders, the company was risking adverse regulatory actions, investigations, lawsuits, and declining sales,” according to the shareholders’ complaint. “The improper statements and omissions have devastated Medtronic’s credibility.”

By artificially boosting the value of Medtronic shares, the company was forced to repurchase more than $2.8 billion of its own shares at inflated rates, the lawsuit claims.

Some of the same Medtronic officials were named in a separate shareholder lawsuit filed in 2009 by the Minneapolis Firefighters’ Relief Association and other institutional investors over the company’s promotion of Infuse. As we reported previously, that complaint alleges that Medtronic stock plunged 13 percent after it was forced to reveal that the U.S. Department of Justice was investigating the alleged off-label marketing of Infuse.

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