Stryker Biotech Pleads Guilty to Misbranding Charge, Pays $15 Million Fine

A Stryker Corp. (SYK) unit agreed to plead guilty and pay a $15 million fine while the medical-device maker was on trial on charges it marketed an unapproved mixture of products for strengthening human bone growth.

The unit, Stryker Biotech, and three Stryker sales representatives were on trial in federal court in Boston on a 13-count criminal indictment claiming conspiracy and wire fraud. The trial began Jan. 9 with jury selection.

Stryker Biotech agreed to plead to one misdemeanor count of misbranding a medical device, according to a letter dated yesterday from the U.S. Attorney’s Office in Boston and filed with the federal court.

Prosecutors agreed to drop the case against Hopkinton, Massachusetts-based Stryker Biotech and won’t call Stryker Corp. President Stephen P. MacMillan to testify “in connection with current or future trial proceedings” in the case before Judge George O’Toole.

The government yesterday dropped charges against former regional sales manager David Ard of California, according to a motion filed by prosecutors. Attorneys for former national sales representative William Heppner of Illinois and ex-regional manager Jeffrey Whitaker of North Carolina have asked the judge to declare a mistrial. Mark Philip, former chief executive officer of Stryker Biotech from 2004 to 2008, is scheduled to go to trial later this year.

Sold to Surgeons

In a letter filed yesterday in court, the U.S. said Stryker Biotech made $12.5 million by misbranding and selling the bone growth mixture to surgeons over a two-year period.

The company could have faced a maximum fine of $25 million, Massachusetts U.S. Attorney Carmen Ortiz said in the letter.

The U.S. had charged Stryker Biotech with misbranding and its sales force with conspiring to defraud surgeons into combining the company’s OP-1 and OP-1 Putty with the bone filler Calstrux. Some patients suffered adverse side effects and required more surgery, the U.S. said.

“That mixture was never studied clinically,” Assistant U.S. Attorney Susan Winkler told the jury in her opening statement on Jan. 12. “They did not know if it worked. They did not know if it was safe, and they marketed it to doctors anyway.”

Narrow Exemption

The U.S. Food and Drug Administration allowed the company to supply its products under a narrow, provisional humanitarian exemption. The company had no FDA approval for mixing in Calstrux, which was later pulled from the market, the U.S. says. Stryker Biotech tracked 63 adverse events in more than 10,000 procedures involving the bone mixture, according to a defense attorney.

Ard’s attorney, Brent Gurney, said during the trial that Stryker Biotech’s products were safe. He displayed a chart showing that less than 1 percent of patients suffered any adverse events, of more than 10,000 surgeries involving the bone mix.

The case is U.S. v. Stryker Biotech LLC, 09-cr-10330, U.S. District Court, District of Massachusetts (Boston).

To contact the reporter on this story: Janelle Lawrence in Boston at jmlawrence@mac.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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