A purported class-action racketeering lawsuit filed this week accused Boston Scientific (NYSE:BSX) of illegally smuggling counterfeit resin made in China to make pelvic mesh, after its original supplier allegedly refused to continue providing the product because it’s not supposed to be implanted in humans.
The lawsuit was filed Jan. 12 in the U.S. District Court for Southern West Virginia, the venue for multi-district litigation against a clutch of companies over their respective mesh products for treating female urinary incontinence and pelvic organ prolapse.
Plaintiff Teresa Stevens alleged that Marlborough, Mass.-based Boston Scientific conspired with subsidiaries in Belgium and Ireland to use the counterfeit resin to make the Advantage mesh used in all of its pelvic mesh products.
Boston Scientific told CNNMoney that “patient safety is of the utmost importance, and we dedicate significant resources to deliver safe, high-quality products. We don’t believe the case has merit and intend to vigorously defend these claims.”
Boston Scientific won 510(k) approval from the FDA in 2002 for the Advantage Mesh, Advantage Fit and Lynx mesh products, manufactured using the Marlex polypropylene resin made in Texas by a joint venture between Chevron and Phillips, the lawsuit alleged.
But by 2005, Phillips allegedly decided to stop supplying Marlex to Boston Scientific because it’s not compatible with human tissue. By 2011, Boston was running out of Marlex and projected it would have none by the fall of 2012. At stake, according to the complaint, was the $120 million worth of pelvic mesh products Boston Scientific sold each year.
“After failing to convince the manufacturer, Phillips, to sell it any more Marlex, BSX made the fateful decision to smuggle counterfeit Marlex out of China,” according to the complaint.
The company then allegedly bought 34,000 pounds of polypropylene resin from a Chinese firm, EMAI Plastic Raw Material Co. of Guandong, projecting that it would be enough to last until 2032. The companies allegedly conspired to put counterfeit labels, including fake lot numbers, designed to look like Phillips markings, on the Boston Scientific product and then allegedly “overbagged” the shipments with blank labels to get them past Chinese and U.S. customs.
From June 2011 through the fall of 2012, the lawsuit alleged, the resin was sent to Belgium’s Luxilon Industries to be made into filament, which was then sent to Ireland for further processing by Proxy Biomedical. Finally, the allegedly counterfeit resin was shipped to Indiana for final mesh fabrication by Medventure, according to court documents.
“Interestingly, Boston Scientific appears to have approached this problem like a drug deal,” the lawsuit alleged, citing the alleged decision to split the 34,000 pounds into 5 separate shipments to different locations.
“Despite defendants’ knowledge that the Chinese material was adulterated and/or counterfeit, BSC, EMAI, Proxy and Luxilon continued with the purchase, distribution, manufacturing, advertising, packaging, labeling and selling the counterfeit mesh, along with the counterfeit bagging and/or marking, which resulted,” the lawsuit alleged.
The complaint charges Boston Scientific and co-defendants EMAI, Luxilon and Proxy with racketeering, mail fraud, wire fraud, intentional and negligent misrepresentation, unfair and deceptive acts and practices, fraud and unjust enrichment. Stevens asked Judge Joseph Goodwin for a jury trial, temporary and permanent injunctions barring the manufacture and sale of products using the allegedly fake Marlex, a warning to the public about it, punitive and consequential damages, legal costs, pre- and post-judgment interest and a temporary restraining order.
Goodwin declined to grant the temporary restraining order, ruling that Stevens’ counsel never told Boston Scientific’s attorneys that a motion for the TRO was planned, as strictly required by federal law, according to the documents. Goodwin reserved judgment on Stevens’ motion seeking a preliminary injunction.
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