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Home » CareFusion slaps Medtronic with anti-trust suit

CareFusion slaps Medtronic with anti-trust suit

March 26, 2010 By MassDevice staff

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CareFusion Corp. (NYSE:CFN) slapped Medtronic Inc. (NYSE:MDT) with a lawsuit accusing the world’s largest medical device maker of seeking a monopoly on the minimally invasive vertebral compression fracture market.

In a lawsuit filed in the U.S. District Court for Northern California, CareFusion accused Medtronic of scheming to keep competitors out of the market by the "acquisition of assets from third parties in an illegal attempt to monopolize, monopolization, and obtaining and acquiring knowingly invalid and unenforceable patents," according to court documents. "[Medtronic has] eliminated competition and obtained approximately 85 percent or more market share in the minimally invasive vertebral compression fracture treatment product market and approximately 97 percent or more market share in the alternative kyphoplasty product market."

The lawsuit also seeks a judgment that four related patents are either invalid or not infringed by San Diego-based CareFusion.

Vertebroplasty involves the placement of bone cement products into fractures of the vertebrae, which are commonly related to osteoporosis. In kyphoplasty, a balloon is used to create a void in the vertebrae before the bone cement is used. The void can also be created by cutting tools or other expandable devices.

The lawsuit alleges that Medtronic and its Kyphon Inc. subsidiary "continued to seek and obtain numerous patents for minor, trivial, and/or obvious modifications to its kyphoplasty procedures and/or the equipment used during a kyphoplasty procedure" and "actively sought to acquire additional patents related to the minimally invasive vertebral compression fracture treatment products, including kyphoplasty, from third parties as part of a scheme to eliminate and/or reduce competition in that market and in the alternative kyphoplasty product market," according to court documents.

The suit cites Kyphon’s $12.3 million acquisition of an exclusive license to 23 patents held by Dr. Peter Bonutti in 2002, its 2003 buyout of Germany’s Sanatis GmbH for $3.2 million, its 2005 deal to acquire five patents from Dr. J. Lee Berger for $1 million and a licensing deal for intellectual property held by Dr. Harvinder Sandhu that same year for an undisclosed amount. All were "part of [Medtronics’] scheme to eliminate competition" in the marketplace, according to the lawsuit.

It also charges Medtronic with artificially raising the price of its kyphoplasty products, including an alleged scheme to defraud Medicare.

"Kyphon embarked on a years-long pricing and marketing scheme that defrauded Medicare and enabled it to charge higher, inflated prices for its kyphoplasty products," according to court documents. The company, "to entice certain hospitals and doctors to pay these higher, inflated prices for its kyphoplasty products," allegedly "convinced those hospitals and doctors to keep patients receiving the kyphoplasty procedure overnight, even though kyphoplasty is typically an outpatient procedure, so that Medicare could be billed at a higher rate for an inpatient procedure."

"Kyphon’s pricing and marketing scheme, which was facilitated by its monopoly power, defrauded the United States government of millions of dollars," according to the lawsuit. "As a result of Kyphon ‘s illegal pricing and marketing schemes, Kyphon settled with the United States Department of Justice for $75 million."

The suit also alleges that Kyphon looked to hold on to its monopoly by trying to stifle competition using patent infringement lawsuits, including cases it filed against Disc-O-Tech Medical Technologies Ltd., which the companies settled before Kyphon bought Disc-O-Tech in December 2006. The Federal Trade Commission later forced Kyphon to sell off Disc-O-Tech’s Confidence line of bone cement injection products. Medronic bought Kyphon in 2007 for nearly $4 billion.

CareFusion, looking to enter the market, waited until a pair of Medtronic patents expired in February last year before launching its 8 Gauge Inflatable Bone Tamp kyphoplasty device, according to court documents, timing its Food & Drug Administration applications to the patents’ expiration. In response, the lawsuit alleges, Medtronic "issued numerous threatening statements directed towards CareFusion as part of Defendants’ scheme to eliminate competitors, and specifically CareFusion,” according to the lawsuit. The suit cites a number of media and analysts’ reports indicating an expectation that Medtronic would sue CareFusion once the product was launched and several statements by Medtronic CEO Bill Hawkins that the company planned to "vigorously defend and assert our IP against any of those that we have reason to believe are infringing our intellectual property."

In addition to judgments on the Medtronic patents, the lawsuit seeks damages for the alleged anti-trust violations.

Filed Under: Business/Financial News, Legal News, News Well, Orthopedics, Spine Tagged With: CareFusion Corp., Vertebroplasty

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