Federal prosecutors blasted Stryker Corp.’s (NYSE:SYK) biotech subsidiary, its former president and three sales reps for seeking the dismissal of the bulk of the 16 criminal charges pending against them in a federal case alleging the illegal promotion of bone putties.
Hopkinton, Mass.-based Stryker Biotech, former president Mark Philip and the sales reps — national sales director William Heppner and regional managers David Ard and Jeff Whitaker — were indicted last year for allegedly promoting the off-label use of a pair of bone-growth products and lying to the Food & Drug Administration. Stryker and Philip were also charged with making false statements to the FDA.
Federal prosecutors last month declined to produce evidence the defendants claimed could clear them of the charges. Now they’re ripping into the defendants’ arguments, filed in September, that 12 of the 16 charges should be dismissed.
The indictment alleged that the defendants were part of a scheme to promote the combined use of a pair of separate bone-healing products, each granted a narrow, provisional “humanitarian device exemption” by the FDA. Combining the treatments and devices — the OP-1 Implant, OP-1 Putty and the bone void filler Calstrux — caused adverse effects in patients ranging from minor irritations to infections requiring follow-up surgeries. The indictment also charges that Stryker and Philip lied to the FDA about the number of patients treated each year with OP-1 Putty.
Under the terms of the HDE granted for the putty, no more than 4,000 units per year are permitted to hit the market. The defendants had argued that a count against Philip for allegedly concealing the fact that more than 4,000 units of the putty were used annually should also go by the board.
“Philips motion labors under the misapprehension that neither he (nor Stryker Biotech who employed him as its president) had a duty to the FDA, the government agency that regulated Stryker Biotech’s medical devices, to make truthful disclosures and/or keep truthful documents regarding the number of patients treated with OP-1 Putty,” the prosecutors retorted. “Stryker Biotech had such a duty, and [broke the law] by taking steps, including procuring a bogus legal opinion, to cover up the falsity of Stryker Biotech’s 2007 annual report to the FDA regarding OP-1 Putty, and conceal facts in connection with the to-be-filed 2008 annual report.”
The defendants had also moved to have a pair of wire fraud charges (over emails allegedly sent as part of the alleged scheme) dismissed because the emails "merely bounced off a Massachusetts-based computer server while in transit," according to court documents.
The feds countered that “venue is proper in any district where any part of the criminal conduct took place,” according to court documents.
“Venue is proper wherever the crime was begun, continued, or concluded,” the prosecutors wrote. “E-mails cross this country routinely over wire communication, and there is no good reason why they would be any less subject to the federal government’s wire fraud laws than older forms of communication.”
The defendants had also argued that another nine counts should be dismissed because the statute cited by the feds to back up the charges is too vague. Federal law requires that statutes be written clearly enough so that "men of common intelligence must necessarily guess at its meaning and differ as to its application."
On the contrary, according to federal prosecutors.
“[N]ot only would a reasonable person of ordinary intelligence understand that the [Food, Drug &Cosmetic Act] prohibited the defendants’ conduct,” they wrote, “but each of these sophisticated defendants worked in a highly regulated industry and specifically knew and understood that distributing widely varying recipes for mixing OP-1 and Calstrux constituted misbranding and would subject them to criminal prosecution and punishment, a prohibition they willfully chose to ignore.”
In August, Stryker Biotech agreed to pay $1.35 million to settle Massachusetts attorney general Martha Coakley for alleged false marketing and fraud over its bone growth products — less than 24 hours after the charges were filed.
