An independent panel tasked with evaluating lawsuits filed against Medtronic (NYSE:MDT) over its Infuse bone graft product is asking state and federal courts in Minnesota to dismiss the complaints after finding no evidence that the medical device giant "designed and executed a scheme to evade the FDA’s prohibition against off- label promotion in order to increase the sales of Infuse."
The shareholder and derivative lawsuits accuse Medtronic and its leadership of breaching their fiduciary duty with an alleged scheme to drive off-label sales of Infuse, a recombinant bone morphogenetic protein used to promote bone growth in spinal fusion surgeries. Medtronic created a "special litigation committee to evaluate its duties in light of the lawsuits, according to a regulatory filing.
The panel, created in August 2012, initially consisted of John Matheson, a law professor at the University of Minnesota; and former Minnesota state Judge George McGunnigle; and former Utah Gov. Mike Leavitt (Leavitt stepped down in December 2012, citing a potential conflict of interest stemming from his service as secretary of the U.S. Health & Human Services Dept.). The panel tapped law firm Gaskins Bennett Birrell Schupp as independent counsel for the investigation, according to its report.
After an 18-month investigation into the various lawsuits filed in 2012 and 2013, the panel found in its May 30 report that "it would not be in Medtronic’s best interests to set forth detailed factual findings on the claims made in the demand letters and derivative complaints, as Medtronic is a defendant in ongoing federal securities fraud and personal injury litigation involving similar allegations."
"Nevertheless, the SLC has determined that it is important to clearly state this finding: it has not found support for and rejects the core proposition of the demand letters and derivative complaints – that Medtronic, with the knowledge and complicity of the defendants, designed and executed a scheme to evade the FDA’s prohibition against off- label promotion in order to increase the sales of Infuse," the panel wrote in the report. Medtronic settled 1 shareholders lawsuit in 2012 for $85 million, admitting no liability.
The panel said it has already moved for dismissal in the shareholder derivative suits filed in Minnesota state court, where a hearing in case is slated for July 2. The SLC also said it plans on June 14 to move for the dismissal of a similar derivative case pending in the U.S. District Court for Minnesota. Finally, the committee "will inform the shareholders who made demands that it rejects those demands as not being in Medtronic’s best interests," according to the report.
The panel also found that Medtronic in 2003 noted reports of serious adverse events stemming from off-label use of Infuse in anterior cervical spine surgeries.
"In 2003, Medtronic noticed that it was receiving reports of serious adverse events when surgeons used Infuse in anterior cervical spine surgeries. The events were few in number, but the seriousness of the swelling caught Medtronic’s attention. Because the cervical spine is located in the neck, even slight swelling could affect a patient’s ability to breathe. Medtronic had insufficient data to indicate whether these swelling events were happening every time surgeons used Infuse in the cervical spine or only infrequently, because there was no official or reliable reporting available showing how many surgeons used Infuse in anterior cervical procedures," according to the report.
The Fridley, Minn.-based company asked the FDA for permission to add a warning to the labeling for Infuse about "the possible serious complications when using Infuse in the cervical spine," the panel wrote.
"Initially the FDA resisted; it worried that a warning might paradoxically encourage the off-label use of Infuse in the cervical spine. The FDA formally denied Medtronic’s request for a warning on July 26, 2004," according to the report. "Medtronic persisted in its pursuit of FDA approval for such a warning. On September 14, 2004, Medtronic sent out a letter (commonly referred to in the industry as a ‘Dear Doctor’ letter) to all of the surgeons it believed might perform cervical fusions with or without Infuse. Medtronic worked with the FDA to finalize the language of the letter, create a surgeon distribution list, and confirm receipt. The ‘Dear Doctor’ letter informed surgeons that Medtronic had received reports of serious adverse events when surgeons used Infuse in the cervical spine, described them, and reiterated that the FDA had not approved Infuse for use in cervical surgeries. Not long after, the FDA allowed Medtronic to add the warning to the Important Medical Information about using Infuse in the cervical spine."
By late 2005, the report found, Medtronic had reinforced strict bans on off-label promotion for all employees. Although sales reps could "provide routine technical support" in the OR during off-label surgeries to "ensure that patient safety remained the highest priority," the panel wrote, they were forbidden from introducing the topic of off-label uses and instructed to refer and questions or requests for information on off-label uses of Infuse to Medtronic’s Office of Medical Affairs.