Medtech titan Medtronic (NYSE:MDT) found itself the target of yet another shareholder lawsuit, lodged over complaints associated with the company’s long-troubled Infuse bone morphogenetic protein.
Shareholders on Thursday filed a complaint against the company and certain of its officers, accusing them of knowingly downplaying possible dangers of the Infuse product in order to artificially inflate stock prices. The lawsuit, led by an unnamed "institutional investor," claims that Medtronic and its leadership made misleading statements about Infuse and its use in pain management and degenerative disc disease treatment.
"The true facts, which were known by defendants but concealed from the investing public during the class period, included that the company had engaged in a scheme with certain researchers to downplay the risks and side effects associated with Infuse and that once those risks were fully appreciated by surgeons, use of the product would drop significantly," according to a press release issued by the law firm Robbins Geller Rudman & Down LLP. "As a result of defendants’ false statements, Medtronic’s stock traded at artificially inflated prices during the class period, reaching a high of $43.20 per share on May 18, 2011."
The new lawsuit cites the newly released data from a Yale study, in which researchers concluded that the Infuse product was safe as the other so-called "gold standard" treatments Anthe market, but that the studies that originally supported it were biased.
Medtronic paid $2.5 million to Yale and provided all of the data in its possession on Infuse for the studies, carried out by teams at England’s York University and the Oregon Health & Science University, after a controversial June 2011 issue of the Spine Journal claimed that the risk of adverse events with Infuse could be as high as 50%. The researchers didn’t assess the reliability of the early Infuse research articles, but the Oregon group’s review concluded that the early Medtronic-sponsored trials were biased.
The study spurred a flurry of editorials, including one which called for the resignation of the Spine Journal editor Dr. Eugene Carragee, who in June 2011 reviewed and published some of the early Infuse studies. It was a matter of days before shareholders took to a Minnesota District Court to file a complaint.
The controversy over the Infuse product, which has at times included allegations of off-label marketing, blew up over the summer of 2011 when the Spine Journal dedicated its entire June issue (PDF) to exposing problems with growth proteins, including a repudiation of some of the research surrounding Infuse.
The journal’s investigation concluded that 13 studies (published by authors who collectively received millions from Medtronic) downplayed or omitted entirely evidence of safety risks from Infuse. The actual rate of "frequent and occasionally catastrophic complications" associated with the product was between "10% to 50% depending on approach."
The ensuing clamor spurred federal investigations into allegations that Medtronic’s paid consultants may have concealed Infuse’s risks. In the fall of 2012 a U.S. Senate report blasted Medtronic over its handling of the Infuse product, saying the company deliberately obscured evidence of adverse events and promoted off-label use of the product and paid out millions to the doctors who co-wrote positive studies, charges that the company "vigorously" denied.
The Infuse bone growth protein has been on the U.S. market since 2002, when the FDA approved the product for use in the lower spine. Lawsuits have accused Medtronic of illegally marketing the device for use in the neck, but a years-long criminal and civil investigation closed in May 2012 without finding evidence of wrongdoing.
MDT shares were up 1.1% to $85.18 as of about 1:10 p.m. today.