West Chester medical device manufacturer Synthes Inc. and its Norian Corp. subsidiary agreed Monday to plead guilty to felony charges related to illegally experimenting with a bone cement on human patients without FDA consent, and to pay fines of $23.2 million.
Synthes, a major employer in Chester County, also agreed to sell Norian and enter a corporate integrity agreement in a plea deal with the U.S. Attorney's Office and the Department of Health and Human Services.
Government documents say Norian tested a bone-repair cement on human spines without the approval of the Food and Drug Administration. Three people died during procedures and doctors could not rule out the Norian product as a cause. Four executives from Pennsylvania have pleaded guilty to charges in the case and are awaiting sentencing.
Forcing a divestiture of a business unit in a plea agreement was precedent-setting for the U.S. Attorney General's Office in the Philadelphia area, spokeswoman Patricia Hartman said Monday.
Officials with the Office of the Inspector General in DHHS said the divestiture should send a message to other health-care companies that Synthes' behavior had grave consequences.
"Criminal conduct can result in a company getting rid of part of their business," Greg Demske, a top official with the Inspector General, said Monday. "This is an egregious case, and it made us firm in our belief that we should draw a line here," he said.
If it remained a subsidiary of Synthes, Norian would be excluded from participating in Medicare and other government-funded health care programs, which would be potentially devastating to its business. According to a divestiture agreement released Monday by the U.S. Attorney in Philadelphia, Synthes has to sell Norian by May 24.
The assets of Norian would not be allowed to be transferred to another part of the Synthes "corporate family" as part of the divestiture, Demske said.
Synthes will update the government monthly on its plans to divest Norian, and if it fails to sell the company by the May deadline, it can be fined $10,000 a day. Several hundred people work for Norian, a Synthes spokesman said.
The improper experimenting and promotional practices took place between May 2002 and July 2004.
Synthes said it has cooperated with the government investigation that was announced in March 2006.
Aside from the fines, Synthes said it does not expect the settlement to have any significant financial impact on its results.
In a statement Monday, the company said: "Synthes remains committed to operating in accordance with the highest legal and ethical standards, and bringing closure to this matter will permit the company to focus on its mission to improve patient care."
Synthes, whose shares trade on the Swiss stock exchange, is one of the world's largest makers of surgical screws, plates, and implants. It reported revenues of about $1.8 billion for the first six months of 2010.
"The FDA approval process exists to make sure that medical devices that are used in the United States are safe and effective," said U.S. Attorney Zane David Memeger. "Device manufacturers have a legal obligation not to test their devices on humans without FDA oversight. This case is especially troubling because in search of greater profits, Norian bypassed this process."
Contact staff writer Bob Fernandez at 215-854-5897 or email@example.com.