Medical Device Lawsuit Watch - July 2006

This summary of key lawsuits affecting medical devices is provided by the Health Care Law Group of Crowell & Moring LLP, in collaboration with the firm’s Torts, Antitrust and Intellectual Property Law Groups. 

Cases in this issue:

• In the Matter of Hologic, Inc.
• United States v. 7,140 Boxes
• Kennedy v. Medtronic, Inc.
• Falls v. Medtronic Inc.
• Riegel v. Medtronic Inc.
• May v. Medtronic Inc.
• Stanger v. Smith & Nephew, Inc.
• United States ex rel Fry v. Guidant Corp.
• Chlopek v. Breg, Inc.
  

In the Matter of Hologic, Inc. FTC File No. 051-0263 (7/7/06)

On July 7, 2006, the Federal Trade Commission announced that it will require Hologic, Inc. to divest to Siemens AG all of the prone stereotactic breast biopsy systems (SBBSs) business Hologic acquired from Fischer Imaging Corporation in 2005. SBBSs are integrated systems that allow for highly precise, minimally invasive breast biopsies through the use of X-ray guidance. The FTC’s vote to approve the divestiture was 5-0.

Hologic paid over $30 million to Fischer to acquire all of Fischer’s intellectual property and other business assets related to its mammography and breast biopsy businesses. At the time of the acquisition, Hologic and Fischer were the only two major manufacturers of prone SBBSs in the U.S. market. The terms of the acquisition required Fischer to relinquish all of its rights to develop and sell SBBSs in the U.S., which, according to the FTC, gave Hologic a virtual monopoly of the U.S. prone SBBS market.

According to the FTC’s complaint, Hologic’s acquisition of Fischer’s SBBS business violated Section 7 of the Clayton Act and Section 5 of the FTC Act, because it eliminated Hologic’s only significant competitor in the U.S. market for prone SBBSs. The FTC found that there was only one other firm participating in the SBBS market, which was not a significant competitor and was not likely to become one due to lack of access to critical SBBS patents and lack of infrastructure, track record, and reputation. Additionally, the FTC found that significant barriers would prevent new entrants to the market, including the strength and breadth of Hologic’s patent portfolio, and research, development, and regulatory obstacles.

The order requires Hologic to divest to Siemens AG all of the prone SBBS assets Hologic acquired from Fischer within 5 days from the consent order being accepted for public comment. Hologic will have a license to use Fischer’s prone SBBS patents, to ensure that it can continue to compete in the market following the divestiture. If the FTC determines that Siemens AG is not an acceptable purchaser of the prone SBBS assets, or that the manner of divestiture is not appropriate, the FTC retains the authority to undo the divestiture and order the assets divested to another FTC-approved purchaser within six months of the order becoming final.

ate Finance Committee investigation into FDA’s approval of the device, and evidence that journal articles lauding use of the device were either written or published by physicians who had ties to Cyberonics.

 

United States v. 7,140 Boxes No. 05-C-5852 (N.D. Ill. 6/29/06)

On June 29, 2006, the District Court for the Northern District of Illinois approved a consent decree between Baxter Healthcare Corp. and the United States, resolving allegations that two of Baxter’s top-selling infusion therapy pumps were flawed and violated the Food, Drug, and Cosmetics Act.

The suit was filed last fall, when FDA agents seized over 7,000 intravenous infusion pumps. The seizures followed an FDA probe of Baxter’s Colleague Volumetric Infusion Pumps and Syndeo PCA Syringe Pumps, after timing malfunctions, design defects, and device failures were believed to be involved in eight patient deaths and 16 serious patient injuries. The government alleged that the methods and controls used for the manufacture, packing, storage, and installation of the pumps did not conform to the government’s regulation for the devices or current standards for good manufacturing practices.

The consent decree requires Baxter to take all necessary measures to either bring the devices and the facilities that process, pack, label, hold, or distribute the devices into compliance with federal current good manufacturing practices (“CGMP”) and the Quality System Regulation (“QS”), or destroy any noncompliant devices. The decree also requires Baxter to post a bond in the amount of $20 million to ensure the company’s compliance with all of the terms and conditions of the decree. FDA will continue to monitor Baxter’s activities through review and approval of the company’s written proposals for reconditioning, salvage, and destruction of the devices, approval of corrective action plans, and continued inspections of Baxter’s devices and facilities.

If corrective action under the decree is completed and the FDA approves the company to resume manufacturing and distribution of the pumps, Baxter must hire an independent expert to conduct annual inspections and audits at Baxter’s facilities for at least four years.

Kennedy v. Medtronic, Inc. No. 1-04-1621 (Ill. App. 2d 6/06/06)

An appeals court in Illinois affirmed a lower court’s finding that a pacemaker manufacturer, Medtronic, Inc., did not owe a duty of care to a patient who was implanted with a pacemaker device in an outpatient clinic. The patient’s daughter filed suit against the doctors and the clinic, as well as Medtronic, alleging that the manufacturer was negligent in selling the pacemaker to the implanting physician and by participating in and assisting in the outpatient procedure.

During the procedure, a Medtronic sales representative was present to ensure that the device’s lead parameters were correctly calibrated and functioning properly. Doctors performing the surgery, however, implanted the pacemaker lead into the wrong ventricle, and the patient died about four months after his surgery.

The district court granted summary judgment for Medtronic and the other medical defendants settled with plaintiff later. On appeal, plaintiff argued that Medtronic owed her father duties of care: (1) to refrain from providing a pacemaker to the doctor and from participating in the insertion of the device when she knew the procedure would take place in an inadequate facility; (2) to warn of the dangers inherent in proceeding with the surgery under the conditions present; and (3) to assist with the insertion in a reasonable manner once it voluntarily undertook to participate. The appeals court held that the Medtronic representative present during the surgery owned no duty to the patient, as the representative was not responsible for the insertion of the pacemaker and lead and could not make a judgment as to where the lead was placed. The court found it significant that the doctor had admitted that he deviated from the standard of care by inserting the non-defective pacemaker lead into the left ventricle of the patient’s heart. The misplacement of the lead was not reasonably foreseeable to Medtronic and the misplacement could have just as easily occurred in a hospital as in the outpatient clinic.

The court also emphasized the significant burdens that would arise from imposing a duty on Medtronic. According to the court, imposing a duty would have the effect of “plac[ing] a medical device manufacturer . . . in the middle of the doctor-patient relationship.” The court declined to run the risk of imposing additional liability on the manufacturer in the event a physician was not in a position to implant a device and the patient suffered adverse medical consequences because it did not have access to the needed device.

Falls v. Medtronic Inc. No. 06-10, (E.D. Ark. 5/18/2006)

The District Court for the Eastern District of Arkansas recently held that the widow of an Arkansas man did not have to "revive" her heart device claims against Medtronic Inc. under state law. The plaintiff’s husband had a Medtronic defibrillator implanted in him when he died in January 2005. In January 2006, his widow filed a complaint against Medtronic, alleging that the defibrillator was defective and caused her husband's death. Medtronic had moved to dismiss on the grounds that under Arkansas law, the plaintiff had failed to revive her action within one year of the date of her husband's death.

The judge found that "Falls commenced this action after her husband's death, and there is no allegation that [Mr.] Falls ever commenced a lawsuit against Medtronic on the same cause of action before he died. Accordingly, the Arkansas revivor statute has no application in this case."

The judge rejected Medtronic's argument that under Arkansas case law, the revivor statute applied to all existing causes of action at the time of a decedent's death that might later be brought in a survival action. She said that in the case cited by Medtronic, the decedent was a party to a suit before he died and the widow's claim was derivative of that action.

Riegel v. Medtronic Inc. No. 04-412 (2nd Cir. 5/16/2006)

The Second Circuit recently ruled that certain state common law claims involving a medical device approved through the FDA’s pre-market approval process (PMA) are preempted.

The ruling involved a patient who underwent coronary angioplasty, in which a doctor attempted to remove calcium deposits from an artery with a rotoblator device and tried unsuccessfully to open to the artery with a Medtronic Inc. Evergreen balloon catheter. The doctor later admitted that he inflated the Medtronic catheter several times up to a pressure of 10 atmospheres, two more than its established burst pressure. The balloon catheter did burst, and the patient was left with severe and permanent injuries. The patient and his wife filed suit in a district court in New York, but the judge found that most of their claims were preempted and granted summary judgment for Medtronic.

On appeal, the Second Circuit held that tort claims alleging liability from PMA-approved devices that adhered to the standards upon which they obtained pre-market approval from the FDA are preempted by the Section 360(k)(a) of the Medical Device Amendments (MDA). That provision prohibits states from imposing requirements that are “different from or in addition to” federal requirements. The Second Circuit found that in some cases, state common law claims constitute different or additional requirements.

Among plaintiffs’ preempted claims were strict liability, breach of implied warranty, and several negligence claims. The Second Circuit also held, however, that plaintiffs’ negligent manufacturing claims were not preempted because they pertained to whether the precise catheter at issue met the device-specific requirements. The court held that tort claims based on a manufacturer’s departure from the standards set forth in the device’s approved PMA application are not preempted. Yet, in this case, there was no genuine issue of material fact that the catheter was not manufactured in accordance with PMA-approved standards.

In a strong dissent, Judge Rosemary S. Pooler argued that because the MDA does not provide a federal remedy for injured consumers, the majority’s decision on preemption would deprive those who were injured by an unreasonably dangerous medical device of any remedy whatsoever. Judge Pooler also questioned FDA’s ability to do an adequate job of ensuring the safety of medical devices. In response, the majority opined that FDA’s success in carrying out its responsibilities is a policy matter best left to Congress and the Executive branch to address.

May v. Medtronic Inc. No. 05-794 (D. S.C. 5/15/2006)

On May 15, after the district court judge agreed to seal certain sensitive records, Medtronic Inc. settled litigation pending involving its SynchroMed® EL implantable drug pump. Plaintiff Hunter W. May III, who used a Medtronic SynchroMed EL pump to deliver cerebral palsy medication, claimed that the device was defective. Mr. May filed a complaint against Medtronic Inc. and subsidiary Medtronic Neurological for strict liability, negligence and breach of warranty.

Before agreeing to settle, Medtronic moved to seal "traceability records" that "traced each step of the manufacturing process for each SynchroMed® EL Pump. Medtronic claimed that the traceability records contained proprietary information that, if disclosed, would put it at an unfair competitive disadvantage. Judge Herlong stated that "[t]he traceability records contain confidential and proprietary information that would damage Medtronic's business if disclosed. . . . [t]herefore, the court finds that Medtronic's interest in non-disclosure of proprietary information outweighs the public's right of access to these documents." As such, the judge allowed the traceability records to be sealed.

Judge Herlong said that the "less drastic" alternative of redacting the documents "would render them meaningless."

Stanger v. Smith & Nephew, Inc. Case No. 04-839 (E.D. Mo. 5/4/2006)

On May 4, 2006 the District Court for the Eastern District of Missouri reversed an earlier decision and ruled that plaintiffs were not entitled to punitive damages from Smith & Nephew. In November the Court granted summary judgment to plaintiffs, finding that Smith & Nephew knew that gamma irradiation sterilization of the ultra-high molecular weight polyethylene tibial insert caused the polyethylene to oxidize over time, delaminate and fail. However, the Court has now ruled that punitive damages are not warranted in this case.

In a negligence case, punitive damages may be awarded only if, at the time of the negligent act, the defendant knew or had reason to know there was a high degree of probability that the action would result in injury. Punitive damages are imposed for the purpose of punishment and deterrence. The Court found that at the time the particular tibial insert was placed in the stream of commerce, Smith & Nephew did not know or have reason to believe that gamma sterilization may cause delamination of the insert over time. Thus, the device was not sold with knowledge with that it was defective at the time it was sold. And while Smith & Nephew had a continuing duty to warn of the possibility of premature failure and was negligent in doing so, such negligence does not rise to the level required to impose punitive damages.

The parties settled the claim on May 13, 2006, two days before trail was scheduled to begin.

United States ex rel Fry v. Guidant Corp. No. 03-842 (M.D. Tenn. 4/25/2006)

On April 25th, a federal judge permitted a qui tam relator to proceed with his suit alleging that Guidant Corp. defrauded the federal and various state governments by concealing device warranty programs, but dismissed similar claims against Medtronic, Inc. The suit was brought by Robert Fry, a former Guidant sales representative.

The activity underlying the lawsuit involved the disposal of limited warranties that were included inside the sealed containers in which implantable heart devices are shipped. Device sales representatives are typically present during implant procedures, and according to Fry, it is the practice of the salesperson to open and remove the device from the sealed container and to dispose of the container and the warranty in the garbage. The warranties included information on credits available to hospitals for replacement devices, which substantially reduce the costs of replacement. According to the allegations in the complaint, the disposal of the warranty prevented the hospital from becoming aware of or pursuing the warranties or credits. As a result, the full replacement costs were passed on to the Medicare and/or Medicaid programs, and the device companies were paid the full cost of replacement and improperly retained the unclaimed credits as profit.

Fry filed his initial complaint in September of 2003, alleging violations of the False Claims Act. In July of 2004, Fry filed an amended complaint adding Medtronic Inc. as a defendant, adding another Guidant sales representative as a second relator, and asserting claims under federal and state anti-kickback statutes and state false claims acts. After the court unsealed the complaint, Guidant and Medtronic both filed motions to dismiss for various pleading deficiencies and jurisdictional restrictions under the False Claims Act (“FCA”).

The court first addressed Fry’s attempt to add a second relator plaintiff, which the Defendants argued was barred by the “first-to-file” rule under the FCA. Fry argued that the second relator merely confirmed and supplemented his allegations, and was not attempting to intervene or bring a related action. The court agreed with Defendants, stating that the first-to-file rule furthers the important policy rationale of barring duplicative claims.

The court then proceeded to address Defendants motion to dismiss for Fry’s failure to plead his fraud claims with particularity. Defendants argued that the allegations Fry sought to add were barred by the FCA’s first-to-file and public-disclosure rules. Fry had obtained the evidence from documents disclosed to him by the Tennessee attorney general and from patients. Without the filing of the qui tam case at issue, the Court found that the evidence would not have surfaced, and had therefore not been “publicly disclosed” for the purposes of the FCA. According to the court, to hold otherwise would force plaintiffs to waive their rights to discovery for fear of disclosing information that would bar the claims for which they sought discovery in the first place.

Finally, the court addressed the claims against Medtronic. The court agreed that these claims were jurisdictionally barred under the public-disclosure rule, because Fry’s second amended complaint disclosed the existence of a previous qui tam action against Medtronic involving the same fraudulent scheme. The court disagreed with Fry that because his claims were based on different facts than the previous action, that he was an original source.

The court concluded that Fry could proceed with his claims against Guidant, but that all claims against Medtronic were dismissed.

Chlopek v. Breg, Inc. No. 05-545 (W.D. Wis. 4/25/2006)

In April, a jury in Wisconsin found that Breg Inc., the manufacturer of a cooling device, did not fail to warn patients adequately about the device and that the device was not defective and unreasonably dangerous. The jury’s verdict came in a case in which a woman lost two of her toes after using the device.

Plaintiff had undergone surgery on her big toe in May, and her doctor subsequently prescribed a “Polar Care 300” cooling device to reduce pain and inflammation. After using the device, Plaintiff experienced discoloration in two of her toes; they eventually had to be amputated. Plaintiff alleged that the device caused her skin to become too cold and caused frostbite, and that Breg provided inadequate warnings in not telling patients how long to use the device.

At trial, Breg argued that its product was safe and effective when used properly. According to the company, neither Plaintiff nor her doctor ever read the device’s instructions or warnings, and that Plaintiff’s claims were barred by the “learned intermediary” doctrine. The company also claimed that plaintiff was destined to lose her big toe, because of her four prior foot surgeries which resulted in bone loss and tissue damage.

The jury ultimately found that the device was not defective or unreasonably dangerous. Plaintiff has moved for a new trial.

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This material was prepared by Crowell & Moring LLP attorneys Chandra Westergaard Snyder, Jennifer Burdman, Jessica Hall, Lauren Kim and Heather Good. It is made available on the Crowell & Moring website for information purposes only, and should not be relied upon to resolve specific legal questions. If you have questions or want additional information, please call your regular Crowell & Moring contact or you may contact the editor of Medical Device Lawsuit Watch.