Medical Device Company Indicted for Off-Label Marketing and Statements Made to FDA During Regulatory Inquiry

19 June 2009 Publication
Author(s): Nathan A. Beaver Thomas F. Carlucci Pamela L. Johnston David L. Rosen Judith A. Waltz

Legal News Alert: Life Sciences

Medical device manufacturer Norian Corp. was indicted on June 16, 2009 for, among other things, several false statements the manufacturer’s personnel allegedly made to the FDA during an unannounced on-site regulatory inspection. The main criminal charges brought by the U.S. Attorney’s Office for the Eastern District of Pennsylvania focused on the allegedly improper testing, marketing, and sale of Norian XR and Norian SRS (types of bone cement), which were being used to treat spinal fractures. According to the indictment, Norian XR did not receive the required pre-approval from the FDA for a particular treatment. After three patients died during surgeries in which Norian XR or Norian SRS was used, the government alleged that the company failed both to provide proper notice to the FDA and to recall the product. The company has indicated that it cooperated during the government’s investigation. The fact that the company was indicted despite such cooperation should raise alarm bells for pharmaceutical and medical device companies subject to FDA regulation and under investigation by the U.S. Attorney's Office for the Eastern District of Pennsylvania.

Criminal Charges Against Defendants
The indictment first charges Norian with conspiring to defraud the United States and its agencies (18 U.S.C. §371) by allegedly circumventing the FDA’s processes regarding labeling, testing, and marketing. It further charges Norian with multiple felony counts due to materially false and misleading statements made to FDA personnel (18 U.S.C. §1001) by several employees and executives. Additionally, Norian is charged with multiple felony counts — and its parent company, Synthes, with multiple misdemeanor counts — of shipping adulterated and misbranded medical devices into interstate commerce (21 U.S.C. §331(a), §§333(a)(1)-(2), and §352(a)). Four Synthes executives each are charged with one count of the same misdemeanor for misbranded drugs.   

In support of the criminal charges, the government alleges that the defendants participated in the illegal testing, marketing, and sale of Norian XR and Norian SRS for the intended use of treating spinal fractures called vertebral compression fractures (VCFs). According to the indictment, Norian XR did not receive the required pre-approval from the FDA for VCF treatment; in fact, the product’s label contained a warning that it was not intended for such treatment. Further, the defendants allegedly marketed Norian XR to physicians but did not inform the physicians that (i) the product label stated that it was not intended for VCF treatment and (ii) pilot test information indicated that use of the product in spinal surgeries could cause dangerous blood clots. When three patients died during surgeries in which Norian XR or Norian SRS was used, the government contends that the defendants failed both to provide proper notice of the deaths to the FDA and to recall the product.         

Allegations of FDA Regulatory Circumvention and Off-Label Marketing
The indictment essentially claims that the company engaged in off-label marketing and circumvented the regulatory clearance or approval processes set in place by the FDA. The FDA regulates the manufacture, labeling, and shipment of medical devices in order to ensure that such devices are sufficiently safe and effective for their intended uses. A manufacturer of a new device must obtain clearance or approval from the FDA prior to marketing the device. Clearance or pre-approval of a device is largely substantiated by physical and clinical testing and may not be obtained unless the device’s labeling sufficiently describes the device, its intended use, and directions for such use. Manufacturers must submit an investigational device exemption (IDE) and obtain the FDA’s permission before conducting clinical trials on medical devices that pose potentially serious risks to the health, safety, or welfare of a patient. The FDA must be notified if the investigational medical device causes or is suspected to cause death or serious injury in patients during clinical testing. Manufacturers that market a device for a non-sanctioned use without required clearance or pre-approval are considered to be marketing an adulterated or misbranded device in violation of 21 U.S.C. §331(a), §§333(a)(1)-(2), and §352(a).

Practical Advice for Companies
The indictment of Norian, its parent company Synthes, and its executives emphasizes the importance of anticipating the FDA’s requirements and approach to the handling of medical devices as well as the willingness of the government to prosecute individuals and companies when the government believes that there has been inappropriate off-label marketing. It is worth noting that although the total net sales of Norian XR only amounted to approximately $400,000, Norian and Synthes face up to $26 million and $8.8 million in fines, respectively. If convicted, Synthes executives may spend time in prison and pay monies.

The facts alleged in the indictment also provide an effective reminder of how crucial a company’s first interaction with a government agency can be, even when that interaction appears at the time to be solely regulatory or civil in nature. As indicated above, several of the counts in the Norian indictment are based on allegations of false statements made to an FDA investigator during an unannounced on-site inspection of Norian. Many companies have compliance policies that address what to do in the event of a government inquiry. Such policies should direct company personnel to reach out and consult immediately with counsel. Mistakes made during a regulatory or civil inquiry may cause serious problems for a company at a later time. This could be a prelude to further significant investigations, enforcement actions, and indictments against pharmaceutical and medical device companies under the new leadership at the FDA.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:

Thomas F. Carlucci
Partner, White Collar Defense Practice
San Francisco, California

Pamela L. Johnston
Chair, White Collar Defense Practice
Los Angeles, California

Nathan A. Beaver
Partner, FDA and Public Policy Practices
Washington, D.C.

David L. Rosen
Chair, FDA Practice and Co-Chair, Life Sciences Industry Team
Washington, D.C.

Judith A. Waltz
Partner, Health Care Industry Team and Co-Chair, Life Sciences Industry Team
San Francisco, California

Richard K. Rifenbark
Senior Counsel, Health Care Industry Team
Los Angeles, California