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Stryker Corp. Reports Another Kickback Investigation

Mar 13, 2008 | Parker Waichman Alonso LLP

Stryker Corp., the medical device maker that recalled hip implants earlier this year, is the subject of yet another investigation regarding kickbacks it allegedly paid to physicians.  This time, Stryker is being investigated by the Department of Justice for violations of the Foreign Corrupt Practices Act, which covers bribes made overseas.

Stryker informed investors in a Securities and Exchange Commission filing that  the Justice Department requested documents from Jan. 1, 2000, to the present, regarding possible violations of federal criminal and antitrust laws. Stryker Orthopedics Inc. of Mahwah, N.J., one of five companies implicated in a $230 million kickback scheme in which physicians were paid consulting fees to endorse or prescribe their products, is being examined by the U.S. Justice Department.

A recently completed New Jersey Attorney General's Office probe alleged the companies paid U.S. physicians lucrative fees for nominal services between 2002 and 2006. Stryker Orthopedics cooperated with prosecutors and escaped a fine, but agreed to federal monitoring for 18 months. The other companies, Zimmer Holdings Inc., Depuy Orthopaedics Inc., Biomet Inc. and Smith & Nephew Inc. agreed to a $311 million settlement with the Justice Department and the U.S. Department of Health and Human Services.

In January, Stryker Corporation issued a  recall of its Trident Hip Implants just days after the Food & Drug Administration (FDA) posted a warning letter on its website regarding serious deficiencies at its New Jersey plant.  The Stryker hip implant components involved were manufactured at the company’s facility in Ireland, which was also the subject of an earlier FDA warning letter.

The FDA implemented a review of the Stryker plants after receiving an unusually high number of complaints from patients receiving Stryker hip implants.  Since 2005, patients receiving Stryker hip implants have reported a wide range of disturbing problems, including pain, difficulty walking, and “squeaky” joints.  Some patients have had pieces of the implant parts break off or wear down unevenly.  Following these reports, the FDA inspected both the Mahwah, New Jersey and Cork, Ireland plants where most of the Stryker hip implants sold in the US are made.

The FDA reports and letters cited several violations at the Ireland plant, including missed deadlines to fix failures, not following procedures for testing problematic products, and not documenting risk.  Stryker received another letter from the FDA regarding the New Jersey facility that warned of deficiencies uncovered during an inspection that had contributed directly to the manufacture of the faulty Stryker hip implants.  This FDA letter described a range of deficiencies that included “clusters” of Staphylococcus bacteria, the pathogen that causes staph infections.  Staphylococcus bacteria was found throughout the plant and the warning letter stated repeatedly that Stryker had “failed to perform corrective and preventive actions in order to prevent the recurrence of nonconforming product or other quality problems.”  For instance, regarding the bacterial contamination, the letter states that Stryker had ‘not identified the root causes of the microorganism contamination and has not executed corrective and preventive action to prevent recurrence.”