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Class Action Lawsuit over Infuse may Affect Medtronic Acquisition of Covidien

Oct 16, 2014

Medtronic's $43 billion acquisition of Covidien, which is already controversial, may be influenced by a class action lawsuit over its Infuse bone growth product. According to Star Tribune, if a jury rules in favor of the plaintiff, many patients may be able to sue over injuries. Medtronic has used the strategy of pre-emption to avoid numerous lawsuits over Infuse; pre-emption generally prevents consumers from suing over an FDA-approved product without allegations of fraud.

U.S. District Judge Tunheim has allowed class allegations over Infuse to proceed. According to Star Tribune, this decision could further damage Medtronic's reputation. The suit, which was filed on behalf of investors, alleges that Medtronic purposely deceived them by manipulating Infuse research which was done by doctors who were paid $210 by the company between 1996 and 2010.

The company in some cases also allegedly edited the results of the studies to overstate the benefits while hiding the risks, including abnormal bone growth into nerves, male impotence and cancer. The lawsuit alleges that Medtronic's actions artificially inflated the stock price through their actions, and those same actions caused the prices to drop substantially.

Judge Tunheim allowed attorneys to explore allegations that the company hid Infuse's side effects. The judge also allowed investors to pursue allegations that former Medtronic CEO William Hawkins intentionally misrepresented the product to stock analysts in order to cover up the fact that the FDA had refused to approve Amplify, another version of Infuse. 

Medtronic said it settled 950 Infuse lawsuits for $22 million in May. At the time, the company also said that it intends to set aside $120 million to $140 million to settle 3,800 outstanding cases. Thousands of patients have allegedly been injured by using Infuse off-label, or in ways not approved by the U.S. Food and Drug Administration (FDA).

Tunheim noted allegations that the company produced “multiple … investor-aimed publications” that utilized “reports on the efficacy and safety of Infuse,” despite being aware that the product is not safe or effective.

“Taken together,” Tunheim stated, “these pleadings adequately allege that investors would have relied on the strength of the early Infuse studies in choosing to invest in Medtronic.” He also denied Medtronic's motion to dismiss claims that a company “scheme to downplay risks in the clinical studies led to increased usage of Infuse and ‘explosive’ sales and revenue growth.”

There have been safety concerns surrounding Infuse ever since a group of spine experts publicly rebuked the product in an issue of the Spine Journal. The experts said that Medtronic-funded studies failed to mention a number of side effects. Later on, an investigation by the Senate finance committee found that the company edited studies promoting Infuse, and paid doctors millions in royalties and consulting fees.

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