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Former OtisMed CEO Sentenced to Prison, Fined $75,000 for Selling Unapproved Knee Implant Guides

Jul 1, 2015

The former chief executive office of OtisMed Corporation, Charlie Chi, has been sentenced for shipping unapproved knee replacement cutting guides. According to the U.S. Food and Drug Administration (FDA), the U.S. District Court of the District of New Jersey sentenced him to 24 months in prison, one year of supervised release and fined him $75,000.

OtisMed agreed to an $80 million settlement last December in relation to the case, the FDA said in a press release. The company was accused of "distributing adulterated medical devices with intent to defraud and mislead" the release indicated. Chi pleaded guilty to those charges simultaneously.

George M. Karavetsos, director of the FDA's Office of Criminal Investigations, said "With more than 600,000 knee replacements performed each year, patients rely on FDA to help ensure that the devices are safe and work as intended. When manufacturers ignore FDA requirements, they risk endangering patients' health and quality of life," according to the release. "We will continue to protect the public health by bringing to justice those who disregard FDA regulations."

The device in question was marketed as a cutting tool used to help surgeons make precise bone cuts during total knee arthroplasty (TKA). The OtisKnee cutting guide used each patient' MRI. According to the FDA, however, this tool was sold without agency approval. More than 18,000 devices were sold between May 2006 and September 2009, garnering $27.1 million in revenue.

OtisMed sought pre-market notification for the OtisKnee in 2008. There were no prior attempts for approval, and the company fraudulently presented the device as being exempt from these regulations. The FDA denied the company's application in 2009, stating that the company did not have sufficient evidence to show the tool is safe and effective. OtisMed shipped 218 OtisKnee guides one week after the submission was rejected.

Today's sentencing of OtisMed's CEO ought to send a clear message to others in positions of authority within the medical device and pharmaceutical industries: the Department of Justice will vigorously prosecute not only corporations, but also the individuals at their helm who are responsible for endangering public health and safety in pursuit of profit," Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department's Civil Division said, according to the release.

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