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Former Drug Company CEO Sentence for Illegal Marketing

Published on Sep 13, 2015 at 11:27 pm in Product Liability.

Marketing surgical aides without prior approval and consent of the FDA is illegal, and to that end OtisMed Corp.’s former CEO was sentenced to prison for two years on Friday (24th July, 2015) for the unapproved distribution of knee replacement surgery guides under false pretense of being exempted from FDA’s pre-market notification for clearance.

Earlier Action

Both Charlie Chi and OtisMed Corp., a subsidiary of Stryker since it was bought in 2009, had pleaded guilty December last year and was fined $34.4 million in general, $5 million in criminal forfeiture, and an additionally agreed $41 million to close a related civil settlement.

The Problem

OtisMed’s device served as a guide that assisted surgeons in making accurate and correct bone cuts before placing the artificial knee prostheses in patients. However, the company marketed the device using claims that were not evaluated by FDA, making the promotional materials and ads illegal. In most cases, the FDA must approve medical devices to protect the public against unnecessary personal injuries.

OtisMed had submitted to the FDA a pre-market notification for clearance so that they could start conducting marketing of the device in 2008. However, the company’s submission was denied by the FDA as it stated that the device’s effectiveness or safety had not yet been proven. However, as the Department of Justice found, during the duration of the clearance, OtisMed started giving false reports about the device’s exemption from these pre-market requirements to the doctors and other related professionals.

While the board of the company decided to stop the shipping immediately, Chi went ahead anyway according to the Department of Justice. Chi and OtisMed admitted that that company had ordered these devices a week after the denial by the FDA.

The Lawyer and Stryker

Evidence revealed by the Department of Justice shows that last year, Chi had communicated to Modern Healthcare claiming that the devices were being shipped by OtisMed and the FDA had full knowledge of it.

Along with this, Stryker stated that it shows great importance to lawful and ethical conduction of its affairs, and that OtisMed conducted this criminal activity before it had been acquired by Stryker, and hence they had no prior knowledge of the incidence.

Claire C. Cecchi, the US District Judge in Newark, NJ, also ordered that Chi serve a year’s worth of supervised release and also pay a fine of $75,000.