Infuse Issues Trigger New Shareholder Lawsuit
Medtronic, the maker of the Infuse bone graft device, faces a new lawsuit over the marketing of its Infuse product, but this time it’s not from patients, but from shareholders. A class action suit filed in federal court in Minneapolis accuses the company of purposely making misstatements to analysts to hide their knowledge that the FDA was going to refuse to approve the “next-generation” of Infuse, a bone graft device called Amplify.
Attorneys representing Medtronic investors received approval from U.S. District Judge John Tunheim to push forward with the suit against Medtronic and its executive team. Investors were, according to this lawsuit, harmed by misstatements made by Medtronic CEO William Hawkins, who they contend was aware of the threats to the Infuse product line stemming from alleged manipulation of scientific research, but mislead analysts in order to prop up the stock price. Some of these allegations mirror those of Plaintiff suits already pending in various state and federal courts, which allege that the company ignored or manipulated scientific data about the efficacy of the Infuse product, resulting in significant health side effects in people who were implanted with the Infuse product by surgeons. For Medtronic, the suit represents further scrutiny into exactly how much its executive team knew about the shortcomings of Infuse and its marketing practices, but hid from both the medical community and Wall Street.
Now, the prospect of fighting legal skirmishes on two fronts, against patients and investors, has Medtronic faced with the possible collapse of its proposed buyout of Irish device maker Covidien. The deal, valued at $43 billion, was structured to take advantage of certain U.S tax “loopholes” called inversions, but now appears to be in doubt. This would likely result in a further hit to the stock price, at a time when its valuation is critical to sealing the Medtronic-Covidien merger. If an investor mutiny results in the Covidien deal falling apart, or reveals further damaging evidence about Medtronic’s alleged improper payments to doctors to manipulate research data and drive off-label use of the product that aids patient lawsuits over Infuse, the company faces the very real possibility of even more litigation over one of its former cash cow products, Infuse. Medtronic had recently settled 950 suits with Infuse class action attorneys for an estimated $22 million just prior to the announcement of the Covidien deal. Those settlements stem allegations that Medtronic edited results of clinical studies to overstate the effectiveness of Infuse, while paying out over $210 million in inappropriate payments to doctors involved in the research.