Medtronic (NYSE:MDT) announced Friday that it will pay $85 million to settle a class action securities fraud lawsuit related to its controversial bone growth product Infuse, but denied any wrongdoing.
The Minneapolis Firefighters’ Relief Association brought the lawsuit against the device maker and alleged that the company and some of its current and former officers misrepresented how it markets Infuse that led the company’s stock to be inflated between Nov. 20, 2006 and Nov. 17, 2008. Here is a portion of the complaint, according to the law firm Bernstein Litowitz Berger and Grossman LLP, which represented the plaintiff.
Specifically, the Defendants misled shareholders regarding a near decade-long campaign to illegally promote INFUSE for uses not approved by the Food and Drug Administration, or so-called “off-label uses,” and concealed from shareholders the fact that the reported sales and future growth of this business line and its associated revenues was driven by misconduct that invited, and ultimately brought about, the scrutiny of federal regulators and an abrupt decline in sales.
For those who don’t know, Infuse is part of Medtronic’s spinal division that has been hurt by falling sales amid charges that the product is unsafe. Critics also allege that researchers who studied Infuse and were compensated by Medtronic overstated its benefits and downplayed potential risks.
To quell the uproar, Medtronic CEO Omar Ishrak took the unprecedented step of making a $2.5 million grant to independent Yale researchers who are reviewing Infuse data. He hopes the review will vindicate Infuse.
Given the negative connotation that surrounds the product, perhaps it comes as no surprise that the one word conspicuous by its absence from Medtronic’s lawsuit settlement announcement was Infuse.
