The Criminal Pursuit of Profit: Device Company Execs Accused of Fraud

Profits can lead corporations to take dangerous risks. In the medical device industry, it can mean that a company decides to rush a product onto market without proper clinical testing. Or it could mean the company goes too far in promoting a product for “off-label use.” Sometimes, the pursuit of corporate profits turns into a crime.

There is an unsettling criminal case being tried in Massachusetts federal court this week. Two executives of a company called Acclarent are being prosecuted for fraud in the marketing of a medical device known as “Stratus.” The Stratus was a device that was supposed to relieve symptoms of sinusitis using saline. It consisted of a tube with a balloon attached to a sharp pin. The device would be implanted in the patient’s sinus, where it would be left in place for two weeks. It was reported to work as similar devices which created space in the sinus area using saline, which allowed patients to breathe easier. But according to testimony in the criminal trial, Acclarent had other intentions for the Stratus. Instead of using saline, the Stratus was intended to deliver “Kenalog,” a steroid found in medications like Nasacourt.

But I should back up.

Again, The Flawed 510(k) Medical Device Approval Process

The Stratus was first approved for sale by the FDA utilizing the 510(k) process. The Code of Federal Regulations allows a manufacturer to notify the FDA of its intent to market a device (like the Stratus). It then allows the company to apply for market approval without rigorous testing or clinical trials. The company must explain how a new device is “substantially equivalent” to an existing product that did undergo testing. Many of the medical devices that have led to thousands of lawsuits (metal-on-metal artificial hips, artificial knees, transvaginal mesh) reached the market under the 510(k) process. In the case of Stratus, Acclarent reported to the FDA that the device was similar to other devices on the market which utilized saline to open the sinus area and to relieve pressure in the sinus. On the basis of these representations, the FDA approved the Stratus for sale in 2006.

The Allegations Against Acclarent Executives

Federal prosecutors allege that two executives committed fraud by obtaining market approval from the FDA under false pretenses. The claim is that Acclarent represented the Stratus was much like devices on the market which used saline, but then intentionally marketed the Stratus instead to deliver the steroid Kenalog. There was virtually no testing of the Stratus and its safety and effectiveness in delivering Kenalog directly into the sinus of patients. Prosecutors state that this intentional misrepresentation defrauded the FDA, the doctors who prescribed the device, and Johnson & Johnson, which purchased Acclarent in 2010 for $800 million. J&J pulled the product in 2013.

Evidence From The Acclarent Criminal Trial

One surgeon testified that he was very concerned that Acclarent had not properly tested the Stratus as safe when using the drug Kenalog. Dr. Michael Armstrong testified that he believed the marketing jumped ahead of the research on the medical device. Although it got approval for the Stratus using saline, Acclarent gave presentations to doctors focusing on the device delivering the steroid. This was not the proper use the FDA approved. Training materials developed by Acclarent showed a white liquid which was not saline (and believed to be Kenalog).

Prosecutors also called to the stand a former sales rep of Acclarent. She testified that the major emphasis in her sales training was in promoting the off-label use of the device and the steroid Kenalog. Because sales reps are not allowed to suggest off-label uses of drugs, the sales reps at Acclarent joked that they wanted to make buttons stating: “Ask me about Kenalog.” The sales rep also testified that Acclarent representatives told her the device was approved only for use with saline, but that doctors would probably not use saline with the Stratus.

At least from this testimony, it seems clear that Acclarent wanted to press ahead (recklessly) to sell the Stratus as a device to deliver the steroid Kenalog, which was not approved by the FDA and which had not undergone sufficient testing. This does not mean the executives will be found guilty of criminal fraud. But it does suggest a rush to market and a dangerous promotion of an off-label use of a drug.

The Takeaway

As consumers, we cannot presume that companies will always act ethically and responsibly. We all need to be vigilant when obtaining products and services. If you are planning to hire an attorney or a home builder or an accountant, check client references. If you are undergoing surgery, do some research in advance on your physician, and check with other people who know the doctor in your community. Is he a good surgeon? Is he responsive? Does he explain the procedure in helpful ways? Does he have a decent bedside manner? And if you are undergoing a procedure where a medical device is being implanted, investigate before the surgery. Ask your doctor about the specific product being used. Get a second opinion from another physician if possible. Ask your doctor why she chose one medical device product over another. Check out the articles on the medical device at the FDA website. Do a check on pending lawsuits against the manufacturer of the device. I know it sounds paranoid, but you may find some useful information and avoid a bad result or even an injury. No one can eliminate all risk in this life (especially when surgery or medical care is involved) but we should never blindly trust doctors or medical device companies.

The criminal case is titled: United States v. Facteau et al, 1:15-cr-10076 (U.S.D.C. Massachusetts). I will let you know the results of the trial when the jury reaches a verdict.