CareFusion plans to pay $41M settlement

CareFusion Corp., the publicly traded devicemaker spun off from Cardinal Health, announced that it will enter into an agreement with federal investigators to pay $41 million and avoid criminal prosecution for its past sales and marketing of antiseptic surgical wipes.

A company announcement did not describe the exact allegations, but the San Diego-based firm has received three rounds of subpoenas since April 2011 looking for documents on how the company markets and sells ChloraPrep sterile skin preparation products to physicians, company filings with the Securities and Exchange Commission say.

“This is a significant settlement,” said Drinker Biddle & Reath partner Jesse Witten. “Any time there is a nonprosecution agreement, that is significant. That means the government thinks they could have charged the case criminally. We'll learn a lot more when the settlement is finalized and the criminal information is filed.”

The agreement in principle announced Thursday would resolve the allegations and have the company enter what it called a “nonprosecution agreement” that would last an undisclosed period of time.

A spokesman with the Kansas U.S. attorney's office, which issued administrative subpoenas to CareFusion for the investigation, could not comment on the agreement or the case against the company.

Because “many months” may separate agreements in principle and final settlements, it's not unusual for publicly traded companies to announce early agreements long before they're finalized, Witten said.

“Enforcement against drug and device and supply companies is very active right now, and cases that would not have been pursued in a criminal manner in the past are more and more being pursued by the criminal prosecutors,” he said. “Healthcare fraud is such a priority in the Department of Justice that they are devoting criminal resources to it.”

CareFusion was spun off from Cardinal Health in 2009. The company's infection-prevention business, which includes the ChloraPrep products, took in $576 million in revenue in 2012, up 1.4% from the prior year.

CareFusion's biggest businesses are in medication-dispensing and infusion pumps, making up slightly more than half of its $3.6 billion in revenue in the fiscal year ended June 30, 2012. The company earned $293 million in income that year, posting a net margin of 8%, its SEC filing says.

Shares of CareFusion on the New York Stock Exchange had declined about 2.4% by 3 p.m. ET on Friday, to $33.64. Friday's agreement is expected to reduce the company's earnings by 15 cents per share in the third quarter as it records a charge to establish a reserve account for the settlement.

The company currently manufactures and sells its infusion pumps under a consent decree with the Food and Drug Administration that dates back to 2007. In 2010, after enhanced corporate compliance and repairs to equipment that was recalled or seized by the FDA, CareFusion resumed manufacturing and selling infusion pumps.

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