A former CEO of a Stryker Corp. subsidiary was sentenced to two years in prison Friday for distributing knee replacement surgery guides without approval from the Food and Drug Administration.
Charlie Chi and OtisMed Corp., a subsidiary Stryker bought in 2009, pleaded guilty in December to distributing the devices despite the FDA's rejection of the company's application for marketing clearance. A federal judge has fined the company $34.4 million and ordered $5 million in criminal forfeiture. OtisMed has also already agreed to pay $41 million in a separate but related civil settlement.
Attempts to reach Chi's attorney, Peter Harvey with Patterson Belknap Webb & Tyler in New York City, weren't immediately successful Friday afternoon. But he told Modern Healthcare last year that OtisMed had been shipping the devices with full knowledge of the FDA.
“They're criminalizing something about which they had knowledge from the day Otismed started shipping these products,” Harvey said at the time.
Stryker has said that it is committed to conducting its affairs ethically and lawfully and that OtisMed's criminal conduct happened before Stryker acquired it and without Stryker's knowledge.
U.S. District Judge Claire C. Cecchi in Newark, N.J., also ordered Chi to serve one year of supervised release and to pay a $75,000 fine.
Surgeons used the device to help them make accurate bone cuts in patients before implanting artificial knee prostheses. But the company's claims about the device weren't evaluated by the FDA before they were used in ads and promotional materials, according to the Department of Justice.
OtisMed submitted a pre-market notification to the FDA seeking clearance to market the device in 2008. Until then, it had falsely told doctors and others that it was exempt from such pre-market requirements, according to the Department of Justice.
The FDA denied the company's submission, saying it hadn't proved the device was as safe or effective as others. The company's board decided to stop shipping the devices, but Chi and others shipped them anyway, according to the Department of Justice.
Chi and OtisMed admitted that Chi ordered the devices be sent a week after the FDA's denial, according to the Department of Justice.
Harvey, however, has said Chi only did so because they were needed for already-scheduled surgeries.
