Medtronic agrees to pay $43M to settle investor lawsuit

Medical device maker Medtronic has agreed to pay investors $43 million in a proposed class-action legal settlement that would resolve one of the last remaining lawsuits dogging the company's bone-growth product Infuse.

The institutional investors who sued Medtronic alleged that the company secretly paid spine surgeons to conceal Infuse adverse events and side effects and to overstate the disadvantages of alternative treatments.

Infuse contains a synthesized human protein that causes bone to grow, avoiding the need for other bone-graft materials for spine-fusion surgery. It can also lead to unwanted bone growth and swelling.

"Plaintiffs allege that early Infuse clinical studies revealed safety risks that threatened Medtronic's goals for the product and, as a result, Medtronic 'embarked on a scheme with physician investigators and authors to conceal the significant safety risks from the public and physician community,' " U.S. District Court Judge John Tunheim wrote in March, summarizing the class-action allegations.

In a 1,000-word disclaimer in the settlement agreement, Medtronic expressly denies all allegations of liability and wrongdoing related to the case, including the allegation that shareholders were harmed by the collapse of a stock price that had been artificially inflated by misrepresentations and omissions related to Infuse's safety.

"This announced agreement is merely a compromise of vigorously disputed claims that avoids the costs and disruptions of continued litigation," Medtronic spokesman Eric Epperson said via e-mail. "Resolving this litigation will allow the company to continue to dedicate funding for productive activities on advancing therapies and patient care."

The proposed settlement of the five-year-old lawsuit comes seven months after Tunheim agreed to certify a class of investors in the case, and three months after the judge declined to dismiss claims against former Medtronic CEO William Hawkins, former Chief Financial Officer Gary Ellis, former senior clinical and regulatory affairs director Dr. Martin Yahiro and former publication coordinator Julie Bearcroft.

The full settlement amount, which includes attorneys fees, will be paid by Medtronic on behalf of the defendants if a judge approves the agreement. The settlement covers shareholders who acquired Medtronic shares between Sept. 8, 2010 and June 28, 2011.

In 2002, Medtronic became the first and only company to receive approval to sell the protein known as rhBMP-2 as part of a surgical kit for lower back fusion surgery. Although the product has had several other approvals since then, it is still widely used in surgeries where the U.S. Food and Drug Administration has never approved it, recently published journal articles show.

Critics including injured patients, investors and state investigators have accused Medtronic of promoting the druglike substance for these so-called "off-label" procedures, and hiding important information about Infuse's risks, which Medtronic denies.

In December the company agreed to pay $12 million to settle a legal complaint from the states of Oregon, California, Illinois, Massachusetts and Washington that accused the company of making deceptive claims to sell Infuse. That included the company's distribution of biased scientific journal articles published between 2002 and 2009. Medtronic denied any wrongdoing as part of the settlement.

In June 2017, Medtronic settled a federal racketeering lawsuit brought by the insurer Humana that accused the medical device company of sponsoring and distributing research that falsely represented Infuse as safe for off-label surgeries, and helping hospitals and doctors get paid for uses of Infuse that Humana would not have approved if the insurer had known the truth. Medtronic made no admission of liability or wrongdoing.

Medtronic is also in the process of settling nearly all of the roughly 6,000 claims from patients who say they were injured by Infuse.

Joe Carlson • 612-673-4779