Wright Medical agrees to pay $240 M to settle metal-on-metal hip revision claims

Wright Medical Technology, Inc. (WMT), a wholly owned subsidiary of Wright Medical Group N.V., has entered into a Master Settlement Agreement (MSA) on November 1, 2016, pursuant to which the medical device manufacturer will pay $240 million to settle claims brought by patients as part of a metal-on-metal hip revision multi-district litigation known as In re: Wright Medical Technology, Inc., CONSERVE® Hip Implant Products Liability Litigation, MDL No. 2329 (MDL) and the consolidated proceeding pending in state court in California known as In re: Wright Hip System Cases, Judicial Council Coordination Proceeding No. 4710 (JCCP). In addition, on October 28, 2016, the medical device manufacturer entered into a Settlement Agreement with three of its insurance carriers. Of the $240 million, approximately $180 million will be funded from cash on hand and $60 million will be funded from insurance recoveries (Wright Press Release, November 2, 2016).

Under the terms of the MSA, the parties have agreed to settle 1,292 specifically identified CONSERVE, DYNASTY or LINEAGE revision claims which meet the eligibility requirements of the MSA and are either pending in the MDL or JCCP, or are subject to tolling agreements approved in the MDL or JCCP. Eligibility requirements of the MSA include that the claimant has a pending or tolled case in the MDL or JCCP, has undergone a revision surgery within eight years of the original implantation surgery, and that the claim has not been identified by WMT as having possible statute of limitation issues. Claimants who have had bilateral revision surgeries will be counted as two claims but only to the extent both claims separately satisfy all eligibility criteria.

The MSA, which includes a 95 percent opt-in requirement, may be terminated by WMT prior to any settlement disbursement if claimants holding greater than five percent of eligible claims in the Final Settlement Pool elect to “opt-out” of the settlement. No funding of any individual plaintiff settlement will occur until the 95 percent opt-in requirement has been satisfied or waived.

Although the MSA will help bring to a close significant metal-on-metal litigation activity in the United States, WMT has declared its intention to continue to defend vigorously all metal-on-metal hip claims not settled pursuant to the MSA. As of September 25, 2016, the company estimated that there were close to 600 outstanding metal-on-metal hip revision claims that would not be included in the MSA settlement, including approximately:

  • 200 claims with an implant duration of more than eight years,
  • 300 claims subject to possible statute of limitations preclusion,
  • 30 claims pending in U.S. courts other than the MDL and JCCP,
  • 50 claims pending in non-U.S. courts, and
  • 20 claims that would be eligible for inclusion in the settlement but for the participation limitations contained in the MSA.

The company also estimated that there were nearly 700 outstanding metal-on-metal hip non-revision claims, which are excluded from the MSA, as of September 25, 2016.

In announcing the company’s third quarter earnings, WMT disclosed the loss range applicable to a substantial portion of revision cases of $150 million to $198 million and, in accordance with U.S. generally accepted accounting practices (US GAAP), the company recognized $150 million as a charge within discontinued operations in the second quarter of 2016. This second-quarter loss represented the low end of the range of probable loss for these cases. During the third quarter of 2016, the company recorded charges of roughly $39 million in order to increase its accrual from the low end of probable loss range that had been recognized during the second quarter to amounts more in line with the final agreements and to record accruals for certain other revision cases.

Problems keep growing for bone graft device manufacturer

A popular—and frequently litigated—implantable medical device has come under congressional scrutiny after allegations of data suppression arose. Medtronic manufacturers and markets the Infuse® Bone Graft/LT-Cage® Lumbar Tapered Fusion Device and the Infuse Bone Graft, a two-part product, for joint surgeries. The Minneapolis Star Tribune released a special report on April 10, 2016, raising allegations that the company failed to disclose important safety information from a study that was shut down without explanation.

How does it work?

Infuse contains a bioactive solution that is mixed with water right in the operating room. This solution is an engineered version of the bone morphogenetic protein (BMP), which causes bone formation. Prior to using the engineered BMP, patients with certain issues like degenerative disc disease were forced to undergo multiple surgeries so that a bone graft could be created from living bone in the hip. Infuse’s solution is inserted into a titanium case that is placed between vertebrae.

Secret data?

Medtronic hoped that the Infuse device would be approved for different types of surgeries, broadening its application in the lucrative field of spinal surgeries. Doctors who performed surgeries using the device reported adverse events, and Medtronic reviewed the records of 3,600 patients. Over 1,000 issues were reported, from minor problems to four patient deaths. Medtronic shut down the study without providing data about it to the FDA. Medical device manufacturers are required to report injuries that are possibly related to their products within 30 days of learning of them.

Executives told the Star Tribune that the data was not purposely hidden. They claim that the adverse events database was internally misfiled and discovered five years later, then reported to the FDA. Medtronic maintains that its procedures have been improved and that no patients were harmed by the failure to report.

Some concerns have been raised regarding the specific type of BMP used, rhBMP-2. Some critics believed that not enough was known about the safety of the compound, and pointed out that doctors might use it in a way that has not been adequately evaluated for safety. After Infuse was approved for fusion of bones in the lower spine in a procedure performed through the patient’s stomach, surgeons began using the product in different ways. Some fused bones in the neck, some fused more than two bones, and some approached the surgery from the back. The Star Tribune reported that between 2003 and 2007, at least 85 percent of the BMP surgeries performed in the U.S. were for uses not reviewed for safety and effectiveness.

Medtronic’s response, Senate attention

Medtronic responded to the Star Tribune’s article, vehemently maintaining that the article made false insinuations and left out important information. The company stated that the Star Tribune left out a large amount of the information in the “extensive account of what transpired.” Medtronic defended its actions, stating that the data was immediately assessed and reported when it was discovered five years later, and emphasized that patient safety is a priority.

The matter caught Senator Al Franken’s (D-Minn) eye, and he asked both Medtronic and FDA Commissioner Dr. Robert Califf to provide details information about the injuries that were allegedly covered up. He also requested an explanation about the correlation between injuries and approved versus unapproved uses, and asked if the rate of injury was consistent with other data. He also suggested that medical device surveillance should be strengthened to ensure patient safety.

Litigation

Issues with Infuse are nothing new to the world of medical device litigation. In 2014, the company settled 950 lawsuits for $22 million. Another suit was filed in June 2015, which specifically alleged that Medtronic marketed the product for use in types of surgeries that were not previously researched. Humana even filed a suit against Medtronic for federal racketeering, claiming that Medtronic reportedly conspired with physicians to promote off-label uses for the device.

Still No “Sunshine” – in the Name of Lighter Regulatory Burdens

Centers for Medicare and Medicaid Services (CMS) Administrator Don Berwick said on October 31 that the agency would delay further rules implementing a provision in the health reform law that requires drugmakers and device companies to report all payments and gifts to physicians.

The Physician Payment Sunshine Act was included in the health care reform law enacted last year (Patient Protection and Affordable Care Act, P.L. 111-148), as a way to reduce healthcare costs through greater transparency. PPACA requires pharmaceutical, medical device, biological, and medical supply manufacturers to track and report to the CMS all payments to doctors above $10. Non-compliance may result in fines of up to $10,000 for inadvertent non-compliance and up to $100,000 for knowing non-compliance. The first reports will be due March 31, 2013 for the calendar year 2012 reporting period which begins in three short months.

The effort is meant to “shine light” on the industry’s gifts to physicians, which critics maintain can improperly influence patient care and treatment decisions, as explained here.

CMS missed the statutory October 1 deadline for publishing the regulations that would clarify certain definitions and provide detailed instructions on how these reports are to be compiled and submitted, but not because the rules are controversial – which they are – but because the agency is trying to lighten the burden of red tape.

In an October 28, 2011 letter to Senators Herb Kohl (D-WI) and Charles Grassley (R-IO), Berwick cited a presidential order from last January that calls on federal agencies to minimize regulatory burdens. “I believe we can implement the statutory goals of (the Sunshine Act) while minimizing burden on the regulated parties. In that vein, CMS is carefully reviewing this statutory requirement and working hard to ensure we meet these goals.”

[Earlier this year, President Obama instructed federal healthcare agencies to streamline regulations that impede flexibility, unnecessarily burden resources, reduce efficiency, increase costs and decrease quality of care. In that vein, CMS recently released three new rules intended to remove or revise outdated, duplicative, overly burdensome and unnecessary regulations, thereby saving the healthcare system an expected $1.1 billion per year and more than $5 billion over five years. Whether the expected savings and efficiencies called for by the Obama administration will actually be achieved through these new rules remains to be seen.]

In his letter to Senators Kohl and Grassley on the Sunshine Act rules, Berwick gives no explanation for the delay and no indication of when CMS may actually issue the guidelines. The irony, of course, is that this is the same administration that wanted to enact the Sunshine provision in the first place.

On November 1, Senator Grassley responded in a statement, “The administrator’s response doesn’t tell us anything new. There’s no explanation for the delay and no indication of when to expect completion. It’s an inadequate response any way you look at it.”

The Pharmaceutical Research and Manufacturers of America (PhRMA) and other groups have advanced a proposal that the initial reporting period, scheduled to begin January 1, 2012, should be delayed for the same amount of time that the rule is; e.g., if the rule is 6 months late, the first reporting period would not be January 1- December 31, 2012 but July 1- December 31, 2012; they would leave in place the requirement that the first actual report from pharma and device companies to HHS would be due the 1st quarter of 2013, but would shorten the time period to be covered in that first report. CMS has not commented on the PhRMA request.

The PhRMA proposal sounds only fair. After all, the longer CMS waits to publish the rules, the more time companies will need to comply, i.e., “minimizing [the] burden.”