Acclarent Inc., a Johnson & Johnson subsidiary, has settled a False Claims Act suit for $18 million. This came just two days after two former executives were convicted of 10 misdemeanors for their roles in the scheme to introduce a misbranded and adulterated medical device on the market. The settlement resolves allegations that Acclarent marketed a sinus-clearing device for off-label use with the steroid Kenalog without Food and Drug Administration (FDA) approval, which caused doctors to submit false claims to Medicare and other federal health programs.
It was alleged in the six-week criminal trial that Acclarent misled the FDA about its Stratus sinus spacer, defrauding the government, doctors and Johnson & Johnson. When it first got clearance in 2006, Acclarent opted for the 510(K) process, where the company needed only to certify that the device was substantially similar to one already on the market. What Acclarent didn’t tell the FDA was that the device was designed and intended for the delivery of steroids, which made the device not only substantially different, but potentially dangerous and subject to rigorous studies that Acclarent didn’t want to pay or wait for.
The jury found that the Stratus did not have proper premarket notification to the FDA. The adulteration charges alleged that the device was a more-dangerous class 3 device but had not undergone required safety tests, because Acclarent chose to go the easier 510(K) route and called it a safe class 1 device. Testimony in the trial involving Acclarent’s former CEO William Facteau and former Vice President of Sales Patrick Fabian revealed that sales reps like Melayna Lokosky, who acted as a whistleblower in this case, were trained solely on the off-label use of the device, and that Acclarent executives ignored safety concerns among doctors. According to FDA witnesses, they also failed to tell the FDA about adverse events, like infections, in the few tests they carried out.
The Stratus was pulled from the market in 2013 amid concerns about safety and off-label promotion, which, according to Lokosky, happened “every day” at Acclarent. Facteau and Fabian, who said they will aggressively appeal the misdemeanor convictions, were acquitted of wire fraud and conspiracy charges. Johnson & Johnson bought the company for $785 million in 2010, earning Facteau $32 million and Fabian $4 million. Facteau is now the CEO of EarLens Corp., another medical device company.
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