Center for Devices and Radiological Health
Failure to Report Serious Adverse Events Results in Convictions
OCI Investigation Uncovers 2,628 Adverse Events Not Reported to FDA
OCI’s Metro Washington Field Office initiated this investigation after FDA received two anonymous letters and an inquiry from Senator Edward Kennedy’s office. These letters provided allegations pertaining to a medical device known as the Ancure endograft system (Ancure Device) manufactured by EndoVascular Technologies, Inc. (EVT), a subsidiary of Guidant Corporation, in Menlo Park, California.
The Ancure Device is a surgically implanted device approved for treating abdominal aortic aneurysms. The allegations included the intentional failure to report serious adverse events to the FDA. Under federal law, a company is required to report to FDA any incident in which a medical device may have caused or contributed to a death or serious injury, or the medical device experienced a malfunction that would be likely to cause or contribute to a death or serious injury if the malfunction were to recur.
OCI’s investigation determined that EVT had failed to file with FDA 2,628 Medical Device Reports. Each report represented an incident in which the Ancure Device malfunctioned or the use of the device was associated with death or serious injury. There were a total of 7,632 Ancure Devices sold. Among the unreported incidents were 12 deaths and 57 emergency procedures in which a physician converted the operation into a more invasive procedure.
On June 9, 2003, a Criminal Information was filed charging EVT with ten felonies, including 9 counts of violating 21 U.S.C. §§ 331(a) and 333(a)(2) - Introducing a Misbranded Medical Device into Interstate Commerce, and 1 count of violating 18 U.S.C. § 1001 - False Statements to the FDA.
The misbranding charges stemmed from the fact that the company intentionally failed to report within 30 days, as required by law, malfunctions of the device that may have caused or contributed to deaths or serious injuries. The false statement charge relates to the fact that the company provided an FDA Investigator with an incomplete and misleading list of complaints when FDA requested information during a routine inspection for all complaints of malfunctions.
On June 12, 2003, EVT was convicted and sentenced and ordered to pay $92.4 million in criminal and civil fines, including $10.9 million to be forfeited to the U.S. Department of Justice, Asset Forfeiture Fund.
The prosecution of the criminal case was the result of a three-year investigation by FDA’s OCI and the Federal Bureau of Investigation.
Convictions for Selling Stolen Devices
OCI Undercover Investigation Discloses Stolen Medical Devices
OCI’s Chicago Field Office initiated this investigation of Bruce Newby as a result of information obtained from another case investigated by the New York Field Office of OCI. During the investigation it became known that Newby was involved in the redistribution/reselling of stolen/diverted medical devices. Newby was interested in obtaining stolen/diverted medical devices in order to resell/redistribute to foreign locations for profit.
After OCI’s execution of a search warrant at Newby’s residence, Newby agreed to provide cooperation and assistance in the investigation. As part of his assistance, Newby met with Christopher Lyon and Terrance O’Connor, both ex-Ethicon salesmen. Newby purchased restricted medical devices from both co-conspirators.
On November 01, 2001, Newby was convicted of 18 U.S.C. § 371- Conspiracy; and Title 26 § U.S.C. 70(1)-Filing False Tax Return.
On December 7, 2001, Lyon, accompanied by his attorneys, provided a proffer. Lyon collaborated with Newby in the dealing of stolen medical devices.
The source for the stolen devices was John Goodwin. Lyon also acquired products from conventions he had attended while still employed with Ethicon. After the convention was over, the attending salesman would just “split and divide” the entire product on hand. Lyon also acquired products by removing them from hospitals at their direction and “sometimes forgetting” to credit the hospitals for the removed product. Lyon maintained that, aside from product he had accumulated himself as an Ethicon salesman, Goodwin was his only outside source of product.
On February 12, 2002, OCI obtained a copy of an inventory list that was faxed by Goodwin showing products that Goodwin was going to sell. The value of the products that Goodwin intended to sell to Lyon was approximately $199, 974.00. On the same date, OCI seized the $2,000.00 and executed a search warrant on a storage unit which contained 24 boxes of miscellaneous medical devices. In total, 31 boxes of miscellaneous medical devices were seized.
On May 9, 2002, Newby was sentenced to 180 days of home confinement, 2 years of probation, 200 hours of community service, and ordered to file and pay amended tax returns and penalties (approximately $80,000.00).
On June 10, 2002, Lyon was convicted of violating 18 U.S.C. § 371 - Conspiracy to Violate 21 U.S.C. §§ 331 and 333(a)(2) - Introduction into Interstate Commerce of Misbranded Medical Devices with the Intent to Defraud or Mislead.
On June 10, 2002, O’Connor, the ex-Ethicon salesman and associate of Newby, admitted to completing one transaction with Newby in which O’Connor received approximately $19,500.00. Subsequently, O’Connor executed a pre-trial agreement. As per the agreement, O’Connor would serve 1 year of supervised probation and would re-pay Ethicon the $19,500.00.
On November 12, 2002, Goodwin was convicted of violating 18 U.S.C. § 371 –Conspiracy; 18 U.S.C. § 2314 - Interstate Transportation of Stolen Property, and 21 U.S.C. §§ 331 and 333(a)(2) - Introduction into Interstate Commerce of Misbranded Medical Devices with the Intent to Defraud or Mislead.
On March 13, 2003, Goodwin was sentenced to 18 months incarceration in a federal prison, 24 months of supervised release after his prison term, and ordered to pay $175,000.00 in restitution to Henry Ford Health Care.
On April 22, 2003, Lyon was sentenced to serve 24 months of probation, and ordered to pay $300,000.00 in restitution ($100,000.00 to Ethicon and $200,000.00 to Henry Ford Health Care).
Fake 510(k) Clearance Letter for Dermabrasion Device
One Year Prison Sentence for Faking FDA Approval of Device
OCI initiated this investigation based on information received from the FDA’s Center for Devices and Radiological Health (CDRH). CDRH reported the creation and use of a counterfeit 510(k) clearance letter by James Fallon, the former president of the now-defunct firm known as Derma Genesis. During the period February through November 1998, Fallon and his sales staff used the counterfeit letter to market a mechanical dermabrasion device to physicians and to obtain financing for those physicians who leased the machine.
On May 15, 2003, following a five day jury trial in the Federal District Court in Philadelphia, Fallon, president of Derma Genesis, was convicted of 3 counts of Title 18 U.S.C. §1341- Mail Fraud; and 1 count of Title 18 U.S.C. §1343 - Wire Fraud.
On October 14, 2003, Fallon appeared before Chief Judge Giles in Federal District Court in Philadelphia and was sentenced to 12 months and a day federal incarceration, ordered to pay $55,236.00 in restitution to American Business Leasing, and fined $1,000.00. Fallon was also placed on 3 years supervised release following his imprisonment, and must abide by a special condition of release that forbids him from having any future involvement in this type of business.
Failure to File Medical Device Reports
OCI, Naval Criminal Investigative Service, & Veterans Affairs Office of the Inspector General Assist in Investigation
OCI’s Washington Field Office initiated this investigation based upon information from a qui tam action filed under the Civil False Claims Act (31 U.S.C. § 2739-3733). Under this statute, a private citizen may bring a civil fraud action in the name of the United States and receive a portion of any judgment or settlement in the action. Dentsply International, Inc., whose headquarters are in York, Pennsylvania, is the largest dental device manufacturer in the world. Dentsply’s Caulk Division, located in Milford, Delaware, manufactured dental cement called Advance Hybrid Ionomer.
The Advance Hybrid Ionomer was manufactured from late 1994 until approximately 2000. During that time period, Dentsply received complaints from dentists that patients, who had the cement applied, were experiencing fractured teeth and roots, pulpal death, and cracked crowns.
Dentsply was required to report these complaints to the FDA under provisions of the Federal Food, Drug, and Cosmetic Act. FDA regulations require manufacturers to report serious injuries and malfunctions to the FDA on a Medical Device Report (MDR). Dentsply did not file any MDRs with the FDA for these reported injuries. Dentsply’s failure resulted in the submission of false claims to the Department of Veterans Affairs and the Department of Defense. Both agencies require government contracts to be in compliance with all FDA statutes and regulations.
On March 6, 2003, Dentsply International, Inc., agreed to pay $600,000 to the United States to resolve civil claims that the company submitted false and fraudulent bills for payment to the Department of Veterans Administration and the Department of Defense in connection with the sale of their now discontinued Advance Hybrid Ionomer.
OCI’s, the Defense Criminal Investigative Service, the Naval Criminal Investigative Service, and the Department of Veterans Affairs, Office of Inspector General, investigated this case.