Investigations Newsletter: Medical Device Company Pays $38 Million to Resolve Criminal Charges Related to Fraudulent Misbranding of Surgical Gowns

Arent Fox
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Arent Fox

US-based multinational medical device company, Avanos Medical Inc., entered into a deferred prosecution agreement and agreed to pay more than $22 million in connection with a criminal complaint charging the company with one count of introducing misbranded surgical gowns in interstate commerce with the intent to defraud and mislead.

Friday Enforcement Wrap

Medical Device Company Pays $38 Million to Resolve Criminal Charges Related to Fraudulent Misbranding of Surgical Gowns

US-based multinational medical device company, Avanos Medical Inc., entered into a deferred prosecution agreement and agreed to pay more than $22 million in connection with a criminal complaint charging the company with one count of introducing misbranded surgical gowns in interstate commerce with the intent to defraud and mislead.

According to DOJ’s press release, Avanos admitted that between late 2014 – early 2015, it sold hundreds of thousands of MicroCool surgical gowns that were incorrectly labeled as AAMI Level 4, the highest protection level for surgical gowns reserved for gowns used in surgeries and other high-risk medical procedures on patients suspected of having infectious diseases. Under the terms of the deferred prosecution agreement, Avanos will pay a $12,600,000 criminal monetary penalty, $689,000 in disgorgement, and will make an $8,939,000 victim compensation fund payment. The government noted that the resolution was based on a number of factors, including the nature and seriousness of the offense, the company’s failure to timely and voluntarily self-disclose, Avanos’s full cooperation with the government’s investigation, and remedial measures taken by Avanos.

Read DOJ’s press release here.

Alere Entities to Pay $38.75 Million to Resolve False Claims Act Allegations Regarding Defective Algorithm in Diagnostic Devices

Medical device manufacturers Alere Inc. and Alere San Diego Inc. (collectively, Alere) agreed to pay $38.75 million to resolve allegations that they billed and caused others to bill Medicare for defective rapid point-of-care testing devices.

Alere sold INRatio blood coagulation monitors, which are used to determine the clinically appropriate and safe dosage of medication for patients who take anticoagulant drugs, such as the blood thinner warfarin. According to DOJ’s press release, since at least 2008, Alere knew that the software algorithm used in each version of its INRAtion monitors contained a material defect that produced inaccurate and unreliable results for some patients. These faulty results were linked to dozens of deaths and hundreds of serious injuries, such as intra-cerebral hemorrhaging. Alere allegedly concealed the defect for years and didn’t take corrective actions until the devices were removed from the market because of a recall in 2016.

Read DOJ’s press release here.

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