Stryker to Pay $33 Million to Settle DOJ Allegations

Stryker has agreed to pay $33 million to settle an investigation into OtisKnee, a surgical technique that uses specially designed guides to allow for an individually tailored knee replacement.

In 2009, the company acquired OtisMed Corp., producer of the OtisKnee product. OtisMed was folded in Stryker’s Orthopaedics Division, and Stryker intended for the company to focus on customizable instrumentation to complement the Stryker Triathlon Total Knee Replacement System.

In 2010, Stryker received a subpoena from the U.S. Department of Justice (DOJ) that alleged the company was marketing a technology that had not been cleared by the U.S. Food and Drug Administration.

Though Stryker has offered the $33 million to settle the issue with the DOJ, a filing with the Securities and Exchange Commission states: “There can be no assurance that we will reach a consensual resolution, when such a resolution would occur, or what the final terms of any such resolution may be.”

The filing by Stryker also states that the company will receive the non tax-deductible $33 million charge from the DOJ in the second quarter of 2012. “The charge is expected to reduce our reported diluted net earnings per share by approximately $0.09 for the second quarter of 2012 and will be excluded from our adjusted diluted net earnings per share.”

Stryker is based in Kalamazoo, Mich., while the former OtisMed operation is located in Alameda, Calif.