A Busy Week for Orthofix

It has been a busy week for officials at Lewisville, Texas-based Orthofix International.

In addition to its two new product releases at this year’s annual meeting of the American Academy of Orthopedic Surgeons (AAOS) in San Francisco, Calif., the company also is steps closer to resolve some recent legal wrangling.

On the new-product front, the company made the international release of an external fixation system designed for use in temporary and definitive, complex orthopedic trauma applications where rapid stabilization and fixation is essential.

“Orthofix has designed yet another innovative external fixation system that brings simplicity and stability to a new level,” said Robert Vaters, president and CEO. “The introduction of Galaxy Fixation represents Orthofix’s commitment to maintaining its leadership in external fixation in international markets. We are excited to offer this next-generation, modular system that provides multi-functional, fracture management capabilities in both upper and lower extremity applications for our surgeon customers outside the U.S.”

According to the company, Galaxy Fixation incorporates a streamlined combination of clamps with both pin-to-bar and bar-to-bar coupling capabilities that provide a complete range of anatomical applications and reduces inventory. It also includes specific units for the elbow and shoulder. While the rigidity and stability allows for use in definitive fixation, the design also addresses the need for rapid stabilization needed for temporary fixation in large trauma centers.

Also at AAOS, Orthofix also made the full U.S. launch of two differentiated internal fixation repair solutions for the foot and ankle market—the Centronail Ankle Compression Nailing and Contours Lapidus Plating Systems.

The Centronail Ankle Compression Nailing (ACN) System, according to the company, provides a “differentiated solution” for hindfoot fusions. This procedure treats patients who suffer from debilitating pain and incapacity as a result of arthritis, trauma and diabetes. The ACN System fuses up to three joints in order to relieve pain and restore activity.

The ACN System’s two-piece targeting assembly allows for screw placement flexibility while providing improved stability and simplicity throughout the procedure, Orthofix officials noted. In addition, the ACN allows for independently controlled compression of the tibiotalar and subtalar joints.

While the ACN System represents the company’s entry into the hindfoot internal fixation market, the Contours Lapidus Plating System (LPS) focuses on revision procedures and joint fusion in the small bones of the midfoot. The Lapidus surgical procedure is comprised of a tarsometatarsal (TMT) joint fusion to treat patients with debilitating pain and discomfort that typically accompanies hallux valgus (bunion deformities). The Contours LPS incorporates a plate design contoured specifically for the TMT anatomy and the anatomical forces at that joint, which leads to restoration of biomechanical properties and healing.

Also this week, the company has taken significant steps to clean up its legal house.

Orthofix has reached an agreement in principle to resolve the U.S. Government investigation of Blackstone Medical Inc. It also has reached a settlement with the U.S. Department of Justice (DOJ) to settle violations of the Foreign Corrupt Practices Act. It also finalized a definitive agreement to resolve criminal and civil matters related to the U.S. government investigation of its bone growth stimulation business.

“I am very pleased with the substantial progress made regarding these three legal matters, which removes a significant amount of risk and uncertainty for the company,” Vaters said, noting that the company had made “significant improvements” to its compliance practices, personnel, and financial standing. “I look forward to a stronger focus on the company’s operations, including investments in R&D to position the company for long-term growth, while maintaining earnings improvement.”

The company has reached an agreement in principle with the U.S. Attorney’s Office in Massachusetts to pay $32 million to resolve matters related to the investigation of its Blackstone Medical subsidiary (Orthofix bought Blackstone in 2006). Blackstone was named in a number of lawsuits and Orthofix received several subpoenas from various government agencies concerning allegations that the spinal implant maker violated the False Claims Act by providing allegedly inappropriate payments and other items of value to physician consultants, SEC filings show.

Orthofix agreed to pay $32 million to resolve the matter, which will be funded by proceeds the company received from the escrow fun established when it acquired Blackstone. The final settlement is subject to the negotiation and approval of definitive agreements with the U.S. Attorney’s Office, the DOJ and the Office of Inspector General of the U.S. Department of Health and Human Services (OIG).

The company also reached an agreement in principle with the DOJ to settle criminal violations of the Foreign Corrupt Practices Act (FCPA) that it voluntarily reported to the U.S. government in June 2010 concerning its former Mexican orthopedic distribution entity. In the first quarter 2011 financial results, the company reported that it had recorded a charge of $3 million to establish an accrual in connection with this matter based on the results of its own internal investigation and an analysis of similar FCPA resolutions.

As the result of recent discussions with the DOJ and staff at the U.S. Securities and Exchange Commission, the Orthofix will take a charge of approximately $4.5 million in the fourth quarter 2011 to establish as an additional accrual in anticipation of a proposed criminal and civil resolution of this matter. Final resolution is subject to the negotiation and execution of definitive agreements with the DOJ.

Last, but not least, the company finalized an agreement with the U.S. Attorney’s Office, the DOJ, and the OIG to resolve criminal and civil matters related to an investigation of its bone growth stimulation business, which includes resolution of a lawsuit pending in the U.S. District Court for the District of Massachusetts. Under the terms of the agreements, the company will pay $43 million, a charge previously disclosed and already accrued by the company in the first quarter 2011. Orthofix expects to plead to a violation of 18 USC 1516, related to an obstruction of a June 2008 federal audit. Orthofix also will enter into a five-year Corporate Integrity Agreement with the OIG as part of the resolution of these matters.