Stryker Biotech, Federal Prosecutors Spar Over Criminal Charges

A once-trivial legal battle between Stryker Corp.’s biotech subsidiary and federal prosecutors in Massachusetts has turned into a full-fledged war.

Both sides are clashing over an indictment handed down last fall that charges Hopkinton, Mass.-based Stryker Biotech, its former president and three sales representatives with allegedly promoting the off-label use of two bone-growth products and lying to the U.S. Food and Drug Administration (FDA). The indictment accuses the four men—former president Mark Philip, national sales director William Heppner and regional managers David Ard and Jeffrey Whitaker—of creating a scheme to bypass the “humanitarian device exemption” the FDA grants to each product.

The indictment claims the defendants promoted the use of OP-1 bone growth products in a manner that was different from its FDA approved use—namely, that they encouraged doctors to combine the products to create a bone void filler called Calstrux. The group also is accused of providing “recipes” to surgeons, medical technicians and others on the proper mixture to create Calstrux. Prosecutors said some patients who received the combination suffered serious medical problems.

Over the summer, Stryker agreed to pay $1.35 million to settle claims that it marketed orthopedic devices without regulatory approval and misled healthcare providers about the use of its products. An investigation by prosecutors concluded that Stryker Biotech violated the state’s Consumer Protection Act by engaging in unfair and deceptive trade practices that boosted sales of products used promote to bone growth. As part of the settlement, Stryker did not have to admit any liability; it agreed to pay $325,000 in civil penalties, $875,000 to fund efforts to combat unlawful marketing and other programs to benefit healthcare consumers, and $150,000 to cover attorneys’ fees and investigative costs.

In September, the defendants named in last year’s indictment (Philip, Heppner, Ard and Whitaker) asked a federal judge to dismiss 12 of the 16 charges against them, arguing that the U.S. District Court in Massachusetts does not have jurisdiction over them. Within weeks of filing that motion, the group asked prosecutors for a host of documents they claimed could undercut the government’s case. A substantial number of FDA documents released by prosecutors are “clearly exculpatory,” according to published reports.

Not so, argued prosecutors. “We do not agree with your contention that any of the three categories in your October 4 letter constitute exculpatory information,” stated an Oct. 18 response from prosecutors.

Prosecutors also refused to provide the defendants with information about other products (not Calstrux), insisting they had turned over all “discoverable” data to their attorney. In addition, they denied Philip, Heppner, Ard and Whitacker’s request to give them documents that discuss adverse events that should be submitted to the FDA as medical device reports.

Besides denying the defendants’ requests, prosecutors also criticized the group’s legal arguments. They lambasted Philip and Stryker Biotech for failing to recognize their duty to keep truthful, accurate records about the number of patients treated with OP-1 putty.

“Philip’s motion labors under the misappropriation that neither he (nor Stryker Biotech which employed him as its president) had a duty to the FDA, the government agency that regulated Stryker Biotech’s medical devices, to make truthful disclosures and/or keep truthful documents regarding the number of patients treated with OP-1 Putty,” the prosecutors said in legal documents. “Stryker Biotech had such a duty, and [broke the law] by taking steps, including procuring a bogus legal opinion, to cover up the falsity of Stryker Biotech’s 2007 annual report to the FDA regarding OP-1 Putty, and conceal facts in connection with the to-be-filed 2008 annual report.”

The defendants contend that two wire fraud charges should be dismissed because the emails “merely bounced off a Massachusetts-based computer server while in transit,” according to documents (the emails allegedly were sent as part of the scheme). Prosecutors, however, countered that argument by asserting that “venue is proper in any district where any part of the criminal conduct took place.”

“Venue is proper wherever the crime was begun, continued or concluded,” the prosecutors said. “Emails cross this country routinely over wire communication, and there is no good reason why they would be any less subject to the federal government’s wire fraud laws than older forms of communication.”

The defendants believe more than half of the counts (9 to be exact) should be dismissed because the statute cited by prosecutors to support the charges is too vague. Federal law requires that statues be written in a manner so “men of common intelligence” are not left guessing its meaning and application. Prosecutors, of course, disagreed:

“Not only would a reasonable person of ordinary intelligence understand that the [Food, Drug & Cosmetic Act] prohibited the defendants’ conduct, but each of these sophisticated defendants worked in a highly regulated industry and specifically knew and understood that distributing widely varying recipes for mixing OP-1 and Calstrux constituted misbranding and would subject them to criminal prosecution and punishment, a prohibition they willfully chose to ignore.”