Synthes gets warning letter from FDA

Posted: March 07, 2012

Synthes Inc., the medical device manufacturer with U.S. headquarters in Chester County, is in more trouble with the U.S. government.

Four former Synthes executives were sent to federal prison last fall for their roles in an illegal clinical trial of bone cement. Last month, the company was sent an unrelated Food and Drug Administration warning letter, which was posted on the agency website Tuesday.

The letter - dated Feb. 16 and addressed to chief executive officer Michel Orsinger - is official notice that the company didn't follow acceptable manufacturing procedures and didn't properly handle complaints about medical products, including surgical rods and screws.

A call to Synthes' U.S. headquarters in West Chester was referred to the world headquarters in Switzerland.

"We will cooperate and work diligently with the FDA until these deficiencies are fully resolved," company spokesman Gilgian Eisner said via e-mail.

The company's response will figure into the FDA's decision on how the company might be penalized.

A fine is possible, but the biggest deterrent to breaking the rules is excluding a company or an executive from government health insurance programs such as Medicare and Medicaid. Most health-care companies could not exist without such government money.

There was no indication Tuesday that federal officials were moving in that direction.

Synthes makes plates, rods, screws, and nails, along with power tools to affix them to broken bones.

In the bone cement case, a Synthes subsidiary, Norian, was excluded from federal programs, and the company had to divest the Norian assets to comply with a Corporate Integrity Agreement. Synthes avoided some of the sting by selling the assets to Kensey Nash for about the same price as it paid in settlement fines - $24 million - and then striking a distribution deal with Kensey Nash.

That profit-making ability is why Johnson & Johnson agreed in April 2011 to buy Synthes for $21.3 billion.

J&J chief financial officer Dominic Caruso said at an investor conference in Boston Tuesday that J&J doesn't expect to save much money combining Synthes with its own device division, DePuy. The deal made sense, Caruso said, because it will generate more revenue.

"Synthes has been a very well-run business and, on a percentage basis, has higher profit margins than Johnson & Johnson as a whole," Caruso said.

Asked about Synthes' legal and regulatory problems, a J&J spokesman declined comment.

The U.S. Attorney's Office in Philadelphia prosecuted Synthes and the executives. The Justice Department and the FDA hope the prison sentences will deter health-care fraud, which includes ignoring regulations.

With its bone cement unapproved for use in a specific spine procedure, Synthes also ignored the need to get approval for testing the bone cement on humans. Three patients died on the operating table. Two of the three families have filed civil lawsuits.

Executives Michael Huggins, Thomas Higgins, Richard Bohner, and John Walsh are in prison now after pleading guilty to charges related to their role in the scheme. Then-CEO, current board chairman, and largest stockholder Hansjorg Wyss was not charged.

A U.S. Attorney's Office spokeswoman declined comment Tuesday.


Contact David Sell at dsell@phillynews.com or 215-854-4506. Read his blog at www.philly.com/phillypharma and follow on Twitter @phillypharma.

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