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Medtronic Settles Lawsuits For $22M But Expects More Claims

Medtronic, which did not admit wrongdoing, expects to record a fourth-quarter charge of up to $140 million to cover its latest settlement and the estimated cost of additional settlements.

Medtronic Settles Lawsuits For $22M But Expects More Claims

Medtronic, Inc., said Tuesday that it has agreed to pay $22 million to settle certain cases related to a controversial bone-growth product called Infuse, which has been the target of many lawsuits.

And while Medtronic—a Fridley-based med-tech giant and one of Minnesota’s 10 largest public companies—said it still stands behind its product, the company also warned that the latest settlement is likely just one step in resolving ongoing disputes. In fact, the company plans to record a fourth-quarter charge of up to $140 million to cover its latest settlement and the estimated cost of additional settlements.

Infuse is a genetically modified version of a naturally occurring protein that encourages the fast growth of bone. The U.S. Food and Drug Administration in 2002 approved the product for specific uses, including a certain type of back surgery, and it was hailed as a game-changer. Unwanted bone growth, however, caused pain and complications in some patients, and in 2011, medical publication The Spine Journal reported that the product's adverse effects were not properly reported in clinical research.

The company has also been accused of manipulating Infuse studies and using deceptive marketing practices. And federal prosecutors investigated the company's marketing practices for Infuse but closed their investigation in 2012, the same year Medtronic paid $85 million to settle a shareholder class-action lawsuit claiming the company misled investors about how much Infuse-related revenue came from uses that were not FDA-approved.

On Tuesday, Medtronic said that it agreed, “subject to certain conditions,” to pay roughly $22 million to resolve the claims of about 950 claimants. The company described the settlement as “a compromise of disputed claims” and said it is “not in any way an admission of liability or validity of any defense in the litigation by Medtronic.”

The company pointed out that its Infuse bone-graft product has been used in more than 1 million patients since being approved more than a decade ago. The product remains on the market, and Medtronic said it will “vigorously defend the product and company actions in the remaining cases.” The company also said that, earlier this month, a California trial judge ruled in favor of Medtronic in the first Infuse case that was set to go to trial.

Still pending, however, are roughly 750 cases filed by about 1,200 individuals. Medtronic noted that the pending cases are “still in the early procedural stages and none have resulted in a finding of liability against Medtronic.”

It appears many more claims are yet to come. Law firms have told Medtronic that they may bring “a large number of similar claims against the company in the future,” Medtronic said. In fact, Medtronic estimated that they represent about 2,600 additional claimants that have yet to file suits.

Medtronic expects to record a charge of between $120 million and $140 million in its recently completed fourth quarter—a charge that accounts for not only the latest $22 million settlement but also the estimated costs of settling the 1,200 pending claims and the 2,600 that have yet to be filed. An accounting rule allows companies like Medtronic to report anticipated charges if they’re able to reasonably estimate them.

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