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Stryker has entered into a settlement agreement with the Federal government stemming from allegations that a subsidiary purchased in 2009, OtisMed, distributed a knee replacement surgery cutting guide device without Food and Drug Administration (FDA) approval.




The device, called the OtisKnee, was marketed to surgeons as a tool to help improve the accuracy of bone cuts specific to the patient, based on magnetic resonance imaging (MRI) done prior to surgery. The alleged criminal conduct took place before Stryker’s acquisition of OtisMed, although, as part of the settlement, Stryker has agreed to comply with certain requirements to discourage similar misconduct. To settle the criminal and civil charges, Stryker will be paying approximately $80 million.

Charlie Chi, the former CEO of OtisMed, was also charged and pled guilty. His attorney stated that OtisMed did not seek FDA approval until 2008 because the FDA had led them to believe it was a Class 1 medical device (not requiring premarket approval). However, the FDA rejected the pre-market notification sent by OtisMed based upon a lack of proof of the device’s safety and efficacy. Despite the board of directors of OtisMed deciding to stop shipment of devices after the FDA rejected the application, OtisMed sent approximately 218 devices to surgeons. Mr. Chi’s attorney noted that “OtisMed had been shipping cutting guides for orthopedic surgeons for three years with full knowledge of the FDA” prior to their rejection of the premarket notification.

This is yet another healthcare investigation brought forward by a whistleblower. In this case the whistleblower will receive about $7 million of the settlement.