Exactech Implant Settlement Results in $8M Payout Over High Failure Rates

Settlement agreement with the Justice Department is part of Exactech’s Chapter 11 bankruptcy filing, which separately seeks to resolve more than 2,500 joint replacement lawsuits over defective implants.

The manufacturer of several widely used joint replacement implants, Exactech, has agreed to pay the U.S. government $8 million to address allegations that it defrauded Medicare and Medicaid by selling defective knee, hip and ankle replacement systems.

The U.S. Food and Drug Administration (FDA) announced a series of Exactech recalls in late 2021 and early 2022, after it was discovered that certain components had been stored in “out-of-specification” vacuum sealed bags, which allowed oxygen to reach the components before they were implanted in patients.

This caused Exactech knee, hip and ankle implants stored in the bags to degrade prematurely, increasing the risk of early failure and the need for risky revision surgery. The recalls impacted Exactech Optetrak, Optetrak Logic and Truliant knee replacement systems, Exactech Vantage ankle systems, and Exactech Novation and Acumatch hip implants.

The company faced more than 2,500 Exactech lawsuits before declaring Chapter 11 Bankruptcy late last year, resulting in a tentative settlement agreement.

In addition to the lawsuits, Exactech also faced charges from the federal government alleging that the manufacturer violated the Federal False Claims Act “by knowingly submitting or causing the submission of false claims for payment to Medicare, Medicaid, and the United States Department of Veterans Affairs (VA) in connection with defective knee-replacement devices,” according to a Department of Justice press release issued on September 16.

The $8 million settlement agreement was announced on Tuesday, a day after the Delaware bankruptcy court approved the company’s Chapter 11 bankruptcy plans.

The government accused Exactech of knowing as early as January 2006 that certain tibial trays used in knee replacement systems had high premature failure rates, but continued to market them for surgeries, some of which were performed on beneficiaries for Veterans Affairs, Medicare and Medicaid. Prosecutors also claimed the company knew the polyethylene component in certain Logic and Truliant knee-replacement systems had unacceptable failure rates as early as January 2019, yet continued to let them be implanted into U.S. patients until February 2022.

“Patients who need a medical device to enjoy their lives rely on device manufacturers to put patient safety first. When a manufacturer learns that its device is defective, it must promptly and transparently address the problem.”

– Kelly O. Hayes, U.S. Attorney for the District of Maryland

The Justice Department lawsuit was the result of a qui tam, or whistleblower, lawsuit filed under the False Claims Act by Brooks Wallace, Robert Farley and Dr. Manuel Fuentes who will collectively receive just under $2 million of the settlement deal.

Exactech did not admit to guilt or liability as part of the agreement.