J&J Hip Replacement, Vaginal Mesh Problems Lead to DOJ Investigation

Johnson & Johnson indicates that it faces an investigation by the U.S. Justice Department and a number of states, who are looking into potentially illegal marketing practices involving a recalled hip replacement and several different surgical mesh products, which may have defrauded government health coverage programs. 

In an annual filing with the Securities and Exchange Commission (SEC) for 2012, Johnson & Johnson disclosed the investigations, indicating that the Department of Justice (DOJ) requested certain documents regarding DePuy ASR hip products and that a multi-state Attorney General investigation is on-going regarding surgical mesh products used for hernia and urogynecological purposes.

According to the filing, the government is looking into whether Johnson & Johnson’s DePuy Orthopaedics subsidiary filed false claims to Medicare over the ASR XL hip replacement system, which was recalled in August 2010 amid data that suggested patients faced a higher-than-expected risk of the device failing within a few years after it was implanted.

The medical device manufacturer also reported that it faces an investigation by 42 states looking into whether it illegally marketed surgical mesh and vaginal mesh implants, indicating that its subsidiaries have since entered into a tolling agreement with the states involved to hold off on filing a lawsuit.

Johnson & Johnson Hip Replacement Probe Looks Into Possible Medicare Fraud

The request for documents involving the DePuy ASR metal-on-metal hip claims was first made in August 2012, according to the filing. The request was an informal one made by the U.S. Attorney’s Office in Massachusetts and the DOJ’s Civil Division.

Subsequent requests for additional information followed later, and Johnson & Johnson indicates that the inquiries are aimed at determining whether the company or anyone else submitted false claims or false statements that cost federal health care programs money in connection to the marketing and use of the recalled ASR metal hip replacement system.

The investigation could lead to a DOJ lawsuit against the company if the investigation turns up evidence that the company knew there were problems with the hip implants but sold them anyway, leading doctors and hospitals to seek reimbursement from the federal Medicare program for defective devices that did not properly treat their patients, which is considered Medicare fraud.

An DePuy ASR hip recall was issued in August 2010, after more than 93,000 of the devices were sold worldwide. The recall was issued due to the high failure rates of the ASR implants, which often caused individuals to require revision surgery due to loosening caused by metallosis, or metal blood poisoning.

Johnson & Johnson now faces more than 10,000 DePuy ASR lawsuits, alleging that the manufacturer failed to adequately research the design or provide adequate information about the risks associated with the metal-on-metal hip replacement.

A first DePuy ASR trial is currently underway in California state court, with a number of former Johnson & Johnson employees and other witnesses providing testimony that suggests the manufacturer knew about the risk of problems with metal-on-metal hips long before they issued the ASR recall.  Some internal documents offered during the trial have suggested that the company’s own predictions estimated a failure rate may reach as high as 37%.

California AG Launching Vaginal Mesh Marketing Probe

The SEC filing also noted that the California Attorney General’s office was leading a multistate investigation into whether the company had illegally marketed its transvaginal and surgical mesh products. Johnson & Johnson indicates that it was contacted by the California AG and alerted to the investigation in October 2012.

Johnson & Johnson’s Ethicon subsidiary currently faces several thousand vaginal mesh lawsuits filed by women who received the company’s surgical mesh for transvaginal repair of pelvic organ prolapse (POP) or female stress urinary incontinence. The lawsuits allege that manufacturer failed to adequately warn women or the medical community about the potential risk of vaginal mesh complications.

One of the first Ethicon mesh trials to reach a jury recently concluded in New Jersey state court, with the jury awarding a plaintiff $3.35 million in compensatory damages on Monday. The judge presiding over the trial is now considering whether the jury should consider an additional claim for punitive damages, which may result in substantially higher compensation designed to punish the company for reckless disregard for consumer safety.

In addition to that case, Johnson & Johnson currently faces at least 1,800 Ethicon Gynecare vaginal mesh lawsuits filed in New Jersey state court. About another 2,000 complaints filed in U.S. District Courts throughout the country have been consolidated in the federal court system as part of an MDL, or multidistrict litigation.

In the SEC filing, Johnson & Johnson indicates that the number of product liability lawsuits involving the surgical mesh products continues to increase, and the company is continuing to receive information regarding the potential costs and anticipated number of cases. A product liability accrual has been established by the company in anticipation of the costs associated with the litigation, but Johnson & Johnson indicates that the ultimate cost to settle the vaginal mesh lawsuits is not expected to have a material adverse effect on their financial position or cash flows.