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As the number of product liability lawsuits over the recalled Stryker Rejuvenate and ABG II hip replacement systems continue to increase, the manufacturer now indicates that the costs associated with the recall may exceed $1 billion.
In a third-quarter earnings reports and financial statement released this month, Stryker revised prior estimates to indicate that the total cost to settle Stryker Rejuvenate hip lawsuits could cost between $700 million and $1.13 billion before third-party insurance recoveries.
“The ultimate total cost with respect to this matter will depend on many factors that are difficult to predict with limited information received to date and may vary materially based on the number of and actual costs of patients seeking testing and treatment services, the number of an actual costs of patients requiring revision surgeries, the number of and actual costs to settle lawsuits filed against us, and the amount of third-party insurance recoveries,” the company wrote in the contingencies section of its form 10-Q report (PDF) to the U.S. Securities and Exchange Commission (SEC).
The company reported that the costs of the recalls had negatively impacted its net revenue in the third quarter of 2013 with quarterly net profits falling 70% mainly due to charges for its recalled hip replacement systems that blunted increased sales of other products.
Stryker Rejuvenate and ABG II Hip Recall
More than 20,000 of the artificial joint implants were sold in the United States before the Stryker Rejuvenate and ABG II hip recall was issued in July 2012. Although such hip implants are expected to last 15 to 20 years, these components were removed from the market only two years after they were introduced.
Unlike traditional hip replacements, which feature a single femoral component, the Stryker Rejuvenate and ABG II are modular neck-stems, featuring two pieces that fit inside each other to allow the surgeon to customize the length of the femoral component based on the patient. However, the design has been linked to an increased risk of problems that may result from the release of microscopic metal debris as the chromium-cobalt neck rubs against the titanium femoral stem. This can cause the implants to corrode or fret at the modular junction, increasing the risk of inflammation and loosening of the hip implant.
Stryker now faces several hundred product liability lawsuits brought by plaintiffs who allege that the metal-on-metal design of the Rejuvenate and ABG II hips were defective. In June, the U.S. Judicial Panel on Multidistrict Litigation established coordinated pretrial proceedings for all complaints filed throughout the federal court system involving the modular femoral hip component.
The cases filed in U.S. District Courts nationwide are centralized before U.S. District Judge Donovan Frank in the District of Minnesota to reduce duplicative discovery into common issues that will arise in a large number of cases, to avoid conflicting pretrial rulings from different judges and to serve the convenience of the parties, the witnesses and the courts.