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Stryker paying $15M to resolve marketing charges

January 18, 2012
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KALAMAZOO, Mich.—Stryker Corp. said Wednesday its biotechnology unit will pay a $15 million fine to resolve federal charges it fraudulently marketed spinal products and made misleading statements to regulators.

The Stryker Biotech unit will also plead guilty to one misdemeanor charge. The company said the payment will reduce its fourth-quarter and full-year profit by about 3 cents per share.

The company announced in early 2009 that the U.S. Attorney's Office for the District of Massachusetts had filed a grand jury indictment that included 13 felony charges against Stryker and several executives, including Mark Philip, the former president of the business. Federal prosecutors said the company engaged in an illegal marketing scheme to promote its OP-1 spinal implant and bone putty, which are used to stimulate bone growth. The Food and Drug Administration approved the products under a humanitarian device exemption, meaning they could not be sold for profit and could be used in the treatment of only one rare condition. The Justice Department said Stryker Biotech advised surgeons to combine the OP-1 products with Calstrux, a bone void filler Stryker makes. That combination of products had never been studied on people, and it had not been approved by the FDA. The mix of products caused "serious medical problems" for some patients, according to the Justice Department.

Stryker Biotech and Philip were also charged with making false statements to the FDA. Other charges were filed against sales managers William Heppner, David Ard, and Jeff Whitaker.

Stryker said its 2011 profit will be at the low of end of its forecast of $3.72 to $3.74 per share. Analysts surveyed by FactSet expect the company to report a profit of $3.73 per share, on average.

Shares of Stryker rose 16 cents to $52.17.

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