Hospitals

More Medtech Executives Risk Going to Prison

Posted in Regulatory and Compliance by Chris Newmarker on May 23, 2016

Nancy Crotti

The criminal trial of two former Acclarent executives is set to begin June 7—but the latest example of the U.S. Justice Department cracking down on medical device corporations’ top brass.

The government’s case claims that formerAcclarent CEO William Facteau and the firm’s VP of sales, Patrick Fabian, plotted a fraudulent scheme to promote the RelievaStratus Microflow spacer for off-label use to deliver drugs. The alleged scheme drove up the startup’s revenues and stock valuation, making the VC-based company an attractive takeover target for Johnson & Johnson.

Specifically, federal prosecutors have charged Facteau (now president and CEO ofEarLens Corp. in Menlo Park, CA) and Fabian (now COO of NxThera in Maple Grove, MN) each with one count of conspiracy, three counts of securities fraud, four counts of wire fraud, and 10 counts of introducing adulterated or misbranded medical devices into interstate commerce.Facteau and Fabian have pleaded not guilty.

The suit also charges Acclarent with hiding a plan to pad its bottom line from potential suitors, including J&J, which bought the company in 2010 for $785 million. The indictment, brought in April 2015, states that Ethicon, a unit of J&J, was said to have instructed Facteau and Fabian to quit promoting the Stratus after it had discovered “extensive off-label use of the product of which Ethicon became aware through its due diligence process.” After that, the two allegedly continued to instruct employees to sell the Stratus as a steroid delivery device in 2010 and 2011. Following the acquisition by J&J, Facteau walked away with roughly $30 million while Fabian took home $4 million.

 

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Josh Sandberg

Josh Sandberg is the President of Ortho Spine Partners and Partner for The De Angelis Group. He also serves as Co-Founder and Editor of OrthoSpineNews.

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