Product News and Recalls

OtisMed Exec Sentenced to Prison for Ignoring FDA Order

otismed exec sentenced to prison700,000 knee replacements are performed in the United States every year and, for a long time, they were generally done the same way using the same hardware. A small startup took notice of this fact and, in 2005, OtisMed set out to change how knee replacement surgeries are done. What followed, however, would be a tale of lies, complete disregard for public safety, whistleblowing, and ultimately a prison sentence.

Most knee replacements are done with devices that could best be described as “one size fits all.” Offering customization, OtisMed’s knee replacement device was supposedly designed to be cut specifically for the patient that needed it. The company claimed that this custom-cut knee replacement would help surgeons use “tailored bone cuts to a patient’s anatomy,” cutting down on surgery times and speeding up recovery.

In an effort to bring their product to market faster, OtisMed’s marketing team took a very aggressive approach. The company sent representatives to events frequented by orthopedic surgeons to explain their “custom-fit” knee replacement device. OtisMed representatives told surgeons and hospital administrators that their OtisKnee was a Class I medical device, which according to FDA regulations, does not need to be reviewed before distribution. In reality, their device was Class III which requires a wide range of testing and research before the FDA will approve the product for marketing.

The company’s falsified marketing strategy worked. Demand for the device increased rapidly and sales doubled month after month. During a three year span starting in 2006, OtisMed distributed over 18,000 unapproved OtisKnees, resulting in sales revenue of over $27 million.

OtisMed’s success with the OtisKnee would attract the attention of other companies. In 2008, Stryker, a Michigan-based medical device company, expressed interest in purchasing OtisMed. No stranger to lawsuits over their own orthopedic hip implants, Stryker, still working off of OtisMed’s claim that the OtisKnee was a Class I medical device requiring no formal approval, requested that OtisMed apply for formal FDA approval of the OtisKnee.

That approval would never come. In 2009, the FDA informed OtisMed that it was concerned over the safety and effectiveness of the OtisKnee device. Upon receiving this news, OtisMed’s board agreed to stop shipment. OtisMed’s CEO at the time, Charlie Chi, had other plans. He allegedly ordered his employees to send out 218 OtisKnee devices and told them specifically how to hide the shipments from the FDA.

After the acquisition of OtisMed in November 2009, a former Stryker employee filed a qui tam, or whistle-blower lawsuit, which resulted in a lengthy investigation into OtisMed and their knee replacement device. In December 2014, OtisMed pled guilty to distributing FDA-rejected devices and agreed to pay $80 million in fines.

Sentencing for Charlie Chi was handed down in late June of 2015. The U.S. District Court of the District of New Jersey sentenced Chi to 2 years in prison and fined him $75,000 for his role.