Medical device manufacturer Aesculap Implant Systems, LLC has agreed to pay $38.5 million to resolve allegations that it sold knee replacement devices with a known risk of premature failure, leading to false claims submitted to Medicare and Medicaid. The settlement was announced by U.S. Attorney David Metcalf for the Eastern District of Pennsylvania and the Department of Justice.
According to the government, from July 2010 through June 2023, Aesculap marketed its VEGA System Knee System in the United States despite knowing that the implants were prone to loosening from patients’ bones soon after surgery. This defect often required patients to undergo additional surgeries for removal and replacement of the failed implants. The company allegedly did not disclose these issues or take sufficient steps to record or report adverse events related to the product. In April 2024, Aesculap ceased selling all knee replacement devices in the U.S., including the Vega system.
The settlement also addresses accusations that Aesculap provided unlawful payments—such as consulting fees, international travel, and entertainment—to an orthopedic surgeon in Georgia who experienced problems with the Vega implant, aiming to induce continued use and recommendations of their product. Such actions would violate federal anti-kickback laws.
“Doctors who implant medical devices need complete and accurate information about those devices to ensure they choose the best and safest options for their patients,” said U.S. Attorney Metcalf. “A company that knows its product has a propensity to prematurely fail must not mislead doctors or government regulators or conceal material information about those known issues. Medicare and other federal programs should not be required to pay charges for devices that are unduly risky, and that may require painful and expensive surgeries to fix.”
Assistant Attorney General Brett A. Shumate stated: “Medical device failures — and their potential to harm patients — are of paramount concern to the Department of Justice. The Department will hold accountable medical device companies that knowingly sell products prone to failure that present risks to patients and waste taxpayer dollars.”
Christian J. Schrank, Deputy Inspector General for Investigations at HHS-OIG added: “Transparency in medical device marketing is essential to safeguarding patient care. Undermining this process to increase profits is a serious violation of federal law that flouts the health and safety of patients. HHS-OIG will continue to work with our law enforcement partners to uncover and dismantle illegal arrangements that exploit the Medicare system for financial gain at the expense of patients.”
In addition, Aesculap entered into a non-prosecution agreement over distributing two medical devices—the ELAN-4 Air Drill used in bone surgery procedures, and JS Series SterilContainer S2 sterilization container—without proper clearance from the Food and Drug Administration (FDA) between March 2017 and August 2017. An employee responsible for FDA submissions forged documents indicating both products had received clearance when they had not; this individual pleaded guilty previously in federal court.
“Certain medical devices require FDA notification and clearance before distribution to the public,” stated Ronald Dawkins, Acting Special Agent in Charge at FDA Metro Washington Field Office. “Distributing such medical devices without FDA clearance and in violation of the Federal Food, Drug, and Cosmetic Act can put patients at risk. The FDA’s Office of Criminal Investigations (OCI) worked with the Justice Department and HHS-OIG to ensure a just resolution, and we commend the exceptional work done by the team.”
The civil settlement resolves claims brought under whistleblower provisions by John Marien, Michael McGee, and Brad Stafford on behalf of taxpayers; such provisions allow private individuals who report fraud against government programs like Medicare or Medicaid potentially receive part of any recovery.
The investigation involved multiple agencies including attorneys from both local offices within Pennsylvania as well as branches within DOJ’s Civil Division focused on commercial litigation fraud enforcement efforts.
Except where admitted by Aesculap under its non-prosecution agreement regarding unauthorized device distribution, all other resolved claims remain allegations only without determination of liability.
