Device approvals should
be based on clinical evidence,
not financial incentives,
NJ AG Anne Milgram maintains
in settlement with the company

New Jersey AG Reaches Settlement With Medical Device Maker Synthes

May 21, 2009
by Lynn Shapiro, Writer
New Jersey Attorney General Anne Milgram and Division of Law Director Robert Gilson announced that the state has entered into a settlement agreement with medical device maker Synthes, Inc., which resolves allegations Synthes failed to disclose financial conflicts of interest among doctors who conducted clinical testing of its products.

Under the Assurance of Voluntary Compliance agreement, Synthes must disclose any future payments made by the company to physicians conducting clinical trials on its devices, as well as any investments held by such physicians in the devices they test. A $3 billion global company, Synthes has also agreed to stop paying clinical trial physicians with company stock or stock options.

Based in West Chester, PA, Synthes is known principally for its development of spinal and trauma products and devices. The state's investigation focused on allegations that most doctors conducting clinical trials for Synthes' ProDisc Total Disc Replacement System, ProDisc-L and ProDisc-C, had a financial stake in the outcome.

Milgram said the apparently common industry practice of clinical trial physicians being paid by--or holding considerable stock in--companies whose products they are testing is wrong, and leaves the clinical trial process lacking in integrity.

"It is outrageous that doctors who are testing and, in many cases, recommending the use of certain high-risk medical devices are being compensated with stock in the very companies that make the devices," Milgram said. "All patients, but especially those considering high-risk devices such as spinal disc replacements, deserve honest, objective clinical trial information about the products available."

Milgram said the Synthes agreement should serve as a template for the entire industry.

In a letter to the FDA, the Attorney General said she is hopeful the Synthes terms will become "best practices" for disclosure among medical device makers.

Milgram's letter described the problem of undisclosed financial conflicts-of-interest among clinical investigators as "rampant," and called on the FDA to more effectively address the problem by adopting rules that require full public disclosure.

Copies of the Attorney General's FDA letter went to Senator Max Baucus, Chairman of the U.S. Senate Committee on Finance, and to Senator Charles E. Grassley, the ranking member of that committee.

In addition, Milgram said her office issued subpoenas today to five major medical device manufacturing companies seeking information about their business practices. She did not disclose the companies' names, but Stryker is also being investigated, according to an SEC document.

Milgram described the Synthes settlement as the first of its kind because of its disclosure provisions, as well as its ban on compensating clinical researchers with company stock. She said the ban runs counter to widespread industry practice--a practice she called unacceptable.

Currently, she said, many clinical investigators stand to profit significantly if the trials in which they are involved are successful. Often, she explained, these financial interests are not disclosed to the public, including the patients participating in clinical trials.

She says ProDisc was developed by a start-up company known as Spine Solutions Inc. A New York investment firm, Viscogliosi Brothers, helped found Spine Solutions and financed the disc's development and research. The Viscogliosi Brothers offered the ProDisc clinical investigators substantial investment opportunities in Spine Solutions, as well as consulting contracts that included gifts of company stock and stock options. Synthes, Inc. bought Spine Solutions in 2003 and failed to fully disclose these conflicts of interest to the FDA, Milgram alleged. For example, she noted, a number of disclosure forms contained in the Synthes submission to FDA were signed and dated, but were otherwise left blank. Other forms indicated that clinical investigators had significant equity interests in the Synthes product they were testing, but offered no details.

Synthes' failure to adequately disclose "should have been obvious from even a cursory review of its FDA submissions," Milgram wrote, yet the FDA "did nothing" and ultimately approved Synthes applications for pre-market approval without delay or further inquiry into the apparent conflicts.

Under terms of the settlement, Synthes, Inc. has agreed to publicly disclose on its Web site any financial relationships with doctors conducting its clinical research trials. The company has also committed to disclosing such financial conflicts-of-interest to the research institutions that serve as clinical trial locations, and to the FDA.

The company has also agreed to:
* Prohibit compensation of clinical investigators tied to the outcome of the clinical trial
* Pay clinical investigators "fair market value compensation" for their clinical trial work, as well any other consulting services they provide to the company
* Collect information on financial interests from clinical investigators
* Create a Financial Interest Information Database that will record all relevant financial interests related to clinical investigators
* Disclose all financial interests of all clinical investigators on the company's Web site
* Provide complete disclosure of financial interests to the FDA and conduct reasonable due diligence to insure that the disclosures are complete and accurate
* Disclose all financial interests directly to health care facilities serving as clinical trial sites
* Provide Financial Interest and Disclosure training to employees.

The Synthes agreement pertains to all ongoing and future clinical trials, except for those conducted outside the U.S. and not intended for use in the marketing of products in this country.

In addition to the other settlement terms, Synthes will pay the state a total of $236,000 as reimbursement for fees and costs related to the investigation.

Also, Stryker Corporation has received a subpoena from the Attorney General of New Jersey and an FDA warning, concerning trials of its maxillofacial implant products, according to an SEC document. The document said other companies are also under investigation.

Read the settlement agreement:

Read New Jersey's letter to the FDA:

Sources: Office of the Attorney General, State of New Jersey; SEC