Dive Brief:

• Orthopedics firm Exactech has agreed to pay an $8 million settlement to resolve allegations that the company violated the federal False Claims Act by knowingly selling defective knee implants, the U.S. Attorney’s Office for the District of Maryland said Tuesday. 
• The settlement addresses allegations that Exactech knew two components of its total knee replacement systems failed prematurely at a higher than acceptable rate, yet the company still sold the devices. Exactech submitted claims for payment to Medicare, Medicaid and the U.S. Department of Veterans Affairs in connection with the defective implants, according to the allegations.
• The settlement follows several other regulatory actions related to Exactech’s implants. Exactech received a warning letter from the Food and Drug Administration last year due to packaging problems with shoulder implants. The company filed for Chapter 11 bankruptcy, facing product liability claims brought by around 2,600 patients, and is in the process of selling to an investor group.

Dive Insight:

The U.S. Bankruptcy Court for the District of Delaware approved the settlement as part of Exactech’s Chapter 11 bankruptcy proceedings. Kelly Hayes, U.S. attorney for the District of Maryland, and Prim Escalona, U.S. attorney for the Northern District of Alabama, announced the settlement.

“Patients who need a medical device to enjoy their lives rely on device manufacturers to put patient safety first. When a manufacturer learns that its device is defective, it must promptly and transparently address the problem,” Hayes said in a statement. “We will hold companies accountable who knowingly sell defective devices.”

The settlement focuses on problems with two parts: the finned tibial tray, a metal component that fits into a patient’s tibia, and a polyethylene component used in certain knee replacement systems.

The settlement alleges that Exactech knew of problems with the tibial tray as early as 2008, but continued to sell the component through 2018. It also alleges that Exactech knew as early as 2019 that the polyethylene component in certain Logic and Truliant knee replacement systems failed prematurely, but continued to sell systems with the defective part between 2019 and 2022. 

Exactech declined to comment. 

The orthopedic firm is currently going through Chapter 11 bankruptcy after failing to reach an out-of-court settlement for product liability claims brought by thousands of patients in response to recalls of its devices. Exactech has recalled shoulder, hip, knee and ankle implants in recent years due to defective packaging. In 2023, the FDA advised healthcare professionals not to use the implants. 

This summer, Exactech named a new CEO and chief medical officer. 

The company also recently received court confirmation of a restructuring plan and approval to sell its assets to a group of investors.

The restructuring will allow investment firms Strategic Value Partners, Stellex Capital Management and Greywolf Capital Management to buy most of Exactech’s operations and assets. The companies expect to complete the customary steps for the sale over the coming weeks.