Medtronic: Federal Probe into Infuse Product is Over

Medtronic, Inc., with headquarters in Fridley, said Wednesday that government investigators have closed their probe of how the company sold its Infuse bone-graft product.

A company spokeswoman told the St. Paul Pioneer Press Wednesday that the investigation "pertained to the company's sales and marketing practices and physician relationships related to off-label use of Infuse bone graft."

The investigation started in 2008. In March, filed by the Minneapolis Firefighters Relief Association for $85 million. The company is also paying Yale University researchers millions of dollars to review Infuse.

'We Are Pleased'
Here is the text of Medtronic's news release Wednesday:

Medtronic, Inc. (NYSE: MDT) today announced it has been notified by the U.S. Department of Justice (DOJ) and the Office of the United States Attorney for the District of Massachusetts that federal prosecutors have closed their investigation of Medtronic related to INFUSE® Bone Graft.  The status of this federal civil and criminal investigation has been regularly reported in Medtronic’s quarterly disclosures.

“After several years of investigation, we are pleased that the Department of Justice and the U.S. Attorney’s Office have come to the decision to close their investigation of the company related to INFUSE Bone Graft,” said Chris O'Connell, executive vice president and group president, Restorative Therapies Group, which includes the company's Spinal business.

'Cloud's Gone'
The Star Tribune cited an industry observer who said the news brightened the skies over the company's Fridley headquarters.

Piper Jaffray & Co. analyst Thom Gunderson said the news gives Medtronic a measure of closure.

"It was a cloud hanging over them. The cloud's gone," Gunderson said. "At least you don't have the uncertainty of where are we with the DOJ and wondering when is the other shoe going to fall."

Another medtech-sector observer, Debbie Wang of Morningstar, told Minnesota Public Radio that while it

"It is probably a huge relief to Medtronic management because it is never good to have this kind of investigation hanging over your head,["] Wang said. "Even worse, if they actually do find there was inappropriate marketing going on, that will lead to fines."

Wang says it is good for the company that the investigation is over but that doesn't end Medtronic's trouble with Infuse. In the three months ending in January, Infuse sales were down by 30 percent.

"This has to be a relief to management," she said. "On the other hand, I don't know that having this investigation end is necessarily going to do anything to help Infuse sales.["]