DOJ launches antitrust investigation focusing on orthopedic companies

Four implant manufacturers received subpoenas in an investigation of possible federal law violations.

Four orthopedic implant device manufacturers have received subpoenas from the Department of Justice as part of a new federal investigation.

Zimmer Holdings Inc. announced Friday, June 23, that it received a subpoena from the Department of Justice (DOJ) Antitrust Division requesting documents from January 2001 through the present “pertaining to an investigation of possible violations of federal criminal law, including possible violations of the antitrust laws, involving the manufacture and sale of orthopaedic implant devices,” according to a Zimmer press release.

Biomet Inc., DePuy Inc., a division of Johnson & Johnson, and Stryker Corp. also announced the receipt of similar subpoenas on Monday, June 26.

All companies stated that they intend to fully cooperate with the DOJ.

This latest action comes more than a year after the DOJ subpoenaed five orthopedic manufactures — Biomet, DePuy, Smith & Nephew, Stryker and Zimmer — for documents relating to consulting and professional service agreements with orthopedic surgeons. Although Smith & Nephew is not included in the latest action, there is some speculation that the two investigations may be related. But: “It’s impossible for us to know for sure,” said Matt Miksic, an equity analyst at Morgan Stanley.

The announcements startled investors and sent shares for the companies falling as investors picked over the language used in the companies’ press releases. But other than those press statements, little information on the investigation is available.

“There is a lot of speculation about how serious [the situation] is,” Miksic told Orthopedics Today. “If you compared these to the subpoenas [issued] last year for an investigation regarding consulting arrangements, these new subpoenas say ‘possible violations of federal criminal law’ while the others were just investigations into those agreements,” he said.

“I think that, although people were quite concerned that this was somehow more severe and serious than last year, what it comes down to is that any violation of these antitrust laws is a criminal violation,” he said. “So the fact that they are using the language ‘criminal’ is not all that significant, not anymore significant than the fact that it is an antitrust investigation. Therefore, this investigation does not appear to be any more or less serious than other non-civil actions by the antitrust division of the DOJ.”

Miksic believes the current investigation is focused on pricing and bidding for business and contracts. But such antitrust cases are typically hard for the government to prove and seldom result in severe penalties, such as jailing of company executives.

“It seems like the most common form of conclusion is a settlement and fines,” he said.

(Editors note: For important disclosures relating to this article, click here.)

For more information:
Justice Department subpoenas orthopedic manufacturers on ties to surgeons. 1st on the Web, March 31, 2005. Available at: orthosupersite.com/view.asp?rID=2821.