PHILADELPHIA, PA — A Pennsylvania medical device manufacturer will pay $38.5 million to settle allegations that it knowingly sold defective knee implants that failed at alarming rates, triggering costly revision surgeries and false claims to Medicare and Medicaid, federal prosecutors announced this week.
Aesculap Implant Systems, LLC, headquartered in Center Valley, agreed to the massive civil settlement after the government alleged the company marketed its VEGA System knee implants for more than a decade while concealing evidence that the devices loosened prematurely and were not safe or effective for patients undergoing knee replacement surgery.
From 2010 through 2023, prosecutors said, Aesculap continued selling the implants despite knowing bone cement often failed to adhere to the device — a flaw that left patients with severe pain, instability, and the need for additional surgeries. Federal authorities also alleged the company failed to record or report adverse events and ignored red flags indicating widespread device failures. Aesculap halted all U.S. sales of its knee replacement systems in April 2024.
“Doctors who implant medical devices need complete and accurate information,” said U.S. Attorney David Metcalf. “A company that knows its product has a propensity to prematurely fail must not mislead doctors or government regulators. Medicare and other federal programs should not be required to pay for devices that are unduly risky.”
The Justice Department’s Civil Division said medical device failures with the potential to injure patients remain “of paramount concern,” and promised continued scrutiny of companies that put patients at risk.
Federal investigators also uncovered an unlawful kickback scheme involving an orthopedic surgeon in Georgia. According to prosecutors, Aesculap paid the doctor consulting fees, lavish international travel, and entertainment to induce him to use and recommend the VEGA implant — violations of the Anti-Kickback Statute that can trigger civil and criminal penalties.
Alongside the civil settlement, Aesculap entered into a non-prosecution agreement after admitting it distributed two separate medical devices — a high-speed surgical drill and a sterilization container — without obtaining required FDA clearance. An employee assigned to handle the FDA submissions never filed the documentation and instead forged records falsely claiming both devices had been approved. That employee previously pleaded guilty and was sentenced to prison.
“Distributing medical devices without FDA clearance can put patients at serious risk,” said Ronald Dawkins, acting special agent in charge of the FDA’s Metro Washington Field Office. “We commend the exceptional work done to bring this case to a just resolution.”
The settlement resolves two whistleblower lawsuits filed under the False Claims Act. The whistleblowers — John Marien, Michael McGee, and Brad Stafford — will receive a share of the recovery. Federal authorities emphasized that except for facts admitted in the non-prosecution agreement, the allegations remain unproven and no liability determination has been made.
Federal investigators said the case reflects a broader enforcement strategy aimed at protecting patients and preventing fraud within the Medicare and Medicaid systems. Tips on suspected health care fraud can be submitted to HHS at 800-HHS-TIPS.
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