OtisMed CEO Jailed

On June 26 the U.S. District Court of New Jersey sentenced the OtisMed Corporation’s (OtisMed) former CEO, Charlie Chi, to 24 months in prison, ordering him to serve one year of supervised release and to pay a $75,000 fine.

In December 2014, OtisMed agreed to pay more than $80 million to resolve related criminal and civil liability related to charges of distributing adulterated medical devices with intent to defraud and mislead. At that same time, Chi pleaded guilty to introducing adulterated medical devices into interstate commerce.

George M. Karavetsos, director of the FDA’s Office of Criminal Investigations, said: “With more than 600,000 knee replacements performed each year, patients rely on FDA to help ensure that the devices are safe and work as intended. When manufacturers ignore FDA requirements, they risk endangering patients’ health and quality of life. We will continue to protect the public health by bringing to justice those who disregard FDA regulations."

The OtisKnee was used by surgeons during total knee arthroplasty (TKA), commonly known as knee replacement surgery. OtisMed marketed the OtisKnee cutting guide as a tool to assist surgeons in making accurate bone cuts specific to individual patients’ anatomy based on magnetic resonance imaging (MRI) performed prior to surgery. None of OtisMed’s claims regarding the OtisKnee device were evaluated by the FDA before the company made them in advertisements and promotional material.

Between May 2006 and September 2009, OtisMed sold more than 18,000 OtisKnee devices, generating revenue of approximately $27.1 million. 

On Oct. 2, 2008, OtisMed submitted a pre-market notification to the FDA seeking clearance to market the OtisKnee. The company had not previously sought the FDA’s clearance or approval, and had been falsely representing to physicians and other potential purchasers that the product was exempt from such pre-market requirements.

On Sept. 2, 2009, the FDA sent OtisMed a notice that its submission had been denied, noting that the company had failed to demonstrate the OtisKnee was as safe and effective as other legally marketed devices. One week after the FDA denied OtisMed’s request for clearance, the company shipped approximately 218 OtisKnee guides from California to surgeons throughout the U.S.

Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, said: “Today’s sentencing of OtisMed’s CEO ought to send a clear message to others in positions of authority within the medical device and pharmaceutical industries: the Department of Justice will vigorously prosecute not only corporations, but also the individuals at their helm who are responsible for endangering public health and safety in pursuit of profit.”