Olympus fined $85 million in duodenoscope case; former exec faces prison

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Olympus (TYO:7733) and a former senior executive in Japan have pleaded guilty in Newark, N.J., to failing to file required adverse event reports involving infections connected to duodenoscopes, and to continuing to sell the devices in the United States despite those failures, the Justice Department announced.

Tokyo-based Olympus and Hisao Yabe, 62, both entered guilty pleas before U.S. District Court Judge Stanley Chesler in Newark Federal Court: Olympus to three counts, and Yabe to one count, of distributing misbranded medical devices in interstate commerce in violation of the Federal Food, Drug, and Cosmetic Act (FDCA).

Olympus has already been fined hundreds of millions of dollars over its duodenoscopes, which are difficult to clean and were implicated in deadly superbug infections in the U.S. and Europe.

Chesler also fined Olympus $80 million and ordered $5 million in criminal forfeiture, consistent with a plea agreement between Olympus and the justice department. Olympus must also abide by an agreement with the justice department requiring Olympus to enact extensive compliance reforms. Yabe is scheduled to be sentenced by Chesler on March 27, 2019. Yabe faces a maximum potential penalty of a year in prison and a $100,000 fine, or twice the gain or loss from the offense.

Olympus admitted that it failed to file adverse event reports with the FDA  in 2012 and 2013 relating to three separate events involving infections in Europe connected to Olympus’s TJF-Q180V duodenoscope (Q180V): the infection of approximately 22 patients with Pseudomonas aeruginosa at the Erasmus Medical Center in the Netherlands in early 2012; the infection of three patients with Escherichia coli at Clinique de Bercy in France in November 2012; and the infection of five patients with Pseudomonas aeruginosa at Kremlin Bicetre in France in July 2012.

Yabe admitted personal responsibility for failing to file the necessary information with FDA relating to the Erasmus Medical Center infections, according to a statement from the court. At the time, Yabe was Olympus’s quality and environment division manager – the company’s top regulatory official, whose responsibilities included adverse event reporting in the United States.

“Medical devices, such as the Olympus duodenoscope that is used in 500,000 procedures per year in the United States, can extend and improve the quality of life for many people,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division, in the statement. “But when a device manufacturer becomes aware of risks that could lead to illness, injury, or death, there is a statutory obligation to report that information to the FDA in a timely manner. By failing to do so, Olympus and Mr. Yabe put patients’ health at risk.”

“Olympus and Yabe failed to file important FDA reports regarding adverse events,” said Rachael Honig,  U.S. attorney for the District of New Jersey. “It is especially troubling that they remained quiet when they received additional information from an independent expert questioning the safety of Olympus’ device. Patient safety must always be a paramount concern for medical device companies, and these defendants simply failed to treat that concern with the gravity it deserves.”

“Medical device adverse event reporting requirements are designed to protect Americans by providing FDA with a tool to detect potential safety issues,” said FDA Commissioner Scott Gottlieb, M.D., in a separate statement. “When device manufacturers fail to report adverse events, unsuspecting patients are placed at risk.”

Although Olympus acknowledged that it failed to comply with the federal reporting requirements, the company said the investigation did not identify any direct harm to patients as a result of the disclosure failures. The settlement does not affect the availability of Olympus products and services worldwide.

“Olympus deeply regrets its failure to file and supplement the MDRs identified in the plea agreement and accepts full responsibility for these failures,” said Olympus president Hiroyuki Sasa in a separate statement.

Olympus admitted that it failed to make the required initial MDR filing regarding the Kremlin Bicetre infections, and failed to file required supplemental MDRs relating to the Erasmus Medical Center and Clinique de Bercy infections, for which Olympus had filed initial MDRs. Under the FDCA, devices for which required MDRs and supplemental MDRs have not been filed are deemed misbranded, and it is a crime to ship such devices in interstate commerce. Between August 2012 and October 2014, Olympus shipped hundreds of misbranded duodenoscopes in the United States, generating approximately $40 million in revenue and approximately $33 million in total gross profit. Olympus’s payment of $85 million is more than 2½ times Olympus’s total profit from sales of the misbranded duodenoscopes.

Yabe admitted that he was aware of Olympus’s obligation to file supplemental MDRs and was involved in Olympus’s failure to file a supplemental MDR regarding the Erasmus Medical Center infections and a report Olympus received prepared by an independent expert of Delft University of Technology in the Netherlands. That expert report – which Olympus obtained in the summer of 2012 – noted numerous problems with the Q180V, including that the Q180V’s tip had various cracks, corners, and crevices that could harbor bacteria and could be cleaned only with great difficulty. The report recommended immediate further investigation of all such scopes, updating the cleaning instructions, and improving the quality of the seal.

As part of its plea agreement, Olympus has agreed to:

• • Retain an independent MDR expert to inspect and review Olympus’s policies and procedures to determine their compliance with the FDCA’s MDR requirements and its implementing regulations;
  • Periodic review by the MDR expert of Olympus’s continued compliance with those requirements and its implementing regulations;
  • And conduct a review and audit of the device classification and market pathway for all endoscope device types manufactured by Olympus that are intended for use in the sterile body cavity and that are currently sold in the United States. The MDR expert will report back to FDA and the justice department periodically for three years.

 

 

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