Compliance Communications Blog

"Knee Replacement and an $80 Million Settlement"


12/16/14: OtisMed Corp. and its CEO Charlie Chi didn’t do the medical device industry, his patients, or his firm’s eventual parent company any favors by taking a twisted path to selling the OtisKnee orthopedic cutting guide. The guides were designed for use in knee replacement surgery but their application for marketing clearance was...rejected by the FDA. No problem for Chi, who sold more than 18,000 of the devices between 2006 and 2009, generating revenue of approximately $27.1 million. Chi submitted a pre-marketing notification to FDA in October 2008 and was denied approval, which led to a unanimous decision by the company’s Board of Directors to halt further shipments of the device. Instead, according to DOJ, Chi directed OtisMed employees “… to organize a mass shipment of all OtisKnee devices that had been manufactured but had not yet been shipped and suggested ways for the employees to hide the shipments from FDA regulators.”  End result? The company settled criminal and civil liability for $80 million, Mr. Chi is awaiting sentencing, and OtisMed has been banned from participating in federal healthcare programs for 20 years. 
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