Exactech Agrees to Pay $8 Million to Resolve False Claims Act Allegations for Selling Defective Knee Implant Devices

Baltimore, Maryland - Exactech Inc. agreed to pay $8 million to resolve allegations that the company violated the federal False Claims Act. A medical device company based in Gainesville, Florida, Exactech allegedly violated the False Claims Act by knowingly submitting or causing the submission of false claims for payment to Medicare, Medicaid, and the United States Department of Veterans Affairs (VA) in connection with defective knee-replacement devices. The U.S. Bankruptcy Court for the District of Delaware approved the settlement as part of the pending Chapter 11 bankruptcy proceedings involving Exactech.

Kelly O. Hayes, U.S. Attorney for the District of Maryland, announced the settlement with Prim F. Escalona, U.S. Attorney for the Northern District of Alabama.

This settlement relates to two separate components of Exactech's total-knee replacement systems. First, the settlement resolves allegations that as early as January 2008, Exactech knew that its finned tibial tray - a metal component of its knee replacement system that fits into a patient's tibia - failed prematurely at a higher than acceptable rate. Therefore, it was not reasonable and necessary for use during total-knee replacement surgeries performed on Medicare, Medicaid, and VA beneficiaries. But Exactech continued to market and sell the component for surgeries between January 1, 2008, and December 31, 2018.

Additionally, the settlement resolves allegations that as early as January 2019, Exactech knew that the polyethylene component in certain Logic and Truliant knee-replacement systems failed prematurely at a higher than acceptable rate. Therefore, it was not reasonable and necessary for use during total-knee replacement surgeries performed on government beneficiaries. But Exactech continued to market and sell the Logic and Truliant knee systems with defective polyethylene components for use during total-knee replacement surgeries between January 1, 2019, and February 7, 2022.

"Patients who need a medical device to enjoy their lives rely on device manufacturers to put patient safety first. When a manufacturer learns that its device is defective, it must promptly and transparently address the problem," Hayes said. "We will hold companies accountable who knowingly sell defective devices."

"Today's resolution reaffirms our commitment to protect the health and safety of patients," Escalona said. "Medical device manufacturers must ensure their medical devices, which may be implanted in patients' bodies, meet the necessary standards of safety and effectiveness at all times."

Under the terms of the settlement, Exactech will pay a total of $8 million, $7,640,000 of which is the federal share. The states are entering into separate agreements with Exactech related to the $360,000 state share. The settlement is based on Exactech's financial condition.

This civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Brooks Wallace, Robert Farley and Dr. Manuel Fuentes in a case captioned United States ex rel. Wallace v. Exactech, Inc., No. 7:18-cv-1010 (N.D. Ala.) (the "Alabama Action") and by Dr. Pasquale Petrera in a case captioned United States ex rel. Petrera v. Exactech, Inc., Civil No. 21-3325-SAG (D. Md.) (the "Maryland Action"). Under these provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. In this case, the settlement provides for the Alabama whistleblowers to receive a $1,329,360 share of the settlement amount and the Maryland whistleblower to receive a $565,360 share of the settlement amount. The resolution obtained in this matter is the result of a coordinated effort between the Justice Department's Civil Division, Commercial Litigation Branch, Fraud Section, and the U.S. Attorney's Offices for the District of Maryland and Northern District of Alabama, with assistance from the U.S. Department of Health and Human Services Office of Inspector General.

This investigation and resolution of this matter illustrates the government's emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

U.S. Attorney Hayes commended Assistant U.S. Attorneys Tarra DeShields and Michael Wilson, Office for the District of Maryland; Assistant U.S. Attorney Don Long, Office for the Northern District of Alabama; and Senior Trial Counsel Michael Hoffman, DOJ Civil Division's Commercial Litigation Branch, Fraud Section who all handled this matter

The claims resolved by the settlement are only allegations. There has been no determination of liability.