Bloomberg News

Stryker President’s Criminal Charges Dropped by Prosecutors

February 03, 2012

(Updates with prosecutor’s comment in 11th paragraph.)

Feb. 2 (Bloomberg) -- A former president at Stryker Corp. won’t be prosecuted on charges of marketing an unapproved mixture of two products for strengthening human bone growth, U.S. lawyers told a judge.

The government will abandon its 2009 indictment of Mark Philip, who ran Stryker Biotech LLC, prosecutors said today in federal court in Boston. The move follows the government’s decision last month to drop charges during the trial of three former Stryker sales representatives. Stryker, charged with a felony, pleaded guilty to a misdemeanor and paid a $15 million fine in connection with the unapproved marketing of the drugs.

“Earlier today, the government had an opportunity to review some documents that had previously been withheld as privileged,” Assistant U.S. Attorney Jeremy M. Sternberg told U.S. District Judge George O’Toole Jr. today at a pretrial hearing. “After reviewing the documents, it’s the government’s plan to file a motion to dismiss in the case against Mr. Philip.”

The decision to drop charges against the fourth and final individual in the case marks a setback for the U.S. attorney’s office in Massachusetts, which has led the nation in health-care prosecutions in recent years. Philip, the president from 2004 to 2008, was charged with wire fraud and conspiracy. He faced as long as 20 years in prison if convicted.

‘Good Faith’

“We were able to give the government documents they had not seen before that showed Mark acted in good faith,” said Philip’s attorney, Stephen G. Huggard, of Edwards Wildman Palmer LLP. “We showed some of our defense.”

Huggard wouldn’t specify what the documents were. He said the government hadn’t agreed to drop the case until an hour before the hearing. Philip, 52, lives near Boston and is a U.K. citizen who faced deportation if he was convicted.

“Justice was done,” Philip said, declining to comment further as he went to retrieve his passport from court personnel.

The judge asked Huggard if he had anything to say.

“With all respect your honor, we’re happy to get out of the building,” Huggard told the judge.

After the two-minute hearing, Huggard said in a statement: “We applaud the government for recognizing that fairness and justice required the case to be dismissed. It is not easy for the government to acknowledge that charges were perhaps brought in error, and in this case, U.S. Attorney Carmen Ortiz deserves special credit for diving into the facts of the matter and making the hard, difficult decision to dismiss the case.”

Ortiz said in an e-mailed statement that her office is proud of its record fighting fraud in the health-care industry.

‘Unfavorable Rulings’

“However, unfavorable pretrial rulings, combined with a strategic error in preparing for trial, led to the dismissal of charges against the individual defendants in the Stryker case,” she said. “This was a difficult decision but one warranted by a complex confluence of factors. At the end of the day, doing justice meant dismissing the charges, rather than subjecting these individuals to a protracted trial where the government could not put its most effective case before the jury.”

Philip was charged for his role in Stryker’s promotion to doctors of the combination of OP1, a protein that stimulates bone growth, and Calstrux, a synthetic bone void filler. While the Food and Drug Administration had approved both products, the regulator hadn’t signed off on using them together.

While doctors can prescribe or use an FDA-approved drug or device for any purpose, U.S. law bars companies from promoting them for so-called off-label use.

Stryker Biotech, based in Hopkinton, Massachusetts, and three sales representatives went on trial Jan. 9 on a 13-count criminal indictment charging conspiracy and wire fraud.

After the first witness, Stryker avoided a felony conviction by agreeing to plead guilty to a misdemeanor charge of misbranding a medical device. The company has said that a felony conviction could have put it out of business.

‘Resume His Life’

The government dropped charges against former regional sales manager David Ard of California, as well as former national sales representative William Heppner of Illinois and ex-regional manager Jeffrey Whitaker of North Carolina.

Prosecutors charged that Philip joined the company and three sales representatives in defrauding the FDA and doctors.

With his co-defendants, Philip “demonstrated that neither the surgeons nor the FDA was defrauded, and that Philip acted in good faith at all times as president,” Huggard said.

The judge hadn’t set a trial date for Philip.

“We said at the outset that Mark Philip was a good and decent family man, innocent of these charges,” Huggard said. “We are pleased that he can now resume his life without the burden of this case.”

In a letter last month, the U.S. said Stryker Biotech made $12.5 million by misbranding and selling the bone-growth mixture to surgeons over a two-year period.

The company could have faced a maximum fine of $25 million, Ortiz said in the letter.

The case is U.S. v. Stryker Biotech LLC, 09-cr-10330, U.S. District Court, District of Massachusetts (Boston).

--Editors: Stephen Farr, Glenn Holdcraft

To contact the reporters on this story: Janelle Lawrence in Boston at jmlawrence@mac.com; David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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