AMS Facing Healthcare Fraud Investigation by California Attorney General

In 2011 Endo Health Solutions bought American Medical Systems for $2.9 billion. That may have been a mistake because since then, the number of product liability lawsuits naming AMS over its transvaginal mesh has grown to 22,000 cases.

This stadium fits a little over 22,000 people. Imagine if every seat was filled – that’s how many women have been injured by this dangerous medical device.

Now the company is looking ahead to the impact on its bottom line amid talks of settlements and investigations.

Last November, the California Attorney General’s office issued a subpoena to begin a healthcare fraud investigation into Endo/AMS. Other states are also allegedly investigating the company for overcharges to Medicare and Medicaid. That was revealed in the company’s annual report filed with the Securities and Exchange Commission (SEC), which was recently released.

Of the 22,000 defective product cases filed, the majority of them, 16,500, are consolidated in multidistrict litigation in West Virginia so they can be tried under one judge. The remainder are filed in various state courts. All of the lawsuits allege the pelvic floor transvaginal mesh, as well as the mesh used to treat stress urinary incontinence, is defective.

Any investigation will focus on whether taxpayers shelled out millions for a product that was fraudulently misrepresented as to its safety and effectiveness.

The company admits in its SEC filing that its insurance coverage may not be adequate to cover all of the costs of litigation.

“Mesh litigation and FDA actions in connection with transvaginal mesh may continue to adversely affect sales of our female incontinence and pelvic floor repair products and the expense or potential liabilities of that litigation may exceed our current insurance coverage.”

In other words, the expenditure may have to be provided by the stockholders.

Last month Endo/AMS set aside $520 million to cover the cost of litigation and last June the company agreed to settle an undisclosed number of transvaginal mesh lawsuits for $54.5 million.

In the SEC filing, Endo tells investors it was ordered by the Food and Drug Administration in January 2012 to study the post-market complications of 19 of its gynecological mesh products.

AMS makes the Perigee, Apogee and Elevate transvaginal mesh used to treat pelvic organ prolapse. The company website now says the Perigee and Apogee are no longer available for sale in the U.S.

By removing the products from the market, Endo/AMS no longer has to conduct the post-market surveillance to check for complications among those women who have received the permanent implants. That FDA investigation mandate has been reduced to just three of its products.

Not just Endo/AMS but Ethicon (Johnson & Johnson) also decided to remove its most dangerous meshes from the market rather than conduct the FDA’s mandated post-approval studies.

By absolving the medical device companies of any responsibility, the FDA sends a clear and convincing signal to any manufacturer that it is more than willing to bend over backwards to accommodate industry. Unfortunately it is at the expense of the unsuspecting public who relies on the watchdog agency for assurances of safety and efficacy from drug and device makers.