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The U.S. Department of Justice on Monday revealed a $38.5 million settlement resolving accusations that a subsidiary of German medical device titan B. Braun Melsungen AG sold a knee implant it allegedly knew was prone to early failure — a product that prosecutors say ultimately triggered false claims submitted to Medicare and Medicaid.

Deal Ends Allegations Over VEGA System Knee Implant

B. Braun’s subsidiary Aesculap Implant Systems agreed to the multimillion-dollar payout to close out the government’s claims tied to its VEGA System knee replacement device. The settlement arrives roughly one year after Aesculap halted U.S. sales of the implant and its related product line.

The DOJ also entered into a nonprosecution agreement, declining to criminally charge Aesculap over the sale of two medical devices allegedly marketed without FDA clearance — an issue tied to a former employee who forged federal authorization documents.

“Devices Must Not Mislead,” Prosecutor Says

“A company that knows its product has a propensity to prematurely fail must not mislead doctors or government regulators,” U.S. Attorney David Metcalf of the Eastern District of Pennsylvania said Monday. “Federal programs should not be forced to pay for devices that carry undue risk and may require painful, expensive corrective surgeries.”

B. Braun attorney Christiana Jacxsens, serving as corporate vice president and general counsel for its U.S. life sciences arm, welcomed the agreement, calling it a long-overdue closure to “these longstanding matters.”

Whistleblower Suit Triggered Years-Long Investigation

The dispute traces back to 2017, when two distributors of Aesculap orthopedic devices filed a whistleblower suit on behalf of federal and state governments. Their complaint alleged that as early as December 2013, the company knew the VEGA System implant was failing to properly adhere to bone cement, causing hardware to loosen and forcing patients into revision surgeries.

The relators reported receiving surgeon complaints, but say Aesculap either failed to submit adverse event reports to the FDA or sent reports containing incorrect information. According to the suit, Aesculap sought permission from B. Braun to modify the implant to fix the problem but was denied.

B. Braun did not immediately respond Monday to questions regarding those allegations.

Federal Intervention: False Claims and Kickback Concerns

Upon stepping into the case, the U.S. government alleged that from 2010 to 2023, Aesculap continued marketing and selling implants it knew would fail at higher-than-acceptable rates — rendering them neither “reasonable nor necessary” for knee replacement surgeries and thus producing false claims to federal healthcare programs.

Prosecutors also claim the subsidiary violated the Anti-Kickback Statute, alleging it provided an orthopedic surgeon experiencing complications with the implant free international travel and other improper benefits to encourage continued recommendations.

Aesculap Denies Wrongdoing, Defends Its Device

In a Monday statement, Aesculap said concerns surrounding its VEGA System were “largely addressed” through prior product liability litigation resulting in more than half the cases being dismissed. The company insists it did not knowingly cause false claims and settled solely to avoid protracted litigation.

The VEGA System was never recalled, Aesculap emphasized, noting it has been used successfully in “thousands of patients” since its 2010 launch. The company said implant loosening can stem from numerous factors, including surgical technique, and that it updated guidance and training in 2018–2019 for proper cementing procedures.

Former Employee Sentenced in FDA Forgery Scheme

The DOJ added that its agreement with Aesculap also resolves issues involving two devices sold without FDA clearance — a result of a former employee forging approval documents. That employee pled guilty last year and received one year in prison plus a year of supervised release.

Aesculap said no patient injuries were linked to those devices and that it recalled them, reimbursed customers, and later obtained proper FDA authorization.

Attorneys on the Case

The federal government is represented by Max J. Goldman and Ross S. Goldstein of the DOJ’s Consumer Protection Branch, and Assistant U.S. Attorney M. Beth Leahy.

The relators are represented by Anthony G. Buzbee of The Buzbee Law Firm.

Aesculap and B. Braun are represented by John Huber of Greenberg Traurig LLP; Carolyn McNiven and Jessica Natali of Faegre Drinker Biddle & Reath LLP; and Howard Young, Scott Memmott, and Dennis Gucciardo of Morgan Lewis & Bockius LLP.