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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.