CryoLife: Weak in the Knees

Company Pinpoints “Untrue Public Statements” in $110 million Lawsuit

CryoLife’s legal problems began when tissue from CryoLife-processed donor tissue led to the November 2001 death of a patient who had received a CryoLife implant during reconstructive knee surgery.

Subsequent inspections by the FDA conducted in 2002 uncovered violations of FDA safety regulations. On June 17, the FDA sent a letter to CryoLife detailing a numerous shortcomings and safety issues at the company’s Kennesaw, GA facility.

In August 2002, the FDA ordered CryoLife to recall all processed human tissue, citing concerns that the company could not ensure that the human tissue was free from fungal and bacterial contaminants.

At that time, CryoLife’s attempts at transparency were less than stellar. A class-action lawsuit alleging that CryoLife had failed to adequately disclose faults prior to that FDA-ordered recall sought damages in excess of $150 millions. The case was settled for $23.3 million in July 2005.

As part of this settlement, CryoLife formed a regulatory affairs and quality assurance committee.

It seemed as if the company was beginning to move beyond its legal travails, only to have knee trouble strike again.

The most recent lawsuit concerns an individual who contracted an infection following a transplant of a meniscal allograft in December 2006.

Michael Hohenbery claims he can no longer work and will be on antibiotics and pain medications the rest of his life. The suit seeks $110 million in damages.

Meniscal transplants are commonly used for patients with significant damage to the knee, who have already undergone several previous knee operations. Ashley Lee, CFO and COO of CryoLife commented, “It is our understanding that his knee function was severely compromised prior to his meniscal transplant.”

After receiving notice of the Hohenbery’s infection, CryoLife conducted an investigation and now believes that it handled the tissue in accordance with all applicable industry standards and regulatory requirements.

Mr. Lee continued, “Regrettably, the lawyers representing this individual have chosen to make untrue public statements against our company and our tissue processing services in an effort to force us into a monetary settlement of the case.”

Indeed, if the 2005 settlement is any indication, Hohenbery may stand a chance at financial enrichment. In that case, CryoLife noted that, although the company believed the plaintiffs’ claims lacked merit, in lieu of the risks and uncertainties of litigation as well as legal costs, the company determined to resolve the matter before the case went to a potentially disastrous trial.

This time around, the company, according to Lee, intends to “vigorously defend against this lawsuit”. CryoLife has adequate insurance coverage to circumvent any more serious losses.

Of the $23.3 million doled out in 2005, $11.5 million came from insurance proceeds.

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