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(Crain's)—Medical products supplier Medline Industries Inc. is facing 18 claims from patients stemming from a counterfeit batch of surgical mesh, a sign of the safety challenges faced by the health care industry.
Medline, with annual revenue of $4.7 billion, bought the mesh, typically used in surgeries like hernia repairs, in 2008-09 from Ram Medical Inc., which said it had been made by Murray Hill, N.J.-based C.R. Bard Inc., a well-known surgical device manufacturer, court records show.
But the mesh had actually been made by a company in Delhi, India, Medline says. Last year, Wayne, N.J.-based Ram Medical pleaded guilty to federal criminal charges in connection with the drug counterfeiting and was fined $73,000 in May.
While it's suing Ram, Mundelein, Ill.-based Medline is fighting off a growing number lawsuits filed by people who received the defective mesh during surgery.
The litigation underscores the difficulties that even well-established suppliers face in determining the safety of products.
“Unfortunately a lot of these products change hands several times,” said Kevin Stout, executive director of the Medical Device Supply Chain Council. “Just trying to track them is a challenge.…So in this particular case, part of the challenge is, who's responsible for this?”
The Dillon, Colo.-based council, which is a network of industry executives, supports a proposal by the U.S. Food and Drug Administration that most medical devices distributed in the U.S. have a unique device identifier, like a barcode on a box of crackers, to help better track products and their problems and improve patient safety.
Medline is one of the largest privately held companies in the Chicago area, with 2011 revenue of $4.7 billion, up 16.3% from 2010, according to Crain's list of the privately held firms, published April 16. A Medline spokesman declined to comment.
Problems with the mesh surfaced in 2010, when the FDA announced that it was investigating claims that a product used to reinforce soft tissue was falsely being marketed in the U.S. under Bard's brand name. Ram voluntarily recalled the product, which was sold to five other distributors besides Medline.
In a June 2010 letter regarding Ram's mesh recall, the FDA said counterfeit samples were not sterile and could increase the risk of infection if implanted in patients, and the mesh was made in a way that could unravel.
Eight lawsuits have been filed against Medline, including one with 11 individual plaintiffs. The cases included two separate class actions, which were consolidated into a single action in U.S. District Court in New Jersey.
Patients allege that Medline and Ram Medical were negligent and fraudulent. The companies failed to determine if the mesh was sterile and free from defects, and it was not FDA-approved to be implanted, among other allegations.
The mesh was “defective and unreasonably dangerous,” and has caused patients severe risk of infection, pain and suffering, economic damages and the need for more surgery to remove the counterfeit mesh, the plaintiffs allege.
It's not clear how many patients were implanted with the counterfeit mesh or the extent of Medline's potential liability.
On Dec. 7, Ram Medical pleaded guilty in U.S. District Court in Newark, N.J., to one count of introducing adulterated medical devices into interstate commerce and one count of introducing misbranded medical devices into interstate commerce.
Richard Mazon, the company's founder and owner, entered the guilty plea on behalf of the company, although he was not charged with any criminal wrongdoing.
In May, the company was sentenced to three years of probation and ordered to pay a $100,000 fine and nearly $73,000 in restitution, according to the U.S. attorney's office in Newark.
The combined class-action case against Medline has been dismissed, but it's expected that the plaintiffs will appeal, Medline said in a lawsuit it filed against Landmark American Insurance Co., which issued a general liability policy to Medline.
Medline and Atlanta-based Landmark disagree over the scope of the coverage under the policy.
Medline has already spent about $375,000 so far defending against the mesh suits and expects the tab to exceed $500,000 within a matter of months, according to the company's complaint filed July 11 in U.S. District Court in Chicago.
David Leonard, CEO of Atlanta-based RSUI Group Inc., which owns Landmark, declined to comment, citing pending litigation.
Medline is also suing Ram in federal court in Chicago. Ram referred questions to an attorney, who declined to comment, also citing pending litigation.
Kristen Schorsch is a reporter at Crain's Chicago Business, a sister publication of Business Insurance.