Olympus to pay $85M after pleading guilty to fraudulently selling scopes linked to superbug spread

Toyko-based Olympus Medical Systems Corp. and one of its executives pleaded guilty in New Jersey on Monday to failing to file required adverse events reports related to the spread of the superbug Klebsiella through the use of its device. Shown here, a biofilm of antibiotic-resistant bacteria including Klebsiella. (Getty/Dr_Microbe)

Following ongoing safety concerns of infections spread to patients through medical scopes at hospitals around the U.S., Toyko-based Olympus Medical Systems Corp. and one of its former executives pleaded guilty in New Jersey on Monday to failing to file required adverse events reports. 

According to an announcement from the Justice Department, the Japanese company not only failed to warn proper authorities about a design flaw in the duodenoscopes— or gastrointestinal scopes— linked to the spread of a superbug infection in hospitals, but continued to sell them.

Olympus generated about $40 million in revenue and approximately $33 million in total gross profit on the duodenoscopes in the U.S.

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Olympus has been ordered to pay $85 million as part of a plea agreement. Olympus also agreed to Justice Department stipulations that it to enact "extensive" compliance reforms. Executive Hisao Yabe, 62, of Japan, is scheduled to be sentenced in March and faces a maximum potential penalty of a year in prison and a $100,000 fine.

RELATED: Redesigned Olympus duodenoscopes linked to new superbug outbreak

“Olympus and Yabe failed to file important FDA reports regarding adverse events,” said Rachael Honig, attorney for the United States in the District of New Jersey. “It is especially troubling that they remained quiet when they received additional information from an independent expert questioning the safety of Olympus’ device. Patient safety must always be a paramount concern for medical device companies, and these defendants simply failed to treat that concern with the gravity it deserves. Today’s resolution is a reminder that this office will act whenever patient safety is put at risk by a quest for profits.”

The case dates back to 2012 when an investigator hired by Olympus Corp.—which controls 85% of the U.S. market for gastrointestinal scopes—warned the device maker in 2012 about a design flaw in the equipment that trapped bacteria and could spread from patient to patient. They said the manufacturer ignored the investigator's recommendation to conduct a worldwide investigation and possibly recall its equipment.

RELATED: Scope-related superbugs: Olympus case timeline increases suspicions

Olympus alerted European hospitals about the possibility of contamination, but it didn't issue a warning to U.S. hospitals, its biggest market, that the scopes were linked to deadly infections in the Netherlands. The manufacturer instead blamed the hospitals for not properly cleaning the devices and didn't tell the organizations that other U.S. hospitals reported similar problems. Each case was treated as an isolated incident.

Over the next three years, dozens of patients were sickened by the scopes in Pittsburgh, Seattle and Los Angeles, and at least 21 people died.

Federal law requires medical device manufacturers to file adverse event reports when they become aware of information that reasonably suggests one of their devices may have caused or contributed to a death or serious injury.

Olympus admitted it failed to file adverse event reports to the Food and Drug Administration in 2012 and 2013 relating to the spread of three separate infections in European hospitals, including the facility in the Netherlands and two facilities in France, connected to one of its devices. Yabe was Olympus top regulatory official at the time.

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