Medtronic Inc. says federal prosecutors have closed an investigation of the company's Infuse bone graft, which had been beset by allegations that doctors were paid illegal kickbacks and sham royalties to entice them to use the product in ways regulators hadn't approved.
A Medtronic spokeswoman said the government notified the company Wednesday that the U.S. Justice Department and the U.S. Attorney for Massachusetts found no evidence of wrongdoing.
Federal authorities opened an investigation in October 2008, looking at the Fridley-based company's sales and marketing practices regarding unapproved uses of Infuse by physicians. The investigation also looked at Medtronic's relationships with physicians who used the product.
A call to the U.S. attorney's office in Massachusetts seeking confirmation of the investigation's close was not immediately returned.
"We are pleased that the Department of Justice and the U.S. attorney's office have come to the decision to close their investigation," Chris O'Connell, president of Medtronic's restorative therapies group, said in a statement the company released.
Infuse became a top seller for Medtronic after the U.S. Food and Drug Administration in 2002 approved it for use in spine fusion surgeries on the lower back, eventually reaping about $700 million a year.
But allegations surfaced that Medtronic was coaxing doctors to use it in "off-label" ways that regulators hadn't approved. Industry analysts have speculated that roughly 80 percent of Infuse use is "off-label."
For example, some doctors used it in neck surgery, prompting the FDA to issue a warning in 2008 after reports of excessive bone growth. It isn't illegal for doctors to use devices as they see fit, although firms cannot market their products for off-label uses.
At least four whistleblower lawsuits have been filed by former Medtronic employees alleging the company courted doctors with lavish perks and lucrative consulting deals.
In August 2011, Medtronic announced it was funding two independent studies of Infuse. It agreed to grant Yale University researchers $2.5 million to determine the safety and effectiveness of the product.
Leading that effort is Dr. Harlan Krumholz, a nationally known physician and advocate of patient safety and transparency in clinical studies.
Yale is working with two clinical research organizations to conduct separate reviews of data on the product. The reviews are in progress, said Medtronic spokeswoman Cindy Resman. She said the results will be available sometime in the fall.
Piper Jaffray & Co. analyst Thom Gunderson said the news gives Medtronic a measure of closure.
"It was a cloud hanging over them. The cloud's gone," Gunderson said. "At least you don't have the uncertainty of where are we with the DOJ and wondering when is the other shoe going to fall."
James Walsh • 612-673-7428