The medical device maker Exactech has filed for bankruptcy after it failed to settle about 2,600 Exactech hip and knee implant lawsuits alleging the devices were defective.
Santa Clara, CAExactech has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware. The medical device manufacturer will sell its assets to investors due to "unsustainable liabilities associated with knee and hip litigation related to the packaging recalls we voluntarily initiated between 2021 and 2022.” However, lawyers advise plaintiffs who have filed defective Exactech knee and hip implants not to panic because insurance and assets are available to victims in bankruptcy.
Exactech rolled out one recall after the other in recent years:
June 2021: Novation, Acumatch, and MCS hip replacement devices explicitly related to the “GXL” liners used in these devices.
October 2021: Optetrak, Logic, and Truliant knee replacement and Vantage total ankle replacement device.
February 2022: Expanded recall for its Optetrak, Logic, and Truliant knee replacement and Vantage total ankle replacement devices.
August 2022: Expanded hip replacement devices to include all devices with polyethylene components shipped in defective packaging.
June 2023: Shoulder replacement device systems – not related to packaging.
January 2024: The FDAannounced that Exactech has refused to issue a recall related to the packaging used to ship its shoulder implant devices.
Exactech’s chief restructuring officer, Jesse York, said: “The costs of litigation became an overwhelming burden for the business, resulting in liquidity constraints in mid- to late-2023.” He added that over the last 12 months alone, recalls and related litigation cost the medical device maker about $20 million.
In a press release, the company said it struck a deal with investors to secure $85 million to fund operations and a “stalking horse” bidder for its assets. According to Exactech, the investor group is led by private equity and alternative asset management firms collectively representing more than $25 billion under management, with dozens of portfolio companies and extensive operational expertise, including in the medical technology and device manufacturing industries.
According to York, uncertainty about the cost of litigation has deterred investors, and it was faced with prioritizing the resolution of Exactech defective medical device lawsuits.
Some patients affected by the recalls filed lawsuits against the Florida-based company. The lawsuits created a second set of legal challenges for Exactech, which was already defending itself against allegations that the sale of certain knee devices violated the federal False Claims Act.
In October 2023, with over 1,000 suing Exactech after their hip and knee implants began to fail, KFF News reported that Exactech sent a letter to surgeons blaming a packaging defect dating back as far as 2004 for possibly causing the plastic in a knee component to wear out prematurely in about 140,000 implants. It further reported that, according to government records, the company took years to report hundreds of adverse events to a federal database that tracks device failures. And that’s not all. KFF unearthed about 400 examples in which Exactech reported adverse events to the FDA’s MAUDE database two years or more after learning of them.
The company has attempted to settle the litigation but has been unable to make “significant progress,” York said to the plaintiffs' lawyers.
Exactech is also facing three whistleblowers accusing the company of fraud for allegedly selling defective products to Medicare and other federal health care programs. The case is pending in federal court in Alabama and Exactech has denied any wrongdoing. Exactech, in mid-August, filed a motion to dismiss the case.
In a press release, Exactech President and CEO Darin Johnson stated, “We take our commitment to patient well-being very seriously and have provided substantial out-of-pocket patient reimbursements and surgeon support for related expenses.” Almost in the same breath, the company also “vigorously disputes” the claims.
And York said it became clear the product liability lawsuits could not be solved on an out-of-court basis, prompting Exactech to pause talks with the Department of Justice and “pivot to trying to raise money and prepare for an in-court restructuring.”
Exactech announced that the investor group is led by private equity and alternative asset management firms collectively representing more than $25 billion under management, with dozens of portfolio companies and extensive operational expertise, including in the medical technology and device manufacturing industries.
Bankruptcy and Litigation
One law firm said they are optimistic that Exactech knee and hip replacement lawsuits will start to be resolved in 2025, even with Exactech now filing for bankruptcy.
After a company like Exactech files for bankruptcy, an automatic stay stops most lawsuits and collection efforts against it, and lawsuits cannot be initiated or continued against the defendant unless special permission is granted from the court. New cases can still be filed but in bankruptcy court. A status conference slated for next January is expected to update any issues on the bankruptcy and joint status reports will be required every 90 days following.
The case is Exactech Inc., number 24-12441, in the US Bankruptcy Court for the District of Delaware.
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