On November 17, 2025, the DOJ announced that knee implant manufacturer Aesculap agreed to pay $38.5 million to resolve allegations under the False Claims Act (FCA) that it sold a knee-replacement device (the VEGA System Knee System) which it alleged the company knew would fail prematurely at a higher‐than‐acceptable rate, leading to false claims being submitted to Medicare and Medicaid. In addition to the civil resolution, Aesculap entered into a non-prosecution agreement (NPA) for allegations that it introduced two medical devices into interstate commerce without FDA clearance or in violation of the Federal Food, Drug, and Cosmetic Act (FDCA).
According to the press release, from July 2010 through June 2023, Aesculap marketed and sold its Vega system, which was “prone to loosening” because of bone-cement adhesion problems, thereby causing the submission of false claims for an implant deemed “not reasonable and necessary” for the surgeries. The government also alleges that, during this same time period, Aesculap paid unlawful remuneration (consulting payments, free international travel, entertainment) to a surgeon in Georgia to induce use of the VEGA System, in violation of the Anti‑Kickback Statute (AKS).
The NPA stems from the marketing of two other devices (the “ELAN-4 Air Drill” and the “JS Series SterilContainer S2”) without proper submission to FDA, including allegedly forged documents. Aesculap did not admit liability under the FCA portion of the civil settlement, although it admitted certain factual elements in the NPA.
The civil settlement resolved a qui tam (whistleblower) action filed under the FCA. The relators will receive $4.475 million as part of the resolution.
Key Take-Aways for Medical Device Companies
1. Device Failure + Billing = Significant FCA Risk
This case highlights that device manufacturers may face FCA risk not only for off-label promotion or kickbacks but also for distributing devices known to have a higher failure rate and then billing Medicare/Medicaid for those devices. If a device is “not reasonable and necessary” or fails at an unacceptably high rate, the potential for FCA liability exists. The government’s position is that Aesculap’s VEGA System was known to have bone-cement issues and loosening, yet was billed to federal health-care programs. For manufacturers, this means post-market surveillance, adverse-event tracking, prompt disclosures (to FDA and payors), and transparency with clinicians matter significantly in litigation risk.
2. Kickback Allegations Still Central
The settlement also emphasizes that promotional or remuneration arrangements with physicians remain heavily scrutinized. Here, the DOJ alleged that consultant payments, travel, and entertainment were used to induce use of a product; classic AKS territory. Compliance programs must continue to monitor physician arrangements, payments, consulting engagements, travel/entertainment, and ensure they meet safe-harbor requirements and reflect bona fide services.
3. FDCA and Device Clearance Violations Do Not Stand Alone
While the larger headline is the FCA settlement, the NPA component reminds manufacturers that marketing or distributing devices without proper FDA clearance or submission can engage criminal and civil liability under the FDCA. In Aesculap’s case, an employee forged documents to indicate clearance had been obtained when it had not, leading to an NPA rather than a deferred prosecution or outright criminal conviction for the company (though the individual pleaded guilty). Thus, device companies should regard regulatory-clearance risk and health-care-program billing risk as part of the same overall compliance ecosystem.
The Aesculap settlement is a vivid illustration that device manufacturers face layered risk: a product known or alleged to fail at higher than acceptable rates, induced usage through physician remuneration, billing to federal health-care programs, and regulatory clearance issues. Even without an admission of FCA liability, the resolution sends a clear message: If you build or sell devices into government-funded health-care systems, you must manage device performance, physician engagements, billing oversight and regulatory compliance as an integrated enterprise risk. For in-house counsel, compliance officers, and external counsel in the med-tech space, now is the moment to revisit:
- Has your post-market surveillance revealed outlier failure rates?
- Are cementing/implantation technique changes documented and communicated?
- Are your consulting/payor-physician arrangements within safe harbors and supported by deliverables?
- Do you audit how your devices are billed under Medicare/Medicaid (directly or indirectly)?
- Do you have documented remediation if you learn of device issues—and are you prepared to self-report to FDA and potential payor risk?
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The attorneys at Chilivis Grubman represent health care companies of all types sizes in connection with government investigations, False Claims Act litigation, and other related matters. If you need assistance with such a matter, please contact us today.