Judge Denies FDA Request for Disgorgement from Device Company in May 1, 2008 Order Following Three Day Bench Trial

On May 1, 2008, a federal judge in the Middle District of Florida brought some measure of closure to FDA’s more than six years of attempts to regulate a self-identified custom device manufacturer.  In his May 1st order, Judge G. Kendall Sharp mostly sided with Endotec, Inc., and the two individual defendants, Michael J. Pappas, Endotec’s co-owner and president, and Dr. Frederick F. Buechel, Endotec’s other co-owner and medical director. 

Since at least its March 15, 2002 Warning Letter to Endotec, FDA has maintained that Endotec’s devices were not custom devices under FDC Act § 520(b).  While the Judge agreed with FDA with respect to the knee devices manufactured by Endotec, he refused to grant FDA’s request for disgorgement of profits even with respect to these devices.  Judge Sharp found, as a conclusion of law, that Endotec’s ankle and TMJ devices were custom devices, and thus not adulterated or misbranded.

The court, without the deference to agency expertise and regulations that one often sees in challenges to FDA decisions, stated that an FDA witness’ “interpretation of ‘custom device’ is so narrow as to make the definition useless.”

FDA typically takes the position that a device being studied under an investigational device exemption (“IDE”) cannot also qualify as a custom device, because it is capable of being studied.  The court concluded, however, that even though Endotec had an approved IDE for the Buechel-Pappas Ankle (“B-P Ankle”), the ankle devices at issue were custom devices.  The court so held based on testimony from Endotec that the “surgeon specials” although “similar to the standardized B-P Ankle that was being studied under the IDE,” were custom devices and not “‘merely a variation’ within a range.”

While not strictly relevant to its analysis, the court’s decision notes as several points that there is no allegation that these devices are unsafe or ineffective.  Additionally, while recognizing that it is up to Congress to improve the law, the court suggested that FDA’s premarket approval (“PMA”) and 510(k) processes were unduly burdensome and time-consuming and were preventing technological advances from reaching patients. 

The case was not a total loss for FDA.  As noted above, the court did find that Endotec’s knee devices were adulterated and enjoined their manufacture and distribution.  In addition, with respect to the ankle devices that the court found to be custom devices, the defendants are enjoined “from advertising the B-P Ankle or any custom ankle device through websites, in professional journals, at professional conferences, or by any other means, thereby essentially incorporating the statutory and regulatory restrictions into a court order.   

FDA has 60 days to appeal from the court’s order to the Eleventh Circuit.  Aside from an appeal, it is uncertain how this case may affect FDA’s regulation of custom devices.  The court did not hold or suggest that FDA’s definition of custom device is invalid.  Nevertheless, the decision demonstrates that for device manufacturers who may disagree with FDA’s application of the custom device exemption, FDA’s enforcement position is not necessarily the final word.

By J.P. Ellison