DOJ charges 3 former Magellan execs with fraud over faulty lead tests

DOJ charges 3 former Magellan execs with fraud over faulty lead tests

Three former leaders from Magellan Diagnostics are facing a flurry of federal charges stemming from sales of inaccurate blood-based lead tests between 2013 and 2017.

The executives were arrested Wednesday, according to an announcement from the U.S. Department of Justice (DOJ). Federal prosecutors in Massachusetts are alleging that the trio knew the tests provided incorrect results—and conspired to cover up those flaws—well before Magellan notified customers and regulators of the potential inaccuracies.

Amy Winslow, Hossein Maleknia and Reba Daoust, Magellan’s former CEO, COO and director of quality assurance and regulatory affairs, respectively, have been charged with wire fraud, conspiracy to commit wire fraud, conspiracy to defraud an agency of the U.S. and introduction of misbranded medical devices into interstate commerce with intent to defraud and mislead.

Each of the charges carries a potential fine of up to $250,000, and the heftiest on the list, those for wire fraud and conspiracy to commit wire fraud, could result in jail sentences of up to 20 years.

According to the announcement, throughout those four years, tens of thousands of people used Magellan’s diagnostics to test for lead poisoning and measure lead levels in their blood. Lead tests are especially important for children and pregnant people, since lead exposure can cause developmental delays, and those living in low-income housing and older homes are most vulnerable, according to the Centers for Disease Control and Prevention, since those homes are more likely to still have paint and appliances containing lead.

In a statement sent to Fierce Medtech, BJ Trach, Winslow’s lawyer and a partner at Latham & Watkins, said, “We are extremely disappointed that the government chose to go forward with this misguided prosecution. Amy left Magellan amicably 5 years ago, and was a thoughtful, compassionate and effective leader there through difficult times for the company. She did not commit any crimes, and this prosecution, inexplicably initiated so many years after the events at issue, should never have been brought. We look forward to Amy having her day in court, and we are confident she will be vindicated.”

Magellan’s LeadCare Ultra, LeadCare II and LeadCare Plus tests were marketed as point-of-care diagnostics that could measure lead levels from either fingerstick or venous blood samples; the charges stem from the latter use.

Prosecutors allege that Magellan’s testing discovered that the LeadCare Ultra and LeadCare II devices produced inaccurately low results from venous samples in 2013. Not only did the three execs plow ahead in bringing the tests to market without notifying the FDA of the malfunction, according to the DOJ, but Winslow also allegedly stopped all further testing of the diagnostics so the company could maintain plausible deniability.

Within a few months of the LeadCare Ultra test’s rollout, which began in late 2013, customers began complaining about inaccurate results. The DOJ says the defendants then orchestrated statements from Magellan claiming the company had only “recently” discovered the testing flaws, which they said hadn’t come up in pre-release clinical testing.

As for the LeadCare II device—“by far Magellan’s highest-revenue product,” per the DOJ—Magellan didn’t report the issues with testing venous samples until after Meridian Bioscience’s $66 million acquisition of Magellan was complete in 2016. Even then, according to prosecutors, “Magellan’s report to the FDA about LeadCare II allegedly made materially false and misleading statements and concealed material facts about Magellan’s discovery of the malfunction in LeadCare II.”

“We believe these executives knew about this malfunction for years, but failed to come clean to their customers and the FDA about it in order to boost their company’s bottom line,” Joseph Bonavolonta, special agent in charge of the FBI’s Boston division, said in the announcement. “The last thing sick children and their parents should have to worry about is whether diagnostic tests and devices live up to their manufacturer’s claims.”

The issues came to a head in 2017, when the FDA questioned Magellan about how long it had known about the malfunctioning tests. The prosecutors claim that Daoust and Maleknia told company representatives to say the problems had only been discovered in late 2014, shortly before it reported them to the FDA in early 2015. Winslow, meanwhile, allegedly “caused Magellan to send a false timeline to the FDA, which omitted the company’s internal 2013 studies about the malfunction.”

That year, the FDA concluded that Magellan’s tests weren’t able to accurately assess lead levels in venous blood samples and warned the public not to use them with those samples. Additionally, that July, the agency released an inspection report suggesting that Magellan may have broken the law in how it validated the LeadCare testing systems and handled subsequent complaints.

The FDA also tasked BD with studying its blood collection tubes used with the LeadCare diagnostics to find the source of the issue, after Magellan cast blame on BD’s materials. According to a 2018 agency statement, early results indeed indicated that materials in the rubber stoppers of the tubes could release gases into blood samples and interfere with the results.

The tests have remained available ever since for use in testing fingerstick blood samples, though Magellan did initiate a Class I recall in 2021 of more than 388,000 LeadCare test kits—comprising nearly 1.9 million total tests—after discovering an issue in certain lots that could cause the tests to churn out inaccurately low blood lead levels.

That issue was linked to a contaminant found in the paperboard material used to package treatment reagent tubes for the test kits, according to Magellan. The recall was expanded twice throughout 2021, but the company was ultimately able to resume shipments of the LeadCare II kits in early 2022 and the LeadCare Plus and LeadCare Ultra kits in October.

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