Lawsuits, Recall to Cost Stryker More than $1 Billion

Stryker, the manufacturer of several metal-on-metal hip implants currently the center of hundreds of lawsuits over design defect allegations, estimates that litigation and recall costs could cost well over $1 billion.

20,000 patients were implanted with the hip implant devices before the recall.

The figure, revealed in a securities filing, covers the cost of recalling the Rejuvenate and ABG II modular-neck stems, as well as legal costs and estimated third party insurance recoveries. The estimate almost doubles the company’s previous calculations of $400 million - $660 million, which was released in July.

The two products in question were recalled voluntarily in July 2012 by Stryker following complaints that the devices’ metal components could wear down, releasing metal particles into patients’ bodies and leading to device failure. Plaintiffs in a number of lawsuits claim that the implants have led to pain, joint swelling, and metallosis, among other injuries. Due to the size of the litigation lawsuits against Stryker were consolidated into a federal multidistrict litigation (MDL) in Minnesota, as well as a New Jersey-based MDL where the company is facing more than 400 suits. Centralization was approved by the U.S. Judicial Panel on Multidistrict Litigation in June.

At the time of the consolidation, Stryker requested that only Rejuvenate cases be considered, as these cases significantly outnumber ABG II suits. The JPML, however, found that the devices were similar enough to be heard together. Stryker’s preferred state, Minnesota, was chosen, with U.S. District Judge Donovan Frank overseeing the MDL.

Along with the projected costs of the recall and litigation, Stryker has also announced that it hopes to compensate patients for testing and any revision or corrective surgeries required.

Approximately 20,000 patients were implanted with the hip implant devices before the recall, and because a number of factors will affect the company’s final costs, it’s difficult to provide an accurate estimate. Stryker’s working calculation of between $700m and $1.13 billion remains subject to change, but one thing is certain – the company is preparing for a large loss over its allegedly defective hip implant modular-neck stem devices.