Exactech Declares Bankruptcy

In a bid to fend off more than 2,200 pending lawsuits, Exactech, Inc.’s owner, TPG Capital, which acquired Exactech in 2018 for $737 million, has decided to put the company into bankruptcy.

While bankruptcy typically spells the end of a company, in this case, it, potentially, gives this venerable orthopedic pioneer a fresh start.

Exactech’s Fight for Survival

Arrayed against Exactech are more than 2,200 pending lawsuits which allege defective implants and injured patients. Approximately 80% of these lawsuits (1,770) are aggregated as a multi-district litigation (MDL) in the U.S. District Court for the Eastern District of New York. The remaining cases are in Florida (595), Illinois (24), and other states (28).

None of these cases have yet been adjudicated. No court has ruled that these claims are true.

Exactech denies the allegations.

The federal courts consolidated the lawsuits into an MDL to reduce costs and streamline the legal process. The MDL includes individual lawsuits, but unlike a class action, the lawsuits can proceed separately.

District Judge Nicholas G. Garaufis, who is overseeing the MDL, has selected four cases for bellwether trials, which are scheduled to begin in 2025.

Exactech’s Product Recall and FDA Warnings

On March 23, 2023, the U.S. Food and Drug Administration (FDA) issued a reminder to surgeons and patients that Exactech’s joint replacement implants manufactured by Exactech between 2004 and August 2021 and recalled in 2021 and 2022 were defective.

According to the FDA, many of Exactech joint replacement devices (including knees, ankles, and hips) were packaged in defective packaging bags. The defective bags were missing one of the oxygen barrier layers that protect devices from oxidation, which is a chemical reaction with oxygen that can degrade plastics over time.

Oxidation can lead to accelerated device wear/failure, and component cracking or fracture, all leading to corrective revision surgery.

The FDA reminded surgeons and patients that Exactech’s recalled devices were associated with increased risk of revision surgeries and bone loss related to excessive device wear/failure.

Exactech began its recall of potentially defective devices in 2021, specifically:

• In June 2021, Exactech recalled some GXL Liners for Novation, Acumatch, and MCS hip replacement devices due to excessive and premature wear but the root cause was unknown.
• On February 7, 2022, Exactech expanded the voluntary recall to all Optetrak, Logic, and Truliant knee replacements and Vantage total ankle replacements packaged in defective bags regardless of a device’s label or shelf life. Exactech recalled the devices because around 80% of the knee and ankle replacement devices manufactured since 2004 were packaged in defective bags. Devices packaged in defective bags can lead to oxidation over time that results in the potential risks listed above.
• In August 2022, Exactech expanded the hip replacement device recall to include all hip devices with polyethylene components packaged in defective bags.

The FDA then issued the following recommendations to surgeons and patients:

• Do not implant any knee, ankle, and hip devices recalled by Exactech.
• Do not remove well-functioning Exactech joint replacement devices from patients who do not have any new or worsening pain or symptoms.
• Monitor patients who have any implanted devices manufactured by Exactech between 2004 and August 2021 for potential device wear, failure, or bone loss. Consider performing X-rays to further evaluate a patient and their implanted device if you suspect a failed device.
• Discuss revision surgery with patients who may have worsening pain or joint weakness that is potentially attributable to the device based on clinical exam, on a case-by-case basis. As a part of shared decision-making, discuss the benefits and risks of all relevant treatment options with your patients.
• Remove all recalled devices from inventory and return to Exactech.

How Bankruptcy Will Save Exactech

Exactech, which was founded in 1985, has been one of the most admired and respected orthopedic implant companies in the world. Founded by Bill Petty, M.D., Gary Miller, Ph.D. and Betty Petty, the company developed a reputation as a trusted “surgeon’s company.” In many ways, the company epitomized old fashioned values of integrity, accountability and innovation to serve patients and the surgeons who care for them.

It was a culture that came directly from its founders.

Dr. Petty, specifically, made his early reputation in academic research. Through Exactech and his activities in such organizations as the Orthopedic Research and Education Foundation, he has been a steady champion for improving orthopedics in all its manifestations.

Chapter 11 bankruptcy will allow Exactech to operate as normal, serving orthopedic surgeons and their patients. It relieves Exactech from non-operating legacy liabilities, has brought in new capital ($85 million from an investor group) and will make sure that the plaintiff’s bar doesn’t get between Exactech and its surgeon customers.

According to Exactech’s President and CEO Darin Johnson, “Despite the strength of the underlying business, we face unsustainable liabilities associated with knee and hip litigation related to the packaging recalls we voluntarily initiated between 2021 and 2022. 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.”

The bankruptcy process, said Johnson, “Is intended to help us create a stronger foundation for long-term growth with an improved balance sheet and new capital as well as ensure that we can continue providing innovative, industry-leading implants for surgeons and their patients for years to come.”

Final Observation

One of the goals of the plaintiff’s bar in these types of litigation is to overwhelm the target company and force it into settlement talks—and to do so, if possible, BEFORE the cases are tried in court. In past cases of mass tort litigation—the breast implant cases or the pedicle screw litigation cases—the plaintiff’s allegations ultimately proved to be either wrong or vastly overstated.

Exactech lives to fight another day. Which is essential for all of orthopedics.

For more information about past mass tort litigation efforts see OTW’s “Biggest Lawsuit in Spine History: The Pedicle Screw Litigation Part I” and “Biggest Lawsuit in Spine History: Pedicle Screw Litigation Part II.”