Under feds’ microscope, Olympus saves up $85M
Company with local headquarters probed over duodenoscopes.
Olympus Corp., a Japanese company that has its North and South American headquarters in Center Valley, is setting aside more than $85 million as expected losses related to the U.S. Justice Department’s ongoing investigation into its duodenoscopes.
More specifically, the company said in a notice Tuesday that it recorded a reserve of 9,653 million yen — or about $85.6 million in U.S. dollars — in the second quarter of its current fiscal year, which will end March 31. While the ultimate loss will be dependent on the probe’s final outcome, Olympus said it believes the reserve amount is “reasonable as expected losses according to the status of the investigation.”
“The company has cooperated fully with the Department of Justice,” said Mark Miller, a spokesman for Olympus Corp. of the Americas in Center Valley. “As the matter is still pending, it would be inappropriate for us to comment further.”
It’s been more than three years since Olympus received subpoenas, in March 2015 and August 2015, from the Justice Department, seeking information about the duodenoscopes the company manufactures in Japan and sells across the globe. Federal prosecutors also sought information about Olympus, which controls about 85 percent of the U.S. market for gastrointestinal scopes, from hospitals that experienced deadly outbreaks of antibiotic-resistant bacteria in patients following procedures that used the duodenoscopes.
The Justice Department did not immediately respond to a request seeking comment on the status of its investigation.
As many as 350 patients at 41 medical facilities in the United States and worldwide were infected or exposed to contaminated scopes from Jan. 1, 2010, to Oct. 31, 2015, according to a U.S. Food and Drug Administration document obtained by the House Committee on Oversight and Government Reform and made public in mid-April 2016. While that document did not list how many deaths were reported, many medical facilities, including Huntington Hospital in Pasadena, Calif., and UCLA’s Ronald Reagan Medical Center, have confirmed that several patients died during that time period after being infected with bacteria tied to medical scopes.
While Olympus is, by far, the largest seller of duodenoscopes, Fujifilm and Pentax also sell the devices in the United States.
In Olympus’ case, its TJFQ180V duodenoscope came under scrutiny because the device’s closed-channel design made it difficult to clean, leaving the potential for bacteria to become trapped and then transmitted from patient to patient. In January 2016, Olympus announced it was recalling and redesigning the device, replacing its forceps elevator mechanism with a new design consistent with a submission cleared by the U.S. Food and Drug Administration. The FDA said the new design created a tighter seal, reducing the potential for leakage of patient fluids and tissue into the closed elevator channel.
Across the United States in 2016 and 2017, Miller said Olympus “inspected and/or repaired” more than 5,800 duodenoscopes and also performed more than 4,000 educational and training visits to more than 1,700 customer sites.
Duodenoscopes, a flexible, lighted tube threaded through the mouth, throat and stomach into the top of the small intestine, are used during endoscopic retrograde cholangiopancreatography (ERCP), most commonly performed to diagnose
and treat conditions in the pancreas and bile ducts. The FDA says duodenoscopes are used in more than 500,000 ERCP procedures each year.
More recently, on March 9, the FDA issued warning letters to Olympus, Fujifilm and Pentax for failing to comply with a federal law that required them to conduct postmarket surveillance studies to assess the effectiveness of reprocessing the duodenoscopes.
Miller said Olympus, which responded to the FDA on March 23, has undertaken significant efforts to enroll the studies, but there have been challenges with the enrollment.
“We are working diligently to address these enrollment challenges, resulting in a robust plan with the goal of completing this study,” he said.
“We take this matter extremely seriously and are working diligently to provide the requested information.”
For Olympus, publicly traded on the Tokyo Stock Exchange with annual global revenue of about $7 billion, setting aside $85.6 million is a relatively small amount compared with its past settlements.
For example, in a similar notice in May 2015, Olympus set aside 53.9 billion yen — or about $450 million in U.S. dollars — for an expected settlement of a U.S. probe into its marketing of medical products.
It then set aside another $137 million in February 2016 related to the same case.
The official settlement in that case was announced March 1, 2016, which required Olympus Corp. of the Americas to pay more than $600 million to resolve criminal and civil penalties related to a kickback scheme in which the company sent millions to doctors and hospitals between 2006 and 2011.
That settlement was touted by prosecutors as the largest in the history of the United States' anti-kickback law and the largest ever paid by a medical device maker.
Olympus Corp. of the Americas, which relocated from Long Island, N.Y., to Center Valley in 2006, has about 1,000 employees across two Lehigh Valley facilities.
The company's Center Valley headquarters handles sales, marketing, management and support services, and Olympus also has a distribution center in Breinigsville.
Olympus products are not made in the Lehigh Valley.