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Medica settles $1 billion lawsuit

Medica's faulty hip implants almost forced the company to declare bankruptcy in the United States


Sulzer Medica has approved a $1 billion (SFr1.56 billion) settlement in the United States over faulty hip and knee implants.

The settlement, announced on Friday, should enable the company to avoid filing for Chapter 11 (protection from creditors).

Although 87 patients have rejected the settlement, Medica (which has been renamed Centerpulse) went ahead and approved the deal, which will pay an average of $200,000 to over 3,000 patients that received defective hip and knee implants and underwent revision surgery.

"Now we can devote all of our strengths to the company's operations, and lead Centerpulse and its various divisions into a successful future," said Stephan Rietiker, the company's CEO, in a statement.

Friday marked the deadline for patients who had rejected the offer to change their minds and accept the payout in compensation. In the past few weeks, Medica convinced dozens of patients to accept the settlement.

Faulty implants

Sixteen of the 87 patients that have rejected the deal had faulty implants surgically replaced and are looking for more than the $200,000 on offer. Patients that received surgery are expected to seek higher compensation than those that did not.

The settlement will cost the company $725 million. Medica voiced concerns earlier this month that if the number of patients opting out of the settlement was too high, it could be forced to file for Chapter 11.

The balance of the payment will be met by Medica's former parent company Sulzer, as well as insurance companies.

Sulzer liability

Sulzer welcomed the agreement, saying its liability was confined to $50 million that it would be contributing to the settlement, as well as 480,000 Medica shares, which it still owns.

"Now we can concentrate fully on our core business again and shape our corporate future without further hindrance," said Fred Kindle, Sulzer's CEO. "This is the moment our management, employees and investors have been waiting for."

The defective joint implants affected more than 30,000 people in the United States, the company's largest market.

Medica recalled thousands of implants in December 2000 after a manufacturing problem contaminated them with an oily residue, preventing them from bonding with patient's bones.

As of June 1, Medica will be named Centerpulse, in what is being seen as move to distance itself from the implant saga.

by Karin Kamp

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