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Govt. closes investigation of Medtronic over bone graft product

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Medtronic headquarters
Medical device maker Medtronic's logo reflects in the pond in front of the corporate headquarters Tuesday, Aug. 24, 2010 in Fridley, Minn. Medtronic Inc. said Tuesday its fiscal first-quarter earnings jumped to $830 million but revenue fell.
AP Photo/Jim Mone

Medtronic says the U.S. Department of Justice has closed an investigation of the sales and marketing practices for the company's Infuse bone graft product.

The Justice department had been looking into whether Medtronic illegally encouraged doctors to use the product to treat conditions for which it was not originally approved.

Infuse has been the subject of a class action lawsuit, scathing medical reviews, warnings about dangerous side effects, and a Congressional inquiry. Medtronic settled the lawsuit earlier this year for $85 million. Morningstar medical device analyst Debbie Wang said the federal decision to drop the investigation is a big deal.

"It is probably a huge relief to Medtronic management because it is never good to have this kind of investigation hanging over your head, Wang said. "Even worse, if they actually do find there was inappropriate marketing going on, that will lead to fines."

Wang says it is good for the company that the investigation is over but that doesn't end Medtronic's trouble with Infuse. In the three months ending in January, Infuse sales were down by 30 percent.

"This has to be a relief to management," she said. "On the other hand, I don't know that having this investigation end is necessarily going to do anything to help Infuse sales.

The company has commissioned Yale University to evaluate Infuse.