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Healthcare Fraud

Medical Device Company to Pay $22 Million for Mislabeling Gowns

Avanos Medical sold hundreds of thousands of falsely labeled gowns between 2014 and 2015.
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Multinational medical device corporation Avanos Medical will pay more than $22 million to resolve a criminal charge for misbranding its surgical gowns. Avanos falsely labeled the gowns to have the highest level of protection against fluids and viruses. 

A formal charging document was filed in the U.S. District Court for the Northern District of Texas that charges Avanos with one count of introducing misbranded surgical gowns into interstate commerce with the intent to defraud and mislead. The company’s MicroCool surgical gowns are subject to investigation by the Food and Drug Administration, which uses a national standard to evaluate the protection a product provides. The highest level is for gowns intended to be used in surgeries and other high-risk medical procedures on patients who may have infectious diseases. 

The case predates the pandemic but settles during a period when increased vigilance around the effectiveness of personal protective equipment. In 2020, demand for effective PPE skyrocketed, and so did fraud related to the equipment. The Department of Justice and the FBI have been warning the public of all manner of PPE fraud. 

Between 2014 and 2015, Avanos sold hundreds of thousands of its MicroCool gowns labeled with the highest level protection, but the gowns did not meet the standard. Avanos went out of its way to misrepresent the gowns, sending letters to hospitals and potential buyers noting that their gowns had been upgraded to meet a new standard set by the FDA, even though Avanos employees knew the gowns did not. One of the hospitals treating Ebola patients in 2014 requested assurance that the protective equipment met the highest standard, and Avanos confirmed it did. 

Avanos sold nearly $9 million worth of these mislabeled gowns globally. 

When the FDA attempted to investigate the gowns in 2016, Avanos made numerous false entries in documents reviewed by agents, obstructing their attempts to learn more. 

Avanos will pay $22,228,000 to resolve the case. This sum includes nearly $9 million in victim compensation payment, more than $12 million in a criminal monetary penalty, and nearly $700,000 in disgorgement payment. Avanos has also agreed to cooperate with the Justice Department to report any other violations by its employees or agents, strengthen its compliance program, and abide by reporting requirements. The company must also submit yearly reports about its internal controls to deter violations. 

After falsely labeling the gowns and failing to self-report, the company cooperated with the government investigation, met government requests promptly, made key employees available for interviews, and provided needed documents. It also remediated its conduct, changed processes, and improved its compliance functions. 

“The last thing healthcare workers should have to worry about is whether their personal protective equipment lives up to manufacturers’ claims,” said Acting U.S. Attorney Prerak Shah for the Northern District of Texas via release. “Misbranded PPE can pose serious risks to medical professionals and patients alike. All companies that do business in Texas, healthcare or otherwise, will be held accountable for the promises they make about their products.”

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