Atricure On the Ropes

Atricure, a Cincinnati-based company which manufactures a FDA 510K-approved curved clamp containing long electrodes that apply bipolar radiofrequency energy near the pulmonary veins to treat atrial fibrillation surgically, saw its stock plummet over 40% today on news the Justice Department is investigating it's marketing practices concerning off-label uses of its ablation system:

The letter also indicated that government investigators are examining whether AtriCure instructed hospitals to bill for surgical-ablation procedures using incorrect billing codes. The company made news of the probe public after the close of trading Friday.

AtriCure has faced past scrutiny over its ablation systems. In 2005 and 2006, The Wall Street Journal reported on the company's close ties with surgeons at the Cleveland Clinic and the University of Cincinnati. In at least two cases, those surgeons wrote favorable studies on the atrial-fibrillation treatment without disclosing their financial links to the company. The Cleveland Clinic had also invested in AtriCure.

AtriCure highlighted the positive studies in regulatory filings, calling them "independent" clinical studies that "demonstrate the efficacy, ease of use and safety of our system."

AtriCure's system for treating atrial fibrillation isn't specifically approved by the Food and Drug Administration for that use. Physicians are free to use FDA-approved medical devices in any way they see fit -- and many medical devices are used in this off-label fashion. But companies are barred from promoting unapproved uses of their products.

Although the specific terms of the Department of Justice's concerns have yet to be outlined publicly, one wonders of the other ablation devices in which the Atricure's 510K was predicated (the Medtronic Cardioblate Pen (K013392), the Boston Scientific Cobra Cardiac Surgical Probe (K013873), the CryoCath SurgiFrost Cryosurgical Device with FrostByte Clamp (K040690), the AFx Microwave Ablation System (K003978) and the Epicor Medical Ultracinch Tissue Ablation Device (K040641)) could also be investigated for similar concerns.

As such, devices that have received 510K approval by the FDA for "substantial equivalence" to existing devices but are promoted for off-label uses by doctor advocates seems like an area ripe for picking by the Department of Justice during this economic downturn and should send a chill down the back of device manufacturers and physician-advocates alike.

-Wes