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Intuitive now faces a pension plan's lawsuit over its robotic surgical device

Shareholders claim the company withheld information related to its da Vinci system
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Intuitive Surgical is facing a new lawsuit over its da Vinci robotic surgical device.--Courtesy of Intuitive Surgical

Intuitive Surgical ($ISRG) is facing more legal pushback from shareholders who claim that the company underreported adverse events and concealed recalls from the FDA related to its robotic surgical device, MassDevice reported.

The City of Birmingham Relief & Retirement System filed a federal shareholder lawsuit in the U.S. District Court for Northern California against the Sunnyvale, CA-based company, accusing its board and management of "failing to make a good-faith effort to ensure that Intuitive complied with applicable laws and FDA regulations governing the safety of medical devices designed to protect the health of the American public," according to court documents cited by MassDevice.

According to the lawsuit, the company "grossly underreport(ed)" complications caused by its da Vinci robotic surgical system, and hid at least three voluntary recalls to warn hospitals about the device's malfunctioning tip cover, which resulted in the burning of patient's internal tissue.

Intuitive's only product, the da Vinci robotic surgery device system, uses a "targeted electrical charge to cut and cauterize a patient's tissue during surgery," and was initially approved by the FDA for laparoscopic procedures like gallbladder and gastroesophageal surgery, according to a 67-page redacted complaint obtained by Courthouse News Service. Intuitive makes 43% of its profits from da Vinci sales, and gets the rest of its revenue from selling accessories for the device and service agreements, the complaint stated.

Shareholders claim the company's board knew as early as October 2011 about severe injuries and deaths related to the device, but concealed the problems from regulators. In 2013, the FDA slapped Intuitive with a warning letter for underreporting adverse events, and later issued an "urgent medical device recall" for 1,300 of the company's da Vinci robot arms.

The lawsuit also accuses top level company management of participating in $113 million of insider trading. Shareholders said CEO Gary Guthart, CGO Marshall Mohr and former CEO Lonnie Smith sold large percentages of their holdings in the company at a time when they knew investors would uncover quality and safety issues.

Shareholder ire is not the only battle Intuitive faces: The company is also dealing with 76 product liability lawsuits, suits from insurers which accused the company of withholding claims, and a securities class action complaint, according to a complaint obtained by Courthouse News Service

Legal action does not bode well for Intuitive, which recently reported a 5% drop in revenue for Q4 2013 and a $60 million decrease in sales for its da Vinci robot. Guthart called 2013 a "challenging year" in an earlier earnings call--but whether the company can bounce back from its latest set of obstacles is anyone's guess.

- read the MassDevice article
- here's Courthouse News Service's take

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