Stryker CEO: DOJ should "back off"

By Julie Steenhuysen

NEW YORK (Reuters) - A U.S. Department of Justice probe into price fixing among top orthopedic device makers has gone too far, and the government should "back off," Stryker Corp. (SYK.N: Quote, Profile, Research, Stock Buzz) Chief Executive Stephen MacMillan said on Wednesday.

MacMillan said he has seen no evidence of price collusion among orthopedic device makers, and he believes the probe was based on an isolated act.

"It was one sales rep in one geography, and no other company bit. The right thing to do is for the government to back off and understand that," MacMillan said.

He said the investigation, which started in June, reduced the market capitalization of orthopedic device makers by about $9 billion in two days.

"I consider this a little bit like looking for weapons of mass destruction," MacMillan said at the Reuters Health Summit in New York.

MacMillan said rival orthopedic device maker Smith & Nephew (SN.L: Quote, Profile, Research, Stock Buzz) had acknowledged that its sales representative had sent an e-mail, which Stryker never received, because the recipient's mail box was overloaded. He said that computer was turned over to government investigators.

The Justice Department has pursued these companies before. Last year, Zimmer Holdings Inc. (ZMH.N: Quote, Profile, Research, Stock Buzz), Biomet Inc. BMET.O, Johnson & Johnson (JNJ.N: Quote, Profile, Research, Stock Buzz) and Stryker were among device makers subpoenaed by the U.S. Attorney's office in Newark, New Jersey, related to lucrative consulting deals the companies make with surgeons.

Analysts have said the government is looking into the industry because of steep rises in prices for the companies' products in recent years.

MacMillan scoffed at the idea that orthopedic device makers would collude on price. "This industry is too darn competitive for that to happen, and we don't like each other well enough to get in a room and do that," he said.

The Kalamazoo, Michigan-based company has received no new subpoenas since the start of the probe, he said.

In the earlier set of subpoenas, disclosed in March 2005, the companies did not mention criminal violations, as do some of the latest requests.

Criminal violations can be punishable by jail time, carry stiffer penalties, and generally are for more serious infractions like price-fixing.

Shares of Stryker fell 52 cents, or 1 percent, to $51.90 in Wednesday afternoon trade on the New York Stock Exchange.