Stryker says hip recall to cost up to $390 mln

Wed Jan 9, 2013 1:59pm EST

* Sees charge of 35 cents/shr in Q4 for hip recall

* Total cost will depend on several variables

* Advises patients to see doctor even if there are no problems

Jan 9 (Reuters) - Stryker Corp on Wednesday said a hip implant recall begun last June will cost $190 million to $390 million for patient testing and treatment, new surgeries, lawsuits and insurance payments.

The company said it increased the low end of its expectations for these costs and as a result also raised its related financial reserves. It will result in a fourth-quarter charge of 35 cents per share, or $174 million before taxes, Stryker said.

Stryker, which also makes power tools, surgical accessories and hospital beds, recalled its Rejuvenate and ABG II modular-neck hip devices in June of 2012, saying there was a risk for corrosion, which may result in local tissue damage as well as pain and swelling. It provided the new cost information on Wednesday with its financial outlook for the fourth quarter and full year.

The company has hired third-party claims administrator Broadspire Services to help deal with patients who need to have their recalled hip implants replaced.

The eventual total cost of the recall will depend on several variables, Stryker said, including the number of patients who require testing and follow-up procedures and the cost of lawsuits.

Stryker advised all patients who have the Rejuvenate Modular or ABG II modular-neck hip implants to consult a doctor.

"It is important that you follow-up with your surgeon, even if you are not experiencing symptoms such as pain and/or swelling at or around your hip," Stryker said on its website.

The company said blood tests and imaging tests, such as X-ray, MRI or ultrasound, may be ordered to evaluate the device.

Stryker's recall last summer followed similar action from other orthopedic device manufacturers, including Johnson & Johnson, which initiated the biggest hip recall and also subsequently hired Broadspire to help manage patient care and limit its financial exposure.

Hip implants made of all metal, known in the industry as metal-on-metal, have been especially problematic. In addition to high failure rates and other pitfalls, they may release metals into the bloodstream over time. It is unclear what the long-term consequences of high levels of metal in the blood may be.

"The issue of greatest concern is the potential for elevated metal ions in the bloodstream and the damage that can be caused to the muscles, tendons, soft tissue and bone," said Dr. Mary O'Connor, an orthopedic surgeon at the Mayo Clinic in Jacksonville, Florida.

"Soft tissue damage is more critical than bone damage. If the bone is damaged, we can do something. But if the muscle is dead because it has been poisoned by metal ions, we can't recreate it," she said.

It is too early to say whether the problems will be as great as those suffered by patients who got the ASR hip implant made by J&J, she said. "But its the same basic problem of metal ions poisoning the tissues."

Stryker shares were up $1.46, or 2.5 percent, at $58.43 in afternoon trading on the New York Stock Exchange.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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