NEA & Johnson & Johnson Development Corporation’s Funding of Federally CONVICTED EarLens CEO William (Bill) Facteau
March 18, 2016
FDA is not as difficult and obscure as it was five years ago – Bill Facteau, CEO, Earlens, @#medtech2014 conference
— Arundhati Parmar (@aparmarbb) May 21, 2014
Whoops! Less than a year later Bill Facteau, CEO, of startup EarLens, (funded in part by NEA & JJDC*), was arrested and federally indicted on 18 counts of fraud for another NEA & JJDC* fund startup Acclarent, where he was also CEO, makes you wonder if he regrets saying “FDA is not as difficult,” now.
“Avoid getting indicted,” William (Bill) Facteau. Here’s a better thought, avoid engaging in unethical & illegal behavior that’s the foundation for the fact-based indictment.
Additional Healthegy Information-->
William (Bill) Facteau
Chairman, President and CEO
As CEO Johnson & Johnson’s Ethicon’s Acclarent, William (Bill) Facteau co-authored one of the more successful investments in Medtech. The final chapter appeared to be the acquisition of the company by Johnson & Johnson for close to $800 million.
Facteau left J&J years ago, and now serves as CEO of EarLens, a hearing-assist device company with a novel technology that uses lasers to transmit sound. But his part in the Acclarent story isn’t over.
Facteau and another Acclarent executive were indicted last year by the Department of Justice on charges of securities fraud (http://www.justice.gov/usao-ma/pr/for…). According to reports, the government is charging that Acclarent pushed its Stratus stent as a drug-delivery device when it didn’t have FDA approval for that use (http://www.qmed.com/news/why-company-…).
In this interview, Facteau discusses the indictment, the upcoming trial in Boston, and what all this means for medtech.
He also updates us on EarLens, which has raised close to $50 million from many investors including Medtronic. EarLens’Contact Hearing Device uses light to transmit sound. Unlike hearing aids, which are in effect tiny speakers that simply turn up the volume on air conducted sound, the EarLens Contact Hearing Device comprises two components: a light-based Behind The Ear (BTE) sound processor, and a removable, custom-made Tympanic Contact Actuator (TCA) placed at the base of the ear canal. The BTE uses a microphone and a digital signal processor to pick up sound and convert it to infrared light. This non-visible light carries both the power and the sound signal to the TCA, which then converts it into vibrations that are directly applied to the eardrum through a tiny custom contact pad and perceived as sound.
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1:00 – The unfortunate next chapter in the Acclarent story?
2:19 – “It is going to be a big thing for our industry. It’s one that we’re going to want to pay attention to.”
2:33 – What was the indictment centered around?
2:57 – What has the reaction been from the medtech community?
3:36 – “You find out about who your friends are during these type of issues.”
3:44 – “My board, investors, and friends have been amazingly supportive. So that is what keeps you going.”
4:11 – Is this a broader concern for an industry under scrutiny?
5:11 – Tell us about EarLens’ story.
6:56 – We’ve seen a lot of hearing-assist devices. What was unique about EarLens’approach?
7:56 – Hearing device with laser beams?
9:11 – Where could EarLens come up short?
10:41 – What needs to be fixed for medtech to thrive?
12:11 – “The burden of proof should be on us to get it through, show the value proposition, get it through the FDA, and get it available. And then I think the burden of proof to not pay should be on payers and CMS.”
“My board, investors, and friends have been amazingly supportive. So that is what keeps you going,” Federally indicted CEO of EarLens William (Bill) Facteau
Of course, they’re supportive, one wonders if that support (clearly not publically) goes beyond moral and perhaps also includes financial. If Facteau is willing to possibly go to jail for fraud, he, co-founders (patent holders for the device in question, NEA General Partner, ExploraMed Founder Josh Makower & John Chang, boards and venture capital investors, like NEA, that either engineered or were aware when Acclarent, likely for the first time in U.S. history, knowingly & willingly defrauding the FDA when fraudulently obtaining the necessary 510(k), they’d be silly not to support him, now that they’ve been caught.
Is Facteau becoming collateral damage as part of the cycle of fraud he’s helped create and perpetuate? The Sociopathic Business Model™ maintains that all accomplices eventually become victims, something I know all too well from personal experience as a rep for then startup Acclarent from June 2007 through the sale to Johnson & Johnson’s Ethicon in January 2010 until wrongful termination in January 2011. Many abusive people have and will continue to suggest, incorrectly, that this site’s coverage of this case & they key players is vindictive. Vindictive behavior is what abusive people engage when there is no justification for their actions. My actions are justified and verified with fact-based evidence. I’ve often said there’s a name for people who have a problem with people who expose fraud, they’re called criminals.
The First Amendment protects truthful speech, but as the Supreme Court pointed out in Illinois v. Telemarketing Associates, it “does not shield fraud.” Facteau mentions VSI CEO Howard Root in the Healthegy video. Root was recently acquitted of criminal charges (not the same as innocent) AND his company paid a civil DOJ fine. Let’s keep in mind that both OJ Simpson (regarding the his ex-wife’s murder) and Casey Anthony were also acquitted of criminal charges.
Recent desperate attempts from the pharma and medical device industry to misappropriate the First Amendment in order to avoid accountability for off-label promotion places blame on FDA, employees, surgeons, and patients and allows for executives, boards and venture capital investors to encourage, replicate and reward unethical & illegal behavior at great expense to us all.
Judge Lamberth from Root’s case, stated it’s “not a crime for a device company or its representatives to give doctors wholly truthful and non-misleading information about the unapproved use of a device.”
Let’s use a simple example to illustrate the dangers of out-of-touch federal judges allowing the industry to misappropriate the First Amendment to shield fraud.
(Not meant to demean or insult any reader, but there are readers from all industries, not just medical devices)
If a drinking straw was a medical device and the FDA 510 (k) cleared it for orally drinking water, reps selling the straw, under the First Amendment off-label guidelines, could also sell their straw (device) to orally drink soda in addition to water.
The industry, if given an in inch will take a yard, would also point out the straw cleared orally for drinking water, used off-label orally for drinking soda could also be used off-label intranasally for snorting cocaine, all are factual statements and by the recent federal ruling approved as off-label selling protected under the First Amendment.
It’s inconsistent & contradictory for the federal courts allow unethical companies & executives to misappropriate the First Amendment, which wholly negates the only purpose of FDA. What the courts are failing to recognize is that companies are already essentially selling straws for cocaine, and taking the extra yard by selling straws that just don’t work, at all.
In the industry, where I made my career for 13 years, if FDA gives companies an inch they’ll take a yard; and, Acclarent is the precedent-setting the case the courts need to fully understand the dangers of the misappropriation of the First Amendment. The device in question is the Relieva Stratus Microflow Spacer, a nasal implant that looks like a cross between a balloon and straw, with hundreds of little micro-drilled holes cleared for saline. If you’re not familiar saline is clear like water, what you’ll notice, is that in the image below the substance is white.
Acclarent: was not wholly truthful, concealing the intended use, from FDA when obtaining their 510 (k) for the Relieva Stratus Microflow Spacer: FDA 510(k) cleared for Saline (which immediately fell out of the device rendering it useless)
FDA 510(k) cleared Stratus for Saline (which immediately fell out of the device rendering it useless)
Patent design for Stratus was for drugs and other substances that must be injected into living tissue (not a device) in order to be viable.
Reps were instructed to sell the device with suspension steroid Kenalog 40 (white substance in image above) that must be injected into living tissue (not a device) in order to be viable.
Stratus did not work with Saline or Kenalog 40. We sold a drinking straw cleared
Using the original example above, essentially, Acclarent sold a straw cleared for water, but the straw never worked with water it never worked for snorting cocaine; and, when they got caught selling and billing a 100% useless product, tried to hide their illegal activity fraudulently behind the First Amendment.
That’s more than taking a yard, that’s taking the lengths of two football fields end to end.
Judging from the Healthegy Inc, PR puff-piece from the beginning of this article, regret, accountability, facts, and anything resembling reality are missing from Facteau’s current portfolio. And speaking of Judge, Judge Allison D. Burroughs assigned to oversee the Facteau & fellow indicted former Johnson & Johnson Ethicon’s Acclarent executive Patrick (Pat) Fabian’s criminal trial set for May 23, 2016, Burroughs previously wrote for Food and Drug Law Journal: Off-Label Promotion: Government Theories of Prosecution And Facts the Drive Them. Let’s hope she understands the law better than Judge Lamberth, off-label, and sees the end-to-end football fields of a difference when a company, their founders, executives and venture capital investors knowingly and willingly lied to the FDA and when caught fraudulently, hid behind the First Amendment.