Three Former Executives for Magellan Diagnostics Charged with Conspiracy, Wire Fraud and FDA Violations

BOSTON – The former CEO, COO, and Director of Quality Assurance and Regulatory Affairs for Magellan Diagnostics, Inc. (Magellan), a medical device company headquartered in Billerica, Mass., have been charged in connection with concealing a device malfunction that allegedly produced inaccurately low lead test results for tens of thousands of children and other patients.

Amy Winslow, 51, of Needham Heights, Mass.; Hossein Maleknia, 64, of Bonita Springs, Fla.; and Reba Daoust, 66, of Amesbury, Mass., were charged with conspiracy to commit wire fraud; wire fraud; conspiracy to defraud an agency of the United States; and introduction of misbranded medical devices into interstate commerce with intent to defraud and mislead. Winslow and Daoust will make an initial appearance in federal court in Boston later today. Maleknia is expected to make an initial appearance in federal court in Tampa later today. 

Magellan’s devices – LeadCare Ultra, LeadCare II and LeadCare Plus – detected lead levels and lead poisoning in the blood of children and adults using either venous (i.e., blood draws through the arm) or fingerstick samples. LeadCare II, which was predominantly used to test fingerstick samples, accounted for more than half of all blood lead tests conducted in the United States from 2013 through 2017. LeadCare Plus and LeadCare Ultra were predominantly used to test venous samples.

According to the indictment, Winslow, Maleknia and Daoust – Magellan’s former CEO, COO, and Director of Quality Assurance and Regulatory Affairs, respectively – repeatedly misled Magellan customers and the FDA about a serious malfunction that affected Magellan’s LeadCare devices when they were used to test venous blood samples. By allegedly hiding the malfunction and later deceiving customers and the FDA about when they discovered the malfunction, the nature, extent and frequency of the malfunction, and the risks associated with the malfunction, the defendants caused an estimated tens of thousands of children and other patients to receive inaccurately low lead test results.

“According to the CDC, there is no safe level of lead in the blood. Additionally, young children and pregnant mothers from low-income households living in public housing are the most vulnerable to lead exposure. We allege that these defendants deceived customers and the FDA about the reliability of medical tests that detected lead levels. By doing so, we assert that they endangered the health and lives of incredibly vulnerable victims,” said United States Attorney Rachael S. Rollins. “This office, along with our other law enforcement partners, will vigorously investigate and prosecute those who put corporate profits before patient health. Here, we allege the personal gain is at the expense of poor people, children, and individuals who are pregnant. We pledge to advocate on these victims’ behalf and hold bad corporate actors accountable.”

“Individuals and companies whose lead testing devices provide inaccurate results can put the health of all patients, and especially vulnerable children, at significant risk,” said Special Agent in Charge Fernando P. McMillan, FDA Office of Criminal Investigations New York Field Office. “We will continue to pursue and bring to justice those who jeopardize the health of patients and the public.”

“Today, we arrested three former senior executives at Magellan Diagnostics for hiding a serious flaw in the lead testing devices the company produced, resulting in inaccurate test results for tens of thousands of children and other patients. We believe these executives knew about this malfunction for years, but failed to come clean to their customers and the FDA about it in order to boost their company’s bottom line,” said Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division. “The last thing sick children and their parents should have to worry about is whether diagnostic tests and devices live up to their manufacturer’s claims. This case should make it crystal clear to all companies that do business in Massachusetts, healthcare or otherwise, that they will be brought to justice for misleading consumers with false promises about their products.”

“Concealing the fact that a device is producing inaccurate lead test results to boost profits while knowing that there is no safe level of lead in the blood, as alleged in this case, is a brazen disregard to the health and safety of our program beneficiaries,” said Phillip M. Coyne, Special Agent in Charge for the U.S. Department of Health and Human Services, Office of Inspector General. “Today’s arrests should serve as strong reminder that we will never tolerate such behavior that puts patients at risk.”

It is alleged that the defendants first learned that a malfunction in their LeadCare Ultra device could cause inaccurate lead test results –specifically, lead test results that were falsely low – during the FDA clearance process in or around June 2013. The defendants, however, allegedly released LeadCare Ultra to the market in December 2013 without informing customers or the FDA of the malfunction. Several months after the release, LeadCare Ultra customers independently discovered the malfunction and complained about inaccurate results. It is further alleged that the defendants drafted and caused Magellan to provide false and misleading statements to customers that they “recently identified cases” of the malfunction and they did not observe the malfunction “in our clinical trials prior to the product release.” According to court documents, the defendants, in fact, had known about the malfunction for over a year, including before the product release. 

Magellan’s testing in 2013 also indicated that the same malfunction affected the LeadCare II device, which was by far Magellan’s highest-revenue product. Winslow and Maleknia, however, were positioning Magellan for sale, which could have been put in jeopardy if there was a malfunction affecting LeadCare II. It is alleged that Winslow told a Magellan employee to stop studying the malfunction in LeadCare II devices because Magellan needed to maintain “plausible deniability.” Only after Magellan was acquired by Meridian Bioscience, Inc. for $66 million in March 2016, did the defendants notify customers and the FDA about the LeadCare II malfunction. Magellan’s report to the FDA about LeadCare II allegedly made materially false and misleading statements and concealed material facts about Magellan’s discovery of the malfunction in LeadCare II (after Meridian acquired Magellan, Winslow received a bonus of approximately $2 million and Maleknia received a bonus of approximately $448,000).

According to court documents, the defendants delayed notifying the FDA and then misled the FDA about the malfunction. The defendants only filed an FDA report for LeadCare Ultra after an outside consultant told Magellan that if they did not notify the FDA about the malfunction, the consultant would. In 2017, the FDA contacted Magellan and asked when the company first discovered the malfunction. It is alleged that, at Daoust and Maleknia’s instruction, Magellan’s representative falsely told the FDA that Magellan first discovered the problem after receiving customer complaints in late 2014 and shortly before Magellan notified the FDA in 2015 – even though Magellan actually discovered the malfunction almost four years earlier, in 2013. Winslow also caused Magellan to send a false timeline to the FDA, which omitted the company’s internal 2013 studies about the malfunction.

The FDA ultimately found that the LeadCare Devices could not accurately test venous samples, leading to a recall of all LeadCare Devices using venous samples and a warning to the public not to use LeadCare Ultra, LeadCare II and LeadCare Plus for venous blood samples because of the malfunction.

According to court documents, as referenced by the Centers for Disease Control and Prevention (CDC), there is no safe level of lead in the blood. Lead exposure may cause irreversible lifelong physical and mental health problems. Young children and pregnant women are most vulnerable to lead exposure, especially those from low-income households and those who live in housing built before 1978 because those homes are more likely to contain lead-based paint and have fixtures containing lead. 

If you or a family member believe you received an inaccurate blood lead test result from a LeadCare device between 2013-2017, please complete the questionnaire located on the FBI’s website at https://www.fbi.gov/MagellanCaseInquiry. Information about the status of the case is located on the U.S. Attorney’s Office website https://www.justice.gov/usao-ma/press-highlights. 

The charges of wire fraud and wire fraud conspiracy as alleged in the indictment provide for a sentence of up to 20 years in prison, up to three years of supervised release and a fine of up to $250,000. The charge of conspiracy to defraud an agency of the United States provides for a sentence of up to five years in prison, up to three years of supervised release and a fine of up to $250,000. The charges of introduction of misbranded medical devices provide for a sentence of up to three years in prison, up to one year of supervised release and a fine of up to $250,000. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and statutes which govern the determination of a sentence in a criminal case.

United States Attorney Rachael S. Rollins; Fernando McMillan, Special Agent in Charge of the Food and Drug Administration, Office of Criminal Investigations, New York Field Office; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division; and Phillip M. Coyne, Special Agent in Charge for the U.S. Department of Health and Human Services, Office of Inspector General made the announcement today. Assistant U.S. Attorneys Elysa Wan, David Derusha, and James Herbert of Rollins’ Criminal Division and Kelly Lawrence, Chief of Rollins’ Healthcare Fraud Unit, are prosecuting the case.