SAN JOSE, Calif. (CN) - Stock prices for Intuitive Surgical dropped from $573 to $393 per share when it was found that the company had grossly underreported injuries and deaths caused by its da Vinci robotic surgery device, shareholders claim in a federal derivative complaint.
The City of Birmingham (Ala.) Relief and Retirement System sued the company's nine-member board of directors and its chief financial officer, alleging unjust enrichment and breach of fiduciary duty.
Intuitive's only product, the da Vinci system, is a robotic surgical device that uses a "targeted electrical charge to cut and cauterize a patient's tissue during surgery," according to the 67-page heavily redacted complaint.
The U.S. Food and Drug Administration initially approved the da Vinci robot for laparoscopic surgeries such as gallbladder and gastroesophageal surgery, and later authorized its use in other procedures such as chest surgery, certain cardiac surgeries and urologic procedures, the complaint states.
It has five main parts: a "high-definition, three-dimensional vision system" for the surgeon; a side cart for the patient; three to four robotic arms; EndoWrist attachments on the arms, which are the parts that cut into patients; and a computer system, according to the complaint.
Each device costs $1 million to $2.3 million. Around 43 percent of Intuitive's profits are from da Vinci sales; it gets the rest of its revenue from selling accessories for the device and service agreements, according to the complaint.
The FDA regulates the manufacture of surgical devices. Companies must submit medical device reports alerting the FDA of serious injuries or deaths caused by their device, and of any voluntary recalls issued by the manufacturer.
Once a manufacturer receives a notice of injury or death from a hospital, it has 30 days to pass the information along to the FDA. It must investigate each alleged malfunction and send the FDA a report about the event.
But Intuitive's board of directors put profits ahead of safety and "grossly underreport[ed]" complications caused by the da Vinci device, the shareholders claim.
They claim the board misclassified serious injuries and deaths as "other" and hid from the FDA "at least three voluntary recalls the company instigated to warn hospitals about the tendency of a part of the da Vinci device, known as the 'tip cover,' to malfunction, resulting in burning of the patient's internal tissue."
Intuitive developed the tip covers to go on the ends of the HotShears Monopolar surgical scissors, the most commonly used EndoWrist attachment for the da Vinci. Made of silicon or rubber, the covers prevent electrical charges from leaking into other tissues and organs that are not being operated on, the complaint states.
The shareholders claim many patients have suffered severe injuries from defective tip covers. For example, Sonya Melton told CNBC that she developed pneumonia and had "excruciating pain" after surgery to remove uterine fibroids because undetected electrical burns from the da Vinci had perforated her small intestine.
Another patent, Shawn Todd, told CNBC that her uterus had been burned during a da Vinci procedure, the complaint adds.