Becton, Dickinson and Co. (BDX), commonly referred to as BD, is a medical device manufacturer based in New Jersey. The company has agreed to pay $175 million to the U.S. Securities and Exchange Commission (SEC) to settle an investigation related to its past public disclosures and reporting concerning the BD Alaris System. Acquired from CareFusion in 2015, this system is part of BD’s Medication Management Solutions division.
The resolution of this settlement does not require BD to restate its financial results. Furthermore, the company has announced it will not be revising its fiscal 2025 guidance in light of this settlement.
The SEC has brought charges against BD for allegedly misleading investors concerning the risks involved with the ongoing sale of its Alaris infusion pump. Additionally, the company was accused of overstating its income by not recording the costs associated with addressing multiple software defects in the pump.
The SEC's findings indicate that in 2016, BD concluded that the software modifications made to the Alaris pump required clearance from the Food and Drug Administration (FDA). However, BD lacked the necessary data for this clearance and chose to continue selling the pump without it, as obtaining the data would have delayed the introduction of new features. By January 2019, BD had identified over 25 software flaws in the pump, which were deemed potentially highly harmful to patients. Instead of notifying investors about these risks and the possibility of FDA restrictions on the pump’s sale—a product accounting for roughly 10% of BD's profits—BD reportedly issued misleading statements regarding its regulatory risks.
The SEC's investigation also revealed that BD reported the software flaws to the FDA in October 2019, proposing to continue sales while resolving the issues to obtain FDA clearance. The FDA rejected this approach, leading BD to halt Alaris shipments immediately. Nonetheless, BD resumed shipping shortly afterward, having addressed the software issues but still without FDA clearance. The SEC alleged that during a November 2019 earnings call, BD misled investors by stating that Alaris sales were paused to implement "improvements" in a strategy aimed at continually enhancing the platform. BD's financial projections for fiscal year 2020 were based on the assumption that FDA consent for Alaris sales without clearance would be forthcoming, though this was not communicated to investors.
The SEC concluded that BD had significantly overstated its operating income for fiscal year 2019 by not accurately accounting for the remediation costs associated with Alaris, thereby inflating its operating income by 82% in the fourth quarter.
As per the SEC's findings, BD breached provisions related to antifraud, reporting, internal accounting controls, record-keeping, and disclosure controls, as stipulated by federal securities laws. BD has consented to cease further violations of these provisions, engage an independent compliance consultant to review and recommend improvements for its disclosure processes, and pay a civil penalty.
In response, BD stated that the BD Alaris System remains a safe and essential element of healthcare in the U.S. It has been effectively used over the years, including throughout the COVID-19 pandemic. The updated version of the BD Alaris System received 510(k) clearance from the FDA in July 2023, and the company is continuing to modernize its Alaris fleet.
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