Magellan Diagnostics Fined $32.7 Million For Lead Testing Fraud

A federal judge approved a plea agreement on Wednesday that resolves serious charges against Magellan Diagnostics, a company found guilty of concealing defects in its lead-testing devices. These malfunctions resulted in thousands of patients receiving inaccurately low lead level results.

U.S. District Judge Patti Saris in Boston accepted the plea deal, imposing a $32.7 million penalty as part of a larger $42 million agreement reached with the U.S. Department of Justice (DOJ). Judge Saris had previously expressed concerns over the “unusual” terms of this deal.

In May, Magellan entered a deferred prosecution agreement to settle felony fraud conspiracy charges and agreed to plead guilty to two misdemeanor violations of the Food, Drug, and Cosmetic Act. This plea follows criminal charges brought against three former executives of the company, including ex-CEO Amy Winslow. All three have pleaded not guilty and are scheduled for trial in April 2025.

Prosecutors allege that both the company and its executives misled customers and the U.S. Food and Drug Administration (FDA) regarding the reliability of their lead detection devices. The defects affected three devices in the LeadCare line, one of which accounted for over half of all blood lead tests conducted in the U.S. from 2013 to 2017, according to federal prosecutors.

Emerson Moser, the general counsel for Meridian Bioscience, which currently owns Magellan, issued a public apology in court, expressing regret to anyone who received inaccurate test results. “We can be better, we are better, and we will be better,” Moser stated.

Judge Saris accepted the plea agreement, imposing a fine of $21.8 million and requiring Magellan to forfeit an additional $10.9 million. Instead of ordering traditional restitution, the deferred prosecution agreement mandates the establishment of a $9.3 million fund, which will be managed by an outside compliance monitor. This fund is intended to compensate patients who faced delayed detection of lead poisoning or exposure due to the company’s actions.

During a June hearing, Judge Saris raised concerns about the method of restitution, noting it was “unusual” for victims to receive compensation through a process not directly overseen by the court. However, during Wednesday’s hearing, she indicated that her concerns were somewhat alleviated by the fact that victims would retain their rights to sue the company if they were dissatisfied with the compensation.

“I do think a victim will still have power if the victim is unhappy,” Saris remarked.

The case is officially registered as United States v. Magellan Diagnostics Inc., U.S. District Court for the District of Massachusetts, No. 1:24-cr-10144. For the U.S. government, the case is represented by Kelly Begg Lawrence from the U.S. Attorney’s Office for the District of Massachusetts, while Magellan is represented by Adam Hollingsworth of Jones Day.