Smith & Nephew hit by US inquiry blow

Smith & Nephew, the medical devices group, has been told to hand over documents detailing payments it makes to surgeons, after the US authorities launched a federal investigation into the high prices of artificial hips and knees and other implants.

Smith & Nephew, the medical devices group, has been told to hand over documents detailing payments it makes to surgeons, after the US authorities launched a federal investigation into the high prices of artificial hips and knees and other implants.

The investigation is expected to centre on whether the company and its peers are too cosy with surgeons who decide whether to buy their products, and who can be paid to test new products and train others to use them. S&N and three other orthopaedics companies have received subpoenas, raising fears of a legal onslaught on the industry similar to that which has destabilised the pharmaceutical industry. Shares fell as investors worried that product prices would be forced down.

The US Attorney's office in Newark, New Jersey, has requested details of consultancy fees paid to surgeons, S&N said yesterday. A spokeswoman for the company said: "In common with our industry colleagues, we will be gathering up the information required and delivering it. We don't really know why we have been asked for this information."

The US firms Johnson & Johnson, Stryker and Biomet said they had received subpoenas, and analysts said the investigation could touch all the industry's main players. In recent years, health authorities battling to keep costs down have endured sharply rising costs for medical implants such as replacement joints and plates for use with fractures. The industry says the rises are more than justified by product improvements.

S&N, whose chief executive is Sir Chris O'Donnell, said it saw no conflict of interest in paying surgeons to test new products, to teach colleagues to use them and to make presentations at company events. The spokeswoman said: "The surgeon's role is to decide which product to use, but he is going to be sure the patient has the appropriate device because on that hangs his reputation and liability." S&N shares were among the worst performers in the FTSE 100 yesterday, falling 4.7 per cent to 497.5p.

Brett Pollard, an analyst at Numis, said: "S&N uses a number of surgeons to promote, carry out research and development, train and perform clinical trials. Our understanding of these relationships is that they are non-exclusive with respect to products and are not linked to sales. It is unclear whether any allegations will be brought against the company."