Becton Dickinson to Pay $175 Million for Misleading Investors Over Flawed Alaris Infusion Pump

Becton Dickinson (BD), a global medical device manufacturer, has agreed to pay $175 million after the Securities and Exchange Commission (SEC) accused the company of “repeatedly” misleading investors regarding its Alaris infusion pump. The SEC alleged that BD knowingly sold the flawed product without the necessary patient-safety approvals from the Food and Drug Administration (FDA).

Complex medical devices such as infusion pumps require FDA approval, a process that demands detailed evidence demonstrating the device’s safety and effectiveness. BD, one of the world’s largest medical device manufacturers with 70,000 employees, derived 10 percent of its profits from sales of the Alaris pump.

As a publicly traded company, BD is obligated to disclose to the SEC—and thereby to its investors—any material risks that could impact its business. However, according to the SEC, BD knowingly failed to reveal that it was selling the Alaris pump without FDA approval, thereby endangering patient safety.

“Public companies have a fundamental duty to accurately disclose material business risks and should expect to be held accountable when they fall short in that regard,” said Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, in a press release.

The issues began in 2016, shortly after BD acquired the Alaris pump from CareFusion in 2015. BD made significant changes to the pump’s software but chose not to notify the FDA, as required. Despite discovering significant flaws in the device, the company continued selling it.

By January 2019, BD had identified over 25 flaws in the Alaris pump’s software. Later that year, the company informed the FDA of the issues and sought to continue selling the pump. The FDA, however, ordered an immediate halt to sales and shipments.

BD initially paused shipments but resumed selling the pump within days, ignoring the FDA’s requirements to address critical safety issues. In November 2019, BD introduced new software but failed to include fixes mandated by the FDA. The company shipped the pump without obtaining FDA clearance.

The FDA discovered in January 2020 that BD was still selling the flawed Alaris pump and had not made the required changes. BD then ceased shipments and initiated a recall of the product in February 2020.

From 2016 through February 2020, the SEC alleged, BD misled investors by concealing the pump’s lack of FDA approval, the issues flagged by the FDA, and the halted shipments.

“BD repeatedly painted a misleading picture of its Alaris infusion pump for investors and then doubled down by keeping them in the dark when the device’s issues came to a head with the FDA in late 2019,” Wadhwa said.

The SEC found that BD had materially overstated its fiscal year 2019 operating income, including an 82 percent overstatement for the fourth quarter.

The company was found to have violated multiple provisions of federal securities laws, including those related to antifraud, reporting, internal accounting controls, books and records, and disclosure controls.

In addition to the penalty, BD has implemented significant operational and governance improvements, including hiring an independent compliance consultant to review and recommend enhanced disclosure controls and procedures, the SEC said.

BD neither admitted nor denied the SEC’s findings but stated, “The company believes that settling with the SEC is the right course of action to fully resolve this matter and move forward.”

In its statement, BD added, “The settlement amount does not impact BD’s investments in innovation or its previously disclosed capital allocation strategy. BD is not updating its fiscal 2025 guidance as a result of the settlement.”

By fLEXI tEAM