Utah Medical Slapped by the FDA

The first time I heard of tiny Utah Medical Devices (Nasdaq: UTMD  ) was in a couple of glowingarticles from fellow Fool contributors Matt Richey and Zeke Ashton discussing its shareholder-friendly management.

Yesterday, Utah Medical again popped up in a shocking development as it was sued by the Food and Drug Administration. This event rocked the stock, sending it down nearly 33% for the day. In this suit, which was filed in the U.S. District Court for the District of Utah, the FDA is seeking to bar Utah Medical from manufacturing and distributing medical devices until it complies with the FDA's Quality System regulation (QSR).

Ouch! It's not every day that a government agency tries to completely shut down a company. I thought that kind of heavy-handed behavior happened only in Russia.

After a review of the history between Utah Medical and the FDA, an outside observer such as myself may view the relationship as downright hostile. But within the context of events of the past few years, this suit doesn't seem all that surprising. Rather, it appears to be the progression of a conflict that stretches back for years. Utah Medical has actually filed suit twice against the FDA for withholding export certificates, impairing its ability to sell its products internationally.

The FDA's position is that it has given repeated warnings and that Utah Medical has consistently failed to ensure that its products are manufactured in accordance with the QSR. This seems to be a one-sided presentation, as Utah Medical has repeatedly claimed in press releases this year that it has made attempts to reconcile the discrepancies with the FDA to no avail. So who is right?

The FDA's mandate is to ensure the safety and efficacy of drugs and medical devices sold in the U.S. In the case with Utah Medical, is it looking out for the public good? Or is the agency bearing a grudge and maliciously throwing its weight around?

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Fool contributor Charly Travers does not own shares of any company mentioned in this article.