Biomet, Stryker, and Johnson & Johnson unit DePuy confirmed Monday that the Department of Justice slapped the companies with subpoenas, starting an investigation that could last six months or longer.

The move by the Justice Department added yet another round of investigations into the industry and gave Wall Street cause for concern as shares in the companies were driven lower.

Biomet shares closed down $1.80 to $33.13, Stryker’s stock sank $2.68 to $42.20, and Johnson & Johnson’s stock fell $1.11 to $60.21.

Industry watchers got a whiff that something might be amiss Friday when Zimmer announced after the close of the markets it had received a subpoena. The company’s stock dropped $4.33 to $58.70 on Monday.

Zimmer said Friday it received a federal grand jury subpoena from the DOJ’s antitrust division. The subpoena requested that the company hand over documents regarding possible violations of federal criminal law, including possible violations of the antitrust laws, relating to the manufacture and sale of orthopedic implant devices. Documents requested date back as far as January 1, 2001.

By Monday, Biomet, Stryker, and Johnson & Johnson company DePuy confirmed they had received similar subpoenas. J&J said that it also had search warrants carried out in connection with the investigations. All of the companies said they are cooperating with the Justice Department.

This is not the first time the orthopedics industry has found itself under investigation. In March of last year, the DOJ filed subpoenas in connection with the same orthopedics device companies, as well as involving Smith & Nephew (see Orthopedic Firms Probed).

The four subpoenas requested documents related to agreements between the companies and orthopedic surgeons.

Investigation Speculation

But with the companies releasing little about the most recent investigation, Wall Street analysts question what it could be about.

“Our gut reaction is that the recent subpoenas have a different target than the investigation begun last year,” A.G. Edwards & Sons analyst Jan David Wald wrote in a research note.

Mr. Wald said the 2005 subpoenas had requested such items as consulting contracts and professional service agreements between orthopedics manufacturers and orthopedic surgeons dating back to January 2002.

Leerink Swann & Company analyst Jason Wittes raised the question in a research note of whether the investigations are related. But given the scope of the inquiry, Mr. Wittes puts his money on the investigations targeting the overall consulting policies and practices of the orthopedics industry.

Among the differences cited by Mr. Wittes is that the latest inquiry is a grand jury investigation, which means a decision on whether to prosecute could happen within six months to a year.

“This timing is quicker,” he wrote in comparison to the earlier investigation, which could take three years or longer to conclude.

Contact the writer:RBarron@RedHerring.com