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Merge Healthcare Inc., purchased by IBM for $1 billion in a deal completed Tuesday, received a warning letter from U.S. regulators about the potential dangers of software that monitors patients during heart procedures and a system that archives medical images. Merge failed to show that it had adequately reviewed or evaluated complaints of malfunctions in its devices and allowed its Merge Hemo cardiac monitoring system to be widely used on patients when its effectiveness hadn’t been supported, according to the Food and Drug Administration’s letter dated Sept. 30. Merge also neglected to inform the FDA when the company recalled the product because it may cause computer systems to freeze and result in a loss of patients’ vital signs while the system reboots, the agency said. The warning letter came after a June inspection of Merge’s factory in Hartland, Wisconsin. (Cao and Edney, 10/14)

A federal judge has ordered a surgical funding company to turn over information about payments it made to healthcare providers for surgeries performed on plaintiffs suing over artificial hips made by a unit of Johnson & Johnson . DePuy Orthopaedics in August sought to compel Texas-based MedStar Funding to hand over the information, saying it was concerned that Medstar was trying to squeeze excessive profits from liens it had placed against personal-injury settlements for 11 hip plaintiffs. (Dye, 10/15)

Drugmaker Bristol-Myers Squibb Co. is expanding its collaboration with Five Prime Therapeutics Inc., which could receive more than $1.75 billion if they succeed in turning Five Prime’s antibody-based drug candidates into approved medicines for cancer and immune-system disorders. (Johnson, 10/15)