A Medical Device Daily
In what may be hailed by some as one of the biggest medical device recalls ever, Boston Scientific (Natick, Massachusetts) on Monday stopped shipment and is retrieving field inventory of all its implantable cardioverter defibrillators (ICDs) and cardiac resynchronization therapy defibrillators (CRT-Ds). The move caused a spike in trading and the company's stock dove 16.45% at midday.
Wall Street's reaction was brutal: Boston Scientific was promptly labeled the Toyota of the medical industry in a Wall Street Journal blog.
“FDA didn't ask for a recall. But FDA will review the root cause for the ICDs recall as part of recall classification process,“ Dick Thompson, an FDA spokesman, told Medical Device Daily. “We were notified just last night.“
Thompson said the reason for the recall will be reviewed as part of a 30-day notice submission. In the mean time, apparently there are no reports of adverse events for any patients who have received the devices. And there was no indication that the manufacturing process changes would prompt explantation of the devices already in patients.
“FDA didn't ask for a recall. But FDA will review the root cause for the ICDs recall as part of recall classification process,“ Dick Thompson, an FDA spokesman, told Medical Device Daily. “We were notified just last night.“
Thompson said the reason for the recall will be reviewed as part of a 30-day notice submission. In the mean time, apparently there are no reports of adverse events for any patients who have received the devices. And there was no indication that the manufacturing process changes would prompt explantation of the devices already in patients.
“Preliminary information indicates that there are no product failures or adverse events related to this issue,“ Thompson said.
The company pledged to work closely with FDA to resolve the situation quickly. Medical device firms are required to report any manufacturing changes affecting the safety or effectiveness of a device.
This news comes just over two weeks after Boston Science negotiated a plea deal on behalf of Guidant a company plagued with product liability problems it acquired for $27.2 billion in 2006 which was criminally charged with concealing information from the FDA regarding catastrophic failures in some of its ICDs. The specific charges include submission of false and misleading reports to the FDA, and failure and refusal to report medical device corrections (MDD, Feb. 26, 2010).
Product families in Monday's advisory include: Cognis, Confient, Livian, Prizm, Renewal, Teligen and Vitality some of the same products involved in the Guidant criminal charges.
In a prepared statement, Boston Scientific said Monday's action was taken because it identified two instances of changes to these products that, while successfully validated, were not submitted to the FDA.
Boston Scientific didn't respond to calls for an interview in time for this edition.
The devices in question, which treat heart failure and manage heart rhythm, made up about 15% of the company's total sales of $8.19 billion in 2009.
“A planned process review revealed that two manufacturing process changes were not submitted for FDA approval,“ Ray Elliott, president/CEO of Boston Scientific, said in a prepared statement. “We are acting voluntarily and expeditiously to resolve this situation, and we have seen no evidence of any risk to patient safety. We apologize for the inconvenience these actions will cause patients and physicians.“
Boston Scientific will evaluate the impact of these actions on its financial results and provide an update when that evaluation is completed. It's likely that the recall could have a material impact on the company's previously issued guidance, including revenue, operating profit and cash flows for the first quarter and full year of 2010, according to the company.
More than 244 million shares were traded on Monday, compared with an average of 21 million trades. In the last 52 weeks, the med tech behemoth's stock has climbed as high as $11.77. At midday, the stock sunk to $6.31, but by the closing bell it had crept back up to $6.80, losing 13% for the day.
Boston Science has taken a beating in the last few years. Last month it reported a series of management changes and restructuring initiatives designed to strengthen the company and position it for long-term success. The company reported a 4Q09 loss of $1.1 billion, and said it would lay off as many as 1,300 employees, roughly 10% of its total staff (MDD, Feb. 12, 2010).
And then there were those criminal charges last month against Guidant. Court documents obtained by MDD indicated that, as a result of the alleged violations, the courts will seek a forfeiture from the company of certain defibrillator devices related to the charges, and if they can't be produced the company will have to pay $42 million, which is the estimated value of those devices.
“The government charges that Guidant committed serious crimes by undermining the FDA's role to guard the American public against potentially dangerous medical devices,“ said Assistant Attorney General Tony West, who heads the Justice Department's Civil Division. “Our message is clear: We will vigorously prosecute individuals and organizations who put profit over public health and safety by violating the law.“
The charges were filed following a four-year investigation into Guidant's handling of short-circuiting failures of three models of ICDs: the Ventak Prizm 2 DR (Model 1861) and the Contak Renewal (Models H135 and H155).
The problems leading to the legal trouble were first revealed in 2005 with the FDA's recall of 11 models of Guidant ICDs. The company had attempted to address the problems by categorizing them as “physician communications“ rather than recalls. On July 1, 2005, the FDA characterized the communications as recalls. A major allegation in the lawsuits was that Guidant continued to ship and sell the devices even after learning that there were possible defects.
Boston Scientific agreed to pay $296 million on behalf of Guidant after reaching an agreement in principle with the DOJ related to product advisories issued by Guidant in 2005, before Boston Scientific acquired it in 2006 (MDD, Nov. 9, 2009).
Then at the end of 2009, Boston Scientific entered into a civil settlement with the DOJ regarding the department's investigation relating to certain post-market surveys conducted by Guidant before Boston Scientific acquired Guidant in 2006. That civil settlement brought to a conclusion an investigation that began in 2005 and involved no admission of wrong doing by the company. Under the terms of that settlement, the company has agreed to pay $22 million, which was previously fully accrued (MDD, Dec. 28, 2009).
Lynn Yoffee; 770-361-4789