The price that Boston Scientific (Natick, Massachusetts) has paid for troubled cardiac rhythm management firm Guidant has far exceeded its 2006 winning bid of $27.2 billion. Plagued with product liability problems, Guidant has cost Boston Sci millions more to settle lawsuits related to electrical flaws in its implantable cardioverter defibrillators (ICDs). And now those troubles have led to alleged criminal violations of the Federal Food, Drug, and Cosmetic Act. Charges were filed yesterday by the Department of Justice (DOJ) in federal district court in St. Paul, Minnesota.
Late Thursday, a Boston Scientific spokesman told Medical Device Daily that the company has already signed a plea agreement with the DOJ.
"We are pleased to resolve this matter," Paul Donovan, Boston Sci's senior vice president, corporate communications, told MDD. "We continue to believe that Guidant and its employees acted in good faith and with the intention of complying with applicable laws and regulations."
But Donovan declined to reveal the specifics of the plea agreement. And Charles Miller, DOJ spokesman, said that agreement has yet to be filed with the court.
Guidant was 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.
Court documents obtained by MDD indicate 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).
Guidant issued safety advisories regarding the failures in June 2005.
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.
Last fall, 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). At the time, Guidant said it would plead to two misdemeanor charges related to failure to include information in reports to the FDA, the company said.
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).
But the current charges stem from information gathered, beginning in 2002, which is when Guidant allegedly became aware that one of its ICDs, the Ventak Prizm 2 DR, was prone to electrical arcing, rendering the device inoperative and unable to deliver life-saving therapy to the patient in whom it was implanted, according to the DOJ.
Guidant changed the design of the Prizm 2 in November 2002 to correct the problem. The information charges that in August 2003, Guidant falsely told the FDA that the design changes did not affect the device's safety or effectiveness. In fact, the device changes were made to correct this flaw, according to the information filed in federal court.
"Guidant falsely described the change as a "minor alternation to the device ... which [did] not affect the safety and effectiveness of the device and stated that device performance [was] unaffected by this change ...," according to the charges.
In early 2004, Guidant allegedly discovered a similar short-circuiting problem with its Renewal 1 and Renewal 2 devices. Following the July 2004 death of a patient associated with a shorted Renewal in Spain, the court records state that Guidant knew that the physician operating instructions for responding to a short-circuit within the device were false and misleading. In an effort to remedy this, Guidant sent a communication by overnight delivery to physicians which the company dubbed a "Product Update." The court information alleges that this communication was actually a correction to the device which attempted to mitigate the safety risk posed by the short-circuiting. Guidant was required by law to alert FDA of this action within 10 days.
Guidant allegedly failed to make that notification, according to court records.
Guidant issued safety advisories on the Prizm 2 and Renewal devices in June 2005. FDA classified those advisories as Class I recalls, the most serious classification of recall, concluding that there was a reasonable probability that the affected devices could cause serious adverse health consequences or death.
"The community has the right to expect that companies that violate federal law by submitting false or misleading information to the FDA will be held accountable, particularly when that information relates to lifesaving devices, such as defibrillators," said Frank Magill, acting U.S. Attorney for the District of Minnesota on this case.
The case was investigated by the FDA's Office of Criminal Investigations and is being prosecuted by Robert Lewis of the U.S. Attorney's Office for the District of Minnesota and Trial Attorneys Ross Goldstein and Matthew Ebert of the Department of Justice's Office of Consumer Litigation. Additional assistance is being provided by Steven Tave of FDA's Office of Chief Counsel.
Earlier this month Boston Scientific 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).
Lynn Yoffee, 770-361-4789;