Boston Scientific (Natick, Massachusetts) has agreed to pay $296 million on behalf of its Guidant subsidiary to settle an investigation with the Department of Justice.
According to the company, it reached an agreement in principal with the DOJ related to product advisories issued by Guidant in 2005, before Boston Scientific acquired it in 2006. Guidant will plead to two misdemeanor charges related to failure to include information in reports to the FDA, the company said Friday.
"We are pleased this investigation has been resolved," Ray Elliott, president/CEO of Boston Scientific said in a company statement. "Guidant and its employees acted in good faith and believed they complied with applicable laws and regulations. We elected to resolve this matter so we could put it behind us and devote our full energies and resources to developing our innovative technologies."
Boston Scientific said the agreement would be recorded in the third quarter because it occurred after the Oct. 19 release of its third quarter financial results and before the filing of the company's quarterly report on Form 10-Q. The company updated its financial results for the third quarter and nine months ended Sept. 30, recording a charge of $294 million, on both a pre-tax and after-tax basis. The company said this amount represents the $296 million charge associated with the agreement net of a $2 million reversal of a related accrual.
As a result of the charge, Boston Scientific third quarter earnings report shows a loss of $94 million. The company previously reported a profit of $200 million.
In January 2006 Boston Scientific won a nearly two-month-long bidding war with Johnson & Johnson (New Brunswick, New Jersey) to buy troubled cardiac rhythm management firm Guidant for $27.2 billion (Medical Device Daily, Jan. 26, 2006), a deal that was finalized four months later (MDD, April 21, 2006). But Guidant has been plagued with product liability problems, including thousands of lawsuits related to electrical flaws in the company's implantable heart defibrillators. As of 1Q09 $220 million has been paid with an additional $20 million expected to be paid (MDD, Aug. 20, 2009).
In 2007 Boston Scientific reported an agreement with the Attorneys General of 35 states and the District of Columbia to settle investigations associated with Guidant's Ventak Prizm 2DR Model 1861, Contak Renewal Model H135 and Contak Renewal 2 Model H155 devices. The company at that time agreed to shell out a total of $16.75 million to settle those investigations (MDD, Aug. 31, 2007).
That settlement came on the heels of the company agreeing to pay $195 million to settle the consolidation of around 4,000 claims involving Guidant's implantable rhythm management devices. Those claims were consolidated in the federal court in Minneapolis (MDD, July 17, 2007).
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 is that Guidant continued to ship and sell the devices even after learning that there were possible defects.
In other Boston Scientific news, according to a Securities and Exchange Commission filing, the company has received a subpoena from the Department of Health and Human Services Office of Inspector General seeking information on contributions from the company's cardiac rhythm management business to charities with ties to doctors or their families.
Amanda Pedersen, 229-471-4212;