A Medical Device Daily

Two class actions have been filed against Bausch & Lomb (B&L; Rochester, New York) alleging improper financial controls resulting in securities violations. The law firm of Lerach Coughlin Stoia Geller Rudman & Robbins (San Diego) reported filing against the company in the U.S. District Court for the Southern District of New York for the class period Jan. 27, 2005, to Dec. 22, 2005.

The complaint charges that B&L and certain of its officers made false statements and concealed material adverse information about the nature of its revenues and that it lacked adequate internal controls and underpaid taxes. This, according to the complaint, resulted in tens of millions of dollars in penalties and forced restatements of its financials over a period of five years.

On Dec. 22, 2005, after the markets closed, the company provided an update on an internal investigation related to its Brazil subsidiary, BL Industria Otica , and said that it would restate its financial results for 2000 through the first half of 2005.

The complaint also alleges that prior to release of these reports, the company's top officers and directors reaped more than $29 million in insider trading proceeds.

A second action filed in the same court by Schiffrin & Barroway, and for the same class period, charges that B&L, and some of its executives – naming Ronald Zarrella, Stephen McCluski, John Loughlin, Dwain Hahs, Angela Panzarella, Robert Stiles, Kamal Sarbadhikari, Geoffrey Ide and William Waltrip – issued material false statements, also citing the difficulties of its Brazilian unit. It also charges that the company's Korean subsidiary engaged in improper sales practices, causing B&L to improperly recognize revenue from such sales and that it lacked proper controls, resulting in inflated financial results.

When on Oct. 26 the company determined that the fraudulent accounting practices of the Brazilian units, its shares of fell 3.7%, to close, on Oct. 27, 2005, at $71.36 per share.

Further revelations on Dec. 22 concerning its accounting difficulties resulted in the company's shares falling 8.94%, on Dec. 23, 2005, to close at $72.

In other legalities: Two major ambulatory surgery center (ASC) associations filed an amicus brief to petition the U.S. Supreme Court to hear and overturn Gordon v. Lewistown Hospital, a case that may have a significant impact on patient care options and treatment costs nationwide.

Crowell & Moring filed the brief on behalf of the American Association of Ambulatory Surgery Centers (AAASC) and Outpatient Ophthalmic Surgery Society , expressing concern that the case affects the ability of ASCs to provide lower-cost, high-quality healthcare in competition with traditional hospitals.

The case arose after Alan Gordon, MD, a cataract surgeon, was stripped of his staff privileges at a Pennsylvania hospital as an apparent result of his attempt to open an ambulatory surgery center in competition with the hospital. A three-judge panel of the U.S. Court of Appeals for the Third Circuit, that included now Supreme Court Justice Samuel Alito, upheld dismissal of Gordon's damage claims, relying on the immunity provided to hospitals under the Health Care Quality Improvement Act for peer review of physicians, based on their competence and professional conduct. The court also rejected injunctive relief, asserting that at the time the hospital's action was taken Gordon was not yet a competitor of the hospital.

“The bottom line before the Supreme Court is the medical care provided to the patient – and our country's commitment to affording beneficiaries more and better surgical treatment options. Without protecting the rights of ASCs and the physicians who operate them, patients will have fewer choices and lower quality care at higher cost,“ said John Duggan, MD, AAASC president and an Arizona physician.