Settlement with Justice Department ends case involving faulty defibrillators sold before company bought the subsidiaries involved.
A $30 million settlement between the U.S. Department of Justice and Boston Scientific will likely end a case involving the sale of defective heart devices from 2002 through 2005 by subsidiaries Guidant, Guidant Sales and Cardiac Pacemakers.
The settlement closes a fraudulent-claims lawsuit that alleged Guidant knowingly sold defective implantable defibrillators to health care facilities that implanted them into thousands of Medicare patients. Boston Scientific has paid more than $500 million since 2007 to settle civil and criminal claims related to defective defibrillators.
“The United States is fortunate that innovative health care companies regularly develop and market remarkable medical devices that improve patients’ lives,” said John Marti, acting U.S. Attorney for the District of Minnesota. “But in this case, Guidant valued profits more than patient safety by selling defective cardiac defibrillators.”
Boston Scientific issued a statement Thursday, saying: “While the company continues to deny the allegations made in the complaint, it felt it was in the best interests of all parties to settle this matter and avoid further protracted litigation.”
When asked whether this settlement is the final chapter of the Guidant defibrillator cases, Ryan Davenport, a spokesman for Boston Scientific, said: “We think this resolves the last of the claims made by the U.S. government regarding these devices.”
The government’s complaint said that Guidant knew as early as April 2002 that its Prizm 2 line of devices was defective and knew in November 2003 that its Renewal 1 and 2 devices were capable of short-circuiting and delivering an electric shock that “arcs” back onto the device instead of being directed to an irregularly beating heart.
According to Boston Scientific’s website, 83 malfunctions and nine reported deaths have been connected with the Renewal devices and 40 confirmed malfunctions and five patient deaths have been associated with the Prizm devices. About 500 Renewal devices remain implanted worldwide; about 1,400 Prizm devices remain in patients, according to the website.
Although Guidant took action to fix the defects, the government alleged that the company continued to sell its remaining stock of the old, defective versions of the devices. In fact, federal officials say that as Guidant learned about the cause of the defect, it took steps to hide the problem from patients, doctors and the Food and Drug Administration.
According to the government, Guidant did not fully disclose the problem until May 2005, when two Minneapolis doctors publicly aired their concerns about one of the defibrillators after it failed to revive a 21-year-old Grand Rapids, Minn., patient. Guidant later admitted it had known for three years that the device could short-circuit, but chose not to alert doctors or the public.
Dr. Robert Hauser, one of the doctors who went public back in 2005, criticized the settlement on Thursday.
“The $30 million should have little impact on their business,” Hauser said in an e-mail. “I find it very disturbing that such a small settlement was accepted by the DOJ in view of the magnitude of wrongdoing by Guidant management.”
Boston Scientific paid $27.5 billion to acquire Guidant in 2006. It has been paying quite a bit since in relation to Guidant’s defective defibrillators.
In 2007, Boston Scientific paid $240 million to settle claims with thousands of patients who had sued Guidant after the defective devices were recalled. Later, in February 2010, Guidant pleaded guilty to misleading the FDA about problems with the devices and paid a fine of $296 million.
Two weeks after that, the government filed the most recent suit, under the False Claims Act, naming former patient James Allen as a whistleblower. Allen had been implanted with one of the defective defibrillators in 2002 and had suffered shocks. He had the device removed in 2005.
Under the False Claims Act, a private citizen, known as a “relator,” can sue on behalf of the government and share in any recovery. Allen will receive $2.25 million as part of the settlement.
Since 2009, the Justice Department has used the act to recover $16.7 billion.