Boston Sci 'disappointed' with federal lawsuit

Boston Scientific Corp. responded Friday to a government lawsuit that accuses its Guidant division of knowingly selling faulty heart defibrillators that were eventually implanted in unsuspecting patients.

The Natick, Mass.-based medical technology company said the "conduct at issue" took place between 2002 and 2005, well before the it acquired Guidant for $27 billion in 2006. In a statement, the company said it is "disappointed that the federal government. . .has chosen to seek additional money" and that the "ultimate resolution of this matter should not have a significant financial impact."

The suit, filed in U.S. District Court in Minnesota, is the latest legal twist in the controversy surrounding Guidant's 2005 recall of popular defibrillator models called Ventak Prizm 2 and Contak Renewal 1 and 2. Part of a $7 billion industry, implantable cardioverter defibrillators (ICDs) are stopwatch-sized devices that shock an errantly beating heart back into rhythm.

The complaint filed Thursday by the U.S. Department of Justice alleges that top executives at Arden Hills-based Guidant hid problems associated with the defibrillators from patients, doctors and the Food and Drug Administration.

Earlier this month, Boston Scientific was found guilty of misleading the FDA about problems related to the device and paid a $296 million fine.

The latest suit alleges that Guidant knew as early as April 2002 that the Ventak Prizm model contained a potentially life-threatening defect. In addition, court documents state that the company knew in November 2003 that the Contak Renewal models could malfunction in a similar manner.

Although Guidant corrected the source of the defect, the suit alleges that flawed models already on hospital shelves continued to be sold and used in patients. And, instead of disclosing the problem publicly, the Justice Department alleges that Guidant "issued a misleading communication to doctors that misinformed them about the nature of the defect."

The government's filing Thursday intervenes in a whistleblower lawsuit originally filed in 2008 by James Allen, a Lancaster, N.Y., man who was allegedly treated with a faulty Guidant device.

"When companies like Guidant request and receive federal dollars for products they know to be defective, the United States is committed to aggressively seeking the recovery of those payments," said John Marti, first assistant U.S. attorney in Minnesota.

Phil Nalbone, an analyst at Wedbush Securities, said the outcome could be significant. "The big question for [Boston Scientific] is what it's going to cost them to make this right," Nalbone said. "Money is really limited at the company right now."

Some analysts are predicting a slowdown in demand for defibrillators after an article in a major medical journal that suggested the devices are overused, as well as the subsequent revelation that the Justice Department has launched an investigation into the matter. Other major defibrillator makers include Minnesota-based Medtronic Inc. and St. Jude Medical Inc.

Nalbone said Boston Scientific's latest legal tussle with the government won't help. "What this does say is that doctors are just going to be more cautious than ever about whom they implant with a defibrillator."