$296 million guilty plea from Boston Scientific in relation to Guidant defibrillator case

By Dr. Ananya Mandal, MDApr 6 2010

The implantable cardioverter defibrillator (ICD) is a life saving battery operated device much like a pacemaker that is placed near the heart in a minor surgical procedure. This device detects abnormal heart rates and rhythms in the patient and delivers an electric shock to make the heart beat normally again. These save millions of people in the US and all over the world from sudden death.

In a new development Guidant LLC, a unit of Boston Scientific Corp, has been implicated in short circuiting failures of three models of their ICDs. The 20,146 devices at issue in the criminal case are Ventak Prizm 2 and Contak Renewal 1 and 2 defibrillators. Guidant have pleaded guilty to the criminal charges on Monday according to the U.S. Justice Department.

According to the DOJ Guidant was guilty of withholding information from the U.S. Food and Drug Administration that could have resulted in the failures in some of the devices. After a death of a patient in 2004, Guidant sent out a product update to advise doctors that the yellow warning screen warned of a potentially serious problem in the device in 2005. This change made to reduce the health risk was not reported as product correction but as product update. Guidant broke the law by not notifying the FDA about the change within 10 days.

Guidant has agreed to pay a combined criminal penalty of more than $296 million, the U.S. Attorney's Office for the District of Minnesota said in a statement on Monday. Within this amount a $42 million in forfeiture funds is also included and the victims could petition the Justice Department for a share. These charges were first announced last November and Boston Scientific already recorded a third-quarter charge of $294 million in relation to the fine, according to Securities and Exchange Commission filings. Prosecutors also said most of the plaintiffs' civil claims have been settled already and they presumably are receiving compensation.

Paul Donovan, Boston Scientific spokesman said, "Today's court action was a procedural step necessary for the completion of the agreement in principle we announced in November."

According to the FDA Guidant's guilty plea and the proposed resolution is the largest criminal penalty ever imposed on a device manufacturer for violating the Food Drug and Cosmetic Act.

Last month, Boston Scientific halted all sales of heart- rhythm devices in connection with this. There have been 1300 jobs or 10% of its of its non-manufacturing workforce. The stocks of the company have also fallen steadily in 17 months on March 15^th after the company said it stopped sales of defibrillators because of a documentation error.

According to US District Judge Donovan Frank, the decision on the plea will be announced within 3 weeks whether to reject the plea deal, accept it as written, or accept it with modifications.