Device makers with big Minnesota ties are focus of Medicare audit

Auditors have determined that the federal Medicare program has spent billions of dollars on implantable medical devices that fail to work as intended, including $1.5 billion related to seven recalled heart devices made by three companies with deep Minnesota ties.

In response to a Freedom of Information Act request, auditors with Medicare's financial watchdog office have told the Star Tribune they are auditing expenses related to problem-prone heart devices made by Medtronic PLC, St. Jude Medical, Inc. and Boston Scientific Corp.

The seven specific devices under investigation in the ongoing audit include defective or recalled pacemakers, implantable defibrillators and the wires called "leads" that connect them to the heart.

"We selected these devices with no intent ... to target any device manufacturer," the auditors' office said in its FOIA response.

The audit is investigating expenses generated by recalls of Medtronic's Concerto, Virtuoso and EnTrust defibrillators; St. Jude's Riata leads and Identity pacemaker; and Boston Scientific's Teligen and Cognis defibrillators. All three companies employ thousands of Minnesotans.

Medtronic and Boston Scientific said in statements that they stand behind their products with warranties and that patient safety is a core company concern.

"It is incorrect to assume that Medtronic profits from devices that reportedly malfunction," a Medtronic spokesman said via e-mail. He added that "when there is an issue with a device, Medtronic stands behind them through robust warranties, which often include replacement devices and reasonable out of pocket medical expenses for the patients."

St. Jude, which is being acquired by Abbott Laboratories in a $25 billion deal, didn't provide a response to questions about the audit.

The final audit report from the inspector general of the U.S. Health and Human Services Department won't be published until next year. But auditors last fall disclosed that shortcomings in Medicare billing records forced them to use subpoenas and a painstaking audit process to document $1.5 billion in spending following the seven recalls.

Other studies have estimated an that eighth recall, of Medtronic's Sprint Fidelis defibrillator lead, cost Medicare as much as $1 billion. Medicare Inspector General Daniel Levinson has said he believes Medicare has spent several billion dollars on monitoring and additional surgeries caused by medical devices that are defective or have had to be replaced sooner than expected.

Medical device companies staunchly defend the safety of their products, noting that the large majority of recalls don't actually require products to be removed from the body or be sent back to the company.

"Because of the quality and compliance efforts undertaken by companies, the industry has achieved an enviable safety record, with less than half of one percent of 510(k) products and PMA products being recalled for serious issues, according to a report by the University of Minnesota Law School," a spokesman with Washington-based med-tech trade group AdvaMed said via e-mail.

510(k) and PMA are two programs used by the Food and Drug Administration to allow the sales of new devices.

Although the ongoing federal audit is focusing on the costs caused by seven devices that required large-scale removals from patients, the auditors are not likely to recommend that Medicare attempt to reclaim the money spent on defective and recalled heart devices spotlighted in the report, the office said in its response to the Star Tribune.

Rather, the ongoing audit is trying to draw attention to omissions in health care billing records that make it difficult to track exactly which devices are implanted in patients.

It's a problem that Minnesotan Jerry Kelly knows well.

Kelly, 74, of Savage, had a Medtronic Sprint Fidelis lead implanted for his heart defibrillator just two years after the FDA approved the lead for sale in 2005. The leads had a high failure rate, and defective models were known for causing shocks when they weren't needed, as happened to Kelly. His wife called for an ambulance after the second of 27 high-voltage shocks.

"While I was talking to 911 and waiting for them to get here, he got shocked several more times," Kelly's wife, Linda, recalled. "It was just like you see in the movies. His whole body flopped up and he screamed out in pain."

Medtronic voluntarily recalled thousands of Sprint Fidelis leads, including Kelly's. After he had his inappropriate shocks in 2009, Medicare paid to take out his old defibrillator and put in a new one, plus new leads, he said. But Kelly soon learned that the new leads he was told were implanted — St. Jude Medical's Riata leads — were part of another massive voluntary recall.

Anxiety-ridden, Kelly started going to the doctor every three months to make sure his new leads weren't breaking. Then last year, Kelly was informed that a mistake had been made involving his leads' serial numbers. It turned out Kelly had received the similarly named, but nondefective, Durata leads.

He thinks Medicare ought to be able to recoup some of its costs for replacing the defective leads, but he's not optimistic about that happening.

"It's hard, because they were approved by the FDA," Kelly said of the recalled Medtronic and St. Jude leads. He says he received a small legal settlement from Medtronic that he can't disclose, and which Medicare got a percentage of. He's not part of any lawsuit against St. Jude Medical.

Daniel Matlis, president of life-science strategy consulting firm Axendia, said he didn't find Kelly's experiences surprising, given the problems with devices not being clearly identified in medical records and insurance claims forms.

Although some improvements have been made to include "unique device identifier" (UDI) codes in electronic health records (EHR), those codes are still not included in insurance claims forms, including Medicare's, Matlis said.

The industry opposes including UDI codes on insurance claims. "AdvaMed ... believes that providing a standard and clear way to document device use from information in EHRs would facilitate more accurate reporting, review and analysis of postmarket data for medical devices, including recalls," the group's spokesman said.

Congress required the FDA to set up a UDI system back in 2007. The FDA's sister agency, the Centers for Medicare and Medicaid Services, initially balked. In July the CMS changed its tune and said would support including a snippet of the UDI number in claims to improve real-world evaluation of different models of medical devices.

The issue may garner more attention next year, when the Medicare inspector general's office audit of device recalls is published amid the ongoing debate. The watchdog office supports including a 23-character portion of the full UDI on Medicare insurance claims.

"The UDI system is intended to better detect devices with adverse events, improve device recalls, and enable more robust postmarket surveillance," inspector general Levinson wrote in September. Including the information on claims "could also assist in any related cost-recovery efforts."

Joe Carlson • 612-673-4779