Guidant to pay a fine of $296M

In what is believed to be the largest criminal penalty ever imposed in a medical device case, a federal judge on Wednesday approved an agreement calling for Guidant Corp. to pay $296 million for concealing safety information about several of its heart devices.

The denouement in U.S. District Court in St. Paul ended a difficult chapter for one of the biggest players in Minnesota's signature medical technology industry. Thirteen patient deaths have been associated with faulty devices made by Arden Hills-based Guidant, which is now part of Boston Scientific Corp. The controversy lingered for almost six years and raised questions about how safety issues involving medical devices are communicated to the Food and Drug Administration, doctors and patients.

Last April, U.S. District Judge Donovan Frank rejected a previous $296 million settlement between the Department of Justice and the company. This time that fine remained intact, but Frank also called for Boston Scientific to serve three years' probation.

Boston Scientific will be required to make quarterly reports to the U.S. Probation Office regarding safety and compliance issues, as well as submit to regular, unannounced inspections of its records. Frank also called upon Boston Scientific to continue charitable programs intended to raise awareness about heart disease.

"I believe this serves not only the interests of the community and the interests of justice, but respect for the law and corporate responsibility," Frank said.

The case revolves around one of medical technology's blockbuster products -- implantable cardioverter defibrillators. A $7 billion global market, the life-saving, stopwatch-sized devices are implanted in the chest and shock an errantly beating heart back into rhythm.

In 2005 Minneapolis Heart Institute doctors Barry Maron and Robert Hauser went public with concerns about a Guidant defibrillator called the Ventak Prizm 2 after a 21-year-old patient died when his defibrillator short-circuited and failed to revive him after he went into sudden cardiac arrest.

In early 2004, Guidant discovered a similar short-circuiting problem in different defibrillator models called Contak Renewal 1 and 2. The company ordered its factory to stop making and shipping the models, but potentially faulty products on hospital shelves continued to be implanted in thousands of patients.

Although engineers at Guidant had recommended recalling the Contak Renewal devices, upper management rejected the proposal, court documents state. Instead, Guidant issued the "least aggressive" form of communication, called a product update, in which sales representatives were told to tell doctors that "nothing was broken" with the device.

Maron and Hauser met with top Guidant officials in May 2005 and urged the company to communicate the problem to doctors, but Guidant refused. The doctors then went to the New York Times, which published an article indicating that the company had known for three years that the Ventak Prizm model could short-circuit, but did not communicate that to doctors.

In June 2005, Guidant issued a public missive detailing safety issues with the defibrillators, which were later recalled by the FDA.

In 2006, Boston Scientific agreed to buy the company for $27.2 billion, after a bidding war with Johnson & Johnson.

The company also said it will contribute an additional $15 million to charitable causes over the next year.

Patient lawsuits

In 2007, Boston Scientific agreed to pay $195 million to settle about 4,000 civil lawsuits that patients had filed. On Wednesday Minneapolis attorney Randy Hopper, who represented patients, said the criminal settlement offers no recourse for aggrieved victims to get restitution.

"It wouldn't have been out of the question for Guidant to step up and offer to pay restitution," he said. "The government could have negotiated restitution, too. But they didn't."

Patients can apply for remission from the Department of Justice, although one assistant attorney general said payments would be "unlikely."

Last year, Hauser and Maron wrote to Judge Frank and urged him to reject the proposed plea "on behalf of the patients who died or suffered pain and mental anguish as the direct result of Guidant's illegal and unethical behavior."

On Wednesday, Hauser said he was disappointed with the revised agreement, but couldn't say exactly what disposition would be appropriate.

"Money doesn't solve any of these issues," he said, "These companies write a big check and it goes away. But it doesn't help patient safety and it doesn't bring anyone back who died. The main thing is for the law to serve as a deterrent, and for people to be held accountable."