Guidant Corp. and Medical Devices and Health Care & Life Sciences and Life Science & Biotech and Law

Judge rejects Guidant's defibrillator plea deal

April 27, 2010

A federal judge has rejected Guidant Corp.'s guilty plea to charges it hid defects in heart defibrillators, after some doctors and patients complained about the deal.

U.S. District Judge Donovan Frank in St. Paul, Minn., Tuesday rebuffed the Boston Scientific Corp. unit’s plea agreement with prosecutors and suggested the company should be placed on probation for failing to disclose defects with its heart devices to regulators. Boston Scientific agreed to plead guilty to two misdemeanors and pay $296 million to settle a U.S. Justice Department probe.

“At a minimum, the public’s interest in accountability would be served by Guidant and Boston Scientific being placed on probation,” Frank said in his 37-page ruling.

Guidant is the coronary products company spun off from Indianapolis-based Eli Lilly and Co. in the 1990s and acquired by Boston Scientific in 2006.

Prosecutors said in court papers Guidant officials learned as early as 2002 that some of the implantable defibrillators had a tendency to short circuit and caused users’ deaths. The company didn’t disclose the defects for more than three years, the government said.

Paul Donovan, a Boston Scientific spokesman, didn’t immediately return calls for comment on the judge’s ruling.

Boston Scientific halted all sales of heart-rhythm devices in March because of an erroneous filing with regulators. The U.S. Food and Drug Administration cleared the company to begin selling defibrillators again April 15. The company’s devices are implanted in patients’ bodies to shock hearts back into normal rhythm.

Natick, Mass.-based Boston Scientific, the world’s second-largest heart-device maker, is cutting as many as 1,300 jobs because it expects sales growth for drug-coated stents and defibrillators to slow. Minneapolis-based Medtronic Inc. is the world’s largest maker of heart-rhythm devices.

Boston Scientific shares fell the most in 17 months on March 15 after the company said it halted all sales of defibrillators because of a documentation error. The devices brought in $1.79 billion last year, or 22 percent of Boston Scientific’s revenue, according to data compiled by Bloomberg.

Guidant issued a June 2005 recall that was eventually expanded to 109,000 defibrillators. Lawyers for patients contend the company knew as early as June 2002 that the devices were flawed and hid the defects to protect sales.

Boston Scientific agreed in 2007 to pay $240 million to settle more than 8,000 lawsuits claiming Guidant hid defects in its defibrillators.

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