Federal judge rejects $296 million Guidant plea deal

April 27, 2010 by MassDevice staff

A federal judge in Minnesota rejects a guilty plea and $296 million penalty Boston Scientific Corp. would have paid to settle a case against its Guidant Corp. subsidiary over faulty defibrillators.

BSX, Guidant logos

A federal judge today rejected a $296 million plea agreement between the U.S. Justice Dept. and Boston Scientific Corp. (NYSE:BSX) subsidiary Guidant Corp. over faulty implantable defibrillators.

Earlier this month the Natick, Mass.-based medical devices giant, which paid $26 billion for Guidant in 2006, agreed to plead guilty to a pair of misdemeanor criminal charges for withholding information from the Food & Drug Administration: specifically, to making a materially false statement about its Ventak Prizm 2DR implantable defibrillator in a required submission and to failing to notify the agency of a "correction" to its Contak Renewal defibrillators. Several patients died due to flaws in the devices that Guidant knew about and moved to correct without notifying the FDA, according to court documents.

In November 2009, Boston Scientific announced that it would pay nearly $300 million to settle the case on behalf of Guidant, even though the alleged infractions occurred prior to its acquisition of the Indianapolis-based company.

But Judge Donovan Frank of the U.S. District Court for Minnesota shot down the plea deal, writing that the deal does not go far enough to address Guidant's penchant for concealing problems with the devices.

"The Court concludes that two provisions of the Plea Agreement ... are not in the best interests of justice and do not serve the public's interests because they do not adequately address Guidant's history and the criminal conduct at issue," Donovan wrote.

In February 2002, Guidant discovered a design flaw in the Ventak device, after receiving reports of failures. By April 2002, according to court documents, it had fixed the flaws and begun producing a corrected version of the device — but didn't recall the defective products.