A survey of 70 electrophysiologists indicates that the impact of Boston Scientific Corp.’s (NYSE:BSX) suspension of its defibrillator operations last month will have long-lasting consequences for the medical device maker.
Majestic Research polled the docs on their reaction to the Natick, Mass.-based company’s March 15 decision to voluntarily stop shipment and pull all defibrillator inventory from the field. Fifty-six percent reported that the news "negatively impacted their perceptions of the overall quality of Boston Scientific’s ICD devices," according to a press release, while 52 percent said they were less likely to use BSX devices in the future because of the issue.
The company decided to make the move after discovering that it had failed to notify the Food & Drug Administration of a pair of changes to its manufacturing processes. In one case the company changed a cleaning process to standardize that portion of the operation; in the other BSX added a new component supplier. Both changes were fully validated, but Boston Scientific neglected to pass that information on to the FDA.
Majestic Research director and senior medical device analyst Philip Legendy said the problem is a potentially huge boon for Boston Scientific’s main competitors for the implantable cardiac defibrillator market, St. Jude Medical Inc. (NYSE:STJ) and Medtronic Inc. (NYSE:MDT).
"Boston Scientific’s decision to suspend sales puts one-third of the market up for grabs, an extraordinary opportunity for those positioned to supply the market in the interim," Legendy said in prepared remarks. "Given their historical sales footprint, we expected to see Medtronic outpacing St. Jude’s share of the new business at a ratio of about two to one. Our study suggests, however, that St. Jude is running only 13 points of share behind Medtronic in converting physicians who formerly preferred Boston Scientific ICDs."
Other analysts predict that the hold — estimated to be costing Boston Scientific about $5 million a day —could end up being a $470 million hit over two years and force the company to sell off a division. The FDA has until mid-April to decide whether to approve Boston Scientific’s belated submissions or to extend its review period.
Other federal agencies are also getting in on the action. The U.S. Justice Dept. subpoenaed documents related to the recall and Securities & Exchange Commission investigators embarked on an informal inquiry.