The U.S. Justice Dept. said today that Boston Scientific (NYSE:BSX) agreed to pay $30 million to settle a False Claims Act lawsuit filed over pacemakers made by its star-crossed Guidant subsidiary.
The lawsuit, filed in 2008 by James Allen in the U.S. District Court for Western New York, accused Guidant of making false claims about the defibrillators between 2002 and 2005. Allen is slated to receive $2.25 million for his part in the case.
Guidant continued to sell the devices even though it knew of their flaws, according to the Justice Dept. Guidant paid $296 million and pleaded guilty in 2010 to criminal charges that it deliberately concealed the defects.
"Medicare patients who depend on cardiac defibrillators should not have to worry about whether their devices will work when they are needed," assistant attorney general Stuart Delery said in prepared remarks. "This settlement, along with the prior criminal prosecution of Guidant, demonstrates that there will be significant consequences when companies engage in conduct that threatens health and safety and violates the law."
"The United States is fortunate that innovative health care companies regularly develop and market remarkable medical devices that improve patients’ lives," added John Marti, acting U.S. attorney for the district of Minnesota. "But in this case, Guidant valued profits more than patient safety by selling defective cardiac defibrillators. This office, along with several other components within the U.S. Department of Justice, will continue to vigorously investigate and take appropriate action against health care companies that place public safety at risk."
Allen was implanted with a Ventak Prizm model 1861 in August 2002. The defibrillator allegedly failed twice, first in December 2002, delivering seven unnecessary, 750-volt shocks that knocked Allen unconscious. The second alleged failure, resulting in a "storm-shocking," caused Allen to fall down a flight of stairs.
Seeking to have the allegedly defective device replaced, Allen scheduled a surgery to be implanted with a competing device made by St. Jude Medical Inc. (NYSE:STJ), according to court documents. But a Guidant salesman allegedly persuaded the surgeon to cancel the procedure, saying Allen’s Ventak Prizm was not defective and that his insurance would not cover the operation (the salesman also allegedly contacted the insurance company, seeking to convince it not to cover explantations of the devices).
Allen allegedly found another surgeon to perform the explantation of the Guidant device and implant the St. Jude defibrillator, which was covered by his insurance policy, according to court documents.
Allen sued Guidant and Boston Scientific in July 2008 under the False Claims Act, alleging that the company knew of problems with the device but failed to disclose them. In March, the Justice Dept. declined to join the case, but reversed course Dec. 14, according to court documents.
In February 2002, Guidant discovered a design flaw in one of its implantable cardiac defibrillators, the Ventak Prizm, after receiving reports of device failures. By April 2002, according to court documents, it fixed the flaws and begun producing a corrected version of the device – but didn’t recall the defective products. Boston Scientific spent $26 billion on Guidant Corp. in 2006.
In September 2010, Boston Scientific asked the court to dismiss the lawsuit, arguing that the case is founded on "parasitic claims" based on media reports. The Justice Dept. joined the suit in December 2010. Last year Boston Scientific lost another bid to toss the case.
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