The federal government reversed course and decided to intervene in a false claims lawsuit filed against Boston Scientific (NYSE:BSX) subsidiary Guidant Corp., after reviewing the case and conducting more interviews.
The U.S. Justice Dept. also wants to move the case to Minnesota, where most of the witnesses live and where "nearly all" of the conduct alleged int he case occurred.
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.
The lawsuit, filed in the U.S. District Court for Western New York, accuses Guidant of making false claims about the defibrillators. James 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.
"Since then, the government has interviewed additional witnesses, reviewed additional documents, and engaged in discussions with the defendants as to conduct related to the allegations set forth in the relator’s complaint," according to the documents.
In September, Boston Scientific asked the court to dismiss the lawsuit, arguing that the case is founded on "parasitic claims" based on media reports.