Boston Scientific (NYSE:BSX) won a bid to force the federal government to release Medicare documents covering reimbursement for implantable cardiac rhythm management devices in a whistleblower lawsuit filed against its embattled Guidant subsidiary.
James Allen sued Guidant and Boston Scientific in July 2008 under the False Claims Act, alleging that they knew of problems with the Ventak Prizm implantable cardiac defibrillator but failed to disclose them.
After initially declining to join Allen’s qui tam suit, the federal government signed on in December 2010. Boston Scientific asked Chief Magistrate Judge Arthur Boylan of the U.S. District Court for Minnesota to force the government’s lawyers to release documents covering Centers for Medicare & Medicaid Services rules governing unnecessary treatments; CMS communications with doctors and hospitals about ICDs; and CMS reimbursement rules for ICDs.
Boylan denied the motion to compel production of the unnecessary treatment rules, writing that CMS never created the documents because the agency didn’t now about the problems with the devices when they were implanted and paid for, according to court documents.
"Defendants have not established by inference or otherwise that documents responsive to these requests indeed exist and the court therefore finds no grounds on which to order production," Boylan wrote.
The move to compel production of communication with doctors and hospitals was moot because Boston Scientific isn’t contesting the government’s claim that it doesn’t know of any such documents, according to the magistrate.
"Nonetheless, the government agrees to produce any responsive communications that may be obtained pursuant to subpoenas that it has issued to hospitals in which defective devices were implanted," Boylan wrote.
Boston Scientific won its bid to compel production of CMS’s reimbursement criteria for ICDs, however, with Boylan ruling that the government must produce documents relating to its national coverage decision for the devices.
"It is the court’s determination that materials that reflect internal agency discussions relating to formulation of the NCD should be disclosed and to the extent that the materials are privileged, a privilege log should be prepared and served," he wrote.
It’s the latest development in the lawsuit, after Boston Scientific lost a bid to quash the case in March. The case dates back to 2002, when Guidant discovered a design flaw in the Ventak Prizm after receiving reports of device failures in February of that year. By April 2002, according to court records, it had fixed the flaws and begun producing a corrected version of the device – but didn’t recall the defective products. Boston Scientific spent $26 billion acquiring Guidant Corp. in 2006.
Allen’s lawsuit accuses Guidant of making false claims about the defibrillators. Allen was implanted in August 2002 with a Ventak Prizm model 1861, which allegedly failed twice, first in December 2002, delivering 7 unnecessary, 750-volt shocks that knocked Allen unconscious. The second alleged failure, resulting in a "storm-shocking," allegedly caused Allen to fall down a flight of stairs.
Seeking to have the device replaced, Allen scheduled an implantation with a competing device made by St. Jude Medical (NYSE:STJ), according to the 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.
The Guidant acquisition has led to a raft of legal problems for its corporate parent. Boston Scientific settled a DoJ lawsuit in November 2009, agreeing to pay penalties of $296 million and pleading guilty to 2 misdemeanor counts of failing to supply certain information to U.S. regulators.
The DoJ settlement followed a federal appeals court upholding the dismissal of a shareholders lawsuit against Guidant, accusing it and former management of malfeasance in failing to disclose the problems with the defibrillators. In 2010, Guidant pleaded guilty to criminal charges in April 2010 related to its ICDs.
Like the gift that keeps on giving, the Guidant deal delivered another legal blow in September 2011, when Boston Scientific agreed to cough up more than $9 million to settle a DoJ case accusing it of overcharging federal health programs.
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