A California state judge has tossed bids to dismiss fraud, conspiracy and medical malpractice charges against St. Jude Medical Inc. (NYSE:STJ) and two individuals, allowing the case against the medical device manufacturer to proceed.
Attorneys for Albert Israel previously filed suit alleging his longtime physician, Dr. Michael Burnam of Tarzana, Calif., placed his financial interests over the health of the patient by prescribing Israel with an unnecessary defibrillator. Israel also alleges that Burnam had St. Jude hire his son Brad as a sales representative with a guaranteed yearly salary, while the cardiologist would be paid by the company for research projects and other engagements in exchange for prescribing St. Jude defibrillators.
Attorneys for Israel contend that the February 2008 surgery nearly killed him when the lead for the device pierced Israel’s heart. The alleged conspiracy involving Burnam, his son and St. Jude came to light during depositions in the case when a former St. Jude sales rep testified about the company’s role in the financial arrangements.
The defendants have denied the allegations and sought to have the charges dismissed, a move recently denied by Judge Michael Harwin of the Los Angeles Superior Court, Northwest Division. Israel late last week also filed documents seeking to amend his original complaint to pursue punitive damages against Dr. Burnam for prescribing the defibrillator.
Minneapolis, Minn.-based St. Jude in May disclosed that the U.S. Justice Dept. had requested documents from the company as part of a civil investigation of its implantable defibrillator business. At the time, St. Jude officials stated they believed its major competitors were served with similar demands and said they were cooperating with the government investigation.
The company, without entering a plea, in June paid $3.7 million to settle a federal lawsuit accusing it and two hospitals in Cleveland and suburban Cincinnati, respectively, of participating in a kickback scheme alleging St. Jude paid illegal rebates to healthcare providers in exchange for using its cardiac implants. That case developed from allegations by a former regional sales manager who claimed he was fired by the company after objecting to the purported scheme.
According to Mark House, the former St. Jude employee cited in the southern California suit, St. Jude originally balked at hiring the younger Burnam, who then took a sales job with Boston Scientific Corp. (NYSE:BSX). During this period, House said, Dr. Burnam stopped referring patients for St. Jude Medical devices and instead steered them to Boston Scientific products.
The plaintiffs further allege that St. Jude Medical wanted to win back Dr. Burnam’s business and began talks in May 2007, eventually resulting in Brad Burnam moving from Boston Scientific to St. Jude. House testified that the company wanted to increase sales in the San Fernando Valley and believed Burnam and his sizable patient base — including the Los Angeles Jewish Home for the Aging — would help accomplish that goal.