COMPANIES SETTLE DEFECTIVE HEART DEVICES ACQUSATIONS AND WILL PAY $30 MILLION

FROM:  U.S. JUSTICE DEPARTMENT 
Thursday, October 17, 2013
Boston Scientific and Subsidiaries to Pay $30 Million for Guidant’s Sale of Defective Heart Devices for Use in Medicare Patients

Boston Scientific Corp. and its subsidiaries, Guidant LLC, Guidant Sales LLC and Cardiac Pacemakers Inc. (Guidant), have agreed to pay $30 million to settle allegations that, between 2002 and 2005, Guidant knowingly sold defective heart devices to health care facilities that in turn implanted the devices into Medicare patients, the Justice Department announced today.  Boston Scientific acquired Guidant, a medical device manufacturer, in 2006.

“Medicare patients who depend on cardiac defibrillators should not have to worry about whether their devices will work when they are needed,” said Stuart F. Delery, Assistant Attorney General for the Justice Department’s Civil Division.  “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 Guidant devices at issue are implantable defibrillators, used in patients at risk of cardiac arrest due to an irregular heartbeat.  The devices are surgically implanted into patients’ chests, and when the devices detect an irregular heartbeat, they send an electrical pulse to the heart to “shock” it back to its normal rhythm.  The government’s complaint alleged that two lines of implantable cardiac devices manufactured and sold by Guidant, known as the Prizm 2 and the Renewal 1 and 2, contained a defect that resulted in “arcing.”  Arcing occurs when the device detects the irregular heartbeat and delivers a shock, but instead of the current traveling to the heart, the current “arcs” back to the device itself.  This causes the device to short circuit, rendering the device ineffective.

The government alleged that Guidant learned as early as April 2002 that the Prizm was defective, and as early as November 2003 that the Renewal 1 and 2 were similarly defective.  Nevertheless, although Guidant took corrective action to fix the defects, the company continued to sell its remaining stock of the old, defective versions of the devices.  The government alleged further that, as Guidant learned about the cause of the defect, it took steps to hide the problem from patients, doctors and the Food and Drug Administration (FDA).  Instead of disclosing the problem, Guidant issued a misleading communication to doctors regarding the nature of the defect and did not fully disclose the problem with the devices to doctors and the FDA until May 2005, after first being contacted by a New York Times reporter.  Subsequently, the company recalled the devices after a front-page article about the defects appeared in The New York Times.

“The United States is fortunate that innovative health care companies regularly develop and market remarkable medical devices that improve patients’ lives,” said John R. 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.”

In February 2010, Guidant pleaded guilty to criminal charges of misleading the FDA and failing to submit a labeling change to the FDA relating to the defective devices.  In 2011, the government joined a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act by James Allen, who had received one of the defective devices.  Under the Act, a private citizen, known as a “relator,” can sue on behalf of the government and share in any recovery.  As part of the resolution, Allen will receive $2.25 million.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $16.7 billion through False Claims Act cases, with more than $11.9 billion of that amount recovered in cases involving fraud against federal health care programs.

This matter was handled by the Justice Department’s Civil Division, Commercial Litigation Branch and the U.S. Attorney’s Office for the District of Minnesota, with assistance from the Department of Health and Human Services’ Office of Inspector General and Office of General Counsel and the FDA’s Office of Criminal Investigations and Office of Chief Counsel.