Guidant's defibrillator complaints get settled

- The Star Ledger

08/31/2007 - Boston Scientific yesterday agreed to pay $16.7 million to 35 states, including New Jersey, to resolve allegations physicians and patients were not properly notified about wiring problems with an implantable heart defibrillator.

PAGE 40Boston Scientific, a Massachusetts-based medical-device maker, inherited the consumer-protection litigation when it acquired Guidant last year.

Safety problems with the implantable defibrillator -- the Ventak Prizm 2 Model 1861 -- go back to 2002, when Guidant discovered faulty wiring, which could cause the defibrillators to short-circuit and injure patients. Although it made modifications to correct the problems, Guidant continued to sell the unmodified devices for another year.

At least seven deaths have been blamed on the faulty devices, and Guidant has recalled more than 88,000 of the defibrillators since 2005.

One analyst who follows the medical device industry said the settlement is only one component of the "dear, dear cost'' the company has paid for its handling of the difibrillator problem.

"They had a significant decline in their market share,'' said Tim Nelson, an analyst with Piper Jaffrey. "Their industry growth came to a grinding halt.''

"The financial impact of that is much, much greater than any penalty a court can impose,'' he said.

Under terms of the agreement signed yesterday, Boston Scientific admits no wrongdoing. In addition to paying the $16.7 million settlement, the company agreed to take a number of steps to monitor the safety of its products and to alert consumers in the event of future problems with its devices.

Among the provisions of the agreement: The company will create an independent patient safety advisory board to evaluate data concerning defibrillator performance.

Boston Scientific also agreed to regularly disclose information, including worldwide failure data and survival probability estimates, in the event federal regulators recall any of the company's implantable defibrillators.

In the event the company modifies any of its implantable defibrillators to correct a problem, it will post a notice on its Web site within 30 days.

"This agreement underscores our commitment to being the industry leader in patient safety and in communicating with patients and doctors," said Jim Tobin, Boston Scientific's president and chief executive.

New Jersey will receive $390,000 from the settlement. The money will be used to pay for consumer awareness programs and consumer protection-related enforcement efforts, according to the state attorney general's office.

Boston Scientific picked up Guidant following an extended bidding war with Johnson & Johnson, but the acquisition has turned out to be something of a Pyrrhic victory. The $27.5 billion Boston Scientific paid for Guidant was too high a price, many Wall Street analysts argued, especially considering the problems Guidant was having with its implantable defibrillators.

Boston Scientific's stock, trading above $25 before the acquisition, is now half that price.

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