Boston Scientific Corp. said Friday it has reached a $296 million agreement with the U.S. Department of Justice related to a series of product recalls in 2005, ending a wrenching chapter in medical technology that has lingered for more than four years.
In an investigation led by the U.S. attorney's office in Minneapolis, the company's Arden Hills-based subsidiary, Guidant, will plead guilty to two misdemeanor charges for "failure to include information" in reports to the Food and Drug Administration (FDA), which regulates medical devices and recalls them if they are found to be faulty.
That was the case in 2005 after two Minneapolis physicians, Robert Hauser and Barry Maron, went public with concerns about the safety of a popular heart defibrillator made by Guidant, which was later purchased by Boston Scientific. Their unusual public outcry came after one of their patients, Joshua Oukrop, 21, of Grand Rapids, Minn., died while biking after his Guidant defibrillator short-circuited and failed to revive him.
The Guidant devices were later recalled by the FDA, but the company was criticized for not warning doctors sooner about the potential defect. The news led to an intense industry review of the way it handles defects and malfunctions.
Part of an $11 billion global industry for cardiac rhythm devices, implantable cardioverter defibrillators shock the heart back into rhythm when they sense an irregular heartbeat. The Twin Cities serves as the epicenter of the once-flourishing industry, with the world's largest makers of the $30,000 devices, Guidant, Medtronic Inc. and St. Jude Medical Inc.
The Justice Department did not release any information regarding the guilty pleas, which are unusual in this type of corporate case. Jeanne Cooney, a spokeswoman for the U.S. attorney's office, said "an agreement has been reached in principle; formal documents will be filed and made public in the next few weeks." Boston Scientific said in a regulatory filing that a definitive agreement will be struck by the end of this year or in early 2010.
Boston Scientific CEO Ray Elliott said in a statement that "Guidant and its employees acted in good faith and believed they complied with applicable laws and regulations." The company opted to resolve the matter in an effort to devote "our full energies and resources to developing our innovative technologies." (The company's Arden Hills cardiac rhythm management division employs about 2,000 people.)
Hauser, of the Minneapolis Heart Institute Foundation, said the agreement "sends a message to the medical device industry that this type of behavior will not be tolerated." He said the controversy has prompted companies to be more transparent about defects and more timely in warning doctors.