Judge Rejects Guidant's $296M Plea Deal

MINNEAPOLIS (AP) -- A federal judge rejected a plea deal by Boston Scientific Corp.'s Guidant unit to pay $296 million for failing to properly disclose changes made to some implantable heart devices, saying it didn't adequately address the company's criminal conduct.

Judge Donovan Frank's ruling Tuesday faulted the deal for not putting Guidant or Boston Scientific on probation.

The plea deal filed earlier this month called for what federal prosecutors said was the largest criminal penalty assessed against a medical device company. As part of that deal, Guidant pleaded to two misdemeanor counts: submitting a false and misleading report to the Federal Drug Administration about one defibrillator model, and failing to notify regulators about a safety correction to another line of devices.

Two doctors who cared for a man who died after his Guidant device malfunctioned were among those who urged the judge to reject the plea, arguing that it was wrong for Guidant to escape by paying a fine.

Some patients had complained that the deal didn't require restitution. But Frank concluded that no patients were directly harmed by the two specific acts to which Guidant pleaded guilty. Prosecutors had noted that patients had other ways to pursue compensation. Many have already sued and reached settlements.

Frank said the government and Guidant can submit a modified plea agreement. He said Guidant is also free to withdraw its guilty plea, but that he could then "dispose of this case even less favorably than the Plea Agreement contemplated."

A spokeswoman for the U.S. attorney's office in Minnesota said prosecutors were reviewing the decision.

Boston Scientific said it plans to work with authorities to modify the plea agreement so it is acceptable to the court.

Charles Zimmerman, an attorney for victims, said he was delighted with the judge's decision, calling it a "good day for justice and public health."

"I think the next plea, if there is one, will find a way to hit the concerns the judge had with regard to accountability, probation and perhaps better uses for the funds," he said. He noted that while Frank ruled there would be no restitution for these two counts, a new deal could include new charges, which might again open up the possibility for restitution.

Lisa Salberg, a cardiac patient advocate in Hibernia, N.J., said she was speechless when she first heard of the judge's ruling. Salberg, who once had a Guidant defibrillator herself -- though it was a different model -- said she hoped that the company would be held accountable.

"I'm curious to know what they are going to impose in replacement of (the deal)," she said. "What is fair? What is just? People died because of decisions that other people made."

The 20,146 devices at issue in the criminal case are Ventak Prizm 2 and Contak Renewal 1 and 2 defibrillators, which monitor for deadly irregular heartbeats and shock the heart back to a normal rhythm.

Guidant discovered in 2002 that its Ventak Prizm 2 DR was prone to short circuiting, which could keep it from providing lifesaving jolts. Guidant fixed the flaw that November, but in August 2003 falsely told the Food and Drug Administration the change did not affect the safety or effectiveness of the device, according to the plea agreement.

The plea deal also says that in mid-2004, the company found a short-circuiting problem with two Renewal models. That device would beep when there was a problem, sending patients to visit a doctor who could examine it with a wireless communications link. But a warning screen for doctors did not state the extent of the problem, according to court documents.

In mid-2004, a patient died of cardiac arrest just a week after he was sent home by a doctor who followed prompts on the screen. In March 2005, Guidant sent out a product update to advise doctors that the yellow warning screen warned of a potentially serious problem.

Because the change was made to reduce a health risk, it should have been reported as a product correction, not a product update, the plea deal says. Guidant broke the law by not notifying the FDA about the change within 10 days.

Guidant issued safety advisories on the devices in June 2005.

Frank wrote that probation for Guidant that included a community service requirement would give the company a chance to "repair the harm caused by its offenses, namely to help build the public's confidence in the FDA regulation process, the medical device manufacturers' quality control efforts, and the cardiac health care industry in general."

He also wrote that Boston Scientific might be required to dedicate an unspecified amount of resources to some of its charitable programs. He cited one Boston Scientific program that seeks to address disparities in cardiovascular care for women and racial minorities, and another that helps give middle and high school students the educational backgrounds they need to succeed in science and engineering.

Guidant and Boston Scientific could also be required to set up a compliance and ethics program or, if they already have one, "to dedicate additional resources to that program to address the specific crimes in this case," he wrote.

He also suggested that a portion of any forfeited funds could go to Medicare.

Dr. Robert Hauser, one of two Minnesota doctors who wrote a letter asking Frank to reject the plea deal, said he was pleased with the judge's decision.

"I think the judge has acted in the best interest of the patients and the patients' safety," Hauser said. "People need to be held accountable for their behavior."

He and Dr. Barry Maron, who cared for a 21-year-old man who died in 2005 when his defibrillator malfunctioned, wrote to Frank that the manufacturer should be responsible.

"To allow a repeat offender, like Guidant, to escape with a fine (that is entirely borne by the shareholders of Boston Scientific) does not hold the guilty parties fully accountable and inevitably undermines patient safety," the doctors wrote. "Manufacturers are the first to know when a medical device is dangerous or underperforming. Thus, it is in the best interest of patients, and society in general, for manufacturers to be liable for the safety and effectiveness of their products."

On Tuesday, Hauser said the judge's ruling was "a message to all medical device manufacturers that this type of behavior will not be tolerated. And it does have applications for patients who currently have medical devices and also the future patients."

Natick, Mass.-based Boston Scientific acquired Indianapolis-based Guidant for $27 billion in 2006.

The criminal case was filed in Minnesota because Guidant's heart rhythm management unit was based in the St. Paul suburb of Arden Hills.