The Bitter Pill

The Official Blog of UNITE – uniteforlife.org

Boston Scientific Hit With Three new Guidant Lawsuits Per Day

Evelyn Pringle May 16, 2007

On March 2, 2007, the Boston Globe reported that since June 2005, Guidant, which was acquired by Boston Scientific early last year, has issued safety warnings or recalls for more than 88,000 defibrillators and 200,000 pacemakers.

At the time of purchase, the deal seemed solid for Boston because the Indianapolis-based Guidant was the second-largest manufacturer of implantable defibrillators. However, according to Boston’s first quarter March 2007 SEC filing, the company is now facing over 75 class action lawsuits and 1,100 individual lawsuits involving Guidant defibrillators and pacemakers, up from 842 lawsuits listed in the company’s November 2006 filing.

The Globe also reported that new lawsuits against the company are being filed at a rate of 3 per day. But medical experts say this is just the tip of the iceberg because many surviving family members will probably never know that a patient’s death was caused by Guidant’s defective products because heart devices are rarely evaluated to determine whether the unit was functioning correctly at the time of death.

According to analyst estimates cited by the Globe, Guidant related liabilities could reach $2 billion and since Boston acquired the firm in April 2006, Boston stock value has dropped about 29%.

As of December 31, 2006, according to SEC filings, Boston has set aside $485 million for legal matters, which represents a $100 million increase from the $384 million reported in September 2006 SEC filings.

Critic say the worst part of the Guidant debacle is that evidence is emerging that shows patients were implanted with defibrillators for profit and not need and the cost of a defibrillator can be as high as $35,000.

The January 2007, Journal of the American College of Cardiology, reported a study that found that as many as one third of defibrillators implanted in 768 patients between March 2001 and June 2004 for irregular heartbeats were unnecessary and therefore, up to a third of the patients received minimal benefits from the device.

In addition, documents have surfaced in litigation that show Guidant knew for years that the devices it was selling were flawed. A report by an independent panel appointed to review Guidant recalls was released in March 2006, and said the firm allowed about 4,000 potentially defective defibrillators to be implanted after the company learned of the malfunction in 2002.

Guidant executives tried to defend their actions by claiming the devices met all engineering projections and that notifying doctors about the flaw might have resulted in more harm than good by causing unnecessary surgery to replace the devices.

But the panel soundly rejected those arguments and concluded that defects need to be disclosed promptly, even when they occur in small numbers. “The Independent Panel believes,” it wrote, “that under no circumstances should a potential or manifest risk of a preventable death be superseded by statistical analyses that indicate that performance remains with general guidelines.”

By the time of that report, at least 7 patients had died because their defibrillators had failed to work due to an electrical defect.

Lawsuits filed by two Corpus Christi, Texas residents who had defibrillators implanted in 2001, alleged that Guidant officials “actively concealed the … defect, suppressed reports, failed to follow through on FDA notification requirements, and failed to disclose a known defect to patients. Instead of revealing the defect, defendants continued to represent their product as safe for intended use, and continued to sell the flawed [devices] despite knowing of the dangers.”

The plaintiffs further allege they have suffered extreme mental anguish from knowing that the defective devices could malfunction at any time.

Legal experts say if plaintiffs can prove that Guidant knew about the problem with the defibrillators and continued to sell the devices, the plaintiffs would be entitled to punitive damages because Guidant has a documented history of knowingly selling defective products and the firm had promised not to do so in the future the last time the company was busted.

In 2003, a former Guidant subsidiary was fined $92 million by the US Department of Justice for concealing serious adverse events, including 12 deaths, related to its abdominal aortic grafts. At that time, as part of its settlement agreement with the DOJ, Guidant pledged to “verify and make sure their reporting procedures were in order, and that they were reporting adverse events for their devices.”

On February 23, 2006, the Associated Press reported that the FDA, US Department of Justice, the Securities and Exchange Commission and several state agencies were investigating Guidant over its recalls. In addition the AP advised that, “Guidant’s St. Paul facility has been the focus of the federal investigations and inquiries into the company’s manufacturing process.”

The DOJ jumped into the current controversy on January 28, 2006, and sent out a press release, when the US Attorney in Minneapolis issued a subpoena seeking the records that were disclosed in the Texas lawsuit that showed the company knew that the defibrillators could fail. Some of the specific documents requested evidence that Guidant executives had discussed whether they should warn doctors that some of the devices could short-circuit and decided against it.

More specifically, the DOJ noted, the documents include notes from Fred McCoy, president of Guidant’s cardiac rhythm management division, that show a decision was made to sell inventory described by the executives as having sporadic ”life-threatening” defects. The DOJ merged its investigation with an investigation already underway by the FDA’s Office of Criminal Investigation.

Experts say product liability lawsuits such as those Guidant is facing have considerable financial implications for a company and failure to notify the public about device flaws can have a more devastating impact on a firm’s financial future than the notification itself.

“Company management should fear the prospect of being accused of deliberately refraining from physician disclosure in order to maintain a high market share that would enhance management’s financial interests,” says Genese Kay Dopson, special counsel at Sedgwick, Detert, Moran & Arnold LLP, in the May/June 2006, Medical Device Link.

“For example, in Guidant’s case,” she explains, “the aftermath of physician notification resulted in the decrease in the value of Guidant’s stock.”

“As a result,” she noted, “a company that was in negotiations to acquire Guidant prior to the physician disclosure negotiated a lower bid as a result of the decrease in stock value.”

“Shareholders have also initiated suits against Guidant for fraud,” she said.

“I think the company is potentially more damned,” she states, “if it does not make the physician disclosure.”

According to Ms Dopson, in product liability cases companies must be able to put forth a defense that demonstrates a commitment to patient safety. “Failure to adhere to the primacy of patient safety,” she says, “coupled with decisions leading to concealment of known defects from the medical community, will fuel lawsuits that lead to jury verdicts that include punitive damages.”

In December 2005, the FDA issued a warning letter to Guidant after inspectors found numerous problems with quality control and record-keeping procedures at the St Paul plant where the defibrillators were manufactured which meant that until the issues were resolved, the FDA would not approve any new Guidant products.

On April 17, 2007, the Boston Globe reported that the FDA had finally lifted the warning letter that had been hanging over Guidant, freeing up the company to introduce products that had been blocked by the quality-control problems.

On April 10, 2007, the FDA said a December 2006 inspection of Guidant indicated that the issues appeared to have been adequately addressed.

However, the good news was likely overshadowed by the FDA’s April 12, 2007, announcement of a recall of approximately 73,000 more defibrillators because of faulty capacitors. “The capacitors,” the FDA said, “may cause accelerated battery depletion and may reduce the time between elective replacement indicator and end of life to less than three months.”

The FDA instructed patients implanted with one of the recalled devices to contact their healthcare provider regarding the steps to take.

Aside from inheriting Guidant’s woes, Boston has major issues pending with the FDA of its own making. On January 26, 2006, Boston received a corporate warning letter from the FDA, notifying the company of serious regulatory problems at 3 facilities and advising Boston that the corrective action plan relating to 3 site-specific warning letters issued to the firm in 2005 was inadequate, according to Boston’s SEC filings.

The FDA warning letter sent on May 18, 2005, about quality-control standards said Boston failed to establish manufacturing controls for the quality of devices and did not properly track quality concerns.

On January 26, 2006, the Associated Press reported that FDA officials said that this was only the third time in the agency’s history that it had issued such a broad companywide warning involving a device maker’s systems to identify potentially defective and unsafe products

According to the AP, the problems identified during inspections involved the company’s headquarters and facilities in Maple Grove, Minn, and Spencer, IN, and also cited continuing problems at sites in Watertown, Mass; Glens Falls, NY, and Quincy, Mass.

On April 17, 2007, the Boston Globe, reported that the companywide warning letter that Boston received in January 2006 is still in effect and applies to Boston’s “drug-coated stent business and the rest of the pre-Guidant areas of the company.”

Company executives told the Globe that they did not expect the issues to be resolved until the second half of 2007. “Until then,” the Globe reports, “the company will be prevented from receiving agency approval of any new models of drug-coated stents.”

Filed under: 2007, Boston Scientific, DOJ, Guidant, medical devices, stents

Guidant Settles Three Lawsuits – 549 To Go

Evelyn Pringle October 2, 2006

Attorneys for the plaintiffs in lawsuits against Guidant and its new owner, Boston Scientific, view the settlement of a Texas case days before a jury trial as a sign that the company is dodging the courtroom.

Guidant settled the case for an undisclosed amount with two plaintiffs avoiding a public trial set to begin on September 18, 2006.

Boston Scientific acquired Guidant’s heart device business in April 2006, following a year of major recalls of products that have resulted in hundreds of lawsuits against Guidant.

The settled case was to be the first state court jury trial and was scheduled to be heard in Neuces County District Court in Corpus Christi, Texas before Judge Jack Hunter.

Guidant Defibrillator lawsuitThe two plaintiffs, Bernice Hinojosa and Louis Motal, were implanted with Guidant’s Ventak Prizm 2 defibrillators in 2001, and alleged that Guidant continued to sell the defective devices for 3 years and “actively concealed the … defect, suppressed reports, failed to follow through on FDA notification requirements, and failed to disclose a known defect to patients.”

There was one earlier settlement of a case in November 2005, with the family of Joshua Oukrop, a college student who died while using a defective defibrillator, and who’s death helped force Guidant to acknowledge and recall the defects products.

When the student died suddenly, his doctors tried to get Guidant to warn doctors about the defective devices and when it refused, they went to the New York Times which in turn conducted its own an investigation. The first Guidant recall, was issued only days before the results of the Time’s investigation were set to become public.

With the settlements of these cases, it means the company has 3 down and roughly 549 lawsuits to go. According to Boston’s second quarter SEC filing, there are about 72 pending class-action lawsuits and about 477 individual lawsuits filed against Guidant in state and federal courts. The company’s first quarter filing three months earlier listed 300 individual cases.

As of June 30, Boston said in the filing, it has accrued $381 million “for legal matters that are probable and estimable.” At the end of 2005, Boston listed $35 million as set aside.

Overall, Boston’s stock has sunk to a 4-year low due to the downturn in its heart device markets, “as the firm confronts $9 billion in debt and legal liability from Guidant product recalls,” according to the September 27, 2006, Boston Globe.

Legal analysts say the Texas case was likely settled because the state trial would have publicized damaging information months before the other trials are scheduled to begin in March 2007.

According to Lawyers Weekly USA, the lead counsel for the Texas plaintiffs, Robert Hilliard, said documents obtained during discovery show that Guidant knew about the defects with certain devices as far back as April 2002, but failed to alert patients and doctors for 3 more years.

However, its unlikely that settling the case will stop the public disclosure of those documents because on January 28, 2006, the New York Times reported that Federal prosecutors had “opened a new front in their investigation into the Guidant Corporation by issuing a subpoena seeking records disclosed in a Texas lawsuit that indicate the company knew that some heart devices could catastrophically fail.”

The subpoena served on the plaintiff’s attorney, specifically sought internal company documents disclosed in the Texas case. “Among other things,” the Times wrote, “the records indicate that company executives debated whether to warn doctors that some heart defibrillators could short-circuit.”

“The records suggest,” it said, “that Guidant might have sold potentially flawed devices.”

The document request also indicates that federal prosecutors have merged their inquiry with an earlier investigation by the FDA’s Office of Criminal Investigations, the Times reported.

According to the Associated Press on January 28, 2006, the 10 pages of documents include notes from then Guidant president of the cardiac rhythm management division, Fred McCoy, that show that a decision was made to go ahead and sell the inventory that Mr McCoy described as having sporadic ”life-threatening” defects.

Legal experts consulted by the Times, said the broad range of the statutes cited indicate a serious investigation and could mean Guidant may face civil or criminal charges. “They are investigating in the broadest possible way,” said Joan Krause, a director of the Health Law and Policy Institute at the University of Houston.

“They are looking at potential fraud involving government plans,” she noted, “like Medicare, private health plans and employee benefit plans.”

In addition to all its troubles with the FDA and Federal prosecutors, Guidant is also being investigated by attorneys general on behalf of 34 states, according to the January 30, 2006 issue of Lawyers Weekly USA.

Most of the Federal civil lawsuits have been transferred under multi-district litigation rules to a US District Court in Minnesota, where Guidant has several manufacturing facilities, with the first federal trial scheduled to begin on March 15, 2007.

Ted Meadows, a plaintiffs’ attorney with Beasley Allen law firm in Montgomery, Alabama, who specializes in medical device litigation, says a key to the plaintiffs’ claims will be to show that Guidant “knew or should have known there was a potential for this problem.”

Any evidence that suggests the company knew about the problem and responded improperly, he says, would entitle plaintiffs to seek punitive damages.

In 2003, a former Guidant subsidiary was fined $92 million by the Department of Justice for not disclosing serious health problems, including 12 deaths, related to its abdominal aortic grafts. According to Mr Meadows, as part of its agreement, Guidant pledged to “verify and make sure their reporting procedures were in order, and that they were reporting adverse events for their devices.”

If it can be shown that the company failed to promptly disclose problems with its heart devices, he said, “This could become an important part of evidence in this case.”

“Part of the allegation we’re making is that they did not tell the healthcare community in a timely manner,” he said.

The stakes got higher for Boston last month when according to Bloomberg News the plaintiffs in the MSL in Minnesota, filed a motion with the court to officially add Boston as a defendant in all the individual lawsuits in light of its purchase of Guidant. The motion also mentions the more recent problems with defective products since Boston took control of the company, including a June 2006 recall of thousands of devices because of a capacitor problem.

Its unlikely that Boston ever imagined the nightmare ahead when it set out to purchase Guidant. By all accounts when the bidding began, Guidant’s heart device division seemed like a gold mine.

According to the February 28, 2006 New York Times, it accounted for about half of the company’s $3.8 billion in sales in 2004. Defibrillators, which cost up to $35,000 each, the Times said, have a profit margin of about 75 percent.

However, that was then and this is now because the number of defibrillators implanted in the US in the last 12 months dropped 8%, according to the Prudential Equity Group, after a decade when implants rose from 21,000 in 1995 to 250,000 in 2005. Analysts blame the downfall on the highly publicized recalls over the past year.

The market for pacemakers seemed equally lucrative until last year. According to the American Heart Association, pacemaker procedures went from under 50,000 in 1979 to more than 200,000 in 2003. In 2004 alone there were about 150,000 devices implanted worldwide, and the market had continued to grow at a steady pace.

However, according to the Associated Press on September 29, 2006, after all the bad publicity about recalls, consumer confidence has now gotten so bad that the FDA “is considering not using the word “recall” to warn patients and doctors about defective pacemakers and defibrillators at the request of a physicians’ group struggling to deal with a loss of public confidence in the safety of implantable heart devices.”

“It’s a terrible term,” Dwight Reynolds, president of the Heart Rhythm Society, an association of doctors who implant the devices told the AP. “The anxiety created among patients and physicians by this term is the No. 1 cause for replacement of devices.”

According to Mr Reynolds, patients who learn they have a faulty device assume they need to have it removed immediately, even though the surgery to replace the device often involves more risk than leaving it in.

The Heart Rhythm Society is asking the FDA to use “safety advisory” or “safety alert” when referring to device problems.

Boston sparked a bidding war in December 2005 that derailed a deal for J&J to purchase Guidant for a little over $24 billion. In January 2006, Boston offered a $27.2 billion bid and won the prize.

However, according to Dow Jones newswire on September 27, 2006, J&J has now filed a multi-billion dollar lawsuit against Boston and Abbott Laboratories, claiming the companies induced Guidant to breach its merger agreement with J&J.

In a complaint filed in a New York US district court, J&J accuses Boston of leaking “confidential” information to Abbott “for the purpose of arranging a prepackaged divestiture of significant Guidant business to Abbott.”

The lawsuit also alleges that that as a result of the disclosure, Abbott agreed to acquire Guidant’s coronary stent business and provide financing for the deal.

J&J is seeking $5.5 billion in general and special damages for the alleged breach of contract. J&J has already received a $705 million termination fee stipulated under its failed agreement with Guidant, but the company maintains it is still entitled to damages due to the breach. The lawsuit also asks for reimbursement of court costs, attorney fees and interest.

Under the merger deal, according to Dow Jones, Abbott agreed to buy Guidant’s stent and vascular business for $4.1 billion, in order to make the deal more acceptable to anti-trust regulators, and agreed to loan Boston $900 million and buy $1.4 billion in company stock.

In the meantime, both J&J and Boston’s drug-coated stent sales are suffering due to recent research that showed the devices increase the risk of blood clots, when compared to the older bare metal stents that are not drug-coated.

And Boston had better set aside a few hundred million more for its legal defense fund because more heart device lawsuits are filed every month. For instance, in mid-September, an Illinois woman filed a 40-count personal injury lawsuit against both Guidant and Boston with claims that a defective pacemaker required her to be hospitalized, according to the September 19, 2006 Madison St Clair Record.

According to the lawsuit, because Boston acquired Guidant and its subsidiaries in January 2006, it assumed Guidant’s liabilities in this litigation.

The plaintiff claims the pacemaker was not of “merchantable” quality and not safe or fit for its intended use because it was unreasonably dangerous.

She also alleges that, “Defendants actively concealed the defect and its wrongful conduct in order to prevent, and succeeded in preventing, adverse publicity and Plaintiff from discovering the defect.”

In the lawsuit, the plaintiff is seeking damages for pain, suffering, mental anguish, emotional distress, loss of capacity to enjoy life, lost past and future income and incurred expenses.

According to the May-June 2006, Medical Device Link, in addition to the legal and regulatory weight of the lawsuits against Guidant, the cases also involve ethical considerations related to patient and physician notification. And when presented before juries of laypersons, MX says, such considerations could have genuine sway over the people determining Guidant’s fate.

“Once in a courtroom, in the context of a plaintiff who has been injured by the drug or device in question, the jury examines the manufacturer’s actions with hindsight,” experts at Vetter & White told MX. “It is then often more difficult to argue that additional steps should not have been taken.”

The evidence on this point does not look good for Guidant. On June 22, 2006, the Indy Star reported that a Guidant defibrillator failed 10 times more often than the company projected at the time of the recall, citing a FDA document.

The document, unsealed in the Texas lawsuit, was written by FDA staffers one day before Guidant began recalling the devices.

At the time, Guidant said no more than 292 of the Contak Renewal units were likely to break down, but the FDA document shows the agency projected thousands of malfunctions within five years.

Filed under: 2006, Boston Scientific, Guidant, Johnson and Johnson, medical devices, stents

Boston Scientific and Guidant Off to Texas Slaughterhouse

Evelyn Pringle September 6, 2006

The first, but by no means the last, Guidant trial is scheduled to begin on September 18, 2006, in Neuces County District Court in Corpus Christi, Texas before Judge Jack Hunter.

The two plaintiffs, Louis Motal, 63, and Bernice Hinojosa, 65, are surviving patients implanted with Guidant’s Ventak Prizm 2 defibrillators in 2001. The lawsuit claims that Guidant “actively concealed the … defect, suppressed reports, failed to follow through on FDA notification requirements, and failed to disclose a known defect to patients.”

“Instead of revealing the defect,” the plaintiffs allege, “defendants continued to represent their product as safe for intended use, and continued to sell the flawed [devices] despite knowing of the dangers.”

Both plaintiffs claim they suffered extreme mental anguish from knowing that the defective devices could malfunction at any time.

According to the company’s latest tally, there are about 72 class-action lawsuits and about 477 individual lawsuits filed against Guidant in various state and federal courts, Boston Scientific reported in its second quarterly report filed with the SEC. The latter number is up from about 300 cases noted in the firm’s first quarterly report filed three months earlier.

As of April 2006, Boston became the proud owner of Guidant after winning a bidding battle with Johnson and Johnson, in what will certainly not go down in history as the deal of the century.

In addition to all the lawsuit already filed, according to Boston latest SEC filing, there are more than 3,300 claims of individuals that may or may not be filed, up from 3,000 claims in the earlier report.

The lawsuits all relate to defective defibrillators and pacemakers. Defibrillators are $30,000 devices that are wired directly to the heart and send electric shocks when abnormal heart rhythms are detected and pacemakers speed up hearts that beat too slowly, and cost between $4,000 and $20,000 for each unit, according to Bloomberg News on June 26, 2006.

According to Boston report, “the majority of claimants allege no physical injury, but are suing for medical monitoring and anxiety.”

The numbers have really grown compared to Guidant’s regulatory filing with the SEC on February 22, 2006, that predicted as many as 2,500 patients may seek damages. Those claims are distinct, Guidant noted in the filing, from the claims already filed by patients in 211 individual and class action lawsuits in the US and Canada.

And the potentially bleak future of Boston does not hinge entirely on what happens in civil lawsuits. Back on February 23, 2006, the Associated Press reported that the FDA, US Department of Justice, the Securities and Exchange Commission and several state agencies are investigating Guidant over its recalls.

The company is in fact being investigated by three attorneys general on behalf of 34 states, according to the article, Litigation Mounts Over Guidant Heart Devices, in Lawyers Weekly USA, on January 30, 2006.

“In addition,” the article states, “New York State and the city of Bethlehem, Pa. are suing Guidant for reimbursement of medical costs involved in replacing the devices.”

All lawsuits pending in federal courts have been consolidated under multi-district litigation rules and moved to a US District Court in Minnesota, where Guidant has several manufacturing facilities, with the first federal trial scheduled to begin on March 15, 2007.

On June 13, 2006, the Minnesota Supreme court appointed one judge to preside over all state court cases involving lawsuits linked to last year’s Guidant product communications, Boston Scientific notes in its report.

According to Lawyers Weekly USA, the lead counsel for the Texas plaintiffs, Robert Hilliard, of Hilliard & Munoz, said documents obtained during discovery show that Guidant knew about problems with its devices as far back as April 2002, but failed to alert doctors and patients for 3 years.

“They knew they were going to kill people based on this defect,” he said.

Ted Meadows, a plaintiffs’ attorney with the Beasley Allen lawfirm in Montgomery, Alabama, who specializes in medical device litigation, told Lawyers Weekly, “There were literally tens of thousands of people who’ve had these devices implanted in them.”

“Now they’re faced with the concern,” he said, “the device might not work properly when they need it most.”

And critics say there is certainly plenty of cause for concern. On June 7, 2006, the New York Times reported that least seven patients are known to have died in episodes in which Guidant defibrillators failed to work because of the electrical defect, five involving Contak Renewals.

“But many experts believe that the number is probably higher,” the Times wrote, “because an implanted heart device is rarely examined after a patient’s death to determine if it was working properly.”

According to Mr Meadows, a key to plaintiffs’ claims will be showing that Guidant “knew or should have known there was a potential for this problem.” In addition, he said, any evidence that indicates Guidant knew about the problem and responded improperly would entitle plaintiffs to seek an award for punitive damages.

Legal experts say this evidence exists and point to a report released in March 2006, by an independent panel appointed to review the recalls that shows Guidant allowed about 4,000 potentially defective defibrillators to be implanted in patients after the company found a flaw in 2002 that caused malfunction.

“The Independent Panel believes,” the report says, “that under no circumstances should a potential or manifest risk of a preventable death be superseded by statistical analyses that indicate that performance remains with general guidelines.”

The panel also said that Guidant and other devices makers need to increase the level of data collected on device failures because studies have shown that only a relatively small number of failures are reported to the manufacturers and the FDA because doctors and hospitals do not always report problems and devices are not ordinarily inspected after a patient die.

According to Boston Scientific, the devices that may be flawed include certain Insignia and Nexus pacemakers, Contak Renewal TR/TR2 cardiac resynchronization pacemakers, and Ventak Prizm 2, Vitality and Vitality 2 implantable cardioverter defibrillators.

These products were manufactured by the company’s Cardiac Rhythm Management Group, formerly Boston Scientific/Guidant’s CRM business, and some were implanted in patients as late as between December 2005 and June 2006.

On June 7, 2006, the New York Times reported that in one analysis, Guidant engineers projected that 1 out of every 100 Contak Renewals could short-circuit, a failure rate considered high by experts.

Guidant also suspected by late 2004 that the Renewal models would become increasingly prone to failure as the devices aged, the Times said documents indicate.

The Contak Renewal combines a pacemaker and a defibrillator, often referred to as a cardiac resynchronization therapy device, or CRT-D and costs about $35,000, the Times notes.

On June 6, 2006, Texas Judge Jack Hunter, unsealed documents containing information about recalled defibrillators, saying he did not trust Guidant’s claims that they contain trade secrets. The files show that Guidant had drafted, but never sent, a “Dear Doctor” letter detailing significant potential problems with the Contak Renewal and Contak Renewal 2 model defibrillators, according to Bloomberg News on June 7, 2006.

Guidant fought hard to keep the documents confidential and for good reason obviously. The never-sent “Dear Doctor” letter disclosed the short-circuiting problem and stated that the company had “removed all non-implanted Renewal and Renewal 2CRT-Ds from hospital shelves and Guidant inventory.”

However, records reveal that by this time Guidant had already sold most of its inventory.

Earlier in 2004, the documents show that company officials drafted a memorandum for their sales representatives explaining why it was asking them to return all the unsold Contak Renewals, but the memorandum was never sent either.

Some documents provide strong evidence that Guidant weighed the risks to patients and the loss of profits and chose to place profits over the lives of patients. For instance, one company document shows that Guidant estimated it would lose about $9 million by purging its inventory of defective Contak Renewal units and parts.

Attorney Hilliard says other documents reveal that Guidant performed a risk analysis that showed there was a possibility the devices could short-circuit, and if they did, “the likelihood of death or serious injury was very likely.”

He also told Lawyers Weekly that Guidant also violated federal regulations by redesigning the devices to eliminate the flaw in 2002, without informing the FDA, and that Guidant continued selling the older devices without notifying patients of the risks.

In what experts are calling the strongest evidence to present to a jury, testimony in a 168-page deposition taken in January 2006 in the Texas case, that was made public in February 2006, has Guidant executive, Fred McCoy, acknowledging that the company made changes to one of its defibrillators in 2002, and incorrectly told the FDA that it had no effect on the product’s performance.

Mr McCoy testified that Guidant made two modifications to the Ventak Prizm 2 in 2002, to keep it from short-circuiting and that neither was approved by the FDA.

And as it turns out, only one of the changes was disclosed in the company’s annual report that year also, and Guidant said that change had no affect on the device’s performance.

In addition, in a report filed two years later, the company said that it had received FDA approval to make the changes when it had not.

Mr Hilliard told the Associated Press on February 22, 2006, that Mr McCoy’s testimony proves that Guidant sold an unapproved defibrillator in violation of federal law.

In the deposition, Mr McCoy claims that he did not learn about problems with the devices until May 2005.

More damning evidence was revealed on June 23, 2006, when the Pioneer Press reported that, “Guidant’s implantable heart devices may fail about 10 times more often than the company had projected last year, according to a U.S. Food and Drug Administration analysis released in a Texas lawsuit.”

“A judge in a product-liability lawsuit involving Guidant’s defibrillators,” the newspaper said, “recently unsealed the FDA document dated June 16, 2005.”

Back when Guidant began its recall in the summer of 2005, the firm said no more than 292 of the units were likely to break down. “But the FDA said “most” of the 16,000 recalled Contak Renewal defibrillators may have damaged insulation within five years of use,” the Press wrote, “and 40 percent of those damaged devices would fail to produce an adequate electrical shock in a medical emergency.”

At that rate, it said, at least 3,200 Renewal units would be likely to fail.

Legal experts predict that the higher projection will hurt Boston Scientific in lawsuits. “This is as damaging a document as we’re going to come across,” said Attorney Hunter Shkolnik, one of many lawyers representing patients suing Guidant, in an interview with Pioneer Press.

“It flies in the face of all the excuses Guidant has been giving for not telling patients to take these devices out immediately,” he added.

It’s difficult to imagine how things can get much worse for shareholders. In the second quarter of 2006, the company lost 27% of its value. On June 29, 2006, the Globe & Mail reported that:

“Boston Scientific, which laid out $27.5-billion in cash and shares for Guidant, has bought itself what, so far, looks like a massive and costly series of headaches, in the form of product recalls and lawsuits. These have helped drive its stock price to a four-year low of less than $17 on the New York Stock Exchange, down more than $9 from early January.”

However, critics say Boston Scientific also has its laundry list of problems. According to the Globe, before it acquired Guidant, both Boston and its target, received corporate warning letters from the FDA saying that, until they have demonstrably improved their quality control, the agency will not approve new products for sale in the US.

Filed under: 2006, Boston Scientific, Guidant, medical devices, prices, settlement

Boston Scientific inherits Guidant Heart Device Lawsuits

Evelyn Pringle August 1, 2006

According to the FDA, the reason there are not more deaths reported in patients implanted with Guidant’s defective defibrillators is because most patients die outside the clinic or hospital and the devices are not sent back to the manufacturer to be checked.

On June 23, 2006, Bloomberg News reported that Guidant’s Contak Renewal devices might fail about 10 times more often than the company projected last year, citing an FDA analysis released in a Texas lawsuit.

The judge in the case unsealed the document that was dated June 16, 2005, which means it was written by FDA officials one day before Guidant began recalling the devices.

At the time of the recall, Guidant claimed that no more than 292 of the units were likely to break down, but the FDA estimate projects thousands of malfunctions within 5 years. In fact, the FDA said “most” of the 16,000 defibrillators may have damaged insulation within five years of use, and 40% of those would fail to produce an adequate electrical shock in a medical emergency, meaning over 3,000 units would likely fail.

“We have no surveillance process for discovering fatal defibrillator malfunctions,” the agency said. “We do not know the death rate associated with this defect.”

“It is probably greater than reported,” the FDA memo noted, “and may be much greater than reported.”

Attorneys representing the plaintiffs against Guident, recognize the significance of the unsealed FDA analysis. “This is as damaging a document as we’re going to come across,” said Attorney, Hunter Shkolnik.

“It flies in the face of all the excuses Guidant has been giving,” he said, “for not telling patients to take these devices out immediately.”

The Texas lawsuit is but one of about 340 product liability cases in the courts so far, and Boston Scientific, the new owner of Guidant, believes more than 3,000 patients may eventually file claims, according to its SEC filing in May.

Boston’s projection may have been made with inside knowledge of the next hurdle right around the bend. In one of its first honorary duties as the new owner, on May 15, 2006, Boston disclosed in a warning letter to doctors, that another batch of 996 defibrillators might stop working due to an electronic defect that causes the batteries to fail, and warned that the battery failures could prevent the devices from functioning properly and restarting a patient’s heart.

The estimated 900 faulty defibrillators that were implanted in patients were not recalled, according to the May 16, 2006, Boston Globe.

The same day, Boston also issued a separate warning to doctors about problems with another group of defibrillators but said it did not know how many patients were affected. Some of those devices were implanted underneath the chest muscles, the company said, instead of under the skin and over the muscles and that positioning caused the defibrillators’ titanium cases to wear, leading to malfunctions.

However, Boston must not have been too worried about these added problems because on May 14, 2006, the Financial Times reported that five “Boston Scientific executives have received special bonuses, some potentially worth more than last year’s salary.”

The five included Lawrence Best, the company’s chief financial officer; Paul Sandman, the general counsel; Jim Gilbert, a strategy co-ordinator; Lucia Quinn, the human resources chief; and Paul Donovan, a public relations executive, and were awarded bonuses worth at least $1.98m in cash, plus options and deferred stock grants, the Times said.

They were given the choice of accepting a large cash payment plus options, or options only and deferred stock. The largest cash payment offered, the Times said, was $625,000 to Mr Best, a amount equal to his salary for 2005.

But next month, it was back to the grind on June 26, when Boston announced yet another recall of 27,200 pacemakers and defibrillators involving six brands of devices. According to an FDA press release, this batch of devices were implanted between December 2005 and June 2006. Boston also asked that about 23,000 more devices, in stock at hospitals or with sales representatives, be returned.

Boston says, of the 27,200 patients implanted with the devices worldwide, 13,800 are in the US and five failures have been reported. One malfunction occurred at the time of implantation and four others failed in patients already implanted. In those cases, the patients needed to have the device replaced. Two of the patients lost consciousness, but there were no reported deaths, according to a July 11, 2006, Up Date statement issued by the FDA. This particular recall includes:

Some Insignia and Nexus pacemakerspacemakers
Contak Renewal TR and TR 2 cardiac resynchronization pacemakers
Ventak Prizm 2, Vitality, and Vitality 2 ICDs (implantable cardioverter defibrillators)

Guidant recommends replacing the implanted devices like its a minor inconvenience. In a July 18, 2005, Dear Doctor Letter, Guident said it will provide “a replacement device at no charge for pacemaker-dependent patients and other patients deemed by their physicians to be best served by replacement, provided the replacement occurs prior to the normal appearance of elective replacement indicators. “

Experts say, its not quite that simple. On March 30, 2006, a New York Times headline read: “Replacing Heart Device Found Risky; It may be safer to leave possibly defective defibrillators in patients, studies show.”

As it turns out, surgery to replace a defibrillator carries a high risk of complications, including death, according to a study published in the March 30, 2006, Journal of the American Medical Association .

The research in JAMA found that one out of every 50 patients needed to have the replacement defibrillator removed because of severe postoperative infections.

One of the study’s lead authors, Dr Andrew Krahn, of Canada’s University of Western Ontario, said the overall complication rate was three to five times higher than expected.

Experts say, patients need to consider all the risks when deciding whether to replace or retain a defibrillator recalled by its maker.

Additionally, the Dear Doctor letter said, “Guidant will reimburse patients up to $2,500 for medical expenses remaining after Medicare and/or health insurance coverage, including device replacement or additional follow-up procedures.” According to SEC filings, Guidant had a $113 million charge in last year’s second quarter for the cost of replacing the recalled defibrillators.

However, Boston had better start putting money aside to pay for the damages because lawsuits are already being filed to force the company to pay up. According to the January 30, 2006, Lawyers Weekly article, “New York State and the city of Bethlehem, Pa. are suing Guidant for reimbursement of medical costs involved in replacing the devices.”

“The bulk of the liability damages sought are for either the cost of explant and replacement surgery or the cost of medical monitoring, which includes periodic evaluation by a physician to test the reliability of devices that remain implanted,” says Attorney Victoria Davis, a partner in the product liability group of Alston + Bird LLP in Atlanta, in the May/June issue of Medical Device Link.

“So obviously the financial implications are huge,” she told Medical Device, “whether you are talking about the cost of defending the growing number of lawsuits or the cost of any payments made to plaintiffs and their lawyers, which could be in the millions if the plaintiffs prevail.”

Even before it acquired Guidant, Boston had its own quality control problems. According to the March/April 2006, issue of Medical Device Link, “just hours after Boston Scientific Corp. (Natick, MA) bested rival suitor Johnson & Johnson Inc. (J&J; New Brunswick, NJ) and nailed down its $27.2 billion bid, the company learned that, in addition to cleaning up the problems at Guidant, it now has to get its own house in order.”

In a warning letter from FDA, Boston was notified of “serious regulatory problems” with medical devices produced at its facilities in Natick, MA; Maple Grove, MN; and Spencer, IN. The letter also referred to three earlier warnings regarding the company’s production plants in Watertown, MA; Glens Falls, NY; and Quincy, MA.

According to the FDA, Boston’s inability to address these issues in a timely manner indicated a “systemic problem with the entire corporate quality management system.”

FDA official, Daniel Schultz, MD, said the warning was only the third time in the FDA’s history that the agency had issued such a broad-based warning to a medtech company. The letter called on Boston “to resolve these serious violations promptly, and to do it not as it relates to specific products, but rather on a corporate wide basis.”

Of particular concern to Boston, MX said, is the stipulation that FDA will not approve any new products until the company’s quality system is in order.”

Which analysts say, likely means that Boston will not be unable to get approval for a new drug-coated coronary stent, until the first quarter of 2007, rather than the final period of 2006, as Boston had hoped.

Boston and Johnson & Johnson are now the only two companies on the US market with drug-coated stents, according to the July 18, 2006, Chicago Tribune.

Last year, Boston paid $750 million, the Tribune says, to settle claims that it broke a contract to jointly manufacture stents by setting up a secret factory in Ireland.

The worldwide market for drug-eluting coronary stents reached an estimated $4.2 billion in 2004, and is expected to nearly double by 2010. In the US, about 1.5 million patients were implanted with stents in 2005, according to The Medtech Marketplace in 2006, Medical Device Link, January/February 2006

The domestic market MX says, is dominated by the Taxus stent from Boston and the Cypher stent from Cordis Corp, a Johnson & Johnson company. Cypher received FDA approval in 2003, and Taxus gained approval in 2004.

However, there was more bad news for Boston in June 2006, when the Wall Street Journal reported that some US hospitals were reducing their use of Boston’s top product, drug-coated heart stents, after a Swiss study found that uncoated stents had a lower rate of complication.

Filed under: 2006, Boston Scientific, Guidant, Johnson and Johnson, medical devices, stents

Boston Scientific Won Guidant – What A Prize

Evelyn Pringle June 24, 2006

In the second quarter of 2006, Boston Scientific may have lost 27% of its value, but in the first quarter, it did win a nearly two month bidding war with Johnson and Johnson over the heart device maker, Guidant, with a bid of $27.5 billion for the grand prize.

It probably seemed like a great deal when the bidding started. Guidant’s heart device division accounted for about half of the company’s $3.8 billion in sales in 2004. According to the February 28, 2006, New York Times, “Defibrillators, which cost up to $35,000 each, have a profit margin of about 75 percent.”

The market for the devices certainly looked bright. According to the American Heart Association, cardiac pacemaker procedures have grown from under 50,000 in 1979 to more than 200,000 in 2003. In 2004, about 150,000 devices were implanted worldwide, and the market had been growing at a steady clip.

At the beginning of the new years, a market analysis in the January/February 2006, Medical Device Link, quoting Kalorama Information, reported that the 2005 US market for cardiovascular devices was expected to reach approximately $14 billion, and by 2014, it is expected to exceed $25 billion.

“Industry analysts estimate that drug-eluting stents and cardiac rhythm management devices account for nearly two-thirds of the total market,” MX said, “which is growing at an annual pace of 16%.”

“The cardiac rhythm management sector,” it noted, “is growing at an annual rate of 20%.” The US constitutes about 62% of the global market, valued at around $22.3 billion, according to MX.

That said, analysts say Boston shareholders are not likely to be viewing Guidant as a prize these days, considering that in January 2006, their stock value was a little over $26, and by mid-July it had dropped to about $16, and the litigation expenses the company inherited get higher by the week.

The “winner” was announced on January 25, 2006, and the next month documents filed with the SEC on February 6, 2006, noted that Boston’s credit rating could be jeopardized and fall below investment grade status, due to the nearly $9 billion in debt the company would incur to finance the deal.

In addition, 3 days after the announcement, on January 28, 2006, the New York Times reported that Federal prosecutors had “opened a new front in their investigation into the Guidant Corporation by issuing a subpoena seeking records disclosed in a Texas lawsuit that indicate the company knew that some heart devices could catastrophically fail.”

“The subpoena,” the Times said, “specifically sought Guidant documents disclosed this month in a Texas state court.”

“Among other things,” it wrote, “the records indicate that company executives debated whether to warn doctors that some heart defibrillators could short-circuit.”

“The records suggest,” the Times said, “that Guidant might have sold potentially flawed devices.”

The document request, served on lawyers representing plaintiffs in the Texas case, also indicates that federal prosecutors have merged their inquiry with an earlier investigation by the FDA’s Office of Criminal Investigations, the Times reported.

The plaintiff’s lawyer, Robert Hilliard, who is representing 2 patients in a claim against Guidant, provided a copy the subpoena to the Times, and said a federal investigator had asked him to retain all documents produced in the case.

The subpoena required him to turn over handwritten notes and PowerPoint slides that he obtained from Guidant during preparations for the case in Texas.

According to the Associated Press on January 28, 2006, the 10 pages of documents include notes from Fred McCoy, then president of Guidant’s cardiac rhythm management division, that show a decision was made to sell inventory the executive described as having sporadic ”life-threatening” defects.

In the January 30, 2006, Lawyers Weekly USA, Mr Hilliard said, documents obtained during discovery show that Guidant knew about problems with its devices as far back as April 2002, but failed alert doctors and patients for 3 years.

“They knew they were going to kill people based on this defect,” Mr Hilliard told Lawyers Weekly.

He says, Guidant performed a risk analysis that showed there was a possibility the devices could short-circuit, and that, if they did, “the likelihood of death or serious injury was very likely.”

Mr Hilliard also told Lawyers Weekly that Guidant violated federal regulations by redesigning the devices to eliminate the flaw in 2002, without informing the FDA. Meanwhile, he said, the company continued selling the older devices without notifying patients of the possible risks.

The subpoena reveals that the government is investigating Guidant for possible violations of health care statutes. Two legal specialists, consulted by the Times, said the broad range of the statutes cited, indicate the serious nature of the investigation and could mean Guidant may face civil or criminal charges.

“They are investigating in the broadest possible way,” Joan Krause, a director of the Health Law and Policy Institute at the University of Houston told the Times.

“They are looking at potential fraud,” she said, “involving government plans like Medicare, private health plans and employee benefit plans.”

In addition to the SEC and FDA, the company is also being investigated by attorneys general on behalf of 34 states, according to the article, Litigation Mounts Over Guidant Heart Devices, in Lawyers Weekly USA, on January 30, 2006

Academic attorney, Barry Turner, who teaches ethics courses in the UK, says these government investigations could ultimately lead to the company’s biggest nightmare by paving the road to victory for plaintiffs in lawsuits filed under the federal and state false claims statute, and the Sarbanes Oxley Act. Over the last two years Mr Turner has assisted US attorneys in lawsuit preparation for these types of cases.

In most instances, fines and damages in FCA actions, he says, come out of profits, which in turn cause the stock value to drop leading to lawsuits by shareholders under the Sarbanes Oxley Act.

When a product causes death and injuries, Mr Turner says, it is not the personal injury lawsuits that will hurt the company the most. “The subsequent shareholder class actions can result in criminal charges,” he notes, “and sends the crooks to jail.”

“When a medical device is put on the market,” he states, “it is incumbent on the manufacturer to have carried out exhaustive tests to see that it is safe.”

“If it is not safe it is a risk not just to the individuals who have the misfortune to have these products foisted on them,” he explains, “but for those who have money tied up in the companies that make them.”

“Where a company’s board knowingly allows a faulty or dangerous product to be marketed, it risks shareholder funds,” he says. “Shareholders will face huge losses, losses,” he notes, “that would have been avoided if the truth had not been hidden.”

“Of course,” he continues, “company executives have to take risks and sometimes these go wrong.” However, Mr Turner says, “There is a fundamental difference in taking calculated ethically sound risks and taking grossly negligent risks.”

“If their investment has been attracted to a faulty product that the manufacturers knew about,” he explains, “they have risked shareholder funds beyond the pale.”

“The fraud in this industry,” he says, “is not divided into that which injures and that which cheats taxpayers and stockholders out of their money.”

“Those at the top of the company,” he states, “gamble with the lives of patients and the money of stockholders in equal bad faith when they engage in fraudulent and dishonest behavior that allows a dangerous product to be marketed.”

Other legal experts agree that Guidant executive may be in for trouble. “Company management should fear the prospect of being accused of deliberately refraining from physician disclosure in order to maintain a high market share that would enhance management’s financial interests,” says Genese Kay Dopson, special counsel at Sedgwick, Detert, Moran & Arnold LLP, in the May/June 2006, Medical Device Link.

“For example, in Guidant’s case,” she explains, “the aftermath of physician notification resulted in the decrease in the value of Guidant’s stock.”

“As a result,” she notes, “a company that was in negotiations to acquire Guidant prior to the physician disclosure negotiated a lower bid as a result of the decrease in stock value.”

And shareholders have, Ms Dobson says, initiated suits against Guidant for fraud.

In fact, it seems like it has been all downhill for the company, since June 2005. All total, Guidant has recalled or issued safety alerts on more than 200,000 pacemakers and about 88,000 defibrillators.

On June 20, 2005, the FDA issued a nationwide notification saying Guidant was recalling certain defibrillators because the devices could “develop an internal short circuit without warning, resulting in failure to deliver a shock when needed.” The devices affected by the notification were:

PRIZM 2 DR, Model 1861, manufactured on or before April 16, 2002
CONTAK RENEWAL, Model H135, manufactured on or before August 26, 2004
CONTAK RENEWAL 2, Model H155, manufactured on or before August 26, 2004

However, critics say the warning from the FDA was once again, too little too late, in light of the fact that the agency knew as early as February 2005, that Guidant defibrillators were malfunctioning, and allowed 4 months to pass before issuing a public alert.

According to Mr Turner, “it is absolutely inevitable that there will be a catastrophic incident soon in the US involving medical products whether they are drugs or devices.”

The FDA has significantly failed to protect US citizens, he says, and is totally inept at preventing such a catastrophe. “The manufacturers consciously intervened in FDA business with the FDA’s own acquiescence.” he states.

“Undermining the safeguard that the FDA was supposed to be,” Mr Turner says, “was part of a strategy which placed dangerous products on the market.”

“Product after product, he points out, “has now been exposed as dangerous, after approval and with clear evidence that the manufacturer knew that before marketing.”

“It is only a matter of time,” he warns, “before there is another Vioxx, possibly next time much worse.”

“There is after all nothing to stop it,” he warns, “and every indication that the pharmaceutical companies have no intention of stopping their current deceitful practices.”

This assertion is obviously true because this is not Guidant’s first encounter with the Justice Department. Hiding news about faulty products seems to be habitual for the company. In 2003, its subsidiary, Endovascular Technologies, pleaded guilty to 10 felony counts and agreed to pay over $92 million to settle criminal and civil charges of failing to notify the FDA about defective stents, that resulted in 12 patient deaths.

As part of the deal to settle the charges in that case, Guidant entered into a corporate integrity agreement with the Department of Health and Human Services, and agreed to comply with all regulations and reporting requirements of the FDA, and health care programs like Medicare. Guidant obviously did not live up to that agreement.

Shortly after the first recall, on June 24, 2005, Guidant warned doctors to stop implanting another group of its most advanced defibrillators because of a flaw that could cause a magnetic switch to become stuck in the off position, and lead to some of the approximately 40,000 units already implanted to not work properly.

“The move,” the June 25, 2005 New York Times said at the time, “could have significant financial consequences for Guidant because it affects, for now, sales of many of the company’s heart devices in the fastest-growing part of the market: advanced defibrillators that also act as pacemakers for both sides of the heart.”

The warning included the Contak Renewal 3; Contak Renewal 4; Contak Renewal 3 and 4 AVT; and the Renewal RF. At the time, Guidant said it had received 4 reports of flawed switches among the 40,000 devices implanted.

Defibrillator sales, the Times reported, accounted for nearly 50% of Guidant’s revenue of $3.8 billion and that analysts thought the types of models involved, known as cardiac resynchronization therapy, or CRT, devices, made up 40% to 50% of its defibrillator sales.

“The use of such devices,” the Times said, “is growing rapidly in part because Medicare has greatly increased the number of older patients for whom it will pay for such devices.”

A little over a month later, on July 18, 2005, Guidant informed doctors that replacements might be needed for 9 pacemaker models manufactured between 1997 and 2000, with some 28,000 implanted in patients worldwide. Due to failures, several patients with the implants had lost consciousness or developed possible heart failure, Guidant stated, and that one patient may have died.

Two months later, on September 22, 2005, Guidant issued a recall for some of its Insignia and Nexus pacemakers because of failures, including nine cases requiring emergency hospitalization. As of September 6, 2005, the company said, 36 out of 49,500 devices experienced loss of pacing output, while 16 out of 341,000 pacemakers suffered a telemetry failure.

Less than a month later, on October 13, 2005, the FDA issued an update about malfunctions occurring with the following defibrillators:

VENTAK PRIZM� 2 DR, Model 1861, manufactured on or before April 16, 2002
CONTAK RENEWAL�, Model H135, manufactured on or before August 26, 2004
CONTAK RENEWAL� 2, Model H155, manufactured on or before August 26, 2004.

The FDA said it was providing the update because Guidant had informed the agency that six additional clinical occurrences of failures had been reported since July 14, 2005, for a total of 21 failures, including 3 patient deaths, as of October 7, 2005.

On January 23, 2006, Guidant issued another warning to doctors about a problem with a batch of its older model pacemakers, and said, 19,200 patients were believed to be still using the devices manufactured between October 1998 and December 2000.

These devices carried a risk of a seal degradation, the company advised, that could allow moisture to seep inside the case and can pose “serious health consequences” for the user.

Less than a month later, on February 22, 2006, the Associated Press reported that Frederick McCoy Jr, the head of Guidant’s cardiac device unit, acknowledged in a deposition that the company made changes to one of its defibrillators in 2002, and incorrectly told federal regulators it had no effect on the product’s performance.

In the deposition, Mr McCoy said, Guidant made two repairs to the pacemaker in 2002, to keep it from short circuiting and that neither modification was approved by the FDA, and that only one repair was disclosed in an annual report.

Mr Hilliard told the Associated Press that Mr McCoy’s testimony could prove that Guidant sold an unapproved defibrillator in a violation of federal law. “They’ve hung out every single doctor in the country if the device was unapproved,” he said.

In the deposition, Mr McCoy also said he was not told about problems with the devices until May 2005.

In addition to all the lawsuits, and the stricter regulatory rules that are bound to be implemented as a result of the Guidant debacle, a Senate committee is considering passing legislation that would make it a crime for company executives to ship products with known defects.

On March 10, 2006, the Senate Judiciary Committee held a hearing on a proposed for criminal sanctions against executives, and witnesses who testified specifically pointed to the Guidant as an example of what happens when corporate executives put profits before human life.

Witness told the panel that the recall only happened because of the March 2005, death of Joshua Oukrop, a 21-year-old college student from Minnesota who received a flawed device.

After the student died, his doctors tried to get Guidant to alert physicians about the problem and when the company refused, they contacted the New York Times which in turn conducted an investigation. The first Guidant recall, was issued just as the results of the Times investigation were about to be made public.

Since the death of their patient, Guidant’s most outspoken critics have been these doctors. They say that if the company had informed them of the problem, they could have quickly replaced defibrillator and saved their patient.

Dr Barry Maron, a Minneapolis cardiologist, testified at the Senate Judiciary hearing and explained how he and his colleague, Dr Robert Hauser, came to diagnose and treat the 21-year-old student in 1999.

He then told the panel how on March 14, 2005, three and a half years after receiving his defibrillator, Joshua died suddenly and unexpectedly while on vacation in Utah.

A post-mortem analysis of the defibrillator, Dr Maron said, found a short-circuiting defect that had caused the device to become electrically inoperative and fail.

“In other words,” he testified, “when the defibrillator tried to issue a life-saving shock, the electrical energy short-circuited and was dissipated and did not enter Joshua’s heart as it should have.”

“Due to this defect,” the doctor told the committee, “he was unprotected and died.”

Shortly after that, Dr Maron said, in a meeting with 4 Guidant executives, he learned that the company had known about this specific defect and problem for over 3 years.

“It then fell upon me,” he told the panel, “to inform Joshua’s father, who also has a defibrillator for hypertrophic cardiomyopathy, of the developments.”

“I cannot forget Mr Oukrop’s reaction,” Dr Maron said, “when told that Guidant had for several years known that his son’s defibrillator was potentially defective and could not save him.”

“Although he was controlled,” Dr Maron recalled, “it was as if his last breath had left his body.”

He testified that Joshua’s father said: “I told Joshua that the defibrillator was his shot, that it would allow him to survive and live his life, and you are saying that they knew all along.”

Probably only because the facts of this unfortunate scenario were documented in a series of New York Times articles in May of 2005, Dr Maron told the committee, “have these problems in this sector of the defibrillator industry—in what has come to be known as the Guidant Affair—now become evident to all.”

He pointed out that the case involved the largest recall of defibrillators and pacemakers in the 25-year history of the industry. “To make it a crime to knowingly sell defective defibrillators to be implanted into high risk patients would I believe have the desired effect on the willingness of companies to make full disclosure,” Dr Maron concluded.

Joshua’s other physicians, Dr Robert Hauser, told the New York Times, he was irate to learn that the FDA was given the information about the defects in February 2005, and that if the agency had disclosed the problem, it might have saved Joshua’s life.

As for the FDA, in what is becoming a common occurrence, the agency once again has managed to provoke the ire of the powerful Republican Senator from Iowa, Charles Grassley, who chairs the Senate Finance Committee which oversee Medicare and Medicaid, by refusing to turn over Guidant’s annual reports to the New York Times, claiming the documents contained trade secrets.

After learning of the refusal, the Senator wrote a letter to the FDA commissioner, asking for an explanation of why the agency does not make all annual reports received from device makers available to the public. “The F.D.A. needs to find reasons to make information public rather than working overtime to withhold findings that the public deserves to know about,” Senator Grassley said. “Amid the scrutiny of the last year, the F.D.A. has acknowledged that the public wants and needs to know, but so far the agency’s actions haven’t matched its words.”

Over the past 2 years, the FDA and the pharmaceutical industry have both come under fire from Senator Grassley’s committee for hiding the results of clinical trials that showed the dangers of Vioxx and the use of antidepressants with children for years. The Guidant situation now appears to have expanded the interest of the committee into the area of medical devices.

As of February 6, 2006, at least seven deaths have been linked to the devices recalled last year, according to the Associated Press. In its regulatory filing on February 22, 2006, Guidant said as many as 2,500 patients may seek damages and that the company had learned of approximately 1,700 claims the previous month, and expected more. Those claims are distinct from the claims already filed by patients in 211 individual and class action lawsuits in the US and Canada, Guidant noted.

A month later, in March 2006, an extremely damaging report was released by an independent panel, appointed to conduct a review of the product recalls, that said the company had relied too heavily on engineers to evaluate the safety of its products and said Guidant should have made a greater effort to consult doctors.

The report also revealed that Guidant had allowed about 4,000 faulty defibrillators to be implanted in patients after the company found a flaw in the devices in 2002.

On March 22, 2006, a report in Dow Jones Market Watch, said Guidant faces more than 200 individual and class action product liability suits tied to product recalls. “Only a small number of cases are thought to be tied to patient deaths, however,” it said. “The vast majority involve living patients who allege problems with the devices.”

The fact of the matter is, just about every kind of lawsuit known to man has been filed against company. A wrongful death suit was filed in St Paul, on March 21, 2006, on behalf of the wife of Allan Gohde, age 53, of Birchwood, WI, who died of sudden cardiac arrest on July 28, 2005, at his home.

In this case, to add insult to injury, at the funeral home, Ms Gohde heard a loud beeping noise coming from her husband’s chest when she was giving him a last kiss and hug goodbye in his coffin. As it turns out, the beeping was from his defibrillator, which was among the devices recalled by Guidant.

After the funeral, the Prizm 1861 defibrillator was sent to Guidant for analysis and in a report to Mr Gohde’s physician, the company stated that “high voltage damage” to the defibrillator had been found and that the beeping sound was a result of the shorted condition.

The report also said that, at the time of Mr Gohde’s death, the defibrillator detected “ventricular fibrillation,” attempted to shock and “became non-responsive during this attempt.”

On February 11, 2002, Mr Gohde was implanted with a Prizm 1861 device that was later determined defective. Despite making design changes to correct the flaw, the lawsuit alleges, Guidant continued to sell defibrillators manufactured before April 2002, without disclosing that the devices contained a serious design flaw.

When Guidant did issue a recall on June 17, 2005, and reported that approximately 13,900 Prizm 1861 devices manufactured before the April 2002, change were implanted in patients and that at least 28 devices had short circuited because of the flaw, and had resulted in one death, Guidant recommended that the devices not be replaced.

Following Guidant’s recommendation, the lawsuit alleges, Mr Gohde’s physician did not replace the implanted device.

In an adverse event form later filed with the FDA, according to press release by the law firm handling the case, Guidant admitted that the defibrillator short-circuited and that the failure directly contributed to Mr Gohde’s death.

“Guidant has an ethical responsibility and duty to its patients and their physicians for ensuring the safety of their implantable heart defibrillators,” said Tara Sutton, Mr Gohde’s attorney, of the law firm, Robins, Kaplan, Miller & Ciresi LLP.

“Mr. Gohde’s death could have and should have been prevented, and this complaint serves as a notice that such conduct is not acceptable,” Ms Sutton stated.

“They admitted to hiding a life-threatening defect in these defibrillators for three years,” the press release said, “while continuing to sell them.”

Another lawsuit suit filed in March 2006, involves Donald Whitting, of Norwalk, Conn, who received a 1298 Insignia pacemaker in September 2004, and died just two days later. Whitting’s pacemaker model was recalled a year later in September 2005. This lawsuit also alleges Guidant should have informed patients about the dangers posed by the devices after hearing about the risks as far back as 2003.

According to the latest reports, “Guidant is facing approximately 60 state and federal class actions and about 145 individual lawsuits, many of which have been consolidated in a multidistrict proceeding, and has been informed of another 2500 individual claims that have not yet been filed,” says Attorney Victoria Davis, a partner in the product liability group of Alston + Bird LLP in Atlanta, in the May/June issue of Medical Device Link.

“These lawsuits characteristically set forth claims for punitive damages for alleged willful, wanton, or deliberate acts,” she explains.

Ms Davis also discussed the numerous regulatory investigations. “Fines could theoretically be imposed by multiple state and federal regulatory entities if violations are found,” she says.

“On top of these financial concerns,” she notes, “you have to take into account the costs of managing the public relations and investor relations regarding the recall, the lawsuits, and the regulatory investigations, and these costs can be significant as well.”

Legal experts say punitive damages are bound to be a major concern for Guidant as well, because depending on the region of the country where a case originates; many punitive damage awards are not covered by insurance.

According to attorney, Brooks Magratten, of Vetter & White, in Providence, RI, in the January/February issue of MX, whether insurance coverage is allowed for punitive damages varies from state to state and many of the most populated states like California, Florida, Illinois, New Jersey, New York, and Pennsylvania, prohibit insurance coverage for punitive damages.

In those states, Mr Magratten says, no insurance carrier is permitted to reimburse a company for any punitive damages under the theory that punitive damages are intended to punish the wrongdoer and insurance thwarts the sting of the punishment.

Another issue of debate that will likely arise, experts say, involves the federal defense of preemption. Guidant will argue, they predict, that state law claims are preempted by federal law since the devices were subject to the FDA’s premarket approval process.

But experts say they have serious doubts about the success of a preemption defense in this case. “If reports that Guidant knowingly distributed defibrillators that had known defects and deliberately did not disclose this to physicians are true, it does not seem like the Guidant experience is the poster child for seeking to extend preemption protections,” says Genese Kay Dopson, special counsel at Sedgwick, Detert, Moran & Arnold LLP, in the May/June 2006 issue of MX.

On June 6, 2006, Texas Judge Jake Hunter, unsealed more documents containing information about Guidant’s recalled defibrillators, saying he did not trust the company’s claims that they contain trade secrets and an appeals court denied Guidant’s challenge of the ruling

The records released contained the draft of a “Dear Doctor” letter written in January 2005, that disclosing the electrical flaws in the certain defibrillators and Guidant’s intention to recall the devices not yet implanted. However, the letter was never sent.

The “product update” that was sent instead of the letter advised doctors to be alert for electrical problems, but did not specify any specific models.

Another document released describes how Guidant represented the problems with the devices to the FDA. A June 30, 2005, memo from a meeting the company requested to discuss the FDA’s handling of a recall of 3 defibrillator models says:

“Guidant stated there is no evidence of a trend. There have only been two deaths involving two different implantable defibrillators and they feel that there is not a reasonable probability of serious adverse health consequences or death.”

In light of the steady drizzle of damaging evidence, whether or not Boston shareholders ended up with a prize when they won Guidant seems to be more questionable every day. As it stand right now, industry analysts say the legal liabilities that Boston faces could run as high as $2 billion.

Filed under: 2006, Boston Scientific, Guidant, Johnson and Johnson, medical devices, stents

Implant For-Profit Industry Not Deserving of Preemption Protection – Part I

Evelyn Pringle July 9, 2007

In addition to the question of how many soldiers will be dead or injured by the time self-proclaimed “war President” George Bush leaves office, Americans need to ask themselves how many citizens will be dead or injured as a result of an FDA controlled by the industry most credited with funding his move to the White House.

Last year, the FDA announced that the agency’s approval of a pharmaceutical product preempts product liability lawsuits against the industry giants in state courts, even when a company actively conceals information that shows serious injury and death are known to be associated with a product.

With the solid backing of the FDA, preemption is now being used as an argument to dismiss lawsuits filed by injured citizens in state courts against medical device makers.

Critics point out that many risks associated with a new product will not be known at the time of FDA approval and that additional safety information often surfaces only after a device is widely used on the market.

Furthermore, FDA regulations allow device makers to add stronger warnings when a risk becomes known, without requiring FDA approval. However, all too often, company documents which surface as a result of litigation show that the device maker was aware of safety risks long before the product was approved and that they actively concealed the information from the FDA.

Legal experts say the legal remedies available under state laws are set up to give additional protection to consumers over and above the minimal protection provided by the FDA approval process, and especially at times like this, when the FDA is run by appointed industry insiders who refuse to police the medical device industry.

The Medical Device Amendments to the Federal Food, Drug and Cosmetic Act establish a federal statutory and regulatory scheme governing the sale of devices in the U.S., but the MDA provides no private cause of action against device makers and therefore, the preemption of state law claims would eliminate most, if not all, legal remedies for persons injured by defective products.

Whether or not the administration has succeeded in immunizing device makers will likely be known in 2008, because on June 25, 2007, the U.S. Supreme Court agreed to hear an appeal in Riegel v Medtronic, involving a case against Medtronic which could determine whether patients will have the right to file lawsuits against device makers under consumer protection laws enacted by the individual states.

The Public Citizen Litigation Group is representing Charles Reigel, who was injured in 1996 when a balloon catheter burst while he was undergoing an angioplasty, a procedure used to open clogged arteries.

After the Second Circuit Court found the lawsuit was preempted based on FDA approval, Public Citizen attorneys Allison Zieve, Wayne Smith and Brian Wolfman, filed a petition asking the Supreme Court to consider whether the Food, Drug, and Cosmetic Act expressly preempts state-law actions brought by patients who have been injured by devices that received pre-market approval, and to issue a ruling due to the inconsistent rulings on the preemption issue in cases filed in the lower courts.

The petition argues that the FDA has switched positions on whether pre-market approval preempts state law claims since the government’s views were solicited by the Court in 1997, when the FDA supported the right to pursue state law claims.

The Supreme Court asked the Solicitor General to offer the government’s views and, of course, the FDA used tax dollars collected in large part from the injured plaintiffs who might have cause to file claims in state courts, to send up a brief that backed Medtronic 1000% in it use of preemption to prevent Americans from suing the device giant.

In direct harmony with Medtronic, the FDA brief tells the Court not to bother with the conflict in preemption rulings in the lower courts because there are now more rulings on one side of issue than the other.

“Also like Medtronic,” Public Citizen responds in a reply brief, “the government asks the Court to overlook the undisputed conflict because it might simply go away.”

“What has changed since 1997,” Public Citizen notes, “is the government’s view on the merits of the question presented.”

“The government’s inconsistency on this question of statutory meaning only underscores the need for this Court to resolve the question presented,” the brief states.

Legal experts say the ruling in this case has the potential to affect thousands upon thousands of lawsuits currently filed in state courts against the makers of medical devices, including defective products implanted in patients with heart disease, such as defibrillators, pacemakers and drug-eluding stents, and devices used during spinal surgery.

A favorable ruling for Medtronic could literally save Boston Scientific from the poor house because, at last count, the company was facing over 75 class actions and 1,100 individual lawsuits involving defective defibrillators and pacemakers manufactured by the recently-acquired Guidant Corp, according to Boston’s SEC filing.

Also, the number of litigants against Boston is rising by the month. On June 15, 2007, the Brown & Crouppen law firm of St Louis filed a 39-count product liability lawsuit in St Clair County on behalf of 14 plaintiffs against Guidant, Boston and Cardiac Pacemakers, alleging the defibrillators/pacemakers were defective and required them to be hospitalized.

These latest lawsuits claim the devices were defective in design, did not conform to federal requirements and subjected users to risks of heart attacks, death and other illnesses that exceeded the benefits of the devices. Other safer products were available, and the makers actively concealed the product defects in order to prevent adverse publicity.

According to the June 29, 2007, Madison St Clair Record, this is at least the third complaint filed by Brown & Crouppen against these same companies.

Spinal surgery represents another division of the implant for-profit industry. A study in the November 2006 Spine journal, conducted at Dartmouth Medical School, analyzed data on lower back (lumbar) surgery among Medicare recipients aged 65 and older nationwide and found that surgery rates in 2002-2003 were almost 8 times higher than in 1992 in some areas of the U.S., and in 2003, Medicare spent over $1 billion on spine surgery.

On August 5, 2006, the LA Times reported that spinal surgery has become a very lucrative business, “with at least $3.2 billion spent last year in the U.S. on spinal fusion.”

In October 2004, Johnson & Johnson obtained FDA approval for the Charite artificial spinal disc as an alternative to spinal fusion surgery, but experts contend that the superiority of the two procedures is limited to the cost. Charite replacement can run as high as $50,000, while spinal fusion surgery costs less than half that, at roughly $23,000.

A favorable ruling on preemption would be great news for Johnson & Johnson, considering that SEC filings reveal that there were 100 lawsuits pending against the company at the end of 2006 related to the Charite artificial spinal disc, alleging that the company knew the disc was defective and boosted profits by implanting the device for uses not approved by the FDA and in patients who would not benefit from the device.

Between the time the disc was approved in October 2004 and July 2006, the FDA had already received over 130 reports of serious adverse events in patients implanted with the device and, in most cases, the disc was implanted in patients who did not meet the criteria for disc replacement as specified by the FDA.

Although a favorable Supreme Court ruling would be beneficial to the device makers in dealing with lawsuits filed by private plaintiffs in state courts, it will do nothing to stop the on-going investigations into the marketing of devices to determine whether device makers are funneling money to doctors and hospitals to increase the use of their products.

Anti-kickback statutes make it illegal for doctors or medical facilities to receive financial incentives to increase the use of devices, which in turn increase the number of implant procedures, in patients covered by public health care programs.

In the end, it was the greed, evidenced by drastic rise in the use of not only defibrillators and pacemakers, but all medical devices with Medicare patients over the past few years that drew the attention of lawmakers and law enforcement officials to the implant for profit industry.

On September 26, 2006, the New York Times reported that overall, Medicare payments to hospitals for implant procedures grew from $10 billion to $14 billion, an increase of about 40%, in just 2 years.

As of today, every major device maker is under investigation for working with doctors and hospitals to increase profits by billing public health care programs for implant procedures performed on patients who, in many cases, did not need the devices.

The FBI, the U.S. Department of Justice and the Department of Health and Human Services have set up a Medicare Fraud Strike Force, and the Strike Force is predicting that as much as $2.5 billion can be saved by cracking down on the device makers, doctors and hospitals involved in the implant industry.

The investigations of J&J and its DePuy Division are not limited to the Charite disc. In June 2006, the company was served a subpoena by the Antitrust Division of the DOJ, requesting documents related to the manufacture and sale of the company’s orthopedic devices, and search warrants were executed in connection with the investigation, according to documents filed by J&J with the SEC on August 8, 2006.

SEC filings also show that Medtronic is responding to a subpoena from the Office of the U.S. Attorney for the District of Massachusetts, issued under the Health Insurance Portability & Accountability Act of 1996, requesting documents relating to pacemakers and defibrillators; monitoring equipment and services; benefits to persons in a position to recommend purchases of such devices; and the company’s training and compliance materials relating to the fraud and abuse and federal Anti-Kickback statutes.

Investigations are also underway into over-use of the new drug-eluting stents (DES), marketed by Boston and Johnson & Johnson, with the average cost to Medicare ranging from $11,184 to $14,287, according to the Centers for Medicare and Medicaid Services.

The first DES was approved in 2003, and on December 4, 2006, Bloomberg reported that, in 2005, the new stents accounted for 43% of total sales for Boston and 52% for Johnson & Johnson. By the end of 2006, the new stent was a top-selling device for Boston, bringing in about $2 billion.

On March 1, 2007, the House Oversight and Government Reform Committee, which conducts oversight of Medicare spending, ordered Johnson & Johnson and Boston to turn over documents, related the marketing of drug-eluting stents.

In May 2007, the Strike Force reported that one Maryland cardiologist had implanted 25 unnecessary stents in 2006, with most patients covered by Medicare.

The salary for the cardiologists who benefit from stent procedures is roughly half-a-million dollars a year, according to an article in Slate Magazine on May 8, 2007.

Legal analysts are predicting that the lawsuits filed by patients injured as a result of the massive over-use of medical devices will involve all the co-conspirators in the medical profession who helped turn the implant business into a billion-dollar industry overnight.

Filed under: 2007, Boston Scientific, Charite, DePuy, Guidant, Johnson and Johnson, MEDICAID, medical devices, MEDICARE, Medtronic, Preemption, Riegel, stents, Supreme Court

Donate: Stop Preventable Infant Deaths and Birth Defects

Click here to lend your support to: Stop Preventable Infant Deaths and Birth Defects and make a donation at www.pledgie.com !

Be a Facebook Fan!

UNITE FOR LIFE Fan Page

UNITE FOR LIFE Fan Page

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 729 other followers

Get the latest from the Fiddaman blog

Archives

UNITE News

October 2014
M T W T F S S
« Sep    
 12345
6789101112
13141516171819
20212223242526
2728293031  

Where Do People See This Blog?

Protect babies from drugs

Eli Lilly Funds Depression Screening Initiatives

depredrugshirt

Matthew Schultz killed by Effexor. Two hours old.

More Photos

Big Pharma Victim

  • I haven't been on in awhile thanks to all those who followed 4 years ago
  • @LindsayRush yay IOWA! 4 years ago
  • Another rainy day here in IOWA. Well at least i had a good time swimmin yesterday. 4 years ago
  • Hey everyone hope you have a great day! THanks to all the new followers :) and for those that continue to follow 4 years ago
  • srry if I dont get on here much I mostly just look at my facebook acct. thanks to all the new followers! 4 years ago

The Indiana Star

Christiane Schultz

  • Is not coping well at all. Loss sucks! 4 years ago
  • is scared to bond with this baby, just in case. 5 years ago
  • Happy 6 months today baby. I love you Matthew. 5 years ago
  • Living with loss, sucks. 5 years ago
  • Thinking I need to discuss plans for this baby soon or I will be having it in my doctors office. Where do I deliver? 5 years ago

Amery Schultz

Seeking Parents in Missouri for Celexa / Lexapro Class Action – Call 800-827-0087

TWEET FOR LIFE

BREATH – The Official Blog of MADNAP – momsandmeds.com

RSS BREATH

  • Untitled
    Originally posted on The Bitter Pill:Kickstarter is a website for artists to use to raise money and complete awesome projects. The best thing to come to the informed consent movement since Thomas Szasz could just be the new, upcoming film by Dan Jenski, “ADDicted” which basically gives Ritalin, Adderall, Concerta and the like a…
  • Untitled
    Originally posted on The Bitter Pill:In the studies submitted to the FDA for approving Zoloft (a drug that has killed numerous families, babies, mothers, children), the drug maker covered up the fact that Zoloft failed to outperform placebo, according to a new consumer fraud lawsuit filed by the firms Baum, Hedlund Aristei & Goldman…
  • Antidepressants Again Linked to Preterm Birth & Seizures
    In what was more than likely originally an attempt to prove that depression causes birth complications, researchers from Yale, Tufts, et al found in two new studies that antidepressants increase the risk of preterm birth and seizures. Read more at this link on the newly redesigned UNITE website.
  • Who Could Do This On Purpose
    Read this blog to find out
  • Canadian Regulation on Fetal Exposure to Psychotropic Drugs – Public Input Needed
    Canadian Regulation on Fetal Exposure to Psychotropic Drugs – Public Input Needed (Cross-Posted on The Bitter Pill blog) Amery and Christiane Schultz have been asked to provide input on proposed recommendations regarding psychotropic drugs in pregnancy in Canada. Amery & Christiane are hard-working activists affiliated with UNITE and MADNAP. Please send […]

UNITE ARCHIVES – Victims & Survivors Against The MOTHERS Act: YouTube Playlist

Videos: Psych Drugs, Birth Defects, Infant Death, Violence & Suicide

UNITE ARCHIVES – Add Your Group To The Coalition Against The MOTHERS Act

CADIMA: 54 Groups and Counting!

UNITE ARCHIVES – The MOTHERS Act Citizen Voting Area on Open Congress

Status: 76% AGAINST S. 324 The MOTHERS Act. Vote & Comment.

UNITE ARCHIVES – Join the Coalition Against The MOTHERS Act on Facebook!

3,271 Facebook Members and Counting!

UNITE ARCHIVES – Stop The Dangerous and Invasive MOTHERS Act!

13,500 Signatures and Counting!

Follow

Get every new post delivered to your Inbox.

Join 729 other followers

%d bloggers like this: