Judge Adds Probation to $296M Guidant Plea Deal

The fine imposed on Guidant, which hid information from federal regulators about "catastrophic failures" in three of its life-saving devices, is reported to be the largest criminal penalty that's ever been handed to a medical device company.

A federal judge on Wednesday signed off on a plea agreement that calls for Boston Scientific Corporation's Guidant subsidiary to pay $296 million-but only after adding three years of probation to the agreement.

The U.S. Department of Justice released information about the ruling, which was made by U.S. District Court Judge Donovan W. Frank.

The plea agreement resulted from allegations that Guidant, LLC, concealed information from the U.S. Food and Drug Administration (FDA) regarding what they called “catastrophic failures” in three of its implantable cardioverter defibrillator (ICD) models. Guidant was charged by the Justice Department in February 2010 and formally pleaded guilty last April to criminal misdemeanor charges for violating federal laws.

Boston Scientific, which acquired Guidant in 2006, is based in Natick, Massachusetts, but Guidant's cardiac rhythm management division-which produced the faulty defibrillators-is headquartered in Arden Hills.

The $296 million that Guidant must pay includes a $254 million criminal fine and $42 million in forfeiture. It is reported to be the largest criminal penalty ever imposed on a medical device company.

“The safety and integrity of critical medical devices is assured only by close FDA oversight,” First Assistant U.S. Attorney John Marti of the District of Minnesota said in a statement. “This agency can only perform its mandated duty when medical device manufacturers provide the agency with timely and accurate information. When Guidant withheld important information, patient safety was jeopardized. The court's sentence recognizes the harm of Guidant's conduct.”

A Thursday morning phone call to a Boston Scientific representative seeking comment on the judge's ruling was not immediately returned.

Guidant's offenses date back to 2002. Court documents filed in federal district court in St. Paul indicated that Guidant became aware that year that one of its ICD models-the Ventak Prizm 2 DR-had an electrical problem that rendered it inoperative and unable to deliver life-saving therapy to those in whom it was implanted. Guidant changed the design of the device in November 2002 to correct the problem but falsely told the FDA in 2003 that the design changes didn't affect the device's safety or effectiveness.

Then in early 2004, Guidant discovered a similar short-circuit problem with two other ICD models-the Renewal 1 and Renewal 2 devices, according to court documents. Following a July 2004 patient death resulting from the problem, Guidant discovered that its operating instructions to physicians that outlined how to respond to a short circuit were false and misleading. The company corrected those instructions through information sent via an overnight delivery but downplayed the correction by calling the information a “product update.” Guidant was required to alert the FDA about the communication within 10 days but failed to do so.

In April 2010, Frank rejected a plea agreement reached between Boston Scientific and the Justice Department, saying that it was “not in the best interests of justice” and does not serve the public's best interest because it did not “adequately address Guidant's history and the criminal conduct at issue.” Frank made several suggestions at the time of his rejection, including that Guidant pay restitution, possibly to Medicare; that Guidant and Boston Scientific be placed on probation; and that Guidant perform community service.

Following Frank's rejection, Boston Scientific said that it planned to work with the Justice Department to develop a modified plea agreement that was acceptable to the court, the government, and the company.

A defense attorney representing Guidant said in a document filed last week that the company has improved its compliance policies since 2005, taken steps to be more transparent, and revised its reporting procedures to comply with FDA regulations. He also highlighted several community service programs that Guidant has participated in.