Boston Scientific Corp.'s Guidant unit was ordered Wednesday to pay $296 million and serve three years of probation for not telling regulators about safety changes it made to some implantable heart devices, a failure prosecutors say put patients at risk.
Guidant LLC pleaded guilty in April to two misdemeanor counts, but U.S. District Judge Donovan Frank initially rejected the $296 million deal, saying that among other things it didn't put the company on probation.
He approved the agreement Wednesday - and added probation - after Guidant filed papers giving him more information about its community service efforts and programs that ensure it complies with federal regulations.
Guidant has 10 days to pay the fines and forfeiture fees.
Frank said the sentence "provides a deterrent effect, and most importantly, provides respect for the law."
An attorney for Guidant declined to comment after the hearing and referred questions to Natick, Mass.-based Boston Scientific, which acquired Indianapolis-based Guidant in 2006 - after the improper disclosures were made.
"The company is pleased that this issue is now resolved," Boston Scientific spokesman Paul Donovan said in a statement. "We continue to believe that Guidant and its employees acted in good faith and with the intention of complying with applicable laws and regulations."
Assistant U.S. Attorney Robert Lewis said in court that Guidant officials made deliberate decisions to conceal information from regulators.
In court filings, he wrote that Guidant came clean only after two Minnesota doctors - investigating the death of a 21-year-old patient whose defibrillator short-circuited - went to the media upon learning that the company did not reveal the product defects.
Still, prosecutors supported the plea agreement and have called the $296 million in fines and forfeiture fees the largest criminal penalty assessed against a medical device company.
As part of probation, Frank said, the court will annually review Boston Scientific and Guidant's compliance efforts to verify Boston Scientific keeps its commitments. The company will have to supply reports on products, finances and other information to probation officials, as well as submit to regular and unannounced inspections of its records, Frank said.
If Guidant does not abide by the terms of probation, a probation officer would ask for a hearing, in which the judge could impose a new penalty.
Guidant discovered a short-circuiting problem in 2002 and 2004 with some of its defibrillators, a problem that could render them unable to deliver the life-saving jolts that patients depended on. The company changed the devices but was accused of falsely reporting the changes or not reporting them at all, leaving doctors and patients unaware of potentially dangerous problems.
The company eventually pleaded guilty to submitting a false and misleading report to the Food and Drug Administration about one defibrillator model and failing to notify regulators about a safety correction to another line of devices.
Guidant attorney Daniel Scott said in court documents that the company had improved its compliance policies since 2005 and upgraded them further after it was acquired by Boston Scientific.
Among the changes, Boston Scientific has taken steps to be more transparent, posting quarterly reports about product performance on its website. Scott also said that the company revised its reporting procedures to eliminate "judgment calls" by requiring that changes stemming from safety issues in the field be reported to the FDA for approval.
He also detailed community service in several programs, including one designed to improve treatment of cardiovascular disease among women, blacks and Hispanics, and another that gives middle and high school students a background in science, technology, engineering and math. Boston Scientific has voluntarily committed to give a total of $15 million to those two programs over the next three years.
"The company has learned a lot from this. They've learned a lot from their mistakes," Scott said in court. "We think, Your Honor, that we're not what we were five years ago. We are much better."
Prosecutors said in court documents that the plea agreement resolves a four-year investigation into events leading up to Guidant's recalls of three models of implantable defibrillators in 2005. Prosecutors said that as of October, 13 deaths associated with product failures have been reported.
The devices at issue are Ventak Prizm 2 and Contak Renewal 1 and 2 defibrillators, which monitor for deadly irregular heartbeats and shock the heart back to a normal rhythm.
Guidant discovered in 2002 that its Ventak Prizm 2 DR was prone to short circuiting. Guidant fixed the flaw that November, but in August 2003 falsely told the FDA the change did not affect the safety or effectiveness of the device, according to the plea agreement.
The deal also says that in mid-2004, the company found a short-circuiting problem with two Renewal models. That device would beep when there was a problem, sending patients to the doctor.
In mid-2004, a patient died just a week after he was sent home by a doctor who followed prompts on a warning screen. In March 2005, Guidant sent out a product update advising doctors that the warning screen indicated a potentially serious problem.
But because the change was made to reduce a health risk, it should have been reported as a product correction, not a product update, the plea deal says. Guidant broke the law by not notifying the FDA about the change within 10 days.
In April, some patients had complained that the deal didn't require restitution. Frank concluded no patients were directly harmed by the two specific acts to which Guidant pleaded guilty.
Many victims have already sued and reached settlements. Victims also can petition for part of the $42 million in forfeiture fees, but Frank and prosecutors acknowledged that it's unlikely the victims would qualify for those funds.
Randy Hopper, an attorney for victims involved in the Guidant litigation, said that because those harmed had to compromise in order to get a settlement, "you have to question whether or not the victims were made whole."
The criminal case was filed in Minnesota because Guidant's heart rhythm management unit was based in the St. Paul suburb of Arden Hills.
(Copyright 2011 by The Associated Press. All Rights Reserved.)