Bloomberg News

Boston Scientific to Pay $30 Million in Heart-Device Accord (2)

October 17, 2013

Boston Scientific Corp. (BSX:US) agreed to pay $30 million to settle a lawsuit in which a whistle-blower alleged the company’s Guidant unit knowingly sold defective heart devices, U.S. officials said.

Guidant, which Boston Scientific bought in 2006 for $27.5 billion, was accused of hiding defects in its Prizm line of heart defibrillators from patients, doctors and the U.S. Food and Drug Administration, the U.S. Justice Department, which joined the suit, said today in a statement.

Boston Scientific paid $296 million almost four years ago to resolve a government probe of Guidant’s handling of its heart devices. Guidant officials pleaded guilty on behalf of the company in 2011 to a criminal charge for misleading regulators. The company was placed on probation for three years.

“This settlement, along with the prior criminal prosecution of Guidant, demonstrates there will be significant consequences when companies engage in conduct that threatens health and safety and violates the law,” Stuart Delery, assistant attorney general in the Justice Department’s civil division, said in the statement.

James Allen, the recipient of a Prizm defibrillator who filed the original suit, will receive $2.25 million as part of the settlement. Allen lives in Lancaster, New York, according to court records.

Company Comment

“While the company continues to deny the allegations made in the complaint, it felt it was in the best interests of all parties to settle this matter and avoid further protracted litigation,” Peter Lucht, a spokesman for Natick, Massachusetts-based Boston Scientific, said in an interview.

Allen and U.S. officials argued in the suit filed in federal court in Minnesota that Guidant knew as early as 2002 that the implantable cardiac devices had a potentially life-threatening defect. Guidant is based in St. Paul, Minnesota.

By selling faulty devices while it was also selling corrected ones, “it was reasonably foreseeable” that defective versions would be implanted in Medicare patients, according to the complaint. Guidant “knowingly caused approximately 2,000 false or fraudulent claims to be submitted to the Medicare program,” the U.S. said.

The settlement brings to $972 million the total amount heart-defibrillator makers Boston Scientific and Medtronic Inc. (MDT:US) have paid to resolve suits and federal investigations of claims their defective devices caused at least 13 deaths, according to data compiled by Bloomberg.

The case is U.S. ex rel. Allen v. Guidant LLC, 11-cv-00022, U.S. District Court, District of Minnesota (St. Paul).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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Companies Mentioned

  • BSX
    (Boston Scientific Corp)
    • $12.78 USD
    • -0.36
    • -2.82%
  • MDT
    (Medtronic Inc)
    • $61.74 USD
    • -0.84
    • -1.36%
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