Judge Rejects Plea Deal On Guidant Heart Device

-NYTimes

04/28/2010 - A federal judge in Minnesota on Tuesday rejected a plea agreement between the federal government and the Guidant Corporation, saying that the deal did not hold the company sufficiently accountable for an episode in which it sold potentially defective defibrillators.

The ruling was a setback for the Justice Department, which had characterized the agreement as a demonstration of its get-tough approach to corporate crime. The deal called on Guidant to plead guilty to two misdemeanors and pay a $296 million fine, described as the largest by a medical device company.

But in his opinion, the judge, Donovan W. Frank of United States District Court said the provisions of the agreement were “not in the best interest of justice and do not serve the public’s interest because they do not adequately address Guidant’s history and the criminal conduct at issue.”

The case results from disclosures in 2005 that Guidant did not alert doctors and patients that some of its defibrillators had a defect that might cause them to fail when needed to interrupt an erratic and possibly fatal heart rhythm. At least six patients who got the devices died.

Judge Frank said that prosecutors should have sought probation for Guidant and its parent, Boston Scientific. Probation would have required the companies to take certain steps, like helping to rebuild public confidence in the safety of heart devices, in addition to paying a fine.

The judge also outlined other provisions that might be suitable in a new plea deal, including charitable activities by Guidant to improve heart device safety and improve medical care among minority patients.

After a hearing this month, several doctors and patients wrote to Judge Frank urging him to reject the deal and arguing that former Guidant executives should be criminally charged in the case. But Judge Frank noted in his ruling that it was up to prosecutors, not a court, to decide who should be prosecuted.

Boston Scientific said Tuesday in a statement that it was willing to discuss modifying the plea agreement, but did not elaborate. Boston Scientific, based in Natick, Mass., acquired Guidant in 2006 for $27 billion, soon after the Justice Department began an investigation into the sale of the defibrillators.

A Justice Department spokesman, Charles S. Miller, said that the department was reviewing the ruling.

Two Minneapolis-based cardiologists, Dr. Robert G. Hauser and Dr. Barry J. Maron, who brought the problems with Guidant’s defibrillators to light, were among those who wrote to the judge to protest the plea deal. On Tuesday, Dr. Maron said he was pleased with the ruling.

“The only reason we got involved again was because we wanted to achieve some accountability, and it appears that this may happen in some form,” Dr. Maron said.

Recently, prosecutors charged in court papers that Guidant had knowingly sold potentially flawed defibrillators. But that issue was not addressed in the plea agreement. Instead, the company agreed to plead guilty to two misdemeanor charges that related to the completeness and accuracy of its filings with the Food and Drug Administration.

Robert M. Lewis, an assistant United States attorney in Minneapolis who led the Guidant case, said in an interview this month that the agreement and the proposed $296 million fine had resulted from negotiations between Guidant and the government.

At the hearing this month before Judge Frank, both government prosecutors and a Guidant lawyer testified that the deal was fair. Also, under questioning by Judge Frank, prosecutors defended their decision not to seek probation, saying it was not necessary because, among other things, the company created to enter Guidant’s plea, Guidant LLC, existed only on paper.

In his ruling, Judge Frank took direct aim at that argument, suggesting it contradicted the Justice Department’s own public statements about the case. He noted that a department news release said Guidant’s plea deal was “about accountability.”

Judge Frank wrote, “The interests of justice are not served by allowing a company to avoid probation simply by changing their corporate form.”

The judge also noted complaints by others, including Dr. Hauser and Dr. Maron, that Guidant had violated the law in the past without much consequence and that Boston Scientific, while not responsible for Guidant’s behavior, could still be held accountable.

“The court believes that a period of probation would likely benefit, rather than harm, Guidant and Boston Scientific’s public image,” he wrote.

Daniel R. Margolis, a lawyer in New York who works on medical product cases, said that probation is effectively a way for a court to maintain some control over a company’s activities after it pays a financial penalty.

“He clearly believes that the government and Guidant did not adequately address the issues in their resolution,” Mr. Margolis said of Judge Frank.

In his ruling, the judge outlined the steps that could be part of the probation process for the companies. He also urged that part of the fine reimburse Medicare for its expenses from the sale of the potentially flawed heart devices.

Guidant has admitted that there is widespread underreporting of device failures and that this underreporting leads to an underestimation of the actual failure rates. Further, and despite Guidant's allegations to the contrary, Justice Cullity found that more than 400 of the pacemakers were implanted after Guidant had identified the problem and model numbers effected and after an advisory had been sent to physicians. These findings are consistent with the findings of Guidant's own Independent Panel, which undertook a review of the company in 2006 and confirmed Guidant's culture of secrecy, underreporting and denial.

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