Judge Rejects Prosecutors' Lenient Settlement of the Case of the Hidden Defibrillator Defects

We just discussed the proposed settlement of a case in which the Guidant subsidiary of Boston Scientific was alleged to have withheld information about defects in its implantable cardiac defibrillators that were associated with six patient deaths (see next most recent post here with more complete summary).  The devices were manufactured in 2000-02, and the issue first became public in 2005.  The proposed settlement included a seemingly large fine for the company. 

Now the New York Times has reported that the presiding judge has rejected the settlement as too lenient.

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 flawed heart 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 story brought several peculiar aspects of the settlement to light.

- The settlement seemed to ignore the most egregious misconduct alleged:

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.

- It was not really the Guidant subsidiary that was going to plead guilty, but a new entity apparently constructed solely to "take the rap."

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.'

So, the judge demanded that at least the company be put on probation, and possibly be required to do some good works:

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.

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.

However, the judge felt he could not require prosecution of the actual people who authorized, directed, or implemented the misbehavior at issue.

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.

We have discussed a series of settlements and convictions resolving cases of alleged wrong-doing by health care organizations.  Almost none included any penalties for people who authorized, directed or implemented the bad behavior.  None of the financial penalties were so big as to be more than another cost of doing business for the organizations involved.  Some of the cases included gimmicks, like a subsidiary constructed only to plead guilty, that otherwise seemed to lessen accountability. 

Despite the US Justice Department's assertion of a new "get-tough" approach, this new settlement did not seem like any more of a deterrent to bad behavior than the parade of settlements that cam before, that is, until Judge Frank acted. 

We applaud the judge for trying to hold at least one large health care organization accountable for its misdeeds.  However, I again suggest that to truly reform health care, we need rigorous regulation of health care organizations that has the power to deter unethical behavior that may risk patients' health.

Boston Scientific to Plead Guilty (of Suppressing Information about Failure-Prone Defibrillators)

In the early days of Health Care Renewal (2005-2006) we posted several times about allegations that Guidant hid information about defects in the implantable cardiac defibrillators (ICDs) the company manufactured.  As we noted in early 2005 here, Guidant executives allegedly knew that ICDs made from 2000-2002 were at risk for short-circuiting and failing, thus making them unable to deliver potentially life saving electrical shocks meant to prevent cardiac arrests, but the company only revealed the problem in 2005.  By failing to notify physicians and the public, Guidant executives let expensive and profitable, but potentially useless devices to continue to be implanted, potentially increasing the risk of sudden death for the patients who received them.  Then here we noted reports that Guidant continued to ship failure-prone devices even after it had designed and started to manufacture new ICDs that were supposed to be less likely to fail.  By June, 2005 we posted that Guidant had recalled thousands of ICDs, including models that were previously not identified as likely to fail.  Later that year, the case rated an article by Robert Steinbrook in the New England Journal of Medicine.  Towards the end of 2005, we noted that Eliot Spitzer had sued Guidant for fraud.  At the end of the year, more information appeared, suggesting that Guidant knew the ICDs were flawed, but continued to sell them.  Still more appeared early in 2006.  Then the business media became interested in the bidding war between Johnson and Johnson and Boston Scientific for Guidant, provoking a bit more interest in the tale of the suppression of data about the flawed ICDs.

And then there was silence.  The story of the suppressed information about the defective defibrillators became old news, as did the story of the merger between Boston Scientific and Guidant.  The story vanished, nothing more happened, until last week

A lone echo from this story from what now seems long ago was heard, as reported by Bloomberg,

Boston Scientific Corp. agreed to pay $296 million to settle a U.S. Justice Department investigation into its Guidant unit’s handling of heart devices and restated third-quarter results to show a loss.

Guidant will plead to two criminal misdemeanors for failing to properly alert the U.S. Food and Drug Administration about problems with some of its implantable defibrillators, Boston Scientific said today in a statement. The probe concerned product advisories sent by Guidant before its acquisition by Boston Scientific in April 2006, the parent company said.

So even though Boston Scientific's now subsidiary Guidant will plead guilty to a crime involving suppression of information about the flaws in its defibrillators, the current CEO of Boston Scientific denied anyone did anything wrong:

'Guidant and its employees acted in good faith and believed they complied with applicable laws and regulations,' Boston Scientific Chief Executive Officer Ray Elliott said in the company’s statement. 'We elected to resolve this matter so we could put it behind us and devote our full energies and resources to developing our innovative technologies.'

I guess it's not hard to put a little matter of criminal conduct behind a big health care corporation and its leaders when the only downside of pleading guilty is a fine paid seven years after the criminal conduct occurred.  Moreover, that fine that will come out of the company treasury, and its impact will thus be spread among stock-holders, employees, and customers, not targeted at those who performed, directed or approved the acts that lead to the guilty plea.

Although the Bloomberg report was more detailed than others I found, none mentioned that the information that was concealed back in the day was about the failure of an expensive device that was supposed to be life-saving, and whose failure might doom some of its recipients to an early death.  Anyone reading these late 2009 articles would get a sense that Guidant personnel were guilty of some technical reporting violations, not of withholding information that supposed life-saving treatments might be useless.

As in the case of many other cases that resulted in legal settlements or guilty pleas, the company involved only needs to pay a fine, and no individual who performed, directed or approved unethical or illegal acts will suffer any negative consequences.  I submit once again that such fines are viewed merely as costs of doing business by the affected companies, and do not deter future bad behavior.

In this vein, note that in 2005, Boston Scientific agreed to a $74 million settlement of charges that it knowingly sold a defective coronary artery stent system (see post here), which did not deter the company from merging with Guidant. 

This case also demonstrates how the anechoic effect continues.  Bad behavior by large health care organizations still gets little notice, and when it is noticed, its real clinical and human effects are discounted.

Real health care reform would address how leaders of health care organizations can continue to act with impunity even when their actions can lead to sickness, disability, and death.

Boston Scientific to Plead Guilty (of Suppressing Information about Failure-Prone Defibrillators)

In the early days of Health Care Renewal (2005-2006) we posted several times about allegations that Guidant hid information about defects in the implantable cardiac defibrillators (ICDs) the company manufactured.  As we noted in early 2005 here, Guidant executives allegedly knew that ICDs made from 2000-2002 were at risk for short-circuiting and failing, thus making them unable to deliver potentially life saving electrical shocks meant to prevent cardiac arrests, but the company only revealed the problem in 2005.  By failing to notify physicians and the public, Guidant executives let expensive and profitable, but potentially useless devices to continue to be implanted, potentially increasing the risk of sudden death for the patients who received them.  Then here we noted reports that Guidant continued to ship failure-prone devices even after it had designed and started to manufacture new ICDs that were supposed to be less likely to fail.  By June, 2005 we posted that Guidant had recalled thousands of ICDs, including models that were previously not identified as likely to fail.  Later that year, the case rated an article by Robert Steinbrook in the New England Journal of Medicine.  Towards the end of 2005, we noted that Eliot Spitzer had sued Guidant for fraud.  At the end of the year, more information appeared, suggesting that Guidant knew the ICDs were flawed, but continued to sell them.  Still more appeared early in 2006.  Then the business media became interested in the bidding war between Johnson and Johnson and Boston Scientific for Guidant, provoking a bit more interest in the tale of the suppression of data about the flawed ICDs.

And then there was silence.  The story of the suppressed information about the defective defibrillators became old news, as did the story of the merger between Boston Scientific and Guidant.  The story vanished, nothing more happened, until last week

A lone echo from this story from what now seems long ago was heard, as reported by Bloomberg,

Boston Scientific Corp. agreed to pay $296 million to settle a U.S. Justice Department investigation into its Guidant unit’s handling of heart devices and restated third-quarter results to show a loss.

Guidant will plead to two criminal misdemeanors for failing to properly alert the U.S. Food and Drug Administration about problems with some of its implantable defibrillators, Boston Scientific said today in a statement. The probe concerned product advisories sent by Guidant before its acquisition by Boston Scientific in April 2006, the parent company said.

So even though Boston Scientific's now subsidiary Guidant will plead guilty to a crime involving suppression of information about the flaws in its defibrillators, the current CEO of Boston Scientific denied anyone did anything wrong:

'Guidant and its employees acted in good faith and believed they complied with applicable laws and regulations,' Boston Scientific Chief Executive Officer Ray Elliott said in the company’s statement. 'We elected to resolve this matter so we could put it behind us and devote our full energies and resources to developing our innovative technologies.'

I guess it's not hard to put a little matter of criminal conduct behind a big health care corporation and its leaders when the only downside of pleading guilty is a fine paid seven years after the criminal conduct occurred.  Moreover, that fine that will come out of the company treasury, and its impact will thus be spread among stock-holders, employees, and customers, not targeted at those who performed, directed or approved the acts that lead to the guilty plea.

Although the Bloomberg report was more detailed than others I found, none mentioned that the information that was concealed back in the day was about the failure of an expensive device that was supposed to be life-saving, and whose failure might doom some of its recipients to an early death.  Anyone reading these late 2009 articles would get a sense that Guidant personnel were guilty of some technical reporting violations, not of withholding information that supposed life-saving treatments might be useless.

As in the case of many other cases that resulted in legal settlements or guilty pleas, the company involved only needs to pay a fine, and no individual who performed, directed or approved unethical or illegal acts will suffer any negative consequences.  I submit once again that such fines are viewed merely as costs of doing business by the affected companies, and do not deter future bad behavior.

In this vein, note that in 2005, Boston Scientific agreed to a $74 million settlement of charges that it knowingly sold a defective coronary artery stent system (see post here), which did not deter the company from merging with Guidant. 

This case also demonstrates how the anechoic effect continues.  Bad behavior by large health care organizations still gets little notice, and when it is noticed, its real clinical and human effects are discounted. 

Real health care reform would address how leaders of health care organizations can continue to act with impunity even when their actions can lead to sickness, disability, and death.