On June 23, 2006, Bloomberg News reported that Guidant's Contak Renewal devices might fail about 10 times more often than the company projected last year, citing an FDA analysis released in a Texas lawsuit.
The judge in the case unsealed the document that was dated June 16, 2005, which means it was written by FDA officials one day before Guidant began recalling the devices.
At the time of the recall, Guidant claimed that no more than 292 of the units were likely to break down, but the FDA estimate projects thousands of malfunctions within 5 years. In fact, the FDA said "most" of the 16,000 defibrillators may have damaged insulation within five years of use, and 40% of those would fail to produce an adequate electrical shock in a medical emergency, meaning over 3,000 units would likely fail.
"It is probably greater than reported," the FDA memo noted, "and may be much greater than reported."
Attorneys representing the plaintiffs against Guident, recognize the significance of the unsealed FDA analysis. "This is as damaging a document as we're going to come across," said Attorney, Hunter Shkolnik.
The Texas lawsuit is but one of about 340 product liability cases in the courts so far, and Boston Scientific, the new owner of Guidant, believes more than 3,000 patients may eventually file claims, according to its SEC filing in May.
Boston's projection may have been made with inside knowledge of the next hurdle right around the bend. In one of its first honorary duties as the new owner, on May 15, 2006, Boston disclosed in a warning letter to doctors, that another batch of 996 defibrillators might stop working due to an electronic defect that causes the batteries to fail, and warned that the battery failures could prevent the devices from functioning properly and restarting a patient's heart.
The estimated 900 faulty defibrillators that were implanted in patients were not recalled, according to the May 16, 2006, Boston Globe.
The same day, Boston also issued a separate warning to doctors about problems with another group of defibrillators but said it did not know how many patients were affected. Some of those devices were implanted underneath the chest muscles, the company said, instead of under the skin and over the muscles and that positioning caused the defibrillators' titanium cases to wear, leading to malfunctions.
However, Boston must not have been too worried about these added problems because on May 14, 2006, the Financial Times reported that five "Boston Scientific executives have received special bonuses, some potentially worth more than last year's salary."
The five included Lawrence Best, the company's chief financial officer; Paul Sandman, the general counsel; Jim Gilbert, a strategy co-ordinator; Lucia Quinn, the human resources chief; and Paul Donovan, a public relations executive, and were awarded bonuses worth at least $1.98m in cash, plus options and deferred stock grants, the Times said.
They were given the choice of accepting a large cash payment plus options, or options only and deferred stock. The largest cash payment offered, the Times said, was $625,000 to Mr Best, a amount equal to his salary for 2005.
But next month, it was back to the grind on June 26, when Boston announced yet another recall of 27,200 pacemakers and defibrillators involving six brands of devices. According to an FDA press release, this batch of devices were implanted between December 2005 and June 2006. Boston also asked that about 23,000 more devices, in stock at hospitals or with sales representatives, be returned.
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