$296 Million Plea Guidant Plea Agreement—Rejected!

In a bold move, Judge Donovan Frank rejected a $296 million plea deal, offered by Boston Scientific and prosecutors. The proposed agreement was offered for Guidant’s failure to timely report problems with some of its defibrillators, which have caused at least seven deaths and numerous injuries. Boston Scientific purchased Guidant back in 2006. The federal Minnesota judge considered the arrangement, but ultimately rejected deal (which included a guilty plea by Guidant for two misdemeanors: submitting a false and misleading report to the FDA, and failing to notify the FDA about a device safety correction).

Judge Frank stated that “[a]t a minimum, the public’s interest in accountability would be served by Guidant and Boston Scientific being placed on probation, regardless of the fact that Boston Scientific acquired Guidant after the events in question. And, the court believes that a period of probation would likely benefit, rather than harm, Guidant’s and Boston Scientific’s public image.” The judge indicated that some measure of community service would be appropriate.

The judge concluded that he could not properly order restitution to victims directly, because patients were not “directly harmed” by the misdemeanors that Guidant fessed up to.
Prosecutors and Boston Scientific will revisit the agreement and seem likely to modify it to satisfy the judge’s concerns. If the monetary amount stays the same, this will be the largest such monetary “fine” levied on a medical device manufacturer. Many judges would have taken it, but Judge Frank is doing his best to do what is right.

I confess that I have a little soft spot for Boston Scientific in all of this—it purchased a company with a bad history hoping to turn it around, and it’s getting a lot of grief for its trouble. But it would be too easy to let them off the hook simply because Guidant changed its corporate form. I think the company will emerge stronger for the experience.