Guidant (Boston Scientific) Gets Probation

The latest in the parade of legal settlements by health care corporations involves a new wrinkle. 

We have been writing about the case of Guidant Corporation's faulty implantable cardiac defibrillators (ICDs) in 2005, almost since the start of the Health Care Renewal blog.  A quick summary, via the Minneapolis Star-Tribune, is:
In 2005 Minneapolis Heart Institute doctors Barry Maron and Robert Hauser went public with concerns about a Guidant defibrillator called the Ventak Prizm 2 after a 21-year-old patient died when his defibrillator short-circuited and failed to revive him after he went into sudden cardiac arrest.

Guidant had known about the short-circuiting issue since 2002 and had made two attempts to fix the device, according to court documents. The company did not alert the FDA -- even though federal law requires manufacturers to report changes that may pose a health risk to patients.

In early 2004, Guidant discovered a similar short-circuiting problem in different defibrillator models called Contak Renewal 1 and 2. The company ordered its factory to stop making and shipping the models, but potentially faulty products on hospital shelves continued to be implanted in thousands of patients.

Although engineers at Guidant had recommended recalling the Contak Renewal devices, upper management rejected the proposal, court documents state. Instead, Guidant issued the 'least aggressive' form of communication, called a product update, in which sales representatives were told to tell doctors that 'nothing was broken' with the device.

Maron and Hauser met with top Guidant officials in May 2005 and urged the company to communicate the problem to doctors, but Guidant refused. The doctors then went to the New York Times, which published an article indicating that the company had known for three years that the Ventak Prizm model could short-circuit, but did not communicate that to doctors.

In June 2005, Guidant issued a public missive detailing safety issues with the defibrillators, which were later recalled by the FDA.

A longer version from a series of Health Care Renewal posts can be found here.

In 2010, Guidant, now a subsidiary of Boston Scientific, agreed to a settlement which would involve guilty pleas to misdemeanors and payment of a large ($296 million) fine, but the settlement was rejected by a federal judge who found it to be too lenient (see post here). Now the judge has approved a new version, again per the Star-Tribune,
In what is believed to be the largest criminal penalty ever imposed in a medical device case, a federal judge on Wednesday approved an agreement calling for Guidant Corp. to pay $296 million for concealing safety information about several of its heart devices.

The denouement in U.S. District Court in St. Paul ended a difficult chapter for one of the biggest players in Minnesota's signature medical technology industry. Thirteen patient deaths have been associated with faulty devices made by Arden Hills-based Guidant, which is now part of Boston Scientific Corp. The controversy lingered for almost six years and raised questions about how safety issues involving medical devices are communicated to the Food and Drug Administration, doctors and patients.

Last April, U.S. District Judge Donovan Frank rejected a previous $296 million settlement between the Department of Justice and the company. This time that fine remained intact, but Frank also called for Boston Scientific to serve three years' probation.

Boston Scientific will be required to make quarterly reports to the U.S. Probation Office regarding safety and compliance issues, as well as submit to regular, unannounced inspections of its records. Frank also called upon Boston Scientific to continue charitable programs intended to raise awareness about heart disease.

'I believe this serves not only the interests of the community and the interests of justice, but respect for the law and corporate responsibility,' Frank said.

The new wrinkle is, of course, probation. I have not previously heard of a US health care corporation put on probation in a criminal settlement. Presumably, the idea is that probation will involve court supervision of the company that might be less lenient than US Department of Justice oversight via a corporate integrity agreement.

So this is a small step forward, but once again, the extent that this settlement will deter future bad behavior seems small. Once again, although the fine imposed seems large, it is small compared to the money to be made by selling these very expensive devices. Moreover, the cost of the fine can be diffused over the entire company, and ultimately over all its employees, its stockholders, and its customers.

Since no individual will pay a penalty, and since it is likely some individuals made themselves rich or richer from the company's actions, it is likely that other individuals in the future will authorize, direct, and implement similar bad behavior to fatten their bonuses and total compensation.

Last June, we noted that some government officials were starting to talk tough about imposing penalties on individuals for misbehavior by health care corporations. In fact, in 1943, the US Supreme Court found that corporate leaders could be held responsible for corporate bad behavior, the so-called Responsible Corporate Officers doctrine. However, the laissez faire malaise that apparently infected most government officials starting in the 1980s seemed to prevent anyone from invoking this doctrine during the last 30 years of health care dysfunction. That malaise still seems to be rendering US federal law enforcement effete, at least when applied to wrong-doing by big, powerful, rich health care corporations.

So like Cassandra, fated to have her predictions always ignored, I repeat: When it comes to health care's leadership, society seems to have acceded to defining deviancy down. Until we start holding health care leaders to high standards, expect their organizations not to uphold high standards.  Further, expect organizations that did not uphold high standards in one instance to fail to uphold them in other instances.  If we really want high quality accessible, reasonably priced health care, we need true health care reform that reduces concentration of power in large organizations, and makes health care organizations' leadership accountable, ethical, and transparent. That will not be easy.