The New York Times
By Barry Meier
January 28, 2006
Federal prosecutors have opened a new front in their investigation into the Guidant Corporation by issuing a subpoena seeking records disclosed in a Texas lawsuit that indicate the company knew that some heart devices could catastrophically fail.
The subpoena, issued Tuesday by the United States attorney in Minneapolis, specifically sought Guidant documents disclosed this month in a Texas state court. Among other things, the records indicate that company executives debated whether to warn doctors that some heart defibrillators could short-circuit. The records suggest that Guidant might have sold potentially flawed devices.
The document request, which was served on lawyers representing plaintiffs in the Texas case, also indicated that federal prosecutors had merged their inquiry with an earlier one by the Food and Drug Administration's Office of Criminal Investigations. The subpoena shows that the government is investigating Guidant for possible violations of health care statutes.
Two legal specialists, after being told of the statutes cited in the subpoena, said their broad range indicated the serious nature of the investigation. Guidant, based on findings, could face civil or criminal charges.
"They are investigating in the broadest possible way," said Joan Krause, a director of the Health Law and Policy Institute at the University of Houston. "They are looking at potential fraud involving government plans like Medicare, private health plans and employee benefit plans."
A spokesman for Guidant, Steve Tragash, said yesterday that the company had no comment on the latest document request. Guidant has said that it did nothing wrong and that it made all required reports about product problems to the F.D.A.
Jeffrey N. Wasserstein, a lawyer in Washington specializing in health cases, said, "I'd be a little worried." The lawyers said neither was involved in the Guidant case.
The latest disclosure comes amid a turbulent rush of news involving Guidant, the nation's second-biggest maker of heart devices after Medtronic, just days after it agreed to be acquired by Boston Scientific for $27 billion, or $80 a share.
Yesterday, Guidant reported that its fourth-quarter earnings fell sharply from the year-earlier period, a result of heart defibrillator recalls and lost sales. On Thursday, Boston Scientific received an unusually strong warning from the F.D.A. about some of its procedures, which could result in the delayed approval of new products.
In trading yesterday, Guidant shares fell $1.54, to close at $73.72. Boston Scientific fell $1.62, to $21.63. Because of considerations involving the value of Boston Scientific stock that underlie the Guidant plan, the deal's value has dropped somewhat.
The newest Justice Department subpoena was sent to a plaintiff's lawyer, Robert Hilliard of Corpus Christi, who is representing two heart patients in a claim against Guidant. He provided a copy to The New York Times and said in a telephone interview that a federal investigator had asked him to retain all Guidant documents produced in the case.
A spokeswoman from the United States attorney's office in Minneapolis did not return a telephone call yesterday seeking comment.
The Justice Department's inquiry, which began in October, is focusing on Guidant's handling of safety issues related to defibrillators known as the Prizm 2 DR, the Contak Renewal and the Contak Renewal 2. Small numbers of the devices have short-circuited, a malfunction related to the use of insulating material known as polyimide that can deteriorate when exposed to moisture.
In October, Guidant disclosed that it had received a federal subpoena, but it is not clear whether it received the latest document request.
A defibrillator is a life-saving device intended to sense and electrically disrupt potentially fatal heart rhythms. A short circuit can render the device useless. At least seven patients are known to have died in incidents in which the devices shorted, though the number is probably higher because physicians only recently became aware of the problem.
Guidant first became aware of polyimide-related failures in early 2002 in the Prizm 2 DR, but the company waited until May 2004 to notify doctors about the flaw, after it became aware that The New York Times was about to publish an article about the device.
The Justice Department subpoena specifically mentions Guidant documents that relate to a more recent episode involving the Contak Renewal and Contak Renewal 2.
The records were initially produced under seal in the Texas lawsuit but they were released this month by the case's presiding judge, Judge Jack Hunter of State District Court in Corpus Christi, who cited a Texas law barring the sealing of court records related to safety issues. The Times obtained the documents after it filed a motion seeking the release of all safety-related records in the case, and it published a recent article about them. Guidant has appealed Judge Hunter's decision.
The records released by Judge Hunter indicated that in October 2004, more than two years after the Prizm 2 DR problem, Guidant confirmed that a small but growing number of Contak Renewals were also shorting out because of polyimide degradation.
The documents include a hand-written annotated chronology related to the Contak Renewal that was apparently composed by the head of Guidant's cardiac unit, J. Frederick McCoy Jr. It suggested that Guidant executives debated in January 2005 whether to alert doctors to the Contak Renewal problem.
At the time of the debate, one entry also states "Informed Ron Dollens: Guido Neels of the development," an apparent reference to Guidant's chief executive and chief operating officer at the time; both men have since retired. Mr. Dollens declined, through a company spokesman, to comment. Mr. Neels, reached by telephone, also declined to comment.
The released documents, hand-dated Oct. 20, 2004, apparently projected that existing inventories of Contak Renewals would run out in mid-November 2004. The company did not disclose the Contak Renewal problem until June 2005, after the F.D.A. had opened an inquiry.
Guidant has previously said that it did not issue earlier alerts about the devices because the number of failures had been too small.
Asked this month about the Texas documents, Guidant issued a statement about the records, stating that they showed that the company had, among other things, taken "responsible action during an ongoing investigation" of the devices and that it had "aggressively evaluated product performance and communication thresholds."
Yesterday, Mr. Tragash, the company spokesman, declined to respond to more questions on the documents.
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