Guidant Defibrillators: A Fixed Design and Defective Stock Still for Sale

Guidant reached a $30 million civil settlement over allegations that it knowingly sold defective heart devices for implantation in Medicare patients. The government’s complaint alleged approximately 2,000 false claims. The government alleged that Guidant corrected the design but continued selling older stock, keeping doctors and even its own sales force uninformed about the defect.

The Department of Justice announced the civil settlement on October 17, 2013. It covered alleged sales between 2002 and 2005. Boston Scientific had acquired Guidant in 2006, after that conduct. The Guidant defibrillator guilty plea concerned reporting failures to the Food and Drug Administration.

What the Defibrillator Was Supposed to Do

Guidant’s Ventak Prizm 2 DR, Model 1861, and Contak Renewal 1 and 2, Models H135 and H155, were implantable heart devices designed to detect a dangerous irregular heartbeat and deliver an electrical shock to restore a normal rhythm. The devices sat inside the patient’s chest. The government’s complaint alleged that an electrical defect could defeat the very function for which they had been implanted.

The failure was called arcing. When a device tried to deliver a shock, the current could travel back into the device instead of reaching the heart. The resulting short circuit could leave it unable to deliver the needed therapy. A device meant to rescue a patient during a dangerous rhythm could fail at that moment.

The government’s complaint described a concrete engineering problem in the Prizm: polyimide insulation around a wire could break down, and that wire could sit too close to another component. Guidant’s first manufacturing correction added an insulating adhesive coating to the backfill tube, also keeping the wire farther away. The government alleged that Guidant understood the change corrected a defect that could leave the device inoperable.

A manufacturing change can improve devices coming off the line while older versions remain on hospital shelves, in sales representatives’ inventory and inside patients. The complaint followed those older devices through the company’s decisions after the correction.

What Guidant Knew and What It Kept Selling

The government alleged that Guidant knew about the Prizm defect as early as April 2002 and the similar Renewal defect as early as November 2003. It said the company continued selling the defective versions after taking corrective manufacturing action. The complaint went further than a general allegation of concealment: it identified internal risk assessments, tracking reports and committee decisions.

The Failures Were Expected

According to the complaint, Guidant’s internal tracking separated Prizm devices made before the correction from those made afterward. The company expected arcing to continue in the older population. Its June 2002 health risk assessment concluded that an arcing injury could be life-threatening and that unexpected deaths could reasonably occur. The government alleged that Guidant did not disclose that assessment to physicians or the Food and Drug Administration.

The complaint then described the reason given for closing the tracking report in April 2003: failures in the older devices were consistent with what the company expected. Later failures did not persuade Guidant to reopen it because they involved devices made before the correction.

On the government’s account, the company had an explanation for the continuing failures. That explanation also identified the stock it kept selling.

A Stop-Ship Order That Stopped at the Factory

For the Renewal devices, the complaint alleged that Guidant stopped manufacture and factory shipments in August 2004 because of the severity of the arcing issue. But those orders did not cover devices already held by sales representatives. In September, the Product Performance Committee recommended continuing to sell field inventory, including trunk stock distributed before the stop-ship order. A committee of senior officers approved that recommendation.

That left a commercially important distinction between a factory shipment and a sale from inventory already in the field. A representative could still have a device available for a hospital even though the factory had stopped sending that version out. According to the complaint, Guidant also left health care providers uninformed about defective devices they already held but had not yet implanted.

The government alleged another revealing choice after the Prizm problem began circulating among physicians:

The alleged trigger for telling the sales force was how far the information had spread outside the company.

A Safety Redesign Described as Faster Production

The government alleged that Guidant described a redesigned Renewal header to the Food and Drug Administration as a manufacturing improvement while concealing its safety purpose. By then, the complaint said, the company had identified deteriorating insulation as the cause of arcing and stopped factory shipments.

The complaint alleged that the request also omitted the known cause of the arcing, the projected failure rate and the factory stop orders. For an engineering or regulatory employee, the comparison is unusually direct: the reason recorded for changing the device inside the company against the reason given to the regulator.

According to the complaint, a chief medical officer steered the physician message toward a yellow screen warning about leads, the wires carrying the shock, even though Guidant knew the warning also appeared when the device itself had arced.

The complaint alleged that senior officers rejected a recall recommendation. The product committee then proposed retrieving shelf devices for testing, which the compliance director said could occur without a formal recall. A formal recall would have required notice to the Food and Drug Administration and communication with the public and health care providers.

The eventual March 2005 Product Update omitted arcing, insulation degradation and the possibility of deaths from the known defect, the government alleged. An accompanying question-and-answer document went to sales representatives to help them speak with physicians.

The government’s complaint described the assurance in that document:

Engineering had a defect to correct. The sales message, as the government alleged it, gave physicians a routine update without that explanation.

The Guidant Defibrillator Guilty Plea

In its 2010 guilty plea, Guidant admitted misleading the Food and Drug Administration and failing to report a correction concerning the devices. The government’s later civil complaint identified two misdemeanor counts and tied each to a different product communication.

The Justice Department’s account of the criminal information explains the Prizm charge. Guidant changed the design to address arcing, then told the agency in its August 2003 report that the changes did not affect safety or effectiveness. The civil complaint records Guidant’s acknowledgment that this description was false and misleading.

The Renewal count concerned the March 2005 Product Update. The criminal information charged that it was a safety correction addressing misleading operating instructions. Guidant had to notify the Food and Drug Administration within ten days and failed to do so. The later complaint identifies that unreported correction as the subject of the second count.

These were decisions about what the regulator would learn from the company’s reports and communications. The civil case then followed the defective devices into government-paid care: what Guidant sold, what physicians implanted and what providers billed Medicare.

Can a Whistleblower Take Legal Action Against a Medical Device Company?

Yes. A patient who had received one of the recalled Guidant devices brought a False Claims Act qui tam case, and the government joined it in 2011. The government’s allegation was that Guidant caused healthcare providers to submit false Medicare claims by selling defective devices for implantation while withholding what it knew about their defects.

The complaint’s payment argument was concrete: when comparable devices without the arcing defect were available, implanting the defective versions was not reasonable and necessary care. Patients relied on a device the government alleged was defective, and taxpayers paid for its implantation.

How Does Reimbursement Work for Medical Devices?

For implanted devices, Medicare generally includes the device cost in the hospital’s payment for the procedure or stay. The physician may strongly influence the brand and type selected, while the hospital buys the device and receives the facility payment. Those different roles explain how a manufacturer’s decisions can reach a government claim submitted by someone else.

In Guidant’s case, the complaint connected the allegedly defective product to specific implantation services. It described claims information identifying the facility, the device type, its manufacturing date, the implant date and the Medicare payment. The manufacturing date mattered because the alleged defect concerned versions made before corrective action. The implant date placed that version in government-paid care after the company allegedly knew about the problem.

The Justice Department announced a $2.25 million share for the whistleblower who brought the case. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

The Recall and the Patient Case Followed the Same Devices

The public disclosure and recall also produced patient product-liability litigation. A federal court opinion in that separate litigation describes the Prizm insulation and wire-spacing problems, the manufacturing changes and continued sales of older units. It also explains a difficulty faced by patients and physicians: there was no way to predict whether a particular device would fail.

The government’s civil complaint alleged that Guidant contacted the Food and Drug Administration about a physician letter after learning that a newspaper intended to publish the Prizm story. It said the June 2005 letters finally disclosed the full arcing problem in both product lines, including the possibility of a life-threatening failure without advance warning. The agency classified the safety advisories as Class I recalls, its most serious recall category.

The separate Guidant warranty-credit case concerned allegations that withheld credits and rebates for replacement pacemakers and defibrillators inflated costs to federal programs.

What Evidence Is Needed to Prove Fraud?

In the Guidant civil case, the evidence described in the complaint connected what the company knew about a particular device version to its decisions to sell it and the Medicare claims that followed. The risk assessment, manufacturing correction, inventory decision and physician communication each answered a different part of that question.

The 2020 Journal of Forensic and Investigative Accounting paper A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud explains that people with knowledge of a fraud can help expose conduct that would otherwise remain hidden.

Here, that knowledge could explain why a tracking report closed despite continuing failures, why a factory stop left field inventory available, or why a safety correction became a routine product message. The government’s complaint put those internal decisions beside the manufacturing and implantation dates.

An engineer may know the purpose of a change order. A sales representative may know which version remained available and what message accompanied it. A hospital purchasing or billing employee may see the replacement credit or the claim.

You Know Why the Device Changed

If you know why a cardiac device was redesigned, why older stock kept selling or why a replacement credit never reached the buyer, speak with our whistleblower experts. We build the case with you and bring in medical device fraud whistleblower lawyers who understand how manufacturing decisions and reimbursement records fit together. We stay beside you through the process, working to turn that inside knowledge into your strongest medical device whistleblower case.