Guidant Settles 4000 Claims, Avoids Trial - For Now

Natick, MAThe Guidant division of Boston Scientific may have dodged a more expensive bullet by settling claims stemming from the recall of Guidant Implantable Cardioverter Defibrillators (ICD), even though it cost the company $195 million to do it.

Rather than going to trial and risk a potentially large jury award, the Massachusetts-based manufacturer of implantable heart devices settled 4000 claims, and avoided court proceedings that were scheduled to commence July 27th. However, the company is not off the hook, yet. Some court suits at the state level are still pending.

Guidant also has to deal with not only the tarnish on its' image, but a worldwide slump in sales of the implantable devices. After recalls by Guidant and competitors St. Jude Medical and Medtronic, product is not moving as it once was and sales have slipped to $5.6 billion, from a full $6 billion per year.

Wary of potential problems with the devices, it is assumed that doctors and their patients are looking at alternatives.

It was in June 2005 that Guidant Corporation - prior to its acquisition by Boston Scientific - began recalling ICDs out of concern over a possible manufacturing defect. Specifically, a failed insulation seal might allow moisture to creep inside, and short-circuit the mechanism. The defibrillator, as most know, works to deliver controlled impulses to the heart to help maintain heart rhythms. With the aging population and the first wave of baby boomers having reached retirement age, the ICD is a popular strategy for people suffering from congestive heart failure, or irregular heart beats. A properly functioning ICD can mean the difference between a full life, and a heart attack.

When the recalls began in 2005 only one model of Guidant defibrillator, the Ventak Prizm 2DR Model 1861, was involved. The recall, however, was soon expanded to include a host of different models represented by Class I and Class II recalls.

When added together, there is the potential for 109,000 of the suspect units having been implanted into U.S. patients. While Guidant had agreed to replace any faulty unit free of charge, it was unclear whether or not the company would also spring for the second surgery required to replace the potentially faulty unit. Potentially because there was no way to conclusively determine whether or not a unit was defective, until it had been explanted, and retrieved.

Terms of the July 14th settlement, beyond the overall cost to the company, were not disclosed, and does not constitute an admission of guilt from the company, given there was no trial.

It is alleged that Guidant knew three years before the recall, as early as 2002, that their defibrillators were potentially defective, but kept mum in order to protect potential sales and avoid any fallout that would hurt the bottom line.

With other lawsuits still pending, Boston Scientific still has the lion's share of its $732 million war chest intact. That amount was set aside in order to fund expected, and potential settlements from the defective ICDs.

In the meantime, Guidant is working to restore confidence in the Guidant brand. A company official was quoted as saying that the settlement would allow the company to better focus time and resources on developing innovative products to serve physicians and patients.

There have been 7 deaths linked to defective Guidant defibrillators.

Class I Guidant Recall: PRIZM 2 DR, CONTAK RENEWAL, CONTAK RENEWAL2

Class II Guidant Recall: VENTAK PRIZM AVT, VITALITY AVT, and RENEWAL AVT Devices, CONTAK RENEWAL 3 and 4, RENEWAL 3 and 4 AVT, and RENEWAL RF Devices.