On February 25, 2010, the Justice Department charged Guidant (acquired in 2006 by Boston Scientific) with criminal violations of the federal Food, Drug, and Cosmetic Act related to safety problems with its implanted defibrillators. The DOJ alleges that Guidant became aware of electrical problems with these life-saving devices that could render them inoperative and, in response, redesigned the devices and provided physicians with updated operating instructions. According to prosecutors, however, Guidant did not fully explain the problems and corrections to the FDA as required by law. Guidant is expected to enter a formal guilty plea agreement. Boston Scientific has already paid $296 million on behalf of Guidant to resolve the charges, and has said that its employees acted in good faith, intending to comply with law, and it is pleas ed to be able to resolve the matter.
In December 2009, Boston Scientific announced that it agreed to pay the federal government $22 million to resolve allegations that Guidant paid physicians kickbacks through post-marketing research designed to induce them to use Guidant products. In 2003 and 2004, Guidant conducted post-marketing studies of its implantable cardiac devices and the federal government contended that such studies were designed to increase device sales by paying physicians to select Guidant devices, rather than devices manufactured by Guidant's competitors, to implant into their patients.
Participating physicians were paid a fee of $1,000 to $1,500 for each implanted device. The government alleged that the participating physicians were selected because Guidant believed the fees associated with participation would cause the physicians to switch some of t heir business to Guidant.
Under the terms of the settlement agreement, in addition to paying to the federal government $22 million, Boston Scientific agreed to enter a corporate integrity agreement under which it must enhance its compliance procedures relating to payments to health care providers. The settlement agreement did not involve admission of any fault or liability by Boston Scientific. The federal government released Boston Scientific from certain civil and administrative monetary claims, as well as common law claims of unjust enrichment and fraud, and agreed not to seek the company's exclusion from participation in federal health care programs.