Medical device manufacturer Guidant LLC on Monday pleaded guilty to failing to notify the Food and Drug Administration of problems with some of its implantable defibrillators and will pay more than $296 million in criminal penalties, the Justice Department announced.

Boston Scientific Corp., Guidant’s parent company, said in November that it expected to pay the penalty to end a four-year investigation by the FDA’s Office of Criminal Investigations. The company pleaded guilty to withholding information about “catastrophic failures” in some of its devices — the Ventak Prizm 2 DR (Model 1861) and the Contak Renewal (Models H135 and H155) – from the Food and Drug Administration.

U.S. District Judge Donovan Frank in St. Paul, Minn., must still approve the plea agreement.

The case is being prosecuted by Assistant U.S. Attorney Robert Lewis of the U.S. Attorney’s Office for the District of Minnesota and Justice Department Trial Attorneys Ross Goldstein and Matthew Ebert of the Civil Division’s Office of Consumer Litigation. Steven Tave of FDA’s Office of Chief Counsel is also assisting with the case.

See the Justice Department news release below.

MEDICAL DEVICE MANUFACTURER GUIDANT PLEADS GUILTY FOR NOT REPORTING DEFIBRILLATOR SAFETY PROBLEMS TO FDA

Company Will Pay Criminal Penalty of More than $296 Million

WASHINGTON – Guidant LLC pleaded guilty today in St. Paul, Minn.,before U.S. District Court Judge Donovan W. Frank to criminal violations of the Federal Food, Drug and Cosmetic Act, the Justice Department announced.  The medical device manufacturer’s admission of criminal wrongdoing is the result of a four-year investigation into Guidant’s handling of short-circuiting failures of three models of its implantable cardioverter defibrillators: the Ventak Prizm 2 DR (Model 1861) and the Contak Renewal (Models H135 and H155).  Guidant’s Cardiac Rhythm Management division, which produced the defibrillators, is headquartered in Arden Hills, Minnesota.

Implantable cardioverter defibrillators are lifesaving devices used to detect and treat abnormal heart rhythms that can result in sudden cardiac death, one of the leading causes of mortality in the United States. The devices, once surgically implanted, constantly monitor the electrical activity in a patient’s heart for deadly electrical rhythms and deliver an electrical shock to the heart in an effort to return the heartbeat to normal.  If they fail to operate properly when needed, a person can die within minutes.

Under the terms of the plea agreement with the Justice Department to resolve the charges, which must still be approved by Judge Frank, Guidant pleaded guilty today to withholding information from the U.S. Food and Drug Administration (FDA) regarding catastrophic failures in some of its lifesaving devices.  Specifically, Guidant admitted to: (1) making a materially false statement in a required submission to the FDA with regard to the Ventak Prizm 2DR device; and (2) failing to notify the FDA of a “correction” to the Contak Renewal devices, which the company made to reduce a risk to health caused by the devices.  As a result of these offenses, the agreement calls for Guidant to pay a combined criminal penalty in excess of $296 million.

“Guidant’s guilty plea today is about accountability,” said Assistant Attorney General Tony West, who heads the Justice Department’s Civil Division.  “This successful prosecution serves as an important wake up call to all those who seek to withhold vital information about public health and safety.  We will continue our efforts to prosecute those who jeopardize public health by evading their reporting obligations to the FDA.”

Guidant, a wholly-owned subsidiary of Boston Scientific Corporation, was charged in federal district court on Feb. 25, 2010.  The guilty plea agreement was then filed with the court on March 11, 2010.

“The guilty plea today should serve as a reminder and deterrent to those who would break the laws requiring honesty and cooperation with government regulators whose mission is to protect the health and safety of the public,” said Frank J. Magill, Acting U.S. Attorney in this case for the District of Minnesota .  “The health care laws are as important as ever.  When medical device and pharmaceutical companies fail to live up to their legal obligations, serious criminal consequences will follow.”

Today’s entry of a guilty plea by Guidant LLC and the proposed resolution would represent the largest criminal penalty ever imposed on a device manufacturer for violating the Food Drug and Cosmetic Act,” said Commissioner of Food and Drugs Margaret A. Hamburg, M.D. “The FDA will continue to commit enforcement resources to seeking this type of criminal resolution and stiff sanctions when device manufacturers fail to adhere to the statutory and regulatory requirements that exist to ensure the safety and efficacy of their products.”

The case was investigated by the FDA’s Office of Criminal Investigations and is being prosecuted by AUSA Robert M. Lewis of the U.S. Attorney’s Office for the District of Minnesota, and Justice Department Trial Attorneys Ross S. Goldstein and Matthew S. Ebert of the Civil Division’s Office of Consumer Litigation. Additional assistance is being provided by Steven Tave of FDA’s Office of Chief Counsel.

If anyone knows what it’s like to get slapped with a large criminal penalty by the Justice Department, it’s Pfizer, which got whacked last year with criminal and civil fines and a forfeiture to the government to the tune of $2.3 billion.

Doug Lankler, Pfizer's chief compliance officer, talks about the company's settlement with the DOJ over the drug Bextra, (Photo by Christopher M. Matthews)

“To put it bluntly, it’s kind of like being hit in the face by a two-by-four,” said Doug Lankler, Pfizer’s chief compliance officer. “Even for a large company, it’s very hard to go through.”

In September, Pfizer pleaded guilty to a federal criminal charge of illegally marketing the painkiller Bextra and agreed to pay $2.3 billion for its illegal promotion of the drug and other medicines. It was the largest-ever settlement resulting from illegal marketing by a drug company.

Under the settlement, Pfizer admitted to encouraging doctors to prescribe Bextra to treat acute pain and other ailments the drug was not intended for, a practice banned by the Food and Drug Administration.

Lankler, who led the company’s internal investigation and dealt with government prosecutors, told attendees of the Global Ethics Summit in New York on Tuesday that he was struck by how demoralizing the settlement was to Pfizer’s employees.

“You don’t understand and realize the phenomenal impact it’s going to have internally,” said Lankler.

Lankler was asked if the settlement has served as a moment of awakening for the company — inspiring improved compliance in the future. Lankler said that it was certainly an eye-opener, but added that even now he believes that Pfizer had a strong compliance program in place when the illegal marketing took place.

“Ninety-nine percent of everyone can be doing the right thing,” he said. “But if you’ve got a problem, you’ve got a problem and it’s not going to work.”

Lankler also had some advice for the conference attendees on dealing with government prosecutors. He said that throughout the government’s investigation, he gave countless presentations to Michael Sullivan’s office, the U.S. Attorney for the District of Massachusetts.

During those interactions, he said, the hardest thing for him was seeing things from the government’s perspective.

“Putting yourself in the government’s shoes is one most difficult things to do, but it’s the most important thing,” Lankler said. Prior to joining Pfizer, Lankler served as an assistant U.S. attorney in the Southern District of New York.

Lankler said it was easy to become defensive when the government was highlighting one instance of wrongdoing, when the majority of the Pfizer’s behavior was entirely proper. But, he said ultimately he recognized that one breach of trust is more than enough for a company whose customers must trust it enough to ingest their drugs.

“It’s a little mind boggling, they certainly don’t teach you a lot of this stuff when you go to law school,” Lankler said.

Main Justice is attending the Global Ethics Summit, hosted by Dow Jones and Ethisphere, in New York today and will be posting on a number of corruption and compliance issues throughout the day.

Stryker Biotech, Inc., a medical technology company based out of Hopkinton, Mass., was indicted Wednesday by a federal grand jury for fraudulent marketing of bone-growth products, Reuters reported yesterday.

The indictment accused the company’s former president, Mark Philip, and three sales managers who are still working at the company, of promoting the use of a bone-filling putty for uses that were not approved by the Food and Drug Administration.

Stryker released a statement indicating it would pursue negotiations with the government. “Conviction of these charges could result in significant monetary fines and Stryker Biotech’s exclusion from participating in federal and state health care programs, which could have a material affect on Stryker Biotech’s business,” the statement said.

The defendants face up to 20 years in prison, three years of supervised release and up to $250,000 in fines or twice the gross amount of money they made off of their allegedly fraudulent sales.