We just discussed the proposed settlement of a case in which the Guidant subsidiary of Boston Scientific was alleged to have withheld information about defects in its implantable cardiac defibrillators that were associated with six patient deaths (see next most recent post here with more complete summary). The devices were manufactured in 2000-02, and the issue first became public in 2005. The proposed settlement included a seemingly large fine for the company.
Now the New York Times has reported that the presiding judge has rejected the settlement as too lenient.
A federal judge in Minnesota on Tuesday rejected a plea agreement between the federal government and the Guidant Corporation, saying that the deal did not hold the company sufficiently accountable for an episode in which it sold potentially flawed heart defibrillators.
The ruling was a setback for the Justice Department, which had characterized the agreement as a demonstration of its get-tough approach to corporate crime. The deal called on Guidant to plead guilty to two misdemeanors and pay a $296 million fine, described as the largest by a medical device company.
But in his opinion, the judge, Donovan W. Frank of United States District Court said the provisions of the agreement were 'not in the best interest of justice and do not serve the public�s interest because they do not adequately address Guidant�s history and the criminal conduct at issue.'
The story brought several peculiar aspects of the settlement to light.
- The settlement seemed to ignore the most egregious misconduct alleged:
Recently, prosecutors charged in court papers that Guidant had knowingly sold potentially flawed defibrillators. But that issue was not addressed in the plea agreement. Instead, the company agreed to plead guilty to two misdemeanor charges that related to the completeness and accuracy of its filings with the Food and Drug Administration.
- It was not really the Guidant subsidiary that was going to plead guilty, but a new entity apparently constructed solely to "take the rap."
The company created to enter Guidant�s plea, Guidant LLC, existed only on paper.
In his ruling, Judge Frank took direct aim at that argument, suggesting it contradicted the Justice Department�s own public statements about the case. He noted that a department news release said Guidant�s plea deal was 'about accountability.'
Judge Frank wrote, 'The interests of justice are not served by allowing a company to avoid probation simply by changing their corporate form.'
So, the judge demanded that at least the company be put on probation, and possibly be required to do some good works:
Judge Frank said that prosecutors should have sought probation for Guidant and its parent, Boston Scientific. Probation would have required the companies to take certain steps, like helping to rebuild public confidence in the safety of heart devices, in addition to paying a fine.
The judge also outlined other provisions that might be suitable in a new plea deal, including charitable activities by Guidant to improve heart device safety and improve medical care among minority patients.
Daniel R. Margolis, a lawyer in New York who works on medical product cases, said that probation is effectively a way for a court to maintain some control over a company�s activities after it pays a financial penalty.
However, the judge felt he could not require prosecution of the actual people who authorized, directed, or implemented the misbehavior at issue.
After a hearing this month, several doctors and patients wrote to Judge Frank urging him to reject the deal and arguing that former Guidant executives should be criminally charged in the case. But Judge Frank noted in his ruling that it was up to prosecutors, not a court, to decide who should be prosecuted.
We have discussed a series of settlements and convictions resolving cases of alleged wrong-doing by health care organizations. Almost none included any penalties for people who authorized, directed or implemented the bad behavior. None of the financial penalties were so big as to be more than another cost of doing business for the organizations involved. Some of the cases included gimmicks, like a subsidiary constructed only to plead guilty, that otherwise seemed to lessen accountability.
Despite the US Justice Department's assertion of a new "get-tough" approach, this new settlement did not seem like any more of a deterrent to bad behavior than the parade of settlements that cam before, that is, until Judge Frank acted.
We applaud the judge for trying to hold at least one large health care organization accountable for its misdeeds. However, I again suggest that to truly reform health care, we need rigorous regulation of health care organizations that has the power to deter unethical behavior that may risk patients' health.
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