Stents sold despite high failure rates
BSX held off recall amid alarming data

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By Jeffrey Krasner, Boston Globe Staff  |  December 26, 2004

Boston Scientific Corp. shipped millions of dollars worth of coronary
stents in fall 1998 even after company officials learned that the
medical devices had high failure rates and may not have met
specifications approved by the Food and Drug Administration.

As cardiologists across the country began to report failures in which
a patient died, another had a heart attack, and another needed
open-heart surgery, the company shipped thousands more.

During a conference call on Sept. 17, 1998, with advisers and business
partners to discuss how to respond to the growing problems, Boston
Scientific's chairman and then-chief executive, Peter Nicholas,
portrayed the crisis in stark terms. Citing the company's tests
indicating that a key part of the stent failed 1 in 10 times, Nicholas
said, ''We're in fact shipping adulterated product, and we cannot do
that."

Nicholas said that while he did not think safety was an issue, the
company had no choice but to recall the stent. But by the end of the
45-minute call, he and the otShers decided instead to try to convince
the FDA that the company could solve the problem without a full-scale
recall.

It was not until 2 weeks later, Oct. 5, that Boston Scientific
recalled the stents.

The decision by the region's largest life sciences company to keep
shipping thousands of stents while it negotiated with the FDA to avoid
a recall is at the core of a criminal investigation by the Department
of Justice.

Boston Scientific disclosed the existence of the investigation in late
1998 but little else. But an unusual federal court ruling this year
sheds new light on what happened between the introduction of the
product and the recall two months later.

The ruling refers to a tape recording, made secretly by one of the
participants, in which Nicholas's comments are heard.

The Globe has listened to a copy of the tape and has also used
Securities and Exchange Commission filings, FDA reports, internal
Boston Scientific documents, and interviews with some key players and
their attorneys to piece together the chain of events.

The company and the Justice Department declined to comment on
specifics of the investigation or any possible settlement.

Paul Donovan, the company's senior vice president for communications,
said, ''Although we did not believe the safety of the product had been
compromised, we promptly notified the US Food and Drug Administration
and two weeks later voluntarily recalled it." In its most recent
quarterly filing, the company said it thinks that it ''acted
responsibly and appropriately." Boston Scientific also said it set
aside $75 million for ''legal and regulatory exposures" but did not
say what it was for.

An attorney for Nicholas, Robert B. Fiske Jr. of Davis Polk & Wardwell
in New York, said his client ''acted in complete good faith in
reliance on the fact that the company's regulatory experts and its
outside counsel all agreed that in light of the safety of the product,
going to the FDA with all the facts instead of withdrawing the product
was an appropriate way to proceed."

Boston Scientific has grown dramatically over the past five years,
largely on the success of its coronary stent business. This year, it
introduced the Taxus drug-coated stent and pulled ahead of rival
Johnson & Johnson in the $4 billion stent market. Its stock market
capitalization of about $30 billion makes it by far the most valuable
life sciences company in Massachusetts.

The Justice Department's six-year investigation of the 1998 recall has
taken place in the sealed chambers of a federal grand jury. Along the
way, Boston Scientific fought the government's request that it turn
over notes made by an outside lawyer during the Nicholas conference
call and other calls.

''After investigating for six years, the Justice Department and FDA
concluded the evidence does not support taking action against any
individual," Andrew Good of Good & Cormier in Boston, attorney for
Boston Scientific chief development officer Arthur L. Rosenthal, said
in a prepared statement.

On March 16, Chief Judge William G. Young of US District Court in
Boston issued a lengthy ruling with a detailed exploration of the
investigation. To avoid compromising the government's investigation
and to maintain the secrecy of the proceedings, the judge disguises
the names of the parties. Boston Scientific is called XYZ Corp.
Company officials are referred to by their titles -- Nicholas is ''XYZ
CEO" -- while outsiders are given fanciful names. The stents
themselves are called ''widgets."

Lawyers involved in the case and others familiar with the
investigation confirmed the ruling is about Boston Scientific's 1998
problems with the stent.

In 1998, Boston Scientific was a medium-size medical device company
looking to hit it big. The NIR stent was to be the Natick firm's
crucial entry into the burgeoning market for coronary stents, the
tiny, wire mesh sheaths that hold coronary arteries open after they
have been cleared of blockages in a procedure called angioplasty.

In a standard stenting procedure, a cardiologist working through an
opening in the patient's groin maneuvers a stent into position inside
tiny coronary arteries that feed blood to the heart muscle. The doctor
inflates a balloon within the stent by filling it with high-pressure
bursts of saline solution. That expands the stent to full size, moving
the blockages aside and keeping the artery propped open.

On Aug. 11, 1998, at 4:30 p.m., Rosenthal received a fax from the FDA:
a smiley face and the message ''Congratulations!" on the cover sheet
indicated that it was the highly anticipated approval of NIR ON Ranger
stents. The stents came in two versions: one, called NIR ON Ranger W/
SOX, had plastic sheaths covering the ends of the stent. It was that
model that became plagued with problems and is the subject of the
investigation.

But within the first week of shipping, the company got reports of 17
balloon failures from doctors and hospitals. More kept coming. In some
cases, the balloon problems resulted in critical medical emergencies,
according to ''adverse event" reports filed by doctors and hospitals
with the FDA. Sometimes, pinhole leaks in the balloon allowed the
inflating solution to spray into the wall of patients' arteries,
causing scratches or tears.

''While an NIR stent was being deployed in a right coronary artery, it
became evident that there was a pinhole leak in the delivery balloon,"
creating a ''large, deep" tear extending several inches, according to
an FDA report from Sept. 11, 1998. Doctors treated the tear with
additional stents. In doing so, one branch of the coronary arteries
was blocked. The patient suffered a heart attack but survived.

A Sept. 16, 1998, report described how a balloon rupture created a
tear that doctors repaired with six additional stents. Eleven days
later, after reporting chest pain, the patient was returned to the
cardiac catheterization lab, where an angiogram indicated a serious
blood clot. The patient, who was not taking an anticoagulant because
of drug interactions with cancer treatments, died.

As the reports mounted, Boston Scientific tried to find out what was
wrong. The company pulled 200 stents off the shelf and subjected them
to particularly stringent tests. Ten percent experienced balloon
failures.

Faced with the growing number of malfunctions and unable to screen out
potentially faulty balloons, Nicholas decided to recall the stents
Sept. 16, according to a prosecutor's report cited by Judge Young.

The next day, Nicholas convened the conference call. It included the
two principals of Medinol Ltd., an Israeli company that supplied a key
component of the device. At one point, Judith Richter, Medinol's chief
executive, interrupts the conversation to shush her dog, which is
barking in the background.

Nicholas's position was clear: The stents were helping patients and
the rate of medical complications was lower than a competitor's stent,
but there was no way to avoid a recall. The issue, he said, was not
one of patient safety. But he did not think the new stent met its
FDA-approved specifications.

''It is not arguable that it doesn't meet the spec," Nicholas said.
''The issue is an internal issue of our manufacturing process failing
to produce a product which meets specs which we therefore don't feel
we can ship."

Larry R. Pilot, a lawyer with the Washington, D.C., firm of McKenna
Long & Aldridge LLP who advised Boston Scientific on how to deal with
the FDA, urged the company to pull the product off the market. FDA
approval of a medical device like a stent includes inspection and
certification of the entire manufacturing process. But Boston
Scientific had made a change to the way it secured the balloon to the
stent. Now there was concern that the change had contributed to the
balloon failures.

''There is no doubt in my mind that when the agency learns about what
we know -- namely that by our change in the manufacturing process, we
introduced a defect into the product -- that they will expect" a
recall, he said. ''I don't know how the agency could rationalize
accepting our continued distribution of a product for which the defect
rate might be 10 percent."

In an interview, Pilot declined to comment on the investigation and
would neither confirm nor deny his participation in the phone call. It
was his notes from that call and others sought by prosecutors that led
to Young's ruling.

Nevertheless, Jacob ''Kobi" Richter, Medinol's chief technical
officer, argued against a recall. Pinhole leaks would not necessarily
prevent doctors from successfully deploying the stent, he said, and
the rate of adverse events was well below those associated with a
competitor's stent. He belittled others who urged a more
''conservative" path and worried that with a recall, the stent would
be off the market at least half a year.

Ultimately, Nicholas engineered a compromise. The company would not
recall the defective stents, and would not withdraw them, an
intermediate step in which shipments are halted but stents already in
hospitals could continue to be used. Instead, Boston Scientific would
''engage" with the FDA and seek guidance on how to deal with the
leaks. The company hoped such a strategy would minimize the time the
product -- a distinct improvement over existing stents -- was kept
from doctors and patients.

Boston Scientific's first step was to send what is known among
physicians and regulators as a ''Dear Doctor" letter. In the letters,
sent Sept. 17 and 18 to 2,000 doctors at 213 hospitals across the
nation, a marketing executive said doctors could ''minimize the
occurrence and severity of balloon failures" by closely following the
NIR stent's instructions for use.

But in the conference call, Nicholas said the leaks were occurring
even ''with physicians who were using the device as intended, as
indicated." The letter to doctors did not mention the high rate of
balloon failures the company found in its internal testing.

Government prosecutors have faulted Boston Scientific for not
disclosing its internal test results in the letter, for implying that
doctors were somehow to blame for the malfunctions, and for not
acknowledging it had stopped manufacturing the stents as it sought to
find the cause of the failures.

The following day, Pilot, the company's outside attorney, called Dr.
Susan Alpert, director of the FDA's Office of Device Evaluation, which
had approved the NIR stent. According to a list of talking points
prepared for the call, he planned to tell her that the company needed
''agency guidance." He would point out that doctors liked the new
stent and that a competitor's stent had a higher rate of complications
after its introduction about a year earlier. Later that day, according
to prosecutors, Boston Scientific shipped NIR stents worth $2.66
million.

On Sept. 30, Boston Scientific sent a stent safety report to the FDA.
It concluded, ''The product failure rate does not represent an
unreasonable risk to patient health and is within the range of rates
estimated for currently available products." But a chart showed the
stent had far more complaints and injuries than another Boston
Scientific stent, highlighting the impact of the pinhole leaks.

Meantime, the company kept shipping the stents, an average of $1.5
million worth each day, according to a prosecutors's report.

Company officials finally met face-to-face with the FDA at the
agency's Rockville, Md., headquarters Oct. 5. A formal recall was
finalized. Nonetheless, government prosecutors said, Boston Scientific
shipped another $2 million of NIR stents later that day after it told
the FDA it would halt shipping.

Debra Lano, regulatory vice president for Boston Scientific's stent
division, said the meeting with the FDA did not go well. After the
meeting, she told Rosenthal, the chief development officer, that the
company should have recalled the stent two weeks earlier.

He replied that Boston Scientific ''had gotten two more weeks of
sales" because of the delay, according to the judge's ruling.

In a statement to the judge, Boston Scientific's lawyer said
Rosenthal's comment, if it had been made, ''obviously would have been
gallows humor."

Good, Rosenthal's lawyer, said Rosenthal never made such a statement:
''Dr. Rosenthal and others consulted with the FDA about whether and
when to recall the product . . . [it] was safer than any of its
competitors, notwithstanding the balloon pinhole problem."

Three years ago, James Tobin, chief executive of Boston Scientific,
predicted the outcome of the Justice Department's investigation. In a
deposition given in another case, Tobin, who joined Boston Scientific
the year after the recall, said the investigation of the recall
''would take another three to four years and that Boston Scientific
would then settle with a consent decree and a fine."

In his ruling, Young said Boston Scientific had to turn over the
lawyer's notes and could not claim attorney-client privilege, in part
because the underlying behavior was so egregious.

''One who argues that violation of a criminal statute is not a crime
has a very long row to hoe," the judge wrote. ''It is well-nigh
impossible to argue against the criminality of intentional shipping of
a product that is more dangerous to health than its label suggests."

Jeffrey Krasner can be reached at krasner@globe.com.