Guidant settles whistleblower's claims for $9.25 million

by Ben Vernia | September 27th, 2011

On September 26, the Department of Justice announced that Guidant LLC, a subsidiary of Boston Scientific had agreed to pay $9.5 million to resolve claims that it failed to honor warranties for its implantable cardiac devices. According to DOJ’s press release:

Guidant LLC, a wholly owned subsidiary of Boston Scientific Corp. of Natick, Mass., has agreed to pay the United States $9.25 million to resolve False Claims Act allegations, the Justice Department announced today. The government alleges that the company inflated the cost of replacement pacemakers and defibrillators to federal health care programs by knowingly failing to grant warranty credits and rebates to hospitals for pacemakers and defibrillators that were explanted while covered under a product warranty or another credit program.

The settlement resolves allegations that Guidant actively promoted the longevity and reliability of its pacemakers and defibrillators to physicians in an effort to convince them to purchase Guidant products over competing devices. Guidant reinforced these claims by touting the generous credits available should a device need to be replaced while covered under warranty.

At the same time, Guidant allegedly was fully aware that it failed to grant an appropriate credit to the purchaser of the device in a large number of cases where a product failed while still under warranty. As a result, the United States contends that Guidant submitted invoices to Department of Veterans Affairs hospitals and Department of Defense facilities that overstated the cost for a replacement pacemaker or defibrillator. In addition, Guidant’s alleged submission of inflated invoices for pacemakers and defibrillators to private hospitals caused these hospitals to overstate the cost of these devices on hospital cost reports, resulting in Medicare paying more for pacemakers and defibrillators than it otherwise should have.

The government announced that the whistleblower will receive $2.3 million of the settlement (a nearly 25% relator’s share).

In 2010, Guidant pleaded guilty to failing to report problems with its implantable defibrillators and paid $296 million when it was sentenced in January. That same month, the Department of Justice intervened in another qui tam relating to the marketing of those defibrillators.

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