U.S. News

Judge Clears Way for Product Liability Claims Against Boston Scientific


A federal judge has ruled that some product-liability claims against Boston Scientific over implantable heart defibrillators can proceed, rejecting the medical device maker's motions to dismiss them.

Guidant Corp., which Boston Scientific bought last year, continued to sell heart rhythm-management devices after learning of possible defects, Judge Donovan Frank of the U.S. District Court in Minnesota said in a ruling Tuesday.

"This case concerns the issues of whether, how and to whom information was shared ... about a device with an alleged defect," Frank wrote in his ruling.

Boston Scientific, which bought Guidant to acquire its portfolio of heart devices, recalled more than 100,000 of the products between 2005 and 2006.

Guidant recalled more than 100,000 of its heart devices between 2005 and 2006.

"We are fully prepared to take the bellwether cases to trial and remain confident that when juries look into the individual facts, they will side with us," a Boston Scientific spokesman said. "Guidant defibrillators continue to be among the most reliable in the industry."

Boston Scientific, the No. 3 maker of the implantable heart devices after Medtronic Inc. and St. Jude Medical Inc. , has estimated damages and costs to cover legal expenses will be $732 million.

"Clearly, Boston Scientific knew they'd be facing litigation ... and in any litigation you're going to have wins and losses," said David Katz, chief investment officer at Matrix Asset Advisors, which owned 2.3 million Boston Scientific shares as of March 31, 2007. "You have to take them in stride."

Katz said the most important issues for the company over then next three to 12 months are progress in resolving a warning letter with the U.S. Food and Drug Administration, a turnaround in the markets for implantable cardioverter defibrillators, better known as ICDs, and drug-eluting stents, and cutting costs.

Michael Barr, an industry analyst with Victory Capital Management, added, "Boston Scientific definitely wants to get its debt levels down ... this is just one more thing that moves this company toward cost cutting."

Boston Scientific shares were down 5 cents to $16.00 in early New York Stock Exchange trade.