DOJ Investigates Cardiac Rhythm Device Manufacturers

U.S. Attorney Sullivan: Scrutinizing CRM manufacturers.

Similar to the probe of leading orthopedic firms announced last March, the U.S. Department of Justice (DOJ) has recently issued subpoenas to the top three manufacturers of cardiac rhythm management (CRM) devices: Medtronic Inc. (Minneapolis), Guidant Corp. (Indianapolis), and St. Jude. Medical Inc. (St. Paul, MN). The subpoenas were issued by the Boston office of the U.S. Attorney for the District of Massachusetts, Michael Sullivan, requesting information and documentation related to the sales practices associated with each company’s implantable cardioverter defibrillators (ICDs), cardiac pacemakers, leads, and related product lines.

A former Massachusetts state legislator, Sullivan is regarded as a tough, aggressive prosecutor who has built a reputation pursuing healthcare fraud cases. He tends to seek maximum penalties while avoiding any plea-bargaining deals. Since his appointment in 2001, his healthcare fraud unit has reportedly netted the federal government $3.3 billion in fines.

The recently issued subpoenas are believed to be part of a broader inquiry into possible violations of federal fraud, abuse, and antikickback laws. Guidant also received an additional subpoena from the U.S. attorney in Minneapolis concerning several of its CRM devices that were recalled earlier in the year.

Most analysts see the investigation as yet another move to beef up government scrutiny of the medical device industry. A long and protracted inquiry is expected, as are eventual fines. The inquiry may also lead to tighter controls on sales procedures and policies pertaining to physician compensation and incentives associated with participation in postmarket surveys and device registries.

Sullivan is known as a watchdog of the pharmaceutical industry. But Boston-area legal wags say he is now setting his sights on the medical device industry. Last June, his office was successful in levying a $74 million penalty against Boston Scientific Corp. (Natick, MA) involving the company’s voluntary recall of the Nir stent—in a case that dated back to 1998. The government asserted that the company was slow to recall the stent after learning it was defective.

Commenting on the settlement, Sullivan said, “This case represents a failure by Boston Scientific to take the most appropriate steps in a timely manner to ensure that the devices it was distributing to hospitals nationwide performed properly.” However, Boston Scientific was quick to note that no charges had been brought against the company or any of its employees, and that it had admitted no wrongdoing in settling the dispute.

Although the three CRM manufacturers are all based in the Midwest, DOJ has reportedly steered a number of cases involving alleged healthcare fraud to Sullivan’s Boston office. All three of the CRM companies have expressed their full cooperation and compliance with the DOJ investigation.

The U.S. market for CRM devices is currently valued at around $9 billion, with worldwide sales growing at an annual rate of 20%.

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