Guidant’s Good News Month

After months when it seemed as though every announcement went from bad to worse, August turned out to be a good news month for executives at Guidant Corp. (Indianapolis).

The company's difficulties began in late May, when it acknowledged that it had failed to properly inform physicians and patients about a potentially fatal flaw in one of its implantable cardiac defibrillator (ICD) models. Subsequent recalls of the company's products affected thousands of its ICDs and pacemakers and received extensive media coverage. Industry analysts began to speculate about the potential long-term damage to the company's high-profit cardiac rhythm management product line and to its pending $25.4 billion acquisition by Johnson & Johnson Inc. (J&J; New Brunswick, NJ).

But in August the company's fortunes took a decided upturn.

Early in the month, FDA approved market reentry of the Contak Renewal 3, the company's best-selling and most profitable ICD, with a price tag of around $30,000. The device was reapproved a week earlier by regulators in Europe, where it is sold as the Contak Renewal 4. Reapproval of the device followed Guidant's decision to replace a faulty magnetic switch that could become stuck in the closed position, thereby preventing the delivery of the necessary electric impulse or shock in the event of cardiac arrest. The change was made in all existing inventory and will be implemented for all such devices manufactured in the future.

Guidant had previously notified physicians that recalled ICDs currently implanted could have the switch corrected via noninvasive software reprogramming of the device. The company also offered to replace any recalled ICD with a new model at no cost. According to reports, many cardiologists advised against such surgical removal, noting that the risk of postoperative infection was far greater than the risk of device malfunction. Out of the 46,000 Contak Renewal 3 and 4 units that had been manufactured at the time of the recall, only four devices were known to have malfunctioned.

U.S. and European regulators also approved market reentry of the following Guidant ICD models: Renewal 3, Renewal 4 AVT, and Renewal RF. Although Guidant recalled 11 ICD models on June 24, several of these are no longer manufactured.

By all accounts, the market return of Guidant's recalled ICDs came much sooner than expected. Such a quick turnaround is considered likely to minimize any loss of market share, particularly since the company claimed it would have inventory levels and prerecall implant rates fully restored by the end of August. “Our progress toward full inventory availability is ahead of schedule,” said Fred McCoy, president of Guidant's cardiac rhythm management division. “Already we have achieved an inventory position to meet all current implant demand and to replenish customer inventory.”

ICDs represent a $4.7 billion market in the United States, where Guidant is the number two manufacturer, following Medtronic Inc. (Minneapolis). At the time of the recall, it was widely speculated that number three, St. Jude Medical Inc. (St. Paul, MN), would be a prime beneficiary of any fallout from Guidant's ICD problems.