Originally Published MX May/June 2006

GOVERNMENTAL AND LEGAL AFFAIRS

With the court of public opinion watching, industry stakeholders are struggling to address patient safety issues that arise in products already on the market.

Lori Luechtefeld

Product liability lawsuits are nothing new for medical device manufacturers. In fact, most medtech executives acknowledge that such suits do and always will come with the territory of manufacturing complex, high-technology products. However, the public spotlight on product liability issues surrounding medical device defects has arguably never been as bright as it has become over the past year. And at the heart of the controversy stands cardiovascular product manufacturer Guidant Corp. (Indianapolis).

Over the past year, the company has recalled hundreds of thousands of its implantable cardioverter-defibrillators (ICDs) and pacemakers due to the possibility for malfunction. Although recalls are not unusual among medtech manufacturers, the debate surrounding Guidant intensified after The New York Times reported that the company failed to properly inform physicians and patients about a potentially fatal flaw in its devices.¹ Company executives defended the decision to limit notification by asserting that the devices met engineering standards and that the risk involved in surgery to remove the devices was greater than the risk associated with leaving the device implanted.

Guidant, which was recently acquired by Boston Scientific Corp. (Natick, MA), currently faces numerous class-action and individual lawsuits nationwide, with hundreds more potentially on the horizon. The claims and damages sought vary among the lawsuits, but most hinge on issues of negligence related to the company's failure to properly warn physicians and patients of the dangers associated with the devices. Some industry analysts believe that Guidant's liability costs could be as high as $2 billion.²

Of greater importance to medical device manufacturers outside Guidant is the attention and reaction that Guidant's woes are drawing, not only from the public and media outlets, but also from industry leaders and regulatory agencies. The lawsuits pending against Guidant raise serious legal, regulatory, ethical, and financial questions, and how each element plays out for the company could have implications for all medical device manufacturers.

"These events have heightened the public's awareness and have captured the attention of the media and state and federal governmental agencies across the country," says Victoria M. Davis, a partner in the product liability group of Alston + Bird LLP (Atlanta). "I would expect that companies will inevitably respond more aggressively to postmarket problems as a result. Whether patients will be better off as a result remains to be seen."

Feeling the Impact

The medical device industry is already starting to witness the ripples generated by Guidant's ongoing challenges. Following what FDA describes as a comprehensive, year-long internal inventory of the tools used to monitor the postmarket safety of medical devices, the agency has announced that it is launching a new "postmarket transformation initiative." Developed through FDA's Center for Devices and Radiological Health (CDRH; Rockville, MD), the initiative is designed to "better protect the public health by allowing FDA to identify, analyze, and act on problems more quickly, including alerting the public sooner of potential medical device issues."

The initiative comes in light of a report released by CDRH that criticizes its own ability to monitor such issues. And although the report does not cite Guidant's situation specifically, the initiative's stated goals would seek to avoid such a debacle in the future. Likewise, any regulatory changes emanating from the postmarket transformation initiative will likely apply to all medtech manufacturers.

On the industry side, AdvaMed (Washington, DC) recently released a draft proposal for pulse-generator product performance reports that is designed to "improve communications between the manufacturers of cardiac rhythm management devices and patients, providers, and the public." The draft document, based on an ISO standard and developed with the help of the Heart Rhythm Society (Washington, DC) and FDA, establishes definitions and requirements for companies to follow when issuing performance reports on such devices as pacemakers and ICDs.³

Issues of Notification

While AdvaMed and other organizations seek to clarify requirements for reporting potential device malfunctions, Guidant has received the findings of an expert panel that it commissioned last summer to review the recall-related actions of its cardiac rhythm management business. The panel concluded that product defects posing a significant risk to patients should have been promptly disclosed, despite the relatively low rate of malfunction. It also noted that decisions regarding assessment of product defects were largely in the hands of the company's engineers and made with little input from the medical community. Among its suggestions, the panel recommended that Guidant form an external committee of experts to evaluate product performance and risk assessment data, as well as hire an in-house physician whose primary responsibility would be patient safety.⁴

"The panel has presented Guidant with a blueprint for improvement and enhancement of our postmarket evaluation of product reliability and communications procedures regarding the performance and safety of our devices," said James M. Cornelius, chairman and chief executive officer of Guidant, following the release of the independent panel's report. "We intend to implement the recommendations to further benefit patients and physicians.

"We recognize that the environment has changed, not just for Guidant but also for our industry as a whole, and we are taking the necessary steps to improve surveillance of device performance and safety, as well as physician and patient communications," Cornelius added.

Regardless of planned changes, Guidant will still have to defend itself in court based on the notification practices it followed prior to the device recalls last summer. "The legal standard commonly cited is the reasonably prudent manufacturer," says Brooks R. Magratten, an attorney with Vetter & White (Providence, RI). "The difficulty lies in that the question is normally asked with the benefit of hindsight. It is easy to conclude that a manufacturer should have done more in response to the first few reports of device failure after a patient has been harmed and the company is defending its actions in litigation.

"FDA regulations tell manufacturers when to report postsales events," Magratten adds. "However, a jury may well conclude that a manufacturer should have taken additional steps, such as postsales warnings or a recall notice, even if FDA has not so directed."

In forming their conclusions, juries will draw on information presented from a variety of sources. "In product liability lawsuits where such issues are in question, the courts will rely on the documentary and testamentary evidence produced by the device manufacturer during the litigation, as well as interpretations and opinions of scientific and clinical experts," says Genese Kay Dopson, special counsel at Sedgwick, Detert, Moran & Arnold LLP (San Francisco).

According to Alston + Bird's Davis, the question of what role the scientific and clinical community should have in determining the threshold for notification strikes at the heart of Guidant's dilemma: Who is in the best position to make decisions regarding patient care in the face of a reported problem? "Is it the physician, who knows the patient best, or is it the manufacturer, who knows the device best?" she says. "We may start to see the more-frequent use of independent panels made up of medical and public health experts assembled to provide guidance in this area."

Magratten agrees that the Guidant litigation could influence the activities of other medical device manufacturers in the future. "Particularly after the Guidant litigation and similar cases, companies must pay closer attention to postsales monitoring, reporting, and warnings," he says. "Their decisions in this regard should be well documented and defensible to a regulator as well as a judge or juror.

"Determining when device reports reveal a pattern of failure or evidence of a defect can be a highly technical and complex question requiring input from experts in many disciplines," he adds. "Companies should consider having this question determined by independent experts. That way there may be less perception that the decision of whether to issue warnings or a recall notice was influenced by financial considerations."

According to Dopson, medtech manufacturers facing product liability cases must be able to put forth a defense that demonstrates the company's commitment to patient safety. "Failure to adhere to the primacy of patient safety, coupled with decisions leading to concealment of known defects from the medical community, will fuel lawsuits that lead to jury verdicts that include punitive damages," she says. "It is insufficient for a device manufacturer to claim the performance of the device falls within engineering limits without considering medical consequences of product defects and failures. A manufacturer will have to show that it is driven by patient safety premised on physician assessments and not by the statistical projections of engineers, the financial interests of management, or concerns about shareholder profitability."

Regulatory Affairs

In addition to lessons medtech manufacturers might take from Guidant related to physician and patient notification, they may also see a shift in the regulatory climate for medical devices, as already evidenced by FDA's postmarket transformation initiative. "Manufacturers will have to be more vigilant regarding postmarket surveillance and disclosure," Dopson says. "A U.S. Senate committee is presently considering drafting legislation that makes it a crime for an executive of a medical device company to knowingly ship products with known defects. Unless such a bill is drafted narrowly, it could have a disastrous and chilling effect on companies that are diligent in their legal compliance but happen to experience occasional or random product defects."

Another issue of debate in legal circles surrounds the federal defense of preemption. "This litigation is one of the biggest waves of medical device product liability in recent years," Davis says. "One key component of the litigation will be how the courts respond to Guidant's federal preemption defense. Guidant will argue that plaintiffs' state law damage actions are preempted by federal law since the devices were approved during FDA's stringent premarket approval process. A successful preemption argument in these cases would have a positive lasting effect for device manufacturers in future product liability cases for years to come."

However, there are doubts that such a defense will be successful. "If reports that Guidant knowingly distributed defibrillators that had known defects and deliberately did not disclose this to physicians are true, it does not seem like the Guidant experience is the poster child for seeking to extend preemption protections," Dopson says.

Ethical Considerations

In addition to the legal and regulatory weight of the lawsuits against Guidant, the cases also touch on ethical considerations related to patient and physician notification. And when presented before juries of laypersons, such considerations could have genuine sway over the people determining Guidant's fate.

From an ethical point of view, the decision of when to notify physicians and patients of potential problems with products is not clear-cut, according to Davis. "You have to think of it more as a sliding scale rather than a given point in time," she says. "The answer depends on an analysis of the various factors at play and a balancing of the risks associated with notification versus nonnotification. One must consider the severity of the problem, the incidence of the problem in the patient population, the probability of failure, and the risk of adverse health effects, balanced against the overall good that the product is providing the patient, the risks of alarming the public, and the risks associated with the perhaps-unnecessary removal of an implantable device.

"These factors will not be the same in every case, but obviously the greater the risk to the patient, then the more vigilant the course," she adds. "In light of the Guidant situation, the analysis is weighing more and more in favor of earlier notification than ever before."

Vetter & White's Magratten says that a manufacturer is ethically obligated to notify physicians and patients of a defect when credible scientists—whether associated with the manufacturer or not—believe that data collected by or reported to a company point to a product defect or a complication that patients may experience with the product. He says this is the same perspective a manufacturer must take when viewing the situation from a liability standpoint.

"Once in a courtroom, in the context of a plaintiff who has been injured by the drug or device in question, the jury examines the manufacturer's actions with hindsight," Magratten says. "It is then often more difficult to argue that additional steps should not have been taken."

Dopson agrees that patient safety concerns must be paramount in determining a manufacturer's course of action from both an ethical and a liability standpoint. "The premise of our medical system in the United States has to do with self-determination—the right of the patient to choose his or her medical care and treatment," she says. "This can only be effected if physicians are advised of the known risks associated with a product.

"To the degree medical ethics relate to issues of what is right or wrong, what is good judgment or bad judgment, defensible cases are defensible because defense attorneys are able to demonstrate that the company has and will do the right thing," she adds. "Guidant's own independent investigatory panel has issued a report that finds there is no evidence that Guidant's claim supports or justifies the decision to refrain from informing physicians about known product defects that posed a risk of injury or death to patients."

The Bottom Line of Liability

Although few medtech executives would dispute the notion that patient safety must trump a company's financial considerations, product liability cases such as those faced by Guidant have considerable fiscal implications for a company.

"According to the latest reports, Guidant is facing approximately 60 state and federal class actions and about 145 individual lawsuits, many of which have been consolidated in a multidistrict proceeding, and has been informed of another 2500 individual claims that have not yet been filed," Davis says. "These lawsuits characteristically set forth claims for punitive damages for alleged willful, wanton, or deliberate acts. The bulk of the liability damages sought are for either the cost of explant and replacement surgery or the cost of medical monitoring, which includes periodic evaluation by a physician to test the reliability of devices that remain implanted. So obviously the financial implications are huge, whether you are talking about the cost of defending the growing number of lawsuits or the cost of any payments made to plaintiffs and their lawyers, which could be in the millions if the plaintiffs prevail."

Davis also points out that Guidant faces numerous regulatory investigations, as well as several stockholder complaints and an inquiry by the U.S. Securities and Exchange Commission. "Fines could theoretically be imposed by multiple state and federal regulatory entities if violations are found," she says. "On top of these financial concerns, you have to take into account the costs of managing the public relations and investor relations regarding the recall, the lawsuits, and the regulatory investigations, and these costs can be significant as well."

Medtech companies often fear prematurely disclosing information about potential product failures due to the hit their stock values might take as a result. However, according to Dopson, failure to notify the public about device flaws can have just as grave an impact on a company's financials as notification itself. "Company management should fear the prospect of being accused of deliberately refraining from physician disclosure in order to maintain a high market share that would enhance management's financial interests," she says. "For example, in Guidant's case, the aftermath of physician notification resulted in the decrease in the value of Guidant's stock. As a result, a company that was in negotiations to acquire Guidant prior to the physician disclosure negotiated a lower bid as a result of the decrease in stock value. Shareholders have also initiated suits against Guidant for fraud. I think the company is potentially more damned if it does not make the physician disclosure."

Conclusion

The issues surrounding the Guidant product liability lawsuits are not new to medtech manufacturers. However, due to the unusually high level of media attention that Guidant's problems have garnered, such issues are now being examined and considered by all stakeholders with a renewed sense of urgency. Recommendations and programs emerging from these deliberations could affect other medical device manufacturers in years to come.

"The Guidant cases illustrate that the question of when to give postsales warnings or a recall notice is not always determined by FDA or courts of law, but in the public media," Magratten says. "It can be difficult to avoid the effects of strong media opinion in subsequent legal or regulatory proceedings."

In product liability cases involving medical devices, one element often lost during trial is the benefit that the product in question brings to its users, says Denise Houghton, a life sciences attorney at Cozen O'Connor (Philadelphia). Many medical devices provide treatment options for seriously ill patients whose options may otherwise be limited—or even nonexistent. "There is a better story to tell at trial: one in which the manufacturer seeks to help people as its driving force," Houghton says. "But within these stories, the realities of costs and side effects do exist.

"I strive to personalize the manufacturer during trial," Houghton adds. "In order to accomplish this, I'll seek out the most-passionate person at the company who 'still believes.' I know it sounds corny, but these folks do exist."

Guidant's legal struggles could continue to play out in the courts for years to come. Regardless of the outcomes, medtech manufacturers would do well to monitor the proceedings and consider the implications the issues raised could have for their own businesses.

References

1. Barry Meier "Maker of Heart Device Kept Flaw from Doctors," The New York Times (May 24, 2005), p A1.
2. Proposal Requirements for Uniform Reporting of Clinical Performance of Pulse Generators [online] (Washington, DC: AdvaMed, 2006); available from Internet: www.advamed.org/publicdocs/PPR_proposal_030306.pdf.
3. "Boston Scientific Juggling Guidant Deal, FDA Warning," MX: Issues Update [online] (February 2006); available from Internet: www.devicelink.com/mx/issuesupdate/06/02/BostonScientific.html.
4. Report of the Independent Panel of Guidant Corporation [online] (Miami, FL: Guidant, 2006); available from Internet: www.guidant.com/panel/panel.pdf.

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