What Price Safety? Guidant's $296 Million Fine Ranks Among Highest Ever

But is it enough of a punishment?

The federal judge who presided over the case, Judge Donovan Frank, didn’t think it was in April of last year, when he rejected the initial plea agreement, which included the same jaw-dropping fine. Back then, Frank called for some sort of probation and additional restitution to be paid by the company.

That the new deal includes probation (the company will serve three years), and the fact that Boston Scientific promised to spend an additional $15 million to expand existing community service programs, seems to have satisfied the judge. And it certainly satisfied the government, which, in court documents filed before the judge’s decision, called the sentence an effective deterrent to future criminal behavior by medical device manufacturers.  

But it didn’t satisfy Dr. Robert Hauser, one of the doctors (along with Dr. Barry Maron) who initially reported problems with Guidant’s Ventak Prizm 2 defibrillator after a short-circuiting incident led to the death of a 21-year-old patient. “These companies write a big check and it goes away,” Hauser told the Minneapolis Star Tribune. “The main thing is for the law to serve as a deterrent, and for people to be held accountable.”

And that is, indeed, the main thing. Yes, again, $296 million is a lot of money. And three years of probation is not insignificant. But is it enough in a case where Guidant admitted to criminally withholding information about flawed devices, especially considering that those flaws led to the deaths of at least 13 people? And more importantly, will the sentence actually deter future corporate criminality?

I’m most interested in the latter question. Boston Scientific’s revenue is in the billions of dollars, and at least one report predicts that the global medical device market will rake in over $300 billion this year. Is a $296 million fine (with some probation sprinkled on top), then, really that significant? Or is it more like a supersized traffic ticket? 

Will future potential corporate malefactors really stop and think, “Gee, we’d like to take this shortcut, but we’d better not break the law, because if we do, we might have to pay a fine that seems impressive to the public but will actually only represent a fraction of our revenue”?

I’m skeptical about that. But then, I’m not a device manufacturer. I’m just a geeky editor, pontificating from my ivory cubicle in an office, far away from the action.

And so I have an honest question for those in the know: what effect will Wednesday’s sentence have on the medical device industry? I’m assuming most medical device manufacturers act in good faith when it comes to product safety, but there are clearly times when things go wrong. Will this landmark penalty actually serve as an effective deterrent? Was it not severe enough? Or, to approach it from another angle, was it too much?

-- Thomas Blair