At first, Shelhigh (Union, New Jersey) vs. FDA appeared to be shaping up to be a battle royal similar to last year’s dispute between Utah Medical and the agency. But it was not to be.

After at first issuing statements indicating that it would put up a fight following the agency’s seizure of its products, Shelhigh last month agreed to stop distributing its implantable medical devices used in heart surgery and other procedures until it brings its production processes in line with FDA standards.

U.S. Marshals had seized all finished devices and components of the devices at Shelhigh’s manufacturing facility, citing concerns for potential risk of non-sterility.

Shelhigh makes pediatric heart valves and conduits (tube-like devices for blood flow), surgical patches, dural patches (to aid in tissue recovery after neurosurgery), annuloplasty rings (to help repair heart valves) and arterial grafts. And, initially, Shelhigh had said it would put up a stiff fight.

While Shelhigh decided to settle rather than fight, it did disagree with the agency’s characterization of the agreement struck between them. The agency said that the agreement was made under a court order. The company, however, said that it was not ordered by the court, but rather that a mutual no-fault settlement had been struck and agreed to by the court so that the agency and the company could “resume good relations.”

Whatever the actual semantics, the U.S. District Court for the District of New Jersey entered the consent order of injunction agreed to by Shelhigh. According to the FDA, the consent order forbids Shelhigh from distributing all devices until its manufacturing methods, facilities, and controls are in compliance with the agency’s current good manufacturing practice (CGMP) and Quality Systems (QS) regulation for medical devices and the medical device reporting (MDR) requirements.

Douglas Goldman, a spokesman for Shelhigh, told Biomedical Business & Technology that the company and the FDA have been “hashing it out” ever since the agency quarantined its products in April. He said the company is “very happy” with the settlement it reached last week with the FDA. “It’s completely a step in the right direction and I think it makes a lot of sense for both sides,” Goldman said. “There’s no sense in going through a trial if both sides want the same thing in the end and that is for the company to be able to continue producing its products.”

In May the agency issued to Shelhigh a formal written request to recall all of its medical devices from the marketplace, including hospital inventories, because of “sterility concerns.” In response, the company said at that time that it did not believe the FDA allegations were valid and that it had no intentions to initiate a recall.

In response to the settlement agreement, Goldman told BB&T it is “important for people to know there was never a recall, either by the FDA or by Shelhigh, and the company continues to have confidence in the safety and efficacy of its products for their intended use.”

The consent order requires that the company hire independent expert consultants to inspect its facility and certify to FDA that corrections have been made. FDA said it would continue to monitor these activities through its own inspections.

According to the FDA, Shelhigh may resume manufacturing, but not distributing, devices in phases, after the agency has approved its plan for bringing its seized products and manufacturing processes into compliance. After Shelhigh has completed corrective actions and been allowed to resume manufacturing, the company must hire an independent auditor to inspect its facility at least once a year. Results of these audit inspections will be reported directly to FDA.

Boston Scientific will pay $195 million to settle Guidant claims

Attempting to avoid the difficulties posed by extended time in court, Boston Scientific (Natick, Massachusetts) agreed to pay $195 million to settle around 4,000 claims involving implantable rhythm management devices made by Guidant, the company it acquired last year for more than $27 billion. Boston Scientific said in a statement that the settlement was reached during mediation sessions with U.S. Magistrate Judge Arthur Boylan in Minneapolis. The claims were all consolidated in the federal court in Minneapolis. The first trial was due to start July 30.

Boston Scientific said the agreement also includes an undetermined number of other similar claims from across the country, but not all of them.

Guidant – now Boston Scientific’s cardiac rhythm management unit — recalled more than 100,000 of the products between 2005 and 2006 which were at risk for failure.

With the recalls, patients implanted with the devices were faced with either having the devices explanted and replaced, or not having an explant and dealing with the continuing concern that the device could fail. Thus, besides asking for the coverage of explant/reimplant expenses, many patients claimed pain and suffering.

The problems leading to the litigation were first revealed in 2005 with the FDA’s recall of 11 models of Guidant ICDs with electrical flaws. The company initially issued “physician communications.” But the FDA then classified the problems under its Cloass I recall protocol. And a major allegation in the liability lawsuits is that Guidant continued to ship and sell the heart rhythm devices even after learning that there were possible defects.

Charles Zimmerman, lead attorney for the plaintiffs, in a statement said that the settlement provides “meaningful and expedient relief” for plaintiffs and their families. “We are pleased that we were able to come to an agreement with the company that serves the best interests of all parties involved.”

Tyco’s former auditing firm to pay $225 million in settlement

In an even larger payout Pricewaterhouse Coopers (PwC; Trenton, New Jersey) last month agreed to pay $225 million to settle a class action lawsuit brought by shareholders of Tyco International (Pembroke, Bermuda) regarding a multi-billion dollar accounting fraud that sent Tyco’s top executives to prison. The settlement with Tyco’s former auditing firm comes on top of one reached in May with Tyco. The company agreed to put $2.975 billion into a fund to settle most shareholder claims over the actions of Tyco’s former CEO, Dennis Kozlowski, and the company’s ex-CFO, Mark Swartz.

With interest, the Tyco settlement is believed to be the largest ever by a single corporate defendant, according to the law firms pursuing claims for the shareholders.

The total settlement of more than $3.2 billion from Tyco and PricewaterhouseCoopers concludes a four-year legal battle.

The money will be divided among shareholders after attorneys’ fees — not yet determined — are deducted, said Jay Eisenhofer, one of the three co-lead counsels in the case.

“Money could be distributed as early as 2008,” Eisenhofer said. The settlement covers investors who acquired Tyco securities from Dec. 13, 1999, to June 7, 2002.

The shareholders’ suit had claimed that as Tyco’s independent auditor, PricewaterhouseCoopers failed to uncover fraud in the accounting scandal at the conglomerate. According to the shareholders’ legal team, Tyco overstated its income during that period by $5.8 billion.

PwC spokesman David Nestor said that the company “was prepared to continue to defend all aspects of its work in the litigation process, (but) the cost of that defense and the size of the securities class action made settlement the sensible choice for the firm.”

Investors’ losses have been estimated at $1 billion to $2 billion. The settlement was reached after extensive litigation and mediation, according to the shareholders’ lawyers.

Kozlowski and Swartz were convicted of grand larceny and other crimes for looting Tyco of about $600 million to fund extravagant lifestyles and inflating the company’s value. The pair are serving terms of eight years to 25 years in prison.

Implant Sciences discontinues radioactive prostate seeds business

Implant Sciences (Wakefield, Massachusetts) reported completing the first phase of its plans for exiting the radioactive prostate seeds business, which included a major reduction of staffing in this business segment. Additionally, the company announced it has reduced the size of its employee base in other areas of activity.

The company has discontinued sales and manufacturing of its I-Plant radioactive prostate seeds and exited the business by successfully selling a portion of its assets to an unnamed medical device manufacturer for about $350,000. Additionally, the company said it is pursuing the sale of other operating assets associated with the prostate seeds business, the terms of which are being negotiated.

The company said that it has significantly reduced its overall cost structure since, while the radioactive seed business had contributed somewhat less than $2 million, it had operated at a loss.

Implant Sciences specializes in the national security, semiconductor and medical industries.

New ventures

Lumera forms Plexera Bioscience to provide life science tools, methods

Lumera (Bothell, Washington) has formed Plexera Bioscience as a subsidiary to serve as the operations unit of its bioscience business. The subsidiary will be led by Joseph Vallner, PhD, as CEO and chairman; and Tim Londergan, PhD, the division’s current manager, as president/chief operating officer. Lumera said it has engaged Robert W. Baird & Co., to assist the company in evaluating partnering and financing alternatives over the coming months.

In early 2006, Lumera created a separate bioscience operating unit within the company to facilitate commercialization and the transition from an R&D company. Plexera will focus on providing the life sciences market with tools, content, and methods to simplify and accelerate proteomic discovery for therapeutic antibodies as well as predictive biomarkers, the company said.

“The formation of Plexera clarifies the purpose, business requirements and market opportunities of both Plexera and Lumera to our investors, customers, and prospective partners,” said Tom Mino, president/CEO of Lumera.

Lumera designs molecular structures and polymer compounds for the bioscience and communications/computing industries. The company also has developed processes for fabricating such devices.

Raytel Cardiac Services (Windsor, Connecticut) reported launch of its “newly designed” CardioCare diagnostic arrhythmia service, including CardioCare eManagement services. The new program is designed to ensure care and compliance for arrhythmia patients, to assist the patients and their treating physicians in using the various cardiac monitoring technologies as effectively as possible, and providing physicians with a flexible data management tool “to enable quick access to accurate test results for use in diagnosis and management of their patients,” the company said.

CardioCare is a “branded” arrhythmia service that offers physicians the option for selecting for their patients a 24- or 48-hour digital Holter monitoring service, a 30-day loop or event arrhythmia monitoring service, or Atrial Fibrillation/Auto-trigger monitoring to track silent and elusive, hard-to-catch arrhythmias. The service includes: a unified testing and reporting platform for all arrhythmia monitoring services; multiple monitor transmission capability; enhanced “one source” patient data management and reports retrieval, including the CardioCare eMove report download feature.

The service is based on Raytel’s new testing and patient data management platform, which supports the use of all current and future arrhythmia monitoring technologies, including the new wireless/cellular monitoring technologies that Raytel said that it will introduce in the next few months.

Robert Sass, general manager at Raytel Cardiac Services, said, “Earlier this year we introduced Raytel’s new CardioCare Service to part of our customers, and we are now pleased to make this innovative service and platform available to all of our customers. When products are intended for use directly by patients, they need to be easy to use to ensure compliance with the test protocol in order to obtain the proper diagnostic data for the treating physician.

Sass added: “Multiple technology options for individual patient needs increases the level of convenience our services provide to our clients, as well as providing the foundation for exciting, soon-to-be-available new cellular technologies. This investment in arrhythmia services reinforces Raytel’s commitment to leadership in ambulatory remote cardiac monitoring and to quality care for physicians and patients.”

Raytel — a subsidiary of SHL-Telemedicine (Tel Aviv, Israel), developer of advanced telemedicine systems, and the provider of call center services to subscribers — is a provider of remote pacemaker monitoring and cardiac diagnostic testing in the U.S.

Aurora Diagnostics (Palm Beach Gardens, Florida), a company that began operations in July 2006 as a national platform for the acquisition and integration of anatomic pathology laboratories, reported net revenue of $60 million on an annualized basis, and said it expects “to approach” $100 million by the end of the year.

Since its founding, the company reported making eight separate acquisitions, developing a presence in Florida, Michigan, Alabama, Georgia, New York and the New England area. It currently has a pipeline of acquisition candidates, including practices in Florida, Alabama, Texas, Oklahoma, California, New York, Maryland, Massachusetts, Georgia, North Carolina, South Carolina, and Ohio.

The company was founded last year with an investment from Summit Partners, a private equity firm, as well as GSO Capital Partners, an investment advisor. Aurora says it serves as a platform for the acquisition and integration of anatomic pathology and other diagnostic laboratory businesses across the U.S.