Medical Device Daily Associate
How will recent warning letters impact business at would-be merger partners Boston Scientific (BSX; Natick, Massachusetts) and Guidant (Indianapolis)?
That was the question a conference call hosted by Prudential (New York) medical technology analyst Larry Biegelsen attempted to answer last week.
Jeffrey Gibbs, an attorney at the Washington law firm Hyman, Phelps, & McNamara, who is an expert on medical device regulatory affairs, fielded questions from Biegelsen and investors on the various warning letters and how they might impact the $27.2 billion merger between the companies that is expected to close before the end of 1Q06.
Gibbs characterized the warning letter received by Boston Scientific last month (Medical Device Daily, Jan. 30, 2006) as “very severe,“ noting as the FDA had in an earlier conference call on the subject that this was only the third such corporate-wide letter ever issued to a medical device company.
The FDA cited the company's management for not properly tracking complaints about certain products, including its wildly popular Taxus stent, as well as Vaxcel catheters, Leveen needle electrodes and the Enteryx device used in surgery to treat acid reflux. Boston Sci also failed to notify the FDA about such complaints, the agency said, citing three company facilities.
The FDA said it might not approve applications for new devices and could refuse to certify that the company was meeting agency standards if other countries sought an opinion.
Another thing that Gibbs said about the Boston Sci letter was the fact that it bore the signatures of both the district office and the office of compliance at the Center for Devices and Radiological Health.
“There are few, if any, other letters that I've seen that would have both people signing, which shows that the agency is communicating a very strong message that this issue is of concern both at the district level, which has primary day-to-day responsibility for compliance, and the headquarters people who make decisions about what kind of enforcement action should be taken,“ he said.
On the positive side, Gibbs noted that the action is only a warning letter and not an injunction or seizure “or some other kind of enforcement action that FDA might have considered or might have had the authority to initiate.“
The FDA conference call on the warning letter also attracted Gibbs' attention. He said such a conference call for a warning letter is a rarity. “I take it as a sign that FDA was trying to assuage some concerns about Boston Scientific's ability to address these issues in any kind of realistic timeframe.“
Gibbs speculated that the company probably would be able to address the agency's concerns in a matter of months, and said he didn't believe that the letter would cause problems with releasing new products into a timeframe that spanned years.
Guidant received its warning from the FDA related to the agency's inspection of its Cardiac Rhythm Management (CRM) facility in St. Paul, Minnesota, back in December (MDD, Dec. 28, 2005). The FDA inspection was completed on Sept. 1, and resulted in Form 483 observations as previously disclosed by the company later that month.
In its disclosure on the FDA's CRM facility inspection in September, Guidant said that that the agency noted “several observations of non-compliance, including an observation with commentary on two specific trends in its Insignia and Nexus families of pacemakers.“ The company said it has provided the agency with “a thorough written response to the observations,“ including steps taken to address them.
The FDA's letter indicated that the agency would not grant requests for exportation certificates to foreign governments or approve premarket approval applications for Class III devices that relate to observations requiring additional action, until such action has been completed.
The company said it will promptly respond to the warning and believes that it can “fully address“ the concerns of the FDA without a material impact to its business.
Gibbs said that in some ways, the Guidant letter may be the more difficult one to address. He said it was “broader in scope and therefore required more different types of corrective intervention.“
That being said, he added the belief that the company has handled both the specific issues and the broad issues addressed in the letter “quite well.“
Gibbs said he thought it was possible that Guidant could take a longer time than Boston Sci to fix its problems “because the warning letter addresses multiple issues in multiple systems and that can be just harder to implement,“ despite the fact that it doesn't have “quite the same ominous tone to it“ that the Boston Scientific letter does.
He said that Guidant's statement that it believes it can address the issues raised in the letter before the end of the year appears to be realistic.
As for the possibility of which company could have the most problems with its respective warning letters, Gibbs said that it could go either way. He said that because Guidant has more parts to it, “it's easier to see something could go wrong with all the disparate parts.“
Conversely, he said that Boston Sci could have “quite a challenge“ implementing its new global complaint center, which it began in December. “They're both daunting tasks,“ he said.
As for the difficulties of the two companies trying to address their individual warning letters while also attempting the delicate merger ballet, Gibbs said this presents an even bigger challenge, especially “when you have two companies involved, both of which have had pretty significant warning letters.“
Add to this, he said, the three other warning letters that Boston Scientific has had in the past year and all of Guidant's potential recall issues and it becomes clear that “integrating all the procedures and policies and addressing everything is certainly not a small task, and it wouldn't be a small task even under the best of circumstances.“