Medical Device Daily

The New York Times and two Texas plaintiffs last week won access in a Texas court to documents which they say demonstrate that Guidant (Indianapolis) continued to sell models of defective implantable cardioverter defibrillators (ICDs) that they knew could malfunction.

The petition requesting release of these documents handwritten notes by Guidant executives and reproductions of a company slide presentation was filed as part of a lawsuit by two Corpus Christi residents who charge that the company was selling defective ICD devices after it knew of the problems (Medical Device Daily, Jan. 20, 2005). State District Judge Jack Hunter granted the motion to release the documents.

Countering allegations by the plaintiffs, Guidant says that the notes indicate “responsible action“ while it was investigating the problems.

The release of documents comes in the wake of a recommendation by a proxy firm that Guidant shareholders should reject the latest buyout proposal from Johnson & Johnson (J&J; New Brunswick, New Jersey) in favor of that from Boston Scientific (Natick, Massachusetts).

Institutional Shareholder Services (ISS; Rockville, Maryland), a well-known firm specializing in advising shareholders on proxy votes and governance, issued a statement recommending against J&J's bid, preliminary to the scheduled Guidant shareholders vote set for Jan. 31.

Guidant's board on Tuesday dropped its support for J&J's $24.2 billion bid in favor of Boston Sci's $27.2 billion counter-offer. Tomorrow is the deadline for J&J to respond to this latest development, such as with a still-higher offer.

In an e-mail note to Medical Device Daily, Sarah Cohn, director of communications for ISS, said that ISS recommended against the J&J merger “based upon the fact that the Guidant board [on Jan. 17] deemed an alternative bid from Boston Scientific to be 'superior' to the J&J merger and, following Boston Scientific's most recent $80 offer, the spread between this and J&J's offer has widened substantially.“

She added that “failing any increased offer from J&J, Guidant's board statement can be considered as demonstrating 'unofficial' support for the Boston offer.“

Meanwhile, the case involving the two Texas plaintiffs, Beatrice Honojosa and Louis Motal, is set to go to trial next month.

Honojosa has had her defibrillator explanted, while Motal's ICD remains implanted.

Bob Hilliard, attorney for Hinojosa and Motal, said that handwritten notes from Fred McCoy, president of Guidant's Cardiac Rhythm Management division, provide evidence that the company made a decision to sell the defective products.

He said the notes show that McCoy was “evaluating and considering what should we do“ after learning of the problems. “They made a decision to change the design and sell the defective inventory without notifying the public,“ Hilliard said.

Another piece of evidence likely to be presented in the case next month is a company slide presentation dated October 2004 evaluating error rates on two of its devices.

Guidant is reportedly attempting to block the release of additional documentation. The company has acknowledged that the malfunctions of these products were related to at least seven deaths.

Jorge Rangel, an attorney representing The Times, said that the newspaper sought release of the documents because they “affect the public's health and safety [but] were not being released.“

In other legalities:

• Escalon Medical (Wayne, Pennsylvania) reported that a federal judge in California declined jurisdiction over a second lawsuit filed by IntraLase (Irvine, California) involving the terms of a license agreement existing between the parties for laser technology. The suit, initiated by IntraLase in the U.S. District Court for the Central District of California, Southern Division, was dismissed without prejudice on the grounds that much of the suit sought a ruling on issues already raised by Escalon in a case it filed against IntraLase in the Court of Chancery of the State of Delaware.

Escalon said the court “held that retaining jurisdiction would likely result in duplicative litigation and an unnecessary entanglement between the federal and state court actions.“

Escalon develops ophthalmic diagnostic, surgical and pharmaceutical products, as well as vascular access devices.

• Matrixx Initiatives (Phoenix) and Charles Zimmerman Zimmerman acting on behalf of a group of plaintiffs in a liability suit reported the end of litigation, via “amicable agreement.“

About 340 plaintiffs who alleged loss of smell arising out of their use of the Zicam Cold Remedy Nasal Gel product will dismiss their cases with prejudice in return for participating in a voluntary settlement program determining how each plaintiff's claim should be resolved in accordance with a medical protocol.

The company will be paying $100,000 to administer the program and $11.9 million to fund the awards that will be made.

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