The possibility for a smooth and easy merger of Guidant (Indianapolis) into healthcare power Johnson & Johnson (New Brunswick, New Jersey) appeared to dim significantly last month as the result of additional recalls and advisories issued by Guidant concerning several lines of its implantable devices. In June, the company issued a recall of 50,000 ICDs, with Guidant saying that the problem was a design flaw that could cause the units to short circuit and malfunction.
Then, in late June, the company issued an advisory to physicians concerning nine models of its pacemakers and representing 28,000 ICD devices. The advisory said the company had determined that a hermetic sealing component used in a group, or "subset," of devices "may experience a gradual degradation," resulting in excessive moisture within the case of the device "late in the device's service life." Guidant said that physicians were to use the advisory to help them in treating patients and "to limit adverse events."
The subset of pacemakers listed as: Pulsar Max, Pulsar, Discovery, Meridian, Pulsar Max II, Discovery II, Virtus Plus II, Intelis II and Contak TR were manufactured between Nov. 25, 1997, and Oct. 26, 2000. Guidant said that the products "are of an earlier-generation design" and have not been sold or implanted for the last four years. The company said that as of July 11 it had identified 69 devices that may have exhibited this failure, from about 78,000 devices distributed with this component, and the remaining 28,000 devices still implanted worldwide.
Following this announcement, and adding to this mix of bad news, comes the potential for closer federal scrutiny into Guidant's policies and the policies of other manufacturers making implantable devices of various kinds in the manner and timing of "field actions" of this nature. In mid-July, Charles Grassley (R-Iowa), chairman of the Senate Committee on Finance, sent a letter to Lester Crawford then still acting FDA commissioner requesting that the agency provide the committee "with copies of the past five annual post-approval reports . . . for all pacemakers and defibrillators," clearly relating to Guidant's recent recalls of ICDs and advisories.
Specifically referring to these actions, Grassley wrote that it is his "understanding" that the FDA does not "make all device manufacturers' annual post-approval reports publicly available, despite the fact that the reports contain important performance data" information including reports of patient deaths, analyses of failure mechanisms and other safety and effectiveness issues related to pacemakers and defibrillators.
"Given the importance of such information," Grassley said, he requested that Crawford "state why the FDA should not proactively post such information in the FDA's electronic reading room. In addition, describe in detail the FDA's disclosure policy with respect to post-approval-related documents for devices, including but not limited to pacemakers and defibrillators."
Grassley's letter is likely to bring about closer scrutiny of the post-approval uses of medical devices, in much the same way the post-approval data for pharmaceuticals has been examined. Specifically, it could indicate the first wave of efforts to examine the circumstances in which medical device makers make public disclosures concerning any life-threatening adverse events for patients using their technologies. While Guidant has announced its own plans to develop an independent oversight organization to examine this issue, the initiative is not likely to stave off greater in-depth investigation of device reporting by the government and activist groups.
Over the short term, the primary effect of Grassley's request could be to further blur the focus of Guidant and J&J as they seek to consummate their proposed $24.5 billion merger, disclosed late last year. That focus is already under heavy attack with a series of individual and class action lawsuits filed against Guidant, its executives and subsidiaries, related to the ICD recalls. And the later announcement of potential leaks in the seals of about 28,000 pacemakers made by the company is likely to produce another round of suit filings.
Despite Guidant's rising difficulties, J&J put a brave face on the proposed acquisition, saying in a quarterly conference call that it remains keen to move forward with the merger. Robert Darretta, CFO of J&J, said, "the impact of product notifications and recalls is something we're evaluating in conjunction with Guidant management." He said that J&J is "making great progress" in its planning for the integration of the companies with Guidant management and that it "continue[s] to be very impressed" with that management
But despite claiming a commitment to the link-up, Darretta suggested that the deal could be delayed beyond its predicted 3Q05 closing. Responding to questions from analysts, he said he couldn't comment on whether the two companies can resolve all of the recall and safety issues in that timeline. Guidant management, Darretta said, "is being very cooperative and very helpful, but as you know, it's an evolving situation."
That situation "evolved" even further later in July with Guidant's report that it had to
"update" previous safety information regarding three devices, its Ventak Prizm AVT, Vitality AVT, and Contak Renewal AVT devices. The update was a new advisory on the need for further reprogramming of those devices.
The company said that its earlier recommendations must be changed as the result of new information indicating that one of the original recommendations could "significantly increase the risk to patients." In a letter to physicians dated June 17, Guidant said it determined that the atrial therapy subgroups of certain Guidant ICD and CRT-D product families are subject to "latching" meaning that the device could lock up and compromise "available therapy." In that letter it confirmed two instances of latching in 20,950 implanted devices. And because of these two occurrences, it recommended programming changes. But a third instance of "latching" was reported to it on July 11, it said, "despite the recommended programming change."
Like the two earlier events, it said the third event required device replacement but no other "apparent" patient injury. It said it immediately began an analysis of this event and determined that the programming recommendations made in June could cause "a significantly higher probability of occurrence of latching for certain devices," thus requiring the additional programming changes.
Guidant also said it is in the process of developing a non-invasive software solution for Vitality AVT and all Renewal AVT devices, which it projects as being available in the fourth quarter, based on a regulatory approval timeline.
Guidant's problems were not yet having a great impact on the company's performance through the first half of the year, according to its report of 2Q financial results. For the quarter, the company reported an increase of 3% in its worldwide ICD sales, for total revenue of $470 million in that sector, and an overall 4% increase in sales of $35 million (4%) to $974 million. ICD sales were negatively impacted, however, by about $70 million, the company said, "primarily from our decision to temporarily stop selling our leading cardiac resynchronization therapy defibrillator product line, including the impact of lower replenishment of hospital-owned inventory."
Ronald Dollens, president and CEO, said, "Guidant's second-quarter revenue growth was supported by the reversal of the sales trend in the vascular intervention product lines and impressive strength in our emerging businesses. Our CRM product revenue was up only slightly due to the unavailability of the Contak Renewal 3 and 4 family of heart failure devices."
While St. Jude Medical (St. Paul, Minnesota) in June also issued an advisory concerning the need for a software upgrade to certain of its ICDs, it too showed no great effect in its recent financial performance. In an earnings conference call, Daniel Starks, St. Jude's president and CEO, reported that the company secured 17% of the global market for ICDs in 2Q05, up from 11% a year ago. He forecast ICD sales growing some 20% and that the company would continue to win share in this important and fast-growing market.
"Our guidance does not assume some huge shift in competitive dynamics tied to any of our competitors' special circumstances," Starks said, an obvious reference to recalls and notifications by both Guidant and Medtronic (Minneapolis). "We have no particular insight or visibility," he said, referring specifically to Guidant's recall. "For us, it's a little like looking at a car accident. We're not in it, but we hate to see it."
A company that could clearly benefit from the troubles being experienced in the implantable cardio-device sector is Raytel Cardiac Services (RCS; Windsor, Connecticut), which remotely monitors these devices to track their operation and potential problems. The company says that remote ICD and pacemaker monitoring reduces unnecessary office and emergency room visits for patients and provides doctors immediate access to "real-time" electrograms, surface ECGs, ICD and pacemaker performance and settings, delivered therapies and stored electrograms.
"You can probably reduce your resource expenditure by 80% by having these patients monitored remotely," said Richard Albrecht, RCS's vice president of business development. So if you can do that, and simply go to one place to get the information on those patients, you're operating in the most efficient manner," he told Cardiovascular Device Update's sister publication, Medical Device Daily.
Currently, he said, the company is monitoring about 80,000 patients, just a drop in a large bucket given the current number of implanted pacemakers and ICDs, a number only expected to increase with the ICD market alone growing 25% to 30% a year.
Raytel's monitoring services are capable of remotely monitoring ICDs manufactured by St. Jude and Medtronic, which the company says account for nearly 65% of the U.S. ICD market but not Guidant. "Guidant is developing their own system," said Albrecht, employing what he called a more "manufacturer-centric model" in which the user, in this case the physician, will have to go to a different platform to get information on their devices. "It encompasses a level of exclusivity that, in our opinion, doesn't keep the physician central enough" in the process.