Boston Scientific Corp. shipped millions of dollars worth of coronary stents in fall 1998 even after company officials learned that the medical devices had high failure rates and may not have met specifications approved by the Food and Drug Administration.
As cardiologists across the country began to report failures in which a patient died, another had a heart attack, and another needed open-heart surgery, the company shipped thousands more.
During a conference call on Sept. 17, 1998, with advisers and business partners to discuss how to respond to the growing problems, Boston Scientific's chairman and then-chief executive, Peter Nicholas, portrayed the crisis in stark terms. Citing the company's tests indicating that a key part of the stent failed 1 in 10 times, Nicholas said, ''We're in fact shipping adulterated product, and we cannot do that."
Nicholas said that while he did not think safety was an issue, the company had no choice but to recall the stent. But by the end of the 45-minute call, he and the others decided instead to try to convince the FDA that the company could solve the problem without a full-scale recall.
It was not until 2 weeks later, Oct. 5, that Boston Scientific recalled the stents.
The decision by the region's largest life sciences company to keep shipping thousands of stents while it negotiated with the FDA to avoid a recall is at the core of a criminal investigation by the Department of Justice.
Boston Scientific disclosed the existence of the investigation in late 1998 but little else. But an unusual federal court ruling this year sheds new light on what happened between the introduction of the product and the recall two months later.
The ruling refers to a tape recording, made secretly by one of the participants, in which Nicholas's comments are heard.
The Globe has listened to a copy of the tape and has also used Securities and Exchange Commission filings, FDA reports, internal Boston Scientific documents, and interviews with some key players and their attorneys to piece together the chain of events.
The company and the Justice Department declined to comment on specifics of the investigation or any possible settlement.
Paul Donovan, the company's senior vice president for communications, said, ''Although we did not believe the safety of the product had been compromised, we promptly notified the US Food and Drug Administration and two weeks later voluntarily recalled it." In its most recent quarterly filing, the company said it thinks that it ''acted responsibly and appropriately." Boston Scientific also said it set aside $75 million for ''legal and regulatory exposures" but did not say what it was for.
An attorney for Nicholas, Robert B. Fiske Jr. of Davis Polk & Wardwell in New York, said his client ''acted in complete good faith in reliance on the fact that the company's regulatory experts and its outside counsel all agreed that in light of the safety of the product, going to the FDA with all the facts instead of withdrawing the product was an appropriate way to proceed."
Boston Scientific has grown dramatically over the past five years, largely on the success of its coronary stent business. This year, it introduced the Taxus drug-coated stent and pulled ahead of rival Johnson & Johnson in the $4 billion stent market. Its stock market capitalization of about $30 billion makes it by far the most valuable life sciences company in Massachusetts.
The Justice Department's six-year investigation of the 1998 recall has taken place in the sealed chambers of a federal grand jury. Along the way, Boston Scientific fought the government's request that it turn over notes made by an outside lawyer during the Nicholas conference call and other calls.
''After investigating for six years, the Justice Department and FDA concluded the evidence does not support taking action against any individual," Andrew Good of Good & Cormier in Boston, attorney for Boston Scientific chief development officer Arthur L. Rosenthal, said in a prepared statement.
On March 16, Chief Judge William G. Young of US District Court in Boston issued a lengthy ruling with a detailed exploration of the investigation. To avoid compromising the government's investigation and to maintain the secrecy of the proceedings, the judge disguises the names of the parties. Boston Scientific is called XYZ Corp. Company officials are referred to by their titles -- Nicholas is ''XYZ CEO" -- while outsiders are given fanciful names. The stents themselves are called ''widgets."
Lawyers involved in the case and others familiar with the investigation confirmed the ruling is about Boston Scientific's 1998 problems with the stent.
In 1998, Boston Scientific was a medium-size medical device company looking to hit it big. The NIR stent was to be the Natick firm's crucial entry into the burgeoning market for coronary stents, the tiny, wire mesh sheaths that hold coronary arteries open after they have been cleared of blockages in a procedure called angioplasty.
In a standard stenting procedure, a cardiologist working through an opening in the patient's groin maneuvers a stent into position inside tiny coronary arteries that feed blood to the heart muscle. The doctor inflates a balloon within the stent by filling it with high-pressure bursts of saline solution. That expands the stent to full size, moving the blockages aside and keeping the artery propped open.
On Aug. 11, 1998, at 4:30 p.m., Rosenthal received a fax from the FDA: a smiley face and the message ''Congratulations!" on the cover sheet indicated that it was the highly anticipated approval of NIR ON Ranger stents. The stents came in two versions: one, called NIR ON Ranger W/ SOX, had plastic sheaths covering the ends of the stent. It was that model that became plagued with problems and is the subject of the investigation.
But within the first week of shipping, the company got reports of 17 balloon failures from doctors and hospitals. More kept coming. In some cases, the balloon problems resulted in critical medical emergencies, according to ''adverse event" reports filed by doctors and hospitals with the FDA. Sometimes, pinhole leaks in the balloon allowed the inflating solution to spray into the wall of patients' arteries, causing scratches or tears.
''While an NIR stent was being deployed in a right coronary artery, it became evident that there was a pinhole leak in the delivery balloon," creating a ''large, deep" tear extending several inches, according to an FDA report from Sept. 11, 1998. Doctors treated the tear with additional stents. In doing so, one branch of the coronary arteries was blocked. The patient suffered a heart attack but survived.
A Sept. 16, 1998, report described how a balloon rupture created a tear that doctors repaired with six additional stents. Eleven days later, after reporting chest pain, the patient was returned to the cardiac catheterization lab, where an angiogram indicated a serious blood clot. The patient, who was not taking an anticoagulant because of drug interactions with cancer treatments, died.
As the reports mounted, Boston Scientific tried to find out what was wrong. The company pulled 200 stents off the shelf and subjected them to particularly stringent tests. Ten percent experienced balloon failures.
Faced with the growing number of malfunctions and unable to screen out potentially faulty balloons, Nicholas decided to recall the stents Sept. 16, according to a prosecutor's report cited by Judge Young.
The next day, Nicholas convened the conference call. It included the two principals of Medinol Ltd., an Israeli company that supplied a key component of the device. At one point, Judith Richter, Medinol's chief executive, interrupts the conversation to shush her dog, which is barking in the background.
Nicholas's position was clear: The stents were helping patients and the rate of medical complications was lower than a competitor's stent, but there was no way to avoid a recall. The issue, he said, was not one of patient safety. But he did not think the new stent met its FDA-approved specifications.
''It is not arguable that it doesn't meet the spec," Nicholas said. ''The issue is an internal issue of our manufacturing process failing to produce a product which meets specs which we therefore don't feel we can ship."
Larry R. Pilot, a lawyer with the Washington, D.C., firm of McKenna Long & Aldridge LLP who advised Boston Scientific on how to deal with the FDA, urged the company to pull the product off the market. FDA approval of a medical device like a stent includes inspection and certification of the entire manufacturing process. But Boston Scientific had made a change to the way it secured the balloon to the stent. Now there was concern that the change had contributed to the balloon failures.
''There is no doubt in my mind that when the agency learns about what we know -- namely that by our change in the manufacturing process, we introduced a defect into the product -- that they will expect" a recall, he said. ''I don't know how the agency could rationalize accepting our continued distribution of a product for which the defect rate might be 10 percent."
In an interview, Pilot declined to comment on the investigation and would neither confirm nor deny his participation in the phone call. It was his notes from that call and others sought by prosecutors that led to Young's ruling.
Nevertheless, Jacob ''Kobi" Richter, Medinol's chief technical officer, argued against a recall. Pinhole leaks would not necessarily prevent doctors from successfully deploying the stent, he said, and the rate of adverse events was well below those associated with a competitor's stent. He belittled others who urged a more ''conservative" path and worried that with a recall, the stent would be off the market at least half a year.
Ultimately, Nicholas engineered a compromise. The company would not recall the defective stents, and would not withdraw them, an intermediate step in which shipments are halted but stents already in hospitals could continue to be used. Instead, Boston Scientific would ''engage" with the FDA and seek guidance on how to deal with the leaks. The company hoped such a strategy would minimize the time the product -- a distinct improvement over existing stents -- was kept from doctors and patients.
Boston Scientific's first step was to send what is known among physicians and regulators as a ''Dear Doctor" letter. In the letters, sent Sept. 17 and 18 to 2,000 doctors at 213 hospitals across the nation, a marketing executive said doctors could ''minimize the occurrence and severity of balloon failures" by closely following the NIR stent's instructions for use.
But in the conference call, Nicholas said the leaks were occurring even ''with physicians who were using the device as intended, as indicated." The letter to doctors did not mention the high rate of balloon failures the company found in its internal testing.
Government prosecutors have faulted Boston Scientific for not disclosing its internal test results in the letter, for implying that doctors were somehow to blame for the malfunctions, and for not acknowledging it had stopped manufacturing the stents as it sought to find the cause of the failures.
The following day, Pilot, the company's outside attorney, called Dr. Susan Alpert, director of the FDA's Office of Device Evaluation, which had approved the NIR stent. According to a list of talking points prepared for the call, he planned to tell her that the company needed ''agency guidance." He would point out that doctors liked the new stent and that a competitor's stent had a higher rate of complications after its introduction about a year earlier. Later that day, according to prosecutors, Boston Scientific shipped NIR stents worth $2.66 million.
On Sept. 30, Boston Scientific sent a stent safety report to the FDA. It concluded, ''The product failure rate does not represent an unreasonable risk to patient health and is within the range of rates estimated for currently available products." But a chart showed the stent had far more complaints and injuries than another Boston Scientific stent, highlighting the impact of the pinhole leaks.
Meantime, the company kept shipping the stents, an average of $1.5 million worth each day, according to a prosecutors's report.
Company officials finally met face-to-face with the FDA at the agency's Rockville, Md., headquarters Oct. 5. A formal recall was finalized. Nonetheless, government prosecutors said, Boston Scientific shipped another $2 million of NIR stents later that day after it told the FDA it would halt shipping.
Debra Lano, regulatory vice president for Boston Scientific's stent division, said the meeting with the FDA did not go well. After the meeting, she told Rosenthal, the chief development officer, that the company should have recalled the stent two weeks earlier.
He replied that Boston Scientific ''had gotten two more weeks of sales" because of the delay, according to the judge's ruling.
In a statement to the judge, Boston Scientific's lawyer said Rosenthal's comment, if it had been made, ''obviously would have been gallows humor."
Good, Rosenthal's lawyer, said Rosenthal never made such a statement: ''Dr. Rosenthal and others consulted with the FDA about whether and when to recall the product . . . [it] was safer than any of its competitors, notwithstanding the balloon pinhole problem."
Three years ago, James Tobin, chief executive of Boston Scientific, predicted the outcome of the Justice Department's investigation. In a deposition given in another case, Tobin, who joined Boston Scientific the year after the recall, said the investigation of the recall ''would take another three to four years and that Boston Scientific would then settle with a consent decree and a fine."
In his ruling, Young said Boston Scientific had to turn over the lawyer's notes and could not claim attorney-client privilege, in part because the underlying behavior was so egregious.
''One who argues that violation of a criminal statute is not a crime has a very long row to hoe," the judge wrote. ''It is well-nigh impossible to argue against the criminality of intentional shipping of a product that is more dangerous to health than its label suggests."
Jeffrey Krasner can be reached at email@example.com.