Boston Scientific and the Road to Ruin

By Catherine Elton | Boston Magazine |

The company came to dominate the so-called interventional cardiology device market, a multibillion-dollar sector comprising various types of stents and catheters. Boston Scientific advanced medicine and, arguably, humanity by bringing lifesaving medical devices to market. It also became an investment portfolio darling, and made its founders billionaires. In 1997, an article in Medical Economics summed it up this way: “What could go wrong with such a success story?”

Plenty, as it would turn out. The company’s phenomenal growth led to some spectacular problems — arrogance, avarice, and treachery among executives and the rank and file alike — which became so embedded in the culture of Boston Scientific that even now, nearly two decades later, the company is still unspooling its infected threads. (Despite repeated requests, Boston Scientific officials declined to comment for this story. Ray Elliott would answer only limited questions.)

THERE ARE TWO CASES that best illustrate all that has gone wrong with Boston Scientific.

The first began in 1995, and involved an Israeli war hero and his wife. Kobi and Judith Richter owned a company called Medinol, which held a patent for a stent — a small metal-mesh tube that, after being threaded to the heart, expands to prop open clogged arteries.

At the time, Johnson & Johnson had just released the first coronary stent on the U.S. market — and Boston Scientific and Johnson & Johnson were far from friendly. The two behemoths had a tendency, as one former Boston Scientific executive put it, “of buying companies out from each other’s noses.” Their competition became ferocious, which may have had something to do with the fact that J&J had at one point tried to acquire Boston Scientific — which did not go over well in Natick. In working with Medinol, then, Boston Scientific may have seen not just a good business deal, but also a chance to stick it to J&J by getting in on its stent action.

Medinol and Boston Scientific drew up a contract under which the Richters’ company would make its metal-mesh stents, called Nir stents, and Boston would market them. But the arrangement proved troublesome. The Richters were difficult to deal with — they missed deadlines and kept asking for more money, according to a suit filed by Boston Scientific. (The Richters denied these claims.) So Boston Scientific looked for a way around Medinol. Pete Nicholas and his CFO, Larry Best, ordered the construction of a top-secret manufacturing facility in Ireland called Project Independence. They also created a shell company, which carried the pseudonym BBD (as in Bringing a Better Deal). According to allegations in a lawsuit filed years later by the Richters, the purpose of the secret facility and shell company was to steal Medinol’s stent design so that Boston Scientific could manufacture them on its own and either cut Medinol out of the deal entirely or depress the company’s value to the point where Boston Scientific could acquire it at a fire-sale price.

By the time of the Richters’ lawsuit, Pete Nicholas had himself taken a seat on the board and named Jim Tobin as Boston Scientific’s new CEO. The Richters claimed in court documents that Tobin had told them that his colleagues were “crooks” and that he was “ashamed to be working for such a dishonest company.”

  • craig

    I worked for Sci Med until it was acquired in 1995. I was fired by dumb assed engineers who were given titles called ‘manager’, who were full of themselves, had no knowledge of the functions of a manager (I had an undergrad. in management, five years’ experience prior to Sci Med, plus a degree in electronic technolgy). Firms that are almost entirely engaged in engineering make the mistake of promoting their ‘own kind’ – that is, engineers, who while they are essential in the engineering function, are absolutely CLUELESS when it comes to maximizing human resources. Hubris, group-think, discrimination against people with other world views, prima donnas, all create a culture of fear among those who love their jobs more than being courageous and speaking truth to neanderthals. Hubris, arrogance CAN KILL!!!! This is how faulty devices find their way into victims and ultimately why B.S., Medtronic etc, are doomed to oblivion UNLESS the culture fosters true managers/coaches who are actually interested in the development of talent who have spent years and tons of their money acquiring the skills. How much talent is sent packing by a dumb-assed engineer who can’t even spell or…

  • Ruben

    I’m a former international employee that was fired when I was the responsible to run the business in a country that was one of the largest market opportunities in the world for BSC.
    Fired in retaliation because through the use the Channel that was included at the Code of Ethic made a formal complaint about many operators “BSC is used to call them Managers” that were using “cold sales” to reach quote that allows them to gain bonus.
    Those fictitious sales were later considered to be part of the annual “write off” at company balance-sheet. As an example, I found ($130K) value equipment (IVUS), seated at a distributor since two year without any action from “BSC Managers” no payment – no return, just an Invoice to gain the bonus for “managers” that of course was paid.
    I made a claim for retaliation at Boston court, that was rejected because the The Sarbanes-Oxley doesn’t protect a citizen of a foreign country. While it was created to protect the investors from any risk, that in a global company can come from international business also. The last CEO “improves” his salary from 600K to 32.4M per year using the same strategy of “bonus…

  • sandy

    confused and saddened that in a time of economic hardship state-wide, and nationally… a local magazine would choose to disparage a locally headquartered company that employs thousands in this state.

  • chris

    I worked at NSC for 2 years in clinical sciences. The place was toxic and leadership was non existent. What goes around comes around. Mr manager was a moron, she is highlr paid, no degree, no morals, and was inappropriate as she bullied any one she wanted to and leadership let her get away with it, no balls to confront her. The ship has sunk.

  • BH

    The article was a clear demonstration of cowardice on the part of the author and the “unnamed analyst”. It’s easy to post negative comments if there is no accountability. In addition, the unprofessionalism demonstrated in publishing unnameed vulgar assessments is inexcusable. Would expect more objective (at least more balanced) “reporting” from a local magazine in writing about a local company that develops life saving medical devices that reduce healthcare costs and help physicians treat patients needs.

  • Martin

    This women signing this article is obviously a crazy feminist writing this coments like;
    “Fed by hubris, testosterone, ego, and greed”.
    Former executives describe what ensued as an all-out testosterone fest.
    Its showing us that testosterone *(men hormon) is responsible for all problems here… Now we should just say that this lady wrote this article estrogenicly stupid and unbalanced and unsure??? Its simple discriminating men and blame them for all here ;p

  • Joel

    This company gets whatever it deserves and folks in the comment section defending them are simply pathetic. I worked for them as a manager for several years and their just the typical old school, east coast good ole boys squeezing every ounce of blood out of their workers and then throwing them away to stay profitable.