Boston Scientific and the Road to Ruin
In court proceedings Tobin denied that he had ever made those comments. Boston Scientific countersued the couple, and insisted that the secret facility was developed as a backup plan because, the company said, the Richters had fallen behind in production. In a summary judgment weighing both suits, a judge determined that Boston Scientific had acted in bad faith. The company settled and paid Medinol $750 million in 2005.
But the tale of the Nir stent involves allegations far worse than double dealing. According to the U.S. Attorney’s office, an investigation revealed that within weeks of launching Nir on the U.S. market in August 1998, Boston Scientific received reports of life-threatening problems with the stent’s delivery system. Some of the balloons used to expand the stent to its full size leaked or burst. According to a resulting lawsuit, Nicholas admitted in a conference call that he knew the Nir stent was faulty and that the company couldn’t continue to sell it. But it did anyway. Boston Scientific kept the faulty product on the market — making $1.5 million in sales each day. The company did send out a letter to physicians that mentioned the flaws, but tried to downplay them.
The FDA found out about the stents and ultimately met with Boston Scientific to discuss them. By that point, one person had died and 26 had been injured due to the flawed stent, according to the FDA. On October 5, 1998, Boston Scientific issued a recall. In 2004, the company paid the government $74 million to settle the case. It admitted no wrongdoing.
ANOTHER CASE EMBLEMATIC of the problems at Boston Scientific was the purchase of the Indiana company Guidant. By 2005, with revenue in the billions thanks to a new stent, Boston Scientific’s board wanted the company to diversify beyond its main business. Guidant had a good chunk of the lucrative market for pacemakers and implantable cardiac defibrillators, devices that shock the heart back into rhythm.
Guidant, in other words, looked like an attractive buy. But Boston Scientific wasn’t the only company to take notice, and, adding to the consternation, Johnson & Johnson looked like it was about to beat them to the punch. But as a J&J–Guidant deal was nearing completion, a patient with a Guidant defibrillator in his chest died. Guidant was forced to issue a massive recall and faced lawsuits and investigations. These developments led J&J to lower its offering price for the company. Undeterred, Boston Scientific pounced. It made an unsolicited offer for Guidant, which set off a bidding war.