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Feds Investigate Boston Scientific Defibrillator Recall

Wed, 03/31/2010 - 4:34am
Tom Murphy, AP Business Writer

NATICK, Mass. (AP) — Investors shrugged off a report Tuesday that medical device maker Boston Scientific could face a fresh wave of regulatory problems thanks to a product recall investigation.

The Wall Street Journal reported that the Department of Justice and the Securities and Exchange Commission are looking into the recent recall of defibrillators.

Boston Scientific two weeks ago suspended sales of its heart-shocking defibrillator implants after saying it realized it had not alerted regulators to changes in the manufacturing process of the best-selling device. The company said it taking back all the devices from suppliers and hospitals.

Two production changes that were not cleared with the Food and Drug Administration were discovered, the company said. Medical device makers are required to alert regulators to significant changes to life-sustaining devices like defibrillators, which help correct irregular heart beats.

Boston Scientific, based in Natick, Mass., has said it is working with the FDA to resolve the situation as quickly as possible.

Citing an internal company memo, the Journal said investigators are looking for documents that led to the recall and communications with stock analysts, regulators and physicians.

The Journal story also said investigators were looking for any injury reports.

Boston Scientific spokesman Paul Donovan declined to comment.

Representatives of both the justice department and the SEC also declined comment.

It is the latest in a string of problems for Boston Scientific's defibrillator business, which it acquired through the 2006 buyout of Guidant.

That same year the company received a rare companywide warning letter from the FDA, which temporarily halted approval of all new products. Over the next two years the company issued multiple safety recalls on its devices.

"The investigation is not a welcome development for a company that already has more than enough challenges on both the revenue and regulatory fronts," Morgan Joseph analyst Bruce Jackson said in a research note.

But Gabelli & Co. analyst Jeff Jonas said that to date, he believes Boston Scientific had handled the recall and disclosure well.

"I guess I'm confused as to what the real problem is, other than the fact that they do have some history," he said.

Spencer Nam of Summer Street Research said the recall involves more of a clerical problem than a clinical issue that affects patient safety.

"I don't think the doctors are too concerned about it," he said.

Shares of Boston Scientific Corp. climbed 6 cents to $7.25 in afternoon trading.

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