Boston Scientific Corporation (NYSE: BSX) today announced that it has reached an agreement in principle with the U.S. Department of Justice (DOJ) related to product advisories issued by its Guidant subsidiary in 2005. The alleged conduct and product sales occurred prior to Boston Scientific's 2006 acquisition of Guidant.
Boston Scientific had previously disclosed an investigation by the U.S. Attorney's Office in Minneapolis into alleged violations of the Food, Drug, and Cosmetic Act by Guidant. Under the terms of the agreement, Guidant will plead to two misdemeanor charges related to failure to include information in reports to the U.S. Food and Drug Administration (FDA), and Boston Scientific will pay $296 million on behalf of Guidant.
U.S. Generally Accepted Accounting Principles (GAAP) require that this agreement be recorded in the third quarter, as it occurred after the October 19 release of the Company's third quarter financial results and before the filing of the Company's Quarterly Report on Form 10-Q. Accordingly, the Company has updated its financial results for the third quarter and nine months ended September 30, 2009, recording a third quarter charge of $294 million, on both a pre-tax and after-tax basis. This amount represents the $296 million charge associated with the agreement net of a $2 million reversal of a related accrual.
"We are pleased this investigation has been resolved," said Ray Elliott, President and Chief Executive Officer of Boston Scientific. "Guidant and its employees acted in good faith and believed they complied with applicable laws and regulations. We elected to resolve this matter so we could put it behind us and devote our full energies and resources to developing our innovative technologies."
The only products involved in the investigation were the VENTAK PRIZM(®) 2, the CONTAK RENEWAL(®) and the CONTAK RENEWAL 2 devices, which were the subjects of the 2005 product advisories.
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