ST. PAUL, Minn. (AP) — Boston Scientific Corp.’s Guidant
unit was ordered Wednesday to pay $296 million and serve three years of
probation for not telling regulators about safety changes it made to some
implantable heart devices, a failure prosecutors say put patients at risk.

Guidant LLC pleaded guilty in April to two misdemeanor
counts, but U.S. District Judge Donovan Frank initially rejected the $296 million
deal, saying that among other things it didn’t put the company on probation.

He approved the agreement Wednesday — and added probation —
after Guidant filed papers giving him more information about its community
service efforts and programs that ensure it complies with federal regulations.

Guidant has 10 days to pay the fines and forfeiture fees.

Frank said the sentence “provides a deterrent effect,
and most importantly, provides respect for the law.”

An attorney for Guidant declined to comment after the
hearing and referred questions to Natick, Mass.-based Boston Scientific, which
acquired Indianapolis-based Guidant in 2006 — after the improper disclosures
were made.

“The company is pleased that this issue is now
resolved,” Boston Scientific spokesman Paul Donovan said in a statement.
“We continue to believe that Guidant and its employees acted in good faith
and with the intention of complying with applicable laws and regulations.”

Assistant U.S. Attorney Robert Lewis said in court that
Guidant officials made deliberate decisions to conceal information from
regulators.

In court filings, he wrote that Guidant came clean only
after two Minnesota
doctors — investigating the death of a 21-year-old patient whose defibrillator
short-circuited — went to the media upon learning that the company did not
reveal the product defects.

Still, prosecutors supported the plea agreement and have
called the $296 million in fines and forfeiture fees the largest criminal
penalty assessed against a medical device company.

As part of probation, Frank said, the court will annually
review Boston Scientific and Guidant’s compliance efforts to verify Boston
Scientific keeps its commitments. The company will have to supply reports on
products, finances and other information to probation officials, as well as
submit to regular and unannounced inspections of its records, Frank said.

If Guidant does not abide by the terms of probation, a
probation officer would ask for a hearing, in which the judge could impose a
new penalty.

Guidant discovered a short-circuiting problem in 2002 and
2004 with some of its defibrillators, a problem that could render them unable
to deliver the life-saving jolts that patients depended on. The company changed
the devices but was accused of falsely reporting the changes or not reporting
them at all, leaving doctors and patients unaware of potentially dangerous
problems.

The company eventually pleaded guilty to submitting a false
and misleading report to the Food and Drug Administration about one
defibrillator model and failing to notify regulators about a safety correction
to another line of devices.

Guidant attorney Daniel Scott said in court documents that
the company had improved its compliance policies since 2005 and upgraded them
further after it was acquired by Boston Scientific.

Among the changes, Boston Scientific has taken steps to be
more transparent, posting quarterly reports about product performance on its
website. Scott also said that the company revised its reporting procedures to
eliminate “judgment calls” by requiring that changes stemming from
safety issues in the field be reported to the FDA for approval.

He also detailed community service in several programs,
including one designed to improve treatment of cardiovascular disease among
women, blacks and Hispanics, and another that gives middle and high school
students a background in science, technology, engineering and math. Boston
Scientific has voluntarily committed to give a total of $15 million to those
two programs over the next three years.

“The company has learned a lot from this. They’ve
learned a lot from their mistakes,” Scott said in court. “We think,
Your Honor, that we’re not what we were five years ago. We are much
better.”

Prosecutors said in court documents that the plea agreement
resolves a four-year investigation into events leading up to Guidant’s recalls
of three models of implantable defibrillators in 2005. Prosecutors said that as
of October, 13 deaths associated with product failures have been reported.

The devices at issue are Ventak Prizm 2 and Contak Renewal 1
and 2 defibrillators, which monitor for deadly irregular heartbeats and shock
the heart back to a normal rhythm.

Guidant discovered in 2002 that its Ventak Prizm 2 DR was
prone to short circuiting. Guidant fixed the flaw that November, but in August
2003 falsely told the FDA the change did not affect the safety or effectiveness
of the device, according to the plea agreement.

The deal also says that in mid-2004, the company found a
short-circuiting problem with two Renewal models. That device would beep when
there was a problem, sending patients to the doctor.

In mid-2004, a patient died just a week after he was sent
home by a doctor who followed prompts on a warning screen. In March 2005,
Guidant sent out a product update advising doctors that the warning screen
indicated a potentially serious problem.

But because the change was made to reduce a health risk, it
should have been reported as a product correction, not a product update, the
plea deal says. Guidant broke the law by not notifying the FDA about the change
within 10 days.

In April, some patients had complained that the deal didn’t
require restitution. Frank concluded no patients were directly harmed by the
two specific acts to which Guidant pleaded guilty.

Many victims have already sued and reached settlements.
Victims also can petition for part of the $42 million in forfeiture fees, but
Frank and prosecutors acknowledged that it’s unlikely the victims would qualify
for those funds.

Randy Hopper, an attorney for victims involved in the
Guidant litigation, said that because those harmed had to compromise in order
to get a settlement, “you have to question whether or not the victims were
made whole.”

The criminal case was filed in Minnesota
because Guidant’s heart rhythm management unit was based in the St. Paul suburb of Arden
Hills.