http://www.nytimes.com/2012/11/27/business/st-jude-medical-suffers-for-redacting-a-product-name.html
NEWS ANALYSIS
By BARRY MEIER FiDA highlight
Published: November 26, 2012
Peter Muhly for The
New York Times
Dr. Ernest Lau holds a Durata lead
from a St. Jude Medical Fortify ICD, an implanted heart defibrillator.
IS covering a product’s name in a public document
a sign that a company has something to hide? And how should doctors, patients
and investors react if the product at issue is one on which peoples’ lives and
a company’s fortunes depend?
Such questions now loom over St. Jude Medical after the disclosure last
week that its executives had blacked out the name of a heart device component
when they released a critical federal report
involving the product. The value of St. Jude has since plummeted more than $1
billion, or 12 percent. But the company’s actions may have a more lasting
impact on its reputation and the health of patients, some experts say.
Last week’s incident was the latest development
in a controversy involving the
component, an electrical wire that connects an implanted defibrillator to a
patient’s heart. St. Jude officials say the wire, which is known as the Durata,
is safe. But uncertainty about the company’s statements is growing,
underscored by its handling of the report, which involved a Food and Drug Administration inspection of a
plant that makes the Durata.
St. Jude released that report in October as part
of a filing with the Securities and Exchange Commission. The F.D.A.
provides device makers with the reports in an unaltered form, and they may contain
criticisms of a company’s procedures.
But the version of the report that St. Jude filed
with the S.E.C. left some doctors and analysts uncertain about which company
product or products were at issue for a simple reason — St. Jude had redacted, or blocked out, all 20
references to the Durata in it.
Company executives said they had done so based on
their “good faith” interpretation of how the F.D.A. would act if it
publicly released the report under the Freedom of Information Act. But both an
F.D.A spokeswoman and a lawyer who specializes in medical devices took
exception with that view, saying that names of approved products typically do not qualify as
the type of confidential business information that the F.D.A. would redact.
Among other things, F.D.A. inspectors found
significant flaws in the company’s testing and oversight of the Durata. It was
those revelations and the implications that the problems could lead to further
F.D.A. action against St. Jude that led to the sharp fall last week in its
stock price.
In 2005, Guidant, a device maker that no longer
exists, also found itself under scrutiny. Back then, its executives decided not
to tell doctors that one of its defibrillators could short-circuit when a
patient needed an electrical jolt to save a life. The expert who brought the
Guidant problem to light, Dr. Robert Hauser, a heart specialist in Minnesota,
has also raised concerns about the St. Jude wires, adding that he believes that
its executives have been less than forthright.
“Patients
and physicians would appreciate more information,” Dr. Hauser said.
Craig
Lassig for The New York Times
Dr. Robert Hauser, a cardiologist who
studies heart devices, has raised concerns about wires in defibrillators from
St. Jude.
In an earlier interview, St. Jude’s chief
executive, Daniel J. Starks, said the company had hidden nothing about the
Durata or another heart wire named the Riata, which it stopped selling in 2010.
“We’ve
been more transparent than others,” said Mr. Starks, referring to company
competitors like Medtronic.
Still, some Wall Street analysts share Dr.
Hauser’s view. And if one St. Jude executive can claim credit for shaping their
opinion, it would be Mr. Starks.
Earlier
this year, he sought, among other things, to have a medical journal retract an
article written by Dr. Hauser that was critical of the Riata. The publication
refused.
Now, after St. Jude’s latest misfire, Wall Street
analysts, who usually agree more than disagree, are placing wildly differing bets
on St. Jude, with some valuing it at $48 a share and others at $30. On Monday,
St. Jude closed at $31.86 on the New York Stock Exchange.
One of those bearish analysts, Matthew Dodds of
Citigroup, said he thought the Food and Drug Administration might act soon on
Durata. “I believe that a
lot of their actions have made the situation worse, ” he said of the company’s
executives.
A St. Jude spokeswoman, Amy Jo Meyer, reiterated
the company’s stance that it had interpreted agency rules in “good faith” when releasing
the redacted report about the Durata. An F.D.A. spokeswoman, Mary Long, said
the agency did not consider the names of approved products to be confidential.
And a lawyer, William Vodra, said that while device makers try to make a confidentiality argument
for product data they consider embarrassing, like injury reports, they rarely
succeed.
“In my experience, the F.D.A. consistently
rejects” such arguments, Mr. Vodra wrote in an e-mail.
For
patients, the dilemma may become more excruciating. The
company’s earlier heart wire, the Riata, has begun failing prematurely in some
of the 128,000 patients worldwide who received it. And those patients and their doctors face a
difficult decision: whether to leave it in place or have it surgically removed,
a procedure that carries significant risks.
St. Jude executives say that the Durata, which
uses a different type of insulation than the Riata, is not prone to such
problems.
And with the Durata already implanted in 278,000 people, many
heart specialists certainly hope they are right.
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