Tuesday, June 27, 2006

Implications of the Boston Scientific Recall

It is interesting that Boston Scientific's stock plummeted 6.7% after the news of their latest recall involving some 26,200 pacemaker and defibrillator devices. This morning in the Wall Street Journal, Boston Scientific is claiming "not to miss a single sale."

But to the practicing physician dealing with heart rhythm disorders who wants to establish his practice "where quality is job one," how can any physician in good conscious recommend this product for their patient? The negative press has bashed this brand, and now has extended to hurting the Boston Scientific name. The question for this company which paid a pretty penny for Guidant is: what will be needed to reinstill confidence in not only patients, but doctors. After all, there has been a suggestion that this negative publicity has encouraged fewer primary care physicians to refer their patients for these devices to cardiologists, despite the life-saving advantages demonstrated in the MADIT-II, SCD-HeFT, COMPANION and CARE-HF trials (which I have discussed previously), and has resulted in the downturn of device implants seen recently in the US.

Overall, I suspect Boston Scientific's sales will only minimally decline after this recall. Those who are staunch end-users are likely to stay put, and the exodus of others from Guidant product to St. Jude or Medtronic devices during prior recalls has already occurred. Furthermore, Guidant's product line in the interventional cardiology world (the "plumbers" of cardiology) is excellent as is their intellectual property portfolio and likely to buoy their stock eventually. Furthermore, the actual incidence of the reported failures is quite low, and probably does not warrant a mass replacement of devices (except, perhaps in patients who are pacemaker-dependent for their heart to beat). Certainly recalling non-implanted devices was the right thing to do. Unfortunately, this will not be the last we hear of recalls from Boston Scientific, or Medtronic, or St. Jude. These recalls come with the territory of these complicated, yet life-saving, devices.

Finally litigation concerns remain for Boston Scientific. Hopefully the press from this legislation will not further compromize their market share, but there certainly is a big hill to climb to reinstill confidence in physician providers.


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