You know a company's having a rough time when it has trouble pleading guilty in court. But considering Boston Scientific's (NYSE: BSX) track record lately, perhaps that shouldn't come as a surprise.
In November, the company agreed to plead guilty for failing to include information about Guidant's heart devices in reports to the Food and Drug Administration. Those issues occurred before Boston Scientific bought Guidant; putting the case behind it seemed like a prudent move for the medical-device maker.
But the judge in the case rejected the plea yesterday. It appears that this serial restructurer of a company, currently dealing with a recall problem, can't even plead guilty in a satisfactory manner.
Apparently, the punishment -- pleading guilty to a couple of misdemeanors, and paying a $296 million fine -- wasn't strong enough. After hearing from patients who received the devices, and doctors who treated them, the judge said the plea agreement with the Department of Justice needed to be toughened up.
The judge wants the company put on probation, which could mean community service. (Gee, I wonder how President and CEO Ray Elliott would look in an orange vest?) The company might also be required to appoint a compliance offer to monitor operations. Fortunately, there doesn't seem to be any talk of increasing the fine. Considering other DOJ settlements in the biomedical industry, the news could have been worse:
|
Company |
DOJ Settlement |
|---|---|
|
Eli Lilly (NYSE: LLY) |
$1.4 billion |
|
Pfizer (NYSE: PFE) |
$2.3 billion |
|
AstraZeneca (NYSE: AZN) |
$520 million |
Source: Press releases.
After it outbid Johnson & Johnson (NYSE: JNJ) for Guidant, I've never really considered the company a savvy negotiator. But it seems Boston Scientific's unusually effective wrangling with the DOJ got it into this mess. The company said it's willing to work with the DOJ to modify the plea agreement.
Like its paperwork fiasco, this settlement will fade into Boston Scientific's history eventually. In the meantime, it's one more thing for management to deal with, and one more reason why investors should demand an insanely discounted price if they decide to invest.
