Medtronic to Pay $268 Million, Settle Suits Over Defibrillator Wire Flaws

Medtronic Inc. the world’s biggest maker of heart devices, agreed to pay $268 million to settle lawsuits over claims that fractured wires in a line of its cardiac defibrillators caused at least 13 deaths.

Medtronic, said it’s resolving claims that wires connecting implantable Sprint Fidelis defibrillators to patients’ hearts were defective. The Minneapolis-based company halted sales of the so-called defibrillator leads in October 2007 after they were linked to users’ deaths.

“Both the plaintiffs and Medtronic realized this was the best resolution for people injured by these wires,” Hunter Shkolnik, a New York-based lawyer for injured defibrillator users, said today in a telephone interview.

Medtronic lowered its profit forecast in August, citing slower defibrillator sales. It expects fiscal 2011 earnings of $3.40 a share to $3.48 a share, down from an earlier forecast of $3.45 to $3.55, company officials said in an Aug. 24 statement.

“Medtronic is pleased we were able to negotiate terms that were mutually agreeable to the parties,” Christopher Garland, a company spokesman, said in a telephone interview. The settlement covers about 8,100 cases, or “virtually all” U.S. claims, Garland said.

The settlement resolves cases in both federal and state courts.

$33,000 Average Payout

It will provide an average payout of more than $33,000 to patients who have defibrillators with wires that have broken or are considered likely to break. The amount will depend on the extent of the injuries and defects.

“The expectation was that they would settle this,” Aaron Vaughn, an Edward Jones & Co. analyst in St. Louis, said in a phone interview. “For a company their size with the balance sheet they have, this is certainly something they can afford to pay.”

Medtronic had more than 50 percent of the $5.8 billion global market for defibrillators before sales of the leads were halted.

The wires deliver electrical jolts from the stopwatch-size defibrillators to regulate faltering heartbeats. About 268,000 patients had the targeted leads at one time, company officials said. They were introduced in 2004, the officials said. The company estimates that 170,000 people worldwide still have defibrillators with the Sprint Fidelis leads inside them.

Patients’ Claims

Lawyers for users contend the fractures were caused by poor welding and quality control at Medtronic’s manufacturing facility in Puerto Rico, according to court filings. Patients also alleged the wires were defectively designed, filings show.

Medtronic acknowledged in March 2009 that the flawed wires “may have been a possible or likely contributing factor” in 13 deaths.

U.S. District Judge Richard H. Kyle in Minnesota, who is overseeing all suits over the heart wires filed in federal courts around the U.S., dismissed those cases in January 2009 after finding they were preempted by federal law.

Kyle cited a 2008 U.S. Supreme Court ruling barring suits over medical devices that were reviewed under the U.S. Food and Drug Administration’s most intensive analysis program. That action by the federal agency superseded court review of defect claims, the court ruled.

Kyle’s ruling was being studied by a federal appeals court in St. Louis when the settlement was announced, said Daniel E. Gustafson, a Minneapolis lawyer who helped negotiate the accord.

‘Significant Money’

“The settlement provides significant money for people injured by this product,” Gustafson said.

The settlement over the Sprint Fidelis defibrillators is the second such accord over a line of the Medtronic’s heart devices. The company agreed in 2007 to pay more than $114 million to settle lawsuits over its Marquis line of defibrillators, which some users alleged suddenly quit working.

The consolidated case involving today’s heart-wire settlement is In Re Medtronic Inc. Sprint Fidelis Leads Products Liability Litigation, 08-1905, U.S. District Court, District of Minnesota (Minneapolis).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; David Olmos in San Francisco at dolmos@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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