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The Price Medtronic Paid

The day that Bill Hawkins announced that Medtronic would
stop shipping the widely sold heart disease management devices
, the company’s
stock had its worst day in 23 years, falling 12 percent. Volume that day was
almost 63 million shares, compared to 3.6 million the day before. And then came
the aftershocks.


First, more deaths associated with the lead have been
reported. In March 2009, Medtronic’s physician panel identified a
total of 13 deaths
in which a Sprint Fidelis lead fracture may have been a
factor.


Second, market share in the category fell from 51 percent to 47 percent in the year after the recall.


Third, the recall shook company morale. The founders of
Medtronic, who started the company in a garage in 1949, invented the first
wearable, battery-powered cardiac pacemaker, and the company takes great pride
in its cardiac therapies.


And we haven’t even gotten to the plaintiff’s
lawyers yet.


Two years later, though, Medtronic has mostly recovered. An
FDA-approved software package, the Lead Integrity Alert, issues an audible
alert to patients when it detects signals that the lead could be fracturing.
This has enabled Medtronic to monitor the lead more closely and intervene
earlier, reducing the chances of complications. Market share in the category
has stabilized.


Although the threat of lawsuits still exists, the company is
somewhat protected by a 2008 Supreme Court decision, Riegel v. Medtronic, in a
case brought by someone using a Medtronic balloon catheter. The Court decided,
8–1, to bar lawsuits concerning devices that had been approved by the
FDA
. So far, Medtronic has been able to block lawsuits on this basis, which is
known as “federal pre-emption,” but the question is now
before a Minnesota state court. Moreover, Congress is considering the Medical
Device Safety Act, which would eliminate the pre-emption. If it passes,
Medtronic could face hundreds or even thousands of lawsuits related to the
Fidelis recall.

More Information:


href="http://www.fda.gov/ForConsumers/ConsumerUpdates/ucm103022.htm">FDA Q&A
on the Recall


href="http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/2007/ucm109007.htm">FDA
Statement on Recall


href="http://online.wsj.com/article/SB119249227531860014.html">Medtronic
Defibrillator Patients Mull Options


href="http://online.wsj.com/article/SB119240777833358629.html">Medtronic Pulls
Defibrillator Wires Off Market

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