Guidant legal fight may cost $381m

Facing a growing wave of lawsuits from patients and insurers, Boston Scientific Corp. has set aside $381 million to pay for legal costs connected to faulty heart devices made by Guidant Corp. , according to a document filed with federal regulators yesterday.

The quarterly report submitted to the Securities and Exchange Commission marks the first time Boston Scientific has put a number on the potential legal costs arising from the problems at Guidant, the Indianapolis company it bought in April for $27 billion.

The $381 million figure is an estimate of legal costs to fight the lawsuits, and did not represent an estimate of potential liability, a Boston Scientific spokesman said yesterday. The company's filing said it is ``still assessing" the total potential liability.

The spokesman, Paul Donovan, said the company had evaluated the potential financial risk from Guidant lawsuits and found it ``manageable."

Guidant, a leading manufacturer of implantable devices that keep the heart beating smoothly, recalled more than 200,000 implantable defibrillators and pacemakers before being acquired by Boston Scientific, of Natick. At least seven deaths have been attributed to Guidant device malfunctions, and tens of thousands of patients are faced with a decision over whether to have a removal operation, or to live with the risk that their device may not deliver its lifesaving charge when needed.

In the documents it filed, Boston Scientific said it is facing about 72 class-action lawsuits and 477 individual lawsuits, mostly in federal courts. The suits predominantly involve patients who were not harmed, but are seeking to be repaid for ``medical monitoring and anxiety," the company said.

Another 3,300 patients have claims that may develop into lawsuits.

A number of health insurers, including several Blue Cross and Blue Shield plans, have also sued Guidant to recover the healthcare charges they say are associated with patients who received faulty devices.

Over the past year, Guidant's troubles have been a two-edged sword for Boston Scientific, the biggest life-sciences company in Massachusetts and one of the largest medical-device companies in the world.

Guidant was set to be acquired by the healthcare giant Johnson & Johnson before a string of 2005 device recalls caused Johnson & Johnson to lower its purchase price, allowing Boston Scientific to jump in and snatch Guidant away in a high-profile bidding war.

But problems with Guidant's devices have left Boston Scientific with a string of questions about quality control at both companies, and about the potential cost of lawsuits from patients who received Guidant's pacemakers and defibrillators.

Analysts contacted by the Globe yesterday said that given the number of potential lawsuits, investors would probably welcome the estimate of legal expenses.

``I thought it was high, but I bet you they're being conservative," said Jan Wald , a medical-device industry analyst with A.G. Edwards & Co. ``Given the number of cases they have to deal with, that's not an unreasonable number."

Dhulsini de Zoysa , an analyst with Cowen & Co., said the filing was unlikely to hurt Boston Scientific's stock, which has tumbled in the past several months over continued problems with its devices.

``The market is very forgiving of one-time payments," she said, but she cautioned that this was just the first round.

``We're not even close to the end of all this, so it's hard to know where it will end up," she said.

Stephen Heuser can be reached at sheuser@globe.com.