FDA issues Boston Scientific stern quality-control warning

(Correction: Because of a reporting error, stories on Boston Scientific Corp.'s acquisition of Guidant Corp. in the Jan. 24, 25, and 27 Business sections contained an incorrect figure for the minimum price Boston Scientific stock must maintain to keep the deal's value from decreasing for Guidant shareholders. The share price must remain at $22.62 or higher.)

Boston Scientific Corp., still savoring victory in its bidding war for Guidant Corp., has been slapped with a rare federal warning letter that could prevent the Natick company from introducing new products until it fixes ''continuing serious deficiencies" in quality control, the Food and Drug Administration said last night.

The FDA warning letter focused on the Natick company's top management, saying executives failed to fix numerous problems the agency had already outlined at particular plants and offices. Such emphasis is unusual for the FDA. This week's ''corporate warning letter" was only the third issued in a decade by the agency's medical device division, officials said.

''The problems we identified in this letter we consider very serious," said Daniel G. Schultz, the director of the FDA's medical device division, in a phone conference last night.

The nine-page letter, addressed to Boston Scientific chairman Peter Nicholas and chief executive James Tobin, was sent to the company Wednesday -- the same day it disclosed a $27 billion deal to acquire Guidant -- and was released last night.

Looming over the warning is the question of how it could affect the purchase of Guidant, a heart device maker that has been stung by product recalls and patient deaths because of malfunctions in its pacemakers and defibrillators. The deal still requires federal antitrust clearance and shareholder approval, and in the long term, investors and analysts widely believe the success of a merged company rides on Boston Scientific's ability to restore doctors' confidence in Guidant's products.

A Boston Scientific spokesman last night said the FDA letter ''doesn't affect" the Guidant acquisition, and Guidant issued a statement saying it was ''aware of the issues involved" and did not expect the letter to derail the deal.

A more immediate concern for Wall Street may be the company's stock price. Almost half the value of the Guidant deal is tied up in Boston Scientific stock, and if it slips below a ''collar" of $22.62 per share in the three weeks before the deal closes, it will lose some of its $27 billion value. Yesterday, before the letter was released, Boston Scientific shares closed at $23.15. After-hours trading in the stock was halted.

Boston Scientific received three FDA warnings last year about shipping errors and lapses in keeping track of doctors' reports of device problems. In one case, workers were able to override a computer system and ship devices to a hospital even though the products had failed an inspection.

This letter also detailed problems in three other plants, including one facility in Indiana where managers were unaware that one of their products, the Leveen needle electrode, had been recalled.

In a statement, Boston Scientific's Tobin said the company had ''clearly not done enough to resolve the issues raised by the FDA last year."

''We will work closely with the FDA to resolve these outstanding issues, and we believe we are on track to do so promptly," he said.

Until the FDA considers a warning resolved, the agency can deny approvals of any new devices affected by the problems in the letter. Because this week's warning was a broad critique of the entire company's quality-control systems, an FDA official said last night that the agency is free to reject any new product it believes is affected by quality-control issues.

It was unclear whether the letter would apply to new products made by Guidant if the deal with Boston Scientific goes through in late March as planned.

A Boston Scientific spokesman said the company would work to resolve the problems as quickly as possible, but neither the company nor the FDA would speculate on when they could be resolved.

Boston Scientific's Tobin, chief operating officer Paul LaViolette, and other executives are scheduled to meet with the FDA next Friday, and the FDA's Schultz said he expected the problems to be addressed ''fairly quickly, certainly in the next few months."

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