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Ex-worker says Guidant pushed speed over quality

He claims troubled Arden Hills plant cut training, pressed for 'unrealistic' production goals

Jan 14, 2006 | Bloomberg News

Guidant Corp. reduced training and emphasized production speed over quality at its troubled factory making implantable heart devices in Arden Hills, says a 14-year worker who trained others there.

Management set "unrealistic" goals for production of pacemakers and defibrillators and offered incentives for meeting them that included cash bonuses and Minnesota Vikings tickets, Juan A. Machado said in an interview given under oath for a Texas product liability lawsuit against Guidant.

Guidant has been the object of a bidding war between Johnson & Johnson and Boston Scientific Corp. that has intensified this week. On Friday, Guidant agreed to be acquired by J&J for $24.2 billion.

Meanwhile, Guidant is fending off at least 60 lawsuits related to the recall of flawed products. The Indianapolis-based company, the world's second-biggest maker of heart-rhythm devices behind Medtronic Inc., has been sanctioned by U.S. regulators for quality failures.

"We were more driven by productivity and profit versus our previous beliefs, which were, 'The No. 1 thing is our patient,' " Machado said in an Aug. 15 statement, a transcript of which was provided to Bloomberg News by the Texas plaintiffs' lawyer. About six years ago, Guidant put manufacturing managers in charge of the quality and training office where he worked, limiting the unit's effectiveness, said Machado, who was fired by the company in July.

Last June, Guidant recalled 109,000 faulty defibrillators that were linked to at least seven deaths. The U.S. Food and Drug Administration said in a Dec. 22 letter to Guidant that persistent deficiencies "may be symptomatic of serious underlying problems in your firm's manufacturing and quality assurance systems."

Until Guidant corrects the quality problems at its Arden Hills factory, the agency said, it won't permit export or pre-market approval of some defibrillators and pacemakers. The company said it would be ready for an FDA inspection again in mid-2006.

Guidant declined through spokesman Steven Tragash to comment on Machado or his statement, citing its policy against discussing matters in litigation. Spokesmen for Boston Scientific and Johnson & Johnson also declined to comment.

J&J sees its move to buy Guidant as a ticket into the $10 billion-a-year market for heart-rhythm devices, the fastest-growing medical technology.

'EXTREME MENTAL ANGUISH'

Bruce Nudell, an analyst at Sanford C. Bernstein & Co. in New York, said Guidant's quality problems aren't exceptional. His firm holds a stake in Boston Scientific and has provided advice to Guidant.

"If you actually look at the performance of Guidant products, they are probably no worse than anybody else's," he said earlier this month.

Machado answered questions under oath from Corpus Christi, Texas, personal injury lawyer Robert Hilliard, for a suit filed in Nueces County District Court on behalf of two people whose Guidant defibrillators were recalled. Machado said he wasn't paid for his statement.

Beatrice O. Hinojosa, 65, had her defibrillator replaced, and Louis E. Motal, 62, still has the recalled device in his chest, Hilliard said in an e-mail. Guidant offered to pay for replacement devices and left it to patients and their doctors to decide whether to remove the suspect defibrillators.

Implanted defibrillators, about the size of an iPod, use electric shocks to restart faltering hearts. They cost $20,000 to $30,000 each, excluding the costs of surgical implantation.

Hinojosa and Motal complain in the suit that they experienced "extreme mental anguish" from the knowledge that their defibrillators might fail and leave them "severely injured or dead." Machado is listed as a witness in a trial set for Feb. 20 in Corpus Christi.

The lawsuit is likely to be the first involving Guidant's recalled defibrillators to reach a jury, Hilliard said. The lawyer said he provided the transcript of Machado's sworn statement to Guidant lawyers last month, and Machado will probably give pre-trial testimony under cross-examination by defense lawyers.

Cuban-born Machado, 43, a gregarious father of two, said in a Jan. 3 interview that he moved to St. Paul from Miami in the early 1990s so his children could attend better schools. His 21-year-old son works in the Guidant plant, he said.

Machado said he was eight credits shy of completing a community college degree in business aviation when he dropped out to join Guidant in 1992. He worked for three years as evening-shift group leader for laser welding.

In his last eight years with the company, Machado trained 1,200 Guidant workers, he said. His manager, Troy Graczyk, fired him in July, after the recalls started, over a miscommunication concerning vacation time, Machado said. His lawyer said he is pursuing an age discrimination claim with the Equal Employment Opportunity Commission and is considering further legal action. Machado said he expects Guidant to depict him as a "disgruntled" worker.

Graczyk and Guidant spokesman Tragash declined to discuss Machado's dismissal.

In his sworn statement, Machado said devices in which flaws had been identified were assembled and shipped for implantation before all the known problems were resolved. Machado said in a Jan. 3 interview that he never contacted the FDA and had nothing to do with the inspection that led to the warning letter.

INCENTIVES A 'BAD IDEA'

Medical-device industry consultants who reviewed Machado's statement said it lacked important technical details. Just the same, consultant John Malloy, a former FDA investigator who worked in regulatory affairs for a drug maker before becoming a regulatory compliance consultant, said the statement did show that management used bonuses to speed up production.

"Cash incentives for increasing volume is absolutely a bad idea," Malloy said. "Do you want the pacemaker made by the guy who made it the fastest or the one who made it the best?"

Offering bonuses to increase output at factories making medical devices is "unheard of," said Jeanne Lesniak, a Natick, Mass., biomedical engineer who consults with startup companies. Lesniak was corporate regulatory affairs director at Boston Scientific and a program manager at Medtronic before becoming a consultant on FDA compliance and quality issues.

Machado said in his sworn statement that training for newly hired workers fell to six hours from 10. In an interview, he said that happened in about 2002 when the training staff shrank.

"That's a dramatic drop for somebody who's off the street who has never seen an implantable device company," Machado said in the sworn statement.

He told Hilliard that manufacturing managers blocked a process control engineer from ordering one worker not to perform a certain production step after the worker left an accessory out of a defibrillator kit that was shipped.

"In the old days, that would have been enough to pull the operator's certification and at a minimum have them retrained," Machado told Hilliard. "In this case a verbal warning was given."

In his last performance review, Machado's supervisor said he was too "confrontational," Machado said.

"That was the way I had to go about my business, confronting people who were not doing the right thing," Machado told Hilliard.

"I would be uneasy about the changes that he has seen," said Lesniak, the Massachusetts biomedical engineer. "I think he's disgruntled, but I think he is for good reason."


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