St. Jude shareholders file class-action over false Riata claims, devalued stockJun 19, 2012 | Parker Waichman LLP
Shareholders of St. Jude Medical Inc. have filed a class-action lawsuit against the company for allegedly hiding safety data that showed failures of its Riata implantable cardiac defibrillator (ICD) leads and it eventually caused company stock to drop 11 percent in less than a week.
The lawsuit, filed in U. S. District Court for the District of Minnesota, claims St. Jude hid this information and used it to gain a market advantage, inflating its stock prices. The Riata model of ICD leads were recalled in 2007 after numerous reports of them malfunctioning led to serious injuries and at least 20 deaths of patients who relied on them to deliver necessary shocks to keep their hearts beating.
The Riata leads failed due to a defective insulation protecting the conductive end of the wires connecting to the ICD generator from the heart. If these conductive ends are fractured, they can deliver an unnecessary and powerful shock to a patient or they could not work at all and put a person at risk of their heart stopping altogether. Thousands of people still rely on the Riata leads even after their recall.
Research on how best to treat patients using Riata leads with their ICD are being conducted and a study this week suggests removal of an ICD generator but keeping the Riata leads in place is a key factor that may lead to the wires malfunctioning. Other studies have suggested the Riata model of leads has an overall higher failure rate than others.
The complaint from the shareholders alleges St. Jude was aware of problems with the Riata and Riata ST models of leads and there were issues beyond the defective insulation. The medical device company also had fielded reports of failures when the Riata lead just short-circuited unexpectedly. A publicly-held company is required to report these events to regulators, which will make them public. It is also obligated to inform its shareholders as the belief that Riata is safe and effective will lead to increased sales and buoyed stock prices.
Shareholders who've invested in St. Jude based on evidence that its Riata and other ICD leads are safe are accusing the company of deception. The complaint, cited by a report at MedCityNews.com, states, "(St. Jude Medical) failed to disclose the full extent of the problems with its products." It said the company's admission that there were problems with its Riata model of leads caused an 11 percent drop in stock price in three days.
St. Jude realized that again this week when its stock price took an immediate 6-to-8 percent drop in value on the news that its newer model ICD lead, the Durata, had also failed in one patient. Details on the case are suspect at the moment but that did not prevent a rather quick sell-off of its stock.