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Shiley Inc. Settles False-Claims Suit : Courts: Irvine-based firm and its parent agree to pay $10.75 million to U.S. in case involving flawed artificial heart valves.

July 01, 1994|ANNE MICHAUD | TIMES STAFF WRITER

WASHINGTON — Heart-valve maker Shiley Inc. and its parent, Pfizer Inc., have agreed to pay the federal government $10.75 million to settle accusations that they made false claims about the potentially fatal artificial valves it manufactured from 1979 to 1986.

The settlement amount is what the government estimates it paid for the valves and valve-related treatments through its health insurance programs, Medicare and the Veterans Health Administration, multiplied by 2 1/2 times, an amount determined in lieu of penalties. This civil suit against Shiley and Pfizer was brought under the False Claims Act and under common law, which allow the government to recoup damages and penalties.

The valve was implanted in about 83,000 heart patients worldwide. At least 250 people died when the tiny struts that held their valves together snapped.

In addition, Shiley agreed to pay the federal agencies for future medical costs related to the valves, for an estimated total of $20 million.

"This agreement represents a landmark settlement," Assistant U.S. Atty. Gen. Frank Hunger said in a statement. "It is significant that a company accused of false representations to the government has been held accountable not only for its statements but also for medical costs."

The companies admitted no liability in settling the case and said they did so to put the litigation behind them.

"Litigation is tremendously distracting and time-consuming, and it keeps us from the real issues at hand," said Bob Fauteux, spokesman for Irvine-based Shiley. He said the company has committed to spending $75 million to, among other things, research diagnostic techniques that would help determine which implanted valves are likely to crack.

Shiley settled last September with 259 valve recipients, for an undisclosed amount. Those close to the case estimated the settlement to be worth $26 million.

More than 20 other lawsuits remain unsettled, as well as a federal court appeal of a 1992 class-action settlement in Cincinnati, which includes all 83,000 Shiley heart valve recipients around the world.

Separately on Thursday, Shiley announced that it would spend an undetermined amount to reimburse third-party payers--insurance companies and, in Europe, government health agencies--for their costs to replace the valves when surgery is approved by a doctor. The agreement complements the provisions of the class action settlement, Fauteux said.

The valve, called the Bjork-Shiley convexo-concave valve, was approved for sale by the U.S. Food and Drug Administration in 1979. Faced with negative publicity, the company pulled it off the market in 1986.

Hunger argued that the valve's FDA approval was based on false statements made by Shiley. Later, the company made further false statements to keep the mechanical valve on the market, Hunger said.

Specifically, Shiley initially told the FDA that the valve caused less blood clotting than others on the market. The government said the Shiley valve's performance advantage was much smaller than the company represented. In addition, Shiley failed to provide the FDA with all the information it possessed concerning fractures of valves. Eighteen had fractured during prototype testing, the government said.

After the fracture problem became evident, Shiley argued to the FDA that the Bjork-Shiley valve should remain on the market because its purported blood-clotting advantage outweighed the threat to people's lives posed by the risk of fracture.

Finally, the government contended that Shiley's manufacturing process was considerably flawed. It said that scrap valves were rebuilt, valves were re-welded an excessive number of times, and cracked valve struts were polished rather than re-welded.

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