Boston Scientific's feud with former sales rep heats up

A dispute between a Boston Scientific unit and a former sales rep who went to St. Jude Medical has taken a highly public turn. The spat began heating up when Boston Scientific CEO Ray Elliott told analysts during the company's fourth-quarter earnings call that several sales representatives and managers who were dismissed from the company last December for repeated breaches of the company's ethical code of conduct had been hired by rival St. Jude, according to the Minneapolis Star Tribune.

Elliott said his company has worked hard to strengthen its internal code of conduct, which governs relationships with doctors and vendors. He confirmed the reps were fired from Boston Scientific's Cardiac Rhythm Management business, but didn't specify what rules they had broken. However, when they left for St. Jude, they took roughly $100 million in business with them.

Boston Scientific agreed in December to pay $22 million to settle allegations that its Guidant unit used clinical studies to pay kickbacks to doctors for using its products, the Boston Globe noted in February. The settlement required the company to enter a corporate integrity agreement mandating that its cardiac-rhythm unit disclose payments to doctors on its website.

St. Jude hired four former Boston Scientific employees, two of whom were cardiac rhythm sales representatives, in the past few months, company spokeswoman Angela Craig, told the Globe in an e-mailed statement. "The remarks from this morning strike us a little bit like a bitter spouse after a bad divorce,'' she said in the e-mail.

Then, last month, a subsidiary of Boston Scientific filed suit in U.S. District Court in Minnesota against St. Jude and Douglas Nock, who was formerly vice president for sales for the company's Western Division until he was discharged last December. The complaint alleges that Nock breached a non-compete agreement with Boston Scientific after accepting a position with St. Jude. Typically, sales reps who sign such an agreement and then leave are prohibited from working with a competitor in their former territories for a year.

The feud is but one problem afflicting Boston Scientific. It recently suspended sales of all its implantable cardioverter defibrillators until it can obtain the FDA clearance on two changes to its manufacturing processes. And its Guidant unit this week pleaded guilty to failing to disclose catastrophic failures in three models of implantable cardioverter defibrillators (see related article).

- check out the Minnesota Star Tribune's report
- see the Globe's coverage