Medtronic Announces Job Cuts, Restructuring

Still struggling in the wake of last year’s <"">Sprint Fidelis Defibrillator Lead recall, medical device maker Medtronic Inc. says it plans to cut 1,100 jobs worldwide as part of a restructuring plan.  Medtronic’s business has been hurt, not just by the Sprint Fidelis recall, but by the declining worldwide demand for implantable defibrillators, which has been shrinking since Medtronic and competitors recalled faulty products in 2005.

Medtronic suspended sales of the Sprint Fidelis Leads in October 2007 after receiving reports of 5 fatalities linked to lead fractures. A lead is a wire that connects an implantable defibrillator to the heart. When it breaks, the defibrillator can emit a massive and painful shock. And in the worse case scenario, the fractured lead can prevent a defibrillator from sending a necessary, lifesaving shock to the heart. Replacing a lead is not an easy procedure, as the invasive surgery can cause the tissue of the blood vessels and heart to tear. In fact, replacing a defibrillator lead is so risky that patients with Sprint Fidelis Leads are being told to leave the defective components in place unless they fracture.

Last November, Medtronic said the Sprint Fidelis recall hurt revenue in its Cardiac Rhythm Disease Management  unit by $130 million, and it also absorbed $31 million in costs to write off the Sprint Fidelis leads recalled during the quarter in which the recall occurred. Medtronic’s revenue grew 12 percent in its most recent quarter, though revenue in the cardiac rhythm disease management unit rose just 3 percent.

According to Reuters, as part of the restructuring effort, Medtronic will move its endovascular manufacturing operations to Galway, Ireland, from Santa Rosa, California. The endovascular division makes stent grafts to treat aortic abdominal aneurysms.  It also intends to relocate the diagnostic and monitoring portion of its cardiac rhythm disease management business to Minneapolis from the Netherlands.

This is not the first time Medtronic has been forced to make job cuts.  Last year, the company eliminated a total of 900 jobs in its cardiac rhythm management, cardiovascular, and Physio-Control external defibrillator businesses.

Medtronic  faces many lawsuits over the defective Sprint Fidelis Lead, as well as some of its other defective medical devices.  Last December, the company  agreed to pay out $114 million to settle product liability lawsuits filed as the result of injuries cased by its malfunctioning Marquis line of implanted cardiac defibrillators.

Late last month, Medtronic announced it had reached an agreement with Food and Drug Administration (FDA) over quality system improvements for its external defibrillators.  The agreement addressed concerns raised by the FDA during inspections and outlined actions Medtronic’s Physio-Control subsidiary must take to resume unrestricted distribution of the portable electronic devices. Physio-Control stopped U.S. shipments in January 2007 due to quality problems.

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