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Redmond defibrillator firm considers layoffs

Physio-Control employs about 800 on Eastside

By ANDREA JAMES

P-I REPORTER

One week after Physio-Control stopped shipping products to U.S. customers,

the Redmond company that makes Lifepak-brand defibrillators has told its

employees that it is considering layoffs, the Seattle P-I has learned.

The firm's Minneapolis-based parent, Medtronic Inc., announced in December

that it would spin off Physio-Control into an independent company. However,

those plans were put on hold last week when the company announced problems

with Physio-Control's manufacturing processes. No products are being

recalled, the company said.

" We've told our employees that we may, in fact, have to reduce the size of

the force, " Medtronic spokesman Rob said Monday. " Clearly with the

suspension of operations, the work is scaled back. That will have an effect

on the resources that we need during this period. "

Although the company has voluntarily stopped shipping its products to U.S.

locations, it still ships to its overseas customers. Medtronic will be

reaching out to the regulatory bodies in other countries, said.

The scope of the role that the Food and Drug Administration has played in

the decision to cease shipment is unclear; however, Medtronic said that both

FDA and the company have identified " system issues. "

" We found a number of things in our quality-control systems back in our

plant in Redmond that concerned us and concerned the FDA, " said.

U.S. sales account for two-thirds of Physio-Control's business, according to

a Prudential Equity Group research report issued Sunday. The report predicts

a 70 percent decline in sales at the plant and gives revised earnings

estimates for Medtronic assuming that the company can cut 30 percent of its

fixed costs at Physio-Control and that U.S. sales resume within one year.

Medtronic officials do not yet have a timeline for any potential layoffs,

said. Physio-Control employs 1,200 people, about 800 of them in

Redmond.

The FDA sent warning letters to Medtronic about the Lifepak defibrillators

in 2000 and 2005, notifying the company about several violations the agency

had found during its inspections. Among the complaints outlined in a letter

dated June 9, 2005, were that Medtronic did not follow proper procedures on

a complaint involving a patient death.

Those issues have since been resolved and are not related to the current

problem, said. The current problem is a " quality systems related

issue, " not affecting any particular product on the market. But it could

take awhile to fix, he said.

" We're working very quickly to try to resolve it, " said. " We

understand that we have employees that are anxious to know. "

Medtronic still plans to spin off Physio-Control once business is back to

normal, though the spinoff likely won't meet its October deadline, the

company said. Physio-Control brings in about $400 million per year,

said, which represents about 3.5 percent of Medtronic's $11.3 billion annual

revenue.

Physio-Control makes automatic external defibrillators that are found in

schools, airports and other public areas and are used to shock hearts back

into rhythm. It also makes manual defibrillators used by hospital and

emergency workers.

Founded in 1955, Physio-Control has been a part of Redmond since it was a

sleepy Northwest town. Today, it is one of Redmond's 20 largest employers,

according to the city. In 1992, the company shut down its manufacturing,

sales and marketing because of alleged violations of good manufacturing

practices found by the FDA.

" Physio-Control is one of my favorites -- it's been in Redmond for several

decades on Willows Road, " Redmond Mayor Rosemarie Ives said Monday. " Even

before Nintendo, there was Physio-Control and those defibrillators. "

P-I reporter can be reached at or

andreajames@....

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