St. Jude has long been revered as a medical institution in whom many trust. However, when a medical device they used was said to have serious cyber security issues, their spotless reputation took a hit. It all happened around August of last year. MedSec is the security company that found the vulnerability within the cardiac device they use. They passed their findings on to Muddy Waters Capital. This company is not scared by corporate titans and strong opposition; their goal is to report the truth.
What Does a Cyber Security Breach Mean?
Some say that it is the deadliest type of attack possible. Terrorists have the ability to hack into a pacemaker through hospital administration using medical device data. Some pacemakers can send data to a computer system, while others can both send and receive data. These devices are meant to communicate with the doctors to show they are functioning properly. However, to a hacker, they can use the communication devices to their advantage. They can stop a pacemaker with one keystroke on a computer.
A vulnerable device means that it does not have the proper safety precautions to prevent such an attack. A television show, Homeland, recently did an episode that features this same sort of event. The sad truth is the show was not fictionally based. The wireless features on these devices leave them susceptible to an outside attack. If terrorist really wanted to have a deadly effect on this country, they could turn off these devices in mass numbers. If St. Jude does have devices that are not cyber protected, the impact could be catastrophic.
One Report Causes A Drastic Stock Drop
Armed with the knowledge of the potential of these deadly attacks, Muddy Waters Capitol released a report based on the findings of MedSec. The investors of the hospital found this report to be quite alarming, and St. Jude can lose up to half of their revenues. Additionally, their stock fell more than four percent after these allegations. Why such a huge drop in such a short period of time? Well, the tell-all report stated that not only pacemakers, but ICDs and CRTs were also affected. An ICD has a pacemaker in it, but this device is a defibulator that restarts a heart, should it stop beating. A CRT is a cardiac resynchronization therapy device that is specifically used for those who are prone to heart failure. It suggested that these items be recalled immediately due to their vulnerabilities. These devices are responsible for up to 46 percent of St. Jude’s revenue, and a recall of this magnitude will cut like a knife.
St. Jude Fights Back
If the recall proceeds, the next two years of revenues will be greatly affected, and St. Jude could be in serious trouble. Investors heeded the report as the stock took a nose dive almost instantly. St. Jude’s Hospital is not going to take this sitting down. They filed a lawsuit against both Muddy Waters and MedSec. The lawsuit claims that they use short-selling techniques to spread false information about the hospital and the devices used. These falsities caused their stock price to decline, and it also affected their reputation. Also interesting, was the research filed with the claims. The University of Michigan did some research on the devices and found no security vulnerabilities. Their statement counters those made by the aforementioned companies.
No One Is Backing Down
When asked about the suit, both MedSec and Muddy Waters insist they are standing by their actions. They feel the public has a right to know about the cyber security risks. They want St. Jude to respond with urgency to the matter, not drag it out in court for months. The CEO of MedSec, Justine Bone, was interviewed regarding the matter. She said that the public must know that devices being used by this hospital could have serious issues. Muddy Waters stated in an article in The Wall Street Journal that St. Jude’s was trying to silence their critics.
It Is Up To The Courts To Decide
And, if matters could not be worse, St. Jude is in the process of being bought by Abbott Laboratories. The hospital’s impeccable reputation led to a deal that was around $25 billion. However, with the pending legal issues, many speculate that the price of this deal may plummet significantly. For now, it is in the hands of the legal system. With conflicting reports and such an impact on the community, the justice system will probably try to push this one through sooner rather than later. It will be an interesting case to follow. Even if St. Jude’s wins, their reputation will still take a major hit.
Learn more about Medical Device Lawsuits.