The Mystery of the Northwestern Settlement - the Plot Thickens

A few weeks ago, we wrote about this curious case.<br /><br /><b>How the Case Stood </b><br /><br />Northwester University, a prominent research university, settled charges it had mismanaged US government grant funds.  While it did not admit guilt, and specifically exonerated the faculty leader on whose watch the mismanagement allegedly occurred, the settlement and most of its coverage strongly suggested wrongdoing by the faculty member in charge of the scientific conduct of the grants, Professor Charles L Bennett.  While the alleged financial mismanagement was of funds in the mere millions, a relatively small amount as federal fraud cases go, and there were no allegations of anything harmful to patients, or of any research misconduct, the investigation involved multiple federal agencies, including the Federal Bureau of Investigation.  The settlement of charges of financial mismanagement, not research misconduct,  included unfavorable references to Dr Bennett, who as Principal Investigator should have been in charge of the scientific conduct of the grants, but not of their financial management.  Much bigger cases of alleged fraud, involving hundreds of millions of dollars, and potentially harm to patients due to overuse of dangerous drugs or devices, have not involved the FBI, and not included any disparagement of individuals who could have authorized, directed, or implemented the alleged misbehavior.<br /><br />None of the initial press coverage noted the peculiarity of these aspects of the case, nor provided any explanations for them.       <br /><br />Days later, the Cancer Letter published a long article in this case, which is now <a href="http://www.cancerletter.com/articles/20130809">available without a subscription</a>.  This article includes even more curiosities that raise even more questions.<br /><br /><b>Dr Bennett Found Irregularities, Sangoleye Pleaded Guilty, Nobody Noticed </b><br /><br />In the original media coverage, Dr Bennett was accused based on complaints by a whistle blower.  For example, in an <a href="http://www.suntimes.com/news/21623742-418/northwestern-to-pay-nearly-3-million-to-settle-cancer-research-fraud-suit.html">article</a> in the Chicago Sun-Times,<br /><br /><blockquote class="tr_bq"> A <i>whistleblower suit filed under seal in 2009 by former Lurie Cancer Center worker Melissa Theis </i>first alleged the wrongdoing by Bennett. </blockquote><br /><br />However, the story in the Cancer Letter suggests Dr Bennett had tried to blow the whistle himself.  First,<br /><br /><blockquote class="tr_bq">Bennett said the allegations that he spent NCI money on dinners and vacations were inaccurate. He said he had encountered administrative irregularities at Northwestern and <i>reported them to compliance officials.</i></blockquote><br />In addition,<br /><br />'I <i>reported administrative issues by Northwestern University with my grants to the university compliance officer</i> in 2006, just prior to my long-term bout with cancer that was diagnosed there,' Bennett said to The Cancer Letter. 'I have never had a single administrative discussion about the matter with anyone.'<br /><br />Specifically,<br /><br /><blockquote class="tr_bq">Bennett’s statement about lax administration of grants at Northwestern appears to be bolstered by <i>an aspect of the scandal that has escaped media attention </i>even as multiple news stories in Chicago and national outlets focused on the settlement.<br /><br />The Cancer Letter has learned that <b><i>days before the settlement with Northwestern was announced, a former research administrator at the Division of Hematology and Oncology at the university’s medical school pled guilty to felony charges stemming from administration of Bennett’s NCI grants.</i></b><br /><br />According to documents filed in the U.S. District Court for the Northern District of Illinois, <i>Feyifunmi Sangoleye, the rogue administrator, set up an elaborate scheme to divert $86,000 to her personal accounts.</i>The proceeds financed a wedding and a honeymoon in Europe, court documents say.</blockquote><br />The article later included more detail,<br /><br /><blockquote class="tr_bq">Bennett said that he <i>saw irregularities in the actions of the research administrator </i>who handled his Research for Adverse Drug Events and Reports and that he has <i>alerted the administration of the Division of Hematology and Oncology.</i><br /><br /><b><i>That same administrator, Sangoleye, pled guilty to larceny and theft, admitting to having embezzled NCI funds from Bennett’s program</i></b> into a checking account created in the name of a fictitious contractor.<br /><br />According to court documents, <i>Sangoleye created a vendor code for a fictitious entity she called ATSDATA.</i><br /><br />Then she <i>created 10 false invoices</i> from that entity and <i>paid them with Northwestern’s checks.</i><br /><br />The checks were <i>sent to the ATSDATA post office box, which Sangoleye had rented, and placed into a bank account she created.</i><br /><br />Between June 29, 2007, and July 29, 2008, ATSDATA received eight Northwestern checks that added up to $86,000. '<i>Sangoleye converted the proceeds of the ATSDATA checks to her own use and to the use of another' individual,</i> the plea agreement states.<br /><br />'I knew nothing about ATSDATA,' Bennett said in response to questions from The Cancer Letter. '<i>The administrator told me that ATSDATA was the billing address for the University of Illinois Survey Research Laboratory</i>, a formal subcontractor. I did not know that the Survey Research Lab had any particular billing name.<i> I have documented this to Jonathan Licht [chief of Northwestern’s Division of Hematology/Oncology] in 2008.</i>'</blockquote>So in summary, Dr Bennett, who was responsible for the scientific integrity but not the financial management of his grants, reported financial irregularities to Northwestern managers.  These reports lead to a guilty plea by a former Northwestern manager who admitted embezzling money.  However, this guilty plea was anechoic.  It did not appear in any media accounts.  The settlement negotiated between Northwestern University and the government did not acknowledge it.    <br /><br /><br />According to the Cancer Letter, Northwestern managers did not want to discuss the crimes of Sangoleye when the Cancer Letter brought it up,<br /><br /><blockquote class="tr_bq"><i> Northwestern officials declined to discuss Sangoleye, </i>saying only that she had been employed by the university as a research administrator from February 2006 through August 2009.</blockquote><br />The Cancer Letter suggested why the university might have had an interest in keeping the Sangoleye crimes and its settlement of the allegations about Dr Bennett apart.<br /><br /><blockquote class="tr_bq">Legal experts say that <i>the final plea agreement between Sangoleye and the government would have weakened Northwestern’s position in negotiating the settlement</i>. The final version of the plea agreement with Sangoleye was filed on July 25, just five days prior to the announcement of the government’s $3 million settlement with Northwestern.</blockquote>Northwestern University might have had an interest in keeping the Sangoleye criminal case and its civil case separate.  However, the government did not obviously have such an interest.<br /><br /><b><i>Why did the government not address Sangoleye's crimes in the settlement it made with Northwestern University?</i></b><br /><br /><b>The Ambiguities of the Named Whistle Blower's Work</b><br /><br />As we noted in our <a href="http://hcrenewal.blogspot.com/2013/08/the-mystery-of-northwestern-settlement.html">earlier post</a> on this case, the role of the named whistle blower, Melissa Theis, was unclear, especially vis a vis Dr Bennett.  Although Dr Bennett as Principal Investigator of some of the grants involved ought not to have had any direct control of the financial management of the grants, Ms Theis apparently worked in some financial management capacity.  Yet Ms Theis apparently blew the whistle on the university, and on Dr Bennett for alleged financial, not research mismanagement. <br /><br />The Cancer Letter raised new doubts about Ms Theis' role,<br /><br /><blockquote class="tr_bq">Several observers were <i>surprised to see that the relator, Theis, was never employed by the cancer center</i>.<br /><br />According to her 2009 suit, Theis came to Northwestern as a temp two years earlier, in 2007, serving as a <i>purchasing coordinator for the Division of Hematology and Oncology. The division, which is separate from the cancer center, administered all but one of the grants in question, the NIH database shows.</i><br /><br />After a year, in 2008, Theis was <i>hired as a fulltime employee of the Northwestern Medical Faculty Foundation. The foundation, which runs the medical practice, is also separate from the cancer center.</i> She left Northwestern in October 2008.<br /><br />'Theis specifically noted that <i>invoices were submitted for consultants and services that were never included in the initial grant budget,</i>' the complaint states. 'Invoices were submitted for consultants and services that were significantly in excess of the amount budgeted for the grant, and many of the consultants and vendors failed to provide detailed information about the actual services rendered.'</blockquote><br />Again, in the usual practice, such invoices might have been requested by a grant investigator, but the requests would have to have been vetted and then the invoices would have to have been generated by managers, not scientists or physicians.  <br /><br /><b><i>Who really administered these grants, and why did the settlement minimize the responsibility of university managers while apparently blaming scientists for bad financial management?</i></b><br /><br /><b>Dr Bennett's Supporters and Enemies</b><br /><br />In our <a href="http://hcrenewal.blogspot.com/2013/08/the-mystery-of-northwestern-settlement.html">first post</a> on this case, we had contrasted how the settlement and media coverage of it appeared to heap blame upon Dr Bennett alone, while not attaching any responsibility to his academic supervisor on one hand, or any university managers on the other.  We noted that Dr Bennett, after having been a consultant for Amgen,  had become known as a "pharmascold," a skeptic of pharmaceutical industry practices, and the author of research that suggested one Amgen product was more hazardous than had been previously thought.  His supervisor, on the other hand, had multiple ongoing financial ties to the pharmaceutical industry.<br /><br />The Cancer Letter suggested others were trying to connect related dots. First, in general,<br /><br /><blockquote class="tr_bq">Making enemies is an exhaustively studied side effect of probing the safety of cancer drugs, and during much of the period in question, <i>Bennett was producing more than his standard quota of foes.</i></blockquote><br />In particular,<br /><br /><blockquote class="tr_bq">Now, researchers who worked with Bennett on the ESA issues are puzzled by his legal problems. <br /><br />'<i>Charlie has been an important voice in raising concerns regarding the use of erythropoietin in patients with cancer,'</i> said Anthony Blau, co-director, Institute for Stem Cell and Regenerative Medicine at the University of Washington. 'In particular, his 2008 metaanalysis, published in JAMA, heightened awareness of the issue and helped to reduce the indiscriminate use of erythropoietin in cancer patients.'<br /><br />Blau is a co-author on the <a href="http://jama.jamanetwork.com/article.aspx?articleid=181533">JAMA paper</a> [as noted in our <a href="http://hcrenewal.blogspot.com/2013/08/the-mystery-of-northwestern-settlement.html">previous post</a>.] <br /><br />'<i>This doesn’t really fit in his picture,</i>' said Michael Henke, a radiation oncologist in Freiburg, Germany, who was the first to stumble across potential problems stemming from overuse of ESAs.<br /><br />'You might recall, we got in contact in 2003 when our group communicated potential dismal effects of erythropoietin on cancer patients—a story not really appreciated these days because of economic interests,'  Henke said referring to the pioneering paper in The Lancet. Henke was the senior author on the JAMA paper.<br /><br />'However, Dr. Bennett and we consistently gathered additional data that were finally reported as a meta-analysis in 2008. Consequently, erythropoietin prescriptions dramatically decreased, eventually prolonging or even saving lives of cancer patients.'<br /><br />'While collaborating, I did learn him <i>as extraordinarily active, alert-eyed colleague who strictly adhered to serious scientific conduct and to the wellbeing of patients</i>.'<br /><br />Henke confesses to <i>wondering whether the many powerful enemies Bennett made in the pharmaceutical and biotechnology industries have struck back.</i><br /><br />'We shouldn’t feed paranoia,' Henke said.  'However, given the exclusively positive experience when collaborating with his group, makes me <i>wonder whether this litigation might follow some very particular other issues</i>.'</blockquote><br /><b><i>Did Dr Bennett's transformation from a consultant to to a fierce scientific skeptic of the pharmaceutical industry influence the handling of this case, and its media coverage?</i></b><br /><br /><b>Summary</b><br /><br />The coverage by the Cancer Letter underscores our previous concerns, so I will simply repeat the summary from my last post.<br /><br />The settlement by Northwestern University, which was mainly about allegations made against Dr Charles L Bennett, who was not a party to the settlement, was very different that the vast majority of the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">march of legal settlements</a> whose continuation we have frequently discussed.<br /><br />The settlement and its media coverage raised important questions whose answers would be important to the assessment of  our current regulatory and legal response to misbehavior by and within large health care organizations.  Health Care Renewal is about raising such issues by commenting on public information, media reports, and research.  I hope those with capacity to investigate will consider these questions.  Inquiring minds want to know.<br /><br /><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTN3CIxmIM6GicEB51I-Ob3VrzUm8FD4oH4c689NVpFCg9z4d7CjFHCs-xail6Kkz-rNhZ1TwUo05OfwWOZClh2E-YeFEGZin13pIgwRIAyHLGtb2uOYm3pXbLJoImDMJf99kwTf2E3Rn7/s1600/SherlockHolmes(RMP082013).jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="196" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTN3CIxmIM6GicEB51I-Ob3VrzUm8FD4oH4c689NVpFCg9z4d7CjFHCs-xail6Kkz-rNhZ1TwUo05OfwWOZClh2E-YeFEGZin13pIgwRIAyHLGtb2uOYm3pXbLJoImDMJf99kwTf2E3Rn7/s200/SherlockHolmes(RMP082013).jpg" width="200" /></a></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiaaBoxJHP1a-4vKQJ-K2QCLeGONuSncMwrZHXm7QlxGpToMSQWfUA8Ynap9x8URrARsYJvEwIE4wUL38ETuPSGQAODJIraz8M9hHw7lu_7KrAzT5KfEXQDC6dkNt7kKVIZcW3iFPoSAwIc/s1600/SherlockHolmes(RMP082013).jpg" imageanchor="1"><br /></a></div>ADDENDUM (27 August, 2013) - See also <a href="http://brodyhooked.blogspot.com/2013/08/the-fate-of-scientist-who-reveals-drug.html">comments</a> by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog. <br /><br /><br />Roy M. Poses MD in Health Care Renewal  <br /><br />

The Mystery of the Northwestern Settlement - the Plot Thickens

A few weeks ago, we wrote about this curious case. How the Case Stood Northwester University, a prominent research university, settled charg...

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Why Do People Think US Health Care is Corrupt? - The Examples of Amgen, Mallinckrodt Settling Charges of Giving Kickbacks to Doctors to Induce them to Prescribe Their Products, While No Individual Suffers Negative Consequences

We recently <a href="http://hcrenewal.blogspot.com/2013/07/43-believe-that-us-health-care-corrupt.html">posted </a>a discussion of the results of <a href="http://www.transparency.org/gcb2013">Transparency International's 2013 corruption barometer</a>, focusing on the US results.  43% of survey respondents thought US health care is corrupt.  Our coverage, apparently the only substantial discussion of the US results published in the US, got star ranking for a while <a href="http://www.reddit.com/r/politics/comments/1iw48a/43_believe_that_us_health_care_is_corrupt_64_that/">on Reddit</a>.  But many anonymous commentators dismissed the survey results as coming from a naive public who does not understand health care economics.<br /><br />I submit that one can recognize corruption without a degree in economics.  In fact, as we discussed in the initial post, there is a lot of evidence for the prevalence of health care corruption in the US, other developed countries, and globally.  It is just that such evidence rarely gets discussed in public (the <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic effect</a>, as we say on this blog), probably because doing so might make those who are profiting from the corruption uncomfortable.<br /><br />So today let me summarize just the latest evidence about US health care corruption, as defined by Transparency International as the abuse of entrusted power for private gain.  (Note that the Transparency International definition of corruption, which is an ethical, not necessarily a legal definition, at least in most jurisdictions.)<br /><br /><b>Amgen</b><br /><br />An <a href="http://www.toacorn.com/news/2013-07-25/Front_Page/Amgen_pays_15_million_in_whistleblower_lawsuit.html">article</a> in the Thousand Oaks [CA] Acorn described the legal settlement,<br /><br /><blockquote class="tr_bq">Amgen Inc. paid the United States <i>more than $15 million</i> this month as part of a settlement agreement to <i>resolve allegations that the biopharmaceutical company used financial kickbacks to persuade doctors to prescribe the cancer drug Xgeva to their patients.</i><br /><br />The settlement resolves a qui tam, or 'whistleblower,' lawsuit filed Jan. 20, 2012, in federal court by William Davis and Spencer Miller—two Amgen employees who work at the company’s Thousand Oaks headquarters.<br /><br />Davis, sales planning director for Amgen’s oncology business unit, and Miller, a senior marketing manager at the company, alleged their employer violated both the Medicare Anti- Kickback Statute and False Claims Act—two laws that aim to prevent Medicare fraud and abuse.</blockquote><br />The allegations were that Amgen used a somewhat complex and deceptive strategy to pay doctors who prescribed its drug, using a survey about practice patterns as a cover story,<br /><br /><br /><blockquote class="tr_bq">According to the U.S. attorney’s office, Amgen used what the company called 'Deep Dive' contracts—or data purchase agreements—in an effort to boost sales of Xgeva, which was approved by the FDA in late 2010 for use by certain cancer patients undergoing chemotherapy.<br /><br />The drug is most commonly prescribed to prevent bone fractures in patients who have been diagnosed with a certain type of tumor after it has spread to the bones.<br /><br />Under Amgen’s original Deep Dive program, <i>the company paid doctors to fill out an Internet-based survey</i>, which asked how they were treating patients with bone cancer and which drugs they used.<br /><br />'That’s not illegal to do,' said Abraham Meltzer, assistant U.S. attorney in the Los Angeles civil fraud section. 'A lot of pharmaceutical companies purchase data legitimately on how various conditions are treated.'<br /><br />But Amgen altered its Deep Dive program, Meltzer said, by <i>increasing the amount of money it offered to pay the doctors who specifically prescribed Xgeva to their patients.</i></blockquote><br />Also,<br /><br /><blockquote class="tr_bq"> The U.S. attorney’s office also alleged that Amgen <i>paid oncologists and urologists to participate in market research surveys, audience response sessions and advisory programs that publicized the benefits of Xgeva.</i></blockquote><br />As is typical in such cases, the settlement did not require any contrition on Amgen's part.  Instead,<br /><br /><br /><blockquote class="tr_bq">In a prepared statement emailed to the <span style="font-style: italic;">Thousand Oaks </span><span style="font-style: italic;">Acorn</span> on Tuesday, Amgen denied all allegations of wrongful conduct.<br /><br />'Amgen settled this matter to avoid the delay, uncertainty, inconvenience and expense of protracted litigation,' the statement read.</blockquote><br />As is also typical, there seemed to be no negative consequences for the human beings who must have engineered the "Deep Dive" contracts and the payments to the oncologists and urologists.  Nor was there any overt consideration of Amgen's sketchy recent ethical record, as described by the Acorn,<br /><br /><blockquote class="tr_bq">This month’s settlement is <i>not the first time the biopharmaceutical giant has been held to answer for kickback allegations or false claims charges.</i><br /><br />In December 2012, Amgen pleaded <i>guilty to illegally selling the drug Aranesp</i>, an anti-anemia drug, for uses or doses not approved by the FDA, according to the U.S. Department of Justice.<br /><br />As part of the false claims case, which was also brought on by a whistleblower lawsuit, Amgen agreed to pay a <i>$612-million civil settlement to the U.S. and individual states, as well as $150 million in criminal penalties.</i><br /><br />Then in April, the Thousand Oaks-based company paid the U.S. another <i>$24.9 million to settle whistleblower allegations that it gave financial kickbacks to long-term care pharmacy providers in exchange for switching Medicare and Medicaid benefi- ciaries from a competing drug to Aranesp, </i>a DOJ press release states.</blockquote><br />We <a href="http://hcrenewal.blogspot.com/2013/05/amgen-ceos-prosper-despite-or-because.html">discussed</a> the guilty plea in the cases of Aranesp misbranding and alleged kickbacks to pharmacists.  Also, in 2013, we noted that Amgen settled allegations that it overpriced its products sold to government health programs in 36 states.  We also noted that despite, or perhaps because of all this misbehavior, the current CEO of Amgen received over $13 million in compensation in 2012, while his predecessor walked away with over $9 million that year.<br /><br /><b>Mallinckrodt</b><br /><br />A small news item from the Associated Press, <a href="http://www.nanaimodailynews.com/business/st-louis-drug-maker-mallinckrodt-to-pay-feds-3-5m-to-settle-lawsuit-over-doctor-kickbacks-1.543318">via</a> the Nanaimo (MO) Daily News, outlined this legal settlement,<br /><br /><br /><blockquote class="tr_bq">A St. Louis-based drug maker will pay <i>$3.5 million to settle allegations that it paid doctors to prescribe</i> 'outdated, third rate' antidepressants and sleep aids, the U.S. attorney's office in San Francisco announced.</blockquote><br />In particular,<br /><br /><blockquote class="tr_bq">The lawsuit alleged the company targeted doctors who prescribed the type of antidepressants and sleep pills Mallinkrodt manufactured.</blockquote><br />Again, the company was allowed to settle without admitting anything.<br /><br /><blockquote class="tr_bq">'While we deny the allegations in this matter, we are glad they are resolved,' company spokeswoman Erica Abbett said in a statement. </blockquote><br />Again, although human beings would have had to engineer any payments to the doctors to induce them to prescribe, no human beings suffered any consequences as a result of this settlement.<br /><br />Mallinckrodt, a storied corporate name, had been acquired by Covidien, and then was spun off again as a separate company in June, 2013 (look <a href="http://www.stltoday.com/business/local/mallinckrodt-pharmaceuticals-declares-its-independence-again/article_24973adf-37ef-5d86-b81b-a441edd4289d.html">here</a>).  It had been acquired in 2000 by Tyco International, which later spun off its health care operations as Covidien.   According to its <a href="http://services.corporate-ir.net/SEC/Document.Service?id=P3VybD1hSFIwY0RvdkwyRndhUzUwWlc1cmQybDZZWEprTG1OdmJTOWtiM2R1Ykc5aFpDNXdhSEEvWVdOMGFXOXVQVkJFUmlacGNHRm5aVDA0TmpZNU16QTNKbk4xWW5OcFpEMDFOdz09JnR5cGU9MiZmbj1Db3ZpZGllbnBsY19ERUYxNEFfMjAxMzAxMjQucGRm">2013 proxy statement</a>, Covidien's CEO received over $10 million in total compensation in 2012.<br /><br /><br />[Note that Tyco was the subject of one of the major scandal stories of the early 21st century.  In 2005, at a time when law enforcement authorities were still pursuing actions against elite corporate executives,  its former CEO and CFO were convicted of stealing millions from it (see USAToday <a href="http://usatoday30.usatoday.com/money/industries/manufacturing/2005-06-17-tyco-timeline_x.htm">summary</a>)]. <br /><br /><b>Summary - Why do People Think US Health Care is Corrupt?  </b><br /><br />Again, the Transparency International definition of corruption is abuse of entrusted power for private gain.  I would argue that pharmaceutical companies are entrusted with the power to honestly sell drugs whose benefits to patients outweigh their harms.  I would further argue that paying physicians, who are entrusted with providing the best possible care to each individual patient, to prescribe drugs which may not be the best treatment for individual patients is an abuse of both the company's and the physicians' entrusted power.  Further, such payments provide private gain to the physicians.  They also may increase revenues for the company who makes these payments, and very likely these increased revenues lead to better compensation for those in the company who authorized, directed or directly provided the payments, that is to private gain for these corporate insiders.  Thus it seems that kickbacks to physicians to prescribe drugs is a form of corruption.<br /><br />While both cases above were settled without admissions of guilt, such settlements do not refute the contentions that kickbacks were given.  Why would the law enforcement officials have brought the cases in the absence of evidence, and why would the companies have settled if the cases were completely baseless?  So I would argue that these settlements provide evidence, although not legal proof, that kickbacks were given.  People with far more legal knowledge than I possess have remarked on the absurdity of settling cases of alleged wrongdoing without any acknowledgement or statement of the facts (see posts <a href="http://hcrenewal.blogspot.com/2009/09/biovail-settles-and-judge-explains-why.html">here</a> and <a href="http://hcrenewal.blogspot.com/2011/11/will-citigroup-ruling-challenge-health.html">here</a>). <br /><br />We have posted lots of instances of conflicts of interest affecting health care, many of which likely involved payments providing private gain that raised the risk of abuse of entrusted power.  We have also discussed many instances of <a href="http://hcrenewal.blogspot.com/search/label/crime">crime</a>, <a href="http://hcrenewal.blogspot.com/search/label/kickbacks">kickbacks</a>, <a href="http://hcrenewal.blogspot.com/search/label/bribery">bribery</a>, <a href="http://hcrenewal.blogspot.com/search/label/fraud">fraud</a> other kinds of <a href="http://hcrenewal.blogspot.com/search/label/health%20care%20corruption">health care corruption</a>.<br /><br />So were the people who answered the Transparency International survey naive and foolish about health care corruption?  Or did they have reasonable beliefs about a topic that the powers that be really do not want to discuss? <br /><br />

Why Do People Think US Health Care is Corrupt? - The Examples of Amgen, Mallinckrodt Settling Charges of Giving Kickbacks to Doctors to Induce them to Prescribe Their Products, While No Individual Suffers Negative Consequences

We recently posted a discussion of the results of Transparency International's 2013 corruption barometer , focusing on the US results.  ...

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Amgen CEOs Prosper Despite (or Because of) Continuing Ethical Questions

This is becoming a familiar narrative on<a href="http://hcrenewal.blogspot.com/"> Health Care Renewal</a>: top health care leaders continue to enrich themselves while their organizations' behavior continues to raise ethical questions.<br /><br />For our latest example we return to the ongoing adventures of biotechnology giant <a href="http://hcrenewal.blogspot.com/search/label/Amgen">Amgen</a>.<br /><br /><b>CEOs Get Richer </b><br /><br />An AP story (<a href="http://www.latimes.com/business/la-fi-amgen-ceo-20130408,0,1832506.story">via the LA Times</a>) documented the continuing enrichment of its current CEO:<br /><br /><blockquote class="tr_bq">Amgen Inc's new chief executive, Robert A. Bradway, <i>received total compensation of <b>$13.6 million</b></i> in 2012, more than his predecessor, according to an analysis of a company regulatory filing.<br /><br />Bradway, who was promoted from chief operating officer to chief executive May 23, saw his compensation nearly double from $7.1 million in 2011.<br /><br />Last year Bradway, 50, was paid <i>a salary of $1.26 million and received stock awards worth $8.57 million, incentive payments of $3.32 million and miscellaneous compensation totaling $420,059. That included nearly $314,000 in retirement plan contributions, $65,000 for personal use of company aircraft, more than $20,000 for his personal expenses and those of guests during business travel, and $15,000 for financial planning services.</i></blockquote><br /><br />The former CEO also did very well in his final year in office.<br /><br /><blockquote class="tr_bq">Former CEO Kevin W. Sharer, who stepped down from his seat on Amgen's board when he retired Dec. 31, <i> received compensation totaling <b>$9.13 million</b> last year.</i><br /><br />Sharer was paid a 2012 <i>salary of $1.81 million and received stock awards worth $3.66 million, incentive payments of $2.31 million and miscellaneous compensation totaling $1.36 million. That included $801,000 in retirement plan contributions, nearly $262,000 for personal use of company aircraft, more than $38,000 for his personal expenses and those of guests during business travel, $15,000 for financial planning services and more than $255,000 for secretarial, information technology and travel support. </i>Much of that support runs through 2017.</blockquote><br />You would think they could both afford financial planning on their own.<br /><br /><b>Legal Settlements Pile Up </b><br /><br />Keep in mind that as we discussed in <a href="http://hcrenewal.blogspot.com/2012/12/amgen-settles-pleads-guilty-to.html">late 2012</a> and <a href="http://hcrenewal.blogspot.com/2013/01/how-revolving-door-and-other-aspects-of.html">early 2013</a>, Amgen pleaded guilty to a charge of misbranding for promoting its epoetin drug Aranesp for unapproved indications, and settled allegations of giving kickbacks to physicians to increase the drug's use, among other charges, for a total of $762 million.<br /><br />Furthermore, soon after the CEOs' compensation was announced, tiny articles in local media announced two more settlements by Amgen. <br /><br />A small AP story (again <a href="http://www.latimes.com/business/la-fi-amgen-20130416,0,4959804.story">via the LA Times</a>) noted another settlement regarding allegations of unethical promotion of Aranesp:<br /><br /><br /><blockquote class="tr_bq">The US Department of Justice<a class="taxInlineTagLink" href="http://www.latimes.com/topic/crime-law-justice/u.s.-department-of-justice-ORGOV0000160.topic" id="ORGOV0000160" title="U.S. Department of Justice"></a> said Tuesday that biotech drug maker Amgen Inc. will pay $24.9 million to resolve claims it paid kickbacks to increase sales of its anemia<a class="taxInlineTagLink" href="http://www.latimes.com/topic/health/physical-conditions/anemia-HEPHC0000047.topic" id="HEPHC0000047" title="Anemia"></a> drug Aranesp.<br /><br />The Justice Department said Amgen paid kickbacks to Omnicare Inc<a class="taxInlineTagLink" href="http://www.latimes.com/topic/economy-business-finance/omnicare-incorporated-ORCRP011399.topic" id="ORCRP011399" title="Omnicare Incorporated">.</a> and PharMerica Corp., which sell drugs to long-term care providers such as nursing<a class="taxInlineTagLink" href="http://www.latimes.com/topic/health/medical-specialization/nursing-HEMSP000015.topic" id="HEMSP000015" title="Nursing"></a> homes and hospitals, and Kindred Healthcare Inc., which runs long-term acute-care hospitals and nursing and rehabilitation centers.<br /><br />Amgen wanted the companies to switch Medicare and Medicaid beneficiaries to Aranesp from competing drugs and tried to get consultant pharmacists and nursing home staffers to encourage the use of Aranesp in patients who didn't have anemia associated with kidney failure, the Justice Department said.<br /><br />The Thousand Oaks company made payments based on the sales volume or market share of Aranesp, the agency said.</blockquote><br />Then a few days ago, a <a href="http://www.sfvbj.com/news/2013/apr/29/amgen-reaches-11-million-settlement-over-medicaid-/">story</a> in the San Fernando Valley Business Journal described yet another Amgen settlement:<br />  <br /><blockquote class="tr_bq">Thousand Oaks biotech Amgen Inc. has reached an $11 million settlement with 36 states over charges it inflated pricing data and caused Medicaid to overpay for six of its drugs, the New York State Attorney General said Monday.<br /><br />The charges allege Amgen inflated cost benchmarks for drugs used to treat kidney disease and cancer patients. The drugs involved were Aranesp, Enbrel, Epogen, Neulasta, Neupogen and Sensipar. Those benchmarks are used to set pharmacy reimbursement rates for drugs dispensed to state Medicaid beneficiaries.</blockquote><br />Keep in mind that all these recent settlements involved allegations of efforts made to oversell Aranesp.  As we noted previously, this drug carries a "black box" warning about serious and potentially fatal side effects.  The <a href="http://www.accessdata.fda.gov/drugsatfda_docs/label/2011/103951Orig1s5173_103951Orig1s5258lbl.pdf">official Aranesp label</a> states (in a black box warning, in capital letters):<br /><br /><br /><blockquote class="tr_bq"> ESAs INCREASE THE RISK OF DEATH, MYOCARDIAL INFARCTION, STROKE, VENOUS THROMBOEMBOLISM, THROMBOSIS OF VASCULAR ACCESS AND TUMOR PROGRESSION OR RECURRENCE</blockquote><br /><br /><br />So the overselling of Aranesp not only appeared unethical, it seemed to put short term revenue ahead of patient safety, and could conceivably have lead to patients dying so that the company could make more money.    <br /><br /><b>Summary</b><br /><br />So while the evidence mounts that health care organizations, and in this case, Amgen, continue to aggressively pursue short-term revenue even is their means of doing so endangers patients.  However, <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal efforts</a> to challenge such reckless practices continue to fail to impose any negative consequences on those who personally profited from this behavior, and particularly those corporate executives who authorized and directed the bad behavior.  Moreover, while such evidence mounts, the top leaders of these organizations continue to pile up riches.  It seems that CEOs of health care organizations continue to prosper despite, or perhaps because of their organizations' continuing unethical and dangerous behavior. <br /><br />As we have said far too many times, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Amgen CEOs Prosper Despite (or Because of) Continuing Ethical Questions

This is becoming a familiar narrative on Health Care Renewal : top health care leaders continue to enrich themselves while their organizati...

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How the "Revolving Door" and Other Aspects of Corporatism Benefited Amgen Just After its Settlement and Guilty Plea

At least here in these United States, our health care corporatism is bipartisan.  Here we present a sorry story of how a company that should have been shamed by dishonest behavior that likely harmed patients instead apparently was awarded special treatment through its cozy relationships with top government leaders <br />  <br /><b>Accusations of Kickbacks and Deceptive Marketing of Aranesp  </b><br /><br />Last month, biotechnology giant pleaded guilty to a charge of misbranding and settled civil charges with the US government for $762 million (look <a href="http://hcrenewal.blogspot.com/2012/12/amgen-settles-pleads-guilty-to.html">here</a>).  Soon after, New York Times <a href="http://www.nytimes.com/2012/12/20/business/amgen-workers-helped-us-in-aranesp-marketing-inquiry.html">article</a> described the unethical practices the company was alleged to have performed.  It opened with a vivid anecdote:<br /><br /><blockquote class="tr_bq">'I hope no one is taping this,' the Amgen<a class="meta-org" href="http://topics.nytimes.com/top/news/business/companies/amgen_inc/index.html?inline=nyt-org" title="More information about Amgen Inc"></a> manager remarked at a company sales meeting in 2005.<br /><br />The manager then <i>boasted of how she had given a $10,000 unrestricted grant</i> to a pet project of a doctor who was an adviser to the local  Medicare contractor. <i>In turn, she said, the doctor would help persuade the contractor to provide reimbursement for an unapproved use of Amgen’s anemia drug, Aranesp.</i>  </blockquote><br />Since that account appeared to be of a quid pro quo, it did sound like some a kickback or bribery.  In addition, <br /><br /><blockquote class="tr_bq">Amgen is also <i>accused of offering kickbacks to doctors and clinics to induce them to use its drugs</i>. These reportedly came as cash, rebates, free samples, educational and research grants, dinners and travel, and other inducements.   </blockquote><br />Of course, since this was the usual sort of settlement we see of health care corporate wrongdoing, in which the reason the company is paying what appears to be a large fine remains ambiguous,<br /><br /><br /><blockquote class="tr_bq"><div itemprop="articleBody">Except for those in the criminal count, <i>Amgen denied the other accusations, though it did issue a statement on Wednesday acknowledging the settlement</i>. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">'The government raised important concerns in the criminal prosecution,' Cynthia M. Patton, chief compliance officer at Amgen, said in the statement. 'Amgen acknowledges that <i>mistakes were made</i>, and we did not live up to our standards.'</div></blockquote><div itemprop="articleBody"><br />"Mistakes were made," what a handy phrase to avoid acknowledging that a real person or person made those mistakes.  Why government prosecutors did not leverage instances in which the mistakes were made by an identifiable person, for example, the manager in the anecdote above, to find out who ultimately authorized and directed the kickbacks and deceptive marketing, and then seek to indict them is a mystery.  The US Department of Justice now seems to be disinclined to ever pursue top  health care corporate executives who may have done wrong, while they exuberantly pursue fines from the companies they direct, fines which have almost no personal impact on those who authorized, directed or implemented the bad behavior.<br />   <br />The Times article also included a telling allegation that behind this apparent misbehavior was a changed corporate culture that put short-term revenue ahead of all other considerations.  </div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody">the corporate culture changed starting around 2000. That was when new management came in and Aranesp was approved, setting up a fierce marketing battle with Johnson & Johnson and its rival anemia drug, Procrit. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><b><i>'It was more important to make your numbers than to follow the rules,' </i></b>said [former Amgen sales representative and now whistle-blower Jill] ...Osiecki, who was based in Milwaukee and sold Aranesp. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">We have discussed how the "make your numbers" culture seems to have resulted from an over-generalization of the prevalent belief in business schools that "maximizing shareholder value," which usually seems to mean maximizing short-term revenue and/or doing whatever it takes to boost stock prices in the short-term (look <a href="http://hcrenewal.blogspot.com/2012/04/health-care-dysfunction-explained-by.html">here</a>).  In companies which make potentially beneficial but also potentially hazardous drugs, the risks of "make your numbers" are obvious.</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><b>Shameful Consequences for Patients  </b></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">These were disconcerting revelations.  They showed that some unidentified employees, probably including top leaders of a major health care corporation seemed to use kickbacks and lies to deceptively market a drug just to "make their numbers," and thus most likely score healthy bonuses.  Yet this drug is clearly dangerous.  The <a href="http://www.accessdata.fda.gov/drugsatfda_docs/label/2011/103951Orig1s5173_103951Orig1s5258lbl.pdf">official Aranesp label</a> states (in a black box warning, in capital letters):<br /><br /><blockquote class="tr_bq"> ESAs INCREASE THE RISK OF DEATH, MYOCARDIAL INFARCTION, STROKE, VENOUS THROMBOEMBOLISM, THROMBOSIS OF VASCULAR ACCESS AND TUMOR PROGRESSION OR RECURRENCE</blockquote><br />Thus deceptive and unethical marketing practices likely lead to overuse of the drug, and overuse of the drug likely lead to sick (via myocardial infarction [heart attack], stroke, venous thromboembolism or thrombosis of vascular access [drug clots], or tumor progression) or dead patients. <br /><br />One would think that the consequences of the particular bad behavior alleged in this case would have lead to more zealous prosecution and to the pursuit of actual people who authorized, directed or implemented the bad behavior.  However, it did not.<br /><br /><br />One would also think that the nature and consequences of this bad behavior would harm the reputation of the company and its leadership.  Instead, it appears that soon after the settlement was announced, top US elected leaders were fawning over this company and its leadership, and rushing to legislate special treatment for it.<br /><br /><b>Special Treatment from Legislators </b><br /><br />Yet soon after these disconcerting revelations that should have shamed Amgen and its leadership, it appears that the company benefited from legislation narrowly crafted mainly just for to suit its interests, and with the aid of allies from both parties within the US government.  That story was again just <a href="http://www.nytimes.com/2013/01/20/us/medicare-pricing-delay-is-political-win-for-amgen-drug-maker.html">reported </a>by the New York Times.  The basics are:</div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody">Just two weeks after pleading guilty in a major federal fraud case, <i>Amgen, the world’s largest biotechnology firm, scored a largely unnoticed coup on Capitol Hill: Lawmakers inserted a paragraph into the "fiscal cliff"  bill that did not mention the company by name but strongly favored one of its drugs. </i></div><div itemprop="articleBody">  </div><div itemprop="articleBody">The language buried in Section 632 of the law<a href="http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf" title="American Taxpayer Relief Act"> </a><i>delays a set of Medicare price restraints on a class of drugs that includes Sensipar, a lucrative Amgen pill used by kidney dialysis patients.</i> </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">The provision gives Amgen <i>an additional two years to sell Sensipar without government controls.</i> The news was so welcome that the company’s chief executive quickly relayed it to investment analysts.  But<i> it is projected to cost Medicare up to $500 million over that period.[That would almost make up for the fine the company had to pay for illegal marketing and to settle kickback charges - Ed]</i></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Amgen, which has a small army of 74 lobbyists<a href="http://www.opensecrets.org/lobby/clientlbs.php?id=D000000391&year=2012" title="Amgen’s lobbyists as of 2012"> </a>in the capital, was the only company to argue aggressively for the delay, according to several Congressional aides of both parties. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">But the Times article noted that it was not just the size of its army of lobbyists that did it.  </div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody"> <i>Amgen has deep financial and political ties to lawmakers like Senate Minority Leader Mitch McConnell, Republican of Kentucky, and Senators Max Baucus, Democrat of Montana, and Orrin G Hatch, Republican of Utah, who hold heavy sway over Medicare payment policy as the leaders of the Finance Committee. </i></div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">In particular, Amgen</div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody">has a deep bench of <i>Washington lobbyists that includes Jeff Forbes, the former chief of staff to Mr. Baucus; Hunter Bates, the former chief of staff for Mr. McConnell; and Tony Podesta, whose fast-growing lobbying firm has unusually close ties to the White House</i>. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><i>Amgen’s employees and political action committee have distributed nearly $5 million in contributions to political candidates and committees</i> since 2007, including $67,750<a href="http://www.opensecrets.org/politicians/contrib.php?cycle=2012&cid=N00004643&type=C"> </a>to Mr. Baucus, the Finance Committee chairman, and $59,000 to Mr. Hatch, the committee’s ranking Republican. They gave an additional $73,000 to Mr. McConnell, some of it at a fund-raising event for him that it helped sponsor in December while the debate over the fiscal legislation was under way. More than $141,000 has also gone from Amgen employees to President Obama’s campaigns. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">What distinguishes the company’s efforts in Washington is the diversity and intensity of its public policy campaigns. <i>Amgen and its foundation have directed hundreds of thousands of dollars in charitable contributions to influential groups like the Congressional Black Caucus and to lesser-known groups like the Utah Families Foundation, which was founded by Mr. Hatch</i> and brings the senator positive coverage in his state’s news media. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><i>Amgen has sent large donations to Glacier PAC, sponsored by Mr. Baucus in Montana, and OrrinPAc, a political action committee controlled by Mr. Hatch in Utah. </i></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">And when Mr. Hatch faced a rare primary challenge last year, a nonprofit group calling itself Freedom Path<a href="http://images.nictusa.com/cgi-bin/fecimg/?C00492504" title="Freedom Path FEC filings"></a> sponsored advertisements in Utah that attacked his opponent, an effort that tax records released in November show was financed in large part by the Pharmaceutical Research and Manufacturers of America<a href="http://www.phrma.org/" title="PhRMA’s Web site"></a>, a trade group that includes Amgen. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">In some cases, <i>the company’s former employees have found important posts inside the Capitol. They include Dan Todd, one of Mr. Hatch’s top Finance Committee staff members on health and Medicare policy, who worked as a health policy analyst for Amgen’s government affairs office from 2005 to 2009</i>. <i>Mr. Todd, who joined Mr. Hatch’s staff in 2011, was directly involved in negotiating the dialysis components of the fiscal bill, and he met with 'all the stakeholders,</i>' Mr. Hatch’s spokeswoman said, not disputing when asked that this included Amgen lobbyists.</div></blockquote><div itemprop="articleBody"><br />In addition, a NY Times <a href="http://www.nytimes.com/2013/01/23/opinion/amgen-gets-a-gift-from-congress.html">editorial</a> today pointed out that Mitch McConnell, the Senate Minority Leader, (Republican - Kentucky) who "exerted great influence over the fiscal negotiations and praised the Medicare provisions" presumably including the specific provision that helped Amgen, also has "political and financial ties to Amgen."  Furthermore, Senator McConnell's willingness to use taxpayer's money to pay Amgen more seemed to contradict his "public statements [which] usually emphasize the need to cut federal spending on entitlement programs, <a href="http://www.lanereport.com/17882/2013/01/entitlement-spending-fix-will-require-medicare-eligibility-age-hike-means-testing-and-cpi-formula-change-mcconnell-says/?utm_source=Faster%20Lane%20Newsletter&utm_medium=Email&utm_campaign=jan-21-2013" target="_blank">as they did in Lexington Friday</a>," as <a href="http://www.weku.fm/post/mcconnell-helped-amgen-delay-price-limits-dialysis-drug">reported</a> by WEKU (the National Public Radio Station at Eastern Kentucky University ).   <br /><br /><br /></div><div itemprop="articleBody"><b>Can We Reform Health Care in the Corporatist States of America?  </b><br /><br /> In summary, Amgen seems to have leveraged its use of former legislative aides affiliated with both political parties as lobbyists, and its presumed influence over former employees who are currently legislative aides, that is, to people who have transited <a href="http://hcrenewal.blogspot.com/search/label/revolving%20doors">revolving doors</a> in both directions, to influence policy in its corporate favor.  It has also leveraged its contributions directly to politicians, to political action committees (PACs), and to non-profit advocacy groups to influence policy in its direction for this purpose.  All this leverage apparently resulted in continuing government favoritism to a company the government had just convicted of a crime, and to a company whose actions likely led to sick and dead patients.  Furthermore, legislators who publicly deplore excess government spending and enlarging government deficits supported spending more taxpayer money to favor a particular company that they ought to have shunned.  <br /><br /><br />The New York Times <a href="http://www.nytimes.com/2013/01/23/opinion/amgen-gets-a-gift-from-congress.html">editorial</a> deplored this case first as<br /><br /><blockquote class="tr_bq">a disheartening example of how intense lobbying and financial contributions can distort the legislative process in Washington</blockquote></div><div itemprop="articleBody"><br />and second as<br /><br /><blockquote class="tr_bq">a classic example of the power of special interests to shape legislation and shows how hard it may be to carry out the reforms needed to cut health care costs. </blockquote><br />But it was really much worse than that.   This case certainly shows the ongoing coziness between big health care organizations and government (this time, mainly legislative) leaders, facilitated by the apparently very common "<a href="http://hcrenewal.blogspot.com/search/label/revolving%20doors">revolving door</a>" interchange of influential people between corporate management and government.  Note that this coziness has now become bipartisan.  However, this was not merely expensive favoritism.  It was hypocritical expensive favoritism that benefited a corporation that ought to have been shamed and shunned for behavior that did not merely cost the government money, but likely harmed patients, sometimes even fatally.  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"></div><div itemprop="articleBody">President Theodore Roosevelt <a href="http://www.theodoreroosevelt.org/TR%20Web%20Book/TR_CD_to_HTML364.html">condemned</a> malefactors of great wealth.  Our current political leaders in both parties seem to put their ties to corporate insiders who work for executives of great wealth ahead of any consideration of what might be good for patients, public health, or the citizenry at large.  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">So the US now seems to be run by a soft, informal version of <a href="http://hcrenewal.blogspot.com/search/label/corporatism">corporatism</a>, the system in which government and big corporations overlap and jointly rule the people.  Since these days big corporations are run largely without accountability by increasingly rich executives, this ends up meaning government by the oligarchs, for the oligarchs, and of the oligarchs.  President Lincoln and President Theodore Roosevelt might be rolling in their graves.  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">To meaningfully reform health care, it seems like we need to meaningfully reform our entire political system, and both make leaders of health care organizations accountable, and make government again of the people, by the people, and for the people.  </div>

How the "Revolving Door" and Other Aspects of Corporatism Benefited Amgen Just After its Settlement and Guilty Plea

At least here in these United States, our health care corporatism is bipartisan.  Here we present a sorry story of how a company that should...

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Amgen Settles, Pleads Guilty to Misbranding Aranesp

Now it's Amgen's turn to settle and plead.  <a href="http://www.nytimes.com/2012/12/19/business/amgen-agrees-to-pay-762-million-in-drug-case.html">Per the New York Times,</a><br /><br /><blockquote class="tr_bq"><i>The biotechnology giant Amgen marketed its anemia drug Aranesp for unapproved uses even after the Food and Drug Administration explicitly ruled them out</i>, federal prosecutors said on Tuesday.<br /><br /><div itemprop="articleBody"> The federal charges were made public as <i>Amgen pleaded guilty to illegally marketing the drug and agreed to pay <b>$762 million</b> in criminal penalties and settlements of whistle-blower lawsuits.</i> </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Amgen was '<i>pursuing profits at the risk of patient safety</i>' Marshall L. Miller, acting United States attorney in Brooklyn, said in a telephone news briefing on Tuesday. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">David J. Scott, Amgen’s general counsel, entered the guilty plea at the United States District Court in Brooklyn to <i>a single misdemeanor count of misbranding the drug, Aranesp</i>, meaning selling it for uses not approved by the F.D.A. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Amgen agreed to pay $136 million in criminal fines and forfeit $14 million, with about $612 million going to settle civil litigation. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">The article noted the key charge against Amgen,</div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody"> In court on Tuesday, prosecutors charged that <i>Amgen had promoted the use of Aranesp to treat anemia in cancer patients who were not undergoing chemotherapy, even though the drug’s approval was only for patients receiving chemotherapy. </i></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><i>A subsequent study sponsored by Amgen showed that use of Aranesp by those nonchemotherapy cancer patients had actually increased the risk of death</i>, and the off-label use diminished. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Also,</div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody"> The federal charges also say Amgen promoted using larger but less frequent injection of Aranesp than stated in the label as a way of making the drug more attractive to doctors and patients than Procrit, a rival anemia drug from Johnson & Johnson. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">As is typical of such cases, the prosecutors could not figure out how to charge any individuals who might have authorized, directed, or implemented the bad behavior,</div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody"> Mr. Miller said that the<i> evidence in the Amgen case was not sufficient to charge individuals</i>. However, he said, Amgen agreed to sign a corporate integrity agreement that requires executives and board members to personally certify compliance with regulations. That would make it easier to prosecute individuals should violations occur again, he said. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><b>The Charges in Context</b></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">In some reports of the settlement, the issue appeared to be money.  For example, Pharmalot <a href="http://www.pharmalot.com/2012/12/amgen-to-plead-guilty-in-marketing-probe/">reported</a> that after a whistle-blower filed suit against Amgen, "a subsequent investigation by the Justice Department found that these practices induced physicians to use Amgen medications unnecessarily when lower cost alternatives were available." </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">However, Amgen's practices could have had much worse effects than just removing money from the US Treasury.</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Consider the context.  Only a few of the not very numerous articles in the media on this case noted that the key complaint was that Amgen was pushing use of Aranesp for patients with cancer, specifically those not receiving chemotherapy.   (<a href="http://news.yahoo.com/amgen-pleads-guilty-misbranding-charges-pay-762-million-161356503--finance.html">Reuters</a> made this explicit, for example, but not so the <a href="http://www.latimes.com/business/la-fi-amgen-plea-20121219,0,7120268.story">Los Angeles Times,</a> or <a href="http://www.bloomberg.com/news/2012-12-18/amgen-expected-to-plead-guilty-to-charges-u-s-says.html">Bloomberg's initial coverage</a>.)</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"> In fact, there has been concern about the adverse effects of Aranesp for patients with cancer for a while.  In 2007, Khuri noted in a commentary in the New England Journal of Medicine(1) that "concern about a detrimental effect of ESAs [erythropoiesis stimulating agents, a class of drugs of which Aranesp is a prominent member] in patients with cancer arose" after results of a small clinical trial of epoetin beta in patients with oral, pharyngeal or laryngeal cancer receiving radiation therapy showed worse survival in patients receiving that drug.  Subsequently, in 2008, a meta-analysis of multiple randomized clinical trials showed that patients with cancer receiving ESAs, including Aranesp, had an increased risk of venous thromboembolism (drug clots) and death.(2)  In 2009,  another meta-analysis showed that ESAs lead to decreased survival in patients with cancer.(3)</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Recall, though, that Aranesp is meant to improve anemia.  It was not meant to cure cancer, or even put the disease into remission.  Its use therefore was mainly adjunctive.  Thus, it appears its benefits for cancer patients (improved anemia, and possibly decrease in such symptoms as fatigue) could not outweigh its harms (including hastening death).</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">So the issue was not merely that Amgen was promoting a drug in an instance in which its use had not been improved by the US Food and Drug Administration (FDA), or that such use of the drug was unnecessarily costly.  The issue was that Amgen was promoting a drug that had no proven benefits for the patients, but could hasten their death.  It appears that Amgen was pursuing profits at the expense of lives.</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><b>Summary</b></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">So it is particularly disturbing that no individual apparently will be held responsible for the promotion of Aranesp for patients for whom its use might prove fatal.  The assurance that the proposed corporate integrity agreement will prevent further abuse is notably hollow.  I can recall no recent case in which the government authorities have used such an agreement to pursue charges against individuals.  The likely deterrent effect of the monetary settlement will likely be minimal.  $762 million may look just like a cost of doing business when the drug in question was bringing in over $2 billion a year (<a href="http://www.latimes.com/business/la-fi-amgen-plea-20121219,0,7120268.story">per the Los Angeles Times</a>).  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">So the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> march on and on.  The government continues to extract fines from health care organizations whose actions endanger not only the federal budget, but patients' well being and lives, without even trying to hold individuals responsible.  The impunity of health care corporate executives thus also continues.</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">As we have said far too many times, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.</div><div itemprop="articleBody"></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><b>References</b></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">1.  Khuri FR. Weighing the hazards of erythropoiesis stimulation in patients with cancer.  N Engl J Med 2007; 356: 2445-2447.  Link <a href="http://www.nejm.org/doi/full/10.1056/NEJMp078101">here</a>.</div><div itemprop="articleBody">2.  Bennett CI, Silver SM, Djulbegovic B et al.  Venous thromboembolism and mortality associated with recombinant erythropoietin and darbepoetin administration for the treatment of cancer-associated anemia.  JAMA 2008; 299: 914-924.  Link <a href="http://jama.jamanetwork.com/article.aspx?articleid=181533">here</a>.</div><div itemprop="articleBody">3.  Bohlius J, Schmidlin K, Brillant C et al.  Recombinant human eryhtropoiesis-stimulating agents and mortality in patients with cancer: a meta-analysis of randomised trials.  Lancet 2009; 373: 1532-1542.  Link <a href="http://www.thelancet.com/journals/lancet/article/PIIS0140-6736%2809%2960502-X/abstract">here</a>.</div>

Amgen Settles, Pleads Guilty to Misbranding Aranesp

Now it's Amgen's turn to settle and plead.  Per the New York Times, The biotechnology giant Amgen marketed its anemia drug Aranesp ...

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"Peer Benchmarking," the "Lake Wobegone Effect," and Outsize Executive Compensation: the Amgen Example

We recently <a href="http://hcrenewal.blogspot.com/2011/10/health-cares-99-percenters.html">discussed </a>why health care's 99 percent may have reason to be upset with the one percent, the elite that run health care organizations. Once <a href="http://www.kevinmd.com/blog/2011/10/99-percent-health-care-angry.html">cross-posted on the KevinMD blog</a>, it caused an eruption of controversy. This included some anonymous commentators who insisted that top leaders' made contributions to health care that were so heroic that their compensation was insufficient. <br /><br />So conveniently an <a href="http://www.washingtonpost.com/business/economy/cozy-relationships-and-peer-benchmarking-send-ceos-pay-soaring/2011/09/22/gIQAgq8NJL_story.html">article</a> this month in the Washington Post dissected the mechanisms that let pay of top health care leaders inexorably rise whatever their and their organizations' performance.  <br /><br /><strong>The Amgen CEOs Compensation</strong><br /><br />It used as an example the compensation given to Kevin W Sharer, the CEO of Amgen, the biotechnology and pharmaceutical company. <br /><blockquote>Sharer, a 63-year-old former Navy engineer, <em>was already earning lots of money — about <strong>$15 million</strong> in the previous year, plus such perks as two corporate jets</em>. <br /><br />The board decided to give Sharer more. It <em>boosted his compensation to <strong>$21 million</strong> annually, a 37 percent increase,</em> according to the company reports.</blockquote><br />This outsize compensation has allowed Mr Sharer to live large.<br /><blockquote>He owns at least three homes, according to property records: a $2 million home in Los Angeles, a $6 million spread in Vail, Colo., and a $5 million place on Nantucket. </blockquote><strong>The Company's Less Than Stellar Performance</strong><br /><br />This huge raise on top of an already huge compensation package, however, seemed completely unrelated to the performance of the company Mr Sharer lead.<br /><blockquote>Shareholders at the company, one of the nation’s largest biotech firms, had <em>lost 3 percent on their investment in 2010 and 7 percent over the past five years. The company had been forced to close or shrink plants, trimming the workforce from 20,100 to 17,400.</em></blockquote><br />In addition,<br /><blockquote>by 2006, the growth that once distinguished Amgen had begun to taper off.<br /><br />In 2008, Forbes magazine named ... [Sharer] among among the <em>country’s most overpaid bosses because the company’s returns had dipped 4 percent annually over six years while he’d earned an average of $12.3 million.</em><br /><br />The lack of enthusiasm was even more noticeable among the people who know most about Amgen — insiders. Companies are required to report when their officials sell stock. Since 2002, <em>the ratio of share sales to purchases has been 12 to 1,</em> according to Bloomberg data reviewed last fall by Christopher.</blockquote><br /><strong>"Peer Benchmarking"</strong><br /><br />The Post article then analyzed the process used to set CEO pay at Amgen, and at many other corporations and organizations, and how it lead to such extreme results.<br /><blockquote>This is how it’s done in corporate America. At Amgen and at the vast majority of large U.S. companies, <em>boards aim to pay their executives at levels <strong>equal to or above</strong> the median for executives at similar companies</em>.<br /><br />The idea behind setting executive pay this way, known as 'peer benchmarking,' is to keep talented bosses from leaving. </blockquote><br />We have discussed examples of peer benchmarking before, most recently <a href="http://hcrenewal.blogspot.com/2011/08/what-goes-up-non-profit-hospital-ceo.html">here</a>. Yet I believe the Post article has the clearest explanation to date of how this works and what its results are. Note that:<br /><blockquote>It wasn’t until recently, however, that its pervasiveness and impact on executive pay became clear. Companies have long hid the way they set executive pay, but in late 2006, the Securities and Exchange Commission began compelling companies to disclose the specifics of how they use peer groups to determine executive pay.</blockquote><br />Peer benchmarking has two components. First the pay of peers are assessed, that is, benchmarked:<br /><blockquote>Amgen selected 11 companies in the biotech/pharmaceutical field, which seems natural enough. </blockquote><br />However, how the peers are chosen is important (just as how the comparator treatment is chosen in a clinical trial of a drug is important.) In this case,<br /><blockquote>But most of the companies on the list are <em>far larger than Amgen</em>. Amgen’s revenue in 2010 was $15 billion; the median revenue of its peer companies was $40 billion, according to Equilar.<br /><br />The practice of choosing peers that boost pay is common. Studies by Faulkender, Bizjak and ISS Corporate Services have shown that <em>when choosing 'peers' for pay-setting purposes, companies tend to choose larger firms or firms with more highly paid chief executives</em>.</blockquote><br />Then an assessment is made, almost always by the organizations board of directors or trustees, of how the CEO compares to these supposed peers:<br /><blockquote>Maybe even more significantly, however, the Amgen compensation committee also <em>decided that Sharer, despite being at a smaller company, should earn stock compensation at the <strong>75th percentile</strong> of peers.</em><br /><br />This is critical because stock compensation tends to be the largest component of executive pay.</blockquote><br />What is missing in the Post article is any rationale for the assessment that Sharer was doing so much better than the median CEO of these questionably comparable companies. The information presented in the article suggested instead that the company was doing badly, with decreasing revenue, decreasing share prices, and declining employment. <br /><br /><strong>Cronyism on the Boards</strong><br /><br />Serving on the board of directors of a for-profit corporation requires board members to "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. <a href="http://www.amazon.com/Corporate-Governance-Robert-G-Monks/dp/1405116986">Corporate Governance</a>, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.] (Boards of trustees of non-profit organizations have duties of loyalty, "a board member must give undivided allegiance when making decisions affecting the organization" and duty of obedience, "board members [must] ... be faithful to the organization's mission. They are not permitted to act in a way that is inconsistent with the central goals of the organization," per <a href="http://www.boardsource.org/Knowledge.asp?ID=3.364">BoardSource</a>.) <br /><br />Rather than representing the interests of stockholders, however, many boards seem to put the interests of the CEO and top management first:<br /><blockquote>The practice has persisted because <em>corporate board members, many of whom have personal or business relationships with the chief executive</em>, have been unwilling to abandon the practice.<br /><br />At Amgen, for example, four of the six members of the board compensation committee had <a href="http://www.washingtonpost.com/business/economy/ties-to-board-members-aided-amgens-ceo/2011/09/29/gIQAAuXPJL_story.html">personal or business connections to Sharer </a>before joining the board. In fact,<em> he nominated at least two of the six to the board</em>, according to a company source and reports.<br /><br /><em>These kinds of ties — between chief executives and the boards that oversee them — permeate corporate America. On a typical board, the chief executive considers about about 33 percent of the board of directors as “friends”</em> rather than as mere “acquaintances,”according to a survey of chief executives at about 350 S&P 1500 corporations conducted over 15 years by University of Michigan business professor James Westphal.<br /><br />More tellingly, <em>the chief executive is likely to find even more friends on the compensation committees of corporate boards — almost 50 percent</em>.</blockquote><br /><strong>The Obvious Problems with Peer Benchmarking</strong><br /><br /><blockquote>But the practice has long been controversial because, as critics have pointed out, <em>if every company tries to keep up with or exceed the median pay for executives, executive compensation will spiral upward, regardless of performance. Few if any corporate boards consider their executive teams to be below average, so the result has become known as the 'Lake Wobegon' effect.</em><br /><br />It wasn’t until recently, however, that its pervasiveness and impact on executive pay became clear. Companies have long hid the way they set executive pay, but in late 2006, the Securities and Exchange Commission began compelling companies to disclose the specifics of how they use peer groups to determine executive pay.<br /><br />Since then, researchers have found that <em>about 90 percent of major U.S. companies expressly set their executive pay targets at or above the median of their peer group. This creates just the kinds of circumstances that drive pay upward.</em><br /><br />Moreover, the jump in pay because of peer benchmarking is significant. <em>A chief executive’s pay is more influenced by what his or her 'peers' earn than by the company’s recent performance for shareholders,</em> according to two independent research efforts based on the new disclosures. One was by Michael Faulkender at the University of Maryland and Jun Yang of Indiana University, and another was led by John Bizjak at Texas Christian University.<br /><br />'Peer benchmarking has a significant influence on CEO pay,' Bizjak said. 'Basically, <em>you can’t have every CEO paid above average without pay ratcheting upward over time.'</em><br /><br />The gap between what workers and top executives make helps explain <em>why income inequality in the United States is reaching levels unseen since the Great Depression</em>.<br /><br /><em>Since the 1970s, median pay for executives at the nation’s largest companies has more than quadrupled, even after adjusting for inflation</em>, according to researchers. Over the same period, pay for a typical non-supervisory worker has dropped more than 10 percent, according to Bureau of Labor statistics.<br /><br />Critical to executive pay levels is peer benchmarking.<br /><br />Even before the extent of the practice was known, it drew criticism from prominent business figures. After the Enron scandals, a blue-ribbon committee led by Peter G. Peterson, then chairman of the Federal Reserve Bank of New York, and John Snow, former chairman of the Business Roundtable, called for setting executive pay 'unconstrained by median compensation statistics.' Legendary investor Warren Buffett, in one of his famously plain-spoken letters to investors, likewise derided the method.<br /><br /><em>'Outlandish ‘goodies’ are showered upon CEOs simply because of a corporate version of the argument we all used when children: ‘But, Mom, all the other kids have one,’'</em> he wrote.<br /><br />Similarly, former Federal Reserve chairman Paul Volcker called it the 'Lake Wobegon syndrome' in congressional testimony in 2008, referring to Garrison Keillor’s fictional town where 'all the children are above average.'</blockquote><br /><strong>Summary</strong><br /><br />Peer benchmarking, as it currently is implemented, is an irrational system that has nothing to do with the free market. It shows how perverse the incentives given to top health care leaders have become. It shows how top hired executives of health care organizations are no longer are accountable to anyone. The boards that are supposed to exercise stewardship over them have become their cheerleaders, possibly because they are populated by cronies, and current and former hired executives of other organizations who are more interested in preserving the wealth and power of hired executives than representing shareholders, or upholding organizations' missions.<br /><br />The problems caused by such perverse incentives include:<br /><br />- Paying the leaders so well (and supporting the public relations staff who sing their praises) costs money that could better be used to improve patients' and the public's health.<br /><br />- Providing such perverse incentives, which seem entirely unrelated to the organizations' primary missions, is likely to distract leaders from the organizations' abilities to support these missions.<br /><br />- It is likely that employees of such organizations who actually try to uphold the mission will be demoralized by the realization that their leaders' enrichment comes first, further damaging the organizations' ability to uphold the mission.<br /><br />- Finally, it is possible that such perverse incentives attract leaders who are particularly unsuited to the task of upholding the mission.<br /><br />So, ad infinitum, I repeat.... health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.<br /><br />If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

"Peer Benchmarking," the "Lake Wobegone Effect," and Outsize Executive Compensation: the Amgen Example

We recently discussed why health care's 99 percent may have reason to be upset with the one percent, the elite that run health care orga...

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