Justice Delayed - Two Device Companies Still Settling Cases from 10 Plus Years Ago

Here we go again.  After a hiatus during which the US media and perhaps parts of the government were preoccupied with such issues as the ongoing controversy over health care reform, and a government shutdown apparently arising out of this controversy, the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">march of legal settlements</a> involving big health care organizations has resumed. <br /><br />In alphabetical order,...<br /><br /><br /><b>Boston Scientific</b><br /><br /><a href="http://www.startribune.com/business/228211891.html">From</a> the Minneapolis Star-Tribune on 17 October, 2013, an account of a settlement arising from alleged misbehavior that started in 2002,<br /><br /><br /><blockquote class="tr_bq">A $30 million settlement between the U.S. Department of Justice and Boston Scientific will likely end a <i>case involving the sale of defective heart devices from 2002 through 2005</i> by subsidiaries Guidant, Guidant Sales and Cardiac Pacemakers.</blockquote><br />Note that the allegations were particularly egregious since they involved a company selling products they knew to be defective in ways that could prove fatal as if they were quite safe, <br /><br /><blockquote class="tr_bq">The settlement closes a fraudulent-claims lawsuit that alleged <i>Guidant knowingly sold defective implantable defibrillators to health care facilities that implanted them into thousands of Medicare patients. </i></blockquote><br />In particular,<br /><br /><br /><blockquote class="tr_bq">The government’s complaint said that <i>Guidant knew as early as April 2002 that its Prizm 2 line of devices was defective </i>and <i>knew in November 2003 that its Renewal 1 and 2 devices were capable of short-circuiting</i> and delivering an electric shock that 'arcs' back onto the device instead of being directed to an irregularly beating heart.<br /><br />According to Boston Scientific’s website, <i>83 malfunctions and nine reported deaths have been connected with the Renewal devices and 40 confirmed malfunctions and five patient deaths have been associated with the Prizm devices. </i>About 500 Renewal devices remain implanted worldwide; about 1,400 Prizm devices remain in patients, according to the website.<br /><br />Although Guidant took action to fix the defects, the government alleged that <i>the company continued to sell its remaining stock of the old, defective versions of the devices. </i>In fact, federal officials say that as Guidant learned about the cause of the defect, <i>it took steps to hide the problem from patients, doctors and the Food and Drug Administration.</i><br /><br />According to the government, <i>Guidant did not fully disclose the problem until May 2005,</i> when two Minneapolis doctors publicly aired their concerns about one of the defibrillators after it failed to revive a 21-year-old Grand Rapids, Minn., patient. Guidant later admitted it had known for three years that the device could short-circuit, but chose not to alert doctors or the public.</blockquote><br />This is only the latest settlement made by Boston Scientific since 2005,<br /><br /><br /><blockquote class="tr_bq">Boston Scientific paid $27.5 billion to acquire Guidant in 2006. It has been paying quite a bit since in relation to Guidant’s defective defibrillators.<br /><br />In 2007, <i>Boston Scientific paid $240 million to settle claims with thousands of patients who had sued Guidant after the defective devices were recalled. Later, in February 2010, Guidant pleaded guilty to misleading the FDA about problems with the devices and paid a fine of $296 million.</i></blockquote><br />In fact, the then case of the allegedly concealed implantable cardiac defibrillators (ICD) was one of the first cases of apparently unethical health care corporate management behavior leading to bad patient outcomes we <a href="http://hcrenewal.blogspot.com/2005/05/guideants-short-circuit.html">discussed</a> on Health Care Renewal.  (Look <a href="http://hcrenewal.blogspot.com/2011/01/guidant-boston-scientific-gets.html">here</a> for a more recent summary of this case.) <br /><br />Yet despite the fact that this apparently deeply unethical conduct lead to patient deaths, no individual who authorized, directed or implemented the bad behavior has suffered any negative consequences for it over the eight years since the details first became public.<br /><br />One physician who helped bring this case to light was also apparently concerned about the impunity of those responsible,<br /><br /><br /><blockquote class="tr_bq"> Dr. Robert Hauser, one of the doctors who went public back in 2005, criticized the settlement on Thursday.<br /><br />'The $30 million should have little impact on their business,' Hauser said in an e-mail. 'I find it very disturbing that such a small settlement was accepted by the DOJ in view of the magnitude of wrongdoing by Guidant management.' <br /> </blockquote><br /><b>Stryker Corp</b><br /><br />This week, MLive.com <a href="http://www.mlive.com/business/west-michigan/index.ssf/2013/10/stryker_to_pay_132_million_to.html">reported</a> on another settlement involving allegations of unethical behavior by a device company dating back to 2003,<br /><br /><blockquote class="tr_bq"> An investigation by federal authorities found that Stryker Corp. subsidiaries in five foreign countries <i>made illicit payments and tried for several years to bribe doctors, health care professionals and government-employed officials in order to obtain or retain business.</i><br /><br />Stryker <a href="http://topics.mlive.com/tag/Stryker/index.html"> </a>has agreed to <i>pay more than $13.2 million</i> to settle the charges.<br /><br />The SEC charged the Kalamazoo-based medical technologies company with <i>violating the Foreign Corrupt Practices Act,  alleging that its subsidiaries in Argentina, Greece, Mexico, Poland and Romania made illicit payments totaling approximately $2.2 million</i> 'that were incorrectly described as legitimate expenses in the company’s books and records.'<br /><br />The SEC said descriptions of the payments varied from a charitable donation to consulting and service contracts, travel expenses, and commissions. <br /><br />The SEC states that Stryker made about $7.5 million in illicit profits as a result of the improper payments. It did not specify during what year all of the events occurred, but indicated <i>some as far back as 2003.</i></blockquote><br />Note that the payments seemed deliberately designed to corrupt health care professionals and managers, for example,<br /><br /><blockquote class="tr_bq">According to the SEC’s order, Stryker’s subsidiary in Greece made a purported 'donation' of nearly $200,000 in 2007 to a public university in Greece to fund a laboratory that was a pet project of a public hospital doctor. <i> In exchange for the payment, the doctor agreed to provide business to Stryker.</i></blockquote><br />Also,<br /><br /><br /><blockquote class="tr_bq">The SEC stated that its investigation also found that Stryker subsidiaries bribed foreign officials by paying their expenses for trips that lacked any legitimate business purpose.<br /><br />'For example,<i> in exchange for the promise of future business from the director of a public hospital in Poland, Stryker paid travel costs for the director and her husband in May 2004</i>,' according to the SEC. 'This included a six-night stay at a New York City hotel, attendance at two Broadway shows, and a five-day trip to Aruba.'</blockquote><br />As in the case above, it appears that no individual who authorized, directed or implemented the questionable payments will suffer any negative consequences.  In fact, as is usual in such cases,<br /><br /><blockquote class="tr_bq"> The settlement does not not require Stryker to admit or deny the allegations,...</blockquote><br />However, an SEC official did say,<br /><br /><blockquote class="tr_bq"> <i>Stryker’s misconduct involved hundreds of improper payments over a number of years </i>during which the company’s internal controls were fatally flawed. Companies that <i>allow corruption to occur</i> by failing to implement robust compliance programs will not be allowed to profit from their misconduct.</blockquote><br />While Health Care Renewal has not discussed this particular case before, it is hardly the first case of bad conduct by Stryker that we have discussed.  In the past we noted<br />-  In 2012, a Stryker subsidiary pleaded guilty to misbranding in response to allegations that its marketers conspired to defraud physicians in order to sell a product to promote bone growth that proved harmful to patients (look <a href="http://hcrenewal.blogspot.com/2012/01/unequal-justice-under-law-comparing.html">here</a>).<br />-  In 2010, Stryker settled a case alleging unfair and deceptive sales practices again used for bone growth accelerators (look <a href="http://hcrenewal.blogspot.com/2010/09/at-end-of-summer-everybody-well-nearly.html">here</a>).   <br />-  In 2009, some apparently low-level Stryker employees pleaded guilty to promoting off-label use of these same products (look <a href="http://hcrenewal.blogspot.com/2009/02/three-troubled-device-companies.html">here</a>).  <br />- In 2007, Stryker made an agreement allowing federal supervision after charges one of its units had violated anti-kickback laws when making supposed "royalty" payments, often huge, to orthopedic surgeons in connection with its production of prosthetic hips and knees.  Several other device companies signed deferred prosecution agreements, and as a result, for a time all had to make public their payments to doctors and various non-profit organizations.  (See summary <a href="http://hcrenewal.blogspot.com/2007/11/more-about-surgeons-who-received-large.html">here</a>.)  <br /><br /><b>Summary</b><br /><br /> This recent crop of settlements has some features in common.  The settlements involved multinational device companies.  The settlements occurred at least a decade after the alleged bad behavior started.  The settlements required only small payments - at least on a corporate scale -from the companies involved, but no negative consequences for anyone who authorized, directed, or implemented the bad behavior.  Finally, the settlements were made by companies who had striking past records of previous settlements of bad behavior.<br /><br />The <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">march of legal settlements</a> demonstrates the pervasiveness of unethical behavior, often involving harm to patients or sullying of health care professionals, involving large, rich health care corporations.  It also demonstrates the impunity of the top leaders of such corporations who often make huge amounts of money despite, or perhaps because of their companies' misconduct.  Despite intermittent threats by US government officials to get tough with unethical behavior by health care corporations, this pattern has continued for years, as we have documented.  <br /><br />True health care reform would hold leaders of health care organizations accountable for their organizations' behavior, and its effects on patients and health care professionals.  <br /><br />

Justice Delayed - Two Device Companies Still Settling Cases from 10 Plus Years Ago

Here we go again.  After a hiatus during which the US media and perhaps parts of the government were preoccupied with such issues as the ongoing controversy over health care reform, and a government…

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Unequal Justice Under Law - Comparing Cases of Alleged Misbehavior by Large Health Care Organizations and Individuals

How the wealthy and powerful have become able to play by a different set of rules than those affecting ordinary people may be the defining issue of our time.  Yesterday, President Obama's State of the Union message asked for an economy in which "everyone plays by the same set of rule."  We posted about how this issue, which got national attention due to the Occupy movement, affects health care <a href="http://hcrenewal.blogspot.com/2011/11/health-care-also-needs-to-challenge.html">here</a>.<br /><br />We have previously posted again and again about how the penalties for misbehavior by large US health care organizations seem to be so minimal as to be incapable of deterring future bad behavior (e.g., see <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">posts</a> about legal settlements).  At most, corporations often pay fines that are no more than a cost of doing business.  They rarely have to admit guilt, and when they do, it is usually to a relatively trivial charge.  The people who authorized, directed, or implemented the bad behavior almost never suffer any negative consequences.  Thus, the leaders of large US health care organizations seem to have <a href="http://hcrenewal.blogspot.com/search/label/impunity">impunity</a>.<br /><br />Similar complaints have been made about the lack of accountability of the leaders of the finance firms that lead us into the global financial crisis, or great recession.  <br /><br />However, while I have reviewed now hundreds of stories about such minimal organizational punishments, I have also seen hundreds of stories discovered by my automatic news searches of much more severe penalties paid by individuals who have been accused of similar misbehavior.  I have never previously made an explicit comparison of how health care corporate and individual misbehavior are handled.<br /><br />A recent set of examples of organizational misbehavior invites such a comparison.  Here they are, in chronological order.<br /><br /><strong>KV Pharmaceutical</strong><br /><br />On December 6, 2011, the St Louis Post Dispatch <a href="http://www.stltoday.com/business/local/kv-pharmaceutical-agrees-to-million-settlement-with-doj/article_3c947aee-2054-11e1-8c50-001a4bcf6878.html">reported</a>:<br /><blockquote>KV Pharmaceutical Co. has agreed to <em>pay $17 million to federal and state authorities to settle Justice Department allegations that it defrauded federal health care programs</em>.<br /><br />The settlement resolves allegations that KV, as the Bridgeton-based parent company of now-defunct Ethex Corp., <em>misrepresented the regulatory status of two of its drugs</em> that did not qualify for coverage under federal health care programs, the Justice Department said today.<br /><br />The Justice Department alleges that <em>Ethex submitted false quarterly reports to the federal Centers for Medicare and Medicaid Services</em> related to the two drugs: nitroglycerin extended release capsules and hyoscyamine sulfate extended release capsules.</blockquote><br />Company leadership made the usual sort of comment. CEO Greg Divis said:<br /><blockquote>The closure of this matter is <em>another step forward as KV moves ahead</em> as a women's healthcare focused branded specialty pharmaceutical company.</blockquote>Corporate leaders seem to love putting such unpleasantness in the past and moving on, especially when they personally are not held accountable for the previous misbehvior.<br /><br />Note that this is just the latest settlement for KV Pharmaceutical:<br /><blockquote><em>KV shut down Ethex after the subsidiary pleaded guilty in March 2010 to two felony counts of criminal fraud</em> for failing to report to the Food and Drug Administration that it was making oversize drugs - and drew $27.6 million in fines and restitution.</blockquote><br /><strong>Catholic Healthcare West, Sutter Health</strong><br /><br />On December 8, the Sacramento Bee <a href="http://www.sacbee.com/2011/12/08/4107855/chw-sutter-pay-23-million-to-settle.html">reported</a>:<br /><blockquote>Two of Sacramento's biggest health care players <em>paid a combined $2.3 million to the federal government to settle allegations that 61 of their hospitals double-billed Medicare</em> for therapies and services, U.S. Department of Justice officials announced Wednesday.<br /><br /><em>Catholic Healthcare West paid more than $875,000 and Sutter Health nearly twice that – more than $1.43 million</em> – for alleged duplicate charges for infusion therapies and treatments to break up kidney and bladder stones, in what Lauren Horwood, a spokeswoman in the Sacramento U.S. attorney's office, called 'a significant settlement.'</blockquote><br />As usual,<br /><blockquote>Officials at the two health networks <em>admitted no wrongdoing</em> in agreeing to the settlement, Horwood said. No charges will be filed.</blockquote><br />Again, however, this was not the first such issue to affect these large non-profit organizations:<br /><blockquote>In 2006, Sutter Health agreed to grant discounts and refunds to uninsured patients the network was accused of overcharging, stemming from a 2004 class-action lawsuit.</blockquote><br /><strong>Blue Shield (California)</strong><br /><br />On December 29, 2011, the Los Angeles Times <a href="http://articles.latimes.com/2011/dec/29/local/la-me-blue-shield-20111229">reported</a>:<br /><blockquote>More than a year after the healthcare reform law sought to prevent sick patients from losing medical coverage, insurers are still paying for their alleged abuses.<br /><br /><em>Blue Shield has agreed to pay $2 million to resolve accusations that the company improperly dropped policyholders after they got sick and needed expensive treatment</em>.<br /><br />The settlement, announced Wednesday by Los Angeles City Atty. Carmen Trutanich, ends an investigation into more than 1,000 so-called rescissions by Blue Shield, a San Francisco-based not-for-profit company.</blockquote><br />As usual, there was no admission of guilt, and a company spokesperson claimed that while the company decided to pay out the money in response to the allegations, it, of course, was blameless:<br /><blockquote>Blue Shield spokesman Steve Shivinsky said the firm settled to avoid litigation.<br /><br /><em>'Our process meets or exceeds all legal and regulatory requirements</em>,' Shivinsky said in a statement. 'In every instance, we provide immediate notice, ensure multiple layers of review, involve a medical director in the decision, give members an opportunity to provide additional information before we take any action, and follow the guidance of an independent third party review.'</blockquote><br />Note that rescission is now against US federal law:<br /><blockquote>President Obama made rescission a central theme in his push for a healthcare overhaul. In September 2010, a ban on rescissions for unintentional application errors became one of the first pieces of the healthcare law to take effect.</blockquote><br /><strong>GE Healthcare</strong><br /><br />On December 29, 2011, the Detroit Free Press reported (<a href="http://www.usatoday.com/money/industries/health/story/2011-12-29/ge-healthcare-settlement-30-million-dollars/52268818/1">via</a> USA Today):<br /><blockquote>Pharmaceutical giant GE Healthcare will <em>pay $30 million to the U.S. Department of Justice to settle</em> claims in a case filed by a Michigan salesman, <em>alleging one of its companies marketed a diagnostic drug used in cardiology tests as one that could be diluted and stretched to more patients than intended.</em></blockquote><br />Not surprisingly,<br /><blockquote><em>GE admitted no wrongdoing</em> in the settlement. </blockquote><br />This was despite the fact that the actions alleged may have harmed patients as well as defrauding the government:<br /><blockquote>For patients, the diluted product <em>resulted in more false positives during cardiology tests and exposed them to additional and unnecessary testing</em>....</blockquote>We have <a href="http://hcrenewal.blogspot.com/search/label/General%20Electric">posted previously</a> about some previous questionable behavior by GE in the health care sphere.<br /><strong>Actavis</strong><br /><br />On January 3, 2012, Bloomberg <a href="http://www.businessweek.com/news/2012-01-03/actavis-to-pay-84-million-to-end-medicaid-drug-pricing-suit.html">reported</a>:<br /><blockquote>Two units of Actavis Group Hf will <em>pay $84 million to settle</em> a lawsuit over drug pricing, Texas officials said, less than half the amount an Austin jury said the company should pay.<br /><br />The state accused Actavis Mid-Atlantic LLC and Actavis Elizabeth LLC, subsidiaries of the Iceland-based company’s U.S. division, of <em>inflating billings to the Texas Medicaid program by falsely reporting drug prices. The state court jury in February ordered the units to pay the state $170 million.</em><br /><br />The settlement resolves that litigation, Texas Attorney General Greg Abbott said today in a statement.</blockquote><br />Note that Medicaid is a joint federal-state insurance program for the poor.<br /><br />The company's statement had a familiar ring to it:<br /><blockquote><em>'Actavis denies any and all wrongdoing, and denies that it has any liability</em> relating to the Texas judgment,' the company and the state said in the settlement agreement. The parties reached a settlement 'to avoid the delay, uncertainty, inconvenience and expense of continuing the litigation.'</blockquote><br />Nothing to see here, just move along.<br /><br /><strong>Denver Health Medical Center</strong><br /><br />On January 5, 2012, the Denver Post <a href="http://www.denverpost.com/breakingnews/ci_19680861">reported</a>:<br /><blockquote>Denver Health Medical Center will <em>pay $6.3 million to federal and state officials for overbilling Medicare and Medicaid,</em> state and U.S. attorneys said.<br /><br />After investigating a whistleblower's lawsuit, government officials said Denver Health was classifying patients with an "inpatient" status when it should have been listing them as 'outpatient' or under 'observation' status, which paid less under government rules.</blockquote><br />Oops, missing from this story was the pro forma denial of blame, wrongdoing, misconduct by organizational leadership. However, the Denver Business Journal was <a href="http://www.bizjournals.com/denver/news/2012/01/05/denver-health-settles-medicare.html">able to add that</a>:<br /><blockquote>Denver Health, in a statement, said it and the government agreed to the settlement <em>to avoid 'protracted litigation' over the allegations. It did not admit guilt in agreeing to the settlement</em>.</blockquote><br />Of course, again despite having to pay millions, the organization asserted that it is fine and upstanding:<br /><blockquote><em>'Denver Health has, and will continue to, strive to ensure that its billing systems are accurate,</em>' the hospital said in a statement, adding that the hospital has implemented a system to correct and improve billing accuracy.</blockquote><br />Whoever wrote the statement seemed to overlook the implication that flowed from the need to "correct" the system.<br /><br /><strong>CVS Caremark</strong><br /><br />On January 12, 2012, the Baltimore Sun <a href="http://articles.baltimoresun.com/2012-01-12/business/bal-consuming-interests-cvs-caremark-settles-deceptive-pricing-charge-for-5-million-20120112_1_cvs-caremark-drug-pricing-information-drug-plan">reported</a>:<br /><blockquote>The Federal Trade Commission announced that CVS Caremark Corp. agreed to <em>pay $5 million to settle a complaint that it misinformed seniors about the price of certain Medicare Part D prescription drugs</em> sold through CVS and Walgreens pharmacies.<br /><br />The action by the company, according to the FTC, caused seniors and consumers with disabilities to pay significantly more for drugs. It also pushed them more quickly into the so-called 'doughnut hole,' in which drug costs aren’t covered by the federal program.</blockquote><br />Despite its multimillion dollar payment, the company admitted no guilt, of course, and asserted its exemplary corporate citizenship:<br /><blockquote>CVS Caremark released a statement:<br /><br />'During the course of this two year investigation, <em>our company cooperated fully with the FTC and provided to the government millions of documents as well as access to numerous members of our management team who participated in voluntary interviews and depositions</em>,' said Douglas A. Sgarro, Executive Vice President and Chief Legal Officer of CVS Caremark.</blockquote><br />He also took comfort from the fact that there were not even more charges:<br /><blockquote>It is important to note that, at the conclusion of this comprehensive investigation, the FTC made no allegations of antitrust law violations or anti-competitive behavior associated with any of our business practices, products or service offerings.</blockquote><br /><strong>Stryker Corp</strong><br /><br />On January 18, 2012, Bloomberg <a href="http://www.bloomberg.com/news/2012-01-18/stryker-biotech-pleads-guilty-to-misbranding-charge-pays-15-million-fine.html">reported</a>:<br /><blockquote>A Stryker Corp. (SYK) unit agreed to <em>plead guilty and pay a $15 million fine while the medical-device maker was on trial on charges it marketed an unapproved mixture of products for strengthening human bone growth.</em><br /><br />The unit, Stryker Biotech, and three Stryker sales representatives were on trial in federal court in Boston on a 13-count criminal indictment claiming conspiracy and wire fraud. The trial began Jan. 9 with jury selection.<br /><br />Stryker Biotech agreed to <em>plead to one misdemeanor count of misbranding a medical device</em>, according to a letter dated yesterday from the U.S. Attorney’s Office in Boston and filed with the federal court. </blockquote><br />This did involve an admission of guilt, but to what amounts to a financial violation when there were allegations that patients may have been harmed:<br /><blockquote>The U.S. had charged Stryker Biotech with misbranding and its sales force with <em>conspiring to defraud surgeons into combining the company’s OP-1 and OP-1 Putty with the bone filler Calstrux. Some patients suffered adverse side effects and required more surgery</em>, the U.S. said.<br /><br />'That mixture was never studied clinically,' Assistant U.S. Attorney Susan Winkler told the jury in her opening statement on Jan. 12. 'They did not know if it worked. They did not know if it was safe, and they marketed it to doctors anyway.' </blockquote><br /><strong>Interval Summary</strong><br /><br />We have presented eight cases in which  major US health care organizations settled cases involving allegations of financial gain under false pretenses. Nearly all involved US federal charges, and the others included alleged misbehavior that affected a federal program or that now would be illegal under federal law. All the cases were resolved with fines over $1 million. However, while these fines may seem big to most people, they were trivial compared to the revenues of the organizations. None of the settlements involved any penalties to actual people who authorized, directed, or implemented the misbehavior. No individuals at any of the involved organizations admitted any mistakes, much less wrong doing.<br /><br />While the volume of such settlements indicates the prevalence of misbehavior by large health care organizations, it is not clear that their results, which amount to slaps on corporate wrists, have any deterrent effect.<br /><br />In comparison, see what happens when little people obtain money from the government under false pretenses. I found a convenience sample of such cases reported in the last month through a Google search.<br /><br /><strong>Vasquez</strong><br /><br />On January 9, the San Francisco Chronicle <a href="http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2012/01/09/state/n193158S68.DTL">reported</a>:<br /><blockquote>A Los Angeles woman who <em>pleaded guilty to committing $6.2 million in Medicare fraud has been sentenced to <strong>5 years in prison</strong></em>.<br /><br />Federal Health and Human Services officials say 47-year-old Carolyn Ann Vasquez has also been ordered to <em>pay $6.2 million in restitution</em>.<br /><br />Vasquez <em>admitted to conspiring with others to use a series of fraudulent Los Angeles-area medical clinics to defraud the federal health care insurance program for people over age 65 and the disabled.</em><br /><br />Between 2007 and 2008, Vasquez obtained a physician's personal information and Medicare provider number and used it to print prescription pads.<br /><br />She then had a physician's assistant, David Garrison, write fraudulent prescriptions for pricey medical equipment.</blockquote><br /><strong>Curtis</strong><br /><br />On January 7, 2012, the [Jacksonville] Florida Times-Union <a href="http://jacksonville.com/news/georgia/2012-01-07/story/leader-medicare-fraud-scheme-gets-3-years-6-months-prison">reported</a>:<br /><blockquote>A federal judge <em>sentenced the would-be owner of a Brunswick prosthetic business to <strong>three years and six months in prison</strong> for his organization and leadership of a scheme that defrauded Medicare of more than $250,000.</em></blockquote><br />Also,<br /><blockquote>In addition to prison, Wood sentenced <em>Curtis to repay $254,750.94</em> to Health and Human Services and serve three years’ probation. She dismissed eight other counts as part of his plea agreement.</blockquote><br />In stark contrast to the stories above about cases of fraud involving large health care organizations:<br /><blockquote>Samuel Curtis III, who had submitted false claims from Preferred Prosthetics and Orthotics in Brunswick and Team Orthotics and Prosthetics of Houston, had <em>pleaded guilty in July to conspiring to commit health care fraud.</em><br /><br /><em>Curtis, 38, apologized and asked U.S. District Judge Lisa Godbey Wood for leniency</em> during his sentencing hearing Friday.</blockquote><br /><strong>Popov</strong><br /><br />On January 12, 2012, the Sacramento Bee <a href="http://blogs.sacbee.com/crime/archives/2012/01/doctor-posing-as-sacramento-clinic-owner-sentenced-in-scam.html">reported</a>:<br /><blockquote>A Los Angeles physician who assumed the role as co-owner of a Sacramento medical clinic has been sentenced to federal prison for his participation in a Medicare fraud scam.<br /><br />Alexander Popov, 47, was <em>sentenced today by U.S. District Judge Morrison C.England Jr. to <strong>eight years and one month in prison</strong> for committing health care fraud and conspiring to commit health care fraud, </em>according to a federal Department of Justice news release. He was found guilty by a jury in July.<br /><br />In sentencing, Judge England found that Popov was responsible for more than a million dollars in fraudulent billings submitted to Medicare and more than $600,000 in payments made on false claims.<br /><br />Evidence at trial showed that Popov gave false testimony and manufactured evidence at trial, amounting to an obstruction of justice, officials said.</blockquote><br />Also,<br /><blockquote><em>Vardges Egiazarian previously pleaded guilty in the case and is serving <strong>78 months in prison</strong></em><strong>. </strong></blockquote><br /><strong>Applebaum</strong><br /><br />On January 20, 2012, Medscape <a href="http://www.medscape.com/viewarticle/757251">reported</a>:<br /><blockquote>A former Idaho psychiatrist was ordered to <em>pay nearly $95,000 in a legal judgment</em> this week, <em>adding to a <strong>prison sentence of up to 5 years</strong></em>, which he received in November for obstruction and falsifying records relating to Medicaid fraud.<br /><br />The judgment, obtained by the US Attorney's Office against Michael Applebaum, MD, of Nampa, Idaho, involved a civil lawsuit in which he was <em>accused of submitting false Medicare and Medicaid claims for undocumented and ineligible services</em> from 2004 through 2009.<br /><br />Prosecutors claimed Dr. Applebaum failed to properly document services for approximately 502 claims, including falsifying service dates on 49 claims to make them appear eligible for reimbursement under Medicaid's rule of submitting claims within 12 months of the date of service.</blockquote><br /><strong>Summary</strong><br /><br />As we noted above, if a large organization, such as a hospital system, pharmaceutical company, or health insurance company is accused of fraud against the government, the outcome is likely to be a large fine that is nonetheless small compared with the organization's revenue, no admission of guilt or responsibility, and no penalties for any individuals who authorized, directed or implemented the misbehavior. However, if an individual or small business is accused of such fraud, the results are likely to include fines sufficient to bankrupt either, admissions of guilt, and years of jail time.<br /><br />Yet such actions by large organizations are likely to be more harmful to individuals and society than those of individuals or small businesses.<br /><br />This seems like a glaring, stark example of unequal justice in health care. If an individual does something bad in a health care context, the punishment is likely to be severe and life altering. If an individual who is a leader of a large health care organization does something equally bad, he or she is likely to receive no punishment at all.<br /><br />This is an example that ought to unite the left and the right, liberals and libertarians in outrage. Liberals are supposed to believe in the rights of the individual and economic justice. Libertarians are supposed to believe in economic freedom and the economic rights of the individual. In this example, the government and large corporations seem to have gotten together to let corporate leaders play by different rules than individuals. Corporate leaders seem to be above the law, the same law that can ruin individuals who violate it. <br /><br />If we really want to reform health care, we need to make sure that its rules apply equally to all individuals, whether humble or rich, whether they are individual professionals of corporate CEOs. As long as the rich and powerful can play by different rules, we only fuel cynicism and anger. Down that road lies disaster.

Unequal Justice Under Law - Comparing Cases of Alleged Misbehavior by Large Health Care Organizations and Individuals

How the wealthy and powerful have become able to play by a different set of rules than those affecting ordinary people may be the defining issue of our time.  Yesterday, President Obama's State of the…

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At the End of Summer, Everybody, Well, Nearly Everybody (Allergan, CVS Caremark, Stryker, WellStar) Settles

Many US health care organizations announced legal settlements as the dog days of summer drew to a close.  The hit parade included, in order of dollar amount:<br /><br /><strong>Stryker Corp</strong><br /><br />As reported <a href="http://www.bloomberg.com/news/2010-08-26/stryker-to-pay-1-35-million-to-settle-massachusetts-marketing-claims.html">by Bloomberg News</a>:<br /><br /><blockquote>Sryker Corp., a maker of artificial hips and knees, will pay <em>$1.35 million to settle claims it marketed items without regulatory approval and misled health care providers about the use of its products,</em> the Massachusetts attorney general said.<br /><br />Stryker’s biotech unit <em>engaged in unfair and deceptive trade practices that boosted sales of products used to strengthen and promote growth of bones, Massachusetts said</em> in a filing in state court in Boston.<br /><br /><em>'Stryker Biotech subverted review procedures designed to safeguard patients and promoted uses of its products that were not shown to be safe or effective</em>,' Martha Coakley, the attorney general, said today in a statement. </blockquote><br />Note that this appeared to be one of those rare cases in which allegations were made against individuals, as well as the company as a whole:<br /><blockquote>In October 2009, the biotech unit and former president Mark Philip were indicted by a federal grand jury for misleading the U.S. Food and Drug Administration about the use of the products. Philip, who was president from 2004 to 2008, was accused along with three sales managers of promoting therapeutics in a manner contrary to their FDA-approved use. They pleaded not guilty, according to the case docket. </blockquote>However, the case has not yet gone to trial.<br /><br />As usual, the company denied anybody did anything wrong:<br /><blockquote>As part of the Massachusetts settlement, Kalamazoo, Michigan-based <em>Stryker didn’t admit any liability,</em> the company said in an e-mailed statement. </blockquote><br />As usual, the penalties were trivial compared to the company's revenues:<br /><blockquote>Under the agreement, Stryker will pay <em>$325,000 in civil penalties, $875,000 to fund efforts to combat unlawful marketing and other programs to benefit health-care consumers, and $150,000 to cover attorney fees and investigative costs. The company reported 2009 revenue of $6.72 billion. </em></blockquote><br /><strong>CVS Caremark</strong><br /><br />As reported very briefly by the Associated Press <a href="http://www.boston.com/business/articles/2010/08/31/cvs_settles_pricing_case_for_265m">via the Boston Globe</a>, <br /><blockquote>CVS Caremark Corp. has agreed to pay $2.65 million under a settlement with the Massachusetts attorney general’s office, which <em>accused the pharmacy chain of overcharging public entities for prescription drugs.</em><br /><br />CVS will pay Massachusetts and about 200 cities and towns in the state that were allegedly overcharged under the workers compensation insurance system, Attorney General Martha Coakley said yesterday in a prepared statement.</blockquote><br /><strong>WellStar</strong><br /><br />This story was published <a href="http://www.ajc.com/health/wellstar-agrees-to-2-602802.html">in the Atlanta Journal-Constitution</a>:<br /><blockquote>WellStar Health System has agreed to <em>pay $2.7 million to settle allegations that it improperly billed the state Medicaid system,</em> Attorney General Thurbert Baker announced Monday.<br /><br />The agreement came after a six-month state investigation which found that WellStar mishandled claims involving patients covered by both Medicare and Medicaid. <em>WellStar filed claims that did not properly reflect payments it received from Medicare, allowing it to receive excessive payments from Medicaid.</em></blockquote><br />As expected, the hospital system denied it was anything more than a soft-ware glitch:<br /><blockquote>The allegations related to patients served at WellStar’s five hospitals: Cobb, Douglas, Kennestone, Windy Hill and Paulding.<br /><br />'Upon learning from the state of this potential billing issue, WellStar immediately conducted an internal investigation and fully cooperated with the state,' WellStar said in a statement.<br /><br />The hospital system <em>said a flaw in claims processing software caused the problem. 'The State specifically found no intent to defraud,' WellStar said</em>.<br /><br />WellStar admitted no wrongdoing as part of the settlement , according to the attorney general’s office. </blockquote>It is not entirely clear whether any individuals suffered any negative consequences because of this soft-ware "flaw" which went undiscovered until the state investigated. In <a href="http://www.ajc.com/news/cobb/wellstar-ceo-fired-by-606194.html">another AJC story</a>, which did not directly refer to the one above, published four days later:<br /><blockquote><em>WellStar Health System’s president and CEO Gregory Simone was fired</em> by the system’s board on Thursday.<br /><br />Board chairman and Marietta attorney Randall Bentley said the decision was a personnel matter and provided no information on the reason for Simone’s termination, which is effective immediately.<br /><br />Earlier this week <em>Bonnie Wilson, WellStar’s executive vice president and general counsel, received notice that her contract would not be renewed</em>.<br /><br />Bentley did not say if the terminations were related.</blockquote><br />Then, in <a href="http://www.ajc.com/news/cobb/questions-surround-wellstar-dismissals-606572.html">a third story</a>, the hospital denied any relationship among the firings and the legal settlement:<br /><blockquote>WellStar Health System's board this week fired the Gregory Simone, president and chief executive of the non-profit operator of five north metro hospitals and dozens of other facilities.<br /><br />Board chairman Randall Bentley, a Marietta attorney, <em>gave no explanation other than to say Simone's termination was a personnel matter</em>. It was announced Thursday and was effective immediately.<br /><br />His firing follows the Aug. 31 departure of Bonnie Wilson, WellStar’s executive vice president and general counsel. She was told her contract would not be renewed, according to WellStar.<br /><br /><em>Bentley did not say if the Simone's firing and Wilson's departure were related</em>.<br /><br /><em>WellStar and Bentley said Simone's firing was not related to a six-month Medicare and Medicaid investigation</em>. In August, the hospital system agreed to pay $2.7 million to settle allegations that it improperly billed the state Medicaid system, resulting in excessive payments from Medicaid.</blockquote><br />[sarcasm on] Of course, it was just a soft-ware "flaw," so no one was responsible, just the soft-ware. [sarcasm off]<br /><br /><strong>Allergan</strong><br /><br />As reported again <a href="http://www.bloomberg.com/news/2010-09-01/allergan-will-pay-600-million-plead-guilty-to-misdemeanor-in-botox-probe.html">by Bloomberg</a>:<br /><br /><blockquote>Allergan Inc., maker of the wrinkle smoother Botox, <em>agreed to pay $600 million and plead guilty to a misdemeanor in settling a U.S. investigation of its marketing practices</em>.<br /><br />Allergan will pay $375 million to the government as part of a 'misbranding' charge that the marketing of Botox from 2000 to 2005 led to use in treating headache, pain, muscle stiffness and juvenile cerebral palsy, purposes for which the Food and Drug Administration during that time hadn’t approved marketing. Allergan will also pay $225 million to resolve civil claims from the Justice Department, the company said today in a statement. </blockquote><br />Once again, although the amount this time appears large, it is small compared to the revenues produced by the product in question. The total fines amount to about $100 million per year of sales, but:<br /><blockquote>Botox, [is] Allergan’s top product with $1.3 billion in annual sales,.... </blockquote><br />Once again, the company denied it did anything all that bad, (even though it did plead guilty to a crime), reported <a href="http://online.wsj.com/article/SB10001424052748703882304575465371767239834.html">by the Wall Street Journal</a>,<br /><blockquote>The company, meanwhile, said the settlement resolves the investigation while avoiding substantial litigation costs and other risks associated with a government enforcement action. <br /><br />Allergan said <em>its plea to the single misdemeanor 'misbranding' charge didn't involve 'false or deceptive conduct.</em>' Specifically, the Botox marketing from 2000 to 2005 resulted in intended Botox use for four unapproved conditions, Allergan said. The drug didn't have directions for these uses, which means it was misbranded, the company said. </blockquote><br />Got that? On the other hand,<br /><blockquote><em>Prosecutors alleged Allergan engaged in tactics to promote the drug for unapproved uses, including paying kickbacks to doctors</em>. For example, the government charged that in 2005, Allergan hosted about 100 doctors at an invitation-only program at its corporate headquarters and a Newport Beach, Calif., resort while paying them $1,500 'to listen to off-label marketing presentations.' </blockquote><br />I did not see anything in any news article that suggested any individual at Allergan would suffer any negative consequences as part of this settlement.<br /><br /><strong>Summary</strong><br /><br />So, the parade of<a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements"> legal settlements</a> marches on.  We have now documented a very large number of heretofore respectable health care organizations who have made legal settlements of all sorts of charges of wrong-doing.  As we have repeatedly noted, these settlements have certain characteristics.  The amount of money involved, although it may seem big to those paid less than CEOs, is usually much smaller than the amount of money that could be made by the bad behavior.  The settlement is usually paid by the organization as a whole, and so its effect may be diffused among the employees, the patients or clients, and the stock-holders, if any.  The settlement rarely involves any negative consequences for those who might have authorized, directed, or implemented the bad behavior.  Rarely is the settlement widely reported, and rarely does the organization involved seem to suffer any stain on its reputation.<br /><br />So is it any wonder that the bad behavior that leads to such settlements continues?  Is it any wonder that health care organizational leaders now just seem to think of such settlements as a (relatively negligible) cost of doing business?<br /><br />Inquiring minds may want to know how this state of affairs came to be.  Why are leaders of health care organizations (and other large organizations) able to behave with such relative impunity?  The answer may have to wait for more historical inquiry (although I recently saw what might be a clue, so stay tuned.)  <br /><br />My refrain has been: 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.

At the End of Summer, Everybody, Well, Nearly Everybody (Allergan, CVS Caremark, Stryker, WellStar) Settles

Many US health care organizations announced legal settlements as the dog days of summer drew to a close.  The hit parade included, in order of dollar amount:Stryker CorpAs reported by Bloomberg News:S…

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Three Troubled Device Companies: ArthroCare, Stryker, AM2PAT

It was quite a week in the medical device business.<br /><br /><strong>Arthrocare</strong><br /><br />Last week we discussed the shenanigans at <a href="http://www.arthrocare.com/">ArthroCare</a> Corporation <a href="http://hcrenewal.blogspot.com/2009/02/another-troubled-device-company.html">here</a>. Since then, more information has come out about in the Austin Business Journal <a href="http://www.bizjournals.com/austin/stories/2009/02/16/daily26.html">provided more information </a>about these improper practices:<br /><br /><blockquote><br />While the internal review, being conducted with the assistance of outside counsel Latham & Watkins LLP, is not yet complete, the ArthroCare’s audit committee has reviewed evidence that indicates that the company’s spine unit engaged in and may have caused others to engage in improper practices in certain instances by:<br /><br />* <em>seeking separate reimbursement from insurers for company products in connection with procedures which were contractually reimbursed on a global basis</em>;<br />* <em>making inaccurate statements in claims submitted</em> to insurers regarding the place where particular procedures were performed;<br />* providing physicians and insurers with <em>descriptions of company technologies which had the effect of circumventing payor policies that did not cover such technologies</em>;<br />* <em>recommending and advocating to physicians the use of a Current Procedural Terminology code to identify its coblation nucleoplasty technology that was not approved by the American Medical Association and may have not properly described the procedure</em> that was performed.<br /><br />These improper practices identified so far may have occurred since at least 2006.<br /><br />Investigators were informed that certain sales and marketing personnel within the spine unit <em>provided physicians and their billing staff with merchandise and administrative services at no charge potentially in exchange for their utilization of the company’s products</em>. The audit committee has determined that company personnel at all levels lacked adequate health care compliance training and that company billing personnel lacked adequate training and supervision in insurance reimbursement requirements. In addition to considering and implementing remediation efforts, the committee is undertaking a review of such practices in other business units.<br /></blockquote><br /><br /><strong>Stryker </strong><br /><br />Meanwhile, the New York Times <a href="http://www.nytimes.com/2009/02/20/business/20bone.html">reported</a> about <a href="http://www.stryker.com/en-us/index.htm">Stryker</a>:<br /><br /><blockquote><br />A Justice Department inquiry into Stryker’s marketing of human bone growth products has resulted in <em>guilty pleas by former company sales representatives</em>.<br /><br />One former sales official pleaded guilty two weeks ago, and another one did in November, court documents show.<br /><br />Stryker, a leading maker of medical devices, and the United States attorney’s office in Boston, which is conducting the inquiry, declined to comment. A spokeswoman for the attorney’s office said the investigation was continuing.<br /><br />The inquiry, which began last year, involves several issues, according to court papers and Stryker filings with the Securities and Exchange Commission. <em>The questions include whether Stryker abused a federal exemption that authorized it to sell only limited quantities of its bone growth products for 'humanitarian' reasons, according to the documents.<br /></em><br /><em>The two former sales officials pleaded guilty to charges that they had promoted off-label use of the products even though they knew that such use had earlier caused problems in some patients</em>.<br /><br />The products in question are used by surgeons to aid the growth of bones that fail to heal properly.<br /></blockquote><br /><br />This case is not the only one raising ethical questions about Stryker's management.<br /><blockquote><br />The inquiry poses new complications for Stryker, which is <em>already operating under federal oversight as a result of an earlier Justice Department investigation of kickbacks paid by makers of artificial hips and knees to doctors</em>.<br /></blockquote><br /><br />We posted about this previous issue, first <a href="http://hcrenewal.blogspot.com/2007/10/stryker-biomet-depuy-orthopedics-zimmer.html">here</a>, most recently <a href="http://hcrenewal.blogspot.com/2008/06/more-multi-million-dollar-orthopods.html">here</a>.<br /><br /><strong>AM2PAT</strong><br /><br />Last, but most assuredly not least, was a story, (<a href="http://www.newsday.com/services/newspaper/printedition/wednesday/health/ny-hssyri256048602feb25,0,1308141.story">here</a> reported by Newsday) about AM2PAT:<br /><br /><blockquote><br />Federal authorities are <em>hunting the mastermind</em> behind a <em>'horrific case' in which bacteria-laden syringes shipped from an Angier, N.C., plant sickened hundreds of people and killed five.<br /></em><br /><em>Two men pleaded guilty Monday in U.S. District Court in Raleigh for their roles in ignoring sterility standards at the former AM2PAT Inc. plant</em>. The court heard of conditions at the plant more consistent with a Third World textile factory than a pharmaceutical facility.<br /><br />The men - plant manager Aniruddha Patel and quality control director Ravindra Kumar Sharma - were each sentenced to 4 1/2 years in prison for <em>fraud and allowing tainted drugs into the marketplace</em>. They were rewarded with a relatively light sentence in exchange for information about chief executive Dushyant Patel, whose company sold $6.9 million worth of heparin and saline syringes in 2006-07 that did not undergo proper sterility testing.<br /><br />Dushyant Patel, indicted late last week on 10 charges that include fraud and selling adulterated medical devices, has not been arrested. Authorities think he may have <em>fled to his homeland</em> in India and are seeking help from Interpol.<br /><br />Syringes from AM2PAT were pulled from the market early last year, and the Angier plant shuttered after an outbreak of Serratia, a bacterial infection, hit patients in Colorado, Texas, Illinois, Florida and other states.<br /><br />On Monday, prosecutors laid out a scheme before Judge Terrence Boyle in which the <em>plant's operators routinely failed to follow sterility rules to keep production running faster</em>. The drugs were not produced at the plant, but were loaded into syringes there, then shipped.<br /><br />The plant was subject to U.S. Food and Drug Administration requirements for its production. The syringes were supposed to be loaded in a 'clean room,' with employees in caps and gowns and air carefully ventilated to keep germs from spreading.<br /><br />A photograph entered into evidence Monday shows a 'clean room' refreshed with a common window fan held together with duct tape. In another photo, women work on an assembly line under lamps, surrounded by what look like green plastic recycling bins.<br /><br />Once the syringes were loaded with drugs, each batch was required to be held for two weeks, while employees tested for bacteria and other contaminants. If bacteria were cultured from the medicines, the whole batch should have been held back. That wasn't happening, court documents show.<br /><br /><em>Batches of syringes went straight from the production line into the marketplace, with Sharma falsifying manufacturing dates to make it appear to regulators that requisite quality tests had been done</em>. And when tests were done, <em>results were ignored.<br /></em></blockquote><br /><br />Note first that none of these cases was isolated, in that each of these companies had questions raised about management behavior before (at Arthrocare, about accounting; at Stryker, about marketing and payments to doctors; at AM2PAT, raised by health care professionals about quality of its products.)<br /><br />In the US, we are undergoing yet another great debate about health care reform. Two big issues are the high cost and questionable quality of our health care. All three of these cases involved behavior that could have raised costs. Two may have had indirect effects on quality. One may have directly caused patient death and disease.<br /><br />Yet, even after executive arrogance, misbehavior, self-interest, and corruption have lead to the global financial meltdown, we are still not really addressing such behavior as a cause of our global health care crisis.

Three Troubled Device Companies: ArthroCare, Stryker, AM2PAT

It was quite a week in the medical device business.ArthrocareLast week we discussed the shenanigans at ArthroCare Corporation here. Since then, more information has come out about in the Austin Busine…

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