healthy4u: antitrust

The Pervasiveness of Health Care Corruption as Shown by Another Roundup of Legal Settlements

Legal settlements are one way to document unethical and even corrupt behavior by large health care organizations, even if they may not deter bad behavior in the future.  It is time for another roundup of settlements by large pharmaceutical and device companies, presented in alphabetical order Abbott Laboratories This one goes back to late December, 2013.  As <a href="http://www.chattanoogan.com/2013/12/27/266328/Abbott-Laboratories-To-Pay-5.475.aspx">described</a> in the Chattanoogan (from Tennessee): <blockquote class="tr_bq">Abbott Laboratories, a global healthcare company, has agreed to pay $5.475 million to settle alleged violations of the False Claims Act, and other federal laws and regulations in connection with the operation of its medical device business which manufactures, markets and supplies carotid, biliary, and peripheral vascular products.</blockquote> The US Justice Department accused Abbott of kickbacks to physicians, <blockquote class="tr_bq"> As alleged in the settlement agreement, between 2005 and 2010, through its employees and a third party continuing medical education providers, Abbott offered physicians paid teaching and training assignments, consulting arrangements, speaking engagements, and/or sponsorship grants for physician conferences, for the purpose of inducing physicians to arrange for or recommend that the hospitals with which they were affiliated purchase or order Abbott’s carotid, biliary and peripheral vascular products.</blockquote> Note in particular that the kickbacks were disguised as payments for consulting or speaking.  As is usual in such cases, no individual seems to have paid any penalty or been subject to any punishment.  Because this was a legal settlement, the company did not admit wrongdoing. Abbott's previous issues are discussed <a href="http://hcrenewal.blogspot.com/search/label/Abbott">here</a>, including a <a href="http://hcrenewal.blogspot.com/2012/05/abbott-pleads-guilty-settles-for-16.html">$1.6 billion settlement in 2012</a>.  Baxter International This was <a href="http://www.modernhealthcare.com/article/20140421/INFO/304219992">reported</a> in April, 2014 by Modern Healthcare, <blockquote class="tr_bq"> Baxter International agreed to pay $64 million to settle a class-action lawsuit that alleged the Deerfield, Ill.-based company and some of its competitors colluded to raise prices of plasma-based therapies.</blockquote> Unlike the other cases above and below, this seemed to be a purely financial misadventure, although one that clearly increased health care costs, <blockquote class="tr_bq">Hospitals and drug distributors, saying they bought the plasma products at inflated prices, sued in 2009 Baxter; Victoria, Australia-based CSL; and the Plasma Protein Therapeutics Association, an Annapolis, Md.-based trade group.</blockquote> Once more, the company admitted no wrongdoing, and no individuals seemed to be subject to any negative consequences.   Baxter International's previous misadventures are <a href="http://hcrenewal.blogspot.com/search/label/Baxter">here</a>, including the <a href="http://hcrenewal.blogspot.com/2011/08/jama-article-begs-key-questions-about.html">striking case</a> of its marketing of contaminated and sometimes deadly heparin made from Chinese pigs.  Endo Health Solutions This one is from February, 2014, as<a href="http://www.bloomberg.com/news/2014-02-21/endo-to-pay-193-million-in-lidoderm-marketing-probe.html"> reported</a> by Bloomberg <blockquote class="tr_bq">Endo Health Solutions entered a deferred-prosecution agreement and will pay $193 million to settle whistle-blower claims that it marketed the shingles drug Lidoderm for unapproved purposes, the U.S. said. Endo will pay $20.8 million in forfeitures and $171.9 million in civil false claims settlements with the states and the U.S. government, the Justice Department said today in a statement. </blockquote> This one was all about marketing for uses not approved by the US Food an Drug Administration, <blockquote class="tr_bq">Between 2002 and 2006, Endo sales managers instructed some representatives on how to expand 'sales conversations' with doctors beyond the treatment of shingles-related pain, the U.S. said. Under the deferred-prosecution agreement, Endo admitted that it intended Lidoderm to be used for uses not approved by the U.S. Food and Drug Administration, the Justice Department said. </blockquote> Note that this case involves false claims, that is, fraud, because it is illegal to bill government programs for unapproved uses. Again, no individual suffered any consequences, and the company offered the usual kind of statement that admitted neither responsibility nor guilt, <blockquote class="tr_bq">'We are pleased to resolve this matter and are confident that we have robust programs in place to assist us in satisfying our legal and regulatory agreements,' Endo Chief Executive Officer Rajiv De Silva said in a statement.  </blockquote> One wonders, as usual, why a company would pay so much merely to avoid the legal expenses of a trial, unless of course the lawyers suspected the trail would not go well? Hospira This one was about hiding quality problems due to cost-cutting from investors, as<a href="http://www.reuters.com/article/2014/03/27/hospira-lawsuit-idUSL1N0MO2BS20140327"> reported</a> by Reuters in March, 2014.   <blockquote class="tr_bq">Hospira Inc has agreed to pay $60 million to resolve a class action lawsuit accusing the drug maker of misleading investors about quality control problems that undermined an initiative to improve the company's margins and operations.</blockquote> The details included, <blockquote class="tr_bq">As Hospira was promising to address issues raised by the U.S. Food and Drug Administration following inspections, the plaintiffs said the company was 'making the problems worse by gutting quality control efforts through cost cutting aimed at boosting short-term profitability.' The lawsuit said those cost-cutting moves stemmed from a March 2009 initiative called 'Project Fuel' intended to increase shareholder value by eliminating underperforming and duplicative units and reducing its global workforce. Plaintiffs contended the cuts in the budget and workforce hurt Hospira's quality control efforts, particularly at Rocky Mount, the company's largest facility. An FDA inspection in January 2010 of the Rocky Mount facility found a number of problems with the company's quality control and drug validation processes, the lawsuit said, and the agency issued a warning letter that April.</blockquote> Note that this involved quality control problems presumably in drug or device production, possibly leading to safety risks for patients.  Yet it was investors who brought the lawsuit. Note also that this seemed to be a clear case in which cost-cutting measures meant to improve short-term corporate revenue lead to problems that could have caused such risks.   One interesting feature of this case was that company executives were named as defendant (presumably again because it was investors, not patients or law-enforcement officials who initiated the suit.) <blockquote class="tr_bq">The lawsuit ... also named executives including Chief Executive Officer Michael Ball as defendants,...</blockquote> I cannot find any information about whether these executives were personally liable for any payments, however.    Pfizer This is yet another settlement involving the marketing of Neurontin, as <a href="http://www.bloomberg.com/news/2014-04-22/pfizer-agrees-to-pay-190-million-to-settle-neurontin-case-1-.html">reported</a> by Bloomberg in April, 2014, <blockquote class="tr_bq">Pfizer Inc the world’s biggest drugmaker, agreed to pay $190 million to end a lawsuit claiming it violated federal antitrust laws by delaying generic versions of its Neurontin epilepsy drug.  </blockquote><blockquote>Pfizer agreed to settle the class-action litigation pending in federal court in Newark, New Jersey, according to a filing today. U.S. District Judge Faith Hochberg must approve the accord, which would cover purchasers of Neurontin from December 2002 to August 2008. </blockquote> Note that this settlement, like many others, is of matter from a long time ago.  When it comes to bad behavior by big health care corporations, any form of justice is not swift. Note also that this is only the latest chapter in the long saga of Neurontin, for whose mis-marketing Pfizer has already shelled out a lot of money (see<a href="http://hcrenewal.blogspot.com/2006/08/stealth-marketing-of-neurontin.html"> this post</a> to start, and <a href="http://hcrenewal.blogspot.com/search/label/Neurontin">here</a> for the collection).  Pfizer has an amazing record of bad behavior on view <a href="http://hcrenewal.blogspot.com/search/label/Pfizer">here</a>.  In fact, it has had a conviction as a Racketeering Influenced Corrupt Organization (RICO) on the basis of its previous marketing of Neurontin (look <a href="http://hcrenewal.blogspot.com/2013/12/blogscan-us-supreme-court-turns-down.html">here</a>). This particular bad behavior involved included, <blockquote class="tr_bq"> improperly listing certain patents with the U.S. Food and Drug Administration, engaging in illegal promotion and sales of Neurontin for unapproved uses, filing and maintaining sham litigations with respect to certain patents, and making misrepresentations to the patent courts,</blockquote> Note that while much of this was legalistic, illegal marketing was in there too. Once more, I found nothing about any negative consequences for individuals who authorized, directed, or implemented questionable actions. Summary So it is all drearily familiar.  Big health care organizations seem to repeatedly engage in deceptive marketing, providing kickbacks to health professionals, fraudulent billing, anti-competitive practices, etc, etc.  These practices increase health care costs, and may risk patients' health and safety.  Many of these practices are corrupt, at least according to the Transparency International definition of corruption, "abuse of entrusted power for private gain."  Drug and device companies, for example, are entrusted to provide safe and effective products.  Deceptive marketing, kickbacks to health professionals to encourage overuse, and cutting quality control to cut costs all seem to be examples of abuse of this entrusted power.  The private gain obviously goes to any managers and executives who score bigger bonuses due to the increases in revenue that result.  Yet there are very few examples of any individuals who gained ever being subject to any negative consequences.  Given that lack, and the lack of any requirement for corporate leaders to admit responsibility, much less guilt, is it any surprise that these practices go on and on.  The failure of current limp legal efforts against such corruption is evident by how many corporations have become ethical repeat offenders.   (Note that in fact, as noted above, one of the pharmaceutical companies above actually was convicted of being a RICO, racketeering influenced corrupt organization, yet that conviction seemed to have no real negative consequences for the organization or any of the people involved.) As I have said again and again, pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction. So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue.

The Pervasiveness of Health Care Corruption as Shown by Another Roundup of Legal Settlements

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30 Apr 2014

Who Knew? ... Judge Finds that Hospital Takeover of Medical Practices Raised Prices

A story that caused only a few ripples in the media in late January, 2014, corroborates concerns about the increasing concentration of power in health care, and suggests new skepticism about the continuing transition of physicians from independent professionals to corporate employees. The Judge Quashes a Hospital System's Acquisition of Physicians' Practices The original story was carried, albeit briefly, in some national business news sources, e.g., the <a href="http://online.wsj.com/news/articles/SB10001424052702304856504579340733626090534">Wall Street Journal</a> and Bloomberg news.   In summary, according to the WSJ, <blockquote class="tr_bq">A federal judge ruled Friday that an Idaho hospital system must unwind its acquisition of the state's largest independent doctor group, a decision that could have significant implications as health-care providers nationwide increasingly seek to join forces.</blockquote> In particular, <blockquote class="tr_bq"> At issue was St. Luke's Health System's 2012 deal for the 40-doctor Saltzer Medical Group. The FTC argued the merger would reduce competition among primary-care physicians and give St. Luke's extra muscle to extract higher payments from health plans, which, in turn, could raise insurance prices for consumers.</blockquote> The Judge seemed to agree, <blockquote class="tr_bq">U.S. District Judge B. Lynn Winmill ruled the deal anticompetitive, but offered comments that reflected current tensions in the debate over industry consolidation. Judge Winmill said he was 'convinced' the deal would have improved the delivery of health care in the region. But he ruled that 'there are other ways to achieve the same effect that do not run afoul of the antitrust laws and do not run such a risk of increased costs.' The judge said he would order St. Luke's to fully divest Saltzer's physicians and assets. The court made only a summary of the ruling public, sealing the full decision temporarily so confidential business information can be redacted. </blockquote> Furthermore, the Bloomberg <a href="http://www.businessweek.com/news/2014-01-24/hospital-antitrust-case-won-by-u-dot-s-dot-over-doctor-group-merger-1">coverage</a> raised a related issue, <blockquote class="tr_bq">David Balto, an antitrust lawyer in Washington who has represented consumer groups, said the ruling could be read as conflicting with the Obama administration’s health care overhaul, which advocates reducing fragmentation of medical care to improve quality. ' This is going to raise really difficult questions about the kind of integration that’s envisioned by the Affordable Care Act,' he said. Winmill didn’t specify alternate means of improving patient outcomes and released only a summary of his ruling pending redaction of proprietary information in the full opinion. </blockquote> Note several aspects to this coverage.  It implied that the deal was done solely for high-minded purposes, improving "health care delivery," and in response to the need for "integration" arising from the health care reform produced by the Affordable Care Act; that health care reform might be in jeopardy from this ruling in the absence of the judge's new prescription for "improving patient outcomes"; and that details of the ruling and the justification for it were kept secret as "confidential business information."  So this initial coverage was difficult to interpret, raising more questions than it answered.  If the practice acquisition was made with such lofty goals, why couldn't it be legally saved?  How could health care reform possibly continue without Judge Winmill saying what should be done?  That last question was sarcastic, maybe the real question is why did anyone think it was the judge's job to explain how to improve health outcomes?  Finally, why was so much of the ruling and the details underlying it kept secret. In a few days, local journalists came up with a better idea of what was really going on. It Was All About the Money The same day that the Wall Street Journal and Bloomberg covered the case, the Idaho Statesman <a href="http://www.idahostatesman.com/2014/01/24/2989492/federal-judge-says-st-lukes-buyout.html">reported</a> more details about the judge's ruling that seem to suggest different interpretations, <blockquote class="tr_bq">Winmill said in his ruling that while it may not have been the goal of the acquisition, it 'appears highly likely that health care costs will rise as the combined entity obtains a dominant market position that will enable it to (1) negotiate higher reimbursement rates from health insurance plans that will be passed on to the consumer, and (2) raise rates for ancillary services (like x-rays) to the higher hospital-billing rates.'</blockquote> Then only a week later, the Statesman <a href="http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html">covered </a>the unveiling of some previously hidden portions of the ruling, first giving the background, <blockquote class="tr_bq"> As St. Luke’s Health System aggressively added hospitals and doctors over the past several years, it commanded more money from Idaho’s largest insurer, and it planned to raise prices in order to give a newly acquired group of doctors a 30 percent raise, according to <a href="http://media.idahostatesman.com/smedia/2014/01/29/09/31/1fjNtG.So.36.pdf" target="_blank">newly released court documents</a>. Unsealed Tuesday, the documents explain why U.S. District Judge B. Lynn Winmill <a href="http://www.idahostatesman.com/2014/01/25/2990546/judge-st-lukes-deal-not-legal.html" target="_blank">last week ordered St. Luke’s to nullify</a> its year-old merger with Nampa’s Saltzer Medical Group. Lawyers for St. Luke’s and Blue Cross of Idaho asked the judge not to reveal some facts in the documents, arguing that they contained trade secrets. But Winmill <a href="http://media.idahostatesman.com/smedia/2014/01/29/09/35/1dSNod.So.36.pdf" target="_blank">denied the requests</a>. 'The facts and figures sought to be redacted are crucial to the court’s analysis, and their removal would render the decision indecipherable,' Winmill said.</blockquote> Then it got to the nitty gritty,  Winmill said in his decision Tuesday to make his ruling public that when the trial started, he thought there were compelling reasons to keep parts of it veiled. But as it went on, those reasons seemed less compelling, he said. <div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy</div>Winmill immediately opened his entire decision.   St. Luke’s told Winmill that he should keep statements such as the following out of his public ruling: <ul><li> 'By 2012, St. Luke’s had three of the top five highest-paid hospitals, and its top hospital was receiving reimbursements 21 percent higher than the average Idaho hospital'</li><li> 'After the acquisition, if St. Luke’s were to bill for (routine services such as lab tests or X-rays) at the higher ‘hospital-based’ rates, (Blue Cross of Idaho) estimates that costs ... would increase by 30 to 35 percent.'</li><li> 'St. Luke’s own analysis projected that it could gain an extra $750,000 through hospital-based billing from Saltzer from commercial payers for lab work and $900,000 extra for diagnostic imaging.'</li><li> 'Consultant Peter LaFleur prepared an analysis at the direction of St. Luke’s showing how office/outpatient visits could be billed for higher amounts if the visit was hospital-based rather than Saltzer-based. The hospital-based billings were more than 60 percent higher.' </li></ul><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy</div> <div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.idahostatesman.com/2014/01/24/2989492/federal-judge-says-st-lukes-buyout.html#storylink=cpy</div> Although it certainly makes sense that the hospital system would want to know what the financial implications of buying the physicians' practices might be, the implication certainly seems to be that making a lot more money faster, in addition to any hopes for better patient outcomes, might be a goal of the merger. Trying to Keep Facts that Might Embarrass the Leaders out of Public View It is hard to understand why the hospital leadership was so fixated on keeping such information private if it were not to forestall any impression that this was all about the money.  As the Statesman reported, <blockquote class="tr_bq">Much of the four-week trial happened behind closed doors, and <a href="http://www.idahostatesman.com/2013/10/18/2821968/hundreds-of-documents-in-st-lukes.html" target="_blank">many documents were sealed or heavily redacted</a>. Lawyers for the hospitals — and for insurance companies and local employers — marked those parts of the trial private because they said they needed to protect trade secrets. St. Luke’s spokesman Ken Dey said some underlying data from Blue Cross of Idaho on which Winmill based his decision was sealed, and St. Luke’s lawyers could not access it. St. Luke’s is concerned that data might have led to some 'misleading conclusions,' he said. The <a href="http://www.idahostatesman.com/2013/11/13/2866737/statesman-other-news-groups-appeal.html" target="_blank">Statesman and several other Idaho news outlets filed a lawsuit</a> to pry open the court proceedings, and that lawsuit is now before the U.S. Ninth Circuit Court of Appeals.</blockquote> It is obviously a matter of opinion whether revealing more information might have lead to misleading, or to accurate conclusions.  Note that local journalists were driven to file their own lawsuits just to gain access to records from a trial held in a government run court, and that many of those records are still secret.   It will be interesting to see the results of these further proceedings, but it seems much more likely that the hospital system leaders tried so hard to keep everything secret to protect their own images as only caring about "patient outcomes," not money.  If these were trade secrets, given that the hospital system seems to have become dominant in the market, from what competitors were they hiding?  <div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"> Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy</div> Summary - Even More Reasons to be Concerned about Corporations Hiring Physicians to Take Care of Patients This case suggests some interesting conclusions which we hope are not misleading. Nationally or globally important health care issues are often still not well covered by national news media, much less the medical and health care literature.  Local journalists may doe a much better job, but local journalism is increasingly threatened. One reason important cases may be <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a> is that people involved with them fear public discussion of what may prove to be embarrassing, uncomfortable or worse to them.  When those people are rich and locally influential, the likelihood of the <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic effect</a> swallowing discussion increases. More specifically, we should be extremely skeptical of attempts at health care reform that add more bureaucracy to try to counter the effects of existing bureaucracy.  The main way current health care reform legislation seemed to address  the high costs and poor quality that we on Health Care Renewal contend may be due to concentration and abuse of power in health care is to further concentrate power without providing safeguards to prevent abuse. Finally, while this case was about whether hospitals (and other large organizations) hiring physicians to provide medical care may command higher prices, the real concern is whether physicians who now have to answer to corporate executives and organizational bureaucrats, that is who have become <a href="http://hcrenewal.blogspot.com/search/label/corporate%20physician">corporate physicians</a>,  may have to put their organizations' and their leaders' needs and wants ahead of their patients' and the public's health. True health care reform would be informed by the core value that physicians are supposed to endorse: the individual patient comes first.  Health care should not be mainly about increasing corporate revenues, or pleasing corporate executives or government bureaucrats.  However, big organizations and the in-group who personally profit from their operations want to keep such concerns anechoic. Instead, we all should start by appreciating the words of Judge Winmill and the information he has provided us. Roy M. Poses MD on Health Care Renewal

Who Knew? ... Judge Finds that Hospital Takeover of Medical Practices Raised Prices

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07 Feb 2014

The Camel's Aching Back - Johnson and Johnson and Novartis Fined 16 Million Euro for "Anticompetitive" Scheme to Delay Generic Fentanyl

Legal and regulatory actions unfavorable for giant pharmaceutical, biotechnology and device company Johnson and Johnson just keep coming.  We last discussed such a story only two weeks ago <a href="http://hcrenewal.blogspot.com/2013/12/how-many-straws-johnson-and-johnson.html">here</a>.  The Latest Case This latest story got only desultory US coverage from the wire services.  The most complete version is in the European Commission <a href="http://europa.eu/rapid/press-release_IP-13-1233_en.htm">press release</a>.  The basics were: <blockquote class="tr_bq">The European Commission has imposed fines of € 10 798 000 on the US pharmaceutical company Johnson & Johnson (J&J) and € 5 493 000 on Novartis of Switzerland. In July 2005, their respective Dutch subsidiaries concluded an anticompetitive agreement to delay the market entry of a cheaper generic version of the pain-killer fentanyl in the Netherlands, in breach of EU antitrust rules.</blockquote> In more detail, <blockquote class="tr_bq"><div class="A_Standard__35__20_Normal">J&J initially developed Fentanyl and has commercialised it in different formats since the 1960s. In 2005, J&J's protection on the fentanyl depot patch had expired in the Netherlands and Novartis' Dutch subsidiary, Sandoz, was on the verge of launching its generic fentanyl depot patch. It had already produced the necessary packaging material. </div><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal">However, in July 2005, instead of actually starting to sell the generic version, Sandoz concluded a so-called 'co-promotion agreement' with Janssen-Cilag, J&J's Dutch subsidiary. The agreement provided strong incentives for Sandoz not to enter the market. Indeed, the agreed monthly payments exceeded the profits that Sandoz expected to obtain from selling its generic product, for as long as there was no generic entry. Consequently, Sandoz did not offer its product on the market. The agreement was stopped in December 2006 when a third party was about to launch a generic fentanyl patch. </div><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal">The agreement therefore delayed the entry of a cheaper generic medicine for seventeen months and kept prices for fentanyl in the Netherlands artificially high - to the detriment of patients and taxpayers who finance the Dutch health system.</div></blockquote><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal">The obligatory colorful bits,</div><div class="A_Standard__35__20_Normal"> </div><blockquote class="tr_bq"><div class="A_Standard__35__20_Normal"> Why did J&J and Novartis conclude that agreement? According to internal documents Sandoz would abstain from entering the Dutch market in exchange for 'a part of [the] cake'. Instead of competing, Janssen-Cilag and Sandoz agreed on cooperation so as 'not to have a depot generic on the market and in that way to keep the high current price'. Janssen-Cilag did not consider any other existing potential partners for the so-called 'co-promotion agreement' but just focused on its close competitor Sandoz. Sandoz engaged in very limited or no actual co-promotion activities.</div></blockquote><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal">So, </div><div class="A_Standard__35__20_Normal"> </div><blockquote class="tr_bq"><div class="A_Standard__35__20_Normal"> The Commission therefore concluded that the object of this agreement was anticompetitive and infringed Article 101 of the Treaty on the functioning of the European Union (TFEU). </div></blockquote><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal">Johnson and Johnson's Ever Lengthening Unhappy Legal History There have been so many settlements made by, fines assessed against, and other adverse legal actions affecting Johnson and Johnson in the recent past that we must make a major revision of our summary of such cases (see same appended at the end of this post.)</div><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal">Yet despite all these actions, there is no hint that anything will change at the company.  After all, it is extremely profitable, and all the fines, while they individually appear large, are not a big fraction of the money it brings in.  And, as we have noted far too often, not one of these actions actually provides any negative consequences, much less severely punishes anyone at the company who authorized, directed, or implemented the bad behavior.  </div><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal">Instead, the leadership of the company continues to make itself very rich. As we wrote <a href="http://hcrenewal.blogspot.com/2013/07/johnson-and-johnson-settles-suit.html">here</a>,  Mr William Weldon, the outgoing CEO on whose watch most of the misbehavior resulting in the legal actions listed in the appendix below occurred, retired with a huge retirement package, after receiving extremely generous compensation prior to that.  The new CEO as of April, 2012,  Mr  Alex Gorsky, per<a href="http://www.investor.jnj.com/common/download/download.cfm?companyid=JNJ&fileid=644762&filekey=44D6D309-4972-4DAE-97C5-60157E6C6CD1&filename=JNJ_2013_Proxy_Statement.PDF"> the company's 2013 proxy statement</a>, already owns more than 190,000 Johnson and Johnson shares,  and received $10,977,109  total compensation in 2012.  Mr Weldon received over $29 million in total compensation just for 2012, the year in which he retired.  Other top executives received from over $3.5 million to over $8 million. One can only imagine how much top executives are making this year.</div><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal">So Johnson and Johnson, once admired for proclaiming in its famous <a href="http://www.jnj.com/about-jnj/jnj-credo">credo</a> to "put the needs and well-being of the people we serve first," now seems to put its own hired managers first.  It boggles the mind that despite this amazing record of bad behavior, the executives who presided over it still have jobs, have made no obvious changes in how they manage the company, and in fact continue to get ridiculously rich.  The <a href="http://www.investor.jnj.com/governance/board.cfm">board of directors</a>, which includes the <a href="http://www.investor.jnj.com/governance/biodetail.cfm?bioid=4341">President of the University of Michigan</a>, a <a href="http://www.investor.jnj.com/governance/biodetail.cfm?bioid=4341">Professor and Emeritus Chancellor and Vice President of Health Affairs at Emory</a>, a <a href="http://www.investor.jnj.com/governance/biodetail.cfm?bioid=5191">Professor at MIT</a>, a <a href="http://www.investor.jnj.com/governance/biodetail.cfm?bioid=44646">former FDA Commissioner, and Senior Fellow at the Brookings Institute</a>, and the <a href="http://www.investor.jnj.com/governance/biodetail.cfm?bioid=40456">Vice Chancellor of Health Sciences, Dean of the David Geffen School of Medicine at the University of California, Los Angeles (UCLA); Chief Executive Officer of the UCLA Health System</a>, who seemingly ought to care about the integrity of evidence, protecting patients from harm, and the need for simple honesty, have not obviously done anything about the apparent massive violation of the company credo that has made its managers wealth.   Other than the stockholder lawsuit discussed below, the supposed owners of the company seem to be mute.</div><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal">When will the straws break the camel's back?  In the absence of such a fracture, I repeat like an old, broken record... </div><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal">Many of largest and once proud health care organizations now have recent records of repeated, egregious ethical lapses. Not only have their leaders have nearly all avoided penalties, but they have become extremely rich while their companies have so misbehaved. These leaders seem to have become like nobility, able to extract money from lesser folk, while remaining entirely unaccountable for bad results of their reigns. We can see from this case that health care organizations' leadership's nobility overlaps with the supposed "royalty" of the leaders of big financial firms, none of whom have gone to jail after the global financial collapse, great recession, and ongoing international financial disaster (look <a href="http://hcrenewal.blogspot.com/2012/08/duchess-of-wellpoint-abdicates-likely.html">here</a>). The current fashion of punishing behavior within health care organization with fines and agreements to behave better in the future appears to be more law enforcement theatre than serious deterrent.  As Massachusetts Governor Deval Patrick exhorted his fellow Democrats, I exhort state, federal (and international, for that  matter) law enforcement to "<a href="http://www.washingtonpost.com/blogs/election-2012/wp/2012/09/04/patrick-it-is-time-for-democrats-to-grow-a-backbone/">grow a backbone</a>" and go after the people who were responsible for and most profited from the ongoing ethical debacle in health care. Again, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior.</div><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal">Appendix - Johnson and Johnson Recent Legal Record</div><div class="A_Standard__35__20_Normal"> </div><div class="A_Standard__35__20_Normal"></div><div class="A_Standard__35__20_Normal">2010 </div><div class="A_Standard__35__20_Normal">- Convictions in two different states in 2010 for misleading marketing of Risperdal - A guilty plea for misbranding Topamax in 2010 2011</div><div class="A_Standard__35__20_Normal">- Guilty pleas to bribery in Europe in 2011 by Johnson and Johnson's DePuy subsidiary - A guilty plea for marketing Risperdal for unapproved uses in 2011 (see <a href="http://hcrenewal.blogspot.com/2011/08/why-cultivate-weldons-confidence-ceo.html">this link</a> for all of the above) - A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post <a href="http://hcrenewal.blogspot.com/2011/09/johnson-and-johnson-pleads-guilty.html">here</a>) 2012 </div><div class="A_Standard__35__20_Normal">- In 2012, testimony in a trial of allegations of unethical marketing of the drug Risperdal (risperidone) by the Janssen subsidiary revealed a systemic, deceptive stealth marketing campaign that fostered suppression of research whose results were unfavorable to the company, ghostwriting, the use of key opinion leaders as marketers in the guise of academics and professionals, and intimidation of whistleblowers. After these revelations, the company abruptly settled the case (see post <a href="http://hcrenewal.blogspot.com/2012/02/texas-tmap-trials-as-illustration-of.html">here</a>). -  Also in 2012,  Johnson & Johnson was fined $1.1 billion by a judge in Arkansas for deceiving patients and physicians again about Risperdal (look <a href="http://hcrenewal.blogspot.com/2012/04/once-more-with-feeling-johnson-and.html">here</a>). -  Also in 2012, Johnson & Johnson announced it would pay $181 million to resolve claims of deceptive advertising again about Risperdal (see this <a href="http://hcrenewal.blogspot.com/2012/09/how-many-legal-settlements-does-it-take.html">post</a>). </div><div class="A_Standard__35__20_Normal">2013 </div><div class="A_Standard__35__20_Normal">-  In 2013, Johnson & Johnson settled case by shareholders alleging that management made misleading statements and withheld material information about manufacturing problems (see this <a href="http://hcrenewal.blogspot.com/2013/07/johnson-and-johnson-settles-suit.html">post</a>)</div><div class="A_Standard__35__20_Normal">-  In 2013, Johnson & Johnson Janssen subsidiary pleaded guilty to a charge of misbranding Risperdal, and settled for a total of $2.2 billion allegations that it promoted the drug for elderly demented patients and adolescents without an indication, and despite evidence of its harms (see this <a href="http://hcrenewal.blogspot.com/2013/11/another-and-huge-22-billion-settlement.html">post</a>).  </div><div class="A_Standard__35__20_Normal">-  In 2013, Johnson & Johnson DePuy subsidiary agreed to settle with multiple plaintiffs for $2.5 billion allegations that it sold defective mental-on-metal artificial hip, and hid evidence of its harms .</div><div class="A_Standard__35__20_Normal">- In 2013, Johnson & Johnsonn Janssen subsidiary was found by two juries to have concealed harms of its drug Topamax (see this <a href="http://hcrenewal.blogspot.com/2013/11/there-they-go-again-again-johnson-and.html">post</a> for this and above case).</div><div class="A_Standard__35__20_Normal">- In 2013, Johnson & Johnson Ethicon subsidiary's Advanced Surgical Products and two of its executives agreed to settle charges by US FDA that is sold mislabeled products used to sterilize equipment such as endoscopes (see this <a href="http://hcrenewal.blogspot.com/2013/12/how-many-straws-johnson-and-johnson.html">post</a>). </div><div class="A_Standard__35__20_Normal">- In 2013, Johnson & Johnson fined by European Commission for anticompetitive practices, that is, collusion with Novartis to delay marketing generic version of Fentanyl (in the current post above).  </div>

The Camel's Aching Back - Johnson and Johnson and Novartis Fined 16 Million Euro for "Anticompetitive" Scheme to Delay Generic Fentanyl

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17 Dec 2013

More Hospitals Settle, But Not for Much

In late February, there have been several notable legal settlements made by more or less prominent hospitals, discussed in rough order of size. United Regional Health Care System <a href="http://www.thecypresstimes.com/article/News/National_News/JUSTICE_DEPARTMENT_REACHES_SETTLEMENT_WITH_TEXAS_HOSPITAL_PROHIBITING_ANTICOMPETITIVE_CONTRACTS_WITH_HEALTH_INSURERS/41050">Per the Cypress Times</a>, <blockquote>The Department of Justice announced today that it has reached a settlement with United Regional Health Care System of Wichita Falls, Texas, that prohibits it from entering into contracts that improperly inhibit commercial health insurers from contracting with United Regional’s competitors. The department said that United Regional unlawfully used these contracts to maintain its monopoly for hospital services in violation of Section 2 of the Sherman Act, causing consumers to pay higher prices for health care services.</blockquote> Note that this appears to be the first settlement involving the Sherman Anti-Trust Act that included a hospital system, or any health care organization which we have discussed. As the Times article mentioned, <blockquote>This is the first case brought by the department since 1999 that challenges a monopolist with engaging in traditional anticompetitive unilateral conduct. </blockquote> Here is more detail about the alleged offenses: <blockquote>According to the complaint, United Regional is by far the largest hospital in Wichita Falls. Its share of general acute-care inpatient hospital services is approximately 90 percent, and its share of outpatient surgical services is more than 65 percent. It is the region’s only provider of certain essential services such as cardiac surgery, obstetrics and high-level trauma care. In Wichita Falls, United Regional’s average per-day rate for inpatient hospital services sold to commercial health insurers is about 70 percent higher than its closest competitor for the services that are offered by both hospitals. The department said that in order to maintain its monopoly in the provision of inpatient hospital and outpatient surgical services, United Regional systematically required most commercial health insurers to enter into contracts that effectively prohibited them from contracting with United Regional’s competitors. United Regional’s contracts required these insurers to pay significantly higher prices if they contracted with a nearby competing facility. Since United Regional is a must-have hospital for any insurer that wants to sell health insurance in the Wichita Falls area, and because the penalty for contracting with United Regional’s rivals was so significant, almost all insurers offering health insurance in Wichita Falls entered into exclusionary contracts with United Regional. As a result, competing hospitals and facilities could not obtain contracts with most insurers and were less able to compete, helping United Regional maintain its monopoly in the relevant markets and raising health-care costs to the detriment of consumers.</blockquote> As far as I could tell, however, for this apparently severe offense there will be no actual penalty. The settlement only appears to provide for a promised change in future behavior by the hospital: <blockquote>The proposed settlement, which if accepted by the court would be in effect for seven years, restores lost competition by prohibiting United Regional from using agreements with commercial health insurers that improperly inhibit insurers from contracting with United Regional’s competitors. In particular, United Regional is prohibited from conditioning the prices or discounts that it offers to commercial health insurers based on whether those insurers contract with other health-care providers and from inhibiting insurers from entering into agreements with United Regional’s rivals. United Regional is also prohibited from taking any retaliatory actions against an insurer that enters into an agreement with a rival provider.</blockquote> So if a hospital engages in actions that restrain competition and results in a de facto monopoly, all the hospital leaders must fear is that at some point it may have to change its monopolistic behavior, according to this settlement. Catholic Healthcare West <a href="http://www.bizjournals.com/sanjose/news/2011/02/22/catholic-healthcare-west-agrees-to.html">Per the San Jose Business Journal</a>, <blockquote>Catholic Healthcare West, parent company to local Mercy hospitals, has agreed to pay $9.1 million to settle allegations that seven of its hospitals submitted false Medicare claims, U.S. Attorney Benjamin Wagner announced late Friday.</blockquote> Here is more detail about the alleged offenses: <blockquote>The hospitals include Community Hospital of San Bernardino, St. Bernadine Medical Center in San Bernardino and St. Elizabeth Community Hospital in Red Bluff. The settlement also included allegations that O’Conner Hospital in San Jose, Seton Medical Center in Daly City and St. Joseph’s Hospital and Medical Center in Phoenix submitted inflated costs for their home health agencies and were overpaid. The agreement also resolves allegations that St. Joseph’s overstated how much was owed in disproportionate share funding for indigent patients. CHW no longer owns O’Conner Hospital or Seton Medical Center. The settlement resolves allegations that St. John’s Regional Medical Center in Oxnard was overpaid for treating a high percentage of patients with end-stage kidney disease for several years, including two when it was not eligible.</blockquote> Note that while the amount of the payment assessed appears substantial, it will be made a very long time after the alleged bad behavior occurred: <blockquote>All of the problems occurred in the 1990s. Federal investigators began looking into the matter in 2001, but it took years to compile evidence and reach a settlement. All of the hospitals had set aside money in a reserve account should they have to pay funds back to the government.</blockquote> So if a hospital submits false claims to the US government, hospital leaders need not fear paying anything back for more than 10 years, according to this settlement. By the way, this was not the first such settlement that Catholic Healthcare West has had to make: <blockquote>In 1998, a whistleblower at Woodland Healthcare disclosed instances of alleged fraud by two medical groups affiliated with local Mercy hospitals, Woodland Clinic Medical Group and Medical Clinic of Sacramento. Following an extensive investigation, former U.S. Attorney John Vincent announced a $10.25 million settlement in May 2001. The allegations included false claims to inflate reimbursement from Medicare, Medi-Cal and military health insurance programs.</blockquote> Massachusetts General Hospital (Partners Healthcare) <a href="http://www.boston.com/news/local/massachusetts/articles/2011/02/25/mgh_to_pay_1m_to_settle_privacy_case/">Per the Boston Globe</a>, <blockquote>Massachusetts General Hospital has agreed to pay the federal government $1 million to settle potential violations of patient privacy laws, which occurred when an employee commuting to work lost patient records on the T’s Red Line two years ago.</blockquote> Here is more detail about the alleged offenses: <blockquote>Health information for 192 patients in Mass General’s Infectious Disease Associates outpatient practice was lost in the incident, including that of patients with HIV/AIDS. The documents included a patient schedule containing names and patient medical record numbers, as well as billing forms containing the name, birth date, medical record number, health insurer and policy number, diagnosis, and name of providers for 66 of those patients.</blockquote> Note that Massachusetts General Hospital is not independent, but part of Partners Healthcare, which reported net patient service revenue of $1.5 billion in the most recent quarter, again <a href="http://www.boston.com/business/healthcare/articles/2011/02/12/partners_healthcare_reports_overall_first_quarter_gain/">per the Boston Globe</a>. So this settlement amounted to about 0.00167% of the system's patient revenue. So if a hospital engages in actions that violate the trust patients have that their information will be kept confidential, all hospital leaders have to fear is that their institution will eventually have to pay something much less than round-up error of their revenue, according to this settlement. Summary Again, the volume of participants in the ongoing <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">march of legal settlements</a> is a reminder of how pervasive bad behavior is in the US health care system. Remember that these settlements are in some sense the tip of the iceberg. They only indicate behavior that inspired legal action which was in turn was publicized. It is likely that for each behavior that eventually leads to a settlement, there are many behaviors that go unreported, or that cause no reaction. It is interesting that sorts of bad behavior that formerly caused no official reaction are now leading to settlements. As noted above, there had been no recent legal actions against <a href="http://hcrenewal.blogspot.com/search/label/concentration%20of%20power">concentration of power</a> in health care up to the United Regional Health Care System settlement. However, like many of the settlements we have previously noted, the latest crop seem to have little deterrent power. The United Regional Health Care System settlement seemingly involved no monetary penalties whatsoever, only a promise of not to do it again. The Catholic Healthcare West settlement's monetary penalties were so delayed, occurring over 10 years after the actions in question, their deterrent power is highly questionable. The Massachusetts General Hospital (really the Partners Healthcare) monetary penalty was infinitesimal compared to the size of the institution's budget. Furthermore, as in nearly every other case we have reported, no person who authorized, directed or implemented the actions in question had to pay any penalty, or suffer any negative consequence, or was even identified. So while there seems to be some increased interest in addressing some kinds of bad behavior, like monopolistic practices, that heretofore generated no official reactions, regulatory authorities still seem loathe to even slap the wrists of the people whose aggregated actions are making our health care so expensive, so inaccessible, and probably of such mediocre quality. Thus, in recent years, health care leaders, like leaders of financial service companies, seem to have impunity,  Up to now, they have been able to preside over all sorts of bad behaviors that help support their exorbitant remuneration without fearing any personal penalties.  As Charles Ferguson, the director of <a href="http://www.sonyclassics.com/insidejob/">Inside Job</a>, said when accepting his Academy Award last night, <a href="http://www.marketwatch.com/story/inside-job-director-slams-wall-street-2011-02-28?reflink=MW_news_stmp">per MarketWatch</a>, <blockquote>Forgive me, I must start by pointing out that three years after a horrific financial crisis caused by fraud, not a single financial executive has gone to jail — and that’s wrong</blockquote> After a slow-motion health care train wreck over the last 30 years, hardly any health care executives have even had to pay a fine, much less go to jail. So I repeat, and repeat, and repeat: 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.

More Hospitals Settle, But Not for Much

In late February, there have been several notable legal settlements made by more or less prominent hospitals, discussed in rough order of size.United Regional Health Care SystemPer the Cypress Times,T…

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28 Feb 2011

Reading Between the Lines: "Scrappy" WellPoint as an Illustration of Contemporary Health Care's Flaws

Giant US for-profit insurance company/ managed care organization WellPoint has provided numerous examples of problems with the current way health care organizations are lead.  <a href="http://hcrenewal.blogspot.com/2010/04/pay-for-hypocrisy-for-health-insurance.html">Here</a> we discussed charges that recent rate increases by its Anthem subsidiary may have violated previous agreements not to directly fund from premiums the golden parachutes of executives who left after the merger of Anthem and WellPoint; that WellPoint used magical accounting to make administrative costs appear to be from patient care; and that WellPoint investigated patients who developed cancer to find minor errors in their policy applications, and  used these as excuses for post-hoc cancellations (rescissions) of their policies.  And <a href="http://hcrenewal.blogspot.com/2010/04/what-me-worry-leaders-prosper-despite.html">here</a> we discussed a long list of WellPoint's previous ethical issues. Recently, Reed Abelson penned a <a href="http://www.nytimes.com/2010/05/16/business/16well.html">discussion</a> of WellPoint's leadership in the New York Times, entitled "A Scrappy Insurer Wrestles With Reform."  Reading between the lines suggests some fundamental flaws in our current model of leadership for health care organizations. The Halo Effect Over long years of service in the last century, many health care organizations built up sterling reputations. Blue Cross and Blue Shield health insurance plans, which were all originally not-for-profit, regionally (state-wide) based organizations, became known for paying for care rather generously and with little fuss. (However, in retrospect, this may have certainly contributed to rising health care costs.)  However, their reputation was clearly for good service leading to generous care. However, in the last 20 years, many of these plans converted to for-profit corporations, and/or were bought out by for-profit corporations. WellPoint is now a for-profit corporation that operates many subsidiaries that still do business as "Blue Cross" and "Blue Shield." <blockquote>Over the last decade, WellPoint has become one of the nation’s largest insurers by buying up the Blue Cross plans that dominate the individual and small group markets in their states. </blockquote> So, <blockquote>[WellPoint CEO] Ms. [Angela] Braly argues that WellPoint is well positioned because of its size and the strong appeal of the Blue Cross name. 'We have a lot of historical strengths,' she said in an interview </blockquote> However, it is likely that the "strong appeal" of many of these Blue Cross plans is based on a halo effect. Many individuals and small businesses may still think that the plans are relatively local, not-for-profit organizations. If not, they may still believe the plans are run as mission-driven organizations, not subsidiaries of a massive for-profit corporation. Thus many health care organizations may so profit by an outdated "halo effect." People may not realize that leadership of these organizations is no longer a calling, but a way to become very rich.  The strong appeal of the Blue Cross name may, in fact, be misleading.  Such confusing, if not deceptive marketing has become a hallmark of our era of commercialized health care. Market Domination and Health Care Costs Prior to almost every merger, one hears an argument that larger organizations and corporations are more efficient, and hence will charge lower prices and lead to lower costs. Mr Abelson wrote, <blockquote>WellPoint now has about 34 million customers, putting it ahead of the UnitedHealth Group in membership, and $60 billion in revenue, second behind UnitedHealth. While UnitedHealth and the other national companies tend to focus on providing services to large employers with workers in multiple locations, WellPoint’s focus has been on the local markets. Its strong presence allows it to demand the lowest prices from doctors and hospitals, while still offering customers a broad network of providers from which to choose. </blockquote> I doubt there is any good data to show that such market power has resulted in lower premiums or lower health care costs. In fact, Mr Abelson also wrote, <blockquote>Because of its dependence on the higher profit margins of its traditional business, WellPoint has also not been as adventurous in trying new approaches,.... </blockquote> If WellPoint really meant to use its market dominance to force down its costs, it appears that the main beneficiary of this has been the company's profit margin, not its policy-holders. Furthermore, <blockquote>Starting in 2014, WellPoint and its competitors will have to offer coverage to anyone who wants it, including people with potentially expensive pre-existing conditions, rather than carefully selecting the people they are willing to cover. As soon as next year, insurers will also have to spend at least 80 cents of every dollar they collect in premiums on providing health care to individual customers.</blockquote> So WellPoint used its market power to "carefully select" the people it insured so as to avoid anyone who might get sick, thus making a mockery of the concept of health insurance. Furthermore, the implication is that WellPoint spent more than 20% of premiums on management and administration (including the breathtaking compensation of its top leaders), and less than 80% on actually paying for health care. As Mr Abelson noted, (as we did <a href="http://hcrenewal.blogspot.com/2010/04/what-me-worry-leaders-prosper-despite.html">here</a>), just how personally remunerative WellPoint's market power has been for its top leader: <blockquote>Ms. Braly, ... received $13.1 million last year in compensation....</blockquote> In fact, as we should have learned in this country more than 100 years ago, market domination leads to higher profits for the dominant company, higher compensation for its employees, and higher prices. However, in health care, for some reason people still believe that concentration of power leads to efficiency. Health Care Leaders Who Know Little About Health Care Ms Braly appears to have no direct experience, training, or expertise in health care, medicine, public health, or biologic science. <blockquote>Ms. Braly, 48, a native of the Dallas area who received a law degree from Southern Methodist University, worked as a lawyer before she became general counsel to a small Blue Cross insurer in Missouri. She eventually ran that company, which is now part of WellPoint. Before being picked for WellPoint’s top job in June 2007, Ms. Braly worked as both a corporate executive and the company’s general counsel. Her selection as C.E.O. surprised many analysts and investors. While some believed that she would bring a warmer touch to the company, others worried that she did not have enough years as a manager to navigate a highly regulated and often highly political environment. In the last year, WellPoint became a favorite example of Congress and the administration for why health care overhaul was needed. Even people inside the industry say the company has been painfully slow to recognize consequences of some of its controversial actions, whether canceling a sick patient’s coverage or raising premiums on policies that lawmakers already call too expensive. And some say that Ms. Braly’s quickness to argue with WellPoint’s critics, revealing her training as a lawyer, is not always productive. 'WellPoint is the most incredibly tone-deaf insurance company in an industry full of deaf executives,' says Mr. Laszewski, the Virginia consultant. He criticizes Ms. Braly, who received $13.1 million last year in compensation, as being insensitive to the politics involved in running a health insurer, at both the state and federal levels. 'I don’t think she has the scar tissue and experience,' he says. 'I don’t think she has the marketplace instincts.' Ms. Braly says her experience in government affairs makes her well suited for handling a complex regulatory environment. </blockquote> Ms. Braly's background was cited as unusual for a health care CEO not because she has no obvious experience in direct health care, or its scientific or social scientific bases, but because she is a lawyer, not an MBA. It is interesting that we as a society have become so used to health care run by businesspeople that nothing in the article even obliquely suggested that Ms. Braly could benefit from some direct knowledge of or experience in caring for patients (or in biology, epidemiology, public health, etc), much less some sympathy for the values of health care professionals. So I submit that this profile of the leadership of WellPoint provides another reason to reconsider why we have journeyed so far from an era <a href="http://hcrenewal.blogspot.com/2007/12/relman-in-jama-on-threats-to-physicians.html">when the AMA asserted</a>, "the practice of medicine should not be commercialized, nor treated as a commodity in trade."  Current commercial health insurance (and the power that generally has been concentrated in large health care organizations) has certainly turned medicine into a commercialized venture, and treated the work of the individual health care professional as a commodity in trade.  Yet so far, what we have called health care reform in the US has just reinforced the power of large health care organizations.  It also suggests that true health care reform ought to address the power now concentrated in large health care organizations, and ought to foster more honest and less profuse marketing by companies lead by people who have some knowledge of health care, and sympathy for its values.  We need to reinforce the neglected idea that health care ought to be a calling, not simply a way for some to become rich.

Reading Between the Lines: "Scrappy" WellPoint as an Illustration of Contemporary Health Care's Flaws

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17 May 2010

Investigations, Indictments and Guilty Pleas at Famous US Teaching Hospitals

Some of the US most prestigious academic medical centers have been receiving unusual scrutiny lately. Mount Sinai Medical Center and New York - Presbyterian Hospital. As <a href="http://online.wsj.com/article/SB10001424052748704464704575208374268651564.html">reported</a> first by the Wall Street Journal, <blockquote>Federal prosecutors are investigating allegations that bid rigging and fraud at Mount Sinai Medical Center and New York-Presbyterian Hospital resulted in the hospitals awarding contracts worth tens of millions of dollars to outside contractors. Purchasing officials at the hospitals, two of the city's largest and most prestigious, are alleged to have gotten more than a million dollars in payments from companies that were then given lucrative contracts to perform work such as re-insulating pipes and removing asbestos, according to documents filed in the Southern District of New York. Nine contractors are involved in the case. So far, eight people and three companies supplying the hospitals have pleaded guilty to charges including bid-rigging, mail fraud and tax fraud. Three more people have been indicted on similar charges. The Federal Bureau of Investigation and Internal Revenue Service have been investigating and the Justice Department's Antitrust Division is prosecuting the allegations in the case.</blockquote> Some relevant specifics: <blockquote>The most recent indictment, handed up by a federal grand jury April 6, involved the alleged awarding of more than $195,000 in maintenance and insulation contracts. Mario Perciavalle, associate director of plant services at Mount Sinai, is accused of taking at least $20,500 in cash from a Long Island City company in 2004 and 2005 in exchange for the company, unnamed in documents, winning the deals. Prosecutors also are pursuing a case involving a former official at New York-Presbyterian, Salvatore Scotto-DiVetta, a supervisor at the hospital's Facilities Operations department. He pleaded guilty in March to rigging bids for re-insulation contracts, the Department of Justice said.</blockquote> The next day, the Journal <a href="http://online.wsj.com/article/SB10001424052748704471204575210560835140390.html">reported</a>: <blockquote>Two New York-Presbyterian Hospital officials and two contractors who did business with the prestigious hospital were indicted on fraud charges Tuesday in the latest cases stemming from a federal investigation into bid-rigging and fraud. The indictment alleges that the hospital officials—Santo Saglimbeni of Armonk, N.Y., and Emilio Figueroa, whose hometown wasn't given—received payments and gifts in exchange for awarding contracts to certain companies. </blockquote> And already the box score for this investigation increased: <blockquote>As a result of the investigation, a total of five hospital employees, 10 people outside the hospitals and six companies have either pleaded guilty or face charges.</blockquote> The comments by hospital officials had a familiar ring to anyone who has been following the hearings in Washington on the global financial collapse. From the first article: <blockquote>A Mount Sinai spokesman said the hospital notified the Justice Department 'about the possibility of impropriety immediately after it was identified in an internal audit' and is cooperating with the investigation. The spokesman said the hospital dismissed the employee under investigation and instituted tougher contracting systems.</blockquote> From the second: <blockquote>New York-Presbyterian was an 'unknowing victim of these alleged crimes,' a hospital spokeswoman said. She also said that the staffers named in the indictment no longer work at the hospital, and it is cooperating with the investigation.</blockquote> Partners Healthcare System <a href="http://www.boston.com/business/healthcare/articles/2010/04/29/justice_department_launches_antitrust_review_of_partners_healthcare/">Just out</a> today in the Boston Globe: <blockquote>The US Department of Justice has opened a civil investigation into possible anticompetitive behavior by Partners HealthCare System Inc., the region’s most powerful hospital and physician network. In a letter sent to Partners and the state’s three largest health insurers on April 19, investigators from the Justice Department’s antitrust division demanded documents relating to Partners’ 'contracting and other practices in health care markets in Eastern Massachusetts.' The letter, obtained by the Globe, said the probe sought to determine whether the practices violated the Sherman Antitrust Act, which bars companies from using their market power to limit trade or artificially raise prices. </blockquote> The background is: <blockquote>Boston-based Partners has been under growing scrutiny because of its market power and ability to draw high prices from insurers. The company employs about 5,500 physicians and operates a half dozen smaller hospitals, in addition to their prestigious Harvard-affiliated Boston teaching hospitals, Mass. General and the Brigham. Earlier this year, Attorney General Martha Coakley issued a report documenting that Massachusetts insurance companies pay some hospitals and doctors, including those in the Partners network, twice as much money as others for essentially the same patient care. The report pointed to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs. A 2008 Globe Spotlight Team series focused on the Boston market found that hospitals such as Mass. General and the Brigham typically are paid 15 to 60 percent more for essentially the same work as other hospitals. Soon after that series, Coakley launched her investigation into whether Partners and Blue Cross-Blue Shield, the state’s largest health insurer, may have illegally colluded to increase the price of health insurance statewide over the last decade, according to several legal and government sources.</blockquote> And again, the official response had a familiarly evasive ring: <blockquote>Partners spokesman Rich Copp yesterday noted that the hospital network already has supplied similar information to investigators from the state attorney general’s office, which launched its own review of Partners’ contracting practices last year. He noted in Partners’ defense that it vies with other providers in the area’s 'highly competitive' health care market. 'The Department of Justice has requested the same information that we have provided to the attorney general’s office,' said Copp. 'We will continue to cooperate with both government agencies during this ongoing analysis of health care in Massachusetts.'</blockquote> Summary So there it is.  Multiple indictments for and guilty pleas to charges of bid-rigging and fraud at two New York academic medical centers, and state collusion and federal anti-trust investigations of a Massachusetts hospital system.  The issues involve four of the most prestigious teaching hospitals in the US. Of course, not all the indictments may result in convictions, and the investigations may not result in charges.  But this involves some institutions that at one time would have appeared beyond reproach.  The lack of clear denials from the inevitable official spokespeople, and attempts to deny responsibility for the actions of employees elsewhere identified as "officials" do not provide much reassurance. Of course, readers of Health Care Renewal would have known that questions could be raised about leadership and governance of these once-revered institutions.  Questions could be raised about the incentives implied by the <a href="http://hcrenewal.blogspot.com/2009/12/98-million-dollar-man.html">huge compensation</a> given to the top hired executives at New York - Presbyterian, awarded by a <a href="http://hcrenewal.blogspot.com/2009/12/with-leaders-like-these.html">board of trustees</a> that includes some of the leaders of the more prominent failed finance corporations involved in the global financial collapse.  <a href="http://hcrenewal.blogspot.com/2009/01/to-whom-did-scorpions-in-bottle-owe.html">Questions</a> could be raised about the dominant presence of finance leaders and possibly <a href="http://hcrenewal.blogspot.com/2009/06/mans-best-hospital-run-by-boss-of-mecc.html">conflicted</a> individuals on the Partners board, and apparent interlocks among Partners leadership and the leadership of the largest health insurer in Massachusetts, which was willing to <a href="http://hcrenewal.blogspot.com/2009/01/scorpions-in-bottle-shook-hands-secret.html">pay that system so much.</a> Maybe, instead of <a href="http://hcrenewal.blogspot.com/2010/04/pondering-leadership.html">lecturing</a> the more lowly among us about our responsibilities to improve health care, the leaders of our previously most august health care institutions need to introspect more about their own responsibility to address the metastasis of "greed and incompetence" in health care from the financial sector.

Investigations, Indictments and Guilty Pleas at Famous US Teaching Hospitals

Some of the US most prestigious academic medical centers have been receiving unusual scrutiny lately.Mount Sinai Medical Center and New York - Presbyterian Hospital.As reported first by the Wall Stree…

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29 Apr 2010

Turning Patients into "Dialysis Dollars"

As we have discussed in previous posts (<a href="http://hcrenewal.blogspot.com/2007/12/relman-in-jama-on-threats-to-physicians.html">here</a> and <a href="http://hcrenewal.blogspot.com/2009/06/why-did-us-physicians-give-up-their.html">here</a>), prior to a US Supreme Court decision in 1975, physicians (and other professionals) were left free to set up and enforce their own codes of ethics. Until about 1980, the US American Medical Association (AMA) stated, <ul><li>"in the practice of medicine a physician should limit the source of his professional income to medical services actually rendered by him, or under his supervision, to his patients"</li><li>"the practice of medicine should not be commercialized, nor treated as a commodity in trade"</li></ul> The Supreme Court decision was widely construed as meaning that any promulgation by US professional organizations of ethical regulations that constrained any economic practices of their members was a violation of anti-trust laws. Thus, in 1980, the AMA dropped their prohibitions against the commercialization of medicine, and nobody, it appeared, tried to change the anti-trust law whose provisions the court interpreted. A vivid example of how physicians and patients may be caught in the cross-fires among health care corporations in this brave new era of commercialized health care was provided by a <a href="http://www.denverpost.com/commented/ci_12830453">recent report </a>in the Denver Post: <blockquote>News that Fortune 500 company DaVita Dialysis is moving its headquarters to Denver socked its competitors like a punch in the gut. To its rivals, the kidney-care giant is a bully armed with high-powered attorneys who use lawsuits as tools to intimidate. DaVita executives counter that they are simply strong competitors — they act as aggressors only when doctors or nurses or other dialysis companies break promises and double-cross them. Either way, a string of DaVita-filed lawsuits around the country — with two major battles boiling in Denver and Colorado Springs — shed light on the ruthless competition over dialysis patients in an industry that costs Medicare alone more than $8 billion per year. For years, DaVita's competition in Colorado's two largest cities was almost nonexistent. The mud began to fly last year when the second-largest group of Denver kidney doctors, called nephrologists, ended their exclusive affiliation with DaVita and partnered with a Massachusetts dialysis company entering the Denver market. Near the same time, the largest nephrology group in Colorado Springs dumped DaVita in favor of Liberty Dialysis, which recently opened two dialysis centers in the city. DaVita quickly sued doctors in both cities, plus a nurse battling breast cancer who quit her job at a DaVita dialysis center and took one with Liberty. The hostility between the companies is so intense, it's seeping down to the patients. 'With everything that is going on, you feel like you are becoming sort of a dialysis dollar,' said Julie Estes, a 53-year- old Colorado Springs woman who spends three days a week, four hours at a time, hooked to a dialysis machine in order to stay alive. DaVita says it 'paid millions' in 1998 to the doctors of Western Nephrology in Denver to retain them as medical directors of six dialysis centers in the metro area for 10 years. The doctors signed non-compete agreements, promising not to join forces with DaVita rivals or steal any of the California-based company's nurses. Patients are free by law to choose any dialysis center they want. But dialysis companies bank on the fact that snagging the most popular kidney doctors in town to serve as medical directors of their centers will bring in the most patients — and the most dollars. Every dialysis center is required by federal law to have a medical director to oversee the care of patients and the water purification system used to flush toxins from the blood of people with failing kidneys. It's a side job, separate from a nephrologist's practice, that some estimate takes only a couple of hours each week. Companies and doctors declined to say what salary comes with the job, but estimates range from $20,000 to $200,000 per year depending on the competitiveness of the market. After 10 years with DaVita, when they believed the non-compete agreement was about to expire, Western Nephrology doctors began making plans to become medical directors of shiny-new American Renal Associates dialysis centers opening in Denver with a flat-panel TV and heated, massage chair at every dialysis station. Four of the new centers are within 3 1/2 miles of existing Da Vita centers. The non-compete agreement that Western Nephrology doctors had signed for DaVita prohibited them from having relationships with competitors within a 35-mile radius. DaVita contends in its lawsuit that it found out about Western Nephrology's 'secret campaign' because the dialysis company they were working with applied for Medicare billing numbers for five new centers in the Denver area. In its counterclaim, American Renal Associates accused DaVita of violating federal antitrust law — the company had controlled at least 80 percent of the Denver market. DaVita lagged in updating its dialysis centers until competition was imminent, according to court records. And the claim accused DaVita of 'filing legal actions that are objectively baseless' merely as an 'anticompetitive weapon.' </blockquote> "Ruthless competition," "lawsuits as a tool to intimidate," "double crosses," flying mud, patients who feel like "dialyis dollars," non-compete agreements, medical directors paid according to "the competitiveness of the market," "secret campaigns?" - is this any way to run a health care system? As Dr Arnold Relman pointed out (see our previous posts linked above), through the 1960s there was some consensus that health care does not function like a pure market, partially because patients cannot function like steely-eyed consumers. They do not have enough information about the benefits, harms and costs of their possible choices. They have trouble understanding the ambiguity and uncertainty of the medical context. And most important, they may not be capable of the cold cognition the free market model requires, since they may be dealing with choices whose potential outcomes prompt extreme emotions, and in many cases, they may be too frightened, sick, or cognitively impaired to make fully rational choices. In particular, patients with end-stage kidney disease, requiring dialysis to maintain life, seem very different from some ideal, coldly cognitive consumers. So what in the world are they doing caught up in these sorts of disputes? I submit that real health care reform ought to help physicians and other health care professionals renew their professionalism, and put the provision of health care (and health education and clinical research) back in the hands of people who view these activities as callings, not purely as ways to get rich. Meanwhile, when you are a patient, be prepared to be treated merely like a source of revenue. PS - Please note that, as we have <a href="http://hcrenewal.blogspot.com/2009/03/meet-new-boss-same-as-old-boss-health.html">posted</a> before, the new US "czar" for health care reform is a former member of the board of directors of DaVita.

Turning Patients into "Dialysis Dollars"

As we have discussed in previous posts (here and here), prior to a US Supreme Court decision in 1975, physicians (and other professionals) were left free to set up and enforce their own codes of ethic…

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17 Jul 2009

Why Did US Physicians Give Up Their Ability to Enforce Their Own Professional Standards?

In his recent review of Dr Ezekiel Emanuel's book, (Healthcare, Guaranteed: A Simple, Secure Solution for America,) Dr Arnold Relman, Editor-Emeritus of the New England Journal of Medicine, <a href="http://www.nybooks.com/articles/22798">discussed </a>the history of the deprofessionalization of American physicians. <blockquote> The behavior of US physicians has been changed by the commercialization of medical care, and this too has increased costs. US medical practice has traditionally relied on fee-for-service, which has always given it some of the attributes and incentives of a business. However, the American Medical Association (AMA) maintained for many years that medical practice was a profession, not a business. The AMA's ethical guidelines therefore advised physicians to limit their income to reasonable earnings from the care of patients, and to refrain from advertising and from entering financial arrangements with drug and device manufacturers. Those restrictions were lifted after the US Supreme Court decided in 1975 that lawyers, and by extension members of other professions, including physicians, are engaged in interstate commerce and therefore must be subject to antitrust law (from which they had largely been exempt).(1) This decision had an enormous effect on the medical profession, but its consequences have received relatively little public attention. Although the courts did not initiate the commercialization of medicine, they certainly accelerated it and gave it legal justification. In 1980, after medical organizations lost some costly antitrust trials, in which they were accused of such offenses as limiting doctor fees or denying staff privileges, the AMA changed its ethical guidelines, declaring medicine to be both a business and a profession. This lowered the AMA's barriers to the commercialization of medical practice, allowing physicians to participate in any legal profit-making business arrangement that did not harm patients. Nearly a half-century ago, Stanford economics professor Kenneth Arrow, later a Nobel laureate, convincingly argued that medical care cannot conform to market laws because patients are not ordinary consumers and doctors are not ordinary vendors. He said that sick or injured patients must rely on physicians in ways fundamentally different from the price-driven relation between buyers and sellers in an ordinary market. This argument implied that, contrary to the assumptions of antitrust law, market competition among physicians cannot be expected to lower medical prices. And since physicians influence decisions to use medical services far more than patients do, the volume and types of services provided to patients—and hence total health costs—need to be controlled by forces other than the market, such as professional standards and government regulation. But Arrow's argument was largely ignored in the rush to exploit health care for commercial purposes that ensued after the passage of Medicare and Medicaid in 1965.(2) </blockquote> Writing about the decline of physicians' professionalism in 2007 [ Relman AS. Medical professionalism in a commercialized health care market. JAMA 2007; 298: 2668-2670. [link <a href="http://jama.ama-assn.org/cgi/content/full/298/22/2668">here</a>) ], Dr Relman had briefly alluded to the effect of the 1975 Supreme Court decision, (see our post <a href="http://hcrenewal.blogspot.com/2007/12/relman-in-jama-on-threats-to-physicians.html">here</a>): <blockquote>The law also has played a major role in the decline of medical professionalism. The 1975 Supreme Court ruling that the professions were not protected from anti-trust law undermined the traditional restraint that medical professional societies had always placed on the commercial behavior of physicians, such as advertising and investing in the products they prescribe or facilities they recommend. Having lost some initial legal battles and fearing the financial costs of losing more, organized medicine now hesitates to require physicians to behave differently from business people. It asks only that physicians' business activities should be legal, disclosed to patients, and not inconsistent with patients' interests. Until forced by anti-trust concerns to change its ethical code in 1980, the American Medical Association had held that 'in the practice of medicine a physician should limit the source of his professional income to medical services actually rendered by him, or under his supervision, to his patients' and that 'the practice of medicine should not be commercialized, nor treated as a commodity in trade.' These sentiments reflecting the spirit of professionalism are now gone. </blockquote> It seems to me that Dr Relman has elucidated one of the "missing links" that help explain the current sorry state of physicians' core values, and the broader continuing health care crisis. I am amazed that this bit of history seems to have been so thoroughly forgotten. Dr Relman did write about it before 2007, but in publications that few physicians and other health care professionals were likely to see. Other than Dr Relman, almost no one writing in the medical and health care literature seems to have interest in this issue. (It has been discussed in the Journal of Health Politics, Policy and Law, and the Stanford Law Review by M. Gregg Bloche, but these unfortunately also could have easily been missed by nearly all physicians and health care professionals.) So we have another example of the anechoic effect. Yet in my humble opinion, every physician and health care professional ought to know that the profession once foreswore the commercialization of medical practice, but gave up on its ability to police its own conflicts of interest after the US Supreme Court decided that professionals are subject to anti-trust law. But knowing this important bit of history raises more questions than it answers: <ul><li>The Supreme Court decision apparently involved interpretation of law, not the constitution. Therefore, why didn't organized medicine pursue a change in the law that would allow physicians to continue to enforce their traditional professional values? </li><li>The Supreme Court decision was primarily directed at lawyers, not physicians. Since the decision, to my knowledge, the law profession has maintained strict rules about conflicts of interest. (For example, no legal CME is sponsored by corporations whose products they seek to have the attendees favor.) Why did the decision wreck physicians' but not lawyers' abilities to regulate their own conflicts of interest? </li><li>The Supreme Court decision only affects US law. Why have physicians in other countries also abandoned their traditional values about commercial entanglements? </li><li>Why did this application of US antitrust law have such significant effects during an era when antitrust enforcement in health care was generally declining? (Insurance companies and hospitals that dominate local markets have not feared antitrust enforcement.)</li><li>Why did only Dr Relman and Prof Bloche seem to care about this up to now?</li></ul> Inquiring minds want to know.... And answering these questions might bring us back on the path of true medical professionalism. Hat tip to Merrill Goozner <a href="http://www.gooznews.com/node/2971">in the GoozNews blog</a>. References (from Relman) 1. Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975). 2. Kenneth J. Arrow, "Uncertainty and the Welfare Economics of Medical Care," The American Economic Review, Vol. 53, No. 5 (December 1963).

Why Did US Physicians Give Up Their Ability to Enforce Their Own Professional Standards?

In his recent review of Dr Ezekiel Emanuel's book, (Healthcare, Guaranteed: A Simple, Secure Solution for America,) Dr Arnold Relman, Editor-Emeritus of the New England Journal of Medicine, discussed …

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26 Jun 2009

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