C R Bard Settles Allegations of Kickbacks to Promote Radiation Treatment for Prostate Cancer

Screening for and aggressive treatment of prostate cancer has become an enormously lucrative business, if not necessarily a life-saving medical strategy.  The minimal media coverage of a recent settlement suggests that at least to some degree, it has been fueled by some questionable practices.<br /><br /><b>The CR Bard Settlement</b><br /><br />As <a href="http://www.ajc.com/news/business/bard-agrees-to-48-million-whistle-blower-settlemen/">reported</a> by the Atlanta Journal Constitution,<br /><br /><br /><blockquote class="tr_bq">A medical device company on Monday agreed to<i> pay a $48.2 million settlement to resolve claims by a Georgia employee that it paid kickbacks to doctors and customers who bought radiation treatment for prostate cancer.</i><br /><br />C.R. Bard Inc., which is headquartered in New Jersey and has offices in Covington, resolved a whistle-blower suit filed by the employee in 2006. The suit <i>alleged that the company paid off doctors and hospitals to induce them to prescribe brachytherapy seeds, which are implanted in the prostate and deliver a dose of radiation to cancer cells.</i></blockquote><br />Another <a href="http://www.macon.com/2013/05/14/2478611/medical-company-agrees-to-pay.html">brief report</a> in the Macon (GA) Telegraph gave a tiny bit more detail about what was given to physicians to get them to use Bard's radiation therapy products,<br /><br /><blockquote class="tr_bq"> Customers could order the seeds, used in brachytherapy to deliver a prescribed dose of radiation directly to cancer cells, from multiple companies. But <i>Bard allegedly offered doctors grant money, rebates, free medical equipment and advertising campaigns to entice them to buy their product at inflated prices,</i> according to a news release issued by [whistle-blower Julie] Darity’s legal team....</blockquote><b>The Usual Elements of Legal Settlements of Allegations of Health Care Corporate Bad Behavior </b><br /><br />The story, briefly told as it was, included many of the usual elements of stories of legal settlements of wrong-doing by large health care corporations. <br /><br /><u>Slow Justice </u><br /><br />The settlement, hence justice, as it were, took a long time, about 7 years since the most recent behavior, and 15 years since its start.  Per the AJC,<br /><br /><blockquote class="tr_bq"> Bard employed its kickback scheme from 1998 to 2006, federal prosecutors said.</blockquote> <u>Penalties Not as Big as They Appeared</u><br /><br />The penalties were not as big as they seemed.  There was the seemingly large fine, $48.2 million dollars.  However, that should be compared to the company's net sales of over $2.95 billion and net income of $530 million in 2012, according to the company's <a href="http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTc1OTY0fENoaWxkSUQ9LTF8VHlwZT0z&t=1">annual report</a>.  It should also be compared to the total compensation of the company's chairman and CEO in 2012, over $8.7 million, and to that of its president and chief operating officer, over $6.0 million, according to the company's <a href="http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTc3OTA0fENoaWxkSUQ9LTF8VHlwZT0z&t=1">2012 proxy statement</a>.   Apparently, the fine came out of the company's treasury, so its impact was diffused among all shareholders, employees, customers, and patients, not directed to those who may have authorized, directed or implemented the kickbacks to physicians. <br /><br /><u>No Penalties for Individuals, No Acknowledgement of Wrong-Doing </u><br /><br />The settlement did not involve any sort of direct penalties to those who authorized, directed, or implemented the kickbacks.<br /><br />The corporation did not even acknowledge any bad behavior.  As per the AJC,<br /><br /><br /><blockquote class="tr_bq">Bard is pleased to settle the claims, Scott Lowry, a company spokesman, said in a statement.<br /><br />'This resolution allows the company to put this matter behind it and continue to focus on delivering life-enhancing medical devices and technologies to patients around the world,' he said. 'We remain committed to continuously enhancing and improving our compliance programs in accordance with industry standards.'</blockquote><b>Suppression of Whistle-Blowing </b><br /><br />It may not be part of all such settlements, but note that in this case there seemed to be an attempt to shut up the whistle-blower.  So, there is reason to think that justice, such as it was, was delayed because the company seemingly tried to punish the whistle-blower, rather than listen to what she had to say.  Per the Macon Telegraph,<br /><br /><blockquote class="tr_bq"> Darity, 56, said she first reported what she suspected as questionable activities to her supervisors.<br /><br />'I did exactly what was outlined in the company ethics policy,' she said. 'I wanted to think things were being corrected.'<br />In time, she realized nothing had changed. She filed an internal whistle-blower complaint.<br /><br />Her job was eliminated in November 2005, soon after an investigation was launched into her whistle-blower complaint, she said.<br /><br />Darity had worked for Bard, which has an office in Covington, for more than 18 years. When her job was eliminated, she was a manager in the Brachytherapy Contracts Administration division.<br /><br />Out of a job, Darity filed the lawsuit in U.S. District Court for the Northern District of Georgia in January 2006.</blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.macon.com/2013/05/14/2478611/medical-company-agrees-to-pay.html#storylink=cpy</div><br />Nonetheless, the government seemingly trusted C R Bard to fix its own behavior going forward, <a href="http://online.wsj.com/article/SB10001424127887323716304578482953550885568.html">per the Wall Street Journal</a>,<br /><br /><blockquote class="tr_bq"> As part of a non-prosecution agreement, C.R. Bard agreed to pay an additional $2.2 million and take remedial steps to enhance compliance. The company had said in a regulatory filing last year that it expected the settlement to include a corporate integrity agreement, which typically require companies to obey restrictions on their sales and marketing practices, but no such agreement was announced Monday. </blockquote>Note that <a href="http://hcrenewal.blogspot.com/2012/06/administrators-at-pepper-spray-u-found.html">here</a> we discussed a case in which an academic medical institution seemingly tried to punish faculty members who questioned that organization's overly enthusiastic approach to prostate cancer. <br /><br /><b>Summary - the Profitable but Unsubstantiated Aggressive Approach to Prostate Cancer </b><br /><br />So its just another day at the office. This was a typical <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">settlement</a> of allegations of unethical behavior by a large health care organization.    A large health care company allegedly bribed doctors to use its products.  It seemingly tried to shut up a whistle-blower.  Seven years later, the company got a financial slap on the wrist, but no one directly involved in the alleged kickbacks, and no one whose compensation may have been enlarged due to such apparently unethical activity paid a price.  Never mind that the alleged kickbacks may have induced doctors to use treatments that provided no overall benefit, but could have harmed patients.  <br /><br />Before ending with our usual fulmination, I should note that this case appears to be one small piece in the puzzle of our national infatuation with an aggressive approach to prostate cancer, despite a lack of essentially any good evidence that this approach does any good.  Brachytherapy, the treatment pushed allegedly by kickbacks, is one kind of aggressive treatment for prostate cancer.  Yet there is no good evidence from randomized controlled trials that is prolongs life.  In fact, a recent (and the only major) randomized controlled trial of aggressive treatment of prostate cancer on initial diagnosis failed to show any overall survival benefit.(1)  There has been a huge push to screen all men of a certain age for prostate cancer.  Yet now two new trials also failed to show any overall survival benefit from screening.(2,3)    <br /><br />But the prostate cancer business is very lucrative.  On the Reforming Health blog, <a href="http://reforminghealth.org/2012/04/25/on-prostate-cancer-screening-warren-buffet-and-ignoring-science/">a post</a> summarized a lecture given by Dr Otis Brawley, chief medical officer of the American Cancer Society in which Dr Brawley described the financial scheme underlying the aggressive approach to prostate cancer,<br /><br /><br /><blockquote class="tr_bq">Brawley recounts an experience he had on a site visit to a hospital in 1998 while an Assistant Director at the National Cancer Institute. During the visit a marketing executive explains to Brawley the publicity value and financial rewards of a free prostate screening program offered by the hospital at a local mall. The plan is to screen the first 1,000 men over 50 who come to the mall for testing. I’ve transcribed Brawley’s recollections from the video and they provide a great explanation for the profit-driven practices that continue to occur today, 14 years later:<br /><br /> <em>'If they screen 1,000 men they’re going to have 145 abnormals. They’re going to charge about $3,000 to figure out what is abnormal about these abnormals, that’s how they pay for the free screening. About 10 of the 145 won’t come to this hospital so that’s business for their competitors, but they’ll get 135 times $3,500 on average. Of the 135, 45 are going to die of prostate cancer and the other percentage are going to get radical prostatectomy at about $30-40,000 a case; there’s a percentage that’s going to get seeds at about $30,000 a case; a percentage were going to get radiation therapy that (at the time) was about $60,000. Then [the marketing executive’s] business plan goes further, he knows how many guys are going to have so much incontinence that diapers aren’t going to do it so he had in his business plan how many artificial sphincters urologists were going to implant. And then he was a little apologetic because there was this new thing called Viagra that screwed up his estimates for how many penile implants he was going to sell because guys were upset about impotence related to prostate cancer treatment.'</em><br /> <br /><em>Brawley says, 'this is 1998, I ask him, if you screen 1,000 people how many lives are you going to save? He took off his glasses and looked at me like I was some kind of fool and said, ‘Don’t you know, nobody’s ever shown that prostate cancer screening saves lives, I can’t give you an estimate on that.’'</em></blockquote><br />Presumably because he was a marketing executive, the manager whom Brawley quoted did not have to feel doubt about all the men subjected to needless procedures, and who would be at risk of serious and unpleasant adverse effects of these procedures, all to make money but not to prolong their lives.  Of course, not only the hospitals make money, but also quite obviously the companies that sell them the drugs and devices needed for all this medical aggression make money, as do the doctors who go along with it all. <br /><br />Now we suspect that one small reason the doctors have gone along with it is that they may have gotten inducements from those companies.<br /><br />Time to fulminate,...<br /><br />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. <br /><br /><b>References</b><br /><br />1.  Wilt TJ, Brewer MK, Jones KM et al.  Radical prostatectomy versus observation for localized prostate cancer.  N Engl J Med 2012; 367: 203-13.  [Link <a href="http://www.nejm.org/doi/full/10.1056/NEJMoa1113162">here</a>]<br />2.  Andriole GL, Crawford ED, Grubb RL et al.  Mortality results from a randomized prostate-cancer screening trial.  N Engl J Med 2009; 360: 1310-9. [Link <a href="http://www.nejm.org/doi/full/10.1056/NEJMoa0810696">here</a>]<br />3.  Schroder FH, Gugosson J, Roobl MJ et al.  Screening and prostate-cancer mortality in a randomized European study.  N Engl J Med 2009: 360: 1320-8.[Link <a href="http://www.nejm.org/doi/full/10.1056/NEJMoa0810084">here</a>]<br /><br /><br /><br /><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.macon.com/2013/05/14/2478611/medical-company-agrees-to-pay.html#storylink=cp</div><br />

C R Bard Settles Allegations of Kickbacks to Promote Radiation Treatment for Prostate Cancer

Screening for and aggressive treatment of prostate cancer has become an enormously lucrative business, if not necessarily a life-saving medical strategy.  The minimal media coverage of a recent settle…

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"Slap on the Wrist" for a "Too Big to Fail" Hospital - Judge Rejects WakeMed Settlement

Maybe we are reaching an inflection point in how misbehavior by big health care organizations is handled in the US legal system. <br /><br />We have frequently discussed the march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> made by big health care organizations.  Many of these settlements indicated severely bad behavior, often behavior that seemed overtly dishonest, sometimes criminal, and had the potential to harm patients.  Yet most of these settlements involved only fines, and sometimes written agreements that pledge the organization will do better in the future, often in the form of <a href="http://hcrenewal.blogspot.com/search/label/deferred%20prosecution%20agreement">deferred prosecution</a> or <a href="http://hcrenewal.blogspot.com/search/label/corporate%20integrity%20agreement">corporate integrity agreements.</a>  Yet the fines were often small compared to the amount the organization stood to make from the bad behavior.  It is not clear that any written agreements were enforced, or caused major penalties if the organization did not fulfill them.  And almost never did any individual within the accused organization suffer any negative consequences for authorizing, directing or implementing the bad behavior, even if such individuals may have personally profited from high compensation partially fueled by the bad behavior.<br /><br />Now and then, though, there are cases that are different.  Perhaps one has just come along that may signal things are going to change.<br /><br /><b>The Basics of the Case</b><br /><br />The case was first <a href="http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html">reported</a> by the Raleigh (NC)  News & Observer in December, 2012.  Here are the basics:<br /><br /><blockquote class="tr_bq"><i>WakeMed has agreed to pay $8 million to settle an investigation into its practice of billing Medicare for expensive overnight care when the patients had been treated and discharged the same day.</i><br /><br />The settlement came after a lengthy <i>criminal investigation</i> into Medicare billing procedures used by nurses at the private, not-for-profit hospital’s Heart Center Observation Area.<br /><br /><i>Nurses there, according to federal court documents, routinely ignored physicians’ orders</i> for how a patient should be classified. Their actions resulted in the hospital receiving millions of unwarranted Medicare dollars for outpatients who were classified wrongly as inpatients.<br /><br />Though some WakeMed managers were aware of the billing practices, according to court documents, investigators found no evidence of anyone personally benefiting from the system.<br /><br /><i>No one, according to WakeMed officials, lost their job or was disciplined because of the investigation. </i></blockquote>The US Attorney made the usual sort of announcement:<br /><br /><blockquote class="tr_bq">'<i>This case will serve as a reminder that hospitals, just like individual health care providers, will be held accountable for their actions</i>,' [Thomas] Walker, the U.S. Attorney for the Eastern District of North Carolina, said in a statement. </blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy</div><br />So far, this is pretty usual.  There were accusations of inflated billing, a monetary fine that might look big to the average citizen, but that pales next to the revenue of the offending organization (over $943 million in the 2010-2011 fiscal year according to the <a href="http://www.guidestar.org/FinDocuments/2011/566/017/2011-566017737-087a1d7c-9A.pdf">WakeMed 2011 US form 990</a>),a stern statement by the US Attorney, but again no penalties for any individual, and here, a rather implausible statement that no one benefited from the deceptive practices.<br /><br />However, there were also some immediately appreciable atypical elements to this case.<br /><br /><b>Atypical Elements</b><br /><br />In addition to the fine to be paid, the case was to be settled using a deferred prosecution agreement:<br /><br /><br /><blockquote class="tr_bq">The hospital <i>faces two criminal charges – making material false statements relating to health care matters and aiding and abetting,</i> but under the settlement reached Wednesday, <i>prosecution will be deferred.</i> If the hospital complies with provisions in the settlement agreement, such as paying $8 million and allowing further monitoring, the charges will be dismissed in two years, according to court documents.<br /><br />As part of the agreement, which has yet to be approved in court,<i> [Wakemed CEO Bill] Atkinson acknowledged the wrongdoing described by prosecutors. He further acknowledged that WakeMed was responsible for the acts of the health-care organization’s employees and officers.</i></blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy</div>While we have sometimes seen deferred prosecution agreements used in cases in which for-profit health care corporations were accused of violating the law, they are rarely used in cases involving non-profit hospitals.  (The biggest one I recall was that of the University of Medicine and Dentistry of New Jersey, a complex case we started discussing in 2005.  See relevant posts <a href="http://hcrenewal.blogspot.com/search/label/UMDNJ">here</a>.)  Criminal charges against a non-profit hospital are also unusual.  Note also that as stated above the hospital system CEO seemed to admit that the hospital did wrong, raising further doubt about the conclusion above that no individual personally profited.<br /><br />The plot further thickened when the CEO seemed to contradict his own statement within the deferred prosecution agreement that acknowledged wrong-doing.<br /><br /><blockquote class="tr_bq">In an interview Wednesday, <i>Bill Atkinson, WakeMed’s president and CEO, wavered between accepting the charges – saying repeatedly  'I don’t want to minimize it, and I don’t want you to hear me doing that' – and being adamant that the hospital’s actions were simply a misinterpretation of complicated federal Medicare guidelines.</i><br /><br />Even though he endorsed a settlement agreement in which prosecutors contend two crimes occurred, <i>Atkinson said he doesn’t believe the hospital’s actions were criminal.</i><br /><i><br /></i><i>'I don’t think so, but the federal government thinks they could certainly turn it that way,</i>' he said. That description differs vastly from what prosecutors contend. 'They’re not going to minimize the media effect,' Atkinson said.</blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"></div><br />The plot thickened further when in the same interview Atkinson seemed to deny that any individual did anything wrong:<br /><br /><blockquote class="tr_bq">Heidi McAfee, who retired earlier this year, was director of Patient Access during much of the period when the problematic billing occurred. Efforts to reach McAfee on Wednesday were unsuccessful, but Atkinson praised her years of work with WakeMed.<br /><br />'Do I think anybody intentionally did anything wrong?' Atkinson said. '<i>No, I don’t</i>.'<br /><br />He said WakeMed had not reported McAfee or any of the nurses to the N.C. Board of Nursing for ignoring doctor’s orders. </blockquote><br />So did the hospital acknowledge wrongdoing, or did it not?  If wrongdoing did occur, did any individual do it, or was it done by ghosts or spirits?  From this account, it was unclear. <br /><br /><b>This Time the Inconsistencies and Ambiguities are not Ignored</b><br /><br />Many of the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">settlements we have discussed</a> seem to have been based on similar illogic.  For example, they often involved accusations of bad behavior, often bad enough to put patients at danger, yet the settlements may included ritualistic statements by defendant organizations that they neither admitted nor denied wrongdoing.  Thus, the settlements left ambiguous and unknown what really happened, and their own appropriateness.  (Note that similar settlements are made all the time by big financial firms, and one intrepid judge did point out how little sense they make, see this <a href="http://hcrenewal.blogspot.com/2011/11/will-citigroup-ruling-challenge-health.html">post.</a>)<br /><br />Yet in most cases, the illogic is rapidly swept under the rug, noticed, if at all, by lowly outsiders like your humble bloggers on <a href="http://hcrenewal.blogspot.com/">Health Care Renewal.</a><br /><br />This time, though, it was different.<br /><br /><u>Why Would the Nurses Ignore Doctors' Orders?</u><br /><br />An important part of the argument by the US Department of Justice in this case was that nurses "routinely ignored doctors' orders."  If it were true, this would be very unusual and would threaten the integrity of health care at the particular institution, since every hospital operates on the assumption that the doctors make management decisions and order tests, treatments, etc, and then the nurses, as well as technicians and therapists carry out these orders.<br /><br />However, In this case, a local nurse immediately and publicly disputed the notion that the nurses were independently flouting the doctors' orders.  As<a href="http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html"> reported</a> again by the News & Observer in December, 2012,<br /><br /><br /><div class="entry-content" id="story_text_top"><blockquote class="tr_bq">When Vicki Hewitt-McNeil read about WakeMed’s $8 million settlement for wrong Medicare billing, the Raleigh nurse didn’t buy the story.<br /><br />According to the settlement, a nursing director instructed her staff to admit patients as inpatients and ignore doctors’ orders to treat them on the less expensive outpatient basis.<br /><br />With two decades of nursing experience, Hewitt-McNeil didn’t like that the blame was shifted down the totem pole to nurses, who don’t wield the power of administrators and doctors.<br /><br /><i>'I honestly cannot believe this was the nursing department that did this,' Hewitt-McNeil said. 'That’s just not possible.'</i></blockquote> Furthermore,<br /><br /><blockquote class="tr_bq">[Ms Hewitt-McNeil]  also worked shifts at WakeMed as a pool nurse, similar to working as a substitute teacher. '<i>Nurses at WakeMed don’t have the autonomy to do anything,' Hewitt-McNeil said. 'You have to call a doctor for everything.'</i></blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy</div><br /><br />Again, the contention that the nurses systematically disobeyed doctors or pretended to be following non-existent orders implied a fundamental break-down of the system and widespread unprofessional, unethical behavior by the nurses.  In addition, the charges did not suggest why the nurses would do something so bad, especially since they were in no position to personally benefit from their actions.<br /><br /> <u>What Did the Hospital Leadership Actually Admit? </u><br /><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy</div></div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy</div><br />It took a few weeks, but someone - it is not clear who it was - noticed that while the Department of Justice asserted that the hospital CEO had admitted wrongdoing, the CEO's public statement seemed to equivocate.  So in mid January, 2013, as <a href="http://www.newsobserver.com/2013/01/15/2607671/wakemed-clarifies-statements-on.html">reported</a> again by the News & Observer,<br /><br /><blockquote class="tr_bq">Deb Laughery, a spokeswoman for the hospital, issued a clarification on Monday.<br /><br />'In an abundance of caution, <i>WakeMed confirms that it has agreed to a settlement with the United States as set forth in the Deferred Prosecution Agreement</i>,' the statement said, adding further that <i>statements of fact laid out in the agreement were 'true and accurate.'</i><br /><br />In the clarification, WakeMed officials acknowledged that the hospital formally faced federal criminal charges. The hospital also retracted any suggestions that the settlement only involved a small number of cases.</blockquote><br />The hospital public relations person apparently could not bring herself to say that the hospital admitted wrongdoing, but by acknowledging that statements of fact in the deferred prosecution agreement were "true and accurate," she seemed to be indirectly admitting again that wrongdoing occurred, and that the hospital was responsible for the actions of its employees.<br /><br /><u>The Judge Notices the Emperor Has No Clothes</u><br /><br />Despite their internal inconsistencies and illogic, most legal settlements of accusations of wrongdoing by big health care organizations are accepted by judges.  In this case, again things were different.  As <a href="http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html">reported</a> yesterday, on 17 January, 2013 again by the News & Observer,<br /><br /><blockquote class="tr_bq"> WakeMed officials and federal prosecutors spent two years hammering out an $8 million proposal to settle a Medicare fraud investigation.<br /><br /><i>A federal judge shredded the 116-page agreement</i> in less than 30 minutes on Thursday.<br /><br />U.S. District Judge Terrence Boyle ticked off a list of his grievances about the proposal, forcing federal prosecutors into the unusual position of defending the defendants. </blockquote><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy</div><br />Quelle surprise!  The judge took particular offense that the settlement seemed disproportionately lenient,<br /><br /><blockquote class="tr_bq"> The agreement, Boyle said, appeared to be a <i>'slap on the hand' for a 'too big to fail' corporate giant. </i>Only the day before, Boyle told the lawyers, he sentenced a woman to a year in prison in a $235,000 insurance fraud case.</blockquote><br />Furthermore,  <br /><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy</div><br /><blockquote class="tr_bq">Boyle was irked that no criminal charges had been filed in the case. He ended the hearing by telling the prosecutor either to fold his briefcase or take it to a federal grand jury for official indictments.<br /><br />'<i>There are lots of corporations that steal from the government,' Boyle said. 'Most of them are convicted, fined and banished.'</i></blockquote><br />Also,<br /><br /><br /><blockquote class="tr_bq">'Why are you coming to court if you tell me you don’t need me?' Boyle asked Gilmore, the prosecutor who rose before him Thursday. 'I’m just window dressing in this case.'<br /><br />'Why not take a guilty plea, defer imposition of the judgment and sentence, and come back in two years later and take a post hoc dismissal?' Boyle asked later.<br /><br />Boyle lamented the increased number of health care fraud cases across the country.<br /><br />'Who are the victims in this case?' Boyle asked before answering his own question. 'Every American wage earner and every American citizen.'<br /><br />Boyle continued: 'It’s very difficult for society and the court to <i>differentiate between the everyday working Joe or Jane who goes to prison and the nonprofit corporate giant who doesn’t go to jail, who gets a slap on the hand and doesn’t miss a beat.'</i></blockquote><br />Exactly.   And finally, just to demonstrate the sense of impunity of the leadership of this particular nonprofit corporate giant<br /><br /><blockquote class="tr_bq">Boyle, who’s been a federal judge for 28 years, also criticized WakeMed for failing to send a top administrator or a board member to answer his questions. It’s rare for a criminal case to be resolved without a defendant at the defense table.<br /><br />Deb Laughery, a WakeMed spokeswoman, said after the hearing that none attended because the board approved a resolution earlier in the week supporting the proposed settlement.</blockquote><br /><b>Summary</b><br /><br />For years now the leadership of large health care organizations have grown rich while denying accountability for their actions that made this so.  This denial has been largely abetted by governmental regulators and law enforcers, who while often recognizing that corporate misbehavior has occurred, have seemed unable or unwilling to pursue anything but the most lenient resolutions of such cases.  These resolutions are often fines that might appear big to gullible members of the public, but are actually small in comparison to the money to be made; sometimes deferred prosecution and corporate integrity agreements that rarely are enforced; and almost never any negative consequences for the people who authorized, directed, or implemented the bad behavior.  Thus the leaders of health care organizations have enjoyed impunity, have become the new untouchables, and thus health care organizations become ever better at raking in money and ever worse at providing good health care.<br /><br />As I have said again and again,  until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations. <br /><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy</div><div style="color: black; font: 10pt sans-serif; height: 1px; overflow: hidden; text-align: left; text-transform: none; width: 1px;"><br />Read more here: http://www.newsobserver.com/2013/01/15/2607671/wakemed-clarifies-statements-on.html#storylink=cpy</div>

"Slap on the Wrist" for a "Too Big to Fail" Hospital - Judge Rejects WakeMed Settlement

Maybe we are reaching an inflection point in how misbehavior by big health care organizations is handled in the US legal system. We have frequently discussed the march of legal settlements made by big…

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Pfizer's Pforeign Pfiasco

Quelle surprise.  Giant international pharmaceutical company Pfizer managed to go for nearly 10 months without announcing a major legal settlement.  However, this month, as <a href="http://www.bloomberg.com/news/2012-08-07/pfizer-agrees-to-settle-foreign-bribery-case-with-u-s-.html">reported</a> by Bloomberg, it was time for Pfizer to settle again.  The basics were:<br /><blockquote>Pfizer Inc., the world’s biggest drugmaker, <em>agreed to pay $60.2 million to settle foreign bribery cases it brought to U.S. authorities involving alleged payments paid by employees and agents of subsidiaries.</em><br /><br />Pfizer entered into two agreements with the Securities and Exchange Commission and the New York-based drugmaker <em>reached a deferred prosecution accord with the Department of Justice</em>, according to filings today in federal court in Washington. </blockquote><br /><strong>Bribery</strong><br /><br />This case is worth perusing because of how it documents what the US government called not merely deceptive, but corrupt practices used by Pfizer to sell drugs. The practices were widespread around the world:<br /><blockquote>The settlements announced today include Pfizer operations in eight countries: Bulgaria, Croatia, Kazakhstan, Russia, Italy, China, the Czech Republic and Serbia. The Wyeth settlement, over its nutrition business, was for China, Indonesia, Saudi Arabia and Pakistan. </blockquote><br />The practices involved, not to put too fine a point on it, bribing doctors. Furthermore, as part of the settlement Pfizer apparently admitted to some of the specific practices alleged by the government:<br /><blockquote>In Bulgaria, local representatives <em>spent $28,000 to invite government doctors on 'incentive trips' to Greece, as a reward for the physicians who were the biggest prescribers</em> of Pfizer’s products, <em>Pfizer admitted</em> according to the Justice Department filing. They also <em>paid $17,000 to send doctors to medical conferences, again in exchange for commitments to prescribe Pfizer drugs. </em><br /><br />In Croatia, the unit there had used<em> a consulting agreement with a government doctor to help influence which drugs were allowed to be sold in the country</em>, paying the physician in cash and travel expenses, Pfizer admitted.<br /><br />Pfizer also admitted to what was called the 'hospital program,' in Russia, where doctors were given a <em>5 percent kick- back on certain drugs prescribed</em>.<br /><br />'Pfizer Russia used the Hospital Program to make cash payments to individual government healthcare professionals to <em><strong>corruptly </strong>reward past purchases and prescriptions of Pfizer products, and to <strong>corruptly</strong> induce future purchases and prescriptions</em>,' the Justice Department said in the filing. Pfizer’s Russian unit also used intermediary companies to pay off doctors and government officials, the company admitted. </blockquote><br /><strong>No Individual Penalties</strong><br /><br />Despite the shamefulness of these practices, as is now distressingly usual (look <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">here</a>), no individual seems to be obligated to suffer any penalty or negative consequences as a result of this settlement. While the US government alleged criminal behavior, beyond the fines imposed on the company, further prosecution will be deferred:<br /><blockquote>The Justice Department charged the Pfizer HCP Corp. unit with two criminal counts, conspiracy to violate the Foreign Corrupt Practices Act and a violation of the FCPA’s anti-bribery provisions. <em>Prosecutors agreed to defer prosecution and drop the charges after two years if Pfizer continues to cooperate and take remedial steps</em>. </blockquote><br />The article contained a curious statement seemingly asserting that the payments were somehow made independent of any actions by individuals at Pfizer:<br /><blockquote>The SEC said the payoffs were made 'without the knowledge or approval of officers or employees of Pfizer, but the inaccurate books and records of Pfizer subsidiaries were consolidated in the financial reports of Pfizer.' </blockquote><br />So were the payments made by machines acting autonomously? or by ghosts? Maybe this was just a typo. However, note that the de rigeur statement by Pfizer's internal counsel was phrased so as to imply the actions somehow occurred outside of the organization:<br /><blockquote>'The actions which led to this resolution were disappointing, but the openness and speed with which Pfizer voluntarily disclosed and addressed them reflects our true culture and the real value we place on integrity and meeting commitments,' Amy Schulman, Pfizer’s general counsel, said in an e-mailed statement.</blockquote><br /><strong>Summary</strong><br /><br />This latest settlement reaffirms the poor ethical culture now prevalent in major health care organizations throughout the world.  It also affirms how deeply unethical the culture has become at some of our largest and most prominent and influential health care organizations.  This settlement is only the latest evidence of ethical missteps by Pfizer's leadership.<br /><br />In the beginning of the 21st century, <a href="http://articles.philly.com/2009-09-03/business/25267571_1_pfizer-employee-pfizer-sales-representatives-zyvox">according to the Philadelphia Inquirer</a>, Pfizer made three major settlements,<br /><blockquote>October 2002: Pfizer and subsidiaries Warner-Lambert and Parke-Davis agreed to pay $49 million to settle allegations that the company fraudulently avoided paying fully rebates owed to the state and federal governments under the national Medicaid Rebate program for the cholesterol-lowering drug Lipitor.<br /><br />May 2004: Pfizer agreed to pay $430 million to settle DOJ claims involving the off-label promotion of the epilepsy drug Neurontin by subsidiary Warner-Lambert. The promotions included flying doctors to lavish resorts and paying them hefty speakers' fees to tout the drug. The company said the activity took place years before it bought Warner-Lambert in 2000.<br /><br />April 2007: Pfizer agreed to pay $34.7 million in fines to settle Department of Justice allegations that it improperly promoted the human growth hormone product Genotropin. The drugmaker's Pharmacia & Upjohn Co. subsidiary pleaded guilty to offering a kickback to a pharmacy-benefits manager to sell more of the drug.</blockquote><br />Thereafter, Pfizer paid a $2.3 billion settlement in 2009 of civil and criminal allegations and a Pfizer subsidiary entered a guilty plea to charges it violated federal law regarding its marketing of Bextra (see post <a href="http://hcrenewal.blogspot.com/2009/09/pfour-legal-settlements-for-pfizer-why.html">here</a>).  Pfizer was involved in two other major cases from then to early 2010, including one in which a jury found the company guilty of violating the RICO (racketeer-influenced corrupt organization) statute (see post <a href="http://hcrenewal.blogspot.com/2010/03/settlement-and-conviction-round-up.html">here</a>).  The company was listed as one of the pharmaceutical "big four" companies in terms of defrauding the government (see post <a href="http://hcrenewal.blogspot.com/2010/12/drug-companies-are-now-no-1-when-it.html">here</a>).  Pfizer's Pharmacia subsidiary settled allegations that it inflated drugs costs paid by New York in early 2011 (see post <a href="http://hcrenewal.blogspot.com/2011/02/pharmacia-or-maybe-pfizer-settles-only.html">here</a>).   In March, 2011, a settlement was announced in a long-running class action case which involved allegations that another Pfizer subsidiary had exposed many people to asbestos (see <a href="http://www.bloomberg.com/news/2011-03-22/pfizer-reaches-asbestos-settlement-that-may-end-quigley-unit-s-bankruptcy.html">this story</a> in Bloomberg).  In October, 2011, Pfizer settled allegations that it illegally marketed bladder control drug Detrol (see this <a href="http://hcrenewal.blogspot.com/2011/10/what-pfizer-v-few-consequences-for-long.html">post</a>).<br /><br />Thus, it appears on 10 separate occasions between 2002 and 2012, Pfizer settled allegations of, pleaded guilty to, or was convicted for actions that represented seriously unethical behavior.  Note that these included a conviction that found the company to be a racketeer-influenced corrupt organization.<br /><br />Yet the company has not failed or been restructured, and none of its leaders has ever faced any negative consequences.  In fact, last year its CEO made over $18 million, up from over $6 million the year before (see <a href="http://hcrenewal.blogspot.com/2012/04/there-they-go-again-pfizer-ceo.html">this post</a>).    <br /><br />So obviously it is not just that one company's culture has become seriously corrupt.  We seem to live in such a corrupt nation, and maybe such a corrupt global society that such corrupt cultures thrive in our major corporations and organizations.  Despite stories like this in health care, just like in finance despite the global financial collapse, as Charles Ferguson said at the Oscar awards last year, " not a single ... executive has gone to jail, and that's wrong."<br /><br /><iframe allowfullscreen="allowfullscreen" frameborder="0" height="315" src="http://www.youtube.com/embed/mpz5DVwnbnk" width="560"></iframe><br /><br /><br />Unless we hold leaders of health care organizations accountable for bad behavior and corruption, expect bad behavior and corruption to get worse.  Until we have political leaders with the courage to stand up for honesty and the law, expect continued dishonesty and the law to continue to be trampled by the rich and powerful. 

Pfizer's Pforeign Pfiasco

Quelle surprise.  Giant international pharmaceutical company Pfizer managed to go for nearly 10 months without announcing a major legal settlement.  However, this month, as reported by Bloomberg, it w…

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Conflicts of Interest or Bribes? - Biomet, Smith & Nephew Settle

More justifications of physicians' and other health care professionals' financial arrangements with industry have been appearing in the media and the medical literature (for recent examples, look <a href="http://hcrenewal.blogspot.com/2012/03/another-cautionary-tale-about-conflicts.html">here</a> and <a href="http://hcrenewal.blogspot.com/2012/03/logical-fallacies-in-defense-of.html">here</a>). Most commonly, the relationships they defended could be characterized as health care professionals consulting or sitting on advisory boards for industry, or receiving royalties from industry for their intellectual property.<br /><br />In the last two months, two device manufacturers, Biomet and Smith & Nephew, accepted penalties for less defensible financial relationships with physicians. They entered into deferred prosecution agreement and settled charges that they bribed doctors employed by foreign governments. Some of these relationships, especially those involving Biomet, would have been prospectively indistinguishable from the sorts of conflicts of interest that have been so fervently defended. <br /><br /><strong>Background</strong><br /><br />Starting in 2007, we posted (<a href="http://hcrenewal.blogspot.com/2007/11/orthopedic-device-makers-reveal.html">here</a>, <a href="http://hcrenewal.blogspot.com/2007/11/few-answers-and-many-more-questions.html">here</a>, <a href="http://hcrenewal.blogspot.com/2007/11/one-more-payment-to-academic-health.html">here</a>, <a href="http://hcrenewal.blogspot.com/2008/03/stories-about-device-manufacturers.html">here</a> and <a href="http://hcrenewal.blogspot.com/2008/06/more-multi-million-dollar-orthopods.html">here</a>) about the payments, often huge, that five manufacturers of prosthetic joints, <a href="http://www.biomet.com/">Biomet</a>, DePuy Orthopaedics,a unit of <a href="http://www.jnj.com/">Johnson & Johnson</a>, Stryker Orthopedics,a unit of <a href="http://www.stryker.com/">Stryker Inc</a>, <a href="http://www.zimmer.com/">Zimmer Holdings</a>, and <a href="http://www.smith-nephew.com/">Smith & Nephew</a>, revealed they made to orthopedic surgeons and various academic and other organizations in the US. All companies except Stryker were charged with "criminal conspiracy to violate anti-kickback laws," and all were subject to deferred prosecution agreements.  (Stryker entered into a voluntary compliance agreement.)  According to a US Department of Justice <a href="http://www.justice.gov/usao/nj/Press/files/pdffiles/Older/hips0927.rel.pdf">news release</a>, the agreements required:<br /><blockquote>• <em>A federal monitor will be in place at each company to review compliance with the DPAs and NPA and all new and existing consulting relationships with the companies</em>;<br />• Each company is required to conduct a needs assessment to determine the reasonable needs for educational consulting services, and new product-development consultants.<br />• All new consulting agreements shall require physicians to disclose their financial engagements with any company to their patients and require the companies to disclose the name of each consultant and what they have been paid on the company website.</blockquote><br />These agreements ended in 2009. <br /><br /><strong>The Latest Settlements</strong><br /><br />As we <a href="http://hcrenewal.blogspot.com/2011/04/johnson-and-johnson-runs-afoul-of.html">noted</a>, in 2011, Johnson and Johnson admitted its subsidiaries, including DePuy, had been bribing doctors in Europe through 2007, and agreed to yet another deferred prosecution agreement. <br /><br /><u>Smith & Nephew</u><br /><br />Last month, Bloomberg <a href="http://www.bloomberg.com/news/2012-02-06/smith-nephew-agrees-to-pay-22-million-to-settle-u-s-bribery-allegation.html">reported</a>:<br /><blockquote>Smith & Nephew Plc, Europe’s biggest maker of artificial hips and knees, agreed to pay $22.2 million to settle allegations by the U.S. Justice Department and Securities <em>and Exchange Commission that it engaged in a scheme to pay bribes in Greece.</em><br /><br />Smith & Nephew admitted in filings today in federal court in Washington that two of its units were involved in a scheme for more than a decade to make 'illicit payments' to doctors employed by government hospitals or agencies in Greece in violation of the Foreign Corrupt Practices Act.<br /><br />The London-based company, which entered into a deferred prosecution agreement with the U.S., agreed to pay a $16.8 million fine to settle the criminal allegations and another $5.4 million to settle a civil suit filed by the SEC. </blockquote><br />The colorful specifics were:<br /><blockquote>Smith & Nephew admitted that<em> from 1997 until June 2008, its U.S. and German units bribed public doctors in Greece to win business</em>. The bribes were paid through a person described in court documents as a 'Greek distributor.' <em>This person used shell companies that masked bribes as 'marketing services,' </em>according to the statement of facts filed in the criminal case.<br /><br />The document cites a March 2002 e-mail from the Greek distributor to a Smith & Nephew vice president in Memphis, Tennessee, complaining that the 'marketing services' payments weren’t enough, noting that competitors were paying 30 percent to 40 percent more.<br /><br />'I absolutely need this fund to promote my sales with surgeons,' the distributor said in the e-mail, according to prosecutors.<br /><br />Reforming a corrupt and dysfunctional public health system was one of the conditions of Greece’s acceptance of a European Union and International Monetary Fund bailout package in 2010. Doctors also supplement their income with payments from patients, called 'fakelaki,' small envelopes with cash for prompt treatment. </blockquote>In the <a href="http://www.sec.gov/litigation/complaints/2012/comp22252.pdf">SEC complaint</a>, the payments made to the physicians were described as "commissions."<br />Note that the company made the usual sort of statement,<br /><blockquote>'We have what I believe to be a world-class compliance program, having enhanced it significantly since this investigation began in 2007,' Olivier Bohuon, Smith & Nephew’s chief executive officer, said in a statement. 'These legacy issues do not reflect Smith & Nephew today.' </blockquote><br />He did not mention why the payments were continuing at a time when the company was already supposedly operating under the previous deferred prosecution agreement that arose out of the charges in the US discussed above.<br /><br /><u>Biomet</u><br /><br />This week, the Indianapolis Star <a href="http://www.indystar.com/article/20120327/BUSINESS/203270312/Indiana-medical-device-maker-Biomet-settles-bribe-case">reported</a>,<br /><blockquote>To sell its products abroad, medical device maker <em>Biomet at times bribed doctors with cash, travel and meals</em>, the federal government says.<br /><br />The Warsaw, Ind.-based company <em>agreed Monday to pay nearly $23 million to settle allegations that its payments to doctors violated the federal Foreign Corrupt Practices Act</em>. The Securities and Exchange Commission <em>alleges that Biomet, acting through four subsidiaries and its distributors, paid bribes from 2000 to 2008 to doctors in Argentina, Brazil and China in order to win business.</em><br /><br />The settlement includes a $17.3 million criminal fine and $5.6 million to the SEC, the government and company said in separate news releases.</blockquote><br />The details were,<br /><blockquote>he SEC accused Biomet of <em>writing phony invoices to cover kickbacks as high as 20 percent of sales</em> to push its products.<br /><br />In other instances, Biomet<em> provided doctors with money and travel in exchange for implanting artificial joints and other Biomet products in their patients</em>, says the SEC complaint, which was filed in federal court in Washington.<em> In China, Biomet vendors gave doctors cash upon completion of surgeries using Biomet implants</em>, the lawsuit says.<br /><br />'I've got to send him to Switzerland to visit his daughter,' a Biomet distributor wrote in a 2001 email to the company, describing <em>a trip given as a reward to a Chinese doctor who implanted 10 Biomet hips and knees a month in patients</em>.<br /><br />The SEC said Biomet's compliance and internal audit functions failed to stop the practices even after determining they were illegal.</blockquote><br />Note how Biomet accounted for the payments,<br /><blockquote><em>The payments were falsely recorded on company books as 'commissions,' <strong>'royalties'</strong> and 'scientific incentives,'</em> the Justice Department said.</blockquote><br />Furthermore, the Fort Wayne Journal-Gazette <a href="http://www.journalgazette.net/article/20120328/BIZ/303289938/1031/BIZ">added</a>,<br /><blockquote>With the settlement announced Monday, the Justice Department found that <em>Biomet and its subsidiaries covered up bribery payments by officially recording them as <strong>'consulting fees'</strong> or 'commissions.'</em></blockquote><br />Note that Biomet's official response was similar to Smith & Nephew's, as reported in another <a href="http://www.journalgazette.net/article/20120327/BIZ/303279978">article</a> from the Fort Wayne Journal-Gazette,<br /><blockquote>Jeffrey Binder, Biomet’s president and CEO, <em>didn’t address the company’s guilt or innocence</em> in a written statement released Monday.<br /><br />Biomet has 'significantly enhanced' its procedures worldwide in recent years to ensure employees’ conduct is legal and ethical, he said.<br /><br />'Moving forward, we intend to continue to adhere to our enhanced global compliance procedures, and to promote the company’s commitment to the highest ethical standards in all the markets that we serve,' Binder said. </blockquote><br />Again, he did not explain why this time the enhanced compliance procedures are likely to work, given that the questionable conduct was still going on after the company had already entered into the 2007 deferred prosecution agreement.<br /><br /><strong>Summary</strong><br /><br /><u>Some Apparent Conflicts of Interest are Actually Bribes</u><br /><br />In these cases, two medical device corporations paid doctors in several countries for implanting their products into patients. The resulting legal proceedings allow us to characterize these actions as bribes. Clearly both the companies' and the physicians' actions were unethical, since they lead to decisions that put the enrichment of the decision makers and those bribing them ahead of the patients' interests. <br /><br />Some of the most common financial arrangements between health care professionals and industry that are thought of as conflicts of interest are paid consulting and payment of royalties for intellectual property. As we have discussed, e.g. <a href="http://hcrenewal.blogspot.com/2012/02/logical-fallacies-in-defense-of.html">here</a>, conflicts of interest in medicine and health care are generally thought to raise the likelihood of corruption, but not necessarily to indicate corruption in specific instances. In the cases above, bribes were sometimes called "consulting payments or royalties." This suggests that some consulting payments and royalties which may commonly be thought of as conflicts of interest are outright bribes, that is, outright <a href="http://hcrenewal.blogspot.com/search/label/health%20care%20corruption">health care corruption</a>.<br /><br />Those who fervently defend conflicts of interest as inevitable, and necessary for collaboration and hence innovation (e.g., look <a href="http://hcrenewal.blogspot.com/2012/03/logical-fallacies-in-defense-of.html">here</a>), often minimize the adverse effects of these conflicts (e.g., look <a href="http://hcrenewal.blogspot.com/2012/02/logical-fallacies-in-defense-of.html">here</a>). In fact, any putative benefits of such conflicts ought to be contrasted with their possible harms. These cases make it clear that these harms include outright corruption which may be disguised as mere conflicts of interest.<br /><br />This adds strength to arguments that conflicts of interest ought to be minimized or eliminated, not tolerated and "managed."<br /><br /><u>Current Measures to Enforce Laws Against Bribes and Kickbacks are More Theatre than Deterrent</u><br /><br />The current cases are just the latest members in the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">march of legal settlements</a>. We have noted that misbehavior in large health care organizations rarely leads to any negative consequences for the people who authorized, directed or implemented the offending actions. Instead, the penalties are, at most, fines paid by the organizations, not the people involved, and variants of deferred prosecution and/or corporate integrity agreements. We and <a href="http://hcrenewal.blogspot.com/2011/11/will-citigroup-ruling-challenge-health.html">others</a> have previously argued without negative consequences affecting the people who authorize, direct or implement unethical actions, such actions will continue. <br /><br />The current cases corroborate this. Corporations that had already paid fines and accepted deferred prosecution agreements for bribes to physicians continued to bribe other physicians. The failure of the offending corporations to admit any wrongdoing, or the need for specific changes of behavior in the future, suggests that the current fines and deferred prosecution agreements will not be any more effective than the previous ones. 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.   <br /><br />As we have said before, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior.

Conflicts of Interest or Bribes? - Biomet, Smith & Nephew Settle

More justifications of physicians' and other health care professionals' financial arrangements with industry have been appearing in the media and the medical literature (for recent examples, look here…

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Another Month, Another Set of Legal Settlements, Deferred Prosecution Agreements, and Jury Findings Adverse to Large Health Care Corporations

Another month, another series of adverse legal rulings suggesting misbehavior by large health care organizations.  In alphabetical order,...<br /><br /><strong>Baxter, McKesson, Teva Pay Punitive Damages</strong><br /><br />As <a href="http://www.businessweek.com/news/2011-10-11/teva-jury-awards-162-5-million-in-damages-over-anesthetic.html">reported</a> by Bloomberg,<br /><blockquote>A jury said Teva Pharmaceutical Industries Ltd. unit and two other drugmakers must <em>pay $162.5 million in punitive damages for selling the anesthetic Propofol in a way that led three colonoscopy patients to develop Hepatitis C.</em><br /><br />Jurors in state court Las Vegas ordered <em>Teva Parenteral Medicines Inc., Baxter Healthcare Corp. and McKesson Corp. to pay so-called punishment damages</em> over sales of the anesthetic in vials large enough to be reused by doctors. Anne Arnold, Richard Sacks and Anthony Devito contend they contracted Hepatitis C from reused vials during colonoscopy procedures. They had sought more than $700 million in damages.<br /><br />It’s the second punitive award against Baxter and the unit of Petach Tikva, Israel-based Teva over a 2008 hepatitis outbreak in Nevada tied to Propofol. The first case resulted in a punitive verdict of more than $500 million against the drugmakers. Teva has agreed to cover all damage awards arising from the Nevada cases on behalf of Baxter and McKesson.</blockquote><br />In particular,<br /><blockquote>The patients’ lawyers <em>allege Teva intentionally sold Propofol in jumbo-sized vials to encourage doctors to reuse them, even with the risk of spreading blood-borne diseases such as hepatitis, an incurable liver disease.</em></blockquote><br />So the allegations are that the company intentionally put financial gain ahead of the safety of patients.<br /><br /><strong>Boston Scientific Settles Over-Billing Allegations</strong><br /><br />Again <a href="http://www.businessweek.com/news/2011-09-26/boston-scientific-to-pay-9-25-million-in-whistleblower-case.html">per</a> Bloomberg:<br /><blockquote><em>Boston Scientific Corp.’s Guidant LLC unit will pay $9.25 million to settle a whistleblower’s claim that the company over-billed the U.S. and private hospitals for heart pacemakers and defibrillators.</em></blockquote><br />The details:<br /><blockquote><em>Guidant allegedly reneged on credits owed to the U.S. Department of Veterans Affairs for replacement of units still under warranty and is accused of over-charging hospitals for the devices, causing them to over-bill Medicare</em>, according to an e-mailed statement from the Justice Department.</blockquote><br />Note that we have quite a extensive files on <a href="http://hcrenewal.blogspot.com/search/label/Boston%20Scientific">Boston Scientific</a>, and on <a href="http://hcrenewal.blogspot.com/search/label/Guidant">Guidant</a>, now its subsidiary.<br /><br /><strong>Hil-Rom Settles Fraud Allegations</strong><br /><br /><a href="http://www.knoxnews.com/news/2011/sep/27/feds-announce-418-million-settlement-in-fraud">Reported</a> by the Knoxville News-Sentinel:<br /><blockquote>Federal prosecutors announced Tuesday a <em>$41.8 million civil fraud settlement in a 'whistle-blower' lawsuit against international medical equipment supply company, Hill-Rom Company Inc.</em></blockquote><br />The results also were that<br /><blockquote>As part of the settlement, <em>Hill-Rom has entered into a five-year 'corporate integrity agreement,'</em> in which the firm will face close scrutiny by federal officials, Killian said.</blockquote>The allegations were:<br /><blockquote><em>'Hill-Rom submitted false claims for medical equipment for patients who did not qualify for the equipment</em>, including patients who had died, were no longer using the equipment or had been moved to nursing homes,' [US Attorney Bill] Killian said.</blockquote><br />In particular,<br /><blockquote>The lawsuit alleged the firm was ripping off Medicare with its faulty billing practices. According to the lawsuit, unsealed Tuesday, <em>Hill-Rom offered its sales representatives $200 gift certificates and 42-inch televisions as reward for boosting billings and, in 2001, laid off the lion's share of staff dedicated to ensuring compliance with Medicare rules</em>.</blockquote><br />Note that this suggests a pattern of providing incentives to employees who "make their numbers," no matter how they do so. We have seen how making the financial numbers seems to take precedence over all else, including patients' well-being, in many contemporary health care organizations.<br /><br /><strong>Maxim Healthcare Settles Fraud Allegations</strong><br /><br />In a <a href="http://www.baltimoresun.com/business/bs-bz-maxim-healthcare-settlement-2-20110912,0,4024222.story">story</a> in the Baltimore Sun,<br /><blockquote>A Columbia-based health care firm has agreed to a <em>$150 million settlement with the federal government and 43 states to resolve criminal and civil charges that it submitted claims for millions of dollars of work that it did not perform and operated offices that were not properly licensed,</em> officials said Monday.<br /><br />A five-year federal investigation found that Maxim Healthcare Services Inc., one of the country's largest providers of home healthcare services, submitted<em> $61 million in false claims for services to the federal government's Medicaid and Veterans Affairs health programs</em> over an 11-year period from 1998 to 2009.<br /><br />Investigators said managers and workers at Maxim repeatedly modified time sheets and documents to cover up the fraud, creating <em>a culture in which submitting false claims became 'common practice.'</em></blockquote><br />The settlement was of criminal as well as civil charges:<br /><blockquote>The settlement includes a <em>$20 million criminal fine</em> and $130 million in civil settlements.</blockquote><br />It will also involve a deferred prosecution or corporate integrity agreement:<br /><blockquote>In addition to the fines, Maxim also <em>has been charged criminally with conspiracy to commit health care fraud.</em> But the company could avoid conviction if it meets requirements outlined in the settlement.</blockquote><br />Unlike many such cases, this one involved criminal charges for and guilty pleas by some people involved in the wrong-doing, in this case, middle managers:<br /><blockquote><em>Several regional account managers, a home health aid and a clinical services director also pleaded guilty to criminal charges</em>, government officials said. They could face as much as $250,000 in fines and jail time for their roles in the fraud.</blockquote><br />Another atypical result was that the CEO who presided over the misbehavior actually suffered some consequences, although he did not have to pay fines for face criminal charges,<br /><blockquote>Maxim officials said they take full responsibility for the violations. The company said it <em>hired a new CEO in 2009</em> and changed its business practices to protect against a repeat.</blockquote><br />ProPublica published an <a href="http://www.propublica.org/article/troubled-health-care-staffing-chain-settles-with-government-for-150-million">article</a> at the same time which noted that Maxim's practices had come into question before, <br /><blockquote>A different set of problems involving Maxim came up during a ProPublica investigation into the oversight of registered nurses in 2009. We identified several nurses who were <em>hired by the Maryland-based company despite having a record of problems.</em></blockquote><br />Although that previous article did not mention the company's name:<br /><blockquote>The articles focused on how regulators across the country did little to scrutinize troubled nurses who crossed state lines to continue working. Our earlier stories did not identify Maxim by name. </blockquote><br />We have noted that organizations which misbehave once are likely to misbehave again. This may stem from an organizational culture that puts revenue ahead of ethics and patients' and the public's health, and the lack of negative consequences that people who respond to the resulting positive financial incentives are likely to suffer.<br /><br /><strong>Medicis Settles Shareholder Class-Action Lawsuit</strong><br /><br /><a href="http://www.azcentral.com/business/news/articles/2011/09/28/20110928medicis-auditor-will-pay-18-million-settle-suit.html">Noted</a> by the Arizona Republic,<br /><blockquote>Medicis Pharmaceutical Corp. and its auditing firm, Ernst & Young, have agreed to <em>pay $18 million to settle a shareholder class-action lawsuit stemming from the pharmaceutical company's financial statements.</em></blockquote><br />The shareholders alleged that Medicis was not honest about its financial affairs:<br /><blockquote>The shareholders' lawsuit stems from Medicis' announcement in September 2008 that it would restate earnings from 2003 through the first half of 2008.<br /><br />Shareholders alleged that Medicis offered its wholesale customers generous return policies for prescription drugs as part of an effort to inflate the company's revenue. Medicis would accept returned products that were expired or about to expire at either no cost or substantial discounts to the wholesale customers, according to the lawsuit.</blockquote><br /><strong>Summary</strong><br /><br />The constant march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements </a>by, jury verdicts against, and in some cases <a href="http://hcrenewal.blogspot.com/search/label/crime">criminal convictions </a>of or guilty pleas by large health care corporations indicate how common misbehavior by such organizations has become. Since it is likely that much misbehavior does not lead to publicly announced legal actions, what is published can only provide a floor for an estimate of how common it is. The march, which we have been documenting since starting Health Care Renewal, shows how sleazy and often corrupt health care has become, and how that sleaziness and corruption is prevalent not just among small players, but among the biggest and richest health care organizations, and their top leaders. <br /><br />One reason the situation continues to be so bad is that while the unethical behavior does sometimes result in pontificating by the civil authorities, and fines that may only be costs of doing business, it rarely leads to meaningful negative consequences for those who authorized, directed or implemented it. This was noted in the reporting of the Maxim Healthcare case above. For example, in the Baltimore Sun <a href="http://www.baltimoresun.com/business/bs-bz-maxim-healthcare-settlement-2-20110912,0,4927923,print.story">article</a> we found,<br /><blockquote>One watchdog group called the penalty a drop in the bucket for a company that had $2 billion in reimbursements from 2003 to 2009.<br /><br />'That is hardly crippling,' said Joe Newman, a spokesman for the Project on Government Oversight, which tracks government contractors. 'It is certainly something that stings Maxim's pocketbook, but they will be fine after that.'<br /><br />'They won't be barred from the Medicaid program. That would hurt them.'</blockquote><br />Also, Sun columnist Jay Hancock <a href="http://www.baltimoresun.com/business/bs-bz-hancock-prmc-accountability-20110919,0,1446559.column">wrote</a>:<br /><blockquote>Corporations are happy to be treated as people under the law, as we know from recent court decisions. They can own property. They can seek redress in Congress and the courts. They can make huge political contributions.<br /><br />But <em>when it comes to being penalized for cheating the government, corporations quickly abandon their personhood and go back to being abstract blobs</em>.<br /><br />'I don't know about you, but if I hired a contractor to work on my house and he charged me a ton of extra money for work he didn't do, I wouldn't use that contractor again,' Minnesota Sen. Al Franken said in Congress a few months ago. 'And I would make sure my friends knew not to use them either. It seems like the same should be true of government contractors.'</blockquote><br />But that is often not the case. For years, government agencies have not vigorously enforced the law when doing so might inconvenience big corporations and their well-paid executives. Maybe this lenience stems from the loony philosophy of former Chairman of the Federal Reserve Alan Greenspan, who was once regarded as some sort of economic genius, who seemed to think that fraud cannot occur in his idealized idea of a free market, because somehow all bad actors would become widely known and therefore all counter-parties would avoid them. In an <a href="http://www.stanfordalumni.org/news/magazine/2009/marapr/features/born.html">article</a> in Stanford Magazine,<br /><blockquote><em>The influential Greenspan was an ardent proponent of unfettered markets</em>. Born was a powerful Washington lawyer with a track record for activist causes. Over lunch, in his private dining room at the stately headquarters of the Fed in Washington, Greenspan probed their differences.<br /><br />'Well, Brooksley, I guess <em>you and I will never agree about fraud</em>,' Born, in a recent interview, remembers Greenspan saying.<br /><br />'What is there not to agree on?' Born says she replied.<br /><br />'Well, you probably will always believe there should be laws against fraud, and <em><strong>I don’t think there is any need for a law against fraud,' she recalls. Greenspan, Born says, believed the market would take care of itself.</strong></em><br /><br />For the incoming regulator, the meeting was a wake-up call. 'That underscored to me how absolutist Alan was in his opposition to any regulation,' she said in the interview.</blockquote><br />It is a measure of the insanity of recent years that one of the chief leaders of government economic policy did not believe there was any need for laws against fraud.<br /><br />It appears that this daft idea has carried over to and still influences how many in government and out deal with health care. However, as we have d<a href="http://hcrenewal.blogspot.com/2010/08/how-fallacy-of-perfect-health-care.html">discussed</a>, health care is not and probably cannot ever be an ideal free market. Also, in health care, most of the bad actions remain <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a>, and in many cases it may be hard for counter-parties to avoid bad actors because they may dominate the market. Also, it may be those that make decisions about whether to deal with particular organizations may be executives, and sometimes health care professionals who have become indifferent to the ethical issues.<br /><br />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.<br /><br />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.

Another Month, Another Set of Legal Settlements, Deferred Prosecution Agreements, and Jury Findings Adverse to Large Health Care Corporations

Another month, another series of adverse legal rulings suggesting misbehavior by large health care organizations.  In alphabetical order,...Baxter, McKesson, Teva Pay Punitive DamagesAs reported by Bl…

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The Case of the Bleeding Heart Prosecutors - How the Justice Department Became Lenient with Corporate Wrong-Doing

We have frequently posted, some may say tiresomely, about the lack of consequences or negative incentives for health care organizational leaders involved in wrong-doing.  For example, see the numerous cases against health care organizations that resulted in <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a>, almost never requiring any penalties against individuals who authorized, directed, or implemented the behavior in question.<br /><br />Now a <a href="http://www.nytimes.com/2011/07/08/business/in-shift-federal-prosecutors-are-lenient-as-companies-break-the-law.html">major article</a> in the New York Times by Gretchen Morgenson and Louise Story explains some of the history behind this aspect of the decreasing accountability of corporate leadership.  Their article focused on financial corporate leadership, but clearly is generalizable to health care corporate leadership.<br /><br /><strong>Banks Asked to Report Their Own Misbehavior</strong><br /><br />The Times article documents how the US Department of Justice deliberately became more lenient in the 1990s, supposedly to conserve scarce investigational resources:<br /><blockquote>dating to the mid-1990s ... banks were asked to regularly report suspicious activities to the Treasury Department, an effort that <em>aimed at relieving regulators of some of their enforcement loads.</em></blockquote><br /><strong>The Effect of the Arthur Andersen Case</strong><br /><br />Around the beginning of the 21st century there had been some vigorous prosecution of corporate financial wrong-doing:<br /><blockquote>The names have become synonymous with corporate wrongdoing — and forceful prosecution: Not just Enron, but also WorldCom, Tyco, Adelphia, Rite Aid and ImClone. In the early part of the last decade, <em>senior executives at all these companies were convicted and imprisoned</em>. </blockquote><br />However, for reasons that were not explained, a single unsuccessful case caused reconsideration of this approach:<br /><blockquote>The department began pulling back from a more aggressive pursuit of white-collar crime around 2005, say defense lawyers and former prosecutors, after the Supreme Court overturned a conviction it won against the accounting firm Arthur Andersen. That ended an era of brass-knuckle prosecutions related to fraud at companies like Enron. </blockquote><br /><strong>Sympathy for the Targets of Investigation</strong><br /><br />The pullback was rationalized for a sudden sympathy for the objects of investigation:<br /><blockquote>But by 2005, a debate was growing over aggressive prosecutions, <em>as some business leaders had been criticizing the approach as perhaps too zealous. </em><br /><br />That May, Justice Department officials met ahead of a session with a cross-agency group called the Corporate Fraud Task Force. It was weeks after Justice Department lawyers had presented to the Supreme Court their case against Arthur Andersen, which was seeking — successfully, it would turn out — to overturn its criminal fraud conviction in a prominent case. <br /><br />In the meeting,<em> the deputy attorney general at the time, James B. Comey, posed questions that surprised some attendees</em>, according to two people there who asked to remain anonymous because they were not supposed to discuss private meetings. <br /><br /><em>Was American business being hurt by the Justice Department’s investigations?,</em> Mr. Comey asked, according to these two people, who said they thought the message had come from others. He cautioned colleagues to be responsible. 'It was a total retrenchment,' one of the people said. 'It was like we were going backwards.' <br /><br />Mr. Comey said recently that he did not recall this conversation. <br /><br />Around the same time, the Justice Department was developing instructions on dealing with companies under investigation — particularly companies that work with the government. It issued <em>a memo in 2003 that gave companies more credit for cooperating</em> than in the past. That message was <em>reinforced in another memo in 2006</em>. <br /><br />As the first memo put it, 'it is entirely proper in many investigations for a prosecutor to consider the corporation’s pre-indictment conduct, e.g., voluntary disclosure, cooperation, remediation or restitution, in determining whether to seek an indictment.' <br /><br />During this period, the Justice Department <em>increased the use of deferred prosecutions or even nonprosecution agreements. </em><br /><br />Many well-known companies have benefited. In 2004, the American International Group, the giant insurer, paid $126 million when it entered a deferred prosecution agreement to settle investigations into claims that it had helped clients improperly burnish financial statements. <br /><br />Deals over accounting improprieties also were struck that year by Computer Associates International, a technology company, and <em>in 2005 by Bristol- Myers Squibb, a pharmaceutical concern</em>. Prudential Financial entered into a deferred prosecution in 2006 over improper mutual fund trading. </blockquote><br />Note that while the emphasis of this article was on the financial services industry, big health care organizations were also benefiting from more lenient treatment.  Note also that one firm given lenient treatment, AIG, went on to threaten collapse, a collapse that was feared could take down the entire world financial system, and hence was given a very generous government bail-out, which has not be paid back to this day.  <br /><br /><strong>Formalized Leniency</strong><br /><br />In 2008, the approach was formalized:<br /><blockquote>As the financial storm brewed in the summer of 2008 and institutions feared for their survival, a bit of good news bubbled through large banks and the law firms that defend them. <br /><br /><em>Federal prosecutors officially adopted new guidelines about charging corporations with crimes — a softer approach that, longtime white-collar lawyers and former federal prosecutors say, helps explain the dearth of criminal cases despite a raft of inquiries into the financial crisis</em>. <br /><br />Though little noticed outside legal circles, the guidelines were welcomed by firms representing banks. <em>The Justice Department’s directive, involving a process known as deferred prosecutions, signaled 'an important step away from the more aggressive prosecutorial practices seen in some cases under their predecessors,'</em> Sullivan & Cromwell, a prominent Wall Street law firm, told clients in a memo that September. <br /><br /><em>The guidelines left open a possibility other than guilty or not guilty, giving leniency often if companies investigated and reported their own wrongdoing. In return, the government could enter into agreements to <strong>delay or cancel the prosecution if the companies promised to change their behavior. </strong></em></blockquote><br /><strong>Less Deterrence</strong><br /><br />The NY Times article documented a number of opinions that increasing leniency was resulting in less deterrence of bad behavior:<br /><blockquote><em>'If you do not punish crimes, there’s really no reason they won’t happen again,'</em> said Mary Ramirez, a professor at Washburn University School of Law and a former assistant United States attorney. 'I worry and so do a lot of economists that we have created no disincentives for committing fraud or white-collar crime, in particular in the financial space.' </blockquote><br /><strong>Why So Much Sympathy from Prosecutors?</strong><br /><br />What was not really clear from the article is why US federal prosecutors seemed to go from their stereotypically tough on crime personas to bleeding hearts for corporate criminals. The one rationale the article provided from the Department of Justice was:<br /><blockquote>Defending the department’s approach, Alisa Finelli, a spokeswoman, said deferred prosecution agreements require that corporations pay penalties and restitution, correct criminal conduct and 'achieve these results without causing the loss of jobs, the loss of pensions and other significant negative consequences to innocent parties who played no role in the criminal conduct, were unaware of it or were unable to prevent it.' </blockquote><br />This, however, makes no sense. Well directed prosecutions of the people who apparently authorized, directed or implemented the wrong-doing ought to have very little effect on "innocent parties." The only jobs and pensions that should be lost should be those of the accused.<br /><br /><strong>Conclusions</strong><br /><br />This seems to be the most recently documented example of important but overlooked, or concealed changes in government policies that have enabled the health care system to become more unethical, dishonest and corrupt, and hence more dysfunctional.<br /><br /><a href="http://hcrenewal.blogspot.com/2009/06/why-did-us-physicians-give-up-their.html">Here</a> we discussed a Supreme Court decision interpreting US anti-trust law that has been used to prevent medical societies from enforcing ethical rules, and hence helped medicine to become increasingly commercialized, and to increasingly put money ahead of patient care.<br /><br /><a href="http://hcrenewal.blogspot.com/2009/06/why-did-us-physicians-give-up-their.html">Here</a> we discussed little discussed legislation from 1945 that allowed US insurance companies/ managed care organizations to avoid federal anti-trust investigation and enforcement, and hence to increased market power.<br /><br /><a href="http://hcrenewal.blogspot.com/2010/06/attempt-to-hold-health-care-leaders.html">Here</a> we discussed failure of the executive branch, and especially the Department of Justice to use existing legal doctrine, the Responsible Corporate Officer Doctrine, available since 1943, to make corporate leaders responsible for their companies' bad behaviors, leading to their increasing lack of accountability and less deterrence of malfeasance.<br /><br />Now we have seen a deliberate turn away from even direct penalties on corporations which have misbehaved, in return basically for a promise that "we won't do it again."<br /><br />The first two examples may be of unintended consequences.<br /><br />The last two seem to signal an increased coziness between some in government and corporations. The origins of this coziness just beg for investigation.<br /><br />Meanwhile, there seems to be no evidence that the government's new leniency has protected innocent people who would have been harmed by the previous tougher approach. Instead, there seems to be a growing tide of bad behavior by health care organizations, exemplified by the nature of some of the bad behavior that lead to the march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a>, and to the <a href="http://hcrenewal.blogspot.com/search/label/deferred%20prosecution%20agreement">deferred prosecution agreements</a> and <a href="http://hcrenewal.blogspot.com/search/label/corporate%20integrity%20agreement">corporate integrity agreements</a> generated in response to the new policies.<br /><br /><strong>What Is to Be Done?</strong><br /><br />- There clearly needs to be investigation, both by journalists and at a congressional level, of Department of Justice policies that have been increasingly lenient to and cozy with large corporations, including health care corporations.<br /><br />- Current Department of Justice officials need to be reminded that their clients are the US people, not corporate executives, no matter how hearty and well-met.<br /><br />ADDENDUM (12 July, 2011) -  See this related <a href="http://www.nakedcapitalism.com/2011/07/defining-deviancy-away-how-the-justice-department-adopted-see-no-evil-approach-to-corporate-crime.html">post</a> on the Naked Capitalism blog.<br /><br />ADDENDUM (19 July, 2011) - See related <a href="http://brodyhooked.blogspot.com/2011/07/kid-gloves-on-corporate-crime-different.html">post</a> by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.

The Case of the Bleeding Heart Prosecutors - How the Justice Department Became Lenient with Corporate Wrong-Doing

We have frequently posted, some may say tiresomely, about the lack of consequences or negative incentives for health care organizational leaders involved in wrong-doing.  For example, see the numerous…

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Two More Settlements, One More Corporate Integrity Agreement for Novo Nordisk

And the legal settlements for health care organizations keep right on marching along.  Here are the basics, <a href="http://online.wsj.com/article/SB10001424052702304259304576377430323510242.html">per</a> the Wall Street Journal, starting with the outline of the first settlement for Novo Nordisk:<br /><blockquote>Drug maker Novo Nordisk A/S's U.S. affiliate has agreed to <em>pay more than $25 million to end investigations by U.S. authorities related to the marketing of NovoSeven and several diabetes drugs.</em><br /><br />In one settlement, Novo Nordisk Inc., the U.S. affiliate, agreed to pay $25 million to end a probe and settle a civil lawsuit related to <em>alleged improper marketing practices regarding Novo Seven</em>, which is used to treat patients suffering from rare bleeding disorders. The complaint had <em>alleged that Novo Nordisk promoted NovoSeven for unapproved uses</em>. </blockquote>Here is the outline of the second settlement:<br /><blockquote>Separately, the U.S. affiliate also agreed to <em>pay $1.73 million in a settlement with the U.S. government to resolve allegations that its sales representatives accessed confidential patient information and submitted false Medicaid claims related to the marketing of diabetes drugs, including Novolin and Novolog.</em><br /><br />Federal prosecutors in Brooklyn, N.Y., had alleged Novo Nordisk representatives <em>made payments to pharmacists in exchange for recommendations for Novolin and Novolog products</em>. As part of their activities, the pharmacists, or Novo Nordisk sales representatives, <em>accessed confidential patient information</em>, according to the settlement agreement. </blockquote>Here is the usual pro forma denial by a company spokesperson that the company had done anything wrong:<br /><blockquote><em>'We are committed to running our business according to high legal and ethical standards</em> and have been cooperating with the government since the investigation began,' said Jim Shehan, corporate vice president and U.S. general counsel for Novo Nordisk Inc. 'With this settlement, <em>we avoid the distraction and costs of a lengthy legal battle,</em> which would not have been in the best interest of the company or its stakeholders.'<br /><br /><em>Novo Nordisk denies any wrongdoing</em> related to NovoSeven marketing....</blockquote>Also,<br /><blockquote>Novo Nordisk didn't admit wrongdoing in the Novolin pact. </blockquote>By the way, here is the brief mention of the corporate integrity agreement:<br /><blockquote>[Novo Nordisk] <em>agreed to enter a five-year corporate integrity agreement with the U.S. Department of Health and Human Services in which it will add additional reporting and other procedures to its compliance program</em>. </blockquote>Why would a company that professes "high ethical and legal standards" not contest allegations that it engaged in improper marketing, paid health care professionals to recommend its products, and instigated breaches of patient confidentiality?  <br /><br />Setting that aside, however, the coverage of this story <a href="http://articles.baltimoresun.com/2011-06-10/news/bs-md-factor-vii-20110610_1_factor-vii-novoseven-novo-nordisk">in the Baltimore Sun </a> raises further questions. <br /><br />First, how Novo Nordisk allegedly promoted Novo Seven, and the uses for which it was promoted are disturbing:<br /><blockquote>the government [did not] back down from its charge that the company <em>engaged in unlawful marketing that helped persuade the Army to treat combat casualties with a largely experimental drug </em>that was not approved for such use by the Food and Drug Administration.<br /><br />Beginning in 2000, according to the government's claims, <em>Novo Nordisk promoted the drug, also known as NovoSeven, to military doctors and entered into research agreements with Army hospitals. It provided funding for trials in which military officers participated, and gave 'donations and other gifts' to nonprofit foundations on behalf of military physicians. Those practices 'caused the military to use NovoSeven in its trauma patients,' the agreement states</em>.</blockquote><br />There was no evidence that Novo Seven decreased the morbidity and mortality of battlefield trauma, but there were reasons to believe the drug increased thrombosis risk:<br /><blockquote>Numerous clinical studies have since shown, however, that <em>Factor VII is ineffective at controlling traumatic bleeding and can potentially cause blood clots</em> that lead to heart attacks and strokes. </blockquote>This was not just paying physicians and institutions to market an expensive, but innocuous drug.  It was paying US military physicians and institutions to market a drug that put injured soldiers at risk, but gave them no benefit.  Given the degree of deference public officials give to the brave soldiers that serve the country on the battlefield, one would think that putting them at risk, and putting the honor of their officers and military institutions at risk ought to be a big deal, maybe a big deal requiring more than even a $25 million fine.<br />On the other hand, although $25 million seems like a lot of money, it pales beside the amounts Novo Nordisk were making from Novo Seven:<br /><blockquote>Last year Novo Nordisk reported <em>annual sales of NovoSeven of almost $1.6 billion</em> — mainly for treatment of hemophilia. Company officials say roughly <em>15 percent of its sales are for unapproved uses, or as much as $250 million last year.</em></blockquote><br />So while the settlement seems expensive compared to the cost of defending the suit in court, and it trades the distraction of a corporate integrity agreement for avoiding the "distraction" of further legal action, maybe a settlement equal to only one-tenth of the yearly sales of the relevant drug seemed a good deal for the company.<br /><br />Since the company was already laboring under a deferred prosecution agreement in the US related to charges of illegal foreign kickbacks (see <a href="http://hcrenewal.blogspot.com/2009/05/novo-nordisk-accepts-deferred.html">this post</a>), maybe adding a corporate integrity agreement did not seem like all that much distraction. <br /><br />On the other hand, the big question is: why was this deal a good one for the US government, or the people which it is supposed to protect? The amount involved only seems like a cost of doing business, and seems disproportionately small given that the allegations involved unlawful marketing that apparently threatened to corrupt US military doctors and hospitals, and were made against a company already under a deferred prosecution agreement for illegal kickbacks. Finally, since the impact of even the relatively small financial payment could be spread among all corporate employees and stockholders, and the deal involved no negative consequences for any individual who authorized, directed or implemented the bad behavior, why would it defer corporate insiders from authorizing or directing future bad behavior?  .<br /><br />We have heard a series of threats from US government officials that they are about to crack down on big health care companies that misbehave, and, in particular, actually try to impose some negative consequences on the people in those companies that authorized, directed, or implemented bad behavior (see <a href="http://hcrenewal.blogspot.com/2011/05/fresenius-fined-82-million-for-false.html">this post</a>). However, we continue to see settlements like this, involving relatively small financial penalties imposed on rather large corporations, and corporate integrity agreements and/or deferred prosecution agreements that do not obviously seem to change how the companies operate.<br /><br />Although a year ago we <a href="http://hcrenewal.blogspot.com/2010/06/attempt-to-hold-health-care-leaders.html">discussed</a> threats by the US government to hold health care leaders accountable using the "Responsible Corporate Officer Doctrine," which has been available since 1943, so far there is no evidence that this concept has been made operational.<br /><br />The continuing <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">march of legal settlements</a> now seems to have included most of the previously well reputed commercial health care firms in the US. The length of this march is an indication of how pervasive is bad behavior by such health care organizations, especially when the marchers were accused of behavior that appeared clinically, not just financially unethical.<br /><br />I assert again that pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction. <br /><br />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.

Two More Settlements, One More Corporate Integrity Agreement for Novo Nordisk

And the legal settlements for health care organizations keep right on marching along.  Here are the basics, per the Wall Street Journal, starting with the outline of the first settlement for Novo Nord…

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Was the Wright Medical CEO Really "Pleased" to "Continue Our Commitment to the Highest Standards of Legal and Ethical Conduct?"

This story fits into the "if you believed that one, I have a bridge to sell you" category.  <br /><br />Let's go back seven months to 2010, when we <a href="http://hcrenewal.blogspot.com/2010/10/wright-medical-settles-but-wait-there.html">discussed</a> the legal settlement, which included submission to deferred prosecution and corporate integrity agreements by Wright Medical, a device manufacturer.  We noted that the company CEO, one Gary D Henley, said he was "<em>pleased</em> to announce these agreements and <em>look[ing] forward to working with the independent monitor as we continue our commitment to the highest standards of ethical and legal conduct</em>."  At the time, we wondered whether the only real reason he was pleased was that he got to keep his job (with total compensation of greater than $2 million a year) and hang onto his stock options (then consisting of 436,601 shares).<br /><br />Now it is 2011, and the Memphis Daily News <a href="http://www.memphisdailynews.com/editorial/Article.aspx?id=58418">reported</a> that last month, Mr Henley was out of a job:<br /><blockquote>It was just last month that [Chairman David] Stevens was appointed interim president and CEO after <em>Gary D. Henley resigned</em> from the position, which he had held since 2006.<br /><br />Stevens at that time asked not to be considered for the permanent position.<br /><br />Henley tendered his resignation prior to a board of directors meeting called to discuss management’s oversight of the company’s ongoing compliance program.<br /><br />The board accepted <em>Henley’s resignation, but deemed it to be without 'good reason' under the terms of his employment agreement, making him ineligible for severance</em>.</blockquote><br />He was accompanied out the door by<br /><blockquote>Frank S. Bono, the company’s senior vice president and chief technology officer,<em> for failing to exhibit appropriate regard for Wright’s ongoing compliance program.</em></blockquote><br />It appeared that the previous company leadership may not have been all that "pleased" to work with external monitors to "continue our commitment to the highest standards of ethical and legal conduct." The Daily News also reported:<br /><blockquote>Wright Medical Group Inc. on Thursday announced that it received a letter from the United States Attorney’s Office for the District of New Jersey pursuant to Paragraph 50 of the Deferred Prosecution Agreement stating that <em>the USAO believes Wright Medical Group knowingly and willfully breached material provisions of the DPA</em>.</blockquote><br />Also, Corporate Counsel <a href="http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202493182276&US_Attorney_Accuses_Wright_Medical_Group_of_Breaching_Deferred_Prosecution_Agreement">reported</a>:<br /><blockquote>Two days after its general counsel departed abruptly, the Wright Medical Group, Inc., said Thursday that <em>the U.S. attorney’s office believes the company 'has knowingly and willfully' breached its deferred prosecution agreement</em>.<br /><br />As a result, <em>the company said it could face 'significant liability' including potential criminal and civil litigation. It also faces possible exclusion from federal health care programs such as Medicare, 'which would have a material adverse effect on our financial condition.'</em><br /><br />The Tennessee-based company revealed the legal problems in 8-K filings on Wednesday and Thursday with the Securities and Exchange Commission. Wright has declined further comment.</blockquote><br />One explanation for the company's pessimism:<br /><blockquote>The board recently received a tip about non-compliance and hired unnamed outside counsel to conduct an internal investigation. The probe found <em>'credible evidence of serious wrongdoing,'</em> which the board communicated to the U.S. attorney’s office on Wednesday.</blockquote><br />The Memphis Daily News noted that another slew of managers just went out the door:<br /><blockquote>Raymond Kolls, senior vice president, general counsel and secretary, Alicia Napoli, vice president of Clinical and Regulatory Affairs, and Cary Hagan, senior vice president of EMEA Commercial Operations, have all stepped down from their positions.</blockquote><br />So should we believe Wright Medical Chairman and now interim CEO Stevens when he said:<br /><blockquote>The board is committed to maintaining the highest standards of ethical conduct and we remain diligent in ensuring that Wright Medical complies with all applicable laws and regulations...</blockquote>?<br /><br />Are you looking to buy a bridge? I know a nice one in Brooklyn.<br /><br />More seriously, day in and day out we hear righteous, if not pompous pronouncements from health care organizational leaders about their organizations' integrity, brilliant performance, quality of care, devotion to patients, etc, etc, etc. Meanwhile, we have seen an astonishing <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">parade of legal settlements</a>, sometimes including guilty pleas to <a href="http://hcrenewal.blogspot.com/search/label/bribery">bribery</a>, <a href="http://hcrenewal.blogspot.com/search/label/fraud">fraud</a>, <a href="http://hcrenewal.blogspot.com/search/label/kickbacks">kickbacks</a>, and other <a href="http://hcrenewal.blogspot.com/search/label/crime">crimes</a> by top health care organizations.  This parade raises serious questions about the performance and integrity of some of our biggest and best known health care organizations.<br /><br />In nearly all cases, these settlements did not include specific negative consequences for those who authorized, directed or implemented the bad behavior that caused the need for the settlements. In nearly every case, the top leaders of the organizations continued to get generous compensation, often more generous than Mr Henley's $2 million plus a year.<br /><br />Yet rarely does the media, much less health care scholarship check back later to see if the righteous pronouncements turned out to be true. Rarely do they check back to see if the settlements lead to better behavior.<br /><br />Here is one vivid anecdote that suggests that the pronouncements may be nothing more than vapid PR, and the settlements lead to no change in behavior as long as the people who were in charge when the bad behavior occurred remain in charge, and richly remunerated.<br /><br />So the next time you see a corporate health care CEO's boasts, think about that bridge in Brooklyn<br /><br />To reprise: 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. <br /><br />[Originally posted on <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a> by Roy Poses]

Was the Wright Medical CEO Really "Pleased" to "Continue Our Commitment to the Highest Standards of Legal and Ethical Conduct?"

This story fits into the "if you believed that one, I have a bridge to sell you" category.  Let's go back seven months to 2010, when we discussed the legal settlement, which included submission to def…

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