How Many Straws? - Johnson and Johnson Settles Again, Again, Again...

It seems like a minor case, but is another straw for the camel. <br /><br /><b>The Latest Settlement </b><br /><br /><a href="http://www.modernhealthcare.com/article/20131205/NEWS/312059936/two-jj-executives-agree-to-50000-in-fines-over-mislabeled-products">Reported</a> in most detail by Modern Healthcare, <br /><br /><blockquote class="tr_bq"><i>Two executives at a subsidiary of Johnson & Johnson have agreed to pay a total of $50,000 to resolve allegations that they knowingly sold mislabeled products used in the sterilization of gastrointestinal scopes and surgical drills.  The settlement also calls for the J&J subsidiary, Advanced Sterilization Products, to pay $1.25 million to resolve a civil complaint filed by the Food and Drug Administration. ASP President Bernard Zovighian will pay $30,000, while Richard Alberti, quality and compliance vice president, will pay $20,000. None admitted wrongdoing.</i><br /><br />'ASP's actions violated the law and put patients at unnecessary risk for infection,' Steve Silberman, director of compliance at the FDA Center for Devices and Radiological Health, said in a statement.<br /><br />Last year, ASP announced two recalls affecting a product called the Cyclesure 24 Biological Indicator, which is used to make sure that medical equipment sterilized using ASP's Sterrad low-temperature cleaning machines is free of bacteria, fungi and viruses. <br /><br />FDA inspectors, according to a civil complaint last July, uncovered evidence that the company sold the Cyclesure 24 tests with 15-month expiration dates even though ASP's internal studies had not established the product's safe shelf life was that long. <br /><br />After the issue was discovered, ASP shortened the shelf life of the Cyclesure indicators to six months. The company also recalled all lots of the products manufactured between February 2008 and December 2011. <br /><br />Dirty endoscopes used during colon cancer screenings, for example, have been implicated in the transmission of hepatitis C and many types of bacteria, according to ASP's own website. </blockquote>Note that this case involves not just legal technicalities, but failures of disclosure that could have put real patients at risk of significant harm.<br /><br /><b>The Context </b><br /><br />This case comes only one week after we <a href="http://hcrenewal.blogspot.com/2013/11/there-they-go-again-again-johnson-and.html">discussed</a> a huge ($2.5 billion) settlement by Johnson and Johnson of allegations that it withheld data about major safety problems affecting metal-on-metal hip prostheses, and two smaller settlements of allegations that it withheld safety data about the drug Topamax.<br /><br /><br />It is noteworthy that in this much smaller current settlement, two admittedly relatively low-level executives had to pay fines amounting to 4% of what the company had to pay. This is unusual.  Usually corporate executives escape any negative consequences, even in cases involving large amounts of money or possible harm to many patients.  If last week's settlement were to have imposed proportionate fines on executives, those fines would have totaled $100 million<br /><br />The latest settlement does seem to follow the usual pattern: relatively small time individual offenders pay a penalty, while very rich and powerful individual offenders avoid all penalties. (For example, look <a href="http://hcrenewal.blogspot.com/2013/01/the-tragic-case-of-aaron-swartz-unequal.html">here</a> to see how one US prosecutor handled the case of Aaron Swartz versus the cases of misdeeds by big corporations)   <a href="http://hcrenewal.blogspot.com/search/label/impunity">Impunity</a> by rich and powerful leaders of big organizations, and failure to enforce laws broken by such people is a very old story in American history, but that pattern was interrupted briefly after the great depression through the 1970s.  Now impunity for the rich and powerful is back, and maybe that is why 43% of the American population think our health care system is corrupt (look <a href="http://hcrenewal.blogspot.com/2013/07/43-believe-that-us-health-care-corrupt.html">here</a>).<br /><br /><br />Of course, the current settlement involved no admissions of wrongdoing.  Like most <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal actions against big health care organizations</a>, it is thus paradoxical.  Fines are paid, but at least on paper, not because of any wrongdoing.  So what were the penalties for?  Who knows?  But allowing a settlement without an admission of wrongdoing allows the next settlement to be made as if it were dealing with an isolated problem.  <br /><br />As we mentioned in our <a href="http://hcrenewal.blogspot.com/2013/11/there-they-go-again-again-johnson-and.html">last post</a> on Johnson and Johnson, the latest settlement should be added to an increasingly  long list of the company's legal woes, often involving allegations and evidence of other unethical actions, sometimes involving guilty pleas to charges of such actions (see compilation of the record through July, 2013 <a href="http://hcrenewal.blogspot.com/2013/07/johnson-and-johnson-settles-suit.html">here</a>.)  Yet each settlement or action seems to take place in a vacuum, with no attention to what appears to be the company's record of ethical recidivism.  Of course, since nearly every action eschewed admissions of wrongdoing, on paper, there was no legal record of recidivism.  The whole situation is becoming so absurd that Jon Stewart on the Daily Show <a href="http://www.thewrap.com/daily-show-jon-stewart-johnson-grand-theft-auto">parodied</a> the ability of Johnson and Johnson, and other big corporations, to escape any meaningful negative consequences of their actions.<br /><br /><br /><div style="background-color: black; width: 368px;"><div style="padding: 4px;"><iframe frameborder="0" height="293" src="http://media.mtvnservices.com/embed/mgid:cms:video:thedailyshow.com:430976" width="360"></iframe><br /><div style="background-color: white; font-family: Arial, Helvetica, sans-serif; font-size: 12px; margin-bottom: 0px; margin-top: 4px; padding: 4px; text-align: left;"><b>The Daily Show</b> <br />Get More: <a href="http://www.thedailyshow.com/full-episodes/">Daily Show Full Episodes</a>,<a href="http://www.facebook.com/thedailyshow">The Daily Show on Facebook</a></div></div></div><br />As quoted on the Wrap<br /><br /><blockquote class="tr_bq">'Holy sh**t. They knowingly bribed doctors to give useless drugs to old people, the disabled and babies,' a stunned Stewart said. 'You’re not even allowed to do that in ‘Grand Theft Auto.''</blockquote><br />When these issues start becoming subjects of popular parody, maybe I can entertain a tiny hope that something might be done. <br /><br /><b> Conclusion</b><br /><br />So I get to say again, again again...  many of largest and once proud health care organizations now have recent records of repeated, egregious ethical lapses. Not only have their leaders have nearly all avoided penalties, but they have become extremely rich while their companies have so misbehaved. <br /><br />These leaders seem to have become like nobility, able to extract money from lesser folk, while remaining entirely unaccountable for bad results of their reigns. We can see from this case that health care organizations' leadership's nobility overlaps with the supposed "royalty" of the leaders of big financial firms, none of whom have gone to jail after the global financial collapse, great recession, and ongoing international financial disaster (look <a href="http://hcrenewal.blogspot.com/2012/08/duchess-of-wellpoint-abdicates-likely.html">here</a>). The current fashion of punishing behavior within health care organization with fines and agreements to behave better in the future appears to be more law enforcement theatre than serious deterrent.  As Massachusetts Governor Deval Patrick exhorted his fellow Democrats, I exhort state, federal (and international, for that  matter) law enforcement to "<a href="http://www.washingtonpost.com/blogs/election-2012/wp/2012/09/04/patrick-it-is-time-for-democrats-to-grow-a-backbone/">grow a backbone</a>" and go after the people who were responsible for and most profited from the ongoing ethical debacle in health care.<br /><br />As we have said before, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior.<br /><br />Roy M. Poses MD on Health Care Renewal  <br /><br />

How Many Straws? - Johnson and Johnson Settles Again, Again, Again...

It seems like a minor case, but is another straw for the camel. The Latest Settlement Reported in most detail by Modern Healthcare, Two exe...

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Sequenom Executive Pleads Guilty, Banned from Leading Any Public Company (for Misleading Investors About the Performance of a Diagnostic Test?)

We have <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">frequently noted</a> how health care organizations accused of kickbacks, fraud, and other unethical and sometimes potentially illegal behavior involving how they produce or market health care products or services often are allowed to settle the charges only with a fines to the companies, and sometimes with corporate integrity agreements.    <br /><br />This <a href="http://www.businessweek.com/news/2010-06-02/former-sequenom-official-lied-to-investors-u-s-says-update3-.html">report from Bloomberg</a> describes a case in which a health care corporation was accused of lying to investors about the performance of a product which it hoped to market. The product was a diagnostic test, and so exaggerating its performance could have affected medical decisions, and hence patients' outcomes, as well as affecting investors' finances. Note how this case was handled.<br /><blockquote><em>Elizabeth A. Dragon, former senior vice president of research and development at Sequenom Inc., <strong>pleaded guilty today in federal court to conspiracy to commit securities fraud</strong> for lying to investors about the company’s prenatal test for Down syndrome</em>, U.S. officials said.<br /><br />Dragon admitted to <em>making false claims to investors and analysts about the effectiveness of the San Diego-based company’s test</em> as well as attempting to 'inflate and sustain' the price of Sequenom’s shares, said Laura E. Duffy, the U.S. Attorney for the Southern District of California in San Diego, in a statement. Dragon said in a court appearance before U.S. Magistrate Judge Barbara Major that <em>she and others manipulated data to make the Down syndrome test appear more accurate than it was</em>, Duffy said.<br /><br />Dragon also was accused of lying to investors in a civil complaint filed today in San Diego by the U.S. Securities and Exchange Commission. Dragon settled the claims without admitting or denying wrongdoing and agreed to be <em><strong>barred from serving as an officer or director of a public company</strong></em>, according to the agency’s statement.</blockquote><br />Here was how the SEC summed it up:<br /><blockquote>'Elizabeth Dragon knew the truth about Sequenom’s Down syndrome test, yet she told the public it was a near-perfect success,' Rosalind Tyson, director of the SEC’s Los Angeles office, said in a statement. 'Her actions misled investors with exaggerated information about a significant new product that never materialized.'</blockquote>What had the company done about this in the past?<br /><blockquote>In June 2009, the company announced an SEC investigation, and, in September, Sequenom said it <em><strong>dismissed Dragon and Chief Executive Officer Harry Stylli</strong></em> and couldn’t rely on the earlier test results.</blockquote><br />And how did it respond to the latest news?<br /><blockquote>'At this time the company has no comment to make other than we continue to cooperate fully with the government agencies and their investigations,' said Ian Clements, Sequenom’s senior director of corporate communications, in an e-mail.</blockquote><br />We have discussed multiple new entrants to the <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">parade of legal settlements</a> by health care organizations. We posted about the most recent entrant <a href="http://hcrenewal.blogspot.com/2010/06/st-jude-medical-settles.html">here</a>.<br /><br />It is instructive to compare what happened to the company and personnel involved in that settlement (which happened to be St. Jude Medical) to the events of the current case. As we noted above, when accusations are made about how a company produced or marketed health care products or services, the worst result for the company is usually a fine, rarely amounting to more than a small fraction of the sales of the product or service in question, and sometimes a corporate integrity agreement. Often meanwhile the company may make a statement that it did nothing wrong, and merely settled the case to get on with things.<br /><br />In the Sequenom case, however, the accusation was of misleading investors (by statements that perhaps just coincidentally could have also misled doctors and patients were the product to have been marketed). The results, however, were that the executives who seemed to be responsible were fired as soon as the government investigation was made known, and a later guilty plea by the executive who seemed most immediately responsible, accompanied by her banning from future service as an "officer or director of a[ny] public company."<br /><br />It is striking that misleading investors, and thereby potentially endangering their financial health, may result in severe penalties to the individuals involved. However, up to now, misleading doctors or patients, and thereby potentially endangering the former's reputations, and more importantly, the latter's health and even survival, rarely has resulted in any penalties to the individuals involved. <br /><br />What is wrong with this picture?<br /><br />If executives who endanger investors' finances can lose their jobs, and be barred from leadership positions in any public company, why can't executives who endanger patients also lose their jobs, and be barred from leadership positions in health care? Inquiring minds would really like to know.<br /><br />As we have repeated endlessly, the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior by health care organizations. Even large fines can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Sequenom Executive Pleads Guilty, Banned from Leading Any Public Company (for Misleading Investors About the Performance of a Diagnostic Test?)

We have frequently noted how health care organizations accused of kickbacks, fraud, and other unethical and sometimes potentially illegal b...

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