The Greedy Leading the Greedy - Multimillionaire Former Johnson and Johnson CEO Approved Huge Compensation for JP Morgan Chase CEO After Company Paid $20 Billion in Legal Settlements

<b>JP Morgan Chase CEO Got Huge Raise Despite Company's Recent Huge Legal Settlements </b><br /><br />The current compensation set by the board of directors of JP Morgan Chase for CEO Jamie Dimon, $20 million a year, has attracted some attention (e.g., see <a href="http://www.rollingstone.com/politics/blogs/taibblog/jamie-dimons-raise-proves-u-s-regulatory-strategy-is-a-joke-20140130">this commentary</a> by Matt Taibbi), especially given the contrast between his raise and the $20 billion or so the company had to pay out last year in settlements of allegations of unethical practices.  A New York Times <a href="http://www.nytimes.com/2014/02/01/business/accounting-for-jamie-dimons-big-pay-raise.html">opinion piece</a> rushed to Mr Dimon's defense<br /><br /><blockquote class="tr_bq">in the world of executive compensation, especially when viewed from the rarefied perspective of other chief executives, and more broadly on Wall Street, Mr. Dimon’s pay — and how it was determined — is <i>not only defensible, but laudable.</i></blockquote><br /><br />Also,<br /><br /><blockquote class="tr_bq">I spoke this week to several people with direct knowledge of the board’s discussions about Mr. Dimon’s pay. They said that the <i>compensation committee went through an exhaustive process </i>to determine the right level and that the board considered the likely negative reaction. 'We were mindful of it, but it didn’t influence our decision,' said one, who like the others, spoke only on condition of anonymity. 'Some people were going to criticize us unless we paid him nothing. <i>We were trying to do the right thing</i>.' </blockquote><br />The author did conclude with a quote from Rep Peter Welch (D - Vermont),<br /><br /><blockquote class="tr_bq">This isn’t really about Jamie Dimon. It’s about <i>a whole culture of immunity</i> for the consequences of your actions.<br /></blockquote><b>A Retired Pharmaceutical CEO Who Also was Hugely Compensated Despite his Company's Troubles Set Dimon's Pay </b><br /><br />We have frequently discussed how the culture of immunity, or <a href="http://hcrenewal.blogspot.com/search/label/impunity">impunity</a> found in <a href="http://hcrenewal.blogspot.com/search/label/finance">finance</a> may carry over into health care, since now many extremely rich  leaders of finance firms sit on boards of trustees of health care institutions like hospitals and hospital systems, universities and their associated medical schools and teaching hospitals, and health related foundations, and boards of trustees of health care corporations. <br /><br />In this case, maybe the culture carried over from health care to finance.<br /><br />The NY Times article noted<br /><br /><blockquote class="tr_bq"> The compensation and management development committee of JPMorgan Chase’s board has three members, <i>all seasoned business luminaries in their own right</i>. Lee R. Raymond, the chairman, is the former long-serving chairman and chief executive of Exxon Mobil. Stephen B. Burke is chief executive of NBCUniversal. <i>William C. Weldon is the former chairman and chief executive of Johnson & Johnson.</i></blockquote><br />Mr Weldon is the former pharmaceutical representative who rose to CEO of giant pharmaceutical/ biotechnology/ device company Johnson and Johnson.  Despite the appellation of business luminary above bestowed by the author of the NYT article, we noted <a href="http://hcrenewal.blogspot.com/2013/12/the-camels-aching-back-johnson-and.html">here</a> how many settlements have been made by, fines assessed against, and other adverse legal actions affecting Johnson and Johnson in the recent past.  Our lengthy summary of such cases is appended at the end of this post.<br /><br />Yet Mr William Weldon, the outgoing CEO on whose watch most of the misbehavior resulting in the legal actions listed in the appendix below occurred, retired with a huge retirement package, after receiving extremely generous compensation prior to that.   The retirement package was estimated to be worth from $143 to $197 million (look <a href="http://hcrenewal.blogspot.com/2012/03/despite-recalls-legal-settlements-and.html">here</a>).  In 2010, his total compensation was $29 million (look <a href="http://hcrenewal.blogspot.com/2012/02/semi-retirement-of-salesman-weldon-to.html">here</a>).   According to the <a href="http://www.investor.jnj.com/secfiling.cfm?filingID=1193125-12-113826">2012 Johnson and Johnson proxy statement</a>, his 2011 total compensation was greater than $26 million. As far as I can tell, Mr Weldon never suffered any negative consequences for his company's sorry record, and retired a very rich man.<br /><br />Yet the luminous Mr Weldon got to make the decision about how much to pay Mr Jamie Dimond after his company's recent sorry record.<br /><br /><b>Summary</b><br /><br />So it appears that the top hired executives of health care and finance organizations, and the so-called stewards sitting on their boards of directors are all blending together.  Together they are in charge of assuring that top hired executives get richer and richer even while the companies they lead commit seemingly endless strings of ethical and sometimes legal offenses.<br /><br /><br />Is this any way to run health care, or the economy?<br /><br />As I have repeated ad nauseum,<br /><br /><div class="A_Standard__35__20_Normal">Many of largest and once proud health care organizations now have recent records of repeated, egregious ethical lapses. Not only have their leaders have nearly all avoided penalties, but they have become extremely rich while their companies have so misbehaved. <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 />Again, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior.</div><br /><br /><div class="A_Standard__35__20_Normal"><b>Appendix - Johnson and Johnson Recent Legal Record</b></div><div class="A_Standard__35__20_Normal"></div><div class="A_Standard__35__20_Normal"></div><div class="A_Standard__35__20_Normal"><span style="background-color: #eeeeee;"><u>2010 </u></span></div><div class="A_Standard__35__20_Normal"><span style="background-color: #eeeeee;">- Convictions in two different states in 2010 for misleading marketing of Risperdal</span><br /><span style="background-color: #eeeeee;">- A guilty plea for misbranding Topamax in 2010</span><br /><span style="background-color: #eeeeee;"><u>2011</u></span></div><div class="A_Standard__35__20_Normal"><span style="background-color: #eeeeee;">- Guilty pleas to bribery in Europe in 2011 by Johnson and Johnson's DePuy subsidiary</span><br /><span style="background-color: #eeeeee;">- A guilty plea for marketing Risperdal for unapproved uses in 2011 (see <a href="http://hcrenewal.blogspot.com/2011/08/why-cultivate-weldons-confidence-ceo.html">this link</a> for all of the above)</span><br /><span style="background-color: #eeeeee;">- A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post <a href="http://hcrenewal.blogspot.com/2011/09/johnson-and-johnson-pleads-guilty.html">here</a>)</span><br /><span style="background-color: #eeeeee;"><u>2012 </u></span></div><div class="A_Standard__35__20_Normal"><span style="background-color: #eeeeee;">- In 2012, testimony in a trial of allegations of unethical marketing of the drug Risperdal (risperidone) by the Janssen subsidiary revealed a systemic, deceptive stealth marketing campaign that fostered suppression of research whose results were unfavorable to the company, ghostwriting, the use of key opinion leaders as marketers in the guise of academics and professionals, and intimidation of whistleblowers. After these revelations, the company abruptly settled the case (see post <a href="http://hcrenewal.blogspot.com/2012/02/texas-tmap-trials-as-illustration-of.html">here</a>).</span><br /><span style="background-color: #eeeeee;">-  Also in 2012,  Johnson & Johnson was fined $1.1 billion by a judge in Arkansas for deceiving patients and physicians again about Risperdal (look <a href="http://hcrenewal.blogspot.com/2012/04/once-more-with-feeling-johnson-and.html">here</a>).</span><br /><span style="background-color: #eeeeee;">-  Also in 2012, Johnson & Johnson announced it would pay $181 million to resolve claims of deceptive advertising again about Risperdal (see this <a href="http://hcrenewal.blogspot.com/2012/09/how-many-legal-settlements-does-it-take.html">post</a>). </span></div><div class="A_Standard__35__20_Normal"><span style="background-color: #eeeeee;"><u>2013</u></span> </div><div class="A_Standard__35__20_Normal"><span style="background-color: #eeeeee;">-  In 2013, Johnson & Johnson settled case by shareholders alleging that management made misleading statements and withheld material information about manufacturing problems (see this <a href="http://hcrenewal.blogspot.com/2013/07/johnson-and-johnson-settles-suit.html">post</a>)</span></div><div class="A_Standard__35__20_Normal"><span style="background-color: #eeeeee;">-  In 2013, Johnson & Johnson Janssen subsidiary pleaded guilty to a charge of misbranding Risperdal, and settled for a total of $2.2 billion allegations that it promoted the drug for elderly demented patients and adolescents without an indication, and despite evidence of its harms (see this <a href="http://hcrenewal.blogspot.com/2013/11/another-and-huge-22-billion-settlement.html">post</a>).  </span></div><div class="A_Standard__35__20_Normal"><span style="background-color: #eeeeee;">-  In 2013, Johnson & Johnson DePuy subsidiary agreed to settle with multiple plaintiffs for $2.5 billion allegations that it sold defective mental-on-metal artificial hip, and hid evidence of its harms .</span></div><div class="A_Standard__35__20_Normal"><span style="background-color: #eeeeee;">- In 2013, Johnson & Johnsonn Janssen subsidiary was found by two juries to have concealed harms of its drug Topamax (see this <a href="http://hcrenewal.blogspot.com/2013/11/there-they-go-again-again-johnson-and.html">post</a> for this and above case).</span></div><div class="A_Standard__35__20_Normal"><span style="background-color: #eeeeee;">- In 2013, Johnson & Johnson Ethicon subsidiary's Advanced Surgical Products and two of its executives agreed to settle charges by US FDA that is sold mislabeled products used to sterilize equipment such as endoscopes (see this <a href="http://hcrenewal.blogspot.com/2013/12/how-many-straws-johnson-and-johnson.html">post</a>). </span></div><div class="A_Standard__35__20_Normal"><span style="background-color: #eeeeee;">- In 2013, Johnson & Johnson fined by European Commission for anticompetitive practices, that is, collusion with Novartis to delay marketing generic version of Fentanyl (see this <a href="http://hcrenewal.blogspot.com/2013/12/the-camels-aching-back-johnson-and.html">post</a>).  </span></div>

The Greedy Leading the Greedy - Multimillionaire Former Johnson and Johnson CEO Approved Huge Compensation for JP Morgan Chase CEO After Company Paid $20 Billion in Legal Settlements

JP Morgan Chase CEO Got Huge Raise Despite Company's Recent Huge Legal Settlements The current compensation set by the board of directors of JP Morgan Chase for CEO Jamie Dimon, $20 million a year, ha…

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BLOGSCAN - US Supreme Court Turns Down Pfizer Appeal of RICO Conviction

<span style="color: #38761d;">Pfizer Inc, which boasts of being the world's largest research based pharmaceutical company, also seems to be one of the world's largest examples of health care corporations that have withstood an amazing number of settlements, fines, and at times convictions for misbehavior without major apologies, significant changes in leadership or corporate culture, or bankruptcy.  (Look <a href="http://hcrenewal.blogspot.com/2013/07/pfizers-umpteenth-settlement-for-491.html">here</a> for a list of the cases, and <a href="http://hcrenewal.blogspot.com/search/label/Pfizer">here</a> for all we have written about Pfizer).  </span><br /><br /><span style="color: #38761d;">Pfizer, amazingly, has the malodorous distinction of having been convicted by a US jury as a RICO - a racketeering influenced corrupt organization in 2010 (look <a href="http://hcrenewal.blogspot.com/2010/03/settlement-and-conviction-round-up.html">here</a>).  Pfizer executives, of course, kept their office of counsel busy by appealing the conviction, all the way up to the US Supreme Court.</span><br /><br /><span style="color: #38761d;">As <a href="http://1boringoldman.com/index.php/2013/12/11/r-i-c-o/">discussed</a> on the 1BoringOldMan blog, the court has now turned down the appeal and let the conviction, which had been affirmed by lower federal court, stand.   So Pfizer is now officially a racketeering influenced corrupt organization.  </span><br /><br /><span style="color: #38761d;">Yet although the description of the RICO statute that 1BoringOldMan quoted notes the law can be used to go after the leaders of organized crime, no individual at Pfizer who authorized, directed, or implemented the relevant misbehavior, which was in this case the promotion of Neurontin for off-label uses, for which its benefits were at best unproven, at worse nonexistent, even if its harms are well-documented.  Thus even this RICO conviction has not affected the impunity of top health care corporate leaders. </span><br /><br /><span style="color: #38761d;">As we have said endlessly, true health care reform will not occur until the leaders of large health care organizations are made accountable for their actions, and are prevented from becoming amazingly rich while their organizations repeatedly commit unethical or illegal acts that harm patients' and the public's health.   </span><br /><br /><span style="color: #38761d;">ADDENDUM (14 December,2013) - The <a href="http://hcrenewal.blogspot.com/2013/12/blogscan-us-supreme-court-turns-down.html">followup post</a> at 1BoringOldMan on this topic includes some optimism that now that the validity of the RICO concept applied to a large health care corporation has been affirmed, more stringent law enforcement may follow.   </span><br /><span style="color: #38761d;"><br /></span><span style="color: #38761d;">Roy M. Poses MD for Health Care Renewal </span>

BLOGSCAN - US Supreme Court Turns Down Pfizer Appeal of RICO Conviction

Pfizer Inc, which boasts of being the world's largest research based pharmaceutical company, also seems to be one of the world's largest examples of health care corporations that have withstood an ama…

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A New, and Huge ($2.2 Billion) Settlement for Johnson and Johnson, but "No Individuals were Charged with Wrongdoing"

The march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements </a>made by big health care organizations has resumed with a bang.  As reported in most major media outlets, giant drug/ device/ biotechnology company Johnson and Johnson has made a big settlement with the US Department of Justice.<br /><br /><b>The Basics of the Settlement</b><br /><br />As <a href="http://www.businessweek.com/news/2013-11-04/j-and-j-settlement-over-risperdal-said-to-be-announced-later-today">reported</a> by Bloomberg / Businessweek, <br /><br /><blockquote class="tr_bq"><div class=""><i>Johnson & Johnson agreed to resolve criminal and civil probes into the marketing of Risperdal, an antipsychotic drug, and other medicines by paying more than <b>$2.2 billion</b></i>, one of the largest U.S. health-fraud penalties. </div><div class=""><br /></div><i>J&J’s Janssen unit will plead guilty to a misdemeanor criminal charge over misbranding Risperdal for uses not approved by the Food and Drug Administration, including treating elderly patients with dementia.</i> Under a plea agreement announced today, Janssen will pay a $334 million fine and forfeit $66 million.<br /><br />Janssen also settled civil claims that it marketed Risperdal without approval for the elderly, children and the mentally disabled, and that it paid kickbacks to physicians and to Omnicare Inc., the largest pharmacy for nursing homes. The civil accord covered off-label marketing of Risperdal; Invega, another antipsychotic; and Natrecor, a heart drug.</blockquote><br />This settlement covered conduct that health care professionals ought to find particularly disturbing, including marketing Risperdal for elderly people with dementia without an approved indication, despite evidence that it could be particularly harmful to those patients; marketing Risperdal to adolescent boys without an indication, again despite evidence that it could be particularly harmful to those patients; and using kickbacks to market Risperdal. <br /><br /><b>Promoting Risperdal for Dementia Despite Increased Risk of Death</b><br /><br />This issue was best <a href="http://online.wsj.com/news/articles/SB10001424052702303936904579177630737380104">summarized</a> by the Wall Street Journal,<br /><br /><br /><blockquote class="tr_bq">Prosecutors alleged that J&J's Janssen Pharmaceuticals unit <i>promoted Risperdal to elderly patients suffering from dementia, despite no approval for that use. </i>Prosecutors also alleged that J&J's 'ElderCare' sales force <i>pushed Risperdal for use in these elderly patients, and sales representatives' bonus awards failed to distinguish prescriptions for schizophrenia or the unapproved dementia use</i>. <br /><br />In 2005, the FDA required the label warn that elderly patients suffering from dementia-related psychosis were at <i>a higher risk of death.</i></blockquote><br />The New York Times <a href="http://www.nytimes.com/2013/11/05/business/johnson-johnson-to-settle-risperdal-improper-marketing-case.html">added</a>,<br /><br /><blockquote class="tr_bq"><div itemprop="articleBody"> Johnson & Johnson officials <i>tried to expand the market for Risperdal to older dementia patients</i> soon after the drug was approved in 1993 to treat symptoms of psychiatric disorders, <a href="http://www.justice.gov/opa/documents/jj/janssen-info.pdf" title="The Justice Department filing (PDF). ">according to federal court filings</a>. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">The drug, whose generic name is risperidone, was primarily tested in schizophrenia patients, and the <i>Federal Drug Administration repeatedly rejected efforts by the company to expand the drug’s use to older dementia patients, </i>according to the filings. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">But Johnson & Johnson, federal officials said, actively pursued the market for geriatric patients. <i>The company created a dedicated sales force, ElderCare, to promote the drug and others to doctors who primarily treated older patients. </i></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><i>The drug, the company claimed, could address symptoms that made treating these patients a challenge, especially in a nursing home setting</i>, including agitation, confusion, hostility and impulsiveness. The company’s sales brochures highlighted these symptoms and <i>minimized the fact that the drug was approved to treat schizophrenia, </i>according to federal documents.</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"> Federal officials said <i>the company knew that Risperdal posed serious health risks for older adults, like an increased risk of strokes, but it played them down.</i> The drug’s label was later updated to warn against the use of the drug in older patients with dementia.</div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">So the allegations were that the company pursued an elaborate and deceptive strategy to promote the drug for elderly dementia patients despite knowledge that the drug was particularly risky for such patients. </div><br /><b>Promoting Risperdal for Adolescent Boys Despite Increased Risk of Gynecomastia</b><br /><br />Again, per the WSJ,<br /><br /><blockquote class="tr_bq">Prosecutors also alleged that J&J <i>promoted Risperdal for use by boys suffering from mental disabilities despite knowing that use could raise levels of a hormone stimulating breast development.</i></blockquote><br />The NYT added,<br /><br /><br /><blockquote class="tr_bq"><div itemprop="articleBody">Federal prosecutors also say, as part of the civil settlement, that <i>Johnson & Johnson promoted the use of Risperdal in people with mental disabilities and children, even though the company did not receive F.D.A. approval to market to children until 2006.</i> Janssen told its sales representatives to visit child psychologists and mental health facilities that mainly focused on children, promoting the drug as a safe treatment for disorders like attention deficit hyperactivity disorder and obsessive-compulsive disorder, the government said. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><i>Johnson & Johnson knew that children were susceptible to certain health risks from taking Risperdal, including the possibility that boys could develop breasts</i> through elevated production of the hormone prolactin, federal officials said. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Again, the allegations were that the company pursued an elaborate deceptive strategy to market the drug for children despite knowledge that the drug was particularly risky for such patients.  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><b>No Executives were Discomfited by the Disposition of This Case</b></div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">The company took pains to emphasize that the settlement only required a single guilty plea to a misdemeanor by a company subsidiary, and did not involve any other admissions of guilt, or any penalties to specific human beings.  For example, per Bloomberg/ Business Week,</div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq">'Today we reached closure on complex legal matters spanning almost a decade,' Michael Ullmann, J&J’s general counsel, said in a statement. 'This resolution allows us to move forward and continue to focus on delivering innovative solutions that improve and enhance the health and well-being of patients around the world.'<br /><br />While Janssen 'accepts accountability' for the actions described in the misdemeanor plea, <i>the civil settlement 'is not an admission of any liability or wrongdoing, and the company expressly denies the government’s civil allegations,' J&J said.</i></blockquote><br />So why give up a perfectly good $2.2 billion (minus $400 million fine and forfeiture by the Janssen subsidiary for the single misdemeanor)?  Was "closure" all that valuable?<br /><br />In addition, in the NY Times we found ,<br /><br /><br /><blockquote class="tr_bq">Ernie Knewitz, a spokesman for Johnson & Johnson, noted that the misdemeanor charge was being entered on behalf of the company and <i>no individuals were charged with wrongdoing</i>. '<i>Mr. Gorsky [current CEO] has been an outstanding Johnson & Johnson leader for more than 20 years</i>,' he said. </blockquote>Would you expect someone who works for Mr Gorsky to say otherwise?  Yet it was on Mr Gorsky's watch that much of the alleged bad conduct actually happened.  <br /><br /><blockquote class="tr_bq">Alex Gorsky was promoted to chief executive officer of J&J in April 2012, in part <i>because of his record of generating sales as leader of Janssen Pharmaceuticals. </i></blockquote><br />Furthermore, the Inquirer noted that Mr Gorsky was deposed in one of the many civil lawsuits filed by patients against Johnson and Johnson. <br /><br /><blockquote class="tr_bq"><i>The 60-page transcript of Gorsky's deposition</i> in one of the Philadelphia suits was part of the publicly available court record. In the transcript, McCormick walks Gorsky through discussions from 2001 with Joseph Biederman, a Harvard medical school professor and a Massachusetts General Hospital pediatric psychiatrist who gained fame - and criticism - for advocating the use of pharmaceuticals to treat children with perceived mental illness. That was before the U.S. Food and Drug Administration approved, in still-limited ways, drugs such as Risperdal for children. <br /><br />In a one-page letter dated Dec. 7, 2001, Biederman requested $500,000 to start what became the Johnson & Johnson Center for the Study of Pediatric Psychopathology. Gorsky said in the deposition that he approved that payment. <br /><br /><i>Gorsky was asked whether he had been hoping Biederman and, by extension, Massachusetts General Hospital and Harvard, would help J&J to get wider diagnosis and treatment for child and adolescent mental disorders. </i><br /><i><br /></i><i>'I think our goal was to, yes, have better diagnostic criteria for children who are in need of treatment and to have better therapeutic options for children who are in need of treatment,' Gorsky said. </i><br /><br />Also in the transcript, McCormick discussed with Gorsky a document called the 'Annual Report 2002: The Johnson & Johnson Center for Pediatric Psychopathology at Massachusetts General Hospital.' Biederman was the director of the center, and <i>one of the goals of its research, according to the report, was that 'it will move forward the commercial goals of J&J.'</i></blockquote><br />Thus this testimony seems to imply that current Johnson and Johnson CEO Gorsky was involved in making large payments to an important key opinion leader (KOL) who was supposed to use his academic gravitas to "move forward the commercial goals" of Johnson and Johnson, specifically by promoting Risperdal for children.<br /><br />Yet, as we discussed above, neither Mr Gorsky nor any other person at Johnson and Johnson who might have authorized, directed, or implemented the alleged conduct which was the subject of the settlement, conduct which Johnson and Johnson of course denies was misconduct, suffered any negative consequences. <br /><br />Mr Gorsky's total compensation as CEO in 2012 was <b><i>$10,977,109</i></b> according too the <a href="http://www.investor.jnj.com/secfiling.cfm?filingID=1193125-13-104341">company's 2013 proxy statement</a>. The retiring CEO, William Weldon, on whose overall watch the alleged events occurred, received <b><i>$29,838,259</i></b> that year.  We last discussed their compensation and its contrast with the company's ethical track record <a href="http://hcrenewal.blogspot.com/2013/07/johnson-and-johnson-settles-suit.html">here</a>.<br /><br />These payments also occurred despite all the other settlements Johnson and Johnson has had to make because of allegations about its marketing of Risperdal.  As described by Bloomberg/ Businessweek,<br /><br /><blockquote class="tr_bq">The settlement won’t resolve suits brought by attorneys general in Arkansas, Louisiana and South Carolina, where the company has appealed or has said it will appeal judgments over Risperdal sales. <br /><br />Judges or juries in those states have ordered J&J to pay a total of about $1.8 billion in damages and fines over Risperdal marketing campaigns that were found to have misled doctors and patients about the drug’s health risks and effectiveness. <br /><br />In 2012, a judge in Arkansas ordered the drugmaker to pay $1.2 billion in fines over Risperdal marketing. That verdict came three months after J&J decided to end a trial in Texas over the drug’s sales with a $158 million settlement. The Arkansas judge also awarded the state $180 million in attorney fees, J&J said in an August regulatory filing. The company is appealing the judgment. <br /><br />In June 2011, a judge in South Carolina ordered J&J to pay $327 million in penalties for deceptively marketing the medicine. Ten months earlier, jurors in Louisiana ordered the drugmaker to pay almost $258 million to state officials over J&J’s Risperdal marketing campaign in the state. A Louisiana judge later ordered the drugmaker to pay an additional $73.3 million in attorney fees and costs. </blockquote><br />The payments further occurred despite a previous settlement involving another drug whose marketing was at issue in the current settlement, according to Bloomberg / Businessweek, <br /><br /><blockquote class="tr_bq">In October 2011, J&J’s Scios unit pleaded guilty to a misdemeanor violation over Natrecor and paid an $85 million criminal fine. </blockquote><br />Finally, the compensation was given despite other legal actions not having to do with Risperdal, Invega or Natrecor, as we most recently summarized,<br />- A guilty plea for misbranding Topamax in 2010 (look <a href="http://hcrenewal.blogspot.com/2010/05/sunday-settlement-and-guilty-plea.html">here</a>)<br />- Guilty pleas to bribery in Europe in 2011 by J+J's DePuy subsidiary (look <a href="http://hcrenewal.blogspot.com/2011/04/johnson-and-johnson-runs-afoul-of.html">here</a>)<br /> - Accusations that the company, which makes smoking cessation products, participated along with tobacco companies in efforts to lobby state legislators (see post <a href="http://hcrenewal.blogspot.com/2011/09/smart-alecs-strange-bedfellows.html">here</a>)<br /><br /><b>Summary</b><br /><br />The latest settlement in the parade is another marker of the sort of conduct that big health care organizations have exhibited to increase revenue, and to use that revenue as a rationale for making their top insiders very rich.  The particular conduct alleged here could have put patients at risk, partly by deceiving health care professionals.  Yet in their wisdom, top US law enforcement saw fit not to try to hold any individuals accountable for this conduct, and allowed the company to deny any misconduct other than a single misdemeanor by a subsidiary.  This occurred despite the company's history of multiple legal settlements and findings of guilt in various courtrooms.<br /><br />Yet none of these actions has resulted in any negative consequences for any individual within the company.  No one who authorized, directed, or implemented bad behavior will pay any penalty, even were the bad behavior to have lead to significant personal enrichment.<br /><br />As we have said ad infinitum, and <a href="http://hcrenewal.blogspot.com/2012/09/how-many-legal-settlements-does-it-take.html">on the occasion of a previous Johnson and Johnson settlement</a>, 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 /><b>Addendum - Other Comments </b><br /><br />See also similar sentiments <a href="http://1boringoldman.com/index.php/2013/11/04/an-ending/">from 1BoringOldMan</a>,<br /><br /><blockquote class="tr_bq"> J&J closes out the escrow fund set aside for this settlement. Alex Gorsky goes to his West Point Anniversaries and Boy Scout Board meetings an ongoing success story [<a href="http://1boringoldman.com/index.php/2012/09/18/shoveling/" target="_blank">shoveling…</a>]. And what was this all about? </blockquote><div><blockquote><div align="right"><i>This is the way the world ends</i></div><div align="right"><i> This is the way the world ends</i></div><div align="right"><i> This is the way the world ends</i></div><div align="right"><i> Not with a bang but a whimper</i></div></blockquote></div><br />and in a <a href="http://www.citizen.org/pressroom/pressroomredirect.cfm?ID=4012">press release from Public Citizen</a>,<br /><br /><blockquote class="tr_bq">Until more meaningful penalties and the prospect of jail time for company heads who are responsible for such activity become common, companies will continue defrauding the government and putting patients’ lives in danger.</blockquote>

A New, and Huge ($2.2 Billion) Settlement for Johnson and Johnson, but "No Individuals were Charged with Wrongdoing"

The march of legal settlements made by big health care organizations has resumed with a bang.  As reported in most major media outlets, giant drug/ device/ biotechnology company Johnson and Johnson ha…

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

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

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

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

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Pfizer's Umpteenth Settlement (for $491 Million Plus a Guilty Plea), but No Person Held Responsible

The world's largest research based pharmaceutical company was in court again, as <a href="http://www.nytimes.com/2013/07/31/business/pfizer-settles-a-drug-marketing-case-for-491-million.html">reported</a> by the New York Times,<br /><br /><blockquote class="tr_bq"> The drug maker Pfizer<a class="meta-org" href="http://topics.nytimes.com/top/news/business/companies/pfizer_inc/index.html?inline=nyt-org" title="More information about Pfizer Inc"></a><i> agreed to pay $491 million to settle criminal and civil charges over the illegal marketing of the kidney-transplant drug Rapamune,</i> the Justice Department <a href="http://www.justice.gov/opa/pr/2013/July/13-civ-860.html" title="The announcement.">announced on Tuesday</a>. </blockquote><br />In particular,<br /><br /><blockquote class="tr_bq"> The recent case centers on the practices of Wyeth Pharmaceuticals, which Pfizer acquired in 2009.<br /><br /><div itemprop="articleBody">Rapamune, which prevents the body’s immune system from rejecting a transplanted organ, was approved by the Food and Drug Administration in 1999 for use in patients receiving a kidney transplant. However, federal officials said <i>Wyeth aggressively promoted the drug for use in patients receiving other organ transplants, even offering financial incentives to its sales force to do so</i>. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Accusations of Wyeth’s practices became public in 2010 after <i>a whistle-blower lawsuit</i> filed by two former employees was unsealed. </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">After lawmakers <a href="http://democrats.oversight.house.gov/index.php?option=com_content&task=view&id=4973&Itemid=49" title="A press release about the inquiry.">announced a Congressional inquiry</a>, the Justice Department <a href="http://www.nytimes.com/2010/09/22/business/22drug.html" title="From the archives.">opted to join the lawsuit</a>. The settlement announced Tuesday, which also resolves a second, similar whistle-blower suit, includes a criminal fine and forfeiture of $233.5 million, and a civil settlement of $257.4 million with the federal government, all 50 states and the District of Columbia. </div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">The case did not get much media coverage.  So far, the only other somewhat detailed <a href="http://www.bloomberg.com/news/2013-07-30/pfizer-unit-pleads-guilty-pays-491-million-over-drug.html">article</a> on it was put out by Bloomberg.   In fact, the lawyer for two of the whistle-blowers who alerted federal authorities to what Wyeth was doing had to say</div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody">the spate of pharmaceutical settlements in recent years had <i>blunted reaction to what he said were shameful practices.</i> 'Everybody’s been asking me why this case is different than any other,' he said. <i>'We used to trust these companies. You can’t trust these companies anymore.'</i></div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">However, we should not be too blase.  This case was not only about money.  The over-promotion of a potentially dangerous drug likely lead to patients being harmed in the absence of any benefits.  Rapamune suppresses the immune system and increases risks of serious infections and malignancy.  Specific serious adverse events have been reported when it is used in transplants of organs other than the kidney (e.g., lung and liver transplants).  (See full prescribing information <a href="http://labeling.pfizer.com/showlabeling.aspx?id=139">here</a>.)  Bloomberg reported that 90% of Wyeth's revenues from Rapamune came from off-label uses, suggesting that quite a few people may have been adversely affected by its excess use.  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">As in most other members of the march of legal settlements by big health care organizations, this case involved no negative consequences for anybody who authorized, directed, or implemented the improper marketing practices.  While such people must have existed, they were not even named in the press coverage.  At least this settlement involved a guilty plea to a crime, albeit a misdemeanor (misbranding as reported by Bloomberg), so the company did have to admit some wrongdoing.  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">A Pfizer manager, however, tried to disavow responsibility, as noted by Bloomberg,</div><div itemprop="articleBody"><br /></div><blockquote class="tr_bq"><div itemprop="articleBody">'Pfizer was not a subject or target of this matter, and cooperated fully with the government from the time it learned of this investigation in October 2009,' Chris Loder, a Pfizer spokesman,...</div></blockquote><div itemprop="articleBody"><br /></div><div itemprop="articleBody">But Pfizer had purchased Wyeth, and in doing so got not only assets and profits, but responsibility for actions.</div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">Also, neither the settlement nor the criminal plea seemed to take into account Pfizer's amazingly sorry recent track record.  I am losing count of all of Pfizer's settlements and/or guilty plea or convictions since 2000.  (The updated list of previous legal results is in the Appendix.)  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">People found guilty of small-time Medicaid or Medicare fraud often forfeit all their assets and go to jail.  Yet actions by large pharmaceutical companies that may harm patients and cost many millions of dollars almost never result in any individual facing any negative consequences, or even being named and shamed.  Meanwhile, the managers of these companies may make gargantuan amounts of money partially rationalized by the revenues produced by such recurrent misbehavior.  In 2012, according to the company's 2013 proxy filing, Pfizer CEO Ian Reed's total compensation was  <b><i>$25,634,136</i></b>, and the four next most highly paid executives all made more than <b><i>$5,000,000</i></b>.  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">So the Kabuki play that is regulation of and law enforcement for large health care organizations goes on.  As our society is being increasingly divided into a huge majority in increasingly difficult economic circumstances and a small and  increasingly rich minority, it also seems to be increasingly divided into little people who may be ruined by lawsuits, and imprisoned for even minor infractions, and big people who have impunity.  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody">True health care reform would need to start by making leaders of big health care organizations accountable for their organizations' misbehavior.  </div><div itemprop="articleBody"><br /></div><div itemprop="articleBody"><b>APPENDIX - Pfizer's Settlements</b><br /><br /></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><span style="background-color: #fff2cc;">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,</span> <br /><blockquote><span style="background-color: #fff2cc;">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.</span></blockquote><blockquote><span style="background-color: #fff2cc;">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.</span> </blockquote><blockquote><span style="background-color: #fff2cc;">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.</span></blockquote><span style="background-color: #fff2cc;"><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>). </span></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><span style="background-color: #fff2cc;"> 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>).  </span></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><span style="background-color: #fff2cc;">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>).  </span></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><span style="background-color: #fff2cc;">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>).   </span></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><span style="background-color: #fff2cc;">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).  </span></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><span style="background-color: #fff2cc;">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>). </span></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><span style="background-color: #fff2cc;">In August, 2012, Pfizer settled allegations that its subsidiaries bribed foreign (that is, with respect to the US) government officials, including government-employed doctors (see this <a href="http://hcrenewal.blogspot.com/2012/08/pfizers-pforeign-pfiasco.html">post</a>).</span></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><span style="background-color: #fff2cc;">In December, 2012, Pfizer settled federal charges that its Wyeth subsidiary deceptively marketed the proton pump inhibitor drug Protonix, using systematic efforts to deceive approved by top management, and settled charges by multiple states' Attorneys' General that it deceptively marketed Zyvox and Lyrica (see this <a href="http://hcrenewal.blogspot.com/2012/12/pfizers-13th-legal-settlement-will-it.html">post</a>).  </span></div><div style="border-bottom: medium none; border-left: medium none; border-right: medium none; border-top: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><span style="background-color: #fff2cc;"> In January, 2013, Pfizer settled Texas charges that it had misreported information to and over-billed Medicaid (see this <a href="http://hcrenewal.blogspot.com/2013/01/pfizers-pfourteenth-settlement-small.html">post</a>).  </span></div><div itemprop="articleBody"><br /></div><br />

Pfizer's Umpteenth Settlement (for $491 Million Plus a Guilty Plea), but No Person Held Responsible

The world's largest research based pharmaceutical company was in court again, as reported by the New York Times, The drug maker Pfizer agreed to pay $491 million to settle criminal and civil charges o…

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55 of Medtronic's Best Hospital Friends, Including HCA, Settle for $34 Million

The case of the over-marketing of Kyphon's kyphoplasty device (look <a href="http://hcrenewal.blogspot.com/2008/05/corporate-integrity-agreement-for.html">here</a>) just got more complicated, and now appears to have involved an amazing number of players.<br /><br /><b>The State of Play </b><br /><br /> As reported by the AP (<a href="http://www.washingtonpost.com/business/justice-department-55-hospitals-reach-34-million-settlement-over-medicare-fraud-claims/2013/07/02/3d3d2356-e34e-11e2-bffd-37a36ddab820_story.html">via</a> the Washington Post),<br /><br /><blockquote class="tr_bq"> <i>Fifty-five hospitals in 21 states have agreed to pay $34 million to the U.S. government to settle allegations that they used more expensive inpatient procedures rather than outpatient spinal surgeries to get bigger payments from Medicare,</i> the U.S. Justice Department said Tuesday.<br /><br />The settlement involves kyphoplasty procedures used to treat spinal fractures usually caused by osteoporosis. It can be done as an outpatient procedure, but he Justice Department said the hospitals performed the surgeries as inpatient procedures to increase Medicare billings.</blockquote><br />The current media reports provided little detail about the allegations, but did note that this case has been litigated for a while,<br /><br /><blockquote class="tr_bq"> A similar settlement was reached last year, when 14 hospitals agreed to pay a settlement of more than $12 million. And in 2008, the Justice Department agreed to a $75 million settlement with Medtronic Inc.’s spine business. The government was investigating allegations that Kyphon, a company that had been acquired by Medtronic Spine in 2007, advised hospitals to do inpatient kyphoplasties to bulk up their Medicare payments.</blockquote><br /><b>The Players</b><br /><br />Per the AP, there were quite a few<br /><br /><br /><blockquote class="tr_bq">In the latest settlement, the largest payments are being made by Atrium Medical Center of Middletown, Ohio, which will pay $4.2 million; Mount Sinai Medical Center in Miami, $1.8 million; Altru Health System of Grand Forks, N.D., $1.5 million; Cedars Sinai Medical Center in Los Angeles, $1.5 million; Wayne Memorial Hospital in Goldsboro, N.C., $1.3 million; Trover Health System of Madisonville, Ky., $1.2 million; The Queen’s Medical Center in Honolulu, $1.1 million; and Des Peres Hospital in suburban St. Louis, $900,000.<br /><br />Several multi-hospital organizations agreed to settlements, including:<br />—Twenty-three hospitals with <a href="http://hcrenewal.blogspot.com/search/label/HCA">HCA Inc</a>. of Nashville, Tenn., paying a total of $7.1 million.<br />—Six hospitals with Lifepoint Hospitals Inc. of Brentwood, Tenn., $2.5 million.<br />—Five hospitals with Trinity Health of Livonia, Mich., $3.9 million.<br />—Four hospitals with Morton Plant Mease BayCare Health System of Clearwater, Fla., $2.4 million.<br />—Three hospitals with Baptist Memorial Hospital-Golden Triangle of North Columbus, Miss., $1.8 million.<br />—Two hospitals with Bayhealth Medical Center of Newark, Del., $1.1 million.</blockquote><br /><br />A Modern Healthcare <a href="http://www.modernhealthcare.com/article/20130702/NEWS/307029967/55-more-hospitals-settle-in-kyphoplasty-overpayment-cases">report</a> noted that the leadership of HCA, the hospital system with the largest liability, made it out to all be a misunderstanding,<br /><br /><blockquote class="tr_bq">Hospital executives say the allegations are prompted by  <i>unclear Medicare rules on when spinal-surgery patients should be held overnight.</i> And they note that even though the whistle-blowers and the government are targeting hospitals, t<i>he decision to admit patients is usually dictated by the treating physician.</i><br /><br />'We are pleased to see new clarification of industry care standards, which help physicians make decisions regarding kyphoplasty patients,' HCA spokesman Ed Fishbough said in an e-mailed statement Tuesday. 'We are confident as a result that this issue has been resolved.'</blockquote><br />However, the case appears to be more complicated than that.<br /><br /><b>What Really Happened, and Who Benefited?</b><br /><br />In fact, we <a href="http://hcrenewal.blogspot.com/2008/05/corporate-integrity-agreement-for.html">discussed</a> the Medtronic settlement in 2008.  At that time, a New York Times <a href="http://www.nytimes.com/2008/05/23/business/23device.html">article</a> described the government's allegations about what went on this way,<br /><br /><blockquote class="tr_bq"><i>A unit of Medtronic defrauded Medicare of hundreds of millions of dollars</i>, according to a civil lawsuit that was unsealed Thursday and simultaneously settled with the Justice Department.<br /><br />Two insiders had said Kyphon, which Medtronic acquired in 2007, <i> improperly persuaded hospitals to keep people overnight for a simple outpatient procedure to repair small fissures of the spine. Medicare then reimbursed the hospitals much more generously than it otherwise would have </i>for the procedure, which was developed as a noninvasive approach that could usually be done in about an hour.<br /><br />By marketing its products this way, <i>Kyphon was able to artificially drive up demand among hospitals, bolstering its revenue and driving up its stock price. Medtronic subsequently bought the company, its competitor, for $3.9 billion, greatly enriching Kyphon’s senior executives. </i></blockquote><br />Furthermore,<br /><br /><blockquote class="tr_bq"> The scheme at Kyphon was <i>based on Medicare’s practice of reimbursing hospitals more for complex inpatient back surgery than for outpatient care.</i> The two whistle-blowers, Charles M. Bates and Craig Patrick, said Kyphon had <i>deliberately urged doctors to admit patients overnight, knowing the admissions were unnecessary.</i><br /><br /><i>Hospitals saw the overnight admissions as a way to raise revenue,</i> the two said, and <i>bought Kyphon’s products, even though they were expensive, starting at $3,500 to repair one spinal fissure.</i> The hospitals could recover the cost through the improper reimbursements for overnight stays.<br /><br />Kyphon sold so much equipment this way that at one point it <i>enjoyed a 90 percent profit margin,</i> according to the two insiders, both of whom worked in sales positions.<br /><br />The former employees said the <i>scheme began in 1999</i>, when Kyphon’s products first came to the market. Kyphon’s rapid sales growth and profitability eventually gave rise to a patent dispute with Medtronic, which was dropped when Medtronic acquired it. The acquisition richly rewarded Kyphon’s shareholders, particularly its top executives. <i>The company said its top 15 executives stood to receive about $145 million by cashing in their options and restricted stock.</i></blockquote><br />Note that at that time, Medtronic leadership, whose decision to purchase of Kyphon would end up so enriching Kyphon executives, seemingly had no worries,<br /><br /><blockquote class="tr_bq">A  spokeswoman for Medtronic, Marybeth Thorsgaard, said the company had <i>known Kyphon was under investigation</i> when it made the acquisition. She said it knew that Kyphon’s marketing strategy was being challenged, and took the risk of litigation into account. <i>'There were no surprises,'</i> she said.</blockquote><br />I can find no public record that any individual who authorized, directed, or implemented the arrangements above that lead to huge overcharges to Medicare, and huge revenues to Kyphon and the hospitals was subject to any negative consequences.  As noted above, it appears that the executives who lead Kyphon at the time it was acquired by Medtronic made substantial amounts of money apparently attributable to this scheme to allegedly "defraud Medicare of hundreds of millions of dollars" (as it was described above in the New York Times).  <br /><br />Using the public record available on the internet, I tried to see how the top three Kyphon executives are doing now.  It appears they are not doing badly, and remain influential in health care.  According to its <a href="http://www.sec.gov/Archives/edgar/data/1123313/000119312507096257/ddef14a.htm">2007 proxy statement</a>, just before Kyphon was bought out, its CEO was Richard W Mott.  As best as I can tell, <a href="http://people.equilar.com/bio/richard-mott-alfred-university/salary/525993#.UdRnh6zNrrI">per Equilar,</a> he currently runs a consulting firm (Walkabout Consulting LLC), and was previously chairman of <a href="http://www.linkedin.com/company/photothera">PhotoThera</a>, which just went out of business.  Kyphon's chief science officer was  Karen D Talmadge, PhD, who is now on the <a href="http://www.diabetes.org/about-us/board-of-directors/karen-d-talmadge.html">board of directors of the American Diabetes Association,</a> and is also "Chair of the Board of Directors of Gynesonics, and serves on the Boards of Directors of Amplyx Pharmaceuticals, Velocity Pharmaceutical Development and Venous Health Systems."  Kyphon's chief operating officer was Arthur T Taylor, who is now on the <a href="http://www.providencemt.com/board-directors">board of directors of Providence Medical Technology</a>.<br /><br />The CEO of Medtronic at the time it bought out Kyphon, and the CEO of HCA at the time the arrangements began appear not to be doing badly either.  The CEO of Medtronic at the time it acquired Kyphon was Arthur D Collins Jr, who is now on the boards of directors of Boeing, Alcoa, and US Bancorp, also, according to his <a href="http://www.boeing.com/boeing/corp_gov/board_directors.page?">Boeing biography,</a> he is a senior adviser to Oak Hill Capital Partners, and is on the Board of Overseers of the Wharton School.  The CEO of HCA at the time of its arrangement with Kyphon began was Dr Thomas Frist Jr, who is currently <a href="http://www.forbes.com/profile/thomas-frist-jr/">on the Forbes list of billionaires</a> at number 262 in the world, with a total worth estimated at $4.3 billion. <br /><br /><b>Summary</b><br /><br />In retrospect, this case allegedly involved arrangements between Kyphon, a device company, and multiple hospitals to increase the revenue of all parties by billing the US government for unnecessary hospitalizations occurring after the use of a device made by Kyphon.  The arrangements appeared to have been particularly lucrative for Kyphon's executives after a larger device company, Medtronic, chose to buy Kyphon. Medtronic ultimately paid a large fine and entered into a corporate integrity agreement nine years after the arrangements began.  Now fourteen years after the arrangements began, at least some of the hospitals involved have also paid fines.  The former Kyphon executives who benefited the most seemingly paid no penalties, nor seemingly did any managers of Medtronic or the hospitals who might have gotten larger compensation because of all the revenue that these arrangements generated.     <br /><br />So initially, the big losers from this complex dance were the US government, and ultimately US tax payers.  Some patients may have also paid out of pocket for unnecessary services and thus lost money too.  Whether some patients suffered due to adverse effects of unneeded procedures was not clear.  Much later, Medtronic and some of the hospitals involved did pay big fines and thus lost some money.  However, it does not appear that they paid anything like what they made from the original scheme, and their payments were delayed for years.  However, the insiders who personally made a lot of money never apparently paid anything later.  So, this case appears to be a vivid example of how such insiders can walk away with piles of money from the misbehavior of their own corporations, while others pay the price.<br /><br /><br />Many of those of us of a certain age were brought up on myths that ultimately the good guys win and the bad guys lose.  We would all like to believe that the "arc of the moral universe ... bends toward justice."  History and this recent example suggest that it may not do so without our active intervention.  <br /><br />In health care, as we have said many times (look <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">here</a> for examples), when bad behavior occurs within a large health care organization, rarely are the insiders who authorized or directed it, and who had the most to gain from the behavior ever made to suffer any negative consequences.  As long as health care leaders have such impunity, expect them to continue to personally profit from unethical behavior.  As a result, expect health care costs to continue to rise as quality and access get worse and worse.<br /><br />True health care reform.needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

55 of Medtronic's Best Hospital Friends, Including HCA, Settle for $34 Million

The case of the over-marketing of Kyphon's kyphoplasty device (look here) just got more complicated, and now appears to have involved an amazing number of players.The State of Play  As reported by the…

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Ghosts in the Criminal Machine - How a Drug Company Can Plead Guilty to Federal Fraud, Yet No One is Held Responsible

We have often discussed how leaders of health care organizations have become increasingly unaccountable for their actions.  A recent, slightly obscure story shows how a corporate admission of guilt to a felony can be used to prevent anyone, including anyone in corporate management, from being held responsible for that fraud.<br /><br /><b>Basics of the Settlement</b><br /><br />The case was that of ISTA Pharmaceuticals.  The basics appeared in brief wire service articles, like <a href="http://www.foxbusiness.com/industries/2013/05/24/bausch-lomb-ista-admits-to-kickbacks/">this one</a> from Rueters (via Fox News):<br /><br /><br /><blockquote class="tr_bq"><i>Ista Pharmaceuticals pleaded guilty on Friday to charges it used kickbacks and improper marketing to boost sales of a drug </i>meant to treat eye pain and agreed to<i> pay $33.5 million to settle criminal and civil liability</i>, the U.S. Department of Justice said.<br /><br /> The unit of eye care company Bausch & Lomb <i>pleaded guilty to conspiracy to offer kickbacks to induce physicians to prescribe Xibrom,</i> a drug meant to treat pain after cataract surgery, and <i>conspiracy to promote that drug for unapproved uses</i>, including after Lasik and glaucoma surgeries.<br /><br /> Ista agreed as part of a criminal settlement to a $16.63 million fine and an $1.85 million asset forfeiture. It also agreed to a $15 million civil settlement to resolve allegations that its marketing of Xibrom caused false claims to be submitted to government health care programs.</blockquote><br /><b>Kickbacks Disguised as Honoraria and Consulting Fees </b><br /><br />Note that unlike many such legal settlements involving large health care organizations, this one involved admissions of guilt to felonious criminal offenses.  The severity of the charges apparently arose out of the egregious conduct of company executives.  Colorful details were <a href="http://www.buffalonews.com/apps/pbcs.dll/article?AID=/20130524/CITYANDREGION/130529545/1005">supplied</a> by the Buffalo (NY) News:<br /><br /><blockquote class="tr_bq">ISTA, which is based in California, <i>admitted using kickbacks to doctors and an illegal marketing campaign </i>as part of an elaborate scheme to increase its sales of Xibrom.<br /><br />The scheme, outlined in detail in newly released court papers, ranged from company-provided instruction sheets for doctors to continuing medical education programs to promote the drug.<br /><br />In many cases, <i>ISTA employees were told not to leave printed materials behind in doctors’ offices or to keep records of their meetings with doctors in order to avoid detection </i>by others.<br /><br />The company went so far as to <i>offer speaking engagements and consulting appearances to doctors in hopes that they might use Xibrom</i> for non-authorized treatments.<br /><br />Doctors can legally prescribe drugs for non-FDA approved treatments, but drugmakers are prohibited from promoting their products for those uses.<br /><br />'Essentially <i>they entered into consulting arrangements to induce physicians to prescribe their drug</i>,' said Jeffrey I. Steger, a lawyer in the Consumer Protection Branch of the U.S. Department of Justice.<br /><br />When [US District Judge Richard J] Arcara asked if money was the doctors’ motivation, Steger said yes.<br /><br />'Thousands of dollars,' he told the judge. </blockquote><br />So here we have a company admitting that it bribed doctors to prescribe its drug, and its techniques of administering bribes included paying the doctors honoraria to give talks, and paying the doctors as consultants.  As an aside, note that many defenders of "collaboration" among doctors and industry sign the praises of doctors "consulting" for industry, and often see nothing wrong with industry paying doctors for "educational" speeches.  Yet here is more evidence that such paid talks and consulting assignments may be nothing more than marketing, and at times are merely disguised bribery. <br /><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><b>An Apparently Tough Penalty</b></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">An unusual feature of this settlement was that (per Reuters):</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote class="tr_bq">As part of the settlement, <i>Ista will be barred from participating in Medicare and Medicaid,</i>...</blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div></div><br /><br />That would appear to be the death knell for the company, as reported by Reuters, <br /><br /><blockquote class="tr_bq">Bausch & Lomb, which is based in Rochester, New York, said it was pleased to settle the matter, which involved conduct between January 2006 and March 2011, and that it knew of the government probe well before it purchased Ista.<br /><br /> That purchase closed in June 2012 and Bausch and Lomb <i>plans to wind down the Ista corporate entity by year end.</i></blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div>So Bausch and Lomb bought a company that turned out to be valueless?  But wait,...  there's a trick. <br /><br />As <a href="http://www.fiercepharma.com/story/ista-excluded-medicare-335m-label-settlement/2013-05-28">detailed</a> in FiercePharma,<br /><br /><blockquote class="tr_bq"> ISTA will be barred from doing business with Medicare, Medicaid, et al, for 15 years. Luckily for Bausch + Lomb, however, it bought ISTA in June 2012,  late enough in the game to actually escape the ramifications of exclusion. <i>The exclusion won't begin until 6 months after the settlement date, giving Bausch + Lomb time to transfer ISTA's products out of that subsidiary and shift the drugs over to the Bausch + Lomb label.</i></blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /><b>A Crime Committed by... No One?</b></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">So Bausch and Lomb gets ISTA's drugs, and essentially can resolve the company's felony convictions by relatively small fines, and through management sleight of hand, can finesse ISTA's disbarment from federal programs..  This will occur despite admissions that someone within ISTA, presumably within ISTA management, perhaps high up in ISTA management, per FiercePharma, </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote class="tr_bq"><i>instructed reps to avoid leaving a paper trail of their off-label discussions with doctors. </i>Prosecutors had enough evidence of this to <i>persuade ISTA to plead guilty to a felony fraud charge.</i> 'These instructions were given in order to avoid having their conduct relating to unapproved new uses being detected by others, the Justice Department said. 'ISTA agreed that this conduct represented an intent to defraud under the law.'</blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br />So felony fraud was committed, but no person apparently committed it.  It was as if a ghost committed the crime.</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Not only was a crime committed, but apparently by nobody, the corporation within which the crime was committed also becomes obscure.  ISTA became responsible, but by being bought out by Bausch and Lomb, the more severe penalty directed against ISTA will be meaningless.  </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Should Bausch and Lomb be responsible?  Of course, they claim they should not.  As <a href="http://www.bloomberg.com/news/2013-05-24/bausch-lomb-unit-pays-33-5-million-in-misbranding-case.html">reporte</a>d by Bloomberg, </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><blockquote class="tr_bq"><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> Rochester, New York-based Bausch & Lomb said the actions occurred 'well before' it acquired Ista in 2012. </div></blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote><br />'Bausch & Lomb is committed to earning trust in everything that we do and is pleased to have resolved this pre-acquisition issue,' Bob Bailey, a Bausch & Lomb spokesman, said in a statement. </blockquote><br />In fact, The Hill<a href="http://thehill.com/blogs/regwatch/healthcare/301949-drug-company-pleads-guilty-to-felony-kickback-scheme-pays-335m"> reported</a> that the bad behavior took place from 2005 to 2010: <br /><br />But consider that while ISTA recently became part of Bausch and Lomb, since 2007, Bausch and Lomb has been wholly owned by private equity firm Warburg Pincus.  In fact, as we <a href="http://hcrenewal.blogspot.com/2009/06/was-private-equity-takeover-of-bausch.html">discussed</a> in in 2009, some people suspected that this maneuver would have allowed Baush and Lomb to settle multiple suits alleging that its products were faulty and dangerous out of the public eye.  So while ISTA is now really Bausch and Lomb is now really Warburg Pincus, no one in the management of ISTA, Bausch and Lomb, or Warburg Pincus apparently will be held responsible for criminal fraud and kickbacks to doctors, even though guilty pleas for these felonies have been made.  So somehow we have admissions that crimes were committed, crimes that compromised the integrity of doctors, and exposed patients to needless side effects, yet these crimes were apparently committed by ... nobody, by a ghost, and even the machine that ghost was in - was it ISTA, Bausch and Lomb, or Warburg Pincus? - becomes a mystery.  Where is Sherlock Holmes when we need him most?.<br /><br /><b>Summary</b><br /><br />This case thus becomes a really striking example of the impunity of health care corporate managers.  They can commit crimes, even felonies, yet the company, but no human beings, is held responsible.  But the company being a company, it cannot go to jail.  And through the magic of obfuscatory corporate take-overs, which company is guilty is not even apparent. <br /><br />As we have said ad infinitum, <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. </div></div>

Ghosts in the Criminal Machine - How a Drug Company Can Plead Guilty to Federal Fraud, Yet No One is Held Responsible

We have often discussed how leaders of health care organizations have become increasingly unaccountable for their actions.  A recent, slightly obscure story shows how a corporate admission of guilt to…

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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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The Myth of the Tough Prosecutor as a Distraction from Health Care Corporate Executives' Impunity

The tragic case of the Boston Marathon bombing illustrates how myth making about tough law enforcement obscures the impunity enjoyed by top health care executives.<br /><br /><b>A "Tough to a Fault" Prosecutor</b><br /><br />A recent Reuters<a href="http://www.reuters.com/article/2013/04/22/us-usa-explosions-prosecutor-idUSBRE93L00X20130422"> article</a> touted the toughness of the prosecutor who will take on the case of the surviving accused Boston terrorist:<br /><br /><blockquote class="tr_bq"><span id="articleText"><span class="focusParagraph">As the top federal law enforcer in Massachusetts, U.S. Attorney Carmen Ortiz has<i> taken heat for being tough to a fault and coming down too hard on some defendants.</i><br /><br /> </span><span id="midArticle_1"></span>But as she builds a possible death penalty case against suspected Boston Marathon bomber Dzhokhar Tsarnaev, 19, the <i>unflinching approach </i>that earned her opponents in the past could become a legal asset for the biggest case of her career, said attorneys who have faced off against her.<br /><span id="midArticle_2"></span><br />'The criticism lately has been that they've<i> over-charged some people and been overly harsh</i>,' said Peter Elikann, a Boston defense attorney.'I don't think that's relevant for Tsarnaev because no one is going to accuse any prosecutor of making too big a deal out of this case.'</span></blockquote><span id="articleText"></span><br /><br />Similarly, an<a href="http://www.businessweek.com/news/2013-04-23/marathon-bomb-prosecutor-seen-as-ready-for-marquee-case"> article</a> in Bloomberg included this:<br /><br /><br /><blockquote class="tr_bq">Ortiz’s former bosses insist that she’s ready for her moment on the big stage. <br /><br />'She’s<i> tough-minded</i> and exceptionally professional,' [former Massachusetts Attorney General Scott] Harshbarger said. </blockquote><br />One of the cases cited as an example of Ms Ortiz's toughness was her prosecution of electronic information freedom activist Aaron Swart.  As Rueters noted,<br /><br /><blockquote class="tr_bq"><span id="articleText">One of Ortiz's best-known cases to date was her prosecution of Aaron Swartz on wire fraud and hacking allegations for downloading millions of articles from an academic database.<br /><br /><span id="midArticle_10"></span>Swartz, a 26-year-old computer prodigy, hanged himself in his Brooklyn, New York, apartment in January, prompting friends and family to partly blame Ortiz's prosecution for his death.</span></blockquote><br /><span id="articleText"></span><br />At the time, Ms Ortiz was criticized for being unreasonably harsh, but then as now toughness was touted as her style.<br /><br /><b>Not So Tough on Corporate Crime </b><br /><br />However, as we <a href="http://hcrenewal.blogspot.com/2013/01/the-tragic-case-of-aaron-swartz-unequal.html">pointed out then</a>, while Ms Ortiz was noted for being tough on individuals accused of various offenses, she was notably not so tough on individuals involved in alleged corporate health care wrong doing.<br /><br />In particular, as we wrote before, Ms Ortiz was involved in three settlements of notably bad behavior by large health care corporations, none of which involved prosecution of, or any penalties for the individuals at the corporations who authorized, directed or implemented the bad behavior.<br /><br /><span style="background-color: #f3f3f3;"><u>Forest Pharmaceuticals </u></span><span style="background-color: #f3f3f3;"><br />In September, 2010, how Ms Ortiz led the pursuit of a settlement with Forest Pharmaceuticals became apparent (look <a href="http://hcrenewal.blogspot.com/2010/09/forest-pharmaceuticals-pleads-guilty-to.html">here</a>).   The company was accused of promoting its anti-depressant Celexa for use in adolescents and children.  Such drugs have since been shown to increase the risk of suicide by such young patients, and this drug was only approved for adults.  At the time, Ms Ortiz said, "Forest Pharmaceuticals deliberately chose to pursue corporate profits over its obligations to the F.D.A. and the American public."  Although the offense may have lead to use of the drug by many adolescents and children, and hence may have lead to some of them attempting or committing suicide, the case was settled only with fines.  As is usual in such legal settlements, no individual corporate executive who authorized or lead the off-label and potentially dangerous marketing of the drug was arrested, or accused, and none suffered any negative consequences.</span><span style="background-color: #f3f3f3;"><br /></span><span style="background-color: #f3f3f3;"><u>GlaxoSmithKline </u></span><span style="background-color: #f3f3f3;"><br />In October, 2010, how Ms Ortiz led the pursuit of a settlement with GlaxoSmithKline became apparent (look <a href="http://hcrenewal.blogspot.com/2010/10/glaxosmithkline-subsidiary-pleads.html">here</a>.)  The company was accused of selling drugs that were not what they appeared to be, apparently because the wrong drugs were put in labelled containers.  Obviously, taking one drug, like Paxil, GSK's anti-depressant which has a number of known adverse effects, including suicide risk for adolescents and children as noted above, when a patient is supposed to be taking a wholly different drug could lead to patient harm.  At that time, Ms Ortiz said, "We will not tolerate corporate attempts to profit at the expense of the ill and needy in our society -- or those who cut corners that result in potentially dangerous consequences to consumers."   Again, while the settlement involved a guilty plea by a GSK subsidiary, again no individual corporate executive who had authority over the drug manufacturing was arrested or accused, much less suffered any negative consequences.</span><span style="background-color: #f3f3f3;"><br /></span><span style="background-color: #f3f3f3;"><u>St Jude Medical </u></span><span style="background-color: #f3f3f3;"><br />In January, 2011, Ms Ortiz led the pursuit of a settlement with St Jude Medical (look <a href="http://hcrenewal.blogspot.com/2011/01/st-jude-medical-settles-again.html">here</a>).  The company was accused of paying kickbacks to doctors to implant its cardiac defibrillators (ICDs) and pacemakers.  Obviously, providing kickbacks to doctors may have lead them to plant devices in patients who did not really need them, yet the devices and the implantation procedures can have adverse effects.  At that time, Ms Ortiz said, "The United States alleges that St Jude solicited physicians for the studies in order to retain their business and/or convert their business from a competitor's product."  Again, as is usual, the settlement did not require any executive who authorized or directed the activities leading to the kickbacks suffered any negative consequences.</span><br /><br /><br />Despite this, note that Bloomberg in its recent coverage of the Tsarnaev prosecution even tried to make Ms Ortiz failure to hold any individuals accountable for this health care corporate misbehavior seem like tough prosecution.<br /><br /><br /><blockquote class="tr_bq"><span id="articleText">The office has been a <i>leader in health-care fraud prosecutions</i>, securing $4 billion in civil and health-care recoveries in 2012. Those included a $3 billion payment from GlaxoSmithKline Plc (GSK), which pleaded guilty to charges that it illegally promoted prescription drugs. </span></blockquote><span id="articleText"></span><br />Again, note that apparently being a "leader" in health care fraud prosecution involved pushing for big fines to be paid by the corporations involved in actions that may have harmed many patients, but no punishment for  the individuals who may have authorized, directed or implemented the bad behavior, but being "tough" on Aaron Swartz involved pushing for a long imprisonment of someone whose alleged crime was not violent, and did not result in anyone being hurt.<br /><br /><br /><b>Summary </b><br /><br />As we have noted again and again and again, leaders of large health care organizations, particularly the largest health care corporations, seem to enjoy virtual impunity.  No matter how bad the behavior of the corporations which they are supposed to be leading, and no matter whether such behavior might have harmed patients, they almost never have to face any negative consequences, especially not fines they must pay themselves, much less prison time.  We have <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">documented many legal settlements</a> of often egregiously bad alleged behavior that did not involve any penalties for top corporate leaders. <br /><br />One way corporate leaders thus escape accountability seems to be the cultivation of myths that distract the public from what is going on.  One such urban legend seems to be the toughness of government prosecutors.  If prosecutors are believed to be uniformly tough and uncompromising, then the public may be lead to believe either that they are tough and uncompromising on corporate crime    <br /><br />As we have said repeatedly, true health care reform would require making the leaders of health care organizations accountable, especially for the effects of their actions on patients' and the public's health.<br /><br />

The Myth of the Tough Prosecutor as a Distraction from Health Care Corporate Executives' Impunity

The tragic case of the Boston Marathon bombing illustrates how myth making about tough law enforcement obscures the impunity enjoyed by top health care executives.A "Tough to a Fault" ProsecutorA rece…

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