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

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

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

Legal settlements are one way to document unethical and even corrupt behavior by large health care organizations, even if they may not deter...

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Turnabout is Fair Play - Why University of Illinois Students, Faculty and Alumni Should Question the Dean of Medicine about Novartis' Ethical Misadventures

Since 2006, we have posted repeatedly about  what was then a new species of severe conflicts of interest.  This occurred when leaders of academic medical institutions or other health care non-profit organizations or non-governmental organizations (NGOs) also serve as members of <a href="http://hcrenewal.blogspot.com/search/label/boards%20of%20directors">boards of directors</a> of for-profit corporations  whose products and actions have major effects on health care. Most recently, we <a href="http://hcrenewal.blogspot.com/2014/03/american-board-of-internal-medicine.html">discussed </a>the cases of the current CEO of the National Quality Forum and past CEO of the American Board of Internal Medicine who was found to be on the board of for-profit hospital group purchasing organization Premier Inc, and had been on the board of its privately held but for-profit predecessors.  We also <a href="http://hcrenewal.blogspot.com/2014/02/incoming-president-of-iom-outed-as.html">discussed</a> the case of the incoming president of the US Institute of Medicine and former Chancellor of Health Affairs at Duke University who was on the boards of Alnylam Pharmaceuticals, Medtronic and Pepsico. We also recently <a href="http://hcrenewal.blogspot.com/2014/03/better-late-than-never-jama-article.html">posted</a> about the first time these sorts of severe conflicts of interest issue have been addressed in a large circulation medical journal.  A commentary in JAMA called for many such conflicts to be banned. The JAMA article, and much of the discussion surrounding the NQF and IOM cases focused on how loyalties to outside for-profit corporations could affect leaders of academic and other non-profit organizations.  However, we also noted (e.g., <a href="http://hcrenewal.blogspot.com/2014/02/the-carefusion-dr-denham-nqf-leapfrog.html">here</a> and <a href="http://hcrenewal.blogspot.com/2014/02/incoming-president-of-iom-outed-as.html">here</a>) how company directors should be accountable for the actions of their companies, even if they also happen to also be academic or non-profit leaders.  Thus, academic and non-profit leaders may find themselves in the awkward position of being held accountable for unethical or even illegal actions of the companies on whose boards they sit.  Such corporate actions may contradict the mission of the institutions whose leadership is their primary job, and whose mission they are supposed to uphold.  While we were writing about these somewhat convoluted, but very important issues, a fellow blogger discovered yet another academic leader serving on the board of a health care corporation, while simultaneously the media reported multiple examples of that corporation's ethical misadventures on his watch.  Those who care about that academic institution ought to question whether a leader accountable for such misadventures is fit to continue to lead.  Yet so far, no one has publicly juxtaposed this leaders' responsibilities to his institution's mission and how the corporation over which he is supposed to exercise stewardship has been taking actions that contradict that mission The Dean of the College of Medicine at the University of Illinois Is a Director of Novartis Paul Levy, blogging on Not Running a Hospital, <a href="http://runningahospital.blogspot.com/2014/01/time-to-fire-somebody.html">noted </a>a print advertisement for the Intuitive Surgical daVinci robot.  The advertisement implied endorsements by academic surgeons at the University of Illinois.  Levy suggested that surgical faculty acting as salespeople for a device company appeared to violate the university code of conduct.  This <a href="http://runningahospital.blogspot.com/2014/01/where-is-ui-board-of-trustees.html">concern was heightened</a> by the status of several of the surgeons in the advertisement as clinical and academic leaders.     Mr Levy then <a href="http://runningahospital.blogspot.com/2014/01/how-fish-rots.html">discovered</a> that the Dr Dimitri Azar, Dean of the University of Illinois College of Medicine, to whom these surgeon report, was on the board of Novartis, the multinational pharmaceutical and device company.  Dr Azar's position is easily verified by consulting the <a href="http://www.novartis.com/about-novartis/people/board-directors.shtml">Novartis web-site</a>.  Mr Levy further discussed the case <a href="http://runningahospital.blogspot.com/2014/02/how-much-should-dean-be-paid-who-should.html">here</a> and <a href="http://runningahospital.blogspot.com/2014/02/all-in-days-work-700000-450000.html">here</a>.  Then he  <a href="http://runningahospital.blogspot.com/2014/03/a-matter-of-public-trust.html">reviewed</a>  the extensive dealings between the University of Illinois and Novartis and its subsidiaries, raising suspicion that the Dean's known involvement with the company may have lead to its favorable treatment by the university. But wait, there is another major dimension to this problem.  Novartis' Recent Ethical Misadventures Novartis, over which Dr Azar is supposed to be exerting stewardship, has made a series of ethical missteps according to recent media reports.  I will summarize them in chronological order according to the date of media publication. Novartis, Roche Fined for Anti-Competitive and Deceptive Practices in Italy to Encourage Sales of Lucentis According to a March 5, 2014 <a href="http://www.nytimes.com/2014/03/06/business/international/italy-fines-novartis-and-roche-in-collusion-case.html">article</a> in the New York Times, Novartis was fined for anti-competitive and deceptive practices,  <blockquote class="tr_bq">Italian antitrust authorities said on Wednesday that they had fined two Swiss pharmaceutical companies, Novartis and Roche Holdings, a total of $250 million for colluding to keep doctors from prescribing a relatively inexpensive eye treatment in favor of a more expensive drug. <div class="story-body-text story-content" data-para-count="436" data-total-count="723" itemprop="articleBody">The authorities said the two companies had sought to steer doctors away from Avastin, an anticancer drug developed by Genentech that has been used for years as an off-label treatment for common eye problems. Instead, they said, the companies had tried to 'channel demand toward the much more expensive drug Lucentis, through an artificial distinction between the two products,' essentially by overstating the dangers of Avastin use.</div><div class="story-body-text story-content" data-para-count="235" data-total-count="958" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="235" data-total-count="958" itemprop="articleBody">It is not the first time such substitution efforts have brought an unwanted spotlight: Genentech got into trouble in the United States in 2010, when it was found to be offering doctors <a href="http://www.nytimes.com/2010/11/04/business/04eye.html?pagewanted=all" title="Previous coverage of the rebates.">secret rebates</a> to prescribe Lucentis over Avastin.</div> Novartis, which holds the rights to market the two drugs outside the United States, has been fined 92 million euros by the Italian regulators. And Roche, which acquired Genentech in 2009, was fined 90.5 million euros, for a total of about $250 million in the Italian case. </blockquote> Given that many drug companies have been cited for marketing their products for unapproved, or off-label uses, it is ironic that in this case, Novartis managers said they were shocked, shocked by the ruling because it could encourage off-label use: <blockquote class="tr_bq"> Novartis said in a statement that the Italian decision 'openly encourages and promotes the widespread unlicensed intravitreal use of Avastin contrary to the requirements of European and Italian regulatory law,' and 'undermines the European regulatory framework designed to protect patient safety.'</blockquote> The NY Times also reported that one method the two companies were alleged to use to encourage Lucentis rather than Avastin use was to launder their message through patient advocacy groups, <blockquote class="tr_bq"><div class="story-body-text story-content" data-para-count="230" data-total-count="4756" itemprop="articleBody">The Italian authorities discovered numerous messages between Roche and Novartis in which the two companies discussed what kinds of communications would be needed to induce doctors and hospitals to adopt the more expensive product.</div><div class="story-body-text story-content" data-para-count="230" data-total-count="4756" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="313" data-total-count="5069" itemprop="articleBody">According to one such message from early 2013, cited in documents in the case released Wednesday, growing cost pressure in Italy and France to use Avastin had 'reinforced the political dimension of the debate,' and 'further reinforcement of the Lucentis value proposition to all stakeholders is critical.'</div><div class="story-body-text story-content" data-para-count="239" data-total-count="5308" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="239" data-total-count="5308" itemprop="articleBody">Another message called for the companies to 'work with diabetes patient groups to increase voiced concerns about safety risks of unlicensed therapies' — a reference to Avastin — for an eye condition known as diabetic macular edema.</div></blockquote><div class="story-body-text story-content" data-para-count="239" data-total-count="5308" itemprop="articleBody"> </div><div class="story-body-text story-content" data-para-count="239" data-total-count="5308" itemprop="articleBody">Novartis Paid Doctors to Act as Marketers for Starlix and Other Drug</div><div class="story-body-text story-content" data-para-count="239" data-total-count="5308" itemprop="articleBody"> </div>After the New York state attorney general filed suit against Novartis, a March 15, 2014 Newsday <a href="http://www.newsday.com/news/health/novartis-gave-doctors-thousands-to-prescribe-pills-feds-allege-1.7404245">article</a> included interviews with physicians that suggested how the company turned them into disguised marketers: <blockquote class="tr_bq">Dr. Howard Brand says he had one goal when he gave a speech at a Miami hotel in the early 2000s -- to tout the diabetes pill Starlix for the pharmaceutical company Novartis.  The giant Swiss drugmaker, which reported $57.9 billion in global sales in 2013, paid the Stony Brook endocrinologist $1,500 for his talk at a doctors' meeting, Brand said in an interview. Novartis also paid for Brand's airfare and his weekend hotel stay, he said. 'It was self-serving, but I also thought it was a benefit to patients,' said Brand,...</blockquote> Furthermore, <blockquote class="tr_bq"> Brand, the Miami speaker, said in an interview that investigators had not approached him about the payments he accepted. He said Novartis paid him a total of $10,000 to $12,000 for speeches, mostly at restaurant dinners it sponsored. The payments, which Brand said he received before 2010, are not reflected on the Novartis website. ' Even [with] the notion that we were paid solicitors, I think people really paid attention,' he said. 'Of course, a lot of doctors just enjoyed going to dinner.' Brand said he accepted more than $60,000 in speaker's fees from drugmakers, including Novartis, in one two-year period. </blockquote> Another physician allowed that Novartis furnished the material for his "educational" talks, <blockquote class="tr_bq">Dr. Howard Hertz, a Babylon internist, confirmed that he had received $4,000 from Novartis in 2010 and 2011 for talking about its hypertension drugs to colleagues. Hertz said he dealt with a Novartis sales rep who brought information about the company's pills to his office. 'He would educate me about the product, give me slides to study,' he said. Hertz said the slides were on CDs and made him an expert on Novartis drugs such as Diovan, a blood pressure pill, Lotrel and Valturna. He said he spoke mostly about Diovan and Lotrel. 'We had dinners whereby I would speak about the products and speak to the colleagues,' Hertz said. 'I became somewhat of an expert in these products.'</blockquote> Note that Dr Hertz's expertise seemed to come exclusively from information provided by a company salesperson, making it obvious that he was not hired for his prior expertise as a physician. The prosecutors allege that Novartis' payments of some $65 million amounted to illegal kickbacks.  This is only an allegation.  However, it seems obvious that Novartis paid physicians to act as salespeople.  Newsday asked bioethicist Arthur Caplan about these actions, <blockquote class="tr_bq">'To even hear about it just takes my breath away,' Caplan said. 'It sounds like egregious, inexcusable violations of agreed upon legal and ethical standards . . . with an inexcusably complicit group of physicians,' Caplan said.</blockquote> Japanese Hospital Investigation Alleged Novartis Manipulated Research A March 17, 2014 <a href="http://www.fiercepharma.com/story/tokyo-hospital-exec-says-novartis-employees-deeply-involved-leukemia-drug-t/2014-03-17">article</a> in FiercePharma stated that Japanese investigators found that Novartis had manipulated clinical research to make its results appear more favorable to the company's products, <blockquote class="tr_bq">Novartis employees were more involved in a Japanese drug study than previously suspected, a Tokyo hospital official said. In an investigative report released last week, the University of Tokyo Hospital said doctors not only let Novartis  employees collect patient data from various trial sites but also allowed the Swiss drugmaker into its records on all 255 trial participants, Japanese media reports. Plus, at least one Novartis employee was involved in planning the trial, designed to compare side effects of multiple leukemia treatments, the hospital found, according to Japan's Mainichi news. Those treatments included Tasigna<a href="http://www.fiercepharma.com/tags/tasigna"></a>, the company's follow-up to the hugely successful Gleevec (imatinib). In fact, according to NHK World, hospital director Takashi Kadowaki said Friday that Novartis employees were 'virtually managing the study.' </blockquote> <a href="http://mainichi.jp/english/english/newsselect/news/20140315p2a00m0na006000c.html">According to Mainichi</a>, this sort of clinical research manipulation is taken very seriously in Japan, <blockquote class="tr_bq"> Senior Ministry of Health, Labor and Welfare officials called the case a serious situation and said the researchers involved showed a lack of ethics. They called for a detailed investigative report from the hospital and are considering punitive measures. The ministry will consider a new law to prevent corruption in clinical tests in the wake of a scandal involving the clinical trial of antihypertensive drug Valsartan.</blockquote> It is obvious this story is not from the US, because the drug company has already apologized, <blockquote class="tr_bq"> A representative for Novartis Pharma's PR division said, 'We want to apologize to patients and doctors. We must refrain from comment on the investigation, which is being handled outside our company.'</blockquote> Indian Regulator Cancels Import License Alleging Fraud by Novartis to Market Veterinary Drug A March 18, 2014 <a href="http://www.business-standard.com/article/companies/novartis-might-face-legal-action-penalty-for-faking-documents-114031800760_1.html">article</a> in the New Delhi Business Standard told how Indian regulators accused Novartis of fraud, opening with, <blockquote class="tr_bq">Swiss drug maker Novaris is likely to face legal action for allegedly faking documents to seek registration of its veterinary product Tiamulin Hydrogen Fumarate (80 per cent granules) in India. The drug regulator, Drugs Controller General of India (DCGI)), has already cancelled the company’s import licences as well as existing registration certificate for the product.</blockquote> Summary So in just the last few weeks, evidence appeared that Novartis engaged in collusive anti-competitive and deceptive practices marketing drugs in Italy, paid physicians to act as marketers in the US, manipulated drug studies in Japan, and lost an import license in India due to alleged fraud.  By the way, in 2013, Novartis was fined for anti-competitive practices in its marketing of Fentanyl by the European Commission (look <a href="http://hcrenewal.blogspot.com/2013/12/the-camels-aching-back-johnson-and.html">here</a>), and in 2011 its Sandoz subsidiary settled allegations of misreporting prices in the US for $150 million (look <a href="http://hcrenewal.blogspot.com/2011/12/legal-settlements-have-become-so-common.html">here</a>)   Other Novartis misadventures from 2010 and earlier appear <a href="http://hcrenewal.blogspot.com/search/label/Novartis">here</a>.  So Novartis has quite an impressive, if not infamous record of ethical failures. While he is Dean of medicine at the University of Illinois, Dr Dimitri Azar is also a director of Novartis, and hence has a fiduciary duty for the company's stewarship.  While questioning Dr Azar's role in the participation of his faculty in advertising for Intuitive Surgical, perhaps those who care about the reputation of the University of Illinois and its ability to fulfill its mission ought to ask how the poor ethical track record of the company Dr Azar is supposed to be overseeing reflects on his ability to defend the mission of the university and the medical school. While parties that enable or enter into arrangements that create conflicts of interest in health care may be thinking mainly of the advantages that they may accrue, many of these arrangements create accountability and obligations, even if they are honored mainly in the breach.  If leaders of academic medicine and health care non-profit organizations insist on becoming directors, and hence stewards of for-profit health care corporations, they ought to be held accountable for the actions of these corporations, and how these actions reflect on their primary obligations to the academic and non-profit organizations they have also pledged to serve. True health care reform would make health care leaders accountable for putting patients' and the public's health ahead of their own self-interest.

Turnabout is Fair Play - Why University of Illinois Students, Faculty and Alumni Should Question the Dean of Medicine about Novartis' Ethical Misadventures

Since 2006, we have posted repeatedly about what was then a new species of severe conflicts of interest. This occurred when leaders of aca...

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

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

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

A story that caused only a few ripples in the media in late January, 2014, corroborates concerns about the increasing concentration of power...

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More Pharmaceutical Misadventures - Actelion Damages Upheld, Genzyme (Sanofi Subsidiary) Settled, Merck Fined

The march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> by large health care organizations goes on, albeit with ever more quiet footsteps as the number of journalists available to amplify their sounds declines.  Last week we <a href="http://hcrenewal.blogspot.com/2014/01/pharmalot-sent-down-memory-hole.html">noted</a> the shutdown of PharmaLot, a journalistic blog edited by Ed Silverman that was one of the few that reported fearlessly on the pharmaceutical industry, warts and all. So we dedicate this round up of legal settlements by pharmaceutical companies announced last month, December, 2013, to Ed Silverman, who reported on two of the cases below, and whose reports have been silenced by the shutdown of the PharmaLot web-site by its corporate owner. In alphabetical order by name of the pharmaceutical company, Actelion $40.7 Million Damages for Keeping Possibly Competitive Drug Off the Market Upheld This story was reported by Ed Silverman on Pharmalot, and <a href="http://www.sfgate.com/business/article/Actelion-loses-appeal-in-lung-drug-case-5079481.php">by the San Francisco Chronicle</a>.  The basics, according to the latter article, were: <blockquote class="tr_bq">A state appeals court has upheld $407 million in damages against the Swiss biotechnology giant Actelion and its executives for buying a Bay Area company and using it to thwart another firm's plans to market a competing hypertension drug in the United States. The drug, Fasudil, is manufactured by Ashai Kasei Pharma Corp of  Japan<a href="http://www.sfgate.com/?controllerName=search&action=search&channel=business&search=1&inlineLink=1&query=%22Asahi+Kasei+Pharma+Corp.+of+Japan%22"></a> for treatment of pulmonary arterial hypertension, an often fatal disease of the lung arteries. In June 2006, Asahi signed a licensing agreement with the South San Francisco biotech firm CoTherix, which agreed to develop oral and inhaled versions of Fasudil and seek regulatory approval in the U.S. and Europe. Less than five months later, Actelion bought CoTherix, paying a premium price of more than $400 million, and announced soon afterward that it was dropping plans to develop Fasudil. Actelion's own drug, Tracleer, dominates the U.S. market for treatment of the same disease and generates more than $1 billion in revenue a year.</blockquote> Note that the federal appeals court judge, Terence Bruiniers, found that the actions by Actelion were not only anti-competitive, but may have harmed patients, <blockquote class="tr_bq">'By impeding the development of Fasudil, Actelion not only sabotaged a competitive and foreseeably profitable commercial venture, but prevented a drug with the potential for alleviating the suffering of patients with life-threatening and debilitating diseases from reaching the market,' Bruiniers wrote.</blockquote> Further note that in this civil lawsuit, it appears that the top executives who engineered the anti-competitive actions that may have harmed patients will actually face negative consequences.  The judge also said, <blockquote class="tr_bq">the jury was entitled to conclude that three Actelion executives - CEO Jean Paul Clozel, chief scientific officer Martine Clozel, and Simon Buckingham, director of corporate and business development - had shown a disregard for the rights of Asahi and its customers and were liable for $30 million in punitive damages, about 10 percent of the executives' net worth.</blockquote> Sanofi Subsidiary Genzyme Settled Charges of Encouraging Unapproved Internal Use of SepraFilm for $22 Million The longest version of this story appeared <a href="http://www.tampabay.com/news/courts/civil/boston-biotech-firm-genzyme-agrees-to-pay-22-million-in-tampa/2158332">in the Tampa Bay Times</a>.  The basics were:  <blockquote class="tr_bq"> A Massachusetts-based biotechnology company has agreed to pay $22.28 million to resolve allegations brought by whistle-blowers in Tampa and Miami that it marketed an inappropriate use for a surgery medication, U.S. government attorneys said. Genzyme, a corporation known for its research into drugs for rare genetic diseases, is paying the settlement in a lawsuit over Seprafilm, a material it manufactures for use in the operating room. According to court documents, Genzyme sales representatives encouraged doctors to use the product in a manner not approved by the U.S. Food and Drug Administration, leading to improper claims for reimbursement from hospitals.</blockquote> The details were: <blockquote class="tr_bq"> According to court documents, Seprafilm is intended to be applied during open surgery to prevent organs and muscle tissue from sticking together. However, the whistle-blowers and lawyers for the federal government alleged that Genzyme sales representatives taught doctors to use it in less invasive procedures — such as laparoscopic or 'keyhole' surgeries — by mixing it into a liquidlike 'slurry' that could be injected into the body.</blockquote> Apparently the sales representative who blew the whistle in this case "recognized that this was a potential danger."  It certainly seems possible that the unapproved use of this material modified to be injected within the body might have resulted in harm to patients, and that at least its harmfulness when used in this manner had had never been tested.  However, in this litigation as supported by the US Department of Justice the plaintiffs were "not required to prove ... that patients had been harmed." Note that unlike the civil case above, and as is typical of federal lawsuits against big health care organizations, those company employees who authorized or directed the questionable actions did not suffer any negative consequences. (Added on 19 January, 2013) - Further note that as the article implied, but did not emphasize, since 2011, Genzyme has been owned by Sanofi.  Sanofi's last three major settlements since 2007 were summarized <a href="http://hcrenewal.blogspot.com/2012/12/tis-season-for-legal-settlements.html">here</a>.  Merck Fined 15.3 Million Euros for Smear Campaign Against Generic Competition This case was reported by Ed Silverman on PharmaLot, and briefly <a href="http://www.reuters.com/article/2013/12/19/france-fine-idUSL6N0JY2DE20131219">by Reuters</a>, <blockquote class="tr_bq">The French competition authority said on Thursday it had fined Schering-Plough, now owned by Merck, 15.3 million euros ($21 million) over what it called a smear campaign against generic competition to Subutex, its drug for opioid addiction. It also handed out a fine of 414,000 euros to parent Merck and another of 318,000 euros to British supplier Reckitt Benckiser for anti-competitive behaviour in staging the campaign in late 2005.</blockquote> Note that while this case did not involve any implications of physical harm to patients, it seemed to involve active deception. Summary First, as we have <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">said for years</a>, legal actions like those listed above may or may not result in huge financial penalties, and rarely result in penalties for individuals who authorized, directed or implemented the actions in question, but do serve as markers of the extent of misbehavior by large health care organizations.  Such misbehavior may have adverse consequences for patients and for public health and the health care system. Second, also as we have said for years, such actions mark the problem, but are unlikely to deter future problems.  In fact, many large health care organizations have settled strings of cases since we started trying to keep track of them (and may not have done so completely).  For example, the Genzyme, hence Sanofi settlement this year is at least the fourth major settlement by this company since 2007.  Settlements resulting in fines imposed on a company as a whole are diffused, paid by stockholders, employees, and patients, and hence are likely to be regarded as a cost of doing business by top  management.  Managers, however, often are given huge financial incentives for all actions that increase short term revenue.  So managers are likely to continue to enable or direct bad behavior as long as it can bring in lots of revenue at no personal risk. Third, while there has been a modest increase in discussion of ill-informed, mission-hostile, self-interested, conflicted, or even criminal or corrupt management since we started Health Care Renewal, the increasing plight of journalism seems to be making these issues more <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a>.  The shutdown of PharmaLot and the silencing of its archives is another reminder of how public relations and marketing are now overwhelming disinterested reporting (see <a href="http://www.propublica.org/article/pr-industry-fills-vacuum-left-by-shrinking-newsrooms">this report</a> by Pro Publica). If we really want to reverse the downward spiral of our ever more expensive, less accessible, and lower quality health care system, we first have to preserve our ability to identify and loudly discuss its problems. Roy M. Poses MD for Health Care Renewal

More Pharmaceutical Misadventures - Actelion Damages Upheld, Genzyme (Sanofi Subsidiary) Settled, Merck Fined

The march of legal settlements by large health care organizations goes on, albeit with ever more quiet footsteps as the number of journalis...

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

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

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

Legal and regulatory actions unfavorable for giant pharmaceutical, biotechnology and device company Johnson and Johnson just keep coming. W...

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Abbott Laboratories Settles, Again

In 2007, we <a href="http://hcrenewal.blogspot.com/2007/01/suits-win-again-how-big-bad-greedy.html">discussed</a> a scheme that Abbott Laboratories seemed to be using to boost the price of Kaletra, a combination of two protease inhibitors it markets to treat HIV and AIDS. Kaletra is a combination of rinoavir (Norvir, sold by Abbott as a single drug), and leponavir. Kaletra was apparently losing sales to the combination of Norvir with Reyataz (atazanavir), made by Bristol-Myers-Squibb. So Abbott increased the price of Norvir by 400%. As <a href="http://www.businessweek.com/news/2011-04-15/abbott-agrees-to-pay-52-million-to-resolve-aids-drug-case.html">reported</a> so far only by Bloomberg, Abbott just settled a class-action lawsuit alleging that its price hike for Norvir was anti-competitive. <blockquote>Abbott Laboratories agreed to pay $52 million to resolve claims by direct drug buyers that it tried to harm competition when it quadrupled the price of its HIV medicine Norvir in 2003. The settlement, which is subject to court approval, would resolve a class-action lawsuit filed on behalf of Abbott customers that purchased Norvir, a boosting agent for other HIV drugs, and a second medicine Kaletra, which includes Norvir, according to an April 8 filing in federal court in Oakland, California. Abbott denied wrongdoing, according to the accord. Abbott increased the wholesale price of a Norvir capsule containing 100 milligrams to $8.57 from $1.71, the Abbott Park, Illinois-based company said in court documents. GlaxoSmithKline Plc and drug retailers and distributors sued, claiming other drugmakers that used Norvir in their medicines couldn’t compete on price with Kaletra, and the price increase penalized drug customers that wanted to buy medicines that competed with Kaletra.</blockquote> Note that, as we discussed <a href="http://hcrenewal.blogspot.com/2010/12/abbott-laboratories-and-pig-roasts.html">here</a>, this is the third significant settlement by Abbott in the last six months. In December, 2010, the company settled claims that it defrauded Medicare and Medicaid for $421 million, and claims that a subsidiary paid kickbacks to doctors to sell its products for $41 million. For other discussion of Abbott's recent misbehavior, look <a href="http://hcrenewal.blogspot.com/search/label/Abbott">here</a>. So while we were discussing other issues, the parade of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> continued. It is beginning to seem like every major pharmaceutical/ device/ and biotechnology company has settled or pleaded guilty to multiple allegations of significantly bad behavior in the last few years. This suggests how bad the leadership of most of these companies has become. Nonetheless, in the current case, like nearly all others, the penalties were paid by the companies themselves, not the people who authorized, directed or implemented the bad behavior. We and others have commented repeatedly that the resulting relative impunity of leaders of health care organizations will hardly deter future bad behavior. (Note that this impunity seems similar to that employed by leaders of finance after the global financial collapse/ Great Recession.) Not only do the leaders not pay penalties, but they continue to become hugely rich at the expense of their companies. For example, Abbott CEO Miles D White enjoyed total compensation of $25,564,283 in 2010, down only slightly from the 26,213,996 he received in 2009, according to the 2011 Abbott proxy statement (available <a href="http://www.abbottinvestor.com/phoenix.zhtml?c=94004&p=irol-sec">here</a>). Threats by government officials to start to employ the "Responsible Corporate Officer Doctrine," (available since 1943) to hold individuals accountable for health care organizations' misdeeds so far appear to be empty (see <a href="http://hcrenewal.blogspot.com/2010/06/attempt-to-hold-health-care-leaders.html">this post</a>). So to repeat Cassandra-like,  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.

Abbott Laboratories Settles, Again

In 2007, we discussed a scheme that Abbott Laboratories seemed to be using to boost the price of Kaletra, a combination of two protease inh...

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Noticing the Elephant in the Room: Bigger Hospital Networks Charge More for the Same Service

We recently <a href="http://hcrenewal.blogspot.com/2010/01/price-is-what.html">discussed</a> a report on hospital prices here in Rhode Island, which showed that hospitals that are part of hospital systems were paid more for the same services than independent hospitals.  The price differences could not be explained by quality of care or severity of illness.  The results suggested that market power determines the price of hospital services, and that increasing concentration of power in hospital networks is likely to further increase costs, without improving quality of care.  The end of last week, a similar report out of the neighboring state of Massachusetts was announced.  As <a href="http://www.boston.com/news/local/massachusetts/articles/2010/01/29/attorney_general_says_clout_drives_up_health_costs/">reported by Liz Kowalczyk in the Boston Globe</a>, <blockquote>Massachusetts insurance companies pay some hospitals and doctors twice as much money as others for essentially the same patient care, according to a preliminary report by Attorney General Martha Coakley. It points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs. The yearlong investigation, set to be released today, found no evidence that the higher pay was a reward for better quality work or for treating sicker patients. In fact, eight of the 10 best-paid hospitals in one insurer’s network were community hospitals, which tend to have less complicated cases than teaching hospitals and do not bear the extra cost of training future physicians. Coakley’s staff found that payments were most closely tied to market leverage, with the largest hospitals and physician groups, those with brand-name recognition, and those that are geographically isolated able to demand the most money.</blockquote>While market power predicted pricing, quality of care and severity of illness did not. <blockquote>The report shows that a small group of about 10 hospitals statewide command significantly higher payments than the other 55, ranging from 10 to 100 percent more than their competitors for similar work. While academic medical centers are widely thought to be the most costly, the report noted that one major teaching hospital that treats some of the state’s sickest patients was paid less than dozens of others with healthier patients. The investigation also discovered that hospitals that treat large numbers of poor patients, who can be more expensive to care for, are as a group paid 10 percent to 25 percent less than average by commercial insurers.</blockquote> Finally, the report showed that increasing prices per unit of service, not increasing amounts of service, accounted for most of the rising costs of hospital care. <blockquote>Coakley’s investigators found that Massachusetts health care costs, which are growing by 7.5 percent annually, are mostly the result of rising prices, not patients getting more imaging tests, surgery, and other procedures. For one major insurer, provider price increases accounted for 80 percent of the total growth in medical expenses between 2006 and 2009.</blockquote> We have tried to encapsulate the concerns that motivated starting the <a href="http://hcrenewal.blogspot.com/">Health Care Renewal blog</a> as "concentration and abuse of power" in health care. Here is a stark of example of that. Lots of hospital insiders have tried to sell increasing concentration of power among hospitals as a way to decrease costs, improve quality, and improve access. The American experience going back to the 19th century, however, has been that market concentration increases costs regardless of quality or access. The two reports from Rhode Island and Massachusetts suggest that as hospitals combine in hospital systems, and these systems become more oligopolistic, costs, but not quality or access increase.  Of course, the insiders within the system are likely to keep selling the idea, because their pay doubtless goes up as the system gets bigger. As I have said many times, real health care reform will require reversing the trend towards concentrated power, maybe most directly by breaking up oligopolies such as large hospital systems, and changing health care organizations' leadership and governance to reduce the incentives to expand regardless of how expansion affects patient care.

Noticing the Elephant in the Room: Bigger Hospital Networks Charge More for the Same Service

We recently discussed a report on hospital prices here in Rhode Island, which showed that hospitals that are part of hospital systems were ...

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