Friday, December 11, 2009

"Person No. 7," Also Known as the 83rd Richest Man in the World

This one nearly snuck by. 

A Settlement and Some Indictments

In May, 2009, we posted that international Swiss-based medical device manufacturer Synthes settled charges that it was paying surgeons who conducted clinical trials for the company with company stock, and in June, 2009, we posted that Synthes was indicted based on allegations that it had subjected patients to an experimental use of its Norian XR bone cement product on the spinal cord, a use not approved by the US Food and Drug Administration, and that its executives had lied to the FDA about these actions.  It was noteworthy that the indictment named but did not charge the then CEO of the company as "Person No. 7" who allegedly decided not to conduct clinical trials of Norian XR, but rather to have surgeons use it in a case series that was not identified as clinical research.  The company CEO at that time was a Mr Hansjorg Wyss, who is still chairman of the Synthes board, owner of 40% of Synthes stock, and the richest man in the Philadelphia area, worth $5.7 billion according to Forbes magazine, making him the 83rd richest man in the world in 2009, according to Forbes magazine.

Four Guilty Pleas

Here is what first escaped my attention.  In July, 2009, the Philadelphia Inquirer reported:
Two senior executives of a West Chester-based manufacturer of medical devices pleaded guilty yesterday in connection with illegal clinical trials of a bone cement on about 200 patients, three of whom died.

The company, Synthes USA Inc., did not tell the patients that they were participating in what amounted to human experimentation, according to a 97-count indictment filed June 16 by the U.S. Attorney's Office in Philadelphia.

Michael D. Huggins, 51, of West Chester, was president and chief operating officer of Synthes' spine division from late 1994 to January 2008.

John J. Walsh, 46, of Coatesville, has served as director of regulatory and clinical affairs in the same division since August 2003.

Before U.S. District Judge Laurence F. Stengel, each pleaded guilty to a single misdemeanor count of introducing adulterated medical devices into interstate commerce. They face $100,000 fines and a year in prison when they are sentenced Oct. 22.
Then, in August, 2009, Bloomberg reported:
Synthes Inc. official Richard Bohner pleaded guilty in Philadelphia to charges tied to illegal clinical trials of a bone cement that led to three deaths.

Bohner, Synthes’ vice president of operations, is the last of four executives to plead guilty to shipping misbranded Norian XR across state lines. He faces as long as one year in prison plus a $100,000 fine, according to documents made public today in federal court in Philadelphia.

Bohner and the other executives, Michael Huggins, John Walsh and Thomas Higgins, promoted the drug through the use of test markets aimed at persuading surgeons to publish the results of their surgeries, according to court documents.

Huggins and Walsh, who pleaded guilty July 20, will be sentenced on Oct. 22.

So that is four individual guilty pleas so far in this case. The pleas received only scant attention in the local media, and hence slipped by the technology I was using to scan the media at the time.

The Richest Man in Philadelphia

I got caught up when on 6 December, 2009, the Philadelphia Inquirer published a summary article focused on the "Person No. 7":
Wyss also is chairman of Synthes in West Chester, which faces 52 felony counts stemming from allegations that it illegally experimented on patients, three of whom died.

Synthes is fighting the charges, and a trial could be held next year. Four of its executives already have pleaded guilty to misdemeanor counts in the case and face sentencing hearings in January.

Federal prosecutors in Philadelphia did not name or charge Wyss, but their June indictment describes a "Person No. 7," who was a major shareholder and chief executive officer of the company when the alleged illegal conduct occurred, from 2001 through 2004. A Synthes representative confirmed that Wyss was CEO then.

In 2001, the U.S. attorney's indictment says, Person No. 7 decided the company should not pursue the costly and time-consuming clinical trials that the U.S. Food and Drug Administration demanded for the company's bone-cement product, Norian.

Instead, according to the indictment, Person No. 7 directed the company to 'get a few sites to perform 60 to 80 procedures and help them publish their clinical results' to help popularize Norian for a use not approved by the FDA.

The procedures involved injecting Norian into the spines of patients who had vertebral compression fractures, which are typically caused by osteoporosis. FDA officials had previously approved Norian for other uses, but they demanded trials for that type of surgery, fearing that the cement could perform differently in the spine.

Even after tests in pigs showed that Norian could leak from the spine and cause life-threatening blood clots, Synthes continued with surgeries on human patients, who were never told that the procedure was experimental.

Three of those patients died, but prosecutors do not know whether Norian played any role in their deaths, because the company and doctors did not immediately report all the fatalities to the FDA. The patients have not been identified.

Through a Synthes representative, Wyss initially agreed to be interviewed for this article, but later declined.

The Inquirer article seemed to try to balance the allegations about Wyss with his wealth and philanthropy:
Wyss grew up in Bern, Switzerland. His father sold mechanical calculators and liked to discuss world events, according to Harvard's Web site. Wyss trained as an engineer in Switzerland and soon began setting up Chrysler manufacturing plants worldwide. In 1965, he earned a master's degree at Harvard's business school.

'I didn't speak in class for the first five weeks,' he told a Harvard Web publication at the time of his gift. 'My classmates were all the crème de la crème, with button-down shirts I had never seen before.'

He worked for several large companies, but sold airplanes on the side. One of his buyers was a Swiss surgeon who founded Synthes. That connection eventually led Wyss to become president of the company's U.S. business in 1977.

Over time, he became a large shareholder and chief executive. He retired from that post in 2007, but he remains chairman.

Forbes Magazine in March estimated Wyss was worth $5.7 billion. His fortune has helped him pursue whatever he wants, including the rehabilitation of the Crooked Tree Golf Course in Tucson, Ariz., and the purchase of the 900-acre Halter Ranch & Vineyard in Paso Robles, Calif. The winery emphasizes organic growing methods and sells many wines, including one named Synthesis.

Wyss has given away large chunks of his fortune, mostly to organizations dedicated to his primary passions: science and the environment.

His $125 million donation to Harvard funded the Wyss Institute for Biologically Inspired Engineering....

Wyss also established two private foundations. The Wyss Foundation is dedicated to preserving land in the American West. Wyss went hiking there as a student and fell in love, according to Forbes.

The Wyss Foundation gave away about $13 million and had about $250 million in assets in 2007, according to tax filings.

Wyss also donates heavily from his personal funds. BusinessWeek estimated his total giving from all sources at $277 million from 2004 through 2008.

However, some of Wyss' philanthropy seems more designed to benefit his company:
Wyss' other foundation, the Hansjörg Wyss Foundation, had about $172 million in assets and gave away $4.9 million in 2007. It focuses mostly on education and training of surgeons, according to the AO Foundation, a Swiss research group with ties to Synthes and Wyss.

By funding research and training, Synthes has forged tight relationships with surgeons. The U.S. Attorney's Office alleges that the company paid for trips to educational seminars in San Diego and Charlotte, N.C., where surgeons learned to use Norian in the spine.
Marketing Over Research

This emphasis on education that actually seems to partake of company marketing is also displayed by Synthes itself.  Per the company's 2008 Annual Report, the company runs a "residency program,"
The Synthes Resident Program was originally released in the United States in 2007 by Synthes Trauma. It was first developed to train orthopaedic trauma surgical residents and consists of both online training modules and locally offered workshops.

In 2008, the Synthes Resident Program was expanded to a selection of European countries with modifications for the needs of specific areas and markets. Furthermore it is now also being offered by Synthes Spine and Synthes CM.
This program has achieved remarkable popularity, or should we say "market penetrance?"
The Synthes Resident Program has been well accepted in the U.S., with more than 90% of all U.S. orthopedic residents having utilized the program.
The company also offers an "Enhanced Surgeon Education Program," and support's the AO Foundation's educational activities.

On the other hand, the financial summary provided in the report suggests that research is not what the company emphasizes.  Its 2008 operating expenses included $943.3 million in sales and promotion, $349.4 million in general and administrative, and only $169.9 million in research and development, only 11.6% of total operating expenses.

And if you like the report's verbiage about education, you will also appreciate its full page section on "Integrity," which includes the header:
Corporate Citizenship. Acting with Integrity. Acting ethically and respectfully is a cornerstone of our business. At Synthes we are committed to responding to the challenges in our business by operating in accordance with the highest levels of professional and ethical standards in our industry. Simply put, we must always act with integrity.
It also boasts:
Our commitment to abide by the rules and regulations applies throughout Synthes, to all countries and to all employees, and to all our business partners.

Acting ethically is highly important for Synthes. Our actions create our
reputation. Our good reputation is an integral part of our Synthes brand,
and an essential element of our continued success.

And finally asserts:
Our effort to operate with the utmost integrity begins with the commitment of our Board of Directors and senior managers. [italics added for emphasis]  Our managers are role models for our employees, and lead our efforts to build and to promote a culture that encourages positive ethical conduct and that demonstrates commitment to compliance with the law.

Those four now admitted guilty top executives certainly were excellent role models. Even better was "Person No. 7," the current board chairman and former CEO.


So here we have all the elements: guilty pleas by top executives in connection with a human experiment whose nature was concealed from patients; allegations about but no charges against a fabulously wealthy company leader; a company that promotes what appears to be marketing in the guise of education; a tremendously profitable company which spends most of its money on marketing, not research; a company that boasts of its integrity and how its leaders are "role models," even as some have pleaded guilty to crimes; and despite the worldwide reach of the company and its products, no national coverage of any of this, the anechoic effect redux.

We have, not only in the US, but in other developed countries (for example, Switzerland, in which Synthes is based), and globally, health care based on marketing and hype, on deception and conflicts of interest, and on making a few privileged insiders fabulously wealthy.  Here is the essence of our health care dysfunction, and the inflating health care bubble.  When would be health care reformer stop arguing about insurance coverage, perhapds they can then pay some attention to these major reasons why health care is so expensive, inaccessible, and often does so little good for patients. 

PS - Earlier this year, we commented on the make-up of the Board of Trustees of the prestigious Hospital for Special Surgery in New York, which seemed split mainly among leaders of finance, including such troubled corporations that contributed to the global financial meltdown as Bank of America, AIG, Citigroup, and Wachovia, and orthopedic surgeons with ties to device makers.  One of the latter was Dr David Helfet, who listed his memberships on advisory boards for OHK Medical Devices Inc, Healthpoint Capital, and Orthobond Corp.  Just to add to the whiffs of lack of full disclosure surrounding this case, Dr Helfet still does not disclose on the hospital web-site that he is on the Board of Directors of Synthes.

Note (added 14 December, 2009) - Per comment below, the Vice President of Corporate Compliance and Internal Audit at the Hospital for Special Surgery claimed that an administrative error, not failure of disclosure by Dr Helfet, lead to the omission of the information about his membership on the Synthes board from the Hospital's web-site.


Anonymous said...

So, the company pays the fines, the people involved get probation, and a wealthy individual mounts a never ending legal battle he considers the cost of doing business.

Great system, and we wonder why we don't see change.

Steve Lucas

Anonymous said...

This sounds eerily like the HIT experiments on patients by vendors and hospitals to improve their output.

He was very charitable with ill gotten a league with some of the all time great charitable criminals.

Sharon Kurtz said...

As the Vice President of Corporate Compliance and Internal Audit at Hospital for Special Surgery, I reviewed your report stating that Dr. Helfet is a member of the Board of Directors of Synthes. You are correct that Dr. Helfet's membership on the Board was not disclosed on our website. However, this was an error that occured during the process of compiling the information for the website. Dr. Helfet did properly disclose his relationship with Synthes to this office. The error was not Dr. Helfet's omission, but rather an administrative error. We have corrected the information on our website.
Sharon Kurtz

Roy M. Poses MD said...

Ms Kurtz,
thanks for clarifying that.

mike said...

The FDA approved labeling for the bone filler clearly contraindicated its use in spinal surgery. Any 1st year regulatory person would know that means it's considered to be a "high risk" use of the product and would absolutely require FDA approval to study it in humans. Failure to seek approval for this device/use was total negligence on the part of Mr. Walsh. Granted, he must have been under enormous pressure from senior management to "go along" (which any senior regulatory person knows is a huge red flag), and it illustrates just how lonely the regulatory function is within many corporations. Often the choices are to get fired for not being a "team player" or to stand on integrity and find another job. If he had it to do over, I'd bet Mr. Walsh would have preferred to move his family cross country to a company that wouldn't ask him to make a Hobson's choice. Welcome to the world of regulatory affairs.