Monday, October 04, 2010

Wright Medical Settles, ... But Wait, There is Less

Everyone loves a parade, and so the parade of legal settlements by prominent health care organizations continues.  The latest to march into view is Wright Medical Group, as reported by Bloomberg:
Wright Medical Technology Inc. agreed to pay $7.9 million to resolve U.S. criminal and civil investigations into whether it paid kickbacks to induce doctors to use its hip and knee devices.

Prosecutors in Newark, New Jersey, today charged Wright with conspiring to violate a federal anti-kickback statue through consulting contracts with orthopedic surgeons. The U.S. agreed to drop the case in 12 months if a monitor agrees that Wright has reformed the way it hires consultants.

Wright, based in Arlington, Tennessee, also agreed to a $7.9 million civil settlement with the Justice Department and inspector general of the Health and Human Services Department to resolve fraudulent-marketing claims. The company entered into a five-year corporate integrity agreement.

Here we go again. A company is accused of giving kickbacks, aka bribes, to individual doctors, in this case orthopedic surgeons, to get them to use the company's products. Such payments clearly violate medical ethics (especially doctors' obligations to put the interests of patients ahead of their personal financial interests), leading to decision making not in the best interests of the patients. However, the penalty to the company itself is minuscule, only a fraction of the company's revenue, according to Google Finance, in 2009, just under $500 million. As we have noted endlessly before, financial penalties to corporations are diffused among all shareholders and employees, and possibly customers and patients.

Do we really expect that this penalty will change anything, or deter future bad behavior by this or any other company?

But our government continues to treat the corporate employees who authorize, direct, or implement bad behavior like this as essentially above the law. In this case, like in many others we have discussed previously, no one who authorized, directed or implemented the bad behavior will have to pay any sort of penalty or suffer any sort of negative consequences.  Does anyone in their right mind believe that Wright Medical really is
pleased to announce these agreements and look[ing] forward to working with the independent monitor as we continue our commitment to the highest standards of ethical and legal conduct

That was a quote from Wright Medical CEO Gary D Henley. He may be pleased to announce the agreements, since they really amount to such a tiny pinprick of a penalty. After all, Mr Henley will be able to to continue to use Wright Medical's revenues, virtually unaffected by this penalty, to justify his compensation (per the 2009 proxy statement, $2,036,517 in 2009, and his continuing accumulation of wealth, e.g., 436,601 shares of stock, currently valued at $13.86/ share according to Google Financial.)

I leave an assessment of what the company's previous commitment to "the highest standard of ethical and legal conduct" was to our dear readers.

We will not have true health care reform until we end the unholy alliance between big government and big health care organizations, that is, health care corporatism. Then, maybe, we can make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.


Anonymous said...

and the parade continues . . .

Synthes, Unit To Pay More Than $23 Million To Resolve Charges

Published October 04, 2010 | Dow Jones Newswires

Surgical-implant maker Synthes Inc. (SYST.VX) and its Norian unit have agreed to pay more than $23 million to settle U.S. criminal and civil charges regarding unapproved use of bone-cement products, and Synthes is required to sell off Norian assets to avoid further penalties.

Anonymous said...

What you see here is a clear cut case of government sanctioned extortion. I guess they needed a little extra cash to bank roll the war effort.