Monday, January 24, 2011

St Jude Medical Settles Again

Here we go again to kick off the week, legal settlements, cardiac devices, alleged kickbacks, manipulated research, as reported by Bloomberg:

Another Legal Settlement by St Jude Medical

St. Jude Medical Inc. agreed to pay $16 million to settle a U.S. government probe of claims the company paid kickbacks to doctors who implanted its heart devices in patients.

The accord resolves a five-year investigation of St. Jude’s marketing practices for defibrillators and pacemakers.

This was not even the first recent settlement by this particular company:
In June, St. Jude agreed to pay the federal government $3.7 million to resolve a separate whistleblower case over claims that it made illegal payments to hospitals in Kentucky and Ohio that used the company’s heart devices.

Our relevant post about that previous settlement was here.

Kickbacks, Manipulated Research

The $16 million settlement stemmed from a case filed by Charles Donigian, a former St. Jude technician from St. Louis, who accused the company of using kickbacks to market products.

The kickbacks, which ranged as high as $2,000 per patient, came in the form of 'sham fees' for phony clinical-research studies on the devices, Donigian said in his suit.

There was slightly more detail in a report in
According to the DoJ, the company used postmarketing studies and a registry as vehicles to reward physicians participating in those studies to implant the devices. 'In each case, St Jude paid each participating physician a fee that ranged up to $2000 per patient,' a statement from US Attorney Carmen M Ortiz notes. 'The United States alleges that St Jude solicited physicians for the studies in order to retain their business and/or convert their business from a competitor's product.'

The statement also observes: 'Although St Jude collected data and information from participating physicians, it knowingly and intentionally used the studies and registry as a means of increasing its device sales by paying certain physicians to select St Jude pacemakers and ICDs for their patients.'


It all is getting so old, isn't it? Yet another pharmaceutical, biotechnology or device company settles a case alleging payments to physicians to induce them to use its products. The twist here is that the form of the payment allegedly also manipulated the clinical research process.

There have been other cases of manipulation or suppression of research about cardiac devices. For example, see our recent post about how Guidant, now a subsidiary of Boston Scientific, was put on probation for its actions in another such case.

The allegations amounted to serious external threats to physicians' professionalism: payments to promote use of health care products whether or not their implantation was in patients' best interests, and manipulation of clinical research that could have further corrupted the clinical evidence base, and presumably could have broken the trust of clinical research subjects. Left unsaid in the brief articles is how willingly the physicians gave in to these threats to their professionalism for the dollars involved.

Yet despite the apparently corrosive quality of the bad behavior, the penalties to the company were trivial. Per St Jude Medical's most recent financial profile, its yearly revenue was over $4.5 billion.  Two settlements totaling less than $20 million amount to a relatively small cost of doing business.  And note that St Jude Medical is not admitting it did anything wrong.  Per, its statement was:
We are pleased to have reached a settlement agreement with the DoJ that fully resolves the postmarket-study matter in Boston. The company maintains that its postmarket studies and registries are legitimate clinical studies designed to gather important scientific data, and St Jude Medical does not admit liability or wrongdoing by entering into this agreement. The company entered into a settlement agreement to avoid the potential costs and risks associated with litigation. This settlement brings the previously reported postmarket-study investigation to a close.

So it all gets so tiresome. The continuing march of legal settlements like this do provide evidence of how professionalism and evidence-based medical practice are under threat. However, as we have said ad infinitum, such settlements are likely to do nothing to alleviate that threat.

To repeat the conclusion of our last post about St Jude Medical, the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior. Even large fines (and the one described above would be peanuts to a large health care corporation) can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.


Anonymous said...

Some fines do make a difference in the company’s financial picture. Per the January 28, 2011 WSJ article; Glaxo to Take $3.49 Billion Litigation Charge we learn that GSK is trying to settle off-label marketing issues with its drugs Avandia, Paxil and Wellbutrin.

This settlement comes on top of a GBP 278M 2008 charge with the total reaching around GBP 4B. The article notes the latest charge will “eclipse” fourth quarter earnings.

At some point the shareholders have to question management’s practices since it is their money being spent on fines. The other real issue is: These numbers are staggering. In an era of ever increasing medical cost one has to question the cost to the public of these marketing schemes, both financially and health wise.

Medicine appears to be the last great bastion of greed and criminal activity as the developing story of billions of money being diverted for personal use in Africa and around the world from an international fund.

Steve Lucas

Afraid said...

If we judge productivity by results, what things are better now as compared to five years ago in the area of providing meaningful consequences to those who authorize, direct or implement bad behavior?

Don't get me wrong Roy, I support your efforts, I don't want you to stop, but realistically, have your efforts contributed to any effect?

If not, what might be potential tipping points or avenues we can take towards change?

Roy M. Poses MD said...

I hope that the issue is at least much more widely discussed than it was five years ago. There have been numerous examples of discussion in the most mainstream of the mainstream media. Officials at the US DOJ and FDA have declared they will start holding individuals accountable, although examples of actions to do so are still very rare.

I have no scientific proof that the blogging by our colleagues listed in the right-hand sidebar and our own efforts have made a difference, but all I can do is hope that we have made the discussion less anechoic.

The tipping point may be achieved when enough people are mad enough that they won't take it any more.

The only way I know to get to that is to make these issues increasingly public.

Anonymous said...

Court sides with St. Jude Medical in unfair competition case
By Dan Haugen | Published Tue, Feb 1 2011 9:21 am

St. Jude Medical says the Massachusetts Superior Court has ruled in its favor in lawsuit between a subsidiary and a supplier.

The litigation was filed by LightLab Imaging, which St. Jude acquired last year, against one of its suppliers, Axson Technology, as well as Volcano Corp., a San Diego company that bought Axson in 2008. Axson and LightLab are both based in Massachusetts.

The court ruled that Volcano acquired Axson as a means of “impeding the growth of a major competitor.” The decision says Volcano orchestrated a scheme to have Axson supply LightLab with a less effective laser, which would “adversely affect the marketability” of LightLab’s Optical Coherence Tomography imaging system, violating the state’s unfair competition laws.

“St. Jude Medical and its LightLab subsidiary are pleased with the Court’s recent ruling,’ Frank Callaghan, president of the St. Jude Medical Cardiovascular Division, said in the company’s statement. “It is gratifying to have both the jury and the Court rule in LightLab’s favor on these important issues.”

Volcano didn’t issue a statement but did disclose the verdict to investors Monday in a filing with the U.S. Securities and Exchange Commission.

The court ordered Volcano to pay LightLab $400,000 in damages in addition to attorneys’ fees and costs, which were expected to be determined in the court’s final judgement, no later than Feb. 9.

The lawsuit was filed in January 2009. A jury sided with LightLab in February 2010, prompting an appeal from Volcano. A separate lawsuit against Volcano was filed by St. Jude Medical last July alleging patent infringement related to company’s guide wire technology.