Thursday, May 02, 2013

Amgen CEOs Prosper Despite (or Because of) Continuing Ethical Questions

This is becoming a familiar narrative on Health Care Renewal: top health care leaders continue to enrich themselves while their organizations' behavior continues to raise ethical questions.

For our latest example we return to the ongoing adventures of biotechnology giant Amgen.

CEOs Get Richer

An AP story (via the LA Times) documented the continuing enrichment of its current CEO:

Amgen Inc's new chief executive, Robert A. Bradway, received total compensation of $13.6 million in 2012, more than his predecessor, according to an analysis of a company regulatory filing.

Bradway, who was promoted from chief operating officer to chief executive May 23, saw his compensation nearly double from $7.1 million in 2011.

Last year Bradway, 50, was paid a salary of $1.26 million and received stock awards worth $8.57 million, incentive payments of $3.32 million and miscellaneous compensation totaling $420,059. That included nearly $314,000 in retirement plan contributions, $65,000 for personal use of company aircraft, more than $20,000 for his personal expenses and those of guests during business travel, and $15,000 for financial planning services.

The former CEO also did very well in his final year in office.

Former CEO Kevin W. Sharer, who stepped down from his seat on Amgen's board when he retired Dec. 31, received compensation totaling $9.13 million last year.

Sharer was paid a 2012 salary of $1.81 million and received stock awards worth $3.66 million, incentive payments of $2.31 million and miscellaneous compensation totaling $1.36 million. That included $801,000 in retirement plan contributions, nearly $262,000 for personal use of company aircraft, more than $38,000 for his personal expenses and those of guests during business travel, $15,000 for financial planning services and more than $255,000 for secretarial, information technology and travel support. Much of that support runs through 2017.

You would think they could both afford financial planning on their own.

Legal Settlements Pile Up

Keep in mind that as we discussed in late 2012 and early 2013, Amgen pleaded guilty to a charge of misbranding for promoting its epoetin drug Aranesp for unapproved indications, and settled allegations of giving kickbacks to physicians to increase the drug's use, among other charges, for a total of $762 million.

Furthermore, soon after the CEOs' compensation was announced, tiny articles in local media announced two more settlements by Amgen.

A small AP story (again via the LA Times) noted another settlement regarding allegations of unethical promotion of Aranesp:

The US Department of Justice said Tuesday that biotech drug maker Amgen Inc. will pay $24.9 million to resolve claims it paid kickbacks to increase sales of its anemia drug Aranesp.

The Justice Department said Amgen paid kickbacks to Omnicare Inc. and PharMerica Corp., which sell drugs to long-term care providers such as nursing homes and hospitals, and Kindred Healthcare Inc., which runs long-term acute-care hospitals and nursing and rehabilitation centers.

Amgen wanted the companies to switch Medicare and Medicaid beneficiaries to Aranesp from competing drugs and tried to get consultant pharmacists and nursing home staffers to encourage the use of Aranesp in patients who didn't have anemia associated with kidney failure, the Justice Department said.

The Thousand Oaks company made payments based on the sales volume or market share of Aranesp, the agency said.

Then a few days ago, a story in the San Fernando Valley Business Journal described yet another Amgen settlement:
Thousand Oaks biotech Amgen Inc. has reached an $11 million settlement with 36 states over charges it inflated pricing data and caused Medicaid to overpay for six of its drugs, the New York State Attorney General said Monday.

The charges allege Amgen inflated cost benchmarks for drugs used to treat kidney disease and cancer patients. The drugs involved were Aranesp, Enbrel, Epogen, Neulasta, Neupogen and Sensipar. Those benchmarks are used to set pharmacy reimbursement rates for drugs dispensed to state Medicaid beneficiaries.

Keep in mind that all these recent settlements involved allegations of efforts made to oversell Aranesp.  As we noted previously, this drug carries a "black box" warning about serious and potentially fatal side effects.  The official Aranesp label states (in a black box warning, in capital letters):


So the overselling of Aranesp not only appeared unethical, it seemed to put short term revenue ahead of patient safety, and could conceivably have lead to patients dying so that the company could make more money.   


So while the evidence mounts that health care organizations, and in this case, Amgen, continue to aggressively pursue short-term revenue even is their means of doing so endangers patients.  However, legal efforts to challenge such reckless practices continue to fail to impose any negative consequences on those who personally profited from this behavior, and particularly those corporate executives who authorized and directed the bad behavior.  Moreover, while such evidence mounts, the top leaders of these organizations continue to pile up riches.  It seems that CEOs of health care organizations continue to prosper despite, or perhaps because of their organizations' continuing unethical and dangerous behavior.

As we have said far too many times, 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.

1 comment:

Steve Lucas said...

Changing CEO’s after legal issues seems to be a common practice in corporate medicine. The print version of the April 26, 2013 Akron Beacon Journal notes Aultman Hospital appoints new CEO by Cheryl Powell. Christopher E. Remark 43 has been named CEO after serving with the company since 1997. He holds undergraduate and graduate degrees in business with an emphasis on finance from a local college.

“As we prepare for the Affordable Care Act and the challenges of health-care reform, we know we will need to continuously improve our quality and become even more efficient and more cost-effective if we want to improve health.”

A salary was not disclosed.

What this means is that the hospital will become even more aggressive it its stance to generate income from patient, relying not on a physician, but on a financial person’s view of medical need.

HCR readers will remember Aultman was denied an appeal based on previous business practices of a for profit insurance subsidiary.

Steve Lucas