Today, I noticed a few short stories in the media about one relatively small legal settlement involving a medical device company. It initially seemed to be too insignificant a settlement to merit a comment. A closer look, however, suggested links to to other larger issues. This story reminded me about other apparently small cases that are mostly ignored, but remind us of bigger problems.
Biomet Settles Kickback Allegations for $6 Million - the Index Case
Here are the main points from the Fort Wayne, Indiana Journal-Gazette,
Biomet Inc. has agreed to pay more than $6 million to resolve allegations that it paid kickbacks to encourage doctors to use its bone growth stimulators, the U.S. Justice Department announced Wednesday.
The Warsaw-based orthopedic devices company signed the agreement along with its subsidiary, EBI LLC, which is doing business as Biomet Spine and Bone Healing Technologies. EBI, based in Parsippany, New Jersey, sells bone growth stimulators, which are used to repair slow-healing fractures without surgery.
Federal official allege that from 2001 to 2008, EBI bribed staffers in physicians' offices to persuade them to use the products.
The story also included the usual tough quotes from law enforcement, including this from US Attorney for the Massachusetts district Carmen Ortiz,
This settlement demonstrates our resolve in ensuring that patients receive, and the government pays for, health care that is based on sound medical judgment, not compromised by kickbacks....
That was it. A mere $6 million was the charge to settle allegations that the device company gave kickbacks to physicians' office staff to induce the doctors to use the company's product. As is usually the case, no individuals who authorized, directed or implemented the questionable activities were named, much less suffered any consequences.
And hardly anyone seemed to notice Biomet's latest case.
It appears to be a small case, but wait.
Biomet's Previous Record
Wasn't Biomet involved in some other, bigger cases? A quick look at Health Care Renewal revealed
- Starting in 2007, we posted (here, here, here, here and here) about the payments, often huge, that five manufacturers of prosthetic joints, Biomet, DePuy Orthopaedics,a unit of Johnson & Johnson, Stryker Orthopedics,a unit of Stryker Inc, Zimmer Holdings, and Smith & Nephew, revealed they made to orthopedic surgeons and various academic and other organizations in the US. All companies except Stryker were charged with "criminal conspiracy to violate anti-kickback laws," and all were subject to deferred prosecution agreements.
- In 2012, we posted about how Biomet paid nearly $23 million, including a $17.3 million criminal fine, which appears to imply a guilty plea, to charges that it gave kickbacks to foreign physicians, thus violating the US Foreign Corrupt Practices Act
So this tiny case, that is, in a monetary sense, suggests that Biomet is another recidivist corporation, and that the deferred prosecution agreement it signed in 2007 was useless, since it did not deter activities that occurred in 2008 and perhaps later.
Carmen Ortiz's Previous Treatment of Large Health Care Corporations Versus Her Treatment of Aaron Swartz
Furthermore, haven't we heard of Carmen Ortiz before? In 2013, we posted that Ms Ortiz was involved in settling three big cases, involving allegations that Forest Pharmaceuticals promoted Celexa in adolescents despite the drug's likely dangers to them, GlaxoSmithKline used misleading drug packaging, also likely endangering patients, and St Jude Medical gave kickbacks to doctors to induce them to implant medical devices. All cases were settled with fines, but again no individuals suffered any negative consequences. However, in contrast, Ms Ortiz was also the prosecutor who proved how tough she was when she threatened activist Aaron Swartz with serious prison time for alleged computer fraud, driving Mr Swartz to suicide.
Biomet and Zimmer
Finally, Biomet is slated to merge with Zimmer Holdings Inc, another large medical device company. Zimmer was also involved in the 2007 prosthetic hips and knees settlement, charged with criminal conspiracy to violate kickback laws, and subject to a deferred prosecution agreement (see summary in this post). So the combined company, whose formation is now subject to a European Union inquiry due to concerns about potentially anti-competitive aspects (see the Wall Street Journal article), would end up with quite a concerning track record.
So this little case reminds us that when a big health care organization is accused of kickbacks or similar unethical activities that may endanger patients, even supposedly tough law enforcers almost never try to hold any individuals accountable, and that absent such accountability, such organizations often become serial legal settlers, accused again and again of unethical or criminal acts that are bad for patients and the public health.
Yet again, nobody seemed to notice this case.
Little Cases that Add Up
While this case was small, it had some links to bigger past issues. It reminded me that I have seen lots of other small cases, which often seemed to small to discuss at the time they occurred.
Thus, it also inspired me to finally pull from my dusty files a host of media reports of little cases which I put away because they seemed to small to individually merit comment at the times they appeared. I quickly summarize some of them below. To make the list manageable, I limited it to cases since 2012 involving medical device companies. In alphabetical order....
Arthrocare Executives Guilty of Securities Fraud (2014)
This case was unusual since it actually involved serious jail time for individual, but perhaps that was because this was a financial crime that did not endanger patients (see the Bloomberg article). The prosecutor called it an "epic tale of greed" after the CEO and CFO were convicted. In 2013, two Vice Presidents, including the head of Strategic Business Units, had also pleaded guilty (see this Bloomberg article).
Baxano Surgical Settled Allegations of Medicare Fraud and Kickbacks to Physicians (2013)
This was standard issue, including a fine of $6 million, allegations of kickbacks, some in the form of speakers' or consulting fees to surgeons for use of the company's back surgery devices, but not admissions of wrongdoing and no penalties for individuals, per the AP.
EndoGastric Solutions Settled Allegations of Kickbacks to Physicians (2014)
This was another standard issue settlement involving a fine of $5.25 million, allegations of kickbacks to physicians to encourage them to use the company's devices, and a corporate integrity agreement, but no admissions of wrongdoing and no penalties for individuals, per the AP via the Billings (Montana) Gazette.
Globus Medical Inc and its CEO Fined for Selling Unapproved Devices (2012)
The only media outlet to report this small case was Reuters. The company, which was then privately held, and its CEO combined paid $1 million to settle US Food and Drug Administration charges it sold unapproved devices. Now the company is apparently public, and its most recent proxy statement disclosed its CEO is currently in the million dollar plus club.
Home Diagnostics Inc Ex-CEO Pleaded Guilty to Insider Trading (2012)
He pleaded guilty to SEC charges that he tipped two people about the company's impending buyout by Nipro Corp, per Bloomberg. His sentence was three years of probation and a fine of $260,000, again per Bloomberg.
Johnson and Johnson DePuy Subsidiary Settled Allegations of Deceptive Marketing of Metal on Metal Prosthetic Hip Joint (2014)
As reported by the Portland (Oregon) Business Journal, the Johnson and Johnson subsidiary settled state claims for $4 million that it marketed its ASR XL metal on metal hip joint without disclosing its known high rate of failure. The company did not admit wrongdoing, and no individual paid a penalty. Note that Bloomberg reported, "While the sum is dwarfed by J&J’s earlier settlement of patient lawsuits linked to the ASR hip, the agreement may lead the way for additional accords as federal and multi-state probes continue into the company’s sales of the device." So it is quite possible there will be more and/or bigger settlements involving the marketing of this device. Johnson and Johnson has quite an extensive record of mischief (look here). Johnson and Johnson's DePuy subsidiary, along with Biomet and Zimmer, settled charges of criminal conspiracies to violate anti-kickback laws in the hips and knees settlements of 2007.
Note that the summary of little cases suggested that the bigger the company, the less likely is any individual to be held responsible. Those cases that included individual penalties were all of relatively small companies. One of those was privately held at the time the case was made public. One individual who paid a penalty was the leader of a previously small company who held that position prior to the buyout of his company by a larger one. Furthermore, note that insider trading seems to be treated more severely than actions that violate professional ethics, like kickbacks to doctors, or might harm patients. The only individuals who went to prison or put on probation were company leaders who committed securities fraud or insider trading. No one involved in giving kickbacks to physicians, deceptive marketing, etc paid any penalties.
The impunity of managers of big companies, especially in cases in which the charges involved actions that likely endangered patients and violated health care professionals values, is underlined by our look at "little cases." Yet this impunity remains unexplained, and has certainly not been addressed by law enforcement authorities.
So the Kabuki play that is regulation of and law enforcement for large health care organizations goes on. As our society is being increasingly divided into a huge majority in increasingly difficult economic circumstances and a small and increasingly rich minority, it also seems to be increasingly divided into little people who may be ruined by lawsuits, and imprisoned for even minor infractions, and big people who have impunity.
True health care reform would hold leaders of health care organizations accountable for their organizations' behavior, and its effects on patients and health care professionals.