Wednesday, April 08, 2015

Three More Settlements by Medtronic of Allegations of Deceptive Behavior, but No Umpire Says "You're Out"

Medtronic, the giant, previously US based device maker settled three lawsuits, all alleging deceptive practices, over three months in early 2015.  I will summarize the settlements in chronological order.

Medtronic Subsidiary EV3 Settled Suit Alleging it Coached Hospitals about How to Overbill Medicare

This was actually an old case, originally against a company that Medtronic bought out, but only settled this year, in February.  As reported by the Minneapolis Star-Tribune,

A Plymouth medical device company owned by Medtronic has agreed to pay $1.25 million to settle a federal lawsuit alleging that it wasted Medicare dollars.

The medical device company EV3 is settling a whistleblower’s claims that in 2006 and 2007, a company it acquired improperly coached hospitals across the country on how to overbill Medicare for minimally invasive procedures to remove hardened plaque from patients’ arteries using one of its devices, called the Silver Hawk.

Specifically, former sales representative Amanda Cashi alleged that the company told hospitals that 80 percent of their patients for the Silver Hawk procedure should stay overnight in the hospital following an atherectomy, leading to higher Medicare payments. The promises of higher reimbursement were intended to drive sales of Silver Hawk devices. Cashi and federal prosecutors who joined her lawsuit said most of the patients should have gotten lower-paying same-day procedures in an outpatient setting.

As is standard operating procedure for such litigation,

[Irish Medtronic subsidiary] Covidien, which negotiated the settlement agreement, is not admitting wrongdoing and specifically denies the allegations in the six-year-old lawsuit, the settlement agreement says.

'Medtronic is committed to the highest standards of ethical conduct, and we take responsibility for delivering outstanding results to our partners, patients and colleagues,' a company statement said. 'The case relates to historical conduct that took place under Fox Hollow. … We are pleased to have the matter resolved.'

Of course, there may be a bit of irony there, since I doubt that the original manufacturer of Silver Hawk, FoxHollow, or its successors were pushing to get the case resolved quickly, and Medtronic likely ultimately financially benefited from the prolonged delay. 

Note that in 2005 we first posted about the questionable clinical research data that FoxHollow used to promote the device

Medtronic Settled Suit Alleging it Gave Kickbacks to Doctors to Promote Unjustified Procedure that Used Medtronic Neuromodulation Device

Just two days later, the Star-Tribune reported,

Medtronic PLC will pay $2.8 million to the U.S. Justice Department to settle a false-claims case that alleged that the Minnesota devicemaker made illegal payments to doctors to recommend a medical procedure that was neither safe nor effective.

In particular,

The case surrounds allegations of corporate promotion of uses of a neurostimulation device that were not approved by the U.S. Food and Drug Administration. The Justice Department said Medtronic paid doctors in 20 states 'tens of thousands of dollars' to encourage health providers to use the device off-label.

This 'created a new, rapidly expanding market for their devices and a potentially huge source of profit for themselves at the expense of the federal Treasury,' the government said in a federal lawsuit.

As in the previous case, the settlement allowed Medtronic to deny "it did anything wrong."

Medtronic Settled Suit that Alleged it Sold Chinese or Malaysian Spinal Surgery Devices as Made in the USA

Finally, in April, 2015, the Star-Tribune again reported,

In its third federal settlement in two months, Medtronic PLC has agreed to pay $4.4 million to settle allegations that it deliberately violated U.S. law requiring that devices sold to the military be manufactured in the United States or its international trading partners.

The False Claims Act lawsuit, handled by Minnesota U.S. Attorney Andrew Luger’s office, alleged among other things that the formerly Fridley-based med-tech company brought spinal surgery devices in from China and then relabeled them 'Manufactured in Memphis, TN,' where its spinal division is based, before selling them to the government.

Of course,

Medtronic spokeswoman Cindy Resman said that although the company has since improved its country-of-origin disclosures in government contracts, it 'makes no admission that any of its activities were improper or unlawful.'

The settlement focused on 'a limited number of accessories and surgical instruments used in spinal surgeries that were provided to Medtronic by third-party suppliers and were manufactured in China or Malaysia. The overwhelming majority of Medtronic’s products are manufactured in the United States or its trading partners, such as Mexico or Ireland,' she said in an e-mail.

But can you believe them now?


Medtronic made three settlements over three months, all of allegations that it deceived, directly or indirectly, doctors, patients, or the government.  These settlements were not isolated events.  In June, 2014 we discussed a settlement Medtronic made of allegations that  Medtronic gave kickbacks (that is, bribes) to doctors to get them to use its cardiac devices.  Previously, as we noted then, ...   As Bloomberg summarized,

 Medtronic agreed in 2007 to pay about $130 million to settle consumer suits accusing the device maker of hiding defects in its defibrillators. The company agreed to a $268 million settlement of suits in 2010 over allegations that fractured wires in another line of defibrillators caused at least 13 patient deaths.

In fact, Medtronic has provided our blog with lots of material.  We first discussed detailed and vivid allegations that Medtronic had been paying off doctors starting in 2003 here in 2006.  Medtronic has been involved in other lawsuits alleging various kinds of deception.
-  In 2011, it settled for $23.5 million two other federal lawsuits alleging it paid kickbacks to encourage physicians to implant its devices (look here).  
- In 2008, Medtronic subsidiary Kyphon settled a suit for $75 million and signed a corporate integrity agreement for allegations that it defrauded Medicare through a scheme that lead to excessive hospitalization for patients who received the company's spine surgery device (link here)
- In 2006, Medtronic subsidiary Sofamor Danek settled for $40 million allegations that it gave kickbacks to doctors in the form of sham consulting fees and lavish trips (look here).

One loses count of all the settlements and cases in which Medtronic was accused of deceptive practices.  Some settlements were for larger amounts, some for smaller.  Yet none of the settlements were large enough to really affect a company which reported earnings of just under $1 billion in 2014 (per this WSJ article.)   None of the later legal settlements seem to have taken into account the company's previous record.

But this is typical of how legal settlements made by large health care corporations are handled.  Almost never is the settlement big enough to have deterrent value.   

The revenues of the company could very well have been increased by the activities alleged to have occurred in the course of this litigation, and these revenues were likely used to justify outsize compensation for top corporate managers.  According to the company's 2014 proxy statement, in fiscal 2014, CEO Omar Ishrak got $12,118,846 in total compensation.  All other listed executives got at least $3.5 million.  In none of these cases did anyone at the company who might have authorized, directed, or implemented bad, and particularly deceptive behavior suffer any negative consequences.   

But this is typical of the impunity seemingly granted to top health care organizational managers.

In baseball, it's three strikes and you're out.  For the leaders of big health care corporations, however, no matter how many strikes your company makes, you never seem to be out.  Despite a continuing stream of ethical issues occurring on their watch, management usually succeeds in becoming filthy rich.

Maybe that would change if the public, or health care professionals, knew all about such things.  However, these settlements remain anechoic.  Although the latest Star-Tribune article did note that the latest 2015 settlement occurred after two previous settlements this year, none of the reporting about these settlements seems to have noted all the previous settlements.  Finally, the discussion of these cases involving a prominent device company and multiple allegations of deceptive, dishonest, unethical behavior never seems to go beyond business sections of media outlets.  Even though such continuing dishonest behavior could have corrosive cumulative effects on health care ethics, the morale of health professionals who have to deal with such deception, and patients' and the public's health, discussion of it never makes it into the medical and health care literature, a striking example of the anechoic effect.

Maybe if more health care professionals, and the public at large, knew the story better, they might ask what sort of stewardship was exerted by the Medtronic board of directors? Maybe they could ask current Medtronic board members, like Rensellaer Polytechnic Institute President Shirley Ann Jackson, and  former US Secretary of Health and Human Services Michael O Levitt,  and former board members, like Dr Victor J Dzau, who was pressured to leave the Medtronic board after he became President of the Institute of Medicine and this membership was noticed (look here)  These board members were making over $200,000 a year, and piling up Medtronic stock, supposedly for exerting stewardship over the company.

But typically board members of big health care organizations remain unaccountable.  

There seems to be increasing recognition that the continuing rise in US health care costs is unsustainable, and that these costs are not buying us good health care.  There are calls to avoid unnecessary, and sometimes harmful care.  Yet there is a persistent disconnect between how continuing dishonest behavior by health care organizations, impunity of their leaders, and lack of accountability by their board members fuel rising costs, shrinking access, and bad outcomes for patients.

To truly reform health care, we will have to at least recognize the causes of the current dysfunction.  Recognizing how health care dysfunction is created by unaccountable, dishonest leadership should lead to true reform that would promote well-informed, honest, accountable leadership that puts patients' and the public's health ahead of personal gain.  

1 comment:

Anonymous said...


Simply the cost of doing business to benefit the executives and then the shareholders. Screw the patients.