Tuesday, May 27, 2008

A Corporate Integrity Agreement for Kyphon (part of Medtronic)

Another day, another "corporate integrity agreement." Last week, there were multiple news reports of a settlement of a civil lawsuit against medical device manufacturer Medtronic. According to the New York Times, some of the key points were:

A unit of Medtronic defrauded Medicare of hundreds of millions of dollars, according to a civil lawsuit that was unsealed Thursday and simultaneously settled with the Justice Department.

Two insiders had said Kyphon, which Medtronic acquired in 2007, improperly persuaded hospitals to keep people overnight for a simple outpatient procedure to repair small fissures of the spine. Medicare then reimbursed the hospitals much more generously than it otherwise would have for the procedure, which was developed as a noninvasive approach that could usually be done in about an hour.

By marketing its products this way, Kyphon was able to artificially drive up demand among hospitals, bolstering its revenue and driving up its stock price. Medtronic subsequently bought the company, its competitor, for $3.9 billion, greatly enriching Kyphon’s senior executives.

The settlement requires Medtronic to pay the federal government $75 million plus interest, and to enter into a 'corporate integrity agreement' with the Office of Inspector General of the Department of Health and Human Services. The agreement will require the company to give correct advice to customers about how to apply for Medicare reimbursements. The company will also have to set up internal procedures to make sure it complies with the law.

Bloomberg's report (via the Boston Globe) also noted:

One former worker, Craig Patrick, said bosses ignored his warnings in 2005 that the practice amounted to fraud.

'It's my opinion that this was a very organized strategy from the beginning to make these inpatient cases, so facilities could afford the expensive kits and Kyphon could be very profitable,' he said in an interview.

After he warned supervisors at Kyphon, he was denied a promotion and told he 'wasn't a team player,' Patrick said. He left the company in 2005, after filing the suit, and now works for another medical device maker.

'The whole thing played out like a cliched movie you'd see about a whistle-blower,' he said.

This is becoming all too drearily familiar. We have all the usual elements: a clever, but deceptive plan by a health care organization to increase its profits, while incidentally driving excess medical care; an internal skeptic who is derided as "not a team player," and thus forced to become a whistle-blower; and eventually, an investigation and then a settlement that probably failed to recover all the costs incurred by the health care system, certainly did not reverse the excess care provided; and may not be sufficient to deter some clever but dishonest health care executive from coming up with the next version of this scenario.

I did find it interesting that the The New York Times article summarized the context of the case thus:

The medical device business is filled with small start-up companies trying to generate excitement about their new products and technologies, hoping to build market share and to attract deep-pocketed buyout offers. It has been fraught with allegations of bribes, exaggerated claims, and other unethical behavior.
One would think that were a segment of the health care industry to be "fraught with allegations of bribes, exaggerated claims, and other unethical behavior," the result would be not only outrage but some systematic efforts to combat these abuses. Instead, this particular case so far has inspired not a single pundit to view it with alarm, and there still seems to be no systematic efforts ongoing to combat "bribes, exaggerated claims, and other unethical behavior." It's the anechoic effect, as usual.

But politician and policy makers keep scratching their heads when confronted with ever increasing health care costs, ever declining access, and stagnant quality. And as we have noted before, the usual approach to these problems seems to focus on cutting physicians' payments, and imposing new guidelines and quality standards, usually starting with primary care. What's wrong with this picture?


Anonymous said...

Healthcare is a for-profit industry until you get to the provider level: above the hospital level there is no one in the industry that would accept partial payment or reimbursement for services or products delivered as we do from insurance companies. In addition to re-instilling ethical business practices, providers have to start taking more responsibility for their part in this way of doing business. Technology assessment is virtually absent at the provider level - we jump on most anything with new bells and whistles, clinical benefit or not. When we start to be responsible consumers in evaluating products and services based on ROI (return on investment, clinical and financial), then the tables will start to turn. How nice it will be able to say "this is what WE need and here's why!"

Anonymous said...

Crime and Punishment: Enough for Corporate Wrongdoing?

Corporate crime should not be a new concept to many. However, it has evolved into more troubling ways- not only in regards to its severity, but the methods of deterrence now being implemented against corporations. So it may be becoming progressively worse for U.S. citizens as a result.
Rather than speak of all corporations, what will be discussed is government health care fraud. Fraud basically is deception with the potential to harm others. In the case of pharma companies, this may include improper promotion and marketing, meaning that such tactics are or may be deceptive misconduct that may be illegal. In addition, there are the crimes of kickbacks and lesser crimes of misbranding products. Probably more methods of wrongdoing as well do in fact exist and happen. Yet the point is that drug companies should not engage in such wrongdoing to enrich their faceless existence with profiting off those who are ill in illegal ways.
How is such conduct discovered? Typically by whistleblowers who worked for the described pharma company, and such people are rare for a number of reasons. The whistleblower then seeks legal agents and files what is called a qui tam false claims act with a district attorney’s office (Boston or Philadelphia, if you want prosecutors to take you seriously). After the case is filed, the whistleblower verbally acknowledges the charges and evidence to the chosen prosecutors and others.
Such cases usually take years for unclear reasons, yet in the past two years, the settlements from such cases has approached 2 billion dollars after investigations ended that took years, which is tax dollars returned to the American public with these settlements.
So, what has been happening once a pharma company is busted. Criminal indictment by the district prosecutor? Hardly, yet appropriate. Usually, the prosecutor’s objective is to dismiss the case, but give the impression that such activities will not be tolerated by our government. So Corporate Integrity Agreements are mandated to the pharma company, but not really taken seriously, as some have more than one of these agreements active still. It’s an invisible ankle bracelet. A pharma company can and have committed equal or worse crimes while under such an agreement. This Agreement is issued after the deferred or non prosecution agreement is sentenced to the law-breaking corporation, which basically is a pre-trial diversion. Essentialy, it’s just parole, which is supported by the DOJ and the administration. The criminals admit wrongdoing, but not guilt. And they pay a settlement in the neighborhood of hundreds of millions of dollars. Not that shocking, if you consider the income of big pharma companies. These agreements are relatively new and partially a result of suggestions from what was known as a Thompson memo, which basically was created by a DOJ guy as commandments for prosecuting corporations and variables to consider when doing so, which ultimately offered responses as to why a greater degree of punishment was not enforced.
We are one of three countries in the world with the most prisoners behind bars, yet those that do similar if not greater harm to others get out of jail free. Double standard, I would say. Is this behavior by our legal system towards corporations an effective deterrent? Most think not. It rather seems like tacit approval of their conduct. And health care fraud may be more damaging than other types in other industries, yet lack of regulation allows such crimes to continue.
Citizens should make the laws in our country. Justice would then finally exist.

“Corporations cannot commit treason, nor be outlawed, nor excommunicated, for they have no souls.”
---- Edward Coke

Dan Abshear

Anonymous said...

Growing cost and lack of access is a problem not limited to the primary care doctors trying to make a living in an era of declining reimbursements. The AP highlights in a May 22 story Settlements Used to Delay Cheaper Drugs the growing practice of drug companies essentially buying off generic drug companies not to bring to market competing products.

"Pay-for-delay settlements continue to proliferate, FTC Commissioner Jon Leibowitz said in a statement. That's good news for the pharmaceutical industry, which will make windfall profits from these deals. Bit it's bad news for consumers, who will be left footing the bill."

In a zero sum game where patients pay more for insurance and doctors receive less reimbursement, fraud and financial maneuvering are enriching the drug companies and device manufacturers. We all need to be aware and concerned about this trend as the cost of medical care, as a percentage of GDP in the US, is the highest of any country in the world, with little to show for it in terms of improved mortality.

We simply cannot afford these excesses.

Steve Lucas

InformaticsMD said...

"Not a team player..."

They were right, because this person shgould have been the team's coach.