Tuesday, January 26, 2010

Drowning our Sorrows in Ketchup: Novartis Settles, Appoints Former Heinz Executive CEO

Here's the latest corporate health care marcher in the legal settlement parade, as reported in the Wall Street Journal.
Swiss drug giant Novartis AG said its U.S. subsidiary struck a plea agreement with U.S. investigators to resolve criminal allegations regarding the company's promotion of the epilepsy drug Trileptal, and agreed to pay a $185 million fine.

Federal investigators have been carrying out civil and criminal investigations of Novartis' marketing of the drug, including allegations that it promoted the drug for uses for which it is not approved by the Food and Drug Administration, an illegal practice known as 'off-label' marketing, Novartis said in a statement Tuesday as it announced fourth-quarter results.

To resolve criminal allegations, Novartis said it agreed to plead guilty to a violation of the U.S. Food, Drug and Cosmetic Act, and to pay a fine of $185 million.

It has become a drearily familiar ritual. We have now discussed numerous instances of large health care corporations pleading guilty to criminal charges and/or settling civil allegations of unethical behavior.  In the current case, like nearly all the others, the corporation will pay what seems to be a huge fine.  However, the amount is a pittance compared to the corporation's revenue, and is likely to be viewed as only a small cost of doing a very lucrative business by corporate executives.  In very few cases does any individual suffer any negative consequence for approving, ordering or implementing the unethical behavior. 

Thus, I would argue that these cases remind us how unethical the health care "business" has become, but the way they have been resolved will fail to deter future bad behavior.  A large fine's impact can be spread among share-holders, employees, and clients/ customers/ patients, and hence poses no threat to executives planning the next bit of unethical behavior. 

In fact, the most notable aspect of the current case is that the corporation involved in not run out of the US, but rather out of Switzerland, showing that this pattern is not exclusively an American one.

There is an interesting juxtaposition to this case, however.  At the same time this settlement was announced, Novartis disclosed its new CEO.  A Wall Street Journal commentary opined, that the " New Novartis Chief Needs Surgery Skills."  Ironically, the new CEO is hardly a surgeon.  Here is a summary of his background.
Mr. Jimenez began his career in the United States at The Clorox Company, and later served as president of two operating divisions at ConAgra. In 1998, he joined the H.J. Heinz Company, and was named President and Chief Executive Officer of the North America business. From 2002 to 2006, he served as President and Chief Executive Officer of Heinz in Europe.

Before joining Novartis, he was a NonExecutive Director of Astra-Zeneca plc, United Kingdom, from 2002 to 2007; and was an advisor for the private equity organization Blackstone Group, United States. Mr. Jimenez joined Novartis in April 2007 as Head of the Consumer Health Division and was appointed to his present position in October 2007.

Mr. Jimenez graduated with a bachelor’s degree from Stanford University in 1982 and with an M.B.A. from the University of California, Berkeley, in 1984.

I would guess that all that expertise marketing ketchup will come in handly preventing the need for more settlements of illegal marketing practices.  Seriously, we have discussed the logic and evidence behind the assertion that health care corporations ought to be run by people with relevant experience and values.  We wish Mr Jimenez well, but hope that he realizes that if he is to prevent future events that could throw his company into disrepute, he ought to lean heavily on people who understand medicine and biomedical science, and who support physicians' core values.

More broadly, I again suggest that real US health care reform would need to deal with both these issues.  We need to have rigorous regulation of health care organizations that has the power to deter unethical behavior that may risk patients' health.  We need to have leaders of health care organizations who actually understand health care and share its values. 

Two hat tips to the PharmaGossip blog (here and here).


InformaticsMD said...

As I wrote at these posts:

Management of pharma without domain expertise is, by definition, mismanagement.

Anonymous said...

Understanding medicine does not stop one from being seduced by the Dark Side as we see in this WSJ Health Blog post:

January 25, 2010, 10:28 AM ET

Harvard Doc Steps Down to Keep Drug-Industry Speaking Gig

By Jacob Goldstein

Starting this year, some high-profile Boston hospitals put new rules in place that prohibited their docs from being paid by drug companies to give speeches. One doc recently left one of the hospitals — and a job as an instructor at Harvard med school — in order to keep getting paid by the industry, the Boston Globe reports.

GlaxoSmithKline recently reported its payments to doctors for the second quarter of last year. One doc — Lawrence M. DuBuske, an allergy and asthma specialist affiliated with Brigham & Women’s Hospital — was paid $99,375 during those three months.
DuBuske recently “made decision between terminating the relationship with Glaxo and terminating his relationship with the Brigham, to do the latter,’’ an official at Partners HealthCare, a health system that includes the Brigham, told the Globe. One other doctor affiliated with the system has also left at least partly because of the new rules, but that doc hasn’t been identified, the Globe says.

Being a part of one of the worlds leading medical institutions and understanding the importance of the work that can be accomplished is not enough for some doctors. We can watch and wonder how many other doctors would move to the Dark Side given the same financial rewards?

Knowledge is not a guarantee of ethical behavior.

Steve Lucas

Roy M. Poses MD said...

Steve, I certainly agree that having an MD degree is no guarantee of ethical behavior.

On the other hand, nearly all doctors swear an oath pledging to put the welfare of individual patients ahead of self-interest, to honor patients' values and the confidentiality of their information, to support medical education, and to practice medicine based on science.

Not every physician lives up to those oaths, but I believe some do. At least some of the ideals of physicians' professionalism are still taught, at least informally at times during medical education. Medical licenses can be lost due to unprofessional behavior. The system is far from perfect, and as we have documented repeatedly on this blog, there are tremendous external pressures pushing physicians away from these professional values.

But the values, while battered, are still taught, still written, and still there.

On the other hand, it seems to me that business schools have completely abandoned any principles other than "do it if it makes you money." Certainly, I have never heard of a business school granting degrees that require swearing to uphold ethical principles. (I understand that 40+ years ago, real ethics and professionalism might have been taught at some business schools.)

Furthermore, as we have discussed frequently, a business executive who condones or orders unethical, even grossly illegal conduct is much less likely to pay a penalty than is a doctor who behaves grossly unprofessionally.

So while I certainly agree that far too many doctors nowadays behave unethically, I still think that the probability of any given doctor behaving unethically is lower than the probability of any given "pure MBA" health care executive behaving unethically.

Anonymous said...


I think your comments are fair and do describe the current situation. My point was that as we increase transparency we see more and more doctors succumbing to the financial incentives offered by the drug and device companies.

In this case we have two doctors leaving a prestigious hospital for the greener pastures of industry. Last year we had the debacle at Emory. Troubling is the profile of these individuals and others such as Scott Reuben who recently had 21 papers retracted for falsifying data.

My understanding, from an article some time ago, is that in some medical schools students now swear an oath to protect and serve society.

Business has certainly lead the way in the decline of ethics. My issue is that a surprising number of high profile doctors are following suit. This combination makes it easier for front line doctors to fool themselves into believing that their behavior is patient centered, when in fact it has broader implications for the business aspect of their practice.

While I wish we could say the cases profiled in the press represent a small number of practicing doctors, I fear the press is only reporting a small number of high profile cases. Doctors do hold a special place in any society. Loosing their integrity will only diminish the society they represent, including ours.

Steve Lucas