Wednesday, January 06, 2010

Spectranetics Settles

I could not let this story, which came out just before the new year, completely slip by.  As reported by the Colorado Springs Gazette:
Spectranetics, the Colorado Springs-based medical-laser manufacturer, will pay $5 million to resolve federal government allegations that the company illegally imported and marketed unapproved medical devices, the U.S. Department of Justice said Tuesday.

Spectranetics will not face criminal prosecution, although it 'has accepted responsibility for its conduct' and agreed that 'officers and employees who acted on behalf of the company engaged in multiple areas of wrongdoing,' according to a Justice Department news release.

The investigation had been under way since at least Sept. 4, 2008, when agents from the U.S. Food and Drug Administration and Immigration and Customs Enforcement raided the company’s Springs headquarters, seeking information and correspondence.

Spectranetics manufactures sophisticated medical lasers used to clear blockages in coronary and leg arteries.

At issue in the federal probe were allegations that Spectranetics imported medical devices and provided them to physicians for use in patients without federal regulatory approval, the Justice Department said.

Also, Spectranetics allegedly conducted a clinical study that didn’t comply with federal regulations, while it also promoted products for which it hadn’t received FDA approval or clearance, according to the Justice Department.

Spectranetics’ actions caused false claims to be submitted to Medicare from 2003 to 2008, the agency also alleged.

Spectranetics will pay $4.9 million in civil damages to resolve the claims, the Justice Department said. In addition, the company said it has agreed to a future forfeiture of $100,000 in cash or property.

Spectranetics has also instituted measures to prevent similar conduct and will cooperate in 'an ongoing criminal investigation,' the agency said.

Also ongoing are a class-action lawsuit initiated by shareholders, and possibly a US Securities and Exchange Commission investigation. The Gazette also noted,
The company also went through a management shake-up; then-President and CEO John Schulte resigned a few weeks after the September 2008 raid.

Another day, another settlement of charges of wrong-doing by a health care organization.  So my stock response is xataloging legal settlements seems to be a useful way to assess the sorts of bad behavior manifested by large health care organizations (see some posts here). However, as we have said frequently, such settlements, including the "corporate integrity agreements" now frequently attached to them, seem to have done little to deter bad behavior. Usually, the companies involved only need to pay fines, and no individual who performed, directed or approved unethical or illegal acts will suffer any negative consequences. I submit once again that such fines are viewed merely as costs of doing business by the affected companies, and do not deter future bad behavior.

As seems standard operating procedure for such settlements, the fine in this case was barely more than a financial speed bump, given that the company had revenues of about $104 million in 2008 (per its 2008 annual report).  At least the CEO who was in charge at the time of the admitted wrongdoing actually lost his job.  However, presumably he was able to leave with at least the 792,354 shares of stock, currently worth $5,340,466, based on today's price of $6.74, 2.5% of outstanding shares which he beneficially owned prior to his departure, according to the company's 2008 proxy statement.

I once again submit that would-be health care reformers who want to improve care, reduce costs and improve access should advocate for real negative consequences for people who implement, direct or approve the various versions of fraud, kickbacks, and miscellaneous wrongdoing, corruption and malfeasance we have discussed on Health Care Renewal.

No comments: