Monday, March 01, 2010

Sacks Medical, KV Pharmaceutical Plead Guilty, Mariner Health Care, SavaSeniorCare Settle

The march of legal settlements and guilty pleas by health care organizations just keeps going.  The most recent participants were:

Sacks Medical Corp

The Pittsburgh Tribune-Review reported:
A Butler County drug company pleaded guilty in federal court in Pittsburgh to international money laundering and violating federal drug laws in an investigation that involved the now-defunct Monsour Medical Center Research Institute.

Sacks Medical Corp. of Evans City was fined $500,000 and ordered to forfeit an additional $500,00 by U.S. District Court Judge Gustave Diamond on Monday. The firm was placed on one year's probation.

The research institute was not charged in the investigation.

According to federal prosecutors, Sacks in 2004 obtained pharmaceutical drugs at discount prices, which were then resold to other drug wholesalers in violation of the Prescription Drug Marketing Act.

Sacks persuaded officials at the Monsour Medical Center in Jeannette to create the research institute, which was nothing more than a shell company, according to the charges.

The institute joined two group purchasing organizations and began buying large amounts of medical supplies that should have been designated only for the hospital's use and not resold, according to the charges.

Purchases were made from major drug companies, AmerisourceBergen of Valley Forge and McKesson Corp. San Francisco. Monsour then sold the medications to Millenia Hope Healthcare Inc., which was located at Monsour.

Millenia then sold the drugs directly to Sacks or to San Med Development Group, which is owned by Sacks, according to prosecutors.

Sacks supplied Monsour with the money to buy the discounted drugs. The company then tried to disguise the transaction by wiring the money to a Canadian bank, which in turn wired the money back to Monsour, according to the plea agreement.

The novel element here seems to be the charge of international money laundering.

KV Pharmaceutical

Bloomberg reported:
KV Pharmaceutical Co. agreed to pay a $25.8 million fine and forfeit $1.8 million to resolve a U.S. Justice Department investigation of its generic pharmaceutical marketing and distribution unit, which will cease operations.

That unit, Ethex Corp., will also enter a plea of guilty to criminal charges arising from its actions in 2008, according to a statement issued today by St. Louis-based KV. The agreement requires court approval, the company said.

Under the terms of the accord, Ethex will plead guilty to two felony counts stemming from its failure to make and submit to the U.S. Food and Drug Administration a report on its discovery of undistributed pills that 'failed to meet product specifications,' KV said separately in a filing today with the U.S. Securities and Exchange Commission.
Note that these first two cases both involved guilty pleas to criminal charges, felonies in the latter case.  Further note, however, that in the latter case, the felony pleas were made by a subsidiary of the corporation, which will then be dissolved, leaving the parent corporation intact.  Although in both cases organizations pleaded guilty to criminal charges, there were no reports that any individuals who worked for or were otherwise involved in these organizations pleaded guilty to any charges.
Mariner Health Care, SavaSeniorCare (and Omnicare)

Again, from a report by Bloomberg:
The U.S. reached a $14 million settlement with nursing home chains Mariner Health Care Inc. and SavaSeniorCare Administrative Services LLC over allegations of kickbacks from a supplier of drugs to nursing home patients.

The accord resolves claims that the companies and their principals, Leonard Grunstein, Murray Forman and Rubin Schron, solicited kickbacks from Omnicare Inc., the U.S. Justice Department said in an e-mailed statement.

The defendants conspired to have Omnicare pay $50 million in exchange for agreeing to use the supplier for 15 years, the government said last March in a complaint in Boston. The alleged kickback scheme involved Omnicare’s paying $40 million to buy a Mariner unit whose only assets were less than $3 million in accounts receivable, according to the complaint.

Note that we discussed another settlement involving Omnicare and kickback allegations here.  It appears, however, that Omnicare paid any additional penalty in this case, despite allegations that it provided the kickbacks.


Again, another week, another series of colorful legal settlements and/or guilty pleas and/or convictions involving health care organizations.  Again, although organizations settled or pleaded guilty, no individuals seemed to be held accountable for authorizing, directing, or implementing the actions that lead to these pleas and settlements.

So, here we go again ... To repeat, seemingly ad infinitum, these are just the latest in a now long parade of settlements and guilty pleas and criminal convictions, sometimes involving charges like bribery, fraud, or kickbacks,  that serve as reminders of poor behavior by myriad health care organizations. As we have previously noted, these settlements seem to have little deterrent effect on future bad behavior. (Note that many large health care organizations have settled or plead guilty in several major cases since we started commenting on such settlements.) 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. Until the people who approve, direct, and perform unethical or illegal acts pay some penalties, expect such acts to continue. I again suggest that to truly reform health care, we need rigorous regulation of health care organizations that has the power to deter unethical behavior that may risk patients' health.


Pharma Conduct Guy said...


As usual a great post on a timely topic. Keep up the good work!


JPB said...

Then we have the multi-million dollar settlement just made by Christiana Care over kickbacks to a neurology practice. Of course, CC did not admit to any wrongdoing!