Last Week's Scandals

The march of settlements and other unfavorable legal results for health care organizations continued last week, in alphabetical order

CVS Settles for $77.6 Million for Violating the Controlled Substances Act

As reported by Bloomberg,

CVS Caremark Corp. agreed to pay $77.6 million to settle claims that some of its stores in California and Nevada allowed criminals to buy cold medications that were used to make methamphetamine.

The pharmacy chain will pay a $75 million fine, the largest civil penalty ever paid under the Controlled Substances Act, and forfeit $2.6 million in profits from the illegal sales, the U.S. Attorney’s Office in Los Angeles said today in a statement.

Between September 2007 and November 2008, CVS failed to ensure that stores in Southern California complied with laws limiting sales of over-the-counter drugs made with pseudoephedrine, which allowed methamphetamine traffickers to buy large amounts of the drugs, according to the statement. CVS changed its sales practices only after it became aware of the investigation, prosecutors said.

What was unusual about this case is that the company's CEO actually seemed to acknowledge that it did something wrong, and vowed change:

'While this lapse occurred in 2007 and 2008 and has been addressed, it was an unacceptable breach of the company’s policies and was totally inconsistent with our values,' CVS Chief Executive Officer Thomas Ryan said in a statement. 'We have strengthened our internal controls and compliance measures and made substantial investments to improve our handling and monitoring of PSE.'

Amazing, a CEO acknowledging that his corporation's values include complying with the law... [sarcasm off]
Note that we most recently posted about a settlement by CVS, one by CVS Caremark for improperly charging a public entity, in September, 2010, here.

Johnson & Johnson Found Liable for $257.7 Million for Fraud

As reported by Bloomberg,

Johnson & Johnson lost a $257.7 million jury verdict in Louisiana for making misleading claims about the safety of the company’s Risperdal antipsychotic drug.

J&J officials defrauded the state’s Medicaid system by wrongfully touting Risperdal as superior to competing antipsychotic drugs and minimizing its links to diabetes, said jurors in state court in Opelousas, Louisiana.

Specifically,

The jury found 35,542 violations of the state’s Medical Assistance Programs Integrity Law and imposed a penalty of $7,250 for each. The total $257.7 million verdict is the fifth- largest in the U.S. so far in 2010, according to data compiled by Bloomberg.

'You can’t come into Louisiana and disseminate false and misleading information,' Patrick Morrow, who represented the state, said after the verdict in a phone interview. 'I’m sure this matter will be in the appellate courts for years to come. This is the first step.'

The state’s case centered on drug safety claims that J&J and Ortho-McNeil Janssen made in November 2003 correspondence to 700,000 doctors. In those letters, J&J touted Risperdal as safer than competing antipsychotics such as Indianapolis-based Eli Lilly & Co.’s Zyprexa and London-based AstraZeneca Plc’s Seroquel. Risperdal global sales peaked at $4.5 billion in 2007, declining after the company lost patent protection.

The U.S. Food and Drug Administration responded with a warning letter saying J&J made false and misleading claims that minimized the potentially fatal risks of diabetes and overstated the drug’s superiority to rival medicines.

Lawyers for the state asked jurors to hold J&J liable for the 7,604 letters it sent to Louisiana doctors and regulators making those claims along with more than 27,542 sales calls in the state made by the drugmaker’s representatives in 2003 and 2004.

Note that we last discussed problems at Johnson and Johnson, those being manufacturing issues leading to contaminated drugs, in September, 2010, here.

Medtronic Settles for $268 Million for Personal Injuries

As reported by the Minneapolis Star Tribune,

Medtronic Inc. has agreed to pay $268 million to settle thousands of lawsuits that patients filed after a 2007 recall of a faulty heart defibrillator wire that caused at least 13 deaths.

The settlement announced Thursday covers some 8,100 personal injury lawsuits in both federal and state courts over Medtronic's popular Sprint Fidelis lead, which was implanted in some 235,000 people when the company recalled the device after a small number fractured. The malfunction could cause the defibrillator to stop working or to inappropriately shock patients -- a frightening and uncomfortable experience, but usually not life-threatening.

The cases had been lingering in a kind of legal limbo that began with a 2008 U.S. Supreme Court decision involving another Medtronic case that prevented many patients with faulty medical devices from filing suit against the makers of those products.

Rather than wait for a definitive resolution to various legal appeals, the Fridley-based medical technology giant agreed to end the three-year legal battle with a settlement.

Note that we last discussed Medtronic's payments to physicians, in June, 2010, here.

Summary

Ho-hum, another week, another set of settlements, convictions, and/or verdicts unfavorable to large, important health care organizations. Although all the actions above would result in seemingly large payments by the companies involved, all of the payments were trivial in size compared to the companies' revenues. Note that in none of the cases above did any individual pay any penalty. In only one of the cases did a corporate leader acknowledge that bad things were done, but should be done no more.

As we have noted infinitum, penalties that only appear to be (relatively small) costs of doing business are unlikely to deter future bad behavior. Until the people who actually authorized, directed and implemented the bad behavior have to suffer some negative consequences, expect the bad behavior to continue.  Note that each of the companies discussed above have had their previous ethical lapses discussed in previous Health Care Renewal posts.

The continuing march of settlements, and sometimes criminal convictions involving major health care organizations should be regarded merely as providing a floor to estimates of the extent of bad behavior by large health care organizations. Bad behavior may not be reported, or lead to legal action, and legal action may not lead to settlements or convictions. However, it is amazing how many organizations that were once regarded as exemplary have had to settle, or plead guilty, or been convicted.

When it comes to health care's leadership, society seems to have acceded to defining deviancy down. Until we start holding health care leaders to high standards, expect their organizations not to uphold high standards.