Why Do People Think US Health Care is Corrupt? - The Examples of Amgen, Mallinckrodt Settling Charges of Giving Kickbacks to Doctors to Induce them to Prescribe Their Products, While No Individual Suffers Negative Consequences

We recently posted a discussion of the results of Transparency International's 2013 corruption barometer, focusing on the US results.  43% of survey respondents thought US health care is corrupt.  Our coverage, apparently the only substantial discussion of the US results published in the US, got star ranking for a while on Reddit.  But many anonymous commentators dismissed the survey results as coming from a naive public who does not understand health care economics.

I submit that one can recognize corruption without a degree in economics.  In fact, as we discussed in the initial post, there is a lot of evidence for the prevalence of health care corruption in the US, other developed countries, and globally.  It is just that such evidence rarely gets discussed in public (the anechoic effect, as we say on this blog), probably because doing so might make those who are profiting from the corruption uncomfortable.

So today let me summarize just the latest evidence about US health care corruption, as defined by Transparency International as the abuse of entrusted power for private gain.  (Note that the Transparency International definition of corruption, which is an ethical, not necessarily a legal definition, at least in most jurisdictions.)

Amgen

An article in the Thousand Oaks [CA] Acorn described the legal settlement,

Amgen Inc. paid the United States more than $15 million this month as part of a settlement agreement to resolve allegations that the biopharmaceutical company used financial kickbacks to persuade doctors to prescribe the cancer drug Xgeva to their patients.

The settlement resolves a qui tam, or 'whistleblower,' lawsuit filed Jan. 20, 2012, in federal court by William Davis and Spencer Miller—two Amgen employees who work at the company’s Thousand Oaks headquarters.

Davis, sales planning director for Amgen’s oncology business unit, and Miller, a senior marketing manager at the company, alleged their employer violated both the Medicare Anti- Kickback Statute and False Claims Act—two laws that aim to prevent Medicare fraud and abuse.

The allegations were that Amgen used a somewhat complex and deceptive strategy to pay doctors who prescribed its drug, using a survey about practice patterns as a cover story,

According to the U.S. attorney’s office, Amgen used what the company called 'Deep Dive' contracts—or data purchase agreements—in an effort to boost sales of Xgeva, which was approved by the FDA in late 2010 for use by certain cancer patients undergoing chemotherapy.

The drug is most commonly prescribed to prevent bone fractures in patients who have been diagnosed with a certain type of tumor after it has spread to the bones.

Under Amgen’s original Deep Dive program, the company paid doctors to fill out an Internet-based survey, which asked how they were treating patients with bone cancer and which drugs they used.

'That’s not illegal to do,' said Abraham Meltzer, assistant U.S. attorney in the Los Angeles civil fraud section. 'A lot of pharmaceutical companies purchase data legitimately on how various conditions are treated.'

But Amgen altered its Deep Dive program, Meltzer said, by increasing the amount of money it offered to pay the doctors who specifically prescribed Xgeva to their patients.

Also,

 The U.S. attorney’s office also alleged that Amgen paid oncologists and urologists to participate in market research surveys, audience response sessions and advisory programs that publicized the benefits of Xgeva.

As is typical in such cases, the settlement did not require any contrition on Amgen's part.  Instead,

In a prepared statement emailed to the Thousand Oaks Acorn on Tuesday, Amgen denied all allegations of wrongful conduct.

'Amgen settled this matter to avoid the delay, uncertainty, inconvenience and expense of protracted litigation,' the statement read.

As is also typical, there seemed to be no negative consequences for the human beings who must have engineered the "Deep Dive" contracts and the payments to the oncologists and urologists.  Nor was there any overt consideration of Amgen's sketchy recent ethical record, as described by the Acorn,

This month’s settlement is not the first time the biopharmaceutical giant has been held to answer for kickback allegations or false claims charges.

In December 2012, Amgen pleaded guilty to illegally selling the drug Aranesp, an anti-anemia drug, for uses or doses not approved by the FDA, according to the U.S. Department of Justice.

As part of the false claims case, which was also brought on by a whistleblower lawsuit, Amgen agreed to pay a $612-million civil settlement to the U.S. and individual states, as well as $150 million in criminal penalties.

Then in April, the Thousand Oaks-based company paid the U.S. another $24.9 million to settle whistleblower allegations that it gave financial kickbacks to long-term care pharmacy providers in exchange for switching Medicare and Medicaid benefi- ciaries from a competing drug to Aranesp, a DOJ press release states.

We discussed the guilty plea in the cases of Aranesp misbranding and alleged kickbacks to pharmacists.  Also, in 2013, we noted that Amgen settled allegations that it overpriced its products sold to government health programs in 36 states.  We also noted that despite, or perhaps because of all this misbehavior, the current CEO of Amgen received over $13 million in compensation in 2012, while his predecessor walked away with over $9 million that year.

Mallinckrodt

A small news item from the Associated Press, via the Nanaimo (MO) Daily News, outlined this legal settlement,

A St. Louis-based drug maker will pay $3.5 million to settle allegations that it paid doctors to prescribe 'outdated, third rate' antidepressants and sleep aids, the U.S. attorney's office in San Francisco announced.

In particular,

The lawsuit alleged the company targeted doctors who prescribed the type of antidepressants and sleep pills Mallinkrodt manufactured.

Again, the company was allowed to settle without admitting anything.

'While we deny the allegations in this matter, we are glad they are resolved,' company spokeswoman Erica Abbett said in a statement.

Again, although human beings would have had to engineer any payments to the doctors to induce them to prescribe, no human beings suffered any consequences as a result of this settlement.

Mallinckrodt, a storied corporate name, had been acquired by Covidien, and then was spun off again as a separate company in June, 2013 (look here).  It had been acquired in 2000 by Tyco International, which later spun off its health care operations as Covidien.   According to its 2013 proxy statement, Covidien's CEO received over $10 million in total compensation in 2012.


[Note that Tyco was the subject of one of the major scandal stories of the early 21st century.  In 2005, at a time when law enforcement authorities were still pursuing actions against elite corporate executives,  its former CEO and CFO were convicted of stealing millions from it (see USAToday summary)].

Summary - Why do People Think US Health Care is Corrupt?  

Again, the Transparency International definition of corruption is abuse of entrusted power for private gain.  I would argue that pharmaceutical companies are entrusted with the power to honestly sell drugs whose benefits to patients outweigh their harms.  I would further argue that paying physicians, who are entrusted with providing the best possible care to each individual patient, to prescribe drugs which may not be the best treatment for individual patients is an abuse of both the company's and the physicians' entrusted power.  Further, such payments provide private gain to the physicians.  They also may increase revenues for the company who makes these payments, and very likely these increased revenues lead to better compensation for those in the company who authorized, directed or directly provided the payments, that is to private gain for these corporate insiders.  Thus it seems that kickbacks to physicians to prescribe drugs is a form of corruption.

While both cases above were settled without admissions of guilt, such settlements do not refute the contentions that kickbacks were given.  Why would the law enforcement officials have brought the cases in the absence of evidence, and why would the companies have settled if the cases were completely baseless?  So I would argue that these settlements provide evidence, although not legal proof, that kickbacks were given.  People with far more legal knowledge than I possess have remarked on the absurdity of settling cases of alleged wrongdoing without any acknowledgement or statement of the facts (see posts here and here).

We have posted lots of instances of conflicts of interest affecting health care, many of which likely involved payments providing private gain that raised the risk of abuse of entrusted power.  We have also discussed many instances of crime, kickbacks, bribery, fraud other kinds of health care corruption.

So were the people who answered the Transparency International survey naive and foolish about health care corruption?  Or did they have reasonable beliefs about a topic that the powers that be really do not want to discuss?