Law and Order? - Bristol-Myers-Squibb Settles Case Alleging Fraud and Kickbacks, No Admissions of Guilt, No Individuals Charged

Introduction 

Donald Trump, Republican candidate for the US presidency last week announced he is the "law and order" candidate, accompanied by then vice presidential contender and New Jersey Governor Chris Christie.



I wonder if all this interest in law and order will lead to increasing the effectiveness of enforcing laws when large US health care corporations are accused?

For years, we have been watching a parade of legal settlements made by big US health care organizations.  These have included the biggest drug companies, biotechnology companies, device companies, insurance companies, etc, etc.  Many involved accusations of fraud, kickbacks, and other seeming crimes.

In many cases, the alleged white collar crimes could have resulted in harms to patients.  For example giving physicians kickbacks to promote particular drugs or devices could have led them to prescribe treatments that could have been useless for particular patients, yet subjected those patients to risks of adverse effects.

Yet few of these cases were resolved with findings of guilt.  Many resulted in financial penalties for the accused organization, but which were tiny compared to that organization's revenue.  Almost none resulted in any consequences for the people in the organization who might have individually profited from the alleged actions, particularly the top executives who were making millions of bonuses, suggesting their apparent impunity.

This parade of settlements does not look like instantiation of law and order to me, in my humble opinion.

Bristol-Myers-Squibb Settles Allegations of Kickbacks

And the parade continues.  The latest case, which barely was noticed in the media, involved huge pharmaceutical company Bristol-Myers-Squibb.  It was best documented by Ed Silverman in Stat,

After nearly a decade of litigation, Bristol-Myers Squibb on Monday agreed to pay $30 million to settle charges by California officials of paying kickbacks to induce doctors to prescribe several of its medicines.

The settlement with the California Department of Insurance stemmed from a whistleblower lawsuit that was filed in 2007 by three former Bristol-Myers employees. They alleged that from 1997 through 2003, the drug maker used a wide variety of inducements to generate revenue. The state later joined the lawsuit in 2011 and, last year, the former employees were dismissed from the case by a state court.

The kickbacks included box seats at sporting events where doctors were given food, drinks, and parking; enrollment in a Los Angeles Lakers basketball camp for doctors and their children; prepaid golf outings at luxury courses; tickets for doctors and their families to see Broadway shows in California cities; and lavish dinners, resort hotel trips, and concert tickets for doctors who were especially big prescribers.

Among the many medicines for which doctors were persuaded to write more prescriptions were the Pravachol cholesterol pill; the Plavix blood thinner; the Abilify antipsychotic; the Glucophage diabetes treatment; and the BuSpar antianxiety drug.

A Bristol-Myers spokesman wrote us that the company denied any wrongdoing, but also noted that the firm began adhering to a voluntary industry marketing code in 2002. 'We are pleased to put this matter behind us so that we can focus on making transformational medicines for patients battling serious diseases,' he wrote.

Note that in this case, as is typical for such cases, the financial penalty seems to be minimal compared to the company's total revenues (more than $16.5 billion according to Google finance.)  The company was allowed to deny wrongdoing (although in absence of same, why should it pay a fine?)  No individuals who might have personally profited from the actions in question suffered any negative consequences.

Why Not More Severe Penalties for a Repeat Offender?

Furthermore, the outcome seems to have nothing to do with the accused's track record.  Anyone who follows the news knows that in general, penalties in criminal cases are likely to be different for first offenders and habitual criminals.  Penalties in civil cases also may depend on the defendant's track record.

However, this case, like most other cases involving big health care organizations, seems to have occurred in a vacuum, separate from the company's track record.  Yet a bit of searching reveals that BMS, like many other big health care corporations, seems to have a pretty bad record.


- In 2003, for $617 million, BMS settled suits alleging it tried to prevent competition from low cost generic versions of its products Taxol and Buspar (per the NY Times).
- In 2004, for $150 million, BMS settled suits by the SEC alleging accounting fraud (per the NY Times here).
- In 2007, BMS paid a $1 million dollar penalty while pleading guilty to lying to federal agents about a deal with the Canadian drug company Apotex (per Law360).   In 2009, it paid additional financial penalties in response to a US Federal Trade Commission charge about this case (per the FTC).
 - In 2007, for $515 million, BMS settled a suit alleging it used kickbacks to induce use of Abilify for dementia and by childeren, despite evidence that the drug was not suitable for either.  The settlement included a five year corporate integrity agreement.  (Look at our post here).
 - In 2014, BMS settled allegations its subsidiary Lantheus Medical Imaging Inc evaded state taxes (per the Corporate Crime Reporter)
 - In 2015, Bristol-Myers-Squibb settled allegations by the US Securities and Exchange Commission (SEC) that it bribed physicians in China to induce them to prescribe its drugs.  (Look at our post here).

(Parenthetically, I apologize that many of these previous cases have not been previously mentioned on Health Care Renewal.  For that I apologize.  Yet some simple Google searches were all that were required to find them.)

Why did none of the law enforcers involved in the later cases do similar searches, and why did the company's track record not figure into how the current case was resolved?

Chris Christie and the Rise of the Deferred Prosecution or Corporate Integrity Agreement for Too Big to Jail Organizations

The answer to that will not be easy.  At best, it now seems to be standard operating procedure for law enforcement to treat big health care organizations very gently.  However, there is one clue in BMS track record that it might be helpful to discuss in this political season.


Note that in one of the biggest settlements listed above, BMS agreed to a corporate integrity agreement.  According to a 2015 article in Time, the use of such agreements, coupled with apparently large fines but no other penalties, for corporate offenders was pioneered by none other than then US Attorney Chris Christie, (who spoke in the video above).

Christie was apparently horrifed by the criminal prosecution of Arthur Andersen, a big accounting firm, in the wake of the Enron scandal.  At that time, federal prosecutors acted so that

The company itself—not its employees who might have been responsible—was indicted and found guilty. The trial put the company out of business. The conviction was overturned on appeal, but not before the company’s reputation was destroyed and its employees forever branded with a Scarlet Letter, representing Andersen, not Adultery.

The article described Mr Christie's response:

Christie had watched wall-to-wall coverage of the case, and it made him uncomfortable. He decided he did not want to run his office in that way. Instead of bulldozing New Jersey companies facing smaller-scale fraud cases and leaving their employees out of work, Christie preferred to build a case against the firms and then bring their leaders in for a take-it-or-leave-it chat. Ultimately, seven New Jersey corporations accepted deferred prosecution agreements, or deals with the government that let them avoid trial in exchange for the companies hiring independent monitors to oversee operations and put in place guards against future wrongdoing.

Christie often was relieved they were open to the deals. 'Put the company itself out of business? Lose all the jobs?' Christie asked when asked about the alternatives. He pointed to a corruption case he built against St. Barnabas Health Care System, the state’s largest, for double- and over-billing Medicare and Medicaid services. St. Barnabas paid $265 million to settle the case. 'What are you going to do?' Christie asks. 'Close the hospital, the largest hospital that serves the poor?'

Neither Time, nor Mr Christie seemed to notice that this reasoning involved a logical fallacy, a false dilemma.  True, there are two options:
1) criminally prosecute the whole company
2) allow the company to operate under a deferred prosecution or corporate integrity agreement.
But there is a third option:
3) Criminally prosecute the individuals in the company who were most involved in and most benefited from the bad behavior.

So in the St Barnabas example, what he could have done was prosecute the people at St Barnabas who were most responsible for the over-billing, and let the hospital itself go with a fine. Mr Christie for some reason never seemed to think about that option.  Neither have most other US law enforcers who have dealt with large organizations since.

Ironically, Mr Christie has got himself into some ethical hot water because of how he managed corporate integrity or deferred prosecution agreements involving BMS and other health care organizations.  Some have alleged that Mr Christie found some other advantages to using such agreements, advantages that accrued mainly to Mr Christie and his cronies.  As the Time article noted, re BMS

As part of its penance, the company also proposed paying for a professor of business ethics at a law school. The company initially offered to pick up the tab at a school in New York. No way, Christie said. 'This is a New Jersey case. Pick a New Jersey school,' Christie replied. Rutgers already had such a program, and there was only one other law school in New Jersey. It just happened to be Christie’s alma mater, Seton Hall. 'It couldn’t have mattered less to me,' Christie says. 'I didn’t get anything out of it. I was long graduated from Seton Hall.' (The Justice Department signed off on the agreement, but would later limit U.S. Attorneys’ ability to negotiate such deals.)

Christie’s critics pounced on the $5 million payment to Seton Hall, and to this day are trying to use it as a way to suggest he is another pay-to-play New Jersey politician.

And in two other health care cases:

Christie hired former Attorney General John Ashcroft, his one-time boss, to monitor Zimmer Inc., one of the firms that settled with the government. In turn, Ashcroft’s company charged between $1.5 million and $2.9 million a month to monitor the medical device company. By the time Christie arrived in Washington to answer lawmakers’ questions, The Ashcroft Group had earned $52 million on that case. 'To me, that is outrageous,' Rep. Steve Cohen chided Christie. 'I don’t care what you did. It is not worth $52 million,' the Tennessee Democrat continued. 'Even if you took steroids and hit 70 home runs, it is not worth $52 million.'

Lawmakers also wanted to know why he named David Kelley to a post to oversee the Bristol-Myers Squibb settlement. Kelley two years earlier, as a former prosecutor, declined to bring securities fraud charges against Todd Christie, the future-Governor’s brother. Was this payback for sparing a Christie Family?

Mr Christie defended his conduct in the BMS case:

Christie to this day says he has no regrets about the deferred prosecution agreements, including the professor position. To him, it matters less about whether there was a conviction than whether the illegal behavior ended. 'The goal as the U.S. Attorney is to stop the conduct,' Christie says. 'If you’ve stopped the conduct, you’ve won.'

But of course the current case, and those involving BMS from 2014 and 2015, shows that Mr Christie's corporate integrity agreement did not "stop the conduct" at least in the case of BMS.  That rationale was fallacious too.


Summary

Now that political campaigners are once again shouting about law and order, maybe this is the time to call for effective and equal enforcement of the laws regarding white collar crime in health care.  For years, we have watched perpetrators of small scale Medicaid and Medicare fraud go to jail.  Yet when big companies are accused of big scale crime, almost no one ever goes to jail.

It is time for equal justice for all in health care.

Let me end with a quote from a report by Senator Elizabeth Warren (D - Massachusetts) published in January, 2016, entitled "Rigged Justice: 2016 - How Weak Enforcement Lets Corporate Offenders Off Easy."

 Laws are effective only to the extent they are enforced. A law on the books has little impact if prosecution is highly unlikely.

This country devotes substantial resources to the prosecution of crimes such as murder, assault, kidnapping, burglary and theft, both in an effort to deter future criminal activity and to provide victims with some degree of justice. Strong enforcement of corporate criminal laws serves similar goals: to deter future criminal activity by making would-be lawbreakers think twice before breaking the law and, sometimes, by helping victims recover from their injuries.

When government regulators and prosecutors fail to pursue big corporations or their executives who violate the law, or when the government lets them off with a slap on the wrist, corporate criminals have free rein to operate outside the law. They can game the system, cheat families, rip off taxpayers, and even take actions that result in the death of innocent victims—all with no serious consequences.

The failure to punish big corporations or their executives when they break the law undermines the foundations of this great country: If justice means a prison sentence for a teenager who steals a car, but it means nothing more than a sideways glance at a CEO who quietly engineers the theft of billions of dollars, then the promise of equal justice under the law has turned into a lie. The failure to prosecute big, visible crimes has a corrosive effect on the fabric of democracy and our shared belief that we are all equal in the eyes of the law.

Under the current approach to enforcement, corporate criminals routinely escape meaningful prosecution for their misconduct. This is so despite the fact that the law is unambiguous: if a corporation has violated the law, individuals within the corporation must also have violated the law. If the corporation is subject to charges of wrongdoing, so are those in the corporation who planned, authorized or took the actions. But even in cases of flagrant corporate law breaking, federal law enforcement agencies – and particularly the Department of Justice (DOJ) – rarely seek prosecution of individuals. In fact, federal agencies rarely pursue convictions of either large corporations or their executives in a court of law. Instead, they agree to criminal and civil settlements with corporations that rarely require any admission of wrongdoing and they let the executives go free without any individual accountability.

And end with a video of her speaking on the subject.