Tuesday, February 21, 2017

As US Attorney, Labor Secretary Nominee Enabled Drug and Biotechnology Executives' Impunity

The new Trump administration nominee for US Secretary of Labor is a former US Attorney for the southern district of Florida.  In that role, he seemed to uphold the ideas that certain big corporations, particularly big pharmaceutical and biotechnology corporations, are too big to jail, and that top executives of big corporations should not be held accountable for their corporations' actions.

He had central involvement in three big settlements of charges of corporate misbehavior which held no individuals accountable for enabling, authorizing, directing or implementing the bad behavior.  The settlements imposed only monetary penalties on the corporations as a whole, accompanied at times by corporate integrity agreements.  In some cases, the failure to charge any individuals at the corporation occurred despite the corporations' history of previous bad behavior.  In each case, the penalties seemed unable to deter more bad behavior by the corporations going forward.  It was not obvious that any of the corporate integrity agreements were enforced. Thus, he enabled the continuing impunity enjoyed by the leadership of large health care organizations. 

The three cases, all discussed on Health Care Renewal, were, in approximate chronologic order:

2005 - GlaxoSmithKline Settled Charges of Overbilling Medicare and Medicaid for Zofran and Kytril

As we discussed in 2005, GlaxoSmithKline has settled for $150.8 million US Department of Justice charges that the company fraudulently overbilled Medicare and Medicaid. The alleged scheme involved inflating average wholesale prices for Zofran and Kytril used to set reimbursement rates.  According to the 2005 Department of Justice news release, "GlaxoSmithKline has agreed to enter into an addendum to its existing Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services that, among other things, will require the company to report accurate average sales prices and average manufacturer's prices for its drugs covered by Medicare and other federal healthcare programs."

No individual who authorized, directed, enabled or implemented these alleged actions suffered any penalty.  The decision not to prosecute any individuals was made after the first (2004) famous Paxil case.  Paxil is the anti-depressant whose marketing lead GlaxoSmithKline (GSK) to settle allegations of fraud brought by then New York Attorney General Elliott Spitzer.  That case included allegations of suppression and manipulation of clinical research, and was discussed in great detail in the book Side Effects by Alison Bass.  We posted about various aspects of this case, e.g., here, here, and here

Since 2005, we have discussed myriad examples of misbehavior by GSK.  Notably the company made a $3 billion settlement in 2012 for all sorts of allegations involving multiple drugs, (see this post).  Its most recent settlement was in 2016 for bribing Chinese doctors (see this post).  Other cases included the manipulation of Study 329 (see this post), the manipulation and suppression of evidence about Avandia (see this post).  So the 2005 settlement seemed to have little deterrent effect.

The 2005 DOJ press release included this quote
'As our nation struggles to contain healthcare costs, we must ensure that drug manufacturers do not take advantage of the poor, the elderly or the sick by illegally inflating the price of prescription drugs. That a manufacturer would fraudulently inflate the cost of a drug used primarily to reduce the side effects of cancer treatments is unconscionable,' said U.S. Attorney R. Alexander Acosta of the Southern District of Florida.      

2007 - Bristol Myers Squibb Settled Charges of Kickbacks to Physicians and Fraudulent Marketing of Abilify 

As we discussed in 2007, BMS was charged by the US government for promoting the atypical anti-psychotic drug Abilify for use by children and the elderly absent any good evidence that it provided benefits that outweighed harms for these group. So such patients who received these drugs due to the overpromotion might have been harmed, and probably did not benefit.   One means used to promote the drug was giving kickbacks to physicians.  The settlement included monetary penalties to the company totaling $515 million, and a five-year corporate integrity agreement to ensure its compliance with the law.

Note that the corporate integrity agreement did not appear to have improved subsequent BMS behavior.  Since 2007, we have noted that:
 - In 2014, BMS settled allegations its subsidiary Lantheus Medical Imaging Inc evaded state taxes (per the Corporate Crime Reporter)
 - In 2015, BMS 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).

No individual who authorized, directed, enabled or implemented the actions alleged in the 2007 settlement suffered any negative consequences. The decision not to charge any individuals seemed to be made despite the company's history of previous bad behavior, which included:
 - 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).

According to the 2007 Department of Justice news release,  one of the two US Attorneys involved in the 2007 BMS settlement was R Alexander Acosta of Florida.

2007 - Sanofi-Aventis Settled Charges of Overcharging Medicare for Anzemat

Per a 2007 post, Sanofi-Aventis settled allegations that it overcharged the US government for the drug Anzemet.  Of course, no individual who authorized, directed, enabled or implemented these alleged actions suffered any negative consequences.

As described by a Law360 post in 2007, he settlement also included yet another corporate integrity agreement.  This did not deter further misbehavior by Sanofi-Aventis.  It  settled charges of overcharging the US Medicaid system in 2009 for over $90 million  (see post here), and charges that it gave doctors kickbacks to induce them to prescribe the drug Hyalgan in 2012 (see post here).  In 2014, Sanofi's Genzyme subsidiary settled charges it promoted a surgical film product for unproven uses (see post here), and settled further charges from this case in 2015 (see post here).

Law360 also reported,

 U.S. Attorney for the Southern District of Florida R. Alexander Acosta said the lawsuit proved that corporations could not get away with misleading the government by exploiting a health care system based on honesty.

'Again, a corporation has been caught fraudulently inflating the cost of a drug used primarily to reduce the side effects of cancer treatments without regard to the increased costs borne by government health care programs or elderly and indigent patients,' Acosta said. 


President Trump promised time and again that he would stand up for the forgotten working people and families of the US, and would reduce the power of big corporate interests.  Now, his nominee to be Labor Secretary is an attorney who seemed unwilling to personally challenge top management of big drug and biotechnology companies when their companies misbehaved.  He did not hold management accountable even when their companies had previously and repeatedly misbehaved.  His failure to hold individuals accountable apparently failed to deter future bad behavior by the same companies.

There are many more examples on this blog of legal settlements, and even episodes involving bribery, fraud, kickbacks, and other crimes that demonstrate the continuing impunity of leaders of large health care organizations.  It is likely that such impunity has led to the general concerns that the system is "rigged" in favor of the wealthy, the well-connected, and the insiders.

And we have a President who has promised to act against the "rigged system," but seems to be bent on appointing wealthy, well-connected people to run his executive branch. Now he has just nominated someone who failed to hold wealthy, well-connected corporate executives accountable for their corporations bad behavior.  So, in any case, as we have said before...)

We once again see the perverse incentives at work that drive bad behavior by health care oragnizational leaders.  One can obviously become very rich by directing this bad behavior.  Up to now, the likelihood that one would eventually pay any penalty for doing so was tiny.  Now it is slightly higher.  Whether those up the ladder, who might have authorized the behavior, turned a blind eye to it, or avoided enquiring about anything that could be bad behavior, as long as the money came in, will suffer any negative consequences from these actions or inactions in the future is still unclear.

We will not make any progress reducing current health care dysfunction if we cannot have an honest conversation about what causes it and who profits from it.  True health care reform requires ending the anechoic effect, exposing the web of conflicts of interest that entangle health care, publicizing who benefits most from the current dysfunction, and how and why.  But it is painfully obvious that the people who have gotten so rich from the current status quo will use every tool at their disposal, paying for them with the money they have extracted from patients and taxpayers, to defend their position.  It will take grit, persistence, and courage to persevere in the cause of better health for patients and the public. 

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