Legal Settlements to Remind Us How Our Health Care System Became Rigged: by GSK, Novartis, CVS

Amidst the sound and fury of the US election season, almost under the radar sneak legal settlements demonstrating continuing bad behavior by big health care organizations, and the continuing lack of accountablity of these organizations' leaders.

We note three cases involving unethical practices leading to overuse of pharmaceuticals that appeared in the last two months, in chronological and alphabetical order.


GlaxoSmithKline Settles Charges of Bribing Chinese Doctors

A summary from Stat by Ed Silverman on September 30, 2016,

GlaxoSmithKline on Friday agreed to pay $20 million to settle charges of violating the Foreign Corrupt Practices Act for what authorities called a pay-to-prescribe scheme in China. In doing so, Glaxo becomes the latest global drug maker to face such accusations as part of a long-running probe by US authorities into companies that paid bribes overseas in order to boost sales of their medicines.

The settlement is an outgrowth of the bribery scandal that rocked Glaxo and resulted in a $490 million fine two years ago after a Chinese court found the company guilty of bribing doctors, hospital officials, and other non-governmental personnel. The former head of the Glaxo unit in China also pleaded guilty to bribery-related charges and was given a three-year suspended sentence.

As part of the scheme, Glaxo employees allegedly funneled kickbacks through trade groups and travel agencies that planned events. Between 2010 and June 2013, Glaxo spent nearly $225 million on planning and travel services. But after reviewing a sample of invoices, authorities found about 44 percent were inflated and approximately 12 percent were for events that did not occur, according to an SEC order.

In 2010, Glaxo hired a Chinese company to develop a project to provide clinics with tools to store and administer vaccines that required refrigeration. Instead, the project was used to give laptops and other electronic devices as gifts to clinics that were believed to have the potential to market still other Glaxo drugs. In all, the drug maker spent about $2.3 million doing this.

Articles in the Wall Street Journal and Reuters stated the bribes were explicitly meant to boost sales of drugs.  However, I am not able to find any information in the few media reports or the US Securities and Exchange Commission order about which products were so promoted.  It appears likely, however, that these alleged practices led to overuse of drugs that at best did patients no good and at worst caused direct harm. 

Although proceedings in China resulted in punishment of a GSK official there, the US proceedings did not subject any individual to negative consequences for enabling, authorizing, directing or implementing any bribes.

Note that our posts on previous misadventures by GSK can be found here.

Novartis Settles Charges of Illegally Promoting Skin Cream for Infants in the US

Again, as summarized by Ed Silverman in Stat on October 5, 2016,

Novartis has agreed to pay $35 million to settle charges of illegally promoting a prescription skin cream for use with infants and toddlers. The deal marks the second time in the past year the drug maker has struck a deal with US authorities to resolve allegations of improperly marketing its medicines.

The agreement, announced on Wednesday, stems from a whistleblower lawsuit filed by a former Novartis sales representative, who accused the company of deliberately trying to widen the market for Elidel by encouraging prescriptions for children younger than 24 months, even though the medicine was not approved for that patient population. At one point, regulators issued a warning about the risk of cancer in small children.

'We were instructed that Elidel was so safe it could be put on up to 80 percent of a baby’s body. And we were never told that it might cause cancer,' said Donald Galmines, 44, the former rep, in a statement. He added that he was trained to invite doctors and their families or staffs to dinners at expensive restaurants, even though during the course of the meal, Elidel might not even be brought up.

The illegal marketing occurred between 2002 and 2009,...

So this case involved allegations of deceptive marketing.  In particular, the deception was potentially dangerous to infant patients, since it appears that the drug promoted was unduly dangerous.

In this settlement, however, the company got to explicitly deny wrongdoing.

Novartis denied the allegations in the settlement agreement.

Novartis has had considerable recent legal trouble involving unethical behavior.

The settlement comes amid a difficult stretch for Novartis. The drug maker last year paid $390 million to settle charges of paying kickbacks to boost sales of two other drugs. And the company is facing a trial stemming from yet another whistleblower lawsuit filed by a different former sales rep, who similarly alleged Novartis illegally marketed medicines.

Those cases gained considerable attention because US Attorney Preet Bharara, who is based in New York, claimed Novartis is a repeat offender when he announced the government had joined the lawsuits in 2013. He was referring to a 2010 case in which the company paid $422.5 million for allegedly marketing six drugs off-label and paying kickbacks to health care professionals.

The United States is not the only venue where Novartis has encountered such charges. Last March, the drug maker agreed to pay $25 million to settle charges that it violated the Foreign Corrupt Practices Act by making illegal payments to health care providers in China. Employees gave money, gifts, vacations, and entertainment to health care professionals between 2009 and 2011, according to US authorities.

Furthermore, an even more extensive list of previous Novartis misadventures can be found in our post here.

Despite all that, however, the settlement did not subject any individual to negative consequences for enabling, authorizing, directing or implementing the allegedly illegal promotion.

Omnicare Settles Charges of Accepting Kickback to Help Illegally Promote Depakote

Finally, as yet again best summarized by Ed Silverman on StatNews on October 17, 2016,

Omnicare, which is the nation’s largest nursing home pharmacy, agreed on Monday to pay more than $28 million to resolve charges of seeking kickbacks from Abbott Laboratories in exchange for boosting prescriptions for a medicine that the drug maker had promoted illegally.

As part of the scheme, Omnicare disguised the kickbacks from Abbott as grants and educational funding, and took rebates from the drug maker based on the amount of Depakote that was prescribed for each nursing home resident. In addition, Abbott paid for Omnicare management meetings at a Florida resort and offered tickets to sporting events, according to the US Department of Justice.

The arrangement between Omnicare and Abbott began after the drug maker launched a new initiative in 1997 to boost prescriptions for the drug, which is approved for treating seizures, bipolar mania, and migraines, but not uncontrollable behavior due to dementia. The following year, Omnicare began soliciting kickbacks from Abbott and the scheme lasted about three years, according to court documents.

The settlement is the latest in a long-running probe by the feds into Omnicare, which is now owned by CVS, and the interplay between nursing home pharmacies and drug makers.

In 2012, Abbott reached a $1.5 billion global civil and criminal settlement that resolved, among other things, alleged kickbacks paid to nursing home pharmacies. At the time of the agreement, the feds noted that Abbott promoted Depakote for controlling behavioral disturbances in dementia patients, even though the US Food and Drug Administration never approved the pill for this particular use.

'Kickbacks to entities making drug recommendations compromise their independence and undermine their role in protecting nursing home residents from the use of unnecessary drugs,' said Benjamin Mizer, the principal deputy assistant attorney general in the Justice Department’s Civil Division,...

So it appears that at best the kickbacks led to prescription of drugs that did patients little good, and may have caused adverse effects.  

An article in the Cincinnati Business Courier noted that CVS, of which Omnicare is now a subsidiary, avoided admitting any responsibility for the alleged acceptance of kickbacks,

CVS 'agreed to settle this matter to avoid the expense and uncertainty of protracted litigation,' spokesman Mike DeAngelis said of the suit against Omnicare. 'The activities, which were alleged to have violated anti-kickback laws, all occurred prior to CVS Health’s acquisition of Omnicare. These matters involved Omnicare only, and no allegations were made against any of CVS Health’s other businesses, including CVS Pharmacy and CVS Caremark. CVS Health is committed to the highest standards of ethics and business practices, and there was no admission of wrongdoing.'

An Associated Press article noted Omnicare's previous track record,

Omnicare has spent hundreds of millions of dollars resolving kickback litigation in recent years. In 2014, it agreed to pay more than $124 million to settle lawsuits alleging it gave kickbacks to some facilities so they would keep the company as their drug provider for elderly Medicare and Medicaid recipients.

In 2009, Omnicare said it would pay $98 million to settle allegations that it solicited or paid a variety of kickbacks. That included an accusation that it received kickbacks from Johnson & Johnson for recommending that doctors prescribe to nursing home patients the antipsychotic Risperdal, which can hasten death in elderly people with dementia.

Furthermore, an extensive list of parent company CVS' misadventures can be found in this post.


Despite all that, again, the settlement did not subject any individual to negative consequences for enabling, authorizing, directing or implementing the alleged acceptance of kickbacks.

Summary

Three settlements in two months by three major health care corporations involved allegations of unethical behaviors that were meant to increase prescribing of various pharmaceuticals, whether or not patients needed them, or were more likely to be harmed by them.  Despite the unsavory nature of the behaviors, and the likelihood of patient harms, the companies involved had to pay fines that were tiny relative to their multi-billion dollar revenues.  The companies did not have to admit responsibility, and company managers and leaders did not suffer any negative consequences for enabling, authorizing, directing or implementing the bad behavior.  Thus they exhibited impunity.

These cases are just the latest in a long march of legal settlements to remind us of the continuing bad behavior of large health care organizations, and the continuing impunity of their managers and leaders.

This adds to the evidence suggesting that US health care, at least, is rigged to benefit its top insiders and cronies, and as such, is part of a larger rigged system.  We have previously discussed how market fundamentalism (or neoliberalism) led to deregulation, which enabled deception, fraud, bribery, and intimidation to become standard business practices, and allowed increasing concentration of power by large corporations. Managerialism allowed the top leaders of these corporations and their insider cronies to amass increasing power and money. Everyone else, other employees, stockholders of public corporations, customers, vendors and suppliers, and the public at large lost out. In health care, these changes led to an increasingly costly system which produced increasingly bad results for patients and the public.

We have called for years for what we sometimes term "true health care reform" to derig the system.  Little has changed, while perceptions that the system is rigged have become more common.

Unfortunately, perceptions of a rigged system may not always inspire honest reform. Instead, they can enable the rise of demagogues and would be dictators who promise only they can solve the problem. This appears to have happened in the US. Now honest people who want to unrig the system must first prevent an even worse result, authoritarianism or frank dictatorship.  Never has Benjamin Franklin's warning that we only have "a republic, if you can keep it" been more salient.

However, should we be successful in fending off despotism, the original problems that led the system to be rigged will remain, and new men on white horses may appear, unless we truly reform the system. 

So let us not forget how we got here in the first place.  And should we successfully preserve our republic, let us remember the need for wholesale, real health care reform that would make health care leaders accountable for what their organizations do, particularly when these organizations misbehave.

There They Go Again - Omnicare to Settle for $120 Million

The march of legal settlements seems to be on its way again.


The Latest Settlement

The details, per Reuters,

Omnicare, Inc, a leading U.S. provider of pharmacy services to the elderly, has agreed to pay the U.S. government $120 million to settle allegations the company gave nursing homes steep discounts on prescription drugs in exchange for patient referrals.

Cincinnati-based Omnicare announced the settlement on Wednesday in a filing with the U.S. Securities and Exchange Commission, but denied any wrongdoing. The lawsuit, filed in 2010 by former Omnicare employee Donald Gale, had been scheduled to go to trial on October 28.

Gale accused the company of engaging in a kickback scheme called 'swapping' in which Omnicare allegedly gave nursing homes heavily discounted prescription drugs for inpatients covered by Medicare Part A. That federal benefit program pays skilled nursing facilities a fixed fee per patient, per day, for the first 100 days of a patient's stay, according to court filings.

In exchange, the nursing homes allegedly referred their other patients, many covered by other federal benefit programs, allowing Omnicare to bill the full price of their prescription drugs and pharmacy services, the lawsuit said.

As is usually the case, 

Omnicare's vice president of investor relations, Patrick Lee, said in an emailed statement that the company did not admit liability in settling the lawsuit.

'The Company agreed to settle the matter in order to avoid continued litigation and to focus on its mission of helping to ensure the health of seniors and other patient populations in a cost-effective manner,' he said.

He did not comment on the discrepancy between the alleged kickback scheme apparently meant to increase company revenue and that bit about ensuring health in "a cost-effective manner."

Will There be Still Others?

In addition, the Cincinnati Business Courier quoted another Omnicare executive,

'This settlement is not an admission of liability, and Omnicare continues to deny that there was any wrongdoing,' Robert Kraft, chief financial officer for Omnicare, said Wednesday in a conference call with market analysts regarding the company’s third-quarter earnings. 'When we agree to settle these types of matters, we have and will continue to make decisions in the best interest of our shareholders. …'

'We operate in a highly regulated industry, and we believe additional matters will likely arise against the company in the future,' Kraft said. 'We believe the matters of which we are now aware, including the aforementioned settlement, are manageable given the company's financial position and cash-flow characteristics.'

Was that an admission that the company often violates regulations?  It is hard to tell.  However, it is clear that this is not the first settlement of allegations of bad behavior that the company has made.

The Previous Settlements

The Cincinnati Business Courier article also stated,
 

I reported in August on the settlement of a lawsuit filed on behalf of Omnicare, which had alleged that a former president and CEO as well as some other former officers or directors of the company had violated federal laws related to kickbacks and false claims.

That settlement was for a mere $16.7 million.

In addition, as we discussed in 2010, in 2009, we discussed a $98 million settlement made by Omnicare, US based corporation that manages pharmacy-benefits, of allegations that it received kickbacks from generic drug manufacturers for buying and recommending their drugs.  Omnicare had previously submitted to a corporate integrity agreement in 2006, and paid $102 million to settle allegations it defrauded Medicaid.

So the count so far is four settlements for a total of approximately $337 million, and one corporate integrity agreement.

Summary

So Omnicare is yet another of the many large health care organizations which have been subject to various legal actions suggesting diverse kinds of bad behavior.  Omnicare, like many of these, has paid penalty upon penalty, yet each settlement seems to be made in a vacuum without reference to prior events.  Furthermore,  almost no settlement, and no settlement made by Omnicare, ever either imposed a large enough penalty on the company to deter further problems, or imposed any - I repeat any - negative consequences on anyone at the company who authorized, directed, or implemented the bad behavior.  So, as obliquely stated by the Omnicare CFO in this case, expect further "matters" to be addressed in the future.

So as we said on the subject of Omnicare in 2010,

 the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior by health care organizations. Even large fines can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. 

 By Roy M. Poses on Health Care Renewal

2 Legal Settlements + 1 Corporate Integrity Agreement = $130 Million Retirement Package?

Omnicare's Trail of Legal Settlements

Last year, we discussed a $98 million settlement made by Omnicare, US based corporation that manages pharmacy-benefits, of allegations that it received kickbacks from generic drug manufacturers for buying and recommending their drugs.  Omnicare had previously submitted to a corporate integrity agreement in 2006, and paid $102 million to settle allegations it defrauded Medicaid.  At the time, we noted that this was yet another of the many cases in which the organization alleged to be involved in wrong-doing paid a fine, but no one who authorized, directed, or implemented the bad behavior was subject to any negative consequences.

So last week, Cincinnati.com ran a story on the retirement of the CEO who presided over Omnicare during the time of the alleged misconduct. 

Before reading further, would anyone care to guess whether the company's previous bad behavior would negatively impact his fortunes?

Contrasted with the Size of the CEO's Retirement Package

No exactamente:

As Omnicare Inc.'s new leadership begins to reshape its corporate culture - one that had included generous pay for senior executives - the Fortune 500 firm's exiting CEO stands to collect one of the largest payouts landed by a U.S. corporate executive in recent history.

Former president and CEO Joel Gemunder, who surprised analysts and investors when he retired on July 31, is in line to receive more than $130 million in severance, pension and departing payouts.

At 71, Gemunder had led Omnicare Inc., the nation's largest provider of pharmaceuticals for the elderly, for nearly 30 years.

On his retirement, Gemunder was up for a lump sum pension payment of more than $91 million. That's in addition to a monthly pension payment of $1,719 and roughly $5.38 million from a deferred compensation plan.

Gemunder also will receive $16.2 million in cash severance payable through next July. His 2.7 million in stock options and more than 705,100 shares of restricted common stock also became fully vested on his retirement. Collectively, the shares were worth more than $21.7 million, according to the company's most recent proxy.

To recapitulate so far: the company had to make two settlements of charges of kickbacks and fraud, totalling about $200 million, and accept a corporate integrity agreement. The CEO on whose watch this occurred left the company with a $130 million retirement package.

Can we spell "impunity?"

Protest from the Main-Stream Media

But this case was different from many of the legal settlements that we have chronicled in the past. In those previous cases, we noted how corporate bad behavior cost the organization as a whole, and hence collectively cost the stock-owners, the employees, and the customers/ clients/ patients involved, but not the leaders who authorized and directed the bad behavior, nor the particular people who implemented it. Hardly anyone else, however, took notice.

However, after Mr Gemunder's obese retirement package was made public, there was actually outrage in the opinion section of the Wall Street Journal:

Health-care costs, the national debt and taxes are all going up, and Joel Gemunder is one reason why.

Until Mr. Gemunder's abrupt retirement was announced on Monday, he was CEO of Covington, Ky.-based Omnicare, the nation's largest dispenser of pharmaceuticals to nursing homes.

Omnicare gets most of its revenue from Medicare, Medicaid and other companies sucking on these same government feeding tubes. Omnicare also lives up to its name, serving 1.4 million beds in 47 states.

Mr. Gemunder, 71, had been in charge since 1981, but now he's split with one of the largest lump-sum pension payouts in history, The Wall Street Journal reported. He's getting a $91 million pension payout, plus severance, vesting of restricted stock and other goodies that bring his final payday to at least $130 million. And that's on top of the $14 million he bagged last year.

As CEO, Mr. Gemunder touted 'cost reduction initiatives,' including salary cuts for employees, but these initiatives didn't apply to himself.

And what did the shareholders get for their money? Omnicare shares took a tumble last week after the company reported a shocking drop in the number of prescriptions it fills.

Omnicare stock peaked in March 2006 at more than $61, but now trades under $23. That's a drop of more than 60% -- versus a roughly 11% decline in the S&P 500 during the same period.

And what did the taxpayers and customers get? Omnicare has long been plagued by huge litigation costs amid allegations of kickback and billing schemes.

It's nice to have company. And it's very nice that the issue of the impunity enjoyed by leaders of top health care organizations has made it into the main-stream media. Now it is time to do something about it.

Summary

Let me say it again:  The Omnicare settlement coupled with its CEO's outlandish retirement package fit right into the parade of legal settlements we have discussed. As we have said again and again, the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior by health care organizations. Even large fines can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Postscript: A Conflicted Board Member?

The Cincinati.com story described the bizarre process used to set the size of the Omnicare CEO's retirement package.

Just ahead of Gemunder on the big pension list is Thomas M. Ryan, president and CEO of CVS Caremark Corp. with $94.4 million at the end of 2009.

CVS posts annual sales in excess of $98 billion compared to Omnicare's $6.17 billion. Annual profit at CVS is $3.6 billion compared to $ 211 million at Omnicare.

Despite the sizable differences, CVS is among 40 companies whose CEOs pay is considered when Omnicare's executive compensation committee determines pay for its top executives, according to the firm's April proxy. The company's compensation committee, which declined comment for this story, is made up of three long-time directors Andrea R. Lindell, board chair John T. Crotty and Steven J. Heyer.

Other companies considered include New York-based Bristol-Myers Squibb Co. with $17.8 billion in sales; Dublin, Ohio-based Cardinal Health, Inc. with $99 billion in sales and New Jersey-based Medco Health Solutions, Inc. with $72 billion in sales.

'These companies are enormously bigger than you would expect for a comparative group' for Omnicare, Crystal said. 'It's the equivalent of the local ball team that's not in the major leagues using their comparative group as the New York Yankees.'

Note that one member of the compensation committee that used this absurd standard to set the CEO's compensation was one Andrea R Lindell. The above story did not identify her further, but as we noted last year, she "is also Dean of the College of Nursing at the University of Cincinnati. One would think that someone who thus boasts 'the success of our students, faculty, staff and alumni who work together to promote excellence in education, research, service and practice' needs to keep a closer eye on the ethical aspects of her company's management. But as the New York Times just noted on the front-page of last Sunday's business section, as another blow to the anechoic effect, "Academics may be trained to ask tough questions in their own fields, but when confronted with tricky business issues far above their level of expertise they 'often become as meek as church mice'...." and hence are just the sort of directors that self-interested CEOs intent on lining their own pockets love. 

So this case becomes another reason to take seriously the increasingly frequent conflicts of interest generated when top leaders of non-profit health care organizations sit on boards of for-profit health care corporations.  These conflicts may not only distract the leaders from the mission of the non-profit organizations, but also distract them from their fiduciary duties to the stock-holders of the for-profit corporations. 

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.

Summary

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.

Omnicare, IVAX Settle

Settlements and kickbacks and corporate integrity agreements, oh my (to the tune of "lions and tigers and bears, oh my")

To quote the BusinessWeek version of the story:

A $112 million settlement involving alleged drug kickbacks that the Justice Dept. announced with the nation's largest nursing home pharmacy and a generic drug manufacturer on Nov. 3 is part of a wide-ranging investigation of suspected Medicaid fraud by the pharmaceutical industry.

Under Tuesday's settlement, Omnicare will pay $98 million plus interest to the federal government and a number of state Medicaid programs to settle allegations that it participated in kickback schemes with IVAX, J&J [Johnson & Johnson], and two nursing home chains. IVAX, a subsidiary of Israel's Teva Pharmaceutical Industries (TEVA), agreed to pay $14 million plus interest.

Omnicare and IVAX entered 'corporate integrity agreements' to establish new training and policies to prevent future problems. Neither company admitted any wrongdoing.

Here are some details of the alleged wrong-doing:

Omnicare is a publicly traded pharmacy benefit manager for long-term care facilities that operates in 47 states, the District of Columbia, and Canada. It had revenues of $6.3 billion in 2008.

According to the settlement, Omnicare allegedly received $8 million in payments from IVAX in 2000-04 to buy $50 million in generic drugs and recommend that physicians prescribe them to their nursing home patients. Omnicare entered the contract even though its outside counsel repeatedly warned it might violate the federal anti-kickback law, the government alleged in its complaint, filed in March. Omnicare also took payments from New Brunswick (N.J.)-based J&J from 1999 to 2004 to aggressively persuade doctors to prescribe Risperdal, an anti-psychotic drug, and discourage use of alternative medications, according to the settlement.

In addition, Omnicare allegedly paid $50 million to nursing home chains Mariner Health Care and SavaSeniorCare in 2004 to keep referring their Medicaid and Medicare patients to Omnicare for pharmacy services.

It is noteworthy that these activities went on despite repeated advice of at least one attorney:

According to the government's complaint, Omnicare again ignored its outside counsel's advice that the payment was illegal.

The activities also went on despite Omnicare's participation in a previous corporate integrity agreement.

This isn't the first time Omnicare has had to settle civil fraud complaints filed by the government. In 2006, Omnicare agreed to pay $102 million to settle Medicaid fraud cases in 43 states, without admitting wrongdoing, including a $52.5 million settlement with Michigan. One complaint accused Omnicare of switching two drugs from tablet to capsule form to boost Medicaid payments. Omnicare had to enter a five-year corporate integrity agreement.

As I have written again and again regarding many other cases that resulted in legal settlements or guilty pleas, 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.

For once, the coverage of this case included some opinions similar to mine:

The Office of Inspector General of the Health & Human Services Dept. has the authority to bar health-care companies from participating in the Medicaid, Medicare, and other federal health programs as a penalty for violating anti-fraud laws. That's a severe sanction given the huge size of those programs. The settlements with Omnicare and IVAX left open the possibility of exclusion.

Some experts say Omnicare should be barred as a repeat offender, to send a strong message to other pharmaceutical industry players that fraud will no longer be tolerated. 'If the government were really serious, they'd give Omnicare the death sentence,' said Erik Gordon, a business professor at the University of Michigan who follows the pharmaceutical industry. 'Then all the other players would say this isn't just the cost of doing business, this is a bet-the-company thing.'

West declined to comment on whether the Justice Dept. will recommended the exclusion of the two companies, saying only that his office works closely with the OIG's office on appropriate penalties.

[Patrick] Burns, with Taxpayers Against Fraud, said the government has been hesitant to exclude health-care companies for fraud, fearing it will be seen as overzealous. But he believes that's the wrong attitude. 'Doing business with the U.S. government is a privilege, not a right,' he said. 'I think Omnicare has abused the privilege.'

Finally, note that the description of this case suggested that the kickbacks had effects on physicians' prescribing and hence the use of specific drugs. The Justice Department's filing alleged that in return for the payment from IVAX, Omnicare tried to get physicians to prescribe that company's products, and that in return for the payment from J&J, Omnicare pushed them to prescribe the atypical anti-psychotic Risperdal. Thus the activities that went on this case could have lead to the use of inappropriate, useless or even harmful drugs by certain patients.

I submit that would-be health care reformers who want to improve care, reduce costs and improve access should advocate for real negative consequences for people who implement, direct or approve the various versions of fraud, kickbacks, and miscellaneous corruption and malfeasance we have discussed on Health Care Renewal.

By the way, it appears one of the members of Omnicare's Board of Directors is also a leader in academic health care.  She is Andrea R. Lindell, DNSc, RN, who is also Dean of the College of Nursing at the University of Cincinnati.  One would think that someone who thus boasts "the success of our students, faculty, staff and alumni who work together to promote excellence in education, research, service and practice" needs to keep a closer eye on the ethical aspects of her company's management.