Their Cheating Hearts - Latest Allergan Settlement Is a Reminder of Merger Participants' Sketchy Pasts

A Huge, but Sketchy Merger

The announced merger and "tax inversion" of Pfizer and Allergan would be one of the largest corporate marriages in US history.  It has drawn more than its share of criticism.  For example, per the Los Angeles Times, former US Senator and Secretary of State, and current presidential candidate Hilary Clinton said "this proposed merger, and so-called inversions by other companies, will leave U.S. taxpayers holding the bag."

By creating the world's largest drug company, it could certainly further consolidate the US and global pharmaceutical market and raise already high drug prices.  While Pfizer in particular has benefited from US funding of biomedical research, including training of researchers and development of research infrastructure, (see this New Yorker article by John Cassidy) making the company pseudo-Irish may be "unpatriotic," as President Obama said with regard to tax inversions in general (per the Washington Post).

The nature of the merger, creating a company that would be Irish for tax purposes, but effectively run out of the US seems at least intellectually dishonest.  (Note that the CEO of its supposedly Irish component, Allergan, works out of Parsippany, NJ (per Bloomberg, here.)

The main beneficiaries of the merger appear not to be patients, or health care providers, or US taxpayers, but top company executives.  As John Cassidy wrote,

It's hard to avoid seeing the merger as a cynical move designed to boost Pfizer's stock price and generate a windfall for the company's senior managers....

But the latest settlement by Allergan, which I was just about to write about before the merger was officially announced, is a reminder that the companies are a good fit in one sense.  Both have long histories of shady behavior as marked by many legal settlements, and in some cases corporate guilty pleas and convictions.

The Latest Allergan Settlement

The beginnings of the latest Allergan settlement were noted back in July, 2015, but first not even connected to Allergan.  According to the US Federal Bureau of Investigation (FBI),

A former district manager of Warner Chilcott Sales U.S., LLC (Warner Chilcott), a pharmaceutical company based in Rockaway, N.J., pleaded guilty today in U.S. District Court in Boston in connection with a scheme to deceive insurance companies and Medicare so that they would cover the costs of Warner Chilcott’s osteoporosis medications, Actonel and Atelvia.

The idea was to promote two of Warner-Chilcott's products, osteoporosis medicines Actonel and Atelvia, by evading insurance company requirements for physicians to justify their use, given questions about their benefits versus harms, and availability of generic treatments for osteoporosis.

Beginning in 2010 and throughout 2011, Podolsky directed the sales representatives in his district to fill out prior authorizations for physicians who prescribed Actonel and Atelvia using false clinical justifications as to why the patient needed Warner Chilcott drugs and submit them to health insurance companies. In some instances, Podolsky’s sales representatives reviewed patients’ medical charts to get the information necessary to fill out the prior authorizations, in violation of the Health Insurance Portability and Accountability Act (HIPAA). Podolsky also directed sales representatives to utilize a website to submit prior authorizations to insurance companies to disguise their identity as pharmaceutical sales representatives. Podolsky and the sales representatives that he supervised knew that they should not be involved in the preparation or submission of prior authorizations.

But Podolsky was not a lone wolf. At the end of October, 2015, the Boston Globe reported more fully on the scheme, and the large settlement made by Allergan, of which Warner-Chilcott was merely a subsidiary. US Department of Justice allegations involved top leaders of Allergan.

The drug reps bought the doctors lunches, dinners, drinks. They paid for speeches the doctors never made. And in exchange, the doctors prescribed drugs that boosted their sales.

Warner Chilcott, a unit of pharmaceutical giant Allergan PLC, will pay $125 million to settle these and other charges in an agreement announced Thursday by US Attorney Carmen M. Ortiz in Boston.

Ortiz said the company ran an elaborate scheme to prod doctors — including in Massachusetts — to prescribe its drugs in exchange for kickbacks.

Warner Chilcott’s former president, W. Carl Reichel, was charged in federal court for allegedly conspiring to pay kickbacks to physicians, and a Massachusetts physician, Dr. Rita Luthra of Longmeadow, was indicted for allegedly accepting payments.

Warner Chilcott illegally promoted at least seven drugs, including the osteoporosis treatments Actonel and Atelvia.

Court documents show that Warner Chilcott representatives promoted their drugs by wining and dining physicians and giving them money and gifts for participating in medical education events. These events often were held at 'upscale restaurants' and contained 'minimal or no educational component.'

The company made fraudulent requests to the federal government and to insurance companies to boost sales of their drugs, the US attorney’s office said, and employees also made unsubstantiated claims about the drugs’ benefits.

Note that the charges were of actions that went well beyond financial fraud. They included dishonest marketing and kickbacks to physicians. The alleged actions could have harmed patients, by inducing physicians to prescribe unneeded drugs with known adverse effects.

Note further that unlike many other legal settlements about which we have written in the past, this one did not allow the company to escape by just paying some money and then claim that it did not confirm or deny the charges.  In this case, the company pleaded guilty.

Warner Chilcott has agreed to plead guilty to health care fraud. It will pay a $23 million criminal fine and $102 million to resolve false claims with state and federal governments. The case was brought by two whistle-blowers.

And as noted above, unlike many other legal settlements which did not entail any negative consequences for those who authorized, directed, or implemented the bad behavior, in this case a top executive (although not the highest executive in the overall corporate structure, and not a current executve) was charged with a crime and apparently actually physically arrested (although he has not been convicted of it, yet.)

Meanwhile, Reichel, the former Warner Chilcott president, was arrested in Boston on Thursday.

Prosecutors say in their indictment that Reichel designed a sales and marketing strategy to entice doctors to prescribe his company’s drugs with free dinners and bogus speaking fees. The physicians paid to give speeches often did not speak at all, and instead enjoyed expensive dinners with sales representatives, the indictment says.

Reichel left Warner Chilcott in 2011, according to a news release.

Furthermore, per a Forbes column, Mr Reichel was allegedly involved up to his proverbial eyeballs.

The Reichel indictment says that, while president of Warner Chilcott’s pharmaceuticals divisions from 2009 to 2011, he directed company sales staff to push physicians’ to prescribe its drugs by throwing money at doctors’ in various ways, such as expensive dinners for doctors and their spouses and 'speaker' fees to attend informal dinners without educational content.

Reichel also allegedly provided sales reps with a separate expense account to buy food and drinks for employees of physicians who prepared prior authorization forms certain insurers required to pay for patients’ drugs.

Reichel hired 'Type A crazy' sales representatives, as he called them, who were provided with 'limited training concerning compliance with health care laws and otherwise de-emphasized the importance of compliance to the sales force,' the indictment says.

Of course, the top executive in the overall corporate structure said the usual, as likely written by his public relations spin doctors,

Brent Saunders, the chief executive of Dublin-based Allergan, said in a statement: 'We take seriously our responsibility and commitment to abide by all US and international laws that govern the sales, marketing, education, and promotion of our products, and recognize the tremendous impact that this responsibility has on the customers and patients we serve.'

Finally, two other middle managers involved in the case entered guilty pleas, according to the Department of Justice.

Thus this settlement may be regarded as much tougher than many previous legal settlements involving big health care organizations.

However, its bearing on the huge Prizer-Allergan merger has apparently not so far been publicly discussed.

Allergan's Previous Track Record

It is not that the new Allergan settlement is a one-off.   It needs to be viewed in the context of Allergan's previous history of misbehavior.

That history may be a bit obscure, especially because of Allergan's complex corporate structure.  However, a Wall Street Journal article on the merger provided a bit of Allergan's corporate back story,

Allergan itself is the result of a number of mergers in quick succession. It started off as a generic-drug company called Watson Pharmaceuticals Inc. In 2012, Watson acquired Swiss rival Actavis Group and adopted that name. It also absorbed Warner Chilcott PLC and Forest Laboratories Inc. in multibillion-dollar deals.

Mr. Saunders was CEO of Forest Labs, and became CEO of Actavis after that deal. Shortly after, Allergan’s predecessor was put into play when Valeant Pharmaceuticals International Inc. made an unsolicited offer to buy the California company.

Actavis then stepped in as a white knight and bought Allergan, taking the company’s name.

Allergan and its predecessor companies have an interesting record of misbehavior.  Just perusing Health Care Renewal one can find:

-  Actavis was convicted and fined more than $170 million in 2011 by a Texas jury of misrepresenting prices to the state's Medicaid program (see this post.)

-  In 2010, in case which included allegations that it paid kickbacks to physicians to promote its product, Allergan pleaded guilty to to federal charges of misbranding of Botox and agreed to penalties of about $600 million (see this post).

-  In 2010, Forest Laboratories settled allegations that it deceptively promoted drugs, particularly that it promoted anti-depressant Celexa for children by partially by covering up negative trial results about it.  This likely hurt patients, since anti-depressants like Celexa have been shown to have severe adverse effects, including suicidal ideation, for children.  The company also was charged with giving kickbacks to physicians to promote drugs.  The company pleaded guilty to a felony charge of obstructing justice, and two misdemeanors, including misbranding Celexa and illegal distribution of Synthroid.  The company paid over $300 million in penalties and submitted to a corporate integrity agreement.  (See this post)  The Department of Justice threatened to disbar the CEO of Forest Laboratories, but then inexplicably backed off (see this post). 

So the latest settlement by Allergan subsidiary Warner Chilcott is the fourth major settlement since 2010.  The company and its predecessors have pleaded guilty to crimes, at least once to a felony, and settled cases involving allegations of kickbacks and deceptive marketing practices. 

Pfizer's Previous Track Record

And things really get interesting when one considers Pfizer's track record, which seems much sorrier than Allergan's.  Our latest post, about Pfizer misbehavior was only one month ago (October, 2015).  A  UK judge found that the company threatened health care professionals for using a generic competitor.

Many posts on Pfizer can be found here.   The latest update of Pfizer's troubles since 2000 follows.

In the beginning of the 21st century, according to the Philadelphia Inquirer, Pfizer made three major settlements,
- In 2002, Pfizer and subsidiaries Warner-Lambert and Parke-Davis agreed to pay $49 million to settle allegations that the company fraudulently avoided paying fully rebates owed to the state and federal governments under the national Medicaid Rebate program for the cholesterol-lowering drug Lipitor.
- In 2004, Pfizer agreed to pay $430 million to settle DOJ claims involving the off-label promotion of the epilepsy drug Neurontin by subsidiary Warner-Lambert. The promotions included flying doctors to lavish resorts and paying them hefty speakers' fees to tout the drug. The company said the activity took place years before it bought Warner-Lambert in 2000.
- In 2007, Pfizer agreed to pay $34.7 million in fines to settle Department of Justice allegations that it improperly promoted the human growth hormone product Genotropin. The drugmaker's Pharmacia & Upjohn Co. subsidiary pleaded guilty to offering a kickback to a pharmacy-benefits manager to sell more of the drug.

Thereafter,
- Pfizer paid a $2.3 billion settlement in 2009 of civil and criminal allegations and a Pfizer subsidiary entered a guilty plea to charges it violated federal law regarding its marketing of Bextra (see post here).
- Pfizer was involved in two other major cases from then to early 2010, including one in which a jury found the company guilty of violating the RICO (racketeer-influenced corrupt organization) statute (see post here).
- The company was listed as one of the pharmaceutical "big four" companies in terms of defrauding the government (see post here).
- Pfizer's Pharmacia subsidiary settled allegations that it inflated drugs costs paid by New York in early 2011 (see post here).
- In March, 2011, a settlement was announced in a long-running class action case which involved allegations that another Pfizer subsidiary had exposed many people to asbestos (see this story in Bloomberg).
- In October, 2011, Pfizer settled allegations that it illegally marketed bladder control drug Detrol (see this post).
- In August, 2012, Pfizer settled allegations that its subsidiaries bribed foreign (that is, with respect to the US) government officials, including government-employed doctors (see this post).
- In December, 2012, Pfizer settled federal charges that its Wyeth subsidiary deceptively marketed the proton pump inhibitor drug Protonix, using systematic efforts to deceive approved by top management, and settled charges by multiple states' Attorneys' General that it deceptively marketed Zyvox and Lyrica (see this post).
- In January, 2013, Pfizer settled Texas charges that it had misreported information to and over-billed Medicaid (see this post).
- In July, 2013, Pfizer settled charges of illegal marketing of Rapamune (see this post.)
- In April, 2014, Pfizer settled allegations of anti-trust law violations for delaying generic versions of Neurontin( see this post).
- In June, 2014, Pfizer settled another lawsuit alleging illegal marketing of Neurontin (see this post).
- In 2015, a settlement by Pfizer of a shareholders' lawsuit stemming from charges of illegal marketing was announced (see this post).

Summary

So the proposed merger of Pfizer and Allergan would truly create a behemouth of bad behavior.  The combined company would have a staggering record of legal settlements, guilty pleas and convictions involving deceptive marketing, fraud, kickbacks, bribes and anti-trust violations, and even an obstruction of justice plea and a RICO conviction.  Yet the managers in charge of the two companies when the bad behavior occurred never had to suffer any negative consequences (although in one current case there is the possibility one executive might be convicted).  Many of these managers have become amazingly rich during the course of their leadership.  Is there any reason to think, absent any unexpected increase in the courage and resolve of government law enforcement, or any unexpected public protest, that the new company will not continue to misbehave as long as its executives are making money from the process?

The Pfizer Allergan merger is the true poster child for the amorality, and consequent dysfunction and decline of modern US and now global health care. As long as top managers of big health care organizations can act with impunity, can avoid all responsibility for their organizations' bad behaviors, and can personally profit wildly from their companies actions, the health care death spiral will continue.  Will we continue to cry out in the wilderness, or will anyone else see the writing on the wall?

A musical moment to partially alleviate the gloom. "Your Cheatin Heart" sung by Hank Williams Jr.



 

The Pervasiveness of Health Care Corruption as Shown by Another Roundup of Legal Settlements

Legal settlements are one way to document unethical and even corrupt behavior by large health care organizations, even if they may not deter bad behavior in the future.  It is time for another roundup of settlements by large pharmaceutical and device companies, presented in alphabetical order

Abbott Laboratories

This one goes back to late December, 2013.  As described in the Chattanoogan (from Tennessee):

Abbott Laboratories, a global healthcare company, has agreed to pay $5.475 million to settle alleged violations of the False Claims Act, and other federal laws and regulations in connection with the operation of its medical device business which manufactures, markets and supplies carotid, biliary, and peripheral vascular products.

The US Justice Department accused Abbott of kickbacks to physicians,

 As alleged in the settlement agreement, between 2005 and 2010, through its employees and a third party continuing medical education providers, Abbott offered physicians paid teaching and training assignments, consulting arrangements, speaking engagements, and/or sponsorship grants for physician conferences, for the purpose of inducing physicians to arrange for or recommend that the hospitals with which they were affiliated purchase or order Abbott’s carotid, biliary and peripheral vascular products.

Note in particular that the kickbacks were disguised as payments for consulting or speaking. 

As is usual in such cases, no individual seems to have paid any penalty or been subject to any punishment.  Because this was a legal settlement, the company did not admit wrongdoing.

Abbott's previous issues are discussed here, including a $1.6 billion settlement in 2012. 

Baxter International

This was reported in April, 2014 by Modern Healthcare,

 Baxter International agreed to pay $64 million to settle a class-action lawsuit that alleged the Deerfield, Ill.-based company and some of its competitors colluded to raise prices of plasma-based therapies.

Unlike the other cases above and below, this seemed to be a purely financial misadventure, although one that clearly increased health care costs,

Hospitals and drug distributors, saying they bought the plasma products at inflated prices, sued in 2009 Baxter; Victoria, Australia-based CSL; and the Plasma Protein Therapeutics Association, an Annapolis, Md.-based trade group.

Once more, the company admitted no wrongdoing, and no individuals seemed to be subject to any negative consequences.  

Baxter International's previous misadventures are here, including the striking case of its marketing of contaminated and sometimes deadly heparin made from Chinese pigs. 

Endo Health Solutions

This one is from February, 2014, as reported by Bloomberg

Endo Health Solutions entered a deferred-prosecution agreement and will pay $193 million to settle whistle-blower claims that it marketed the shingles drug Lidoderm for unapproved purposes, the U.S. said.
Endo will pay $20.8 million in forfeitures and $171.9 million in civil false claims settlements with the states and the U.S. government, the Justice Department said today in a statement. 

This one was all about marketing for uses not approved by the US Food an Drug Administration,

Between 2002 and 2006, Endo sales managers instructed some representatives on how to expand 'sales conversations' with doctors beyond the treatment of shingles-related pain, the U.S. said. Under the deferred-prosecution agreement, Endo admitted that it intended Lidoderm to be used for uses not approved by the U.S. Food and Drug Administration, the Justice Department said. 

Note that this case involves false claims, that is, fraud, because it is illegal to bill government programs for unapproved uses.

Again, no individual suffered any consequences, and the company offered the usual kind of statement that admitted neither responsibility nor guilt,

'We are pleased to resolve this matter and are confident that we have robust programs in place to assist us in satisfying our legal and regulatory agreements,' Endo Chief Executive Officer Rajiv De Silva said in a statement.  

One wonders, as usual, why a company would pay so much merely to avoid the legal expenses of a trial, unless of course the lawyers suspected the trail would not go well?

Hospira

This one was about hiding quality problems due to cost-cutting from investors, as reported by Reuters in March, 2014.  

Hospira Inc has agreed to pay $60 million to resolve a class action lawsuit accusing the drug maker of misleading investors about quality control problems that undermined an initiative to improve the company's margins and operations.

The details included,

As Hospira was promising to address issues raised by the U.S. Food and Drug Administration following inspections, the plaintiffs said the company was 'making the problems worse by gutting quality control efforts through cost cutting aimed at boosting short-term profitability.'

The lawsuit said those cost-cutting moves stemmed from a March 2009 initiative called 'Project Fuel' intended to increase shareholder value by eliminating underperforming and duplicative units and reducing its global workforce.

Plaintiffs contended the cuts in the budget and workforce hurt Hospira's quality control efforts, particularly at Rocky Mount, the company's largest facility.

An FDA inspection in January 2010 of the Rocky Mount facility found a number of problems with the company's quality control and drug validation processes, the lawsuit said, and the agency issued a warning letter that April.

Note that this involved quality control problems presumably in drug or device production, possibly leading to safety risks for patients.  Yet it was investors who brought the lawsuit.

Note also that this seemed to be a clear case in which cost-cutting measures meant to improve short-term corporate revenue lead to problems that could have caused such risks.  

One interesting feature of this case was that company executives were named as defendant (presumably again because it was investors, not patients or law-enforcement officials who initiated the suit.)

The lawsuit ... also named executives including Chief Executive Officer Michael Ball as defendants,...

I cannot find any information about whether these executives were personally liable for any payments, however.   

Pfizer

This is yet another settlement involving the marketing of Neurontin, as reported by Bloomberg in April, 2014,

Pfizer Inc the world’s biggest drugmaker, agreed to pay $190 million to end a lawsuit claiming it violated federal antitrust laws by delaying generic versions of its Neurontin epilepsy drug. 

Pfizer agreed to settle the class-action litigation pending in federal court in Newark, New Jersey, according to a filing today. U.S. District Judge Faith Hochberg must approve the accord, which would cover purchasers of Neurontin from December 2002 to August 2008. 

Note that this settlement, like many others, is of matter from a long time ago.  When it comes to bad behavior by big health care corporations, any form of justice is not swift.

Note also that this is only the latest chapter in the long saga of Neurontin, for whose mis-marketing Pfizer has already shelled out a lot of money (see this post to start, and here for the collection).  Pfizer has an amazing record of bad behavior on view here.  In fact, it has had a conviction as a Racketeering Influenced Corrupt Organization (RICO) on the basis of its previous marketing of Neurontin (look here).

This particular bad behavior involved included,

 improperly listing certain patents with the U.S. Food and Drug Administration, engaging in illegal promotion and sales of Neurontin for unapproved uses, filing and maintaining sham litigations with respect to certain patents, and making misrepresentations to the patent courts,

Note that while much of this was legalistic, illegal marketing was in there too.

Once more, I found nothing about any negative consequences for individuals who authorized, directed, or implemented questionable actions.

Summary

So it is all drearily familiar.  Big health care organizations seem to repeatedly engage in deceptive marketing, providing kickbacks to health professionals, fraudulent billing, anti-competitive practices, etc, etc.  These practices increase health care costs, and may risk patients' health and safety.  Many of these practices are corrupt, at least according to the Transparency International definition of corruption, "abuse of entrusted power for private gain."  Drug and device companies, for example, are entrusted to provide safe and effective products.  Deceptive marketing, kickbacks to health professionals to encourage overuse, and cutting quality control to cut costs all seem to be examples of abuse of this entrusted power.  The private gain obviously goes to any managers and executives who score bigger bonuses due to the increases in revenue that result. 

Yet there are very few examples of any individuals who gained ever being subject to any negative consequences.  Given that lack, and the lack of any requirement for corporate leaders to admit responsibility, much less guilt, is it any surprise that these practices go on and on.  The failure of current limp legal efforts against such corruption is evident by how many corporations have become ethical repeat offenders.   (Note that in fact, as noted above, one of the pharmaceutical companies above actually was convicted of being a RICO, racketeering influenced corrupt organization, yet that conviction seemed to have no real negative consequences for the organization or any of the people involved.)

As I have said again and again, pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction.

So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue.

BLOGSCAN - US Supreme Court Turns Down Pfizer Appeal of RICO Conviction

Pfizer Inc, which boasts of being the world's largest research based pharmaceutical company, also seems to be one of the world's largest examples of health care corporations that have withstood an amazing number of settlements, fines, and at times convictions for misbehavior without major apologies, significant changes in leadership or corporate culture, or bankruptcy.  (Look here for a list of the cases, and here for all we have written about Pfizer).  

Pfizer, amazingly, has the malodorous distinction of having been convicted by a US jury as a RICO - a racketeering influenced corrupt organization in 2010 (look here).  Pfizer executives, of course, kept their office of counsel busy by appealing the conviction, all the way up to the US Supreme Court.

As discussed on the 1BoringOldMan blog, the court has now turned down the appeal and let the conviction, which had been affirmed by lower federal court, stand.   So Pfizer is now officially a racketeering influenced corrupt organization.  

Yet although the description of the RICO statute that 1BoringOldMan quoted notes the law can be used to go after the leaders of organized crime, no individual at Pfizer who authorized, directed, or implemented the relevant misbehavior, which was in this case the promotion of Neurontin for off-label uses, for which its benefits were at best unproven, at worse nonexistent, even if its harms are well-documented.  Thus even this RICO conviction has not affected the impunity of top health care corporate leaders. 

As we have said endlessly, true health care reform will not occur until the leaders of large health care organizations are made accountable for their actions, and are prevented from becoming amazingly rich while their organizations repeatedly commit unethical or illegal acts that harm patients' and the public's health.   

ADDENDUM (14 December,2013) - The followup post at 1BoringOldMan on this topic includes some optimism that now that the validity of the RICO concept applied to a large health care corporation has been affirmed, more stringent law enforcement may follow.  

Roy M. Poses MD for Health Care Renewal

The Settlement and Conviction Round-Up: Friday Frequent Flier Edition

It's time for one of our periodic round-ups of legal settlements and convictions of health care organizations.  This time, we report on three frequent fliers, in chronologic order of the appearance of the relevant news stories.

Robert Wood Johnson University Hospital Hamilton (UMDNJ)

We have written multiple times about the woes of the University of Medicine and Dentistry of New Jersey, which lead to a deferred prosecution agreement and operation under the watchful eye of a federal monitor for several years, and resulted in criminal convictions of a former Dean and the state legislative leader he hired.  Scroll through this for far too many details. 

Now, the redoubtable Newark Star-Ledger reports:

Robert Wood Johnson University Hospital in Hamilton has agreed to pay $6.35 million to settle allegations that the facility defrauded Medicare, Justice Department officials said today.

The Mercer County hospital was accused of inflating charges to Medicare patients to obtain bigger reimbursements from the federal government.

'Taxpayer dollars should go towards quality health care, not wasted on fraud and abuse,' said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice.

The hospital denied wrongdoing in the settlement, said Skip Cimino, the facility's president and CEO. 'Robert Wood Johnson University Hospital Hamilton has resolved the outstanding Medicare Reimbursement issue with the government and looks forward to continuing its service to the community,' he said.

Note that Robert Wood Johnson Medical School is one of the two medical schools contained within UMDNJ.

Fresenius

I admit that we last discussed Fresenius Medical Care Holdings Inc, a for-profit provider of kidney dialysis services, a while ago, back in 2007. At that time, the company settled charges made by the US Federal Trade Commission that it had tried to restrain competition. Last week, the Tennessean reported:

A long-running whistleblower complaint against the once-Nashville based Renal Care Group has led to a $19.3 million federal court judgment against the acquired dialysis supplier and the German company that bought it four years ago.

The lawsuit, which focused on improper claims submitted to Medicare for home dialysis supplies, named Renal Care Group Supply Co. and Fresenius Medical Care Holdings Inc., as co-defendants. The federal government joined the whistleblower complaint more than two years ago.

Renal Care operated a shell billing company solely to submit claims on behalf of itself in violation of federal law that requires suppliers to be independent of the dialysis facilities where patients are treated, the government said. Even after employees raised concerns, Renal Care continued to operate the billing company because of the 'illicit revenues it created,' the suit said.

One employee wrote: 'I do not wish to go to jail' and felt the company's plan 'was not in the best interests of patients,' said federal Judge William J. Haynes Jr. of Nashville in his ruling.

The billings reportedly occurred over a six-year period beginning in 1999. The Fresenius-Renal Care acquisition closed in 2006 at a sales price of $3.5 billion.

Pfizer

Pfizer Inc, which proclaims itself to be the world's largest pharmaceutical company, has provided an amazing amount of material for Health Care Renewal. In September, 2009, we discussed the huge, that is, $2.3 billion dollar settlement Pfizer made of criminal and civil fraud charges. At that time, this was the fourth settlement of charges of unethical marketing made by Pfizer since 2002.

Since then, we have discussed another fraud settlement in October, 2009, and yet another in January, 2010.

Today, Bloomberg reported:

Pfizer Inc. violated U.S. racketeering law in the marketing of its epilepsy drug Neurontin and should pay $142.1 million in damages, a jury decided.

Kaiser Foundation Health Plan Inc. and Kaiser Foundation Hospitals claimed in a monthlong trial in federal court in Boston that Pfizer illegally promoted Neurontin for unapproved uses. The insurer said it was misled into believing migraines and bipolar disorder were among the conditions that could be treated effectively with Neurontin, approved in 1993 by the U.S. Food and Drug Administration for epilepsy.

'The jury found Pfizer engaged in a racketeering conspiracy over a 10-year period,' Tom Sobol, a lawyer for Kaiser, said after yesterday’s verdict. 'That bodes well for future cases.'

Furthermore, this was a very special kind of verdict:

The jury, which deliberated for two days, found that New York-based Pfizer violated the federal Racketeer Influenced and Corrupt Organizations Act, or RICO, and California’s Unfair Competition Law. Under RICO, the amount of actual damages found by the jury, $47.36 million, will be tripled.

The RICO statute was meant to be used against organized crime.  A jury seems to have found that Pfizer is a "Racketeer Influenced and Corrupt Organization," that is, the moral equivalent of a crime syndicate.

Summary

So this week's settlement and conviction round-up shows the impunity that many health care organizations have exhibited thus far.  Some organizations have been charged again and again with unethical behavior.  Now one of the most frequent of the fliers has been convicted under the RICO law, certainly a new low.

Yet none of the affected organizations in this post, and precious few we have discussed at other times, seem to have suffered any major consequences.  All have paid fines, some which seemed large at the time, but which have never been large enough to seriously threaten the organizations' financial well being.  None of the organizations seems to have lost business, or even much reputation.  Very few of the people within the organizations who approved, lead or implemented unethical behaviors have suffered any sort of negative consequences.

There seems to be something very wrong here.  In the US, we have put much of our health care system in the hands of very large organizations, for-profit and not-for-profit, without holding these organizations and their leaders accountable for their actions.  The results have been increasingly rich leaders who often behave like a new aristocracy, and repeated bad behavior by the organizations they lead. 

Our latest effort at health care "reform" has continued to rely on large private organizations, while so far not adding to their or their leaders' accountability.  In my humble opinion, if we really want to reform health care so as to improve quality, increase access, control costs, and support professionalism, we will have to make our new health care oligarchs accountable.

WellPoint Settles RICO Law Suit

As reported in the Los Angeles Times (and elsewhere), WellPoint has recently agreed to settle its role in a class-action lawsuit brought by California physicians under the RICO (Racketeer Influenced and Corrupt Organizations) standard. WellPoint will pay about $198 million, including $135 million in damages to physicians, $5 million to set up a foundation to improve medical practices, and up to $58 million in attorney's fees. WellPoint, lead by Chief Executive Officer Larry C. Glasscock (2005 total compensation according to Forbes, $24, 970,000), is the largest health care insurer in the US.
The suit charged that WellPoint systematically denied and under-payed physicians' claims. According to the Times, "it includes a ban on WellPoint's alleged use of computer programs to systematically deny and underpay purportedly legitimate claims." (Ah, the uses of health care information technology....) Glasscock commented, "we see this agreement as a very important step in further collaborating with physicians."
The class-action suit originally targeted ten insurance companies/ managed care organizations. Those that have already settled included Aetna, Health Net Inc., Prudential Financial Inc., and Cigna Corp. Those that have not settled so far include UnitedHealthGroup and Pacificare, which just merged. (See post here.)
Juxtaposed with our previous two posts, it appears that some managed care companies vigorously tried to control costs by across the board cuts of payments to physicians, while they seemed to ignore the high prices charged for supposedly "high tech" drugs and devices. But why?