Issues at the 18th International Anti-Corruption Conference

Many issues brought up at the 18th International Anti-Corruption Conference (IACC) in Copenhagen, Denmark, were relevant to the problems of conflicts of interest, crime and corruption in health care which we often discuss on Health Care Renewal, and hence bear repeating here.

The discussion certainly got at the complexity of fighting corruption, seemingly one of many necessities that has come into light in the new political era.  Unfortunately, while the complexity is fascinating, it suggests this fight will hardly be simple.  Since warnings about corruption go back thousands of year, we already knew it would not be easily, if ever totally won.

Reported in the order they came up at the conference...

Whistle-Blowing Holding Leadership Accountable

At the Opening Ceremony, Lars Lokke Rasumussen, the Prime Minister of Denmark, underlined the importance of journalists and activists holding leadership accountable. Yet the corrupt will tend to defend their interests by attacking such people. (Thus we have noted that corruption in health care, in particular, has long been a taboo topic, the anechoic effect.) Things can get very bad when a country is governed by the corrupt, and worse when these rulers are despotic.

The hazards of being a whistle-blower, activist, and/or journalist holding the powerful accountable were emphasized by Huguette Labelle, Chair, International Anti-Corruption Conference Council, in that same session, who remembered those who have lost their lives for doing so.  Also at that session, Delia Matilde Ferreira Rubio, Transparency International Chair, warned that despots may hijack the narrative, turning watchdogs into their lapdogs, and into attack dogs against their political opponents. On the other hand, watchdogs who refuse to cooperate may be punished or killed.

At the Day 2 Plenary 3 Session on Exposing the Corrupt, Knocking Out Impunity, Barbara Trionfi, Executive Director, International Press Institute, noted that deception, propaganda, and disinformation may be used to mobilize attacks against whistle-blowers and real journalists, perhaps government responses to such attacks might help, at least if the government has not been totally captured.

At the Day 3 workshop on Is the American Anti-Corruption Model Broken, Frank Vogl, Advisory Council Member, Transparency International, noted that there are now daily threats in the US to the free press, while the opposition party is assailed as a “mob.” Moreover, the US government institutions, such as the Department of Justice and the FBI, that often used to protect the free press, among others, from threats of violence, are themselves under constant attack from the top of the administration.


Authoritarian/ Despotic Rulers Hijacking the Anti-Corruption Cause in an Era of Conspicuous Corruption

At the Day 1 Fighting Corruption in“Post-Truth” America workshop, Danielle Brian, Executive Director of the Project for Government Oversight, noted that pre-2016, her organization was mainly concerned with the problem of conflicts of interest created by the revolving door, especially to and from the defense industry and big pharma. Since the election, the administration generated an atmosphere of “conspicuous corruption in which shame does not matter, and in which human rights are now under threat." (See what we recently posted about fighting corruption under a corrupt regime.)

 At the Day 2 Fight Against Corruption as a Threat to Democracy workshop, one participant suggested that fighting corruption at best requires stable, functional specific anti-corruption institutions. While some countries have such institutions at the national level, the US does not. So at the Day 3 workshop on Is the American Model of Anti-Corruption Broken, Harvard Univeristy Professor Matthew Stephenson noted that the current US susceptibility to corruption may be partly due to the country's history of relying on norms rather than laws to address corruption. The Trump administration has set itself up as a norm violator, with so far little pushback.

Furthermore, people subject to corruption may tend to go down extremist pathways, as noted at the "Post-Truth" workshop by Sarah Chayes, former Senior Fellow at the Carnegie Endowment for Peace.  At that workshop, Nora Gilbert, Director of Strategic Projects and Partnerships, Represent.US, asked whether populist anti-corruption rhetoric, e.g., about “unrigging the system,” could be leveraged without going down the authoritarian pathway?  If not,  corruption may generate despotism, which in turn generates more corruption, a positive feedback cycle.

The concern about how emphasis on fighting corruption could have the unintended effect of boosting authoritarian or despotic rulers was the subject of the Fight Against Corruption as a Threat to Democracy workshop. The audience was asked not to attribute quotes to participants, but I noted the following sorts of observations.  The war on corruption can be seen as a war on politicians, parties, and institutions, and so can increase cynicism while risking pulling the whole system down. Even so, since strong supporters of certain politicians tend to disbelieve any negativity about them, including corruption allegations, such a war can leave the most corrupt offenders standing.

Yet corruption is itself a huge threat to a reasonable democratic political system, because it robs people of votes, free speech, and the rule of law. Corrupt politicians do not shrink from protecting themselves by attacking votes, speech, and legal actions that threaten them.

Ideally, it is thus better to tackle moderate corruption early, because a scorched earth attack on severe corruption may be as hazardous as the corruption itself. (Not to toot our own horn, but at Health Care Renewal, we have been trying to challenge health care conflicts of interest, corruption, and crime long before the current unpleasantness.)

Trans-National Kleptocratic Networks

At the Fight Against Corruption as a Threat to Democracy workshop, Sarah Chayes noted that now in the US and many other places, corruption is now systemic, the standard operating system of trans-national kleptocratic networks. At an IACC a decade ago, embedded networks of influence were shown to be vehicles of corruption.  They have apparently gone global. They may use extreme measures to preserve their power. One they have become especially good at is exploiting identity divides.

At the Day 2 Plenary Session, Breaking the Global Corruption Web, Sarah Chayes further discussed how the networks were enabled in an era of predatory capitalism in which everything has its price. The networks' work is facilitated by finance firms, shell corporations, and reputation and money launderers. Rajiv Joshi, Managing Director, the B Team, noted that the Lewis Powell memo of 1972 provided the blueprint, by showing how big US corporations to use their public relations/ propaganda resources to capture the US government.

Claudia Escobar, former Magistrate of the Court of Appeals of Guatemala, stated that the networks intertwine private companies, government, and organized crime. (Note that we have discussed some of the links between organized crime and the current US administration.) The melding of these entities was further emphasized by Monique Villa, Executive Director, Thompson Reuters Foundation, who urged us to always follow the money: asking again and again, cui bono? Who benefits? 

Deception, Propaganda, and Disinformation

Corruption is enabled by deception, propaganda, and disinformation. A participant at the Fight Against Corruption as a Threat to Democracy workshop noted that traditionally democratic systems seem to depend on the idea that lies are easily counteracted. In an era of public relations, propaganda, and disinformation, lies are the currency.

This was underlined by Kumi Naidoo, Secretary-General Designate, Amnesty International, speaking at the Breaking the Global Corruption Web plenary. He accused some parts of the global media, plus social media technology corporations, of complicity with the global kleptocratic network. He suggested that in the US, the in your face corruption of the Trump administration is enabled by the large minority of Americans who only believe what they see on extreme right-wing media and social media.

Yet as Thomas Hughes, Executive Director, Article 19, pointed out in the Day 2 Plenary, Exposing the Corrupt, Knocking Out Impunity, the way to attack deception, propaganda, and disinformation may not be government regulation which risks censorship, especially if the government is corrupt, much less despotic. Will Fitzgibbon, Reporter, International Consortium of Investigatve Journalist, suggested it would be better to form alliances, preferably international, of journalists and whistle-blowers, like the group that published the Panama Papers.

Discussion

I would submit that the issues brought up at the conference suggested three themes, all disturbing.

Embedded Networks of Influnece Morphed into Global Kleptocratic Networks

First, corruption has become increasingly systemic and global.  The embedded networks of influence, which seemed to be national pheonomena a decade ago, are now global and supercharged, encompassing government, the private sector, and organized crime.  Thus they can be termed global kleptocratic networks.  Here in the US, it is most disturbing that the country seems to be governed by one such network.  Our president and his family continues to run the Trump Organization, a global, albeit mysterious set of businesses which has had documented links to both domestic US and overseas organized crime (look here).

The Positive Feedback Loop Encompassing Corruption and Despotism

As corruption increases, wouldbe and actual despots increase their populist appeal by claiming to be anti-corruption (in the US, we heard "drain the swamp.")  Yet despotic regimes often foster even more corruption, but then might blame it on others, while continuing to proclaim their drainage skills.

Enabling by Public Relations, Propaganda and Disinformation in an Era of Social Media

Shady business practices and shady politics have long been enabled by public relations (which Bernays thought sounded better than "propaganda") and the disinformation campaigns that grew from it.  Now this has been further ramped up by social media.

Conclusions

The good news is that the problems of corruption and crime in health care can now be more easily seen as just part of  larger problems.  The bad news is that this has only come into view as the problems of US and global corruption become profound.  Furthermore, as we think about more corruption, the issue seems much more complex.  At least conferences like the 18th IACC provided a venue to being to address the complexity before we are totally overwhelmed.

NOTE (Oct 29, 2018) -  Discussion section revised and enlarged to include the three themes above.

Gutting the Health Care Corporate Strike Force

Health care corruption is a severe problem in the US, and globally.

For years, we have ranted about the US government's lackadaisical - to use an execessively polite term - approach to wrongdoing by big health care organizations.  The trend really got started back in the day when now Governor Chris Christie (R - NJ), then a federal prosecutor, started making deferred prosecution agreements available to corporations which appeared to have committed white collar crimes.  However, these agreements were originally meant to give young, non-violent first offenders a second chance.

Since then, we have noted the continuing impunity of top health care corporate managers.  Health care corporations have allegedly used kickbacks and fraud to enhance their revenue, but at best such corporations have been able to make legal settlements that result in fines that small relative to their  multibillion revenues without admitting guilt.  Almost never are top corporate managers subject to any negative consequences.

The Health Care Corporate Strike Force

The US Department of Justice during the Obama administration made some modest attempts to decrease such impunity.  One such measure was the formation of a Health Care Corporate Strike Force.

As reported by Law.com,

the strike force was created in the fall of 2015, with five dedicated lawyers working on about a dozen of the most complex corporate fraud cases in the health care space.

Andrew Weissmann, the then-chief of the DOJ’s fraud section, told a health care conference in April 2016 that the section was placing 'a heightened emphasis' on corporate health care fraud investigations. He pointed to the recently established Corporate Fraud Strike Force that he said would focus resources in investigation and prosecution of larger corporate health care law violations, as opposed to smaller groups or individuals.

The Downsizing of the Health Care Corporate Strike Force

But now, after candidate Donald Trump promised to 'drain the swamp,'





and railed against the supposed corruption of former Secretary of State Hillary Clinton (leading tochants of 'lock her up'), the Trump administration will further diminish this tiny attempt to reduce impunity, the Law.com report stated:

the DOJ, under the Trump administration and new U.S. Attorney General Jeff Sessions, has announced new priorities: violent crime, drugs and illegal immigration.

In restructuring to focus on those priorities, the DOJ has gutted the Health Care Corporate Fraud Strike Force, according to at least two high-level sources who worked at the Justice Department until recently. The sources declined to be named, as being identified could affect their current jobs and clients.

The sources said the strike force has been cut from five full-time lawyers to only two – assistant chief Sally Molloy and trial attorney William Chang. And both are splitting their time in the strike force with other duties.

The DOJ declined an interview request for this story. But DOJ spokesperson Wyn Hornbuckle issued this statement: 'The Health Care Corporate Strike Force, as with the entire health care fraud unit, is going strong under steady leadership—continuing to vigorously investigate and hold accountable individuals and companies that engage in fraud, including tackling an opioid epidemic that claimed 60,000 American lives last year.'

The Task Force had resolved one major case against for-profit hospital chain Tenet.  The Task Force alleged but Tenet actually admitted its

supervisors lied to in-house counsel about the purpose of millions of dollars in contracts, which purportedly were for 'services' but really were bribes and kickbacks to clinics and doctors for sending Medicaid patients to Tenet hospitals.

While its settlement included a non-prosecution agreement, the Task Force actions also resulted in two convictions and a pending indictment of actual people.

Still,

The lawyer openings on the strike force were exacerbated when, on April 14, Sessions imposed a hiring freeze on the DOJ’s Criminal Division as well as on U.S. Attorney Offices, as reported by The New York Times, which obtained a copy of the freeze memo.

Some DOJ lawyers believe, sources said, that white-collar crime and corporate fraud resources are being shifted to cover Sessions’ new priorities of violent crime, drugs and illegal immigration. That emphasis, they said, can be seen in who runs the DOJ’s criminal division.

Under former U.S. Attorney General Eric Holder, himself a white-collar crime prosecutor and then corporate defense attorney, assistant attorney general Leslie Caldwell led the division. Caldwell specialized in securities fraud and white-collar crime, and had participated in the Enron Corp. prosecution.

Under Sessions, himself a former law and order prosecutor in Alabama, the criminal division now reports to deputy assistant attorney general Kenneth Blanco. Blanco has a long history of bringing cases centered on drugs and violent crime in the Miami-Dade State Attorney’s Office, in the U.S. Attorney’s Office in Southern Florida, and in Main Justice in Washington, D.C., where he served as chief of the narcotic and dangerous drug section at the DOJ.

Discussion

So the Trump administration proposes two part time attorneys to drain the health care corporate swamp.  That seems like bailing out the Titanic with teaspoons. But should we expect anything else from an administration that is being increasingly identified with corruption and impunity itself?

We have frequently discussed outright corruption in health care as one of the most important causes of health care dysfunction.  Transparency International (TI) defines corruption as

Abuse of entrusted power for private gain

In 2006, TI published a report on health care corruption, which asserted that corruption is widespread throughout the world, serious, and causes severe harm to patients and society.

the scale of corruption is vast in both rich and poor countries.

Also,

Corruption might mean the difference between life and death for those in need of urgent care. It is invariably the poor in society who are affected most by corruption because they often cannot afford bribes or private health care. But corruption in the richest parts of the world also has its costs.

The report did not get much attention.  Since then, health care corruption has been nearly a taboo topic in the US.  When health care corruption is discussed in English speaking developed countries, it is almost always in terms of a problem that affects benighted less developed countries.  On Health Care Renewal, we have repeatedly asserted that health care corruption is a big problem in all countries, including the US, but the topic remains anechoic,. presumably mainly because its discussion would offend the people made rich and powerful by corruption.

As suggested by the recent Transparency International report on corruption in the pharmaceutical industry,  there is so much money to be made through pharmaceutical (and by implication, other health care corruption) that the corrupt have the money, power, and resources to protect their wealth accumulation by keeping it obscure.  In the TI Report itself,

However, strong control over key processes combined with huge resources and big profits to be made make the pharmaceutical industry particularly vulnerable to corruption. Pharmaceutical companies have the opportunity to use their influence and resources to exploit weak governance structures and divert policy and institutions away from public health objectives and towards their own profit maximising interests.

I might as well repeat myself once again.  As I wrote in 2015, if we are not willing to even talk about health care corruption, how will we ever challenge it? 

So to repeat an ending to one of my previous posts on health care corruption....  if we really want to reform health care, in the little time we may have before our health care bubble bursts, we will need to take strong action against health care corruption.  Such action will really disturb the insiders within large health care organizations who have gotten rich from their organizations' misbehavior, and thus taking such action will require some courage.  Yet such action cannot begin until we acknowledge and freely discuss the problem.  The first step against health care corruption is to be able to say or write the words, health care corruption.

Musical Interlude

What else, the Honey Island Swamp Band, playing "Prodigal Son,"

Through the Revolving Door, Darkly

While the rare appointments to top health care positions by the Trump administration deservedly get considerable media coverage, lower level appointments sneaking through the revolving door do not.  So we hereby present our latest roundup of same, in chronological order by first coverage.

Lance Leggitt from Health Care Lobbyist at Baker Donelson to Chief of Staff for the Secretary of Health and Human Services

This appointment first appeared in StatPlus on March 2, 2017 but was behind a paywall.  It was more recently covered in the New York Times in a long article about revolving door appointments not specific to health care.  From the Times,

Lance Leggitt, who serves as chief of staff to Tom Price, the health and human services secretary, worked last year as a lobbyist for 10 different health care companies, including United States Medical Supply and Advanced Infusion Services. He focused largely on lobbying the agency related to Medicare billing rules, as well as rules for health care supplier accreditations, lobbying disclosure reports show. All these issues are routinely handled by the agency he helps oversee.

Note that a lobbyist for many large health care corporations would now be next door to the leader of government policy on health care. 

Makan Delrahim from Lobbyist at Brownstein Hyatt Farber Schreck to Assistant Attorney General for Anti-Trust

This was first reported by Reuters on March 17, 2017, and has health implications beyond the headline above,

Before coming to work at the White House following Trump's inauguration in January, Delrahim was a lobbyist with the law firm Brownstein Hyatt Farber Schreck, LLP.

Furthermore,

Another client in 2016 was health insurer Anthem Inc, which this year lost a court fight with the Justice Department over whether it would be allowed to merge with rival Cigna. Anthem is appealing the loss.

In addition, per David Sirota, writing in the International Business Times,

Makan Delrahim served as one of the healthcare conglomerate’s top lobbyists working on antitrust issues as the company pushed the Justice Department to approve its controversial proposal to merge with Cigna.

Delrahim would head the office that Anthem is pushing to approve the merger, which physicians and consumer groups say could raise healthcare prices and reduce medical coverage for up to 53 million Americans.

And,

According to federal lobbying records, Anthem paid $370,000 in lobbying fees to Delrahim’s firm, Brownstein Farber, between 2015 and 2016. Those fees paid for the lobbying services of Delrahim and William Moschella. Delrahim had previously served in the Justice Department’s antitrust unit under George W. Bush, and Moschella was also a top Justice Department official during Bush’s presidency. The lobbying records said Delrahim and Moschella were working on 'antitrust issues associated with Anthem's proposed acquisition of Cigna.' Lobbying records show Delrahim has also lobbied on antitrust issues for Pfizer, Qualcomm, Ardent Health Services and WMG Acquisitions.

Delrahim was last listed as an Anthem lobbyist five months ago. He is currently serving as President Donald Trump’s deputy White House counsel.

News of Delrahim’s appointment to the nation’s top antitrust job comes weeks after Anthem lawyers told a Delaware judge that they are relying on the Trump administration to settle the antitrust division’s current lawsuit blocking its Cigna merger. Between those court statements and Delrahim’s appointment, President Trump had a personal telephone call with Anthem’s CEO, Joseph Swedish. Anthem gave $100,000 to Trump’s inaugural committee, and after Trump assumed office, the Securities and Exchange Commission helped Anthem quash a shareholder resolution designed to force it to disclose its lobbying expenditures.

Note that Mr Delrahim has worked to promote consolidation of already large health care corporations, yet now would be charged with regulating such consolidation.


John Bardis from MedAssets CEO to Assistant Secretary of Health and Human Services for Administration

This first appeared in Modern Healthcare on March 22, 2017,

John Bardis, the founder and former CEO of MedAssets, has been named HHS assistant secretary for administration.

Alpharetta, Ga.-based MedAssets was a publicly traded group purchasing and revenue-cycle management company. Bardis founded it in 1999 and grew it into one of the largest healthcare group purchasing organizations. He oversaw the firm's diversification into other areas, like revenue-cycle services, for hospital and health system clients.

Bardis stepped down as CEO of MedAssets in early 2015.

 Note that most recently Mr Bardis was the CEO of a health care financial firm and thus was responsible for that company's financial fortunes.  While he has previous experience running other health care related companies, he seems to have no direct experience in health care or public health, per his official biography.

A Prelle Pfuelle from Lobbyist for the Mining Industry to Occupational Safety and Health Administration Administrator

This first and only appeared so far in the Managed Care Matters blog on April 2, 2017,

The Trump Administration’s pick to lead OSHA will push the President’s deregulation agenda far and deep as he shifts OSHA to a more 'business friendly' focus. According to Administrator-designee A. Prelle Pfuelle, the watchword will be 'compliance assistance' instead of enforcement.

Reports indicate the new Administrator, a former lobbyist for the mining industry, will provide 'leadership to curtail funding for enforcement, rescind rules under deregulatory orders, and drop defense of regulations facing legal challenges.' The mining industry has been actively applauding initial moves by President Trump to revoke, rescind, or withdraw several regulations and enforcement actions; Pfuelle may have been instrumental in those early actions.

Pfuelle’s past experience includes stints working as a manager in a diamond mining firm in South Africa, labor relations in Liberia’s oil industry, workplace safety officer in the Pakistani ship-breaking association and most recently lobbyist for the Oklahoma natural gas industry.

 Note that while the OSHA mission is to protect the health and safety of workers, this appointee's past work has involved the financial interests of the mining industry.  Health and safety protections may cost this industry money.  Furthermore, the article suggests that the appointee may be more "friendly" and sympathetic to corporations that employee workers than to to the workers whose health and safety he ostensibly would be protecting.  Note further that he seems to have no experience in public health or health care.

Brett Giroir from CEO of VibraCyte to Assistant Secretary of Health and Human Services

This was first reported by the Bryan (TX) Eagle on April 25, 2017,

President Donald Trump intends to nominate the former executive vice president and CEO of Texas A&M’s Health Science Center to a U.S. Department of Health and Human Services leadership position, according to a White House announcement.

Brett Giroir, who currently serves as president and CEO of biopharmaceutical company ViraCyte and as an adjunct professor at the Baylor College of Medicine in Houston, would serve as assistant secretary of health for the department.

 Note that Dr Giroir is currently responsible for the financial health of a biotechnology company.  He is however, unlike many of these other appointments, a physician.

Summary

When we started Health Care Renewal, the topic of conflicts of interest in health care got little attention in the media or in the medical and health care literature.  The topic of health care corruption was virtually taboo.  Through the years these topics have become somewhat more prominent.  But it took the Trump campaign and then the Trump transition and administration to really put them in the headlines.

So, for example, up to now we did not much discuss the amazing collection of conflicts of interest affecting the Trump administration's pick for leadership of the US Food and Drug Administration, Dr Scott Gottlieb.  His case has been well covered since he was named the nominee.  For example, the NY Times article noted above included:

 Dr. Scott Gottlieb, the nominee to lead the Food and Drug Administration, received more than $350,000 in payments in 2014 and 2015 from nearly a dozen different pharmaceutical companies, including Vertex Pharmaceuticals, whose two approved drugs are seen as breakthrough treatments for cystic fibrosis. (They carry list prices of more than $250,000 a year.) Dr. Gottlieb, who has never been registered as a lobbyist but has served as the director of eight pharmaceutical companies and one laboratory company, wrote in a letter that he was prepared to recuse himself as necessary to avoid any conflicts.

I should note that we have discussed previous examples, in 2007 and 2008 (look here, here, here and here), of Dr Gottlieb's strident promotion of the interests of pharmaceutical and biotechnology companies.  After 2008, I though we thought further discussion of this topic would be redundant.  Who would have thought that Dr Gottlieb, such a noisy champion of pharma and biotech, would be a nominee to run the FDA in 2017?  Whou would have thought.... 

But now headlines about conflicts of interest and corruption are so frequent that the less vivid but still important cases, as those discussed above, may get lost in the shuffle.  So the case of Dr Gottlieb is just the most prominent example of how the latest administration has set the revolving door spinning.  (See also previous posts here, here, and here.) 

As we noted previously, the revolving door is a species of conflict of interest. Worse, some experts have suggested that the revolving door is in fact corruption.  As we noted here, the experts from the distinguished European anti-corruption group U4 wrote,

The literature makes clear that the revolving door process is a source of valuable political connections for private firms. But it generates corruption risks and has strong distortionary effects on the economy, especially when this power is concentrated within a few firms.

The ongoing parade of people transiting the revolving door from industry to the Trump administration once again suggests how the revolving door may enable certain of those with private vested interests to have excess influence, way beyond that of ordinary citizens, on how the government works, and that the country is still increasingly being run by a cozy group of insiders with ties to both government and industry. The latest cohort of revolving door transits suggests that regulatory capture is likely to become much worse in the near future.

So, as we have said before.... The continuing egregiousness of the revolving door in health care shows how health care leadership can play mutually beneficial games, regardless of the their effects on patients' and the public's health.  Once again, true health care reform would cut the ties between government and corporate leaders and their cronies that have lead to government of, for and by corporate executives rather than the people at large.

The Bigger They Come, the Softer They Fall - the Size of Pharma Companies and How Vigorously they are Prosecuted

After we found lessons to be learned from even  relatively small legal cases involving medical device companies, we reviewed some relatively small cases involving pharmaceutical companies made public in 2014.  Again, we had an index case that linked to larger issues

Merck Settled Fraud Allegations for $31 Million

This case got very little coverage in October, 2014.  A very short story by Reuters included these essentials,

A subsidiary of Merck & Co has agreed to pay U.S. states $31 million to settle claims that it overcharged their Medicaid programs for an antidepressant it had sold at a discount to pharmacy companies, attorney generals from three states said on Wednesday.

The officials from Idaho, New York and Florida said Organon USA Inc offered the drug, Remeron, to nursing home pharmacies at a discount to encourage its use over competitors. At the same time, the company reported the full cost of the drug when seeking reimbursements from state Medicaid programs, the states claimed.

New Jersey-based Organon, which did not admit any wrongdoing, also was accused of improperly promoting use of the drug by children and teens.

The agreement, which includes Washington, D.C., and every state besides Arizona, settled whistleblower lawsuits filed in 2007 in federal courts in Massachusetts and Texas.

That was the main content of the article.

Kickbacks to Promote Use of a Dangerous Drug

However, on the PharmaLot blog, Ed Silverman added important nuance,

Organon also allegedly offered kickbacks to nursing home pharmacies to encourage use of the Remeron antidepressant. The drug maker also allegedly promoted the medicine for uses not approved by the FDA. The marketing included targeting children and teenagers, according to a statement from New York Attorney General Eric Schneiderman.

So this was not merely financial fraud, but involved kickbacks to encourage excess use of a medicine for patients for whom it may have an enhanced risk of severe adverse effects.  In particular, Remeron (mirtazapine) may lead to higher risks of suicide attempts, including successful ones, by adolescents (look here for its official label).  So this case was not only about a company allegedly over-charging the government, but promoting a medicine that might be dangerous for vulnerable patients taking it. 


Merck's Track Record

Merck in some ways is the poster child for health care companies once renowned, but now troubled.  Merck's own voluminous Values and Standards document starts with this famous quote by founder George W Merck,

We try never to forget that medicine is for the people. It is not for the profits. The profits follow ,and if we have remembered that, they have never failed to appear.

Yet Merck was one of the first big multinational pharmaceutical companies to be tripped up by a big scandal in the 21st century.  As we wrote here, 

In summary, Vioxx (rofecoxib, Merck) a Cox-2 inhibitor non-steroidal anti-inflammatory drug used for pain, and touted for its ostensibly low risk of gastrointestinal side-effects, was withdrawn from the market in 2004 because of its cardiac risks.  The Vioxx case is flush with examples of how the company used deception to market a very profitable drug without regard to its risks to patients. 

A longer summary of the Vioxx scandal is in the Appendix below.

Furthermore, Merck also seems to have a chronic problem with honest discussion of another of its products, Zetia (look here).   Merck was also fined by the French government for a "smear campaign" against generic competitors (look here) and this month got a very poor rating for its global corporate transparency from Transparency International (look here). 

So this relatively small case reminds us that when a very large health care company is accused of misbehavior, including deceptive behavior that could have led to patient harms, not only are no individuals who might have authorized, directed or implemented the bad behavior held accountable, but the case is likely resolved in a seeming vacuum, totally uninformed about the company's previous record of similar problems.

Sheffield Pharmaceuticals CEO Pleaded Guilty of Felony for Discharge of Wastewater Without Permit

An interesting contrast is the case of one Mr Thomas Faria, as described by the New London (CT) Day in July, 2014,

Thomas H. Faria, who resigned in March as president and chief executive officer of Sheffield Pharmaceuticals, pleaded guilty in U.S. District Court Tuesday to a felony violation of the Clean Water Act for knowingly discharging untreated industrial wastewater to the New London sewage treatment plant from 1986 to 2011.

His penalty does not yet seem to be public, but could go considerably beyond loss of his job,

Faria pleaded guilty to one count of knowingly violating, or causing to be violated, the Clean Water Act, an offense that carries a maximum penalty of three years of imprisonment and a fine of not less than $5,000 but not more than $50,000 per day of the violation.

Yet the harms produced by the company's actions are not so clear,

The environmental impact of the violation over a 25-year-period is unknown, though Special Assistant U.S. Attorney Peter Kenyon from the Environmental Protection Agency said the EPA is unaware of any fish kills or direct harm suffered by humans.

'The possibility of impact from this type of discharge certainly exists,' Kenyon said during a conference call Tuesday.

So in this case, the offense was environmental, and had nothing directly to do with the over the counter drugs manufactured by the company, or their effects on patients.  The impact of the offense on the environment was unclear.  Nonetheless, the CEO of this small, privately held company lost his job, had a felony on his record, and is liable for large fines or up to three years in jail, pending sentencing.

Jury Found Takeda and Eli Lilly Concealed Cancer Risks of Actos, Company Subject to Punitive Damages of $36.8 Million

The basics of the case were reported by Medscape in April, 2014, and were also covered by Reuters and Bloomberg,

Drugmakers Takeda Pharmaceutical Co. and Eli Lilly and Co. promised to appeal an award of $9 billion in punitive damages — one of the largest in US history — after a federal jury found they had concealed the cancer risks for their type 2 diabetes drug pioglitazone (Actos).

In addition, the jury ordered the payment of $1.475 million in compensatory damages.

Pioglitazone is associated with an increased risk for bladder cancer among persons with type 2 diabetes, according to a 2012 study in BMJ, as reported by Medscape Medical News.  The US Food and Drug Administration in 2011 updated the pioglitazone label to warn against starting the drug in patients with active bladder cancer and to use caution if starting it in patients with a prior history of bladder cancer,...

In addition, the judge ruled that the company destroyed relevant documents to prevent their use in court proceedings,

attorney Mark Lanier said Takeda officials intentionally destroyed documents about the drug.

US District Judge Rebecca Doherty agreed and penalized the company, telling jurors they could infer that the files may have supported Allen's claims that the company wrongfully concealed the medication's health risks. 'The breadth of Takeda leadership whose files have been lost, deleted or destroyed is, in and of itself, disturbing,' Doherty wrote in a January ruling.

In late October, 2014, the judge reduced the award for punitive damages, per Reuters,

In her ruling, Doherty said the original $9 billion damages award was 'excessive' and violated the companies' constitutional rights to due process.

She ordered Takeda to pay $27.6 million and Eli Lilly to pay $9.2 million for a total of $36.8 million. Doherty said that, while far smaller than the jury's original award, the reduced punitive damages were still 'large enough to accomplish the jury's clear aim: to send a message to the defendants that their wrongdoing must stop...'>

I should note that apparently the judge found the amount excessive given the size of the compensatory award to the single plaintiff.  However, the judge reiterated her concerns about the companies' deceptive conduct,

The companies also had sought a new trial, arguing that the court had made prejudicial rulings on evidence and jury instructions that tainted the trial's outcome.

Doherty rejected that request Monday, writing that the evidence during the trial showed that the companies 'disregarded, denied, obfuscated and concealed' for more than a decade that Actos could increase patients' risk for bladder cancer.  

Note that in this civil case, a jury found the companies' deceptive conduct reprehensible, and a judge agreed that they "disregarded, denied, obfuscated and concealed" the truth.  No government prosecutors seemed to care to get involved with this particular case.  Because it was a civil case in which the companies were defendants, I am not sure whether any penalties affecting individuals were a possible outcome.  The results seem to suggest, at least in my humble opinion, that both ordinary people, like those sitting on juries, and judges may take greater exception to deceptive conduct that could harm patients than may government law enforcers and regulators.

Teva Pharmaceutical Industries Made $27.6 Million Settlement of Charges that it Induced Physicians' Excessive Prescriptions


This was well summarized by ProPublica in March, 2014,

Teva Pharmaceutical Industries Ltd. has agreed to pay more than $27.6 million to settle state and federal allegations that it induced Chicago psychiatrist Michael Reinstein to overprescribe clozapine, a powerful antipsychotic drug.

Reinstein has twice figured into ProPublica investigations.


Four years ago, ProPublica and the Chicago Tribune spotlighted Reinstein's prescribing pattern, finding that in 2007 he had prescribed more clozapine to patients in Medicaid's Illinois program than all of the doctors in the Medicaid programs of Texas, Florida and North Carolina combined. At least three of Reinstein's patients died of clozapine intoxication. At that time, Reinstein defended his prescription record, arguing that clozapine is effective and underprescribed.

Then, last spring, ProPublica reported that Reinstein prescribed even more of the drug in Medicare's prescription drug program for seniors and the disabled. ProPublica cited Reinstein in an investigation about how Medicare fails to monitor problem prescribers,...

Illinois Attorney General Lisa Madigan and the U.S. Justice Department claimed that IVAX, a Teva Pharmaceuticals subsidiary, paid Reinstein to overprescribe clozapine to Medicare and Medicaid patients. Yesterday Teva agreed to pay almost $15.5 million to the federal government and more than $12.1 million to Illinois to settle those allegations out of court.

Note that the government case seemed to be about how the government had to pay too much, not about harms to patients, despite the patient deaths described above.  Furthermore, the prosecutors, as they usually now do, allowed the case to be settled without any findings of wrongdoing,

Teva spokeswoman Denise Bradley told Reuters that the settlement does not mean that the company has admitted any liability.

It is interesting that the government is apparently pursuing a case against the physician as an individual, but not any cases against corporate managers who might have authorized, directed, or implemented the "inducements" to that physician,

In November 2012, federal prosecutors also filed suit against Reinstein, alleging that IVAX hadpaid him $50,000 a year to work as a consultant, paid his nurse to promote the drug and funded a study at an affiliated research institute. After the payments, Reinstein began overprescribing clozapine. The company also allegedly paid for trips and entertainment for Reinstein and his friends.

Otherwise, this case is typical of many US government and state prosecutors have pursued against big health care corporations.  There was a monetary settlement that might appear big to the public, but was tiny given the size of the company.  (According to Yahoo Finance, Teva's annual revenue is about $20 billion.)  The settlement did not involve any admission of wrongful behavior.  No one in the company who may have been involved with the wrongdoing that was not admitted suffered any negative consequences.  But, as is not usual, the government is pursuing a case against one individual, the physician who allegedly was paid as a "consultant," by maybe actually just to prescribe the company's product.

Summary

These cases add to the march of legal settlements about which we have often written.  These settlements and other legal cases suggest how frequently big health care organizations are involved in practices that may be unethical, illegal, and/or harmful to the patients they proclaim to serve.  Yet almost never do cases that involve US state and particularly federal law enforcement ever impose monetary penalties that are more than costs of doing business for the companies involved.  Almost never do they impose any negative consequences on any individuals within the companies who might have authorized, directed or implemented unethical, illegal, or harmful behavior.  

However, as we saw before, when the government asserts its law enforcement power against small organizations, small companies, or individuals, people may lose their livelihoods or go to jail.

The leniency of the government towards big health care corporations is very similar to the leniency shown towards big financial corporations.  A recent review of the book "Too Big to Jail" in the Washington Monthly noted that Mr Eric Holder, the current US Attorney General has urged leniency for big, and hence economically powerful corporations,

a memo written by Holder in 1999, during his stint as deputy U.S. attorney general. The document, 'Bringing Criminal Charges Against Corporations,' urged prosecutors to take into account 'collateral consequences' when pursuing cases against companies, lest they topple and take the economy down with them. Holder also raised the possibility of deferring prosecution against corporations in an effort to spur greater cooperation and reforms—a policy, unsurprisingly, later supported by the Bush administration.

The attorney general angered many last year when he reiterated those concerns at a congressional hearing, admitting 'that the size of some of these institutions becomes so large that it does become difficult for us to prosecute' because of the potential nasty economic effects of a major company failure.

Furthermore, the book provided some essentially epidemiological evidence that the government in fact has been more lenient towards bigger corporations, at least in the finance sphere,

There’s some compelling evidence that the largest, most established companies are more likely to win leniency with a delayed or canceled prosecution: 58 percent of the companies awarded such deals are public firms listed on a U.S. stock exchange, while publicly traded firms make up just 6 percent of those against whom the Department of Justice obtained convictions.

Yet there seems to be no evidence that this policy produces social good.  In particular, there seems to be no evidence that corporations treated leniently behave any better.

Finally, there is a question of essential fairness, and equal treatment under the laws.  It appears that executives of large finance, and likely health care corporations have virtual impunity.  Yet little people in health care, or finance, who do something wrong may go to jail.

True health care reform would establish a level playing field.  True health care reform would deter unethical behavior, especially when it harms patients.  True health care reform would make leaders of health care organizations accountable for putting patients' and the peoples' health first.   


Appendix- Vioxx Case

There is evidence is that the company knew about the cardiac risks of Vioxx since 2000, but suppressed the clinical research evidence until 2003.(1)  In particular, in 2005, the editors of the New England Journal of Medicine raised concerns that an article published in that journal in 2000 about the results of the VIGOR study of rofecoxib sponsored by Merck failed to report data that would have suggested that the drug caused excess cardiovascular risks.(2) In 2007, the company paid more than $4.9 billion to settle patient lawsuits alleging harm due to Vioxx.(3)  Also in 2008, the company made a $58 million settlement of claims its advertising of Vioxx deceptively minimized its risks.(4) In 2008, it became clear that at least one apparently clinical trial of Vioxx, the ADVANTAGE trial, was merely a "seeding trial,' that is, a marketing exercise.(5)

On Health Care Renewal, we starting writing about Vioxx in 2005, including,
- here about ghost-writing of a Vioxx research publication;
- here, and here about allegations that Merck executives tried to intimidate Vioxx critics;
- here about how advocates of an extreme laissez faire approach to regulation of health care corporations used illogical arguments about the Vioxx case;
- here about the ADVANTAGE "seeding trial," that is, a study really meant to recruit supposed physician-researchers as prescribers; and
- here about how one once prominent Vioxx researcher pleaded guilty to fraud in connection with his research on other drugs.
-  here about how in settling a shareholder lawsuit Merck vowed to improve its scientific and academic integrity, and refrain from manipulating and suppressing clinical research.

In 2010, we summarized the Vioxx case thus, " the Vioxx case provides a good lesson about some of the tactics used to deceptively and unethically promote health care products (pharmaceuticals in this case)." 

In case there are any doubts about the harms patients suffered as a result of using Vioxx as a pain reliever, in 2004, a cumulative meta-analysis of published trials of Vioxx known by then estimated the risk of myocardial infarction (heart attack) due to Vioxx compared with placebo or other non-steroidal anti-inflammatory drugs was 2.3 times the baseline rate.(6)  That analysis suggested that there was data by 2000 that Vioxx increased the risk of bad cardiovascular events.  A cumulative meta-analysis from 2009 suggested that the risk of death due to Vioxx was 1.7 times the baseline rate.(7)   That analysis suggested there was data by 2001 that Vioxx increased the risk of bad cardiovascular events.  Graham and colleagues' nested case-control study of Vioxx use in a large managed care organization lead them to estimate that "88 000 - 140 000 excess cases of serious coronary heart disease probably occurred in the USA over the market-life of rofecoxib."(8).

References

1. Topol EJ. Failing the public health - rofecoxib, Merck and the FDA. N Engl J Med 2004; 351: 1707-1709.  Link here.
2. Curfman GD, Morrisey S, Drazen JM et al.  Expression of concern reaffirmed. N Engl J Med 2006; 354:1193. Link here.
3. Charatan F. Merck to pay $5bn in rofecoxib claims. Brit Med J 2007; 335: 1011. Link here.
4. Charatan F. Merck to pay $58m in settlements over rofecoxib advertising. Brit Med J 2008; 336: 1208-1209. Link here.
5. Hill KP, Ross JS, Egilman DS, Krumholz HM. The ADVANTAGE seeding trial: a review of internal documents. Ann Int Med 2008; 149: 251-258. Link here.
6.  Juni P, Nartey L, Reichenbach S et al. Risk of cardiovascular events and rofecoxib: cumulative meta-analysis.  Lancet 2004; 364: 2021-2029.  Link here.
7.  Ross JS, Madigan D, Hill KP et al.  Pooled analysis of rofecoxib placebo-controlled clinical trial data: lessons for postmarket pharmaceutical safety surveillance.  Arch Intern Med 2009; 169: 1976-1984.  Link here.
8.  Graham DM, Campen D, Hui R et al.  Risk of acute myocardial infarction and sudden cardiac death in patients treated with cyclo-oxygenase 2 selective and non-selective non-steroidal anti-inflammatory drugs: nested case-control study.  Lancet 2005; 365: 475-481.  Link here.

Department of Justice Throws (at Least a Small Paperback) Book at Bio-Rad Laboratories - $55 Million Settlement, Admission of Wrongdoing, Employees Fired

Hard on the heels of our recent roundup of legal cases involving medical device companies comes a notable settlement by Bio-Rad Laboratories Inc, a company that makes equipment and supplies for clinical diagnostic testing. 

The Basics

As reported by Reuters,

Bio-Rad Laboratories Inc will pay $55 million to end U.S. investigations into whether it failed to prevent bribery of government officials in Russia and other countries, and falsified records to conceal payments, U.S. authorities said on Monday.


The company, which makes medical diagnostics products, entered a non-prosecution agreement with the U.S. Justice Department to resolve charges that it violated the Foreign Corrupt Practices Act by recording fake payments in connection with sales in Russia.

It also entered a civil settlement with the U.S. Securities and Exchange Commission, which said units of the Hercules, California-based company made $7.5 million in improper payments to officials in Russia, Vietnam and Thailand to win business.

Some Sordid Details
 
Some details of the unseemly conduct were reported by the San Jose, California, Mercury News,

The Department of Justice and the SEC said Bio-Rad subsidiaries in Europe and Asia bribed government officials from 2005-10 with payments to phony middleman companies. Bio-Rad executives ignored the payments, which were so obvious that they should have spotted them, the federal investigators said. One Russian middleman company even used a phony address that was actually the address of a Russian government building, according to the SEC.

Large commissions to companies that didn't have the resources to perform any of the contracted services should have raised an alarm, the complaints said. Also, the payments were made through banks in Latvia and Lithuania, another alleged red flag. Yet several 'high level' Bio-Rad managers approved the payments, the Justice Department said.


In Vietnam, a sales representative of Bio-Rad authorized payment of bribes to government officials, including the hiring of a middleman to pay the bribes, according to the SEC. Bio-Rad's sales manager agreed to the practice fearing that the company would lose 80 percent of its sales if it stopped paying bribes, the SEC's complaint said.

In Thailand, Bio-Rad invested in a local company in 2007 that had an ongoing bribery scheme. An agent of the company received inflated commissions which were split with Thai government officials, the complaint said.  

 Admissions of Wrongdoing, Firing of Employees

Note that the $55 million was not just a civil fine, according to Reuters,

 

Bio-Rad's payout includes a $14.35 million criminal fine to the Justice Department, and $40.7 million representing illegal profit and interest to the SEC....

Moreover, the penalties could have been worse,

The Justice Department said the criminal sanctions were not more severe because Bio-Rad disclosed the misconduct and fully cooperated in its probe, including by making employees available for interviews and producing documents from overseas.

Bio-Rad also bolstered its internal compliance processes, and said it fired employees responsible for the misconduct.

If the company disclosed the misconduct, that meant they acknowledged there was misconduct.  Furthermore, in this case, the company at least indirectly admitted the wrongdoing,

'The actions that we discovered were completely contrary to Bio-Rad's culture and values and ethical standards for conducting business,' Bio-Rad Chief Executive Norman Schwartz said in a statement.

Summary

In summary, employees of Bio-Rad Laboratories bribed officials in various countries to induce more sales.  Upper level managers seemed to disregard fairly obvious signs that this was happening, but eventually someone in upper level management discovered what was going on and reported it to authorities.  The activities were unethical, but the crimes were financial and did not appear to directly risk patients.  The company paid a moderate sized fine, but part of the fine was criminal.  Top management acknowledged wrongdoing, and apparently some employees involved suffered negative consequences: they were fired.

So this case appears a bit different from the majority of the settlements we have discussed.  Bad behavior was acknowledged by managers, and some individuals involved in the bad behavior suffered modest negative consequences.  However, after reviewing the last set of cases we discussed, it does confirm the pattern.  The bigger the company, the proportionately SMALLER the penalties to the company, and the LOWER the likelihood and severity of any negative consequences to an individual.  (This was a moderate sized company, so the penalties were moderate.)  Also, financial misadventures lead to harsher penalties than actions that primarily harm patients.

At least this case shows that the US Department of Justice is capable of making a settlement of a case involving unethical behavior by a health care organization that does not allow the organization to deny misbehavior, and leads to at least some negative consequences for individuals who authorized, directed or implemented the bad behavior.

The question remains, though: why are cases involving really big organizations, and hence often lots of money, and/or cases that involve clinical rather than financial risks treated so leniently?  

The usual pattern, at least for large companies, is: settlements that involve fines that appear large, but are not proportionate to the size and revenue of the company; fines that are imposed on the company as a whole, but no penalties for the people who authorized, directed, or implemented the bad behavior, and likely personally profited from it; and no findings of guilt or acknowledgement of wrong doing.  This lenient approach allows large health care organizations to treat such settlements as costs of doing business.  Hence, it is unlikely to deter future bad behavior, especially given that the people most likely to make the most money from it can expect impunity.  

Note that the pattern of law enforcement and regulation for health care in the US is similar to the pattern of law enforcement and regulation of the finance sector.  And that helped bring us the global financial collapse.  Meanwhile, our health care system has become the most expensive, but clearly not the best in the world.

To repeat, the Kabuki play that is regulation of and law enforcement for large health care organizations goes on.  As our society is being increasingly divided into a huge majority in increasingly difficult economic circumstances and a small and  increasingly rich minority, it also seems to be increasingly divided into little people who may be ruined by lawsuits, and imprisoned for even minor infractions, and big people who have impunity. 

True health care reform would hold leaders of health care organizations accountable for their organizations' behavior, and its effects on patients and health care professionals. 

Shire Settles Claims of Deceptive Marketing of Multiple Drugs for $56.8 Million, No Individual Held Responsible

Here we go again.  A big drug company has settled claims of deceptive marketing, yet no individual was held accountable.  The most extensive coverage came from the Philadelphia Inquirer, presumably since the announcement came from the local US Attorney.

The basics were:

Shire Pharmaceuticals L.L.C. will pay $56.5 million to settle allegations that it inappropriately promoted the sale of ADHD medicine, among other drugs, the U.S. Attorney's Office in Philadelphia said Wednesday.

Shire is registered in the Channel Islands and headquartered in Dublin, but operates from the United States....

As is usual in such cases,

Shire admitted no wrongdoing, but also entered into a five-year Corporate Integrity Agreement with the Office of Inspector General for the Department of Health and Human Services.

The detailed allegations make for interesting reading.

The settlement resolves allegations that, between January 2004 and December 2007, Shire promoted Adderall XR for certain uses despite a lack of clinical data to support such claims and overstated the efficacy of Adderall XR, particularly relative to other ADHD drugs. Among the unsupported claims allegedly made by Shire was that Adderall XR was clinically superior to other ADHD drugs because it would 'normalize' its recipients, rendering them indistinguishable from their non-ADHD peers. Shire allegedly stated that its competitors’ products could not achieve similar results, which the Justice Department contended was not shown in the clinical data Shire collected. Shire also marketed Adderall XR based on claims that Adderall XR would prevent poor academic performance, loss of employment, criminal behavior, traffic accidents, and sexually transmitted disease. In addition, Shire promoted Adderall XR for the treatment of conduct disorder, an indication not approved by the Food and Drug Administration (FDA).

The settlement further resolves allegations that, between February 2007 and September 2010, Shire sales representatives and other agents also allegedly made false and misleading statements about the efficacy and abuse liability of Vyvanse to state Medicaid formulary committees and to individual physicians. For example, one Shire medical science liaison allegedly told a state formulary board that Vyvanse 'provides less abuse liability' than 'every other long-acting release mechanism' on the market. No study Shire conducted concluded that Vyvanse was not abusable, and, as an amphetamine product, the Vyvanse label included an FDA-mandated black box warning for its potential for misuse and abuse. Shire also made unsupported claims that treatment with Vyvanse would prevent car accidents, divorce, being arrested, and unemployment.

Additionally, the settlement resolves allegations that, from April 2006 to September 2010, Shire representatives improperly marketed Daytrana, administered through a patch, as less abusable than traditional, pill-based medications. The settlement also resolves allegations that, for part of the foregoing periods, Shire representatives improperly made phone calls and drafted letters to state Medicaid authorities to assist physicians with the prior authorization process for prescriptions to induce these physicians to prescribe Daytrana and Vyvanse.

Finally, the settlement resolves allegations that, between January 2006 and June 2010, Shire sales representatives promoted Lialda and Pentasa for off-label uses not approved by the FDA and not covered by federal healthcare programs. Specifically, the government alleged that Shire promoted Lialda off-label for the prevention of colorectal cancer.

Thus, the allegations were that Shire marketers and "agents" made false, sometimes apparently ridiculous claims about four different medicines.  Some of these claims, for example, that an amphetamine drug had no abuse potential, or that an anti-inflammatory drug would prevent cancer (in patients at risk for cancer), could conceivably have led to patients being harmed. 


According to the Wall Street Journal, the settlement was made to clean up loose ends before the big take-over of Shire,

 The pact resolves one outstanding issue ahead of Shire's planned $54 billion acquisition by AbbVie Inc.

So note that the dollar amount of the settlement is approximately one one-thousandth (0.1%) of the total value of Shire.

According to the Philadelphia Inquirer, no one admitted guilt, and no individual will pay any penalty:

'We are pleased to have reached a resolution and to put this matter behind us,' Flemming Ornskov, Shire’s chief executive officer said in a statement.

So this follows the usual formula for legal settlements in health care.  A big pharmaceutical company was alleged to have deceptively marketed multiple products.  Some of the deceptions could have lead to patient harm.  The government took the company to court, but the end result was a monetary penalty paid by the company that might appear large, but which was tiny compared to the assets of the company.  The company did not have to admit guilt.  No individual at the company paid any penalty or suffered any consequence.  While the organization had to sign a "corporate integrity agreement," it is not clear that such agreements prevent future bad behavior.

There have been many, many such settlements, as we have discussed on Health Care Renewal.  At least these settlements serve as evidence that many, many large health care organizations have behaved unethically, often in ways that not only increase health costs, but may directly harm patients.  Yet the settlements seem bent over backwards not to trouble the people who personally profited from unethical behavior. 

Individual company marketers, their supervisors, and top executive likely made more money because of the revenue brought in by the unethical practices.  However, the settlement somehow avoided identifying any of them, or even stating unequivocally that the company, or any of its employees did anything wrong.  That is absurd, since if nothing bad was done by anybody, why did the company have to pay anything?  Beyond that, if individuals who work for big drug companies, and other large health care organizations know that whatever they do in their official capacities, they will not be held personally responsible, what would deter them from taking unethical actions in the future?

Most citizens trust drug companies to provide safe effective medicines.  Marketing drugs as safer than they are, or for purposes for which they are not effective abuses the companies' entrusted power.  Doing so in order to enrich oneself thus is a manifestation of corruption.  The ongoing parade of legal settlements is thus a marker of how corrupt health care has become. 

Furthermore, the continued inability of regulators and law enforcement to do more in the face of corruption suggest moral failure, incompetence, and perhaps more corruption.

We will never achieve true health care reform, and will never really improve our vastly over-priced, ineffective health care system until we address this sort of health care corruption. 

A final note: Eric Holder, the current US Attorney General, will soon leave.  While he has been hailed for promoting human rights in some instance (that is, for LGBT individuals), he has been criticized for never making an effort to pursue the top corporate executives who were responsible for the global financial collapse of 2008 (look here) although the Department of Justice constantly goes after relatively small scale white collar criminals.  He also appears to have almost never pursued any top corporate executives involved in deceptive, unethical, illegal or corrupt health care practices, while the government constantly pursues perpetrators of relatively small scale Medicare and Medicaid fraud (look here).  One of his US Attorneys notably pursued the late Aaron Swartz for vaguely specified computer crimes which did not appear to harm anyone while she gave passes to executives at big health care corporations that settled cases of alleged actions that likely harmed patients (look here).   His failure to pursue such large scale health care corruption should be regarded as no less serious than his failure to pursue financial corruption.

Health Care Revolving Door Roundup

Increasingly, the regulatory and law enforcement functions of the US government in the health care sphere seem to be blending with the management of large health care organizations.  One mechanism for this is the "revolving door," the constant interchange of personnel between government agencies and corporate management. 


Here is a list of some of this year's interesting cases of people transiting the revolving door between US government agencies that are supposed to regulate health care organizations or enforce the relevant laws and the organizations subject to these regulations and laws.   Note that this list may not be complete.  It is difficult to keep track of these transitions. 

Leader of Health Care Fraud Section of Philadelphia US Attorney's Office to Teva Pharmaceuticals

Via MainJustice.org in March, 2013,

John Pease, who led the government and health care fraud section in the U.S. Attorney's Office in Philadelphia, has left the Justice Department for a job with a pharmaceutical company.

Pease, 45, is a new senior counsel at Teva Pharmaceuticals, where he oversees government investigations of the company for the Americas.  'I was just ready to try something different,' Pease said in an interview.

 Leader of US Department of Justice Fraud Section in Charge of Health Care Issues to Law Firm as Defender of Companies and Senior Executives

The initial notice again was via MainJustice.org in March, 2013

Sam Sheldon, the deputy chief in the Criminal Division's Fraud Section who oversaw health care fraud prosecutions, is leaving the Justice Department to join Quinn Emanuel Urquhart & Sullivan LLP.

Mr Sheldon's new job was made clear on the firm's website,

Sam Sheldon is head of the firm’s Health Care Practice Group.  He is a trial lawyer who represents companies and senior executives in litigation before the United States federal government including Department of Justice and Department of Health and Human Services, and other law enforcement and regulatory agencies.

FDA Deputy Commissioner for Global Regulatory Operations and Policy to Mylan

This story, in April, actually made it (briefly) to Reuters,

 Generic drugmaker Mylan Inc said on Tuesday it hired Deborah Autor, deputy commissioner for global regulatory operations and policy at the U.S. Food and Drug Administration, to help oversee its global regulatory strategy.

Leader of Health Care Fraud Enforcement of Philadelphia US Attorney's Office to Law Firm as Industry Defender

From Bloomberg, in August, 2013,

Marilyn May, a False Claims Act litigator at the U.S. Justice Department, joined Arnold & Porter LLP’s Washington office as litigation counsel with a focus on healthcare, pharmaceutical and medical device industry defense work. 

May was the head of healthcare fraud enforcement in the U.S. Attorney’s Office in the Eastern District of Pennsylvania. She coordinated healthcare fraud cases and investigations as well as handled False Claims Act cases involving pharmaceutical and medical device companies, hospitals, nursing homes and other healthcare providers, the firm said. 

The law firm's website states,

 Her litigation practice focuses on pharmaceutical, medical device and healthcare defense matters.

Summary

In each of these cases, a person with responsibility for regulation of and/or law enforcement for health care organizations went through the revolving door to either work for health care corporations subject to such regulation and/or law enforcement, or work for legal firms that specialize in defending such corporations and their leaders in regulatory and law enforcement actions.

As far as I know, none of these instances was the least bit illegal.  However, like previous examples of the revolving door, they raise the concern that people in government regulation or law enforcement who think that they may have future lucrative job prospects helping health care organizations attenuate regulation and law enforcement may not be the most enthusiastic, aggressive, or persistent regulators or law enforcers.  Why would one want to upset one's future employer?

While these cases of the revolving door are legal, they are clearly conflicts of interest in the sense that the prospect of such future employment likely may increase the risk of compromising a government official's devotion to serving the public and enforcing the law, if not in the legal sense.  In some particular case, the revolving door may actually lead to corruption according to the Transparency International definition, abuse of entrusted power for private gain, if not according to the legal definition.  Thus the continuing occurrence of government officials blithely transiting the revolving door no doubt was a reason that more than 40% of the public consider the US health care sector to be corrupt (see this post.)

True health care reform would require curtailing the severe sorts of conflicts of interest created by the revolving door.  This might require both improving pay and working conditions for government regulators and law enforcers, and specific laws to prevent immediate transitions from being a regulator/ law enforcer to handling corporate responses to or defenses of such regulation and enforcement.

Of course, I can already hear the protests of those people who decry paying more for government or increasing government regulation.  I can at least hope that the protests are not from those who personally profit from the current seemingly corrupt system.  

The Myth of the Tough Prosecutor as a Distraction from Health Care Corporate Executives' Impunity

The tragic case of the Boston Marathon bombing illustrates how myth making about tough law enforcement obscures the impunity enjoyed by top health care executives.

A "Tough to a Fault" Prosecutor

A recent Reuters article touted the toughness of the prosecutor who will take on the case of the surviving accused Boston terrorist:

As the top federal law enforcer in Massachusetts, U.S. Attorney Carmen Ortiz has taken heat for being tough to a fault and coming down too hard on some defendants.

But as she builds a possible death penalty case against suspected Boston Marathon bomber Dzhokhar Tsarnaev, 19, the unflinching approach that earned her opponents in the past could become a legal asset for the biggest case of her career, said attorneys who have faced off against her.

'The criticism lately has been that they've over-charged some people and been overly harsh,' said Peter Elikann, a Boston defense attorney.'I don't think that's relevant for Tsarnaev because no one is going to accuse any prosecutor of making too big a deal out of this case.'

Similarly, an article in Bloomberg included this:

Ortiz’s former bosses insist that she’s ready for her moment on the big stage.

'She’s tough-minded and exceptionally professional,' [former Massachusetts Attorney General Scott] Harshbarger said. 

One of the cases cited as an example of Ms Ortiz's toughness was her prosecution of electronic information freedom activist Aaron Swart.  As Rueters noted,

One of Ortiz's best-known cases to date was her prosecution of Aaron Swartz on wire fraud and hacking allegations for downloading millions of articles from an academic database.

Swartz, a 26-year-old computer prodigy, hanged himself in his Brooklyn, New York, apartment in January, prompting friends and family to partly blame Ortiz's prosecution for his death.

At the time, Ms Ortiz was criticized for being unreasonably harsh, but then as now toughness was touted as her style.

Not So Tough on Corporate Crime

However, as we pointed out then, while Ms Ortiz was noted for being tough on individuals accused of various offenses, she was notably not so tough on individuals involved in alleged corporate health care wrong doing.

In particular, as we wrote before, Ms Ortiz was involved in three settlements of notably bad behavior by large health care corporations, none of which involved prosecution of, or any penalties for the individuals at the corporations who authorized, directed or implemented the bad behavior.

Forest Pharmaceuticals
In September, 2010, how Ms Ortiz led the pursuit of a settlement with Forest Pharmaceuticals became apparent (look here).   The company was accused of promoting its anti-depressant Celexa for use in adolescents and children.  Such drugs have since been shown to increase the risk of suicide by such young patients, and this drug was only approved for adults.  At the time, Ms Ortiz said, "Forest Pharmaceuticals deliberately chose to pursue corporate profits over its obligations to the F.D.A. and the American public."  Although the offense may have lead to use of the drug by many adolescents and children, and hence may have lead to some of them attempting or committing suicide, the case was settled only with fines.  As is usual in such legal settlements, no individual corporate executive who authorized or lead the off-label and potentially dangerous marketing of the drug was arrested, or accused, and none suffered any negative consequences.
GlaxoSmithKline
In October, 2010, how Ms Ortiz led the pursuit of a settlement with GlaxoSmithKline became apparent (look here.)  The company was accused of selling drugs that were not what they appeared to be, apparently because the wrong drugs were put in labelled containers.  Obviously, taking one drug, like Paxil, GSK's anti-depressant which has a number of known adverse effects, including suicide risk for adolescents and children as noted above, when a patient is supposed to be taking a wholly different drug could lead to patient harm.  At that time, Ms Ortiz said, "We will not tolerate corporate attempts to profit at the expense of the ill and needy in our society -- or those who cut corners that result in potentially dangerous consequences to consumers."   Again, while the settlement involved a guilty plea by a GSK subsidiary, again no individual corporate executive who had authority over the drug manufacturing was arrested or accused, much less suffered any negative consequences.
St Jude Medical
In January, 2011, Ms Ortiz led the pursuit of a settlement with St Jude Medical (look here).  The company was accused of paying kickbacks to doctors to implant its cardiac defibrillators (ICDs) and pacemakers.  Obviously, providing kickbacks to doctors may have lead them to plant devices in patients who did not really need them, yet the devices and the implantation procedures can have adverse effects.  At that time, Ms Ortiz said, "The United States alleges that St Jude solicited physicians for the studies in order to retain their business and/or convert their business from a competitor's product."  Again, as is usual, the settlement did not require any executive who authorized or directed the activities leading to the kickbacks suffered any negative consequences.


Despite this, note that Bloomberg in its recent coverage of the Tsarnaev prosecution even tried to make Ms Ortiz failure to hold any individuals accountable for this health care corporate misbehavior seem like tough prosecution.

The office has been a leader in health-care fraud prosecutions, securing $4 billion in civil and health-care recoveries in 2012. Those included a $3 billion payment from GlaxoSmithKline Plc (GSK), which pleaded guilty to charges that it illegally promoted prescription drugs. 

Again, note that apparently being a "leader" in health care fraud prosecution involved pushing for big fines to be paid by the corporations involved in actions that may have harmed many patients, but no punishment for  the individuals who may have authorized, directed or implemented the bad behavior, but being "tough" on Aaron Swartz involved pushing for a long imprisonment of someone whose alleged crime was not violent, and did not result in anyone being hurt.


Summary

As we have noted again and again and again, leaders of large health care organizations, particularly the largest health care corporations, seem to enjoy virtual impunity.  No matter how bad the behavior of the corporations which they are supposed to be leading, and no matter whether such behavior might have harmed patients, they almost never have to face any negative consequences, especially not fines they must pay themselves, much less prison time.  We have documented many legal settlements of often egregiously bad alleged behavior that did not involve any penalties for top corporate leaders.

One way corporate leaders thus escape accountability seems to be the cultivation of myths that distract the public from what is going on.  One such urban legend seems to be the toughness of government prosecutors.  If prosecutors are believed to be uniformly tough and uncompromising, then the public may be lead to believe either that they are tough and uncompromising on corporate crime   

As we have said repeatedly, true health care reform would require making the leaders of health care organizations accountable, especially for the effects of their actions on patients' and the public's health.