Novartis' Latest Ethical Misadventure: Did it Pay to Play ... with the US President?

Amidst the news deluge, a story that stood out in the last few days was that of the strange relationships between a consulting firm set up by President Donald Trump's former lawyer and Trump Organization counsel Michael Cohen, and several large corporations.  As reported on May 8, 2018 by the New York Times, the focus was on the payments made to the firm, Essential Consultants LLC, by a financial firm, Columbus Nova, associated with a Russian oligarch, Viktor Vekselberg, who has been described as "Kremlin-linked."

 Did Novartis Pay Michael Cohen's Essential Consultants LLC for Access to the White House?

However, Essential Consultants LLC also had a poorly described business relationship with Swiss-based multinational pharmaceutical manufacturer Novartis.  Per the NYT,

Among the other payments to Mr. Cohen’s company described in the financial records were four for $99,980 each between October and January by Novartis Investments S.A.R.L., a subsidiary of Novartis, the multinational pharmaceutical giant based in Switzerland. Novartis — whose chief executive was among 15 business leaders invited to dinner with Mr. Trump at the World Economic Forum in January — spent more than $10 million on lobbying in Washington last year and frequently seeks approvals from federal drug regulators.

Additional reporting on this relationship suggests that Novartis may have been trying to buy access to or influence on the Trump administration. More details on the arrangements between the firms came from Ed Silverman in Stat News ,

A Novartis unit called Novartis Investment SARL made four payments, each one totaling $99,980, to the consulting firm, according to documents released by Michael Avenatti, the lawyer for Stormy Daniels, the adult film star whose real name is Stephanie Clifford and who was paid $130,000 by Essential Consultants to keep quiet about her alleged affair with Trump.

In a statement, Novartis says it entered into a one-year agreement with Essential Consultants in February 2017, 'shortly after the election of President Trump focused on U.S. healthcare policy matters. The terms were consistent with the market. The agreement expired in February 2018.'

The first Novartis payment was purportedly made on Oct. 5, 2017, while the subsequent payments followed in successive months — Nov. 3, 2017, Dec. 1, 2017, and Jan. 5, 2018, according to the documents.

A Novartis spokesman said that 'any contracts were done prior to (chief executive officer Vasant Narasimhan) taking over' and that he 'had no involvement whatsoever with this arrangement.' He did not provide any further details concerning the payments, but indicated the agreement had expired.

Narasimhan succeeded Joe Jimenez as Novartis chief executive on Feb. 1 this year, although he attended a dinner with Trump at the World Economic Forum in Davos, Switzerland, on Jan. 25, which Avenatti noted in the documents that he released. A Novartis spokesman later added that Jimenez last met with Trump at a meeting with executives from several drug makers last spring.

Another article by Mr Silverman in Stat gave some further rationale for this agreement.

Michael Cohen, a longtime fixer for the president, reached out to Novartis’s then-chief executive officer Joe Jimenez, promising help gaining access to Trump and influential officials in the new administration, according to an employee inside Novartis familiar with the matter.

Jimenez took the call and then instructed his team to reach a deal with Cohen.

Furthermore, a Novartis empoyee said,

'With a new administration coming in, basically, all the traditional contacts disappeared and they were all new players. We were trying to find an inroad into the administration. Cohen promised access to not just Trump, but also the circle around him. It was almost as if we were hiring him as a lobbyist.'

A Huffington Post article found

an official with one of those companies [Novartis, At&T, or Korea Aerospace], who requested anonymity to speak openly, was more blunt. The official said Cohen 'was promising access to Trump and members of the administration, positioning himself as a lobbyist.'

So there seemed to be a confluence of reporting suggesting that Novartis paid Michael Cohen via the perhaps ironically named Essential Consultans LLC for access to or influence over the Trump administration, and possibly specifically President Trump himself.  Chummy relationships between large health care organizations, particularly large for-profit health care corporations, and US government agencies that regulate health care, or set health policy are old news.  We have frequently discussed the revolving door through which people travel going to and from leadership positions in health care corporations and in health related government agencies.  While we have discussed many examples of health care corporations being accused of, settling allegations of, or even pleading guilty to charges of bribery or kickbacks, I cannot recall any case of a health care corporation paying for access to and possibly raising suspicions about the bribery of the President of the US. That would be a new low in the annals of health care corruption.


Nothing New for Novartis

Thus it should be no surprise that pundits on the business of health care were back on their heels.  John LaMattina, wrote for Forbes,

The most recent revelation involving Novartis is both shocking and depressing.

Also,

One wonders what Novartis was thinking in entering such an agreement. Clearly, any sensible person would look at such an agreement cynically and come away with the view that Novartis was attempting to buy access to the President through his lawyer. Furthermore, the one year contract that Novartis had with Cohen - $100,000/month – is a lot of money for a lawyer with no background in healthcare. Didn’t anyone at Novartis think about how badly this would look if such a deal was made public?

But Mr LaMattina is a former President of Global Research and Development for Pfizer, a company with a long history of ethical misadventures (look here), so may be a bit biased about the integrity of the pharmaceutical industry.

In fact, Mr Silverman's first article suggested that Novartis is not so innocent.

Throughout much of last year, Novartis was embroiled in a bribery scandal in Greece, where the government was probing allegations that the drug maker made payments to numerous politicians to boost sales of its medicines through public agencies.

Also,

In the U.S., the drug maker is defending a long-running lawsuit that is being pressed by the federal government over allegations it provided doctors with paid speaking engagements, fancy meals, and alcohol in exchange for writing prescriptions for its drugs.

The case is being closely watched because the company has been accused of being a repeat offender. How so? In 2010, Novartis paid $422.5 million in penalties and pleaded guilty to a misdemeanor to resolve criminal allegations that it improperly promoted several medicines.

At the time, the company was already operating under a Corporate Integrity Agreement, which required establishing an internal compliance program and reporting violations, among other things. That agreement was signed in September 2010, yet the lawsuit alleged the infractions occurred afterward, suggesting Novartis might face a stiff penalty should it attempt a settlement with the government.

Moreover, those who follow Health Care Renewal would realize that Novartis' record of ethical misadventures is much more extensive than that.


In October, 2016, Novartis settled charges that from 2002-2009 it promoted use a skin cream for pediatric patients for unapproved indications and in ways that could have endangered patients (look here).  

In March, 2016, Novartis settled charges by the US Securities and Exchange Commission (SEC) under the Foreign Corrupt Practics Act (FCPA) thatfrom 2009-2013 it bribed Chinese health care professionals to increase sales (look here).  

In November, 2015 we discussed what were then the latest misadventures by Novartis and its leadership.  At that time, our post included these section headings covering 2014-15:

-  Japanese Health, Labor and Welfare Ministry Found that Novartis Concealed Serious Adverse Effects
- Novartis Executive Pleads Guilty to Bribing Polish Official
- Novartis Subsidiary Sandoz Settles Allegations that it Misrepresented Pricing Data to US Medicaid
- Express Scripts Settles Allegations that it Accepted Kickbacks from Novartis
- Novartis Settles US Allegations of Kickbacks to Enhance Sales of Multiple Drugs

Furthermore, in that post we also documented Novartis' previous record.   In March, 2014, we had noted:
- Italian authorities had fined Novartis and Roche for colluding to promote the use of an expensive opthamologic treatment
- the NY Times published interviews with physicians ostensibly showing how Novartis turned them into marketers for the drug Starlix
- Japanese investigators charged Novartis with manipulating clinical research
- Indian regulators canceled a Novartis import license, charging the company with fraud.

Also,  in 2013, Novartis was fined for anti-competitive practices in its marketing of Fentanyl by the European Commission (look here), and in 2011 its Sandoz subsidiary settled allegations of misreporting prices in the US for $150 million (look here)   Other Novartis misadventures from 2010 and earlier, including the two described in the Stat News article, appear here.  So Novartis has quite an impressive, if not infamous record of ethical failures.

Note that through all these cases, Novartis leadership enjoyed impunity.  No Novartis top manager suffered any negative consequences from any of them (although one apparent mid-level company manager at the Polish subsidiary did plead guilty), and all these previous episodes apparently did not suggest a pattern of recidivism to US authorities this time sufficient to attempt to impose any negative consequences on higher level managers.

So is it at all surprising that the previous Novartis CEO did not see a big problem paying Donald Trump's lawyer and former corporate counsel to a little access to The Donald?

Discussion

Most corrupt actions require two parties.  While it is understandable that there has been tremendous recent interest in evidence that the Trump regime is corrupt (look here), any such corruption had to have been enabled by unethical actions on the parts of others.  Those others likely included large numbers of leaders of large corporations, including health care corporations.  We have shown repeatedly that top leaders of US health care organizations have enjoyed impunity that has allowed them to foster a host of unethical actions, including crimes such as bribery, fraud, and kickbacks, and true health care corruption.

Our societal tolerance of health care (and other forms of) corruption probably enabled the currently breathtaking scope of executive branch corruption.  For a long time we have argued that health care corruption is a major cause of health care dysfunction.  As we wrote in August, 2017, 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 got little attention.  Health care corruption has been nearly a taboo topic in the US, anechoic, presumably because its discussion would offend the people it makes rich and powerful. As suggested by the recent Transparency International report on corruption in the pharmaceutical industry,

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.

Presumably the leaders of other kinds of corrupt organizations can do the same. 

When health care corruption is discussed in English speaking developed countries, it is almost always in terms of a problem that affects somewhere else, mainly  presumably benighted less developed countries.  At best, the corruption in developed countries that gets discussed is at low levels.  In the US, frequent examples are the "pill mills"  and various cheating of government and private insurance programs by practitioners and patients.  Lately these have gotten even more attention as they are decried as a cause of the narcotics (opioids) crisis (e.g., look here).  In contrast, the US government has been less inclined to address the activities of the leaders of the pharmaceutical companies who have pushed legal narcotics (e.g., see this post). 

However, Health Care Renewal has stressed "grand corruption," or the corruption of health care leaders.  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  multi-billion revenues without admitting guilt.  Almost never are top corporate managers subject to any negative consequences.


The continuing festering of widespeard amorality and corruption at the top of US business has fostered a situation in which now corruption appears to have spread to the top of the US government.
 The only way we can now address health care corruption is to excise the corruption at the heart of our government.

A Tenet of Impunity - Tenet Settles Kickback Allegations for $514 Million, No Individual Suffers Any Negative Consequences

Tramp, tramp, tramp.  The march of legal settlements continues.  The latest entry is a corporation that has had a 20 plus year history of legal misadventures, allegations of unethical behavior, and actual crimes.  Here are the basics from the Atlanta Business Chronicle:

Tenet Healthcare Corp. (NYSE: THC) said Monday that it believes it has reached an agreement in principle with the government to resolve a long-running criminal investigation and civil litigation about a kick-back scandal involving an Atlanta medical clinic and three of the company's Atlanta-area hospitals.

Dallas-based Tenet said it has agreed to pay $514 million, has agreed to the appointment by the U.S. Department of Justice of a corporate monitor for a period of three years, and has agreed for two wholly owned subsidiaries that previously operated Atlanta Medical Center and North Fulton Hospital to each plead guilty to a single-count indictment.

In particular, regarding kickbacks,

The company's two subsidiaries will plead guilty to a single count of conspiracy to violate the federal anti-kickback statute and defraud the United States, Tenet reported.

Four hospitals owned by Tenet -- Atlanta Medical Center, North Fulton Hospital, Spalding Regional Medical Center and Hilton Head Hospital -- allegedly paid kickbacks to a Georgia company called Clinica de la Mama for Medicaid patient referrals. Clinica de la Mama operated medical clinics that provided prenatal care to predominantly undocumented Hispanic women in metro Atlanta and Hilton Head, S.C.

The contracts were in effect for various periods from 2000 to 2013 between the four hospitals.

Like many such settlements, this one evoked almost no media coverage, and what coverage there was appeared in the business, not health care news.  For example, the brief Wall Street Journal story focused almost entirely on the financial implications for Tenet of the settlement.  Thus the anechoic effect continues.  

Unpacking the Settlement

Bad Patient Care

First of all, the settlement included guilty pleas to charges of "conspiracy to violate the federal anti-kickback strategy."  The allegations were that the kickbacks were paid "for Medicaid patient referrals."  That means that Tenet was alleged to have paid the operator of medical clinics to send patients to Tenet hospitals.  This goes beyond financial crime.

Physicians swear oathes to put the care of individual patients ahead of all other concerns.  The new American Medical Association Principles of Medical Ethics states:

A physician shall, while caring for a patient, regard responsibility to the patient as paramount.

That means that decisions by physicians to refer patients to specific hospitals, specialists, etc should be based on what referrals would be best for individual patients, and certainly not on payments to the physicians by such hospitals, specialists, etc.  Kickbacks like those described above could send patients to hospitals that were not the most suitable for the patients' needs, thus potentially harming patients.  So this case raises big concerns about bad patient care, not merely unethical money transfers.

Yet in the minimal media coverage of the Tenet settlement, I see nothing about medical ethics, potential harms to patients, etc. 

Impunity

As is typical of such settlements, no individual who might have authorized, directed or implemented the kickbacks suffered any consequences.  While top managers of Tenet might have gotten even bigger bonuses because of the additional revenues supplied by the sorts of behavior discussed above, they  would suffer no financial penalties as a result of this settlement.  In fact, in 2015, the current Tenet CEO,  Mr. Trevor Fetter, who was an officer of the company in 2013, the last year kickbacks covered by the settlement ocurred, received total compensation of $15,354,283 according to the company's 2016 proxy statement.

Although in this settlement there were at least some corporate guilty pleas, allowing this case to be considered criminal, these pleas were not made by Tenet.  Instead they were by its subisidiaries.  This would allow Tenet itself  to avoid any non-financial penalties, such as being barred from participating in US government programs.  While the monetary size of the settlement appeared to be large, it was trivial compared to Tenet's annual earnings, which last year were over $18.6 billion according to Google Finance.

This settlement, like many others, included a corporate integrity agreement.  Such agreements, and conceptually similar deferred prosecution agreements, were heavily promoted, in part through the use of a logical fallacy, by then US Attorney, now Governor of New Jersey Chris Christie.  However, there seems to be little evidence that they deter future bad behavior (look here).  

Recidivism

Tenet actually has a long, dark record of misbehavior.  In 2012, we published our last post on Tenet.  It was about a $42.7 million dollar settlement the company made then of charges it overbilled the Medicare program from 2005-07.  As we wrote then:

While this story appeared briefly and without context in a few business news outlet, it really is part of a much bigger picture.

National Medical Enterprises

Published in 2006, Maggie Mahar's Money Driven Medicine was one of the important early works on health care dysfunction (see post here, the web-site of the documentary film based on it here).  One of the striking cases it discussed was that of Nartional Medical Enterprises.  NME was charged not only with run of the mill offenses like over-billing, but more exotic ones like kidnapping patients. NME eventually settled with federal authorities in 1994 for $379 million, and pleaded guilty to a variety of charges. The results were similar to many more recent cases. No one went to jail, and the CEO walked away with a golden parachute.  Despite the seriousness of the offenses, NME did not go out of business.  It simply changed its name - to Tenet Healthcare.

Legal Problems in the 21st Century

The "new" Tenet continued to have legal issues.  These included a $395 million settlement of the Redding Medical Center unnecessary heart surgery scandal in 2004 (look here), and a $21 million settlement of US government charges of kickbacks (look here), a $7 million settlement with the government of Florida of charges of fraudulent billing (look here), and a $900 million settlement of federal over-billing complaints (look here, and see our post here), all in 2006.  There was an apparent lull, and then in 2011 the company settled a class action suit brought after the deaths of 34 patients in a Tenet facility in New Orleans after Hurricane Katrina (see Bloomberg story here.)

Yet this more than 20 year history of repeated allegations, settlements, and crime did not apparently affect the latest settlement.

Conclusions

Nearly every big US health care corporation now seems to now have a long history of bad behavior, sometimes criminal behavior, that has not stopped the revenues from flowing, and the top managers from becoming millionaires, or billionaires.  Is it any wonder that a few years ago, nearly a majority of US respondents to a Transparency International poll declared our health care system to tbe corrupt (look here)?

Their dark musings may be partially due to their awareness that health care corruption is a taboo topic.  As we wrote about it in 2016 (look here)...

 Essentially, 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 Transparency International 2016 Report on health care corruption in the pharmaceutical industry,

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.

Keep in mind that the money made from corruption does not just go to innocent peoples' retirement funds that are invested in pharmaceutical stocks.  It predominantly goes to top corporate executives and managers, and their cronies who preside over the corrupt practices.

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.

What They Really Think of Us (Swiss Version) - Novartis CEO Would Not Commit to Changing Company Behavior After Latest of Multiple Legal Settlements

The huge corporations which now dominate global health care are creating amazing records of repeated ethical misadventures.  We last discussed multinational Swiss based pharmaceutical manufacturer Novartis' escapades in early 2014.   Since then, the legal settlements and other legal findings just keep on coming, capped with a big one in late October, 2015.

We will summarize them in chronological order.


Japanese Health, Labor and Welfare Ministry Found that Novartis Concealed Serious Adverse Effects

In August, 2014, per the Japan Times, but apparently not reported widely outside of that country.

Novartis Pharma K.K. said it has failed to report at least 2,579 cases of serious side effects to the health ministry, including one that was fatal, related to its drugs for leukemia and other diseases, although employees were aware of the problems.

Of the total, 1,313 cases were related to Glivec and 514 to Tasigna, both drugs for leukemia treatment. Another 261 cases involved Afinitor, a cancer drug, the Japanese unit Swiss drug giant Novartis AG said Friday.

The findings were reported to the Health, Labor and Welfare Ministry the same day.

The marketing staff at Novartis Pharma recognized the side effects but failed to report them to the division in charge, breaking the drug firm’s internal rules, Novartis Pharma said. They were not fully aware of the importance of the problem and higher-ranking officials failed to supervise them properly, it said.

In February, per the PharmaLot blog, the Ministry decided to suspend the company for 15 days, after having issued a business improvement order to it.  More details of Novartis' problems in Japan can be found in the Japan Times.  I cannot find anything to suggest any one in a position of leadership at Novartis faced any negative consequences as a result, however.

Note that by allegedly hiding adverse effects of its drugs, it is possible that the company's alleged actions led doctors and patients to believe the drugs were safer than they really are, possibly leading to overuse of the drugs and resulting in even more adverse effects.  I did not see a discussion of possible patient harm in the discussion of this case.


Novartis Executive Pleads Guilty to Bribing Polish Official

In October, 2014, per a short Reuters (UK) article, and apparently not mentioned elsewhere,

An executive at a pharmaceutical company in Poland who pleaded guilty in a bribery case involving improper payment, works for Novartis, the Swiss drugmaker said on Thursday.

Poland's anti-corruption bureau said on Tuesday two women had appeared in court in a case in which a health fund official was given a tourist trip worth more than $1,000 (620.67 pounds) in exchange for backing the sale of a particular drug.

Both defendants pleaded guilty....

The drug involved was not clear, and the company suggested this was an individual act ("the enquiry relates to an individual and the company is not part of the enquiry.")  Why an individual would do something like this if not to advance her career is not clear, however.  I cannot find any followup coverage of this, nor anything to suggest the supervisors of the executives involved faced any negative consequences.

Again, by bribing an official to promote a particular drug, this case could have led to overuse of the drug, and potentially to patient harm from the drug's adverse effects. 

Novartis Subsidiary Sandoz Settles Allegations that it Misrepresented Pricing Data to US Medicaid

In March, 2015, per the PharmaLot blog,

In what the federal government says is the largest such settlement ever reached, Sandoz has agreed to pay $12.64 million to resolve allegations that it misrepresented pricing data on medicines that were provided to the Centers for Medicare & Medicaid Services.

Sandoz, which is owned by Novartis and markets hundreds of generic drugs in the U.S., allegedly misrepresented the average sales price data to Medicare between January 2010 and March 2012, according to a statement from the Office of the Inspector General of the U.S. Department of Health & Human Services.

A Novartis spokeswoman writes that the drug maker did not admit to any liability or wrongdoing. 'Sandoz continues to be committed to providing high-quality, affordable medicines to U.S. patients and conducting business with customers and the government with integrity.' As part of the settlement, Sandoz agreed to provide certification that it established a government pricing compliance program.

As the OIG explains, Medicare uses the pricing data to set payments for most drugs covered under Medicare Part B....

Again, no one who authorized, directed or implemented any price misrepresentation faced any negative consequences.  Futhermore, as often occurs in US cases, the company did not admit any wrongdoing, and provided the usual public relations boilerplate about upholding the highest principles, the allegations leading to the settlement notwithstanding.

Express Scripts Settles Allegations that it Accepted Kickbacks from Novartis

In May, 2015, also per the PharmaLot blog,

Express Scripts  has agreed to pay $60 million to resolve allegations by U.S. authorities that a business unit participated in a kickback scheme with Novartis that caused federal health care programs to pay for a medicine based on false claims, according to court documents and a regulatory filing.

The U.S. Department of Justice alleged that Novartis offered patient referrals to Accredo Health Group, which is a specialty pharmacy run by Express Scripts, in exchange for bolstering refills of Exjade, a drug used for reducing excess iron in patients who undergo blood transfusions....

Apparently other lawsuits involving allegations of Novartis payments to other pharmacies are pending. Note that the events alleged in some of these proceedings may have occurred while Novartis was already subject to a so-called corporate integrity agreement,

a key issue to watch is the extent to which a so-called Corporate Integrity Agreement that Novartis signed in 2010 factors into the proceedings. These agreements typically run for five years and require a company to establish an internal compliance program and report violations.

At the time that Preet Bharara, the U.S. Attorney in New York, announced the lawsuits against Novartis two years ago, he called the drug maker a 'repeat offender,' and the lawsuits noted that the violations alleged in the litigation took place before and after the CIA was signed.

Note that the settlement was with Express Scripts, although it involved allegations of misbehavior by Novartis.  Note also that this settlement throws into doubt one mechanism now widely used by law enforcement in the US to settle cases involving big corporations, the corporate integrity agreement or defererred prosecution agreement.  These are agreements made by corporations not to behave badly again.  Yet this case may yet demonstrate that these agreements do not deter future bad behavior.

Again, so far, this settlement did not involve any negative consequences for who may have authorized, directed or implemented the bad behavior either at Express Scripts or Novartis.

Novartis Settles US Allegations of Kickbacks to Enhance Sales of Multiple Drugs

In late October, 2015, a larger settlement, at least in monetary terms, of related issues was announced, per Reuters,

Novartis agreed in principle to pay $390 million to settle U.S. allegations that it used kickbacks to speciality pharmacies to push sales of some drugs, the Swiss company said on Tuesday, hitting third-quarter earnings.

Since this case involved hundreds of millions dollars, it got a bit more coverage than the others.  For example, Bloomberg provided some more specifics,

The payment covers all claims related to the medicines Myfortic, Exjade, Tasigna, Gleevec and TOBI, the company said. The U.S. had sought as much as $3.3 billion from Novartis for Exjade and Myfortic claims, claiming it had referred patients to specialty pharmacies and paid kickbacks in the form of rebates to get those pharmacies to recommend the drugs to patients and to increase sales.

It is customary in such settlements for them to allow the accused corporation to avoid any admission of guilt, often with some statement that the corporation neither confirms or denies the allegations.  In this latest cast, however, while the company issued the usual "neither confirm nor deny" statement, the Novartis CEO appeared to want to deny the allegations despite his willingness to pay so many millions to get them behind him, as per Reuters,

Chief Executive Joe Jimenez told reporters Novartis had made the disputed payments to ensure patients took their drugs, including treatments to prevent rejection of transplanted organs, but U.S. government attorneys disagreed.

'It's something we just believe we want to put behind us,' Jimenez said. Novartis said it neither admitted nor denied liability as part of the settlement.

How the payments or rebates to the pharmacies had anything to do with improving patient adherence is not clear.  Mr Jiminez's expertise in improving patient adherence is similarly not clear.  Per his official company biograpphy, his education was limited to business school, and before becoming a Novartis executive, he ran the Heinz company, makers of the famous ketchup (look here and here).  

Note that if, despite the protestations of the CEO to the contrary, the effect of the company's alleged actions was to over-promote use of the drugs, the results could have been excess adverse effects for patients. 

Furthermore, and despite this possibility, per the Wall Street Journal, the CEO also seemed unwilling to agree that the company would change any of its practices beyond paying the money,

Chief Executive Joe Jimenez said the rebates were designed to induce specialty pharmacies to ensure that patients completed a course of medicine. He added that Novartis still used this 'quite common' practice at specialty pharmacies in the U.S.

'We continue to maintain that specialty pharmacies must continue to play a role in ensuring patient adherence,' he said. 'How that is going to play out as to whether we change our behavior or not remains to be seen.'

This suggests that CEO Jiminez really thinks that the company should pay the money and then continue doing what it pleases, based on the rationale that the payments to or discounts given pharmacies were meant to improve patient adherence, not oversell the drugs.  This may reflect what he really thinks of what his company ought to be doing for, or to us, that is to or for the patients who take the drugs it manufactures. 

 Nonetheless, a public relations release tried to make those comments inoperative.

Some media coverage did not accurately reflect our position and the seriousness of the Company's commitment to working with the government to ensure our behaviors and interactions with specialty pharmacies meet the highest ethical standards. As such, we want to emphasize the following points:

Novartis will make detailed admissions of fact concerning the Government’s allegations as part of the final settlement.

Any reports suggesting that we are not addressing the Government’s concerns or the particular issues on which the litigation focused was not intended by the Company.

We remain committed to working with the government on corporate integrity obligations, including those relating to specialty pharmacies, and conducting our business in an ethical manner that is fully compliant with the law.

We await the statement of facts.  Maybe this statement will prove true, but given that the original statement came from the CEO, to whom the PR people who wrote the satement report, perhaps CEO and former purveyor of ketchup Jiminez meant what he said.  As noted in the Modern Healthcare blog,

Patrick Burns, co-director of the Taxpayers Against Fraud Education Fund, a not-for-profit funded by whistle-blowers and law firms that represent them, said he remains skeptical of the company's intentions.

Burns said Jimenez's original statements smack of disrespect for the U.S. Justice Department and the U.S. attorney general.

'It's a level of arrogance and ignorance which is jaw-dropping,' Burns said. 'You have the CEO coming out and brazenly saying we will not even change our practice. I think this really is the time for the attorney general to show her teeth.'

We also await any such dental findings. 


Summary

This set of misadventures are just the latest in a long series by Novartis.  In March, 2014, we noted:
- Italian authorities had fined Novartis and Roche for colluding to promote the use of an expensive opthamologic treatment
- the NY Times published interviews with physicians ostensibly showing how Novartis turned them into marketers for the drug Starlix
- Japanese investigators charged Novartis with manipulating clinical research
- Indian regulators canceled a Novartis import license, charging the company with fraud.

Also,  in 2013, Novartis was fined for anti-competitive practices in its marketing of Fentanyl by the European Commission (look here), and in 2011 its Sandoz subsidiary settled allegations of misreporting prices in the US for $150 million (look here)   Other Novartis misadventures from 2010 and earlier appear here.  So Novartis has quite an impressive, if not infamous record of ethical failures.

Nonetheless, the march of its legal cases continues.  Furthermore, after the latest case, the Novartis CEO suggested that he saw no clear need for the company to change its ways, even though his PR people later tried to recast his statements.

So we see that the big health care organizations which now dominate health care globally continue to misbehave, and current legal efforts centering on settlements and fines seem to do nothing to deter continued misbehavior.  Maybe it is time to end the impunity of the corporate managers who have become rich while such behavior continues on their watch.  Modern Healthcare quoted Mr Burns as saying

the financial penalty in this case didn't seem to be enough to fix the problem. He believes the government needs to begin excluding executives such as Jimenez from federal healthcare programs in order to better get its message across that such behavior won't be tolerated.

In the new PharmaLot blog, Ed Silverman was hopeful that things may really be getting ready to change. He first noted, as we have done many times previously,

Over the years, a parade of drug companies has reached settlements, mostly for paying physicians to favor their medicines or illegally marketing products. Rarely, though, do executives suffer any consequences.

Also,

Mostly, the federal government resorts to large fines, even though countless people may have been prescribed medicines unnecessarily — at great expense and sometimes great harm. And drug makers simply treat these penalties as a cost of doing business. The failure to come down harder is sadly reminiscent of the recent financial crisis in which most heads of the biggest banks escaped unscathed.

Lately, however, there are signs the government might be changing its approach toward recalcitrant executives, and such a move is long overdue. After all, if individuals are not held accountable, the senior officials who run these companies have little incentive to play by the rules.

One can only hope, I suppose.  But to conclude as I have so many times before....

There seems to be increasing recognition that the continuing rise in US health care costs is unsustainable, and that these costs are not buying us good health care.  There are calls to avoid unnecessary, and sometimes harmful care.  Yet there is a persistent disconnect between how continuing dishonest behavior by health care organizations, impunity of their leaders, and lack of accountability by their board members fuel rising costs, shrinking access, and bad outcomes for patients.

To truly reform health care, we will have to at least recognize the causes of the current dysfunction.  Recognizing how health care dysfunction is created by unaccountable, dishonest leadership should lead to true reform that would promote well-informed, honest, accountable leadership that puts patients' and the public's health ahead of personal gain.  

The March of Legal Settlements Continues into 2015 - Daiichi Sankyo Settles Charges of Kickbacks to Doctors for $39 Million

We are just into January and have our first legal settlement by a major health care corporation of charges of giving physicians kickbacks to spur use of a commercial product.  Like most such stories, this one got little notice.  The most extensive report was in Ed Silverman's PharmaLot blog on the Wall Street Journal site.

The Summary and Allegations

The basic summary...

Daiichi Sankyo agreed to pay $39 million to the U.S. federal government and state Medicaid programs to settle allegations of paying kickbacks to physicians to prescribe several of its drugs.

The allegations were ...

that Daiichi initiated different speaker programs and paid doctors kickbacks – in the form of honoraria and meals, among other things – that were labeled as speaking fees between 2004 and 2011. The speaker programs, however, were problematic, according to the U.S. Department of Justice.

How so? The feds allege that some physicians spoke only to his or her own office staff; the audience sometimes included the physician’s spouse; payments were made to physicians even when participants took turns 'speaking' about duplicative topics at dinners paid for by the drug maker; and the dinners were lavish and, sometimes, exceeded internal Daiichi cost limitations of $140 a person, according to the settlement agreement.

Note that the defenders of physician - industry "collaboration" often defend payments such as speaking fees as necessary "conflicts of interest" to encourage health care "innovation."  Innovation does not seem the right word for the conduct in this case, and the payments seem to be more than just "conflicts of interest."  Nonetheless the defenders often argue that at best, such "conflicts of interest" only need to be disclosed, not limited. 

The drugs whose prescription were allegedly being encouraged by the kickbacks were...

the Welchol cholesterol-lowering medication and the Benicar, Azor and Tribenzor high blood pressure pills

Details of the Penalties, or Lack Thereof

This settlement followed the usual choreography. It included a corporate integrity agreement...

which stipulates that the drug maker must implement compliance programs to prevent such illegal practices from occurring in the future.

It did not apparently include any obligation for the company to admit wrongdoing, much less plead guilty to anything. Instead, a company executive offered the de rigeur statement...

Ken Keller, who heads Daiichi Sankyo commercial operations in the U.S., says 'we are pleased to have finalized these agreements and remain focused on our core mission of helping people live healthy and meaningful lives. We are committed to being an ethical, trusted and respected company, and constantly improving how we operate is part of our culture.'

The irony induced by juxtaposing the present tense "we are committed to being... ethical" and the substance of the charges was apparently lost on Mr Keller.

Finally, no individual who authorized, directed, or provided the kickbacks apparently suffered any negative consequences, much less fines or other legal sanctions.

Summary and Comments

Here comes the New Year, just like the old year. I have lost count of how many posts we have published about legal settlements of cases in which drug, biotechnology, or device companies were alleged to have given physicians kickbacks to prescribe, use or implant their products.

During the last half of 2014, similar cases in our archives include -
November, 2014 - Biotronik settled charges of kickbacks for use of its devices
November, 2014 - Teva settled charges it induced physicians use of drugs by payments to physician
October, 2014 - Biomet settles charges it gave kickbacks for use of its bone growth products
October, 2014 - DaVita settles charges it gave kickbacks for referral of patients to its dialysis clinics


Such kickbacks are obviously unethical, and fit the Transparency International definition of corruption, "abuse of entrusted power for private gain."  Physicians are entrusted to make decisions on behalf of patients in the patients' best interests, not for the sake of payments from commercial firms.

Nonetheless, as in the cases of legal settlements of other charges involving other kinds of unethical behavior by big health care organizations, the consequences for these organizations seem to be slaps on the wrist with wet noodles.  Although the fines meted out may seem big to regular folk whose income has been stagnant for years, they are usually small compared to the organizations' revenues.  In any case, the fines are paid out of general corporate funds, and so ultimately by stockholders, employees, and perhaps customers, clients, or patients who had nothing to do with the kickbacks.  On the other hand, those who actually profited from the kickbacks usually walk away with no consequences.  Thus it seems unlikely that these sorts of fines in the absence of penalties assessed against individuals deter future bad behavior.  We have discussed these problems frequently in our posts on legal settlements.

The corporate integrity and/or deferred prosecution agreements deserve a bit more comment at this juncture.  They only seem to ask the company to refrain in the future from doing anything really nasty, but rarely incorporate serious scrutiny or any meaningful consequences should the company do something nasty.

In fact, the pioneering use of these  agreements by current New Jersey Governor Chris Christie when he was a US Attorney lead to charges that they were a form of "shakedown," rather than justice, and could be used to do favors for political cronies installed as the monitors for the agreement.  A 2014 article in the New York Observer provided examples of health care related settlements authored by Mr Chistie,

In 2007, the Star-Ledger broke the news that John Ashcroft, the former attorney general who had been Mr. Christie’s boss at the DOJ, received a '$52 million payday' for serving as an outside monitor to medical device company Zimmer Holdings. [See our summary of the Zimmer case including this deferred prosecution agreement here.]  Another DPA led to Bristol-Myers Squibb agreeing to spend $5 million to fund a business ethics program at Seton Hall University, where Mr. Christie had attended law school. [See our 2005 summary of the Bristol-Myers-Squibb case involving this deferred prosecution agreement here.]  And then there was the mother of all eyebrow-raising DPA paydays.

When the University of Medicine and Dentistry of New Jersey, one of the largest medical schools in the country, was revealed in 2005 to be a veritable parking garage for politically connected no-show jobs, Mr. Christie tapped an old friend, mentor and predecessor, former New Jersey U.S. Attorney Herb Stern, to serve as the school’s federal monitor. [We posted extensively on the UMDNJ case here.]  Mr. Stern is a giant in New Jersey legal circles—he is the subject of the book Tiger In the Court—but his fees after his return to private practice had raised eyebrows. The former CEO of Qwest, Joseph Nacchio, alleged that Mr. Stern wildly overbilled him for 'duplicative and unnecessary work,' including sending seven attorneys to attend a court appearance and even charging thousands for staff breakfasts, in-room movies and underwear. According to The New York Times, Mr. Stern’s firm 'ultimately billed the state for more than $10 million.' A couple of days after Mr. Stern landed the contract, Mr. Christie hired Samuel Stern, the son of Herb Stern, despite what were reported by The Star-Ledger to be 'objections from nearly every assistant U.S. attorney who interviewed him.' A couple days after that, Mr. Christie announced his own resignation as U.S. attorney.

Note further that most of these legal settlements seem uninformed by any previous bad behavior of the organization or the people involved.  Many of the organizations subject to these settlements have already made previous settlements, sometimes many of them.  Some of them have already signed corporate integrity or deferred prosecution agreements.  Relevant to the current case, Daiichi Sankyo's Ranbaxy subsidiary paid a $500 million settlement for selling adulterated products in 2013 (see our blog post here).

Finally, note that the settlements made by large health care corporations often seem effete compared to those imposed on smaller organizations or individuals.  Some recent examples appear in blog posts here and here.  In fact, the US Attorney responsible for the current Daiichi Sankyo settlement is Ms Carmen Ortiz.  In 2014, Ms Ortiz was responsible for the little ($6 million) Biomet settlement above, constructed without regard to several larger settlements made by the same company.  In fact, we had posted that Ms Ortiz was involved in settling three seemingly big previous cases, involving allegations that Forest Pharmaceuticals promoted Celexa in adolescents despite the drug's likely dangers to them, GlaxoSmithKline used misleading drug packaging, also likely endangering patients, and St Jude Medical gave kickbacks to doctors to induce them to implant medical devices.  All cases were settled with fines, but again no individuals suffered any negative consequences.  However, in contrast, Ms Ortiz was also the prosecutor who proved how tough she was when she threatened activist Aaron Swartz with serious prison time for alleged computer fraud, driving Mr Swartz to suicide.

So, quelle surprise, 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. 

For a more humorous take on Mr Christie's career, see this performance by Jimmy Fallon and Bruce Springsteen, "Governor Christie Traffic Jam" -




 

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.

"Slap on the Wrist" for a "Too Big to Fail" Hospital - Judge Rejects WakeMed Settlement

Maybe we are reaching an inflection point in how misbehavior by big health care organizations is handled in the US legal system. 

We have frequently discussed the march of legal settlements made by big health care organizations.  Many of these settlements indicated severely bad behavior, often behavior that seemed overtly dishonest, sometimes criminal, and had the potential to harm patients.  Yet most of these settlements involved only fines, and sometimes written agreements that pledge the organization will do better in the future, often in the form of deferred prosecution or corporate integrity agreements.  Yet the fines were often small compared to the amount the organization stood to make from the bad behavior.  It is not clear that any written agreements were enforced, or caused major penalties if the organization did not fulfill them.  And almost never did any individual within the accused organization suffer any negative consequences for authorizing, directing or implementing the bad behavior, even if such individuals may have personally profited from high compensation partially fueled by the bad behavior.

Now and then, though, there are cases that are different.  Perhaps one has just come along that may signal things are going to change.

The Basics of the Case

The case was first reported by the Raleigh (NC)  News & Observer in December, 2012.  Here are the basics:

WakeMed has agreed to pay $8 million to settle an investigation into its practice of billing Medicare for expensive overnight care when the patients had been treated and discharged the same day.

The settlement came after a lengthy criminal investigation into Medicare billing procedures used by nurses at the private, not-for-profit hospital’s Heart Center Observation Area.

Nurses there, according to federal court documents, routinely ignored physicians’ orders for how a patient should be classified. Their actions resulted in the hospital receiving millions of unwarranted Medicare dollars for outpatients who were classified wrongly as inpatients.

Though some WakeMed managers were aware of the billing practices, according to court documents, investigators found no evidence of anyone personally benefiting from the system.

No one, according to WakeMed officials, lost their job or was disciplined because of the investigation. 

The US Attorney made the usual sort of announcement:

'This case will serve as a reminder that hospitals, just like individual health care providers, will be held accountable for their actions,' [Thomas] Walker, the U.S. Attorney for the Eastern District of North Carolina, said in a statement.

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

So far, this is pretty usual.  There were accusations of inflated billing, a monetary fine that might look big to the average citizen, but that pales next to the revenue of the offending organization (over $943 million in the 2010-2011 fiscal year according to the WakeMed 2011 US form 990),a stern statement by the US Attorney, but again no penalties for any individual, and here, a rather implausible statement that no one benefited from the deceptive practices.

However, there were also some immediately appreciable atypical elements to this case.

Atypical Elements

In addition to the fine to be paid, the case was to be settled using a deferred prosecution agreement:

The hospital faces two criminal charges – making material false statements relating to health care matters and aiding and abetting, but under the settlement reached Wednesday, prosecution will be deferred. If the hospital complies with provisions in the settlement agreement, such as paying $8 million and allowing further monitoring, the charges will be dismissed in two years, according to court documents.

As part of the agreement, which has yet to be approved in court, [Wakemed CEO Bill] Atkinson acknowledged the wrongdoing described by prosecutors. He further acknowledged that WakeMed was responsible for the acts of the health-care organization’s employees and officers.

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

While we have sometimes seen deferred prosecution agreements used in cases in which for-profit health care corporations were accused of violating the law, they are rarely used in cases involving non-profit hospitals.  (The biggest one I recall was that of the University of Medicine and Dentistry of New Jersey, a complex case we started discussing in 2005.  See relevant posts here.)  Criminal charges against a non-profit hospital are also unusual.  Note also that as stated above the hospital system CEO seemed to admit that the hospital did wrong, raising further doubt about the conclusion above that no individual personally profited.

The plot further thickened when the CEO seemed to contradict his own statement within the deferred prosecution agreement that acknowledged wrong-doing.

In an interview Wednesday, Bill Atkinson, WakeMed’s president and CEO, wavered between accepting the charges – saying repeatedly  'I don’t want to minimize it, and I don’t want you to hear me doing that' – and being adamant that the hospital’s actions were simply a misinterpretation of complicated federal Medicare guidelines.

Even though he endorsed a settlement agreement in which prosecutors contend two crimes occurred, Atkinson said he doesn’t believe the hospital’s actions were criminal.

'I don’t think so, but the federal government thinks they could certainly turn it that way,' he said. That description differs vastly from what prosecutors contend. 'They’re not going to minimize the media effect,' Atkinson said.

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

The plot thickened further when in the same interview Atkinson seemed to deny that any individual did anything wrong:

Heidi McAfee, who retired earlier this year, was director of Patient Access during much of the period when the problematic billing occurred. Efforts to reach McAfee on Wednesday were unsuccessful, but Atkinson praised her years of work with WakeMed.

'Do I think anybody intentionally did anything wrong?' Atkinson said. 'No, I don’t.'

He said WakeMed had not reported McAfee or any of the nurses to the N.C. Board of Nursing for ignoring doctor’s orders. 

So did the hospital acknowledge wrongdoing, or did it not?  If wrongdoing did occur, did any individual do it, or was it done by ghosts or spirits?  From this account, it was unclear.

This Time the Inconsistencies and Ambiguities are not Ignored

Many of the settlements we have discussed seem to have been based on similar illogic.  For example, they often involved accusations of bad behavior, often bad enough to put patients at danger, yet the settlements may included ritualistic statements by defendant organizations that they neither admitted nor denied wrongdoing.  Thus, the settlements left ambiguous and unknown what really happened, and their own appropriateness.  (Note that similar settlements are made all the time by big financial firms, and one intrepid judge did point out how little sense they make, see this post.)

Yet in most cases, the illogic is rapidly swept under the rug, noticed, if at all, by lowly outsiders like your humble bloggers on Health Care Renewal.

This time, though, it was different.

Why Would the Nurses Ignore Doctors' Orders?

An important part of the argument by the US Department of Justice in this case was that nurses "routinely ignored doctors' orders."  If it were true, this would be very unusual and would threaten the integrity of health care at the particular institution, since every hospital operates on the assumption that the doctors make management decisions and order tests, treatments, etc, and then the nurses, as well as technicians and therapists carry out these orders.

However, In this case, a local nurse immediately and publicly disputed the notion that the nurses were independently flouting the doctors' orders.  As reported again by the News & Observer in December, 2012,

When Vicki Hewitt-McNeil read about WakeMed’s $8 million settlement for wrong Medicare billing, the Raleigh nurse didn’t buy the story.

According to the settlement, a nursing director instructed her staff to admit patients as inpatients and ignore doctors’ orders to treat them on the less expensive outpatient basis.

With two decades of nursing experience, Hewitt-McNeil didn’t like that the blame was shifted down the totem pole to nurses, who don’t wield the power of administrators and doctors.

'I honestly cannot believe this was the nursing department that did this,' Hewitt-McNeil said. 'That’s just not possible.'

 Furthermore,

[Ms Hewitt-McNeil]  also worked shifts at WakeMed as a pool nurse, similar to working as a substitute teacher. 'Nurses at WakeMed don’t have the autonomy to do anything,' Hewitt-McNeil said. 'You have to call a doctor for everything.'

Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy

Again, the contention that the nurses systematically disobeyed doctors or pretended to be following non-existent orders implied a fundamental break-down of the system and widespread unprofessional, unethical behavior by the nurses.  In addition, the charges did not suggest why the nurses would do something so bad, especially since they were in no position to personally benefit from their actions.

 What Did the Hospital Leadership Actually Admit?

Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy

Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy

It took a few weeks, but someone - it is not clear who it was - noticed that while the Department of Justice asserted that the hospital CEO had admitted wrongdoing, the CEO's public statement seemed to equivocate.  So in mid January, 2013, as reported again by the News & Observer,

Deb Laughery, a spokeswoman for the hospital, issued a clarification on Monday.

'In an abundance of caution, WakeMed confirms that it has agreed to a settlement with the United States as set forth in the Deferred Prosecution Agreement,' the statement said, adding further that statements of fact laid out in the agreement were 'true and accurate.'

In the clarification, WakeMed officials acknowledged that the hospital formally faced federal criminal charges. The hospital also retracted any suggestions that the settlement only involved a small number of cases.

The hospital public relations person apparently could not bring herself to say that the hospital admitted wrongdoing, but by acknowledging that statements of fact in the deferred prosecution agreement were "true and accurate," she seemed to be indirectly admitting again that wrongdoing occurred, and that the hospital was responsible for the actions of its employees.

The Judge Notices the Emperor Has No Clothes

Despite their internal inconsistencies and illogic, most legal settlements of accusations of wrongdoing by big health care organizations are accepted by judges.  In this case, again things were different.  As reported yesterday, on 17 January, 2013 again by the News & Observer,

 WakeMed officials and federal prosecutors spent two years hammering out an $8 million proposal to settle a Medicare fraud investigation.

A federal judge shredded the 116-page agreement in less than 30 minutes on Thursday.

U.S. District Judge Terrence Boyle ticked off a list of his grievances about the proposal, forcing federal prosecutors into the unusual position of defending the defendants.

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Quelle surprise!  The judge took particular offense that the settlement seemed disproportionately lenient,

 The agreement, Boyle said, appeared to be a 'slap on the hand' for a 'too big to fail' corporate giant. Only the day before, Boyle told the lawyers, he sentenced a woman to a year in prison in a $235,000 insurance fraud case.

Furthermore, 

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Boyle was irked that no criminal charges had been filed in the case. He ended the hearing by telling the prosecutor either to fold his briefcase or take it to a federal grand jury for official indictments.

'There are lots of corporations that steal from the government,' Boyle said. 'Most of them are convicted, fined and banished.'

Also,

'Why are you coming to court if you tell me you don’t need me?' Boyle asked Gilmore, the prosecutor who rose before him Thursday. 'I’m just window dressing in this case.'

'Why not take a guilty plea, defer imposition of the judgment and sentence, and come back in two years later and take a post hoc dismissal?' Boyle asked later.

Boyle lamented the increased number of health care fraud cases across the country.

'Who are the victims in this case?' Boyle asked before answering his own question. 'Every American wage earner and every American citizen.'

Boyle continued: 'It’s very difficult for society and the court to differentiate between the everyday working Joe or Jane who goes to prison and the nonprofit corporate giant who doesn’t go to jail, who gets a slap on the hand and doesn’t miss a beat.'

Exactly.   And finally, just to demonstrate the sense of impunity of the leadership of this particular nonprofit corporate giant

Boyle, who’s been a federal judge for 28 years, also criticized WakeMed for failing to send a top administrator or a board member to answer his questions. It’s rare for a criminal case to be resolved without a defendant at the defense table.

Deb Laughery, a WakeMed spokeswoman, said after the hearing that none attended because the board approved a resolution earlier in the week supporting the proposed settlement.

Summary

For years now the leadership of large health care organizations have grown rich while denying accountability for their actions that made this so.  This denial has been largely abetted by governmental regulators and law enforcers, who while often recognizing that corporate misbehavior has occurred, have seemed unable or unwilling to pursue anything but the most lenient resolutions of such cases.  These resolutions are often fines that might appear big to gullible members of the public, but are actually small in comparison to the money to be made; sometimes deferred prosecution and corporate integrity agreements that rarely are enforced; and almost never any negative consequences for the people who authorized, directed, or implemented the bad behavior.  Thus the leaders of health care organizations have enjoyed impunity, have become the new untouchables, and thus health care organizations become ever better at raking in money and ever worse at providing good health care.

As I have said again and again,  until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations.

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/01/15/2607671/wakemed-clarifies-statements-on.html#storylink=cpy

Just the Latest Legal Settlement for HCA

Last month, we posted about investigative reports that suggesting that for-profit hospital chain HCAwas pushed by its private equity owners to put short-term revenue ahead of good patient care.  A legal settlement announced this week corroborates these concerns. 

As reported by television station WRCB in Chattanooga, TN,

HCA Inc., one of the nation's largest private hospital chains, has agreed to pay $16.5 million to settle alleged violations of the Ethics in Patient Referrals Act (also known as the Stark law), the False Claims Act, and other federal and state laws and regulations in connection with the operation of its subsidiary, Parkridge Medical Center, Inc., in Chattanooga.
In addition, Parkridge Medical Center has entered into a comprehensive five-year Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services (HHS-OIG) to ensure its continued compliance with federal health care benefit program requirements.
As alleged in the settlement agreement, during 2007, HCA, through its subsidiaries Parkridge and HCA Physician Services (HCAPS), entered into a series of financial transactions with a physician group, Diagnostic Associates of Chattanooga, through which it provided financial benefits intended to induce the physician members of Diagnostic to refer patients to HCA facilities.
The financial benefits included lease of office space from Diagnostic at a rental rate well in excess of fair market value to meet the mortgage obligations of the Diagnostic members and release of Diagnostic members from a separate lease obligation. These financial arrangements violated the Ethics in Patient Referrals Act and the Anti-Kickback Statute – laws designed to protect patients as well as the integrity of government-funded health care benefit programs such as Medicare, Medicaid, TRICARE, and TennCare.

The issue here were allegations that HCA and its subsidiaries were paying physicians extra so that they would refer patients to an HCA hospital. Obviously, physicians are supposed to put each patient's interests ahead of extraneous considerations, and hence should make referral decisions based on the patients needs, and the likely benefits and harms of the referral, not the amounts the physicians might make from such payments.

Referrals for particular services can be very lucrative for hospitals.  So this settlement seems to provide more evidence that to get profitable referrals, HCA was willing to subvert physicians' values by paying physicians to induce to make what might have been the wrong decisions for individual patients.  Of course, in this situation some physicians were hardly blameless, since they were also willing to set aside their values to receive the payments that generated those referrals.

This fits with the thesis we advanced last month.  While hospitals are supposed to have a mission to put care of the sick ahead of all else, it appears that for-profit hospitals, and especially those owned by private equity are more likely to put short-term revenue ahead of patient care.

As an aside, while this settlement provides useful information, do not think of it as a solution to the immediate problem. 

As we have frequently asserted, it is doubtful that the relatively small payment and the relatively unlikely to be enforced corporate integrity agreement imposed in this settlement will change the company's behavior, in the absence of any negative consequences for the people who authorized, directed or implemented the bad behavior.  HCA once made a $1.7 billion fraud settlement, at the time the biggest such settlement ever made (see this post).  However, the company's CEO at the time, Rick Scott, left the firm with a golden parachute and no negative consequences, and is now Governor of Florida.  If that previous huge settlement did not deter the more recent bad behavior in the absence of any penalties for company executives, why should we expect that the current comparatively tiny settlement also in the absence of such penalties will have any effect?

As we have now said many, many times, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Furthermore, as I wrote last month, we need to challenge the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. Before market fundamentalism became so prominent, many stated prohibited the corporate practice of medicine, and the American Medical Association forbade the commercialization of medicine. It is time to heed that wisdom. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.