Round Up No Suspects: the Bio Telemetry Settlement Demonstrates the Continuing Impunity of Health Care Organizational (and Other) Leaders

The march of legal settlements by important health care organizations continues, although now producing barely an additional ripple on top of the white-capped covered ocean of news and commentary roiled by the recent US election.  However, even the latest small settlement is a reminder of all the problems that continue under the surface.  (And I have now beaten this metaphor to death, sorry.)

The Settlement

As reported very briefly in NJ.com:

A company that monitors cardiac devices worn by heart patients has agreed to pay $1.3 million in civil fines to resolve allegations it paid kickbacks to doctors to persuade them to use their services, the U.S. Attorney's Office announced.

Mednet Healthcare Technologies, Inc. of Ewing, arranged 'fee-for-service' and 'direct-bill' agreements with certain hospital and physician customers for two services - event monitoring and telemetry - and charged them a fee, the office said.

But Mednet then allowed the physicians to directly bill Medicare for the same services, and keep any reimbursements they received that exceeded the fee that Mednet charged them.

U.S. Attorney Paul Fishman's office contends Mednet set up the remuneration agreements so their medical customers would continue to send referrals to Mednet, and were illegal under the federal Anti-Kickback Statute.

The Classic Elements

In this case, the allegations were that a company paid kickbacks (aka "bribes") to physicians to cause patients to use their products.  This appears to fit the ethical definition of corruption per Transparency International, "the abuse of entrusted power for private gain."  The physicians were entrusted to make the best decisions for patients, yet allowed their decisions to be influenced by the prospect of making more money (private gain).  The company was entrusted to provide safe and effective products, yet over-promoted their products presumably to increase revenue, regardless of whether the ensuing use of it would lead to net benefit, or harm for patients, leading to private gain by their top executives and presumably private gain through bonuses for the sales people involved.

However, as has become usual in enforcement of laws regarding kickbacks, bribes, fraud etc, the case was resolved by a relatively small fine.  (According to Yahoo Financials, Bio Telemetry's 2015 total revenue exceeded $178 million.)  The settlement occurred years after the alleged bad behavior (which was said to occur from 2006 -2014.) There was no determination of guilt: 

The claims settled in the agreement are allegations only, and there has been no determination of liability, [US Attorney Paul] Fishman's office said....

Of course, there was no determination of lack of liability, or that the allegations were false either.  Left unanswered was why the company settled if no one had done anything wrong. 

No one who enabled, authorized, directed or implemented the alleged kickbacks was named, much less suffered any negative consequences. Thus, they exhibited impunity.

All that is missing is the de rigeur statement that usually goes something like this: "We will move on from now.  Our company stands for the highest principles and will continue to provide wonderful products and services," yada, yada, yada...

Comments

We have gone on and on that settlements like this do nothing to deter continued bad behavior by large health care organizations.  Such settlements have been the norm in health care for years.  They have also been the norm in finance.  There were some famous statements to the effect that no one with major responsibility for the global financial crisis or great recession of 2008 went to jail.  I contend that the impunity of top leaders in health care, in finance, and in other spheres has led to increasing health care and societal dysfunction.

Such settlements now seem to be the norm for very politically connected figures involved with large for profit education companies.  To wit, per the New York Times,

Donald J. Trump has reversed course and agreed on Friday to pay $25 million to settle a series of lawsuits stemming from his defunct for-profit education venture, Trump University, finally putting to rest fraud allegations by former students, which have dogged him for years and hampered his presidential campaign.

The allegations were that the "university," and Mr Trump himself, committed fraud:

Students paid up to $35,000 in tuition for a programs that, according to the testimony of former Trump University employees, used high-pressure sales tactics and employed unqualified instructors.

The agreement wraps together the outstanding Trump University litigation, including two federal class-action cases in San Diego, and a separate lawsuit by Eric T. Schneiderman, the New York attorney general. The complaints alleged that students were cheated out of thousands of dollars in tuition through deceptive claims about what they would learn and high-pressure sales tactics.

The settlement was for $25 million, a lot of money, but peanuts for Mr Trump, who privately owned the company, and says he is worth billions.

No individual, including Mr Trump, who enabled, authorized, directed or implemented the alleged fraud will suffer any negative consequences.  Thus the leaders of Trump University, and the Trump Organization exhibited impunity in this case. 

And here is what Mr Trump publicly said about the university previously:

When political opponents pressed him on the claims during the campaign, Mr. Trump doubled down, saying he would eventually reopen Trump University.

'It’s something I could have settled many times,' Mr. Trump said during a debate in February. 'I could settle it right now for very little money, but I don’t want to do it out of principle.'

He added, 'The people that took the course all signed — most — many — many signed report cards saying it was fantastic, it was wonderful, it was beautiful.'

Mr Trump did settle, of course, but in a way that did not directly contradict his statement that the university was "fantastic, ... wonderful,... beautiful."  But the settlement did not affirm that statement either. And the settlement allows Mr Trump to proclaim, per his lawyer,

Mr. Petrocelli said Mr. Trump had settled the case 'without an acknowledgment of fault or liability.'

But the settlement did not refute the allegations either. 

So as we just said...   Thus the system appears to be rigged to favor of leadership and management of large companies, as opposed to health professionals, and particularly as opposed to patients.  For years now we have discussed stories like this, which include allegations of severe misbehavior by large health care companies affirmed by legal settlements, but which only involve paltry financial penalties to the companies, and almost never any negative consequences to any humans. Furthermore, as in this case, these stories are often relatively anechoic, noted often only briefly in the media, and have inspired no real action by the US government. 

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

We have called for years for what we sometimes term "true health care reform" to derig the system.  Little has changed, while perceptions that the system is rigged have become more common.  Failure up to now of the "establishment" do do anything about the rigging of the system leads to cynicism, and the search for quick and dirty solutions. 

But now we see that the US president-elect has personally benefited from this aspect of the rigged system.  Do we really think he will now take the lead in unrigging it?  Can I sell you a bridge connecting Brooklyn to Manhattan? 

Instead, true health care reform would encourage open, widespread discussion of all aspects of health care dysfunction, particularly bad behavior by those who profit most from it, and would encourage health care leadership that puts patients' and the public health first, is willing to be accountable for its actions, is transparent, honest and ethical.  

And there is a parallel case to be made for larger reform of government and society.  

Latest Example of the Rigged Health Care System: BTG Pleaded Guilty to "Misbranding" for Marketing a Device Never Proven to Do Any Good

Just before the US Presidential election, yet another story of how the health care system is rigged slipped just barely into public view.   The only media report with any detail about it came from the Corporate Crime Reporter on November 7, 2016.

The Selling of an Unproven Invasive Device

The basics were:

Pennsylvania-based medical device manufacturer Biocompatibles Inc., a subsidiary of BTG plc, pled guilty to misbranding its embolic device LC Bead and will pay more than $36 million to resolve criminal and civil liability arising out of its illegal conduct.

So,

Biocompatibles pled guilty to a misdemeanor charge in connection with the company’s misbranding of LC Bead, in violation of the Food, Drug and Cosmetic Act.

LC Bead was cleared by the U.S. Food and Drug Administration (FDA) as an embolization device that can be placed in blood vessels to block or reduce blood flow to certain types of tumors and arteriovenous malformations.

LC Bead has never been cleared or approved by FDA as a drug-device combination product or for use as a drug-delivery device or 'drug-eluting' bead.

In fact, while

The FDA sought assurances in 2004 that Biocompatibles would not use FDA clearance for the device for embolization to market the device for drug delivery, according to a statement of offense to which the company agreed.

Biocompatibles told the FDA that 'under no circumstance' would the company use the embolization clearance to market the device for drug delivery.

However, two years later, Biocompatibles began marketing LC Bead for drug delivery through the company it hired to carry out its sales and distribution in the United States.

The distribution company told its sales representatives that LC Bead was '[a] drug-delivery device' and trained its sales representatives to 'aggressively penetrate the chemoembolization market.'

Sales representatives subsequently told health care providers that the device increased the level of chemotherapy delivered to a liver tumor and resulted in “better tumor response rates,...”

Furthermore,

In December 2009, Biocompatibles filed an application with FDA for approval of LC Bead as a drug-eluting bead combination product. However, FDA informed the company that it was not accepting the application because clinical studies did not provide adequate evidence of a therapeutic benefit.

Summary

So to summarize, this device was approved for a specific use (embolization). The company was admonished not to market the device for drug delivery, as there was no evidence that it was safe and effective for this use. The company promised not to market it for drug delivery, but allegedly did exactly that, and rather aggressively. Since there was no evidence that the device was effective or safe in that application, patients were implanted with devices that at best may have been useless, or even directly harmful, and all implanted patients were at risk of the usual complications from such devices.

The penalty to the company appeared substantial, until it is compared with the company's revenue, which was 447.5 million pounds sterling last year (look here).  

However, despite the fact that the company did what it promised the FDA it would not do, and the likelihood that patients may have been harmed by these actions, it was only charged with "misbranding." Note that at least it did actually admit to misbranding, as it pleaded guilty to this charge. Yet despite the apparent egregiousness of all this, no individual at the company who may have enabled, authorized, directed, or implemented these dishonest and likely dangerous behaviors suffered any negative consequences.

Health care professionals who lie to patients about the risks of the procedures they perform on them are liable to lose malpractice suits, if not face criminal lawsuits. People at big companies that act analogously face... usually nothing adverse.  Thus they exhibit impunity.

Thus the system appears to be rigged to favor of leadership and management of large companies, as opposed to health professionals, and particularly as opposed to patients.  For years now we have discussed stories like this, which include allegations of severe misbehavior by large health care companies affirmed by legal settlements, but which only involve paltry financial penalties to the companies, and almost never any negative consequences to any humans. Furthermore, as in this case, these stories are often relatively anechoic, noted often only briefly in the media, and have inspired no real action by the US government. 

  

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

We have called for years for what we sometimes term "true health care reform" to derig the system.  Little has changed, while perceptions that the system is rigged have become more common.  Failure up to now of the "establishment" do do anything about the rigging of the system leads to cynicism, and the search for quick and dirty solutions. 

The Wages of Sin - a Small Illustration of How Executives Can Personally Profit from Bad Corporate Behavior in Health Care

The resolution of two related cases involving drug/ biotechnology/ device giant Johnson and Johnson opened a small window on the perverse incentives driving bad managerial behavior in health care.

The Settlement of the Allegedly Illegal Marketing of the Stratus Device

The basics of the case, which looks like a typical marcher in the march of legal settlements, were best explained by Ed Silverman in Stat on July 22, 2016,

A Johnson & Johnson subsidiary has agreed to pay $18 million to resolve charges of causing health care providers to submit false claims to Medicare and other federal health care programs, which then paid for a device that was illegally marketed.

In particular,

In 2006, Acclarent won FDA approval to market its Stratus device to be used only with saline to maintain sinus openings following surgery. But the feds alleged the company intended to market Stratus as a drug-delivery device for prescription corticosteroids and maintained the device was specifically designed and engineered for this use, according to court documents.

Note that as is usual, the settlement involved a monetary penalty that would not even be spare change to Johnson and Johnson, which last year had total revenues of more than $70 billion according to Google Finance.  As is additionally usual, the settlement did not seem to be informed by Johnson and Johnson's huge record of previous settlements and other legal actions suggesting its misbehavior (see a list of these in the appendix below.)  As is also usual, the settlement involved no admissions of guilty or innocence by Johnson and Johnson itself, but as is further usual, a company public relations person said it was a long time ago, we have changed, and we will just move on.  As the Wall Street Journal reported,

A spokeswoman for Johnson & Johnson said the company has since put in place tighter compliance controls. She noted the agreement, which didn’t include an admission of liability or wrongdoing, resolves alleged conduct that took place almost entirely before Johnson & Johnson acquired Acclarent.

Two Johnson and Johnson Executives Convicted of Distributing Misbranded and Adulterated Devices

But one part of this case was unusual.  Not only did US government authorities pursue a settlement with Johnson and Johnson, they prosecuted two executives who were involved in setting up the bad behavior alleged in the settlement.  Per Mr Silverman in Stat,

The settlement with the US Department of Justice, which was disclosed on Friday, comes just two days after a pair of former executives at the J&J subsidiary, which is known as Acclarent, were found guilty of several misdemeanor charges of distributing a misbranded and adulterated device. A federal court jury in Boston found the executives marketed the Stratus device for a use that was not approved by the US Food and Drug Administration.

So while the Johnson and Johnson spokesperson denied that the company was guilty of anything, it appears that two people who eventually became Johnson and Johnson executives were found guilty of having a company that Johnson and Johnson acquired distribute a misbranded and adulterated device.  At best, the spokesperson seemed to be asserting a distinction in the absence of a meaningful difference.      

Especially, since the allegations that led to the convictions of the executives included actions that occurred after their company was acquired by Johnson and Johnson, per the Stat article,

Between 2008 and 2011, the men allegedly concealed a scheme to illegally distribute and promote a device they planned to market for delivering steroids to sinuses. The feds charged, however, they deceived the FDA by falsely claiming the intended use was to maintain an opening to the sinus, and that the device was supposed to be used with saline.

Acclarent, where Facteau was the chief executive and Fabian was the vice president of sales, was eventually sold to Johnson & Johnson in January 2010 for $785 million. Following the acquisition, Acclarent management was told to stop marketing the device for unapproved uses, but they continued to do so anyway, court documents stated.

So why would Mr Facteau and Fabian do this?  An article in Reuters implies an answer:

Prosecutors said Facteau and Fabian had hoped to increase the company's revenue to make it an attractive acquisition target, and concealed the off-label marketing from potential buyers, including J&J unit Ethicon Inc.

Ethicon bought California-based Acclarent in early 2010 for about $785 million. Facteau and Fabian received compensation worth about $30 million and $4 million, respectively, from the deal, according to the indictment.

So the former Acclarent executives, later Johnson and Johnson subsidiary, made what seems to be a lot of money from directing their company to distribute a misbranded and adulterated product.  In fact, they made considerably more money than Johnson and Johnson paid to settle the case.

Conclusions

So this case appears to be a step forward, in that not all the people who apparently authorized, directed, or implemented the bad behavior could escape any negative consequences.  Keep in mind, however, that no one above the two convicted executives, no one at Johnson and Johnson who decided to acquire Acclarent, and let it continue its previous activities, seemed to suffer any negative consequences.  How much money those executives might have received in response to the revenues that the new subsidiary brought in is unknown.

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

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

Appendix - Johnson and Johnson Legal Record since 2010 -
2010
- Convictions in two different states for misleading marketing of Risperdal
- A guilty plea for misbranding Topamax
2011
- Guilty pleas to bribery in Europe  by Johnson and Johnson's DePuy subsidiary
- A guilty plea for marketing Risperdal for unapproved uses  (see this link for all of the above)
- A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post here)
2012 
  - Testimony in a trial of allegations of unethical marketing of the drug Risperdal (risperidone) by the Janssen subsidiary revealed a systemic, deceptive stealth marketing campaign that fostered suppression of research whose results were unfavorable to the company, ghostwriting, the use of key opinion leaders as marketers in the guise of academics and professionals, and intimidation of whistleblowers. After these revelations, the company abruptly settled the case (see post here).
-  Johnson & Johnson was fined $1.1 billion by a judge in Arkansas for deceiving patients and physicians again about Risperdal (look here).
-  Johnson & Johnson announced it would pay $181 million to resolve claims of deceptive advertising again about Risperdal (see this post).
2013
-  Johnson & Johnson settled case by shareholders alleging that management made misleading statements and withheld material information about manufacturing problems (see this post)
-  Johnson & Johnson Janssen subsidiary pleaded guilty to a charge of misbranding Risperdal, and settled for a total of $2.2 billion allegations that it promoted the drug for elderly demented patients and adolescents without an indication, and despite evidence of its harms (see this post).
 -  Johnson & Johnson DePuy subsidiary agreed to settle with multiple plaintiffs for $2.5 billion allegations that it sold defective mental-on-metal artificial hip, and hid evidence of its harms .
- Johnson & Johnsonn Janssen subsidiary was found by two juries to have concealed harms of its drug Topamax (see this post for this and above case).
- Johnson & Johnson Ethicon subsidiary's Advanced Surgical Products and two of its executives agreed to settle charges by US FDA that is sold mislabeled products used to sterilize equipment such as endoscopes (see this post).
- Johnson & Johnson fined by European Commission for anticompetitive practices, that is, collusion with Novartis to delay marketing generic version of Fentanyl (see this post).
2014 
- Johnson & Johnson DePuy subsidiary settled Oregan state charges that it marketed the ASR XL metal-on-metal hip joint prosthesis without disclosing its high failure rate (see this post). 
2015
-  Johnson & Johnson found by jury to have concealed harms of Risperdal.
-  Johnson & Johnson Ethicon subsidiary found by jury to have concealed harms of its vaginal mesh device.
-  Johnson & Johnson McNeil subsidiary pleaded guilty to marketing adulterated Tylenol. (see this post for three items above.)

Stryker Subsidiary Pleads Guilty to Selling Adulterated Devices, Former CEO of Subsidiary Pleads Guilty to Fraud, Stryker's Track Record Goes Unremarked

The US Thanksgiving Day parade is over, so it must be time for the march of legal settlements to begin again. Our next example was best described by Bloomberg and by NJcom, but brief articles from the Associated Press, Reuters, and the Wall Street Journal have also appeared.

The Basic Facts

The Bloomberg lede was,

Stryker Corp. OtisMed unit pleaded guilty to selling devices used in knee-replacement surgeries in September 2009 without regulatory approval and will pay more than $80 million to resolve the case.

The conduct in question was,

The company admitted it never obtained U.S. Food and Drug Administration approval to sell 18,000 custom-built devices used by surgeons from 2006 to 2009 to make accurate bone cuts to implant prosthetic knees. OtisMed applied for FDA approval in October 2008, and the agency said 13 months later the company hadn’t shown it was safe and effective. [OtisMed CEO Charlie] Chi then shipped 218 devices to surgeons, overruling his advisers and board.

Furthermore, in this case, there was some information about who actually did what,

After a conference call with OtisMed directors on Sept. 9, 2009, Chi talked to two employees about ways to hide the shipments from the FDA, including taking them to an off-site shipping location, using Chi’s personal Federal Express account, and backdating shipping documents, court records show.

The NJ.com report clarified to what charges the guilty pleas referred,

Charlie Chi, 45, pleaded guilty to three misdemeanor counts of fraud linked to the September 2009 shipment of 218 OtisMed devices to surgeons throughout the U.S., including 16 in New Jersey.

Also,

OtisMed, which was acquired by Stryker Corp., pleaded guilty to a felony charge of distributing adulterated medical devices into interstate commerce.... 

So, a company acquired by large medical device manufacturer Stryker admitted and pleaded guilty to charges that it fraudulantly marketed an unapproved device, and that this marketing was lead and facilitated by the company's CEO.  The CEO pleaded guilty to misdemeanor fraud charges.

The Penalties

Per Bloomberg,

OtisMed will pay a fine of $34.4 million and forfeit $5.16 million in a criminal case, while paying a civil fine of $41.2 million. The company pleaded guilty today in federal court in Newark, New Jersey, where former Chief Executive Officer Charlie Chi also pleaded guilty.

Chi has not yet been sentenced, but according to NJ.com,

Chi, of San Francisco, faces up to three years in prison when he’s sentenced on March 18, 2015.

Bloomberg noted that,

The $80 million payment is almost three times the total revenue that OtisMed got for all of the knees the company sold, according to Fishman.

However, the amount could also be compared to the approximate annual revenue of Stryker Corp, which was most recently about $8 billion per Google Finance, or its net income, about $1 billion.

Furthermore,

OtisMed was barred from Medicare, Medicaid and all other federal health-care programs for 20 years. Stryker, based in Kalamazoo, Michigan, wasn’t barred.

This case was unusual in that a health care corporate CEO was actually charged and pleaded guilty to crimes connected to illegal marketing practices, and in that his company not only admitted wrongdoing and pleaded guilty, but also agreed to disbarment from federal programs.  However, by the time the case was thus decided, the CEO was no longer CEO, his company had been acquired by a larger health care corporation, and that corporation, while letting its new subsidiary agree to a fine and disbarment, was not itself disbarred from anything. 

Stryker's Track Record 

The Bloomberg noted that Stryker did not have unblemished track record,

In 2007, New Jersey’s U.S. attorney at the time, Chris Christie, reached an agreement with four makers of hip- and knee-implants that paid $310 million to settle U.S. claims they paid kickbacks to surgeons who used their products. Stryker, a fifth company, received a non-prosecution deal. Christie, a possible Republican presidential candidate in 2016, is now governor.

In fact, that year, we posted (here, here, here, and here) about the payments, often huge, that five manufacturers of prosthetic joints (Biomet, DePuy Orthopaedics (a unit of Johnson & Johnson), Stryker Orthopedics,a unit of Stryker Inc, Zimmer Holdings, and Smith & Nephew) revealed they made to orthopedic surgeons and various academic and other organizations. We also noted that some of the leadership of the major orthopedic societies have received substantial amounts from these companies, as have the societies themselves.

However, there is much more to the Stryker track record,

In 2013, we noted that Stryker paid $13.2 million to settle charges that it bribed doctors in various countries to use its devices, violating the US Foreign Corrupt Practices Act (FCPA) (look here).

In 2012, we noted that Stryker paid a $15 million fine after pleading guilty to a federal count of misbranding a medical device. Government prosecutors alleged the company conspired to defraud surgeons into combining two of its products, contrary to their labeled usage, and possibly harming patients (look here).

In 2010, we noted that Stryker paid $1.35 million to settle charges that it marketed bone growth products without FDA approval (look here).

In 2009, we noted that two Stryker sales representatives pleaded guilty to charges they promoted off-label use of Stryker bone growth products although they knew such use could endanger patients (look here).  

So the larger corporation that paid fines that appeared large, but were actually small given its size, and that let its subsidiary and its subsidiary's former CEO otherwise take the raps, had a long track record of similarly questionable behavior.  That track record did not apparently inform the resolution of the current case.


Summary

So here we go again. A large medical device company resolved charges of wrongdoing by paying a fine that appears large to the common person, but in fact was small compared to its revenue.  The case was unusual in that the company did admit wrongdoing, but in a way that seemed to reflect the blame onto one of its subsidiaries.  The case was further unusual in that a CEO was charged and pleaded guilty, but it was not the CEO of the large corporation, but the former CEO of the acquired company.  The case was yet further unusual in that a company was disbarred from transactions with the federal government, but the company was just the subsidiary of the larger company, which otherwise could continue business as usual. 

Thus while the penalties meted out in this case seemed more severe than usual, on examination they left the big parent corporation relatively unscathed.  No one still in management at that corporation, including anyone involved in the acquisition of the wayward subsidiary, apparently will suffer any negative consequences.  Furthermore, that larger corporation turns out to have a substantial track record of previous misbehavior.  Yet that did not apparently affect the outcome of this case, and little of this track record was even reflected in the reporting of the current case.

While we have often - some might say ad infinitum - discussed the march of legal settlements by large health care organizations, and how these settlements seem to impose relatively small penalties on the corporations, and leave their hired managers untouched, these settlements seem to produce few echoes.  Like many other examples of unpleasantness that might reflect badly on the leaders of large health care organizations, even those who may have personally profited from the unpleasantness, they remain largely anechoic.  So we would urge the reporters who cover the next settlements by big health care organizations at least look to see if the organizations had been involved in similar settlements in the past

Finally, as we have said all to often,...   The failure of the current limp legal efforts against such corruption is evident by how many corporations have become ethical repeat offenders.  Pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction.  So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue.

Even Crazy Eddie Knows "Corporations Don't Commit Crimes, People Commit Crimes" - But Biotronik Settles

The deals the government gives are INSANE!!!  Just ask Crazy Eddie's former Chief Financial Officer.

The Former Crazy Eddie CFO on Impunity

Those of a certain age who were in or near the New York area remember Crazy Eddie, a discount appliance and electronics retailer with insane advertisements.




As reported by CNN, Sam F Antar, the former Chief Financial Officer of Crazy Eddie, was a speaker on a conference on financial fraud,

The U.S. government is losing the war against white collar crime.

That's the message from Sam E. Antar, one of the masterminds of the massive Crazy Eddie fraud of the 1980s.

'We are in the golden era of white-collar crime. My biggest regret is I should've been a criminal today rather than 20 years ago,' Antar told CNNMoney on the sidelines of a New Jersey securities fraud summit.

Antar drew a big round of applause when he pointed out that no one from Wall Street went to prison because of crimes that led to the financial crisis.

'We are devoting far less resources to combating crooks like myself today than back in my day,' he said.

Antar knows a thing or two about corporate fraud. He served as Chief Financial Officer of Crazy Eddie, the electronics retailer that became one of the symbols of white-collar crime in the 1980s.

Known for its loud commercials promising "INSAAAANE" prices, Crazy Eddie got into trouble for understating income to avoid taxes and then committing securities fraud once it decided to go public.

'Crazy Eddie was from Day One planned to be a criminal enterprise. We committed our crimes simply because we could,' said Antar, whose cousin Eddie Antar founded the chain.

Because he 'showed the feds where the bodies were buried,' Antar got off with only six months of house arrest, community service and tens of thousands of dollars in civil penalties. Crazy Eddie co-founder Eddie Antar served more than six years in prison.

Today, the convicted felon is advising the government and private companies about white-collar crime. Antar expressed frustration with the government's failure to put Wall Street bankers behind bars.

'We have turned prosecutors into tax collectors,' he said. 'Corporations don't commit crimes, people commit crimes.'

While the focus of this conference was corporate fraud and crime in the financial sector, we have frequently discussed corporate crime and corruption in the health care sector.  We have noted, especially in our posts on the march of legal settlements, that most wrongdoing by big health care organizations is punished - if it is punished at all - only by fines assessed against the organization, and perhaps a lightly enforced corporate integrity or deferred prosecution agreement.  Rarely does the organization admit wrongdoing.  Rarely are criminal charges involved (the settlements are usually civil).  Almost never do any individuals who authorized, directed or planned the wrongdoing suffer any negative consequences.

However, in health care, corporations do not do wrong.  People do wrong.

This brings us to our latest example.


Biotronik Settles Kickback Allegations for $4.9 Million

This story barely rippled the media waters, getting its most extensive coverage in the (Portland) Oregonian.

Biotronik, Inc, the Lake Oswego medical device manufacturing firm, will pay $4.9 million to the federal government to resolve allegations that the firm paid kickbacks to doctors in Nevada and Arizona to use its products.

In particular, the Department of Justice charged,

The settlement resolves allegations that Biotronik, through the payment of kickbacks to physicians, caused hospitals and ambulatory surgery centers to submit false claims to Medicare and Medicaid for the implantation of Biotronik pacemakers, defibrillators and cardiac resynchronization therapy devices.

Biotronik allegedly induced electrophysiologists and cardiologists practicing in Nevada and Arizona to continue using Biotronik devices, or to convert to Biotronik devices, by paying the implanting physician in the form of repeated meals at expensive restaurants and inflated payments for membership on a physician advisory board.

So the issue was not only defrauding the government, but giving kickbacks to doctors to induce them to use Biotronik devices, presumably whether or not such devices were the best treatments for their individual patients. Thus, the alleged conduct could have resulted in the unnecessary or inappropriate implantation of devices, leading to patient risks in the absence of benefits.

Nonetheless, as is usual in such cases, Biotronik did not admit any guilt, and in fact refused to talk to the reporter.  Furthermore, no one at Biotronik who authorized, directed or implemented the conduct in question suffered any negative consequence.

The light touch of the law on Biotronik was striking considering the company's track record.

Biotronik's Track Record: 2011 - 2013

Physicians Settle Allegations They Concealed Payments from Biotronik

In fact, the 2014 settlement was actually the second settlement resulting from allegations that Biotronik paid physicians to get them to use its devices.  As the Oregonian reported in 2013,

The state recently concluded a court case against two Salem doctors who put heart implants into patients without telling them that a manufacturer's training program put a sales representative into the operating room. The [Oregon] DOJ accused the doctors in the civil case of having 'misrepresented' their services as 'for the exclusive benefit of the patient' and 'concealing' from patients payments that created a potential "incentive" to use Biotronik implants -- defibrillators and pacemakers. The surgeons received between $400 and $1,250 for implant surgeries when a trainee was present.

This case was unusual in that the prosecutors, from the state of Oregon here, not the US Department of Justice, targeted the physicians who received the money rather than the corporation that provided it. So these individuals actually suffered some negative consequences, albeit rather minor,

cardiologists Matthew Fedor and Kyong Turk admitted no wrongdoing but agreed to pay $25,000 each and inform future patients of any payments from a drug or device maker in connection with their services to that patient and when admitting sales representative trainees to the operating room.

At the time,

At Biotronik's U.S. headquarters in Lake Oswego, president Jake Langer called the state's case unfair and detrimental to good health care.

'We are really clean when it comes to our relationships with physicians,' he said. He blamed the first-of-its-kind case on overzealous prosecutors trying 'to set up a new law' without going to the Legislature.

In 2011, Documents Revealed Biotronik's Marketing Tactics

Furthermore, the relatively meager penalties provided for by the 2014 and 2013 settlements were more incongruous given the colorful evidence provided by a disgruntled Biotronik employee reported in a 2011 New York Times article, about which we posted here.  The article suggested that Biotronik attempted to boost sales through "seeding trials," which are more about recruiting doctors than clinical research, paying "consulting fees" to doctors who wanted their patients implanted with Biotronik products, and  who actually implanted such products, and finally currying physicians' favor by hiring their spouses.

Summary

Those government settlements really are INSAAANE.


The Biotronik settlements followed a familiar pattern.  Now that we have been following organizational misbehavior in health care for some years, we see that organizations that get into trouble once are very likely to get into trouble again.

This may be enabled by how government regulators and law enforcement give large health care organizations such  gentle treatment.  We have talked about the march of legal settlements by such organizations before.  Allegations are usually resolved with legal settlements that involve no admissions of guilt, small monetary penalties (compared with these organizations' total revenues), and sometimes apparently toothless corporate integrity agreements.  Settlements get desultory public notice, rarely informed by previous settlements or other evidence of previous misbehavior.  No individual who may have authorized, encouraged, directed, or implemented the bad behavior is likely to suffer any negative consequences.   It does not help that while nominally public, these settlements get little press, and what coverage there is usually fails to put the whole pattern together.

So we would urge the reporters who cover the next settlements by big health care organizations at least look to see if the organizations had been involved in similar settlements in the past.

Furthermore, as we have said all to often,...   The failure of the current limp legal efforts against such corruption is evident by how many corporations have become ethical repeat offenders.  Pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction.  So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue.

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. 

Drip, Drip, Drip - the Steady Accumulation of Little Cases Pointing to Big Problems

Sometimes an apparently insignificant noise can signal a big problem, like the sound of dripping water in a room with no visible plumbing.

Today, I noticed a few short stories in the media about one relatively small legal settlement involving a medical device company.  It initially seemed to be too insignificant a settlement to merit a comment.  A closer look, however, suggested links to to other larger issues.  This story reminded me about other apparently small cases that are mostly ignored, but remind us of bigger problems.

Biomet Settles Kickback Allegations for $6 Million - the Index Case

Here are the main points from the Fort Wayne, Indiana Journal-Gazette,

Biomet Inc. has agreed to pay more than $6 million to resolve allegations that it paid kickbacks to encourage doctors to use its bone growth stimulators, the U.S. Justice Department announced Wednesday.

The Warsaw-based orthopedic devices company signed the agreement along with its subsidiary, EBI LLC, which is doing business as Biomet Spine and Bone Healing Technologies. EBI, based in Parsippany, New Jersey, sells bone growth stimulators, which are used to repair slow-healing fractures without surgery.

Federal official allege that from 2001 to 2008, EBI bribed staffers in physicians' offices to persuade them to use the products.

The story also included the usual tough quotes from law enforcement, including this from US Attorney for the Massachusetts district Carmen Ortiz,

This settlement demonstrates our resolve in ensuring that patients receive, and the government pays for, health care that is based on sound medical judgment, not compromised by kickbacks....

That was it.  A mere $6 million was the charge to settle allegations that the device company gave kickbacks to physicians' office staff to induce the doctors to use the company's product.  As is usually the case, no individuals who authorized, directed or implemented the questionable activities were named, much less suffered any consequences.

And hardly anyone seemed to notice Biomet's latest case. 

It appears to be a small case, but wait. 

Biomet's Previous Record

Wasn't Biomet involved in some other, bigger cases?  A quick look at Health Care Renewal revealed

-  Starting in 2007, we posted (here, here, here, here and here) about the payments, often huge, that five manufacturers of prosthetic joints, Biomet, DePuy Orthopaedics,a unit of Johnson & Johnson, Stryker Orthopedics,a unit of Stryker Inc, Zimmer Holdings, and Smith & Nephew, revealed they made to orthopedic surgeons and various academic and other organizations in the US. All companies except Stryker were charged with "criminal conspiracy to violate anti-kickback laws," and all were subject to deferred prosecution agreements.
-  In 2012, we posted about how Biomet paid nearly $23 million, including a $17.3 million criminal fine, which appears to imply a guilty plea, to charges that it gave kickbacks to foreign physicians, thus violating the US Foreign Corrupt Practices Act

So this tiny case, that is, in a monetary sense, suggests that Biomet is another recidivist corporation, and that the deferred prosecution agreement it signed in 2007 was useless, since it did not deter activities that occurred in 2008 and perhaps later.

Carmen Ortiz's Previous Treatment of Large Health Care Corporations Versus Her Treatment of Aaron Swartz

Furthermore, haven't we heard of Carmen Ortiz before?  In 2013, we posted that Ms Ortiz was involved in settling three big 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.

Biomet and Zimmer

Finally, Biomet is slated to merge with Zimmer Holdings Inc, another large medical device company. Zimmer was also involved in the 2007 prosthetic hips and knees settlement, charged with criminal conspiracy to violate kickback laws, and subject to a deferred prosecution agreement (see summary in this post).  So the combined company, whose formation is now subject to a European Union inquiry due to concerns about potentially anti-competitive aspects (see the Wall Street Journal article), would end up with quite a concerning track record.   

So this little case reminds us that when a big health care organization is accused of kickbacks or similar unethical activities that may endanger patients, even supposedly tough law enforcers almost never try to hold any individuals accountable, and that absent such accountability, such organizations often become serial legal settlers, accused again and again of unethical or criminal acts that are bad for patients and the public health.

Yet again, nobody seemed to notice this case.  

Little Cases that Add Up


While this case was small, it had some links to bigger past issues.  It reminded me that I have seen lots of other small cases, which often seemed to small to discuss at the time they occurred.

Thus, it also inspired me to finally pull from my dusty files a host of media reports of little cases which I put away because they seemed to small to individually merit comment at the times they appeared.  I quickly summarize some of them below.  To make the list manageable, I limited it to cases since 2012 involving medical device companies.  In alphabetical order....

Arthrocare Executives Guilty of Securities Fraud (2014)

This case was unusual since it actually involved serious jail time for individual, but perhaps that was because this was a financial crime that did not endanger patients (see the Bloomberg article).   The prosecutor called it an "epic tale of greed"  after the CEO and CFO were convicted.  In 2013, two Vice Presidents, including the head of Strategic Business Units, had also pleaded guilty (see this Bloomberg article).

Baxano Surgical Settled Allegations of Medicare Fraud and Kickbacks to Physicians (2013)

This was standard issue, including a fine of $6 million, allegations of kickbacks, some in the form of speakers' or consulting fees to surgeons for use of the company's back surgery devices, but not admissions of wrongdoing and no penalties for individuals, per the AP. 

EndoGastric Solutions Settled Allegations of Kickbacks to Physicians (2014)

This was another standard issue settlement involving a fine of $5.25 million, allegations of kickbacks to physicians to encourage them to use the company's devices, and a corporate integrity agreement,  but no admissions of wrongdoing and no penalties for individuals, per the AP via the Billings (Montana) Gazette. 

Globus Medical Inc and its CEO Fined for Selling Unapproved Devices (2012)

The only media outlet to report this small case was Reuters.  The company, which was then privately held, and its CEO combined paid $1 million to settle US Food and Drug Administration charges it sold unapproved devices.  Now the company is apparently public, and its most recent proxy statement disclosed its CEO is currently in the million dollar plus club.

Home Diagnostics Inc Ex-CEO Pleaded Guilty to Insider Trading (2012)

He pleaded guilty to SEC charges that he tipped two people about the company's impending buyout by Nipro Corp, per Bloomberg.  His sentence was three years of probation and a fine of $260,000, again per Bloomberg.

Johnson and Johnson DePuy Subsidiary Settled Allegations of Deceptive Marketing of Metal on Metal Prosthetic Hip Joint (2014)

As reported by the Portland (Oregon) Business Journal, the Johnson and Johnson subsidiary settled state claims for $4 million that it marketed its ASR XL metal on metal hip joint without disclosing its known high rate of failure.  The company did not admit wrongdoing, and no individual paid a penalty.  Note that Bloomberg reported, "While the sum is dwarfed by J&J’s earlier settlement of patient lawsuits linked to the ASR hip, the agreement may lead the way for additional accords as federal and multi-state probes continue into the company’s sales of the device."  So it is quite possible there will be more and/or bigger settlements involving the marketing of this device.  Johnson and Johnson has quite an extensive record of mischief (look here).  Johnson and Johnson's DePuy subsidiary, along with Biomet and Zimmer, settled charges of criminal conspiracies to violate anti-kickback laws in the hips and knees settlements of 2007. 

Summary


Note that the summary of little cases suggested that the bigger the company, the less likely is any individual to be held responsible.  Those cases that included individual penalties were all of relatively small companies.  One of those was privately held at the time the case was made public.  One individual who paid a penalty was the leader of a previously small company who held that position prior to the buyout of his company by a larger one.   Furthermore, note that insider trading seems to be treated more severely than actions that violate professional ethics, like kickbacks to doctors, or might harm patients.   The only individuals who went to prison or put on probation were company leaders who committed securities fraud or insider trading.  No one involved in giving kickbacks to physicians, deceptive marketing, etc paid any penalties.  

The impunity of managers of big companies, especially in cases in which the charges involved actions that likely endangered patients and violated health care professionals values, is underlined by our look at "little cases."  Yet this impunity remains unexplained, and has certainly not been addressed by law enforcement authorities. 

 So 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. 

A Little Sunshine Peeking Through the Clouds? - the Sunshine Act is Finally Implemented, Sort of

"Conflicts of interest" is probably the most frequently used Health Care Renewal tag.  We believe conflicts of interest are a major causes of health care dysfunction.  Therefore, I felt that one of the truly reformative aspects of the US Accountable Care Act (ACA, "Obamacare") could be the "Sunshine Act," a provision championed by Iowa Senator Grassley (R) and his staff investigator, Paul Thacker, that would require public reporting of most financial interactions among health care corporations and health care professionals and hospitals.

The roll-out of Sunshine Act implementation occurred this week, and not unexpectedly, was very rocky.   As reported by the Wall Street Journal,

it hasn't been a smooth process. First, CMS delayed the public reporting of the data by a year to give companies more time to prepare. The Open Payments online system has experienced technical problems, including a data mix-up that resulted in some doctors being linked to payment records for other doctors with the same surname. The preview function for doctors had a cumbersome registration process, some doctors said, and was taken offline at times in recent weeks.

The first batch of data is incomplete. CMS in August said it removed about one-third of the payment records from the physician-preview database because it said some of the state medical-license numbers that companies reported for doctors didn't match a database that the agency was using for verification, among other problems. CMS now is releasing those records but without identifying the physicians tied to them. It will update the database to include the physicians' names for those records next year. Also, CMS isn't immediately releasing payments related to proprietary research-and-development; those will be reported at a later date.

 But why should we have expected anything else, given the parties involved?

Drug, Device and Biotechnology Companies

As reported by the NY Times,

all manufacturers of drugs, medical devices and medical supplies that have at least one product covered by Medicare or Medicaid must report payments or gifts they make to doctors and teaching hospitals. This can be as seemingly trivial as a bag of bagels — all payments above $10 are included — or as lofty as a research grant. It also includes meals, travel expenses and speakers’ fees. Group-purchasing organizations, which serve as middlemen between health care providers and manufacturers, also must disclose doctors’ ownership and investment interests in their companies.

Presumably such reporting actually was quite burdensome to the companies.

Furthermore,company executives might not be exactly thrilled about putting all this information out there.  As we have frequently discussed, to serve their own interests, such companies make all sorts of payments to physicians, other health care professional, and hospitals and other non-profit health care organizations.  In particular, payments to health care professionals may foster companies' marketing and public relations goals.

While some payments are made for technical and clinical consulting, many are to support "education" that may serve marketing or public relations.  In particular, many payments are for "drug talks," that is, talks sponsored by the drug companies, usually through speakers' bureaus, and given probably not as part of formal, accredited continuing medical education.  Since the publication of "Dr Drug Rep" in the New York Times in 2007, it became evident that such talks emphasize content provided by the pharmaceutical companies, and are intended to be corporate marketing exercises.  From that case we also learned that physicians who deviate from the marketing message do not last long on speakers' bureaus.  (See posts here and here.)

In addition, pharmaceutical companies often pay physicians deemed to be "key opinion leaders," whose opinions are promoted supposedly for their brilliance and erudition.  However, as noted here and here, the companies buying their services think of KOLs as sales people.    Evidence about key opinion leaders actually performing like marketers has come from documents revealed during litigation (e.g., see this recent example of a huge monetary settlement made of charges that GlaxoSmithKline, a major multinational drug company committed fraud among other things, and in the course of its unethical activities used key opinion leaders as marketers).   Also, see the Neurontin marketing plan (see post here), and the Lexapro marketing plan (see post here) for examples of how corporate managers view key opinion leaders as marketers.

Pharmaceutical, biotechnology, and device companies protest that much of the money they pay goes to support research.  But the clinical research they sponsor has been shown to be frequently subject to manipulation designed to increase the likelihood of results favorable to these companies' products.  When manipulation fails to provide sufficiently favorable results, corporations may simply  suppress it.  Academic institutions desperate for more external funding, and physicians whose continued gainful employment at such institutions requires external funding may not be too quick to protest manipulation and suppression by those paying the bills.

Vox just summarized some of the relevant evidence:

Research for decades has shown that relations with industry — from industry-sponsored education to encounters with pharmaceutical-company sales representatives, and even drug samples provided by those companies — can bias a doctor's judgment in all sorts of ways. It can color the medical education they give to future doctors, cause them to inappropriately prescribe drugs, to push for the FDA approval of medicine, or for drugs to be included on their hospital formularies. Industry-funded studies are also four times more likely to lead to favorable and positive results than independent research.

The side-effects of this 'Bad Pharma' behavior range from waste in the health system, to mistreatment of patients, and even avoidable patient death.

So is it any surprise that industry may not have been enthused or comfortable about complying with the Sunshine Act?  Instead of admitting that, of course, they have complained, as reported by the NY Times,

the website is being questioned by the industry, which says that technical problems and data inaccuracies limit its value.

But it seems that industry may have created the sorts of data problems about which they now complain.  Note that when ProPublica made this first assessment of the database,

Many drug and device companies attributed payments to multiple subsidiaries, rather than reporting them under the name of a single parent company. Johnson & Johnson, for instance, submitted payments under at least 15 subsidiaries. The device maker Medtronic reported payments by at least six subsidiaries. So did the drug maker Novartis. On first blush, that makes it tough to calculate how much each company spent overall.

Similarly, companies reported payments associated with particular drugs in different ways. The expensive drug Acthar, which is marketed for a variety of different conditions, is listed under at least eight different name variations. The diabetes drug Januvia is reported as both 'Januvia' and 'Januvia Diabetes.' There is one drug simply listed as 'KNEES' and another as 'Foot and Ankle.'

So it appears that the companies reported data in a confusing, perhaps deliberately confusing manner, obfuscating the relationships between companies and subsidiaries, and between essentially similar drugs with different names.  It is hard to believe that all, or even most of these problems were due to mishandling by the government.  So it is a little hard to take the companies' criticisms of the quality of the data seriously.

Physicians and Organized Medicine

"We have met the enemy and he is us." - Pogo

On the other hand, news articles suggested some physicians were also unhappy with the data release.  For example, per the WSJ article,

Some doctors disputed details of the payment data. The database shows John LeDonne, a surgeon from Baltimore, as having received about $78,200 in payments for food and beverage for the five-month period from medical-device maker Dr. LeDonne acknowledged he performs paid consulting work for health-care companies including Teleflex, but that he rarely received free meals. He said the total payment amount was in the right 'ballpark,' but should not have been classified in the food-and-beverage category. 

That seems to be a bit of quibble.  The amount he received, and its source, seem more important than whether it was labelled "consulting," or "food and beverage" payments.

More importantly, a few doctors were worried, as reported by the Minneapolis Star-Tribune, that the information may reflect negatively on them,

 'Overwhelmingly, the interaction between industry and physicians is positive,' said Dr. Robert Harbaugh, chairman of neurosurgery at Penn State and president of the American Association of Neurological Surgeons.

Maybe Dr Harbaugh should realize that there already are a lot of reasons to think about the negative aspects of physician - industry paid interactions, as summarized above. And Vox reported,

 Dr. Thomas Stossel, known as Harvard's 'pro-industry professor,' says 'doctors' work with industry is necessary and beneficial.' He worries that the Sunshine Act could make it embarrassing and difficult for doctors to do work like developing medical devices or designing clinical trials, and that industry may start avoiding working with American doctors because of the time and investment disclosure will require.  

Dr Stossel did not provide evidence to explain the necessity or benefits of the work for industry, nor why doctors could not design clinical trials outside of industry relationships. 
Doctors also complained about data quality, but I am not aware that the medical profession rushed to help with improving the data for the Sunshine Act.  Obviously, there are some physicians who have personally profited quite a lot from their relationships with drug, device, and biotechnology companies but who may not be comfortable having the figures booted around in public, e.g., per the WSJ,

Among individual physicians, Stephen Burkhart was one of the top recipients of non-research payments from industry. The San Antonio orthopedic surgeon received $7.4 million in non-research payments or transfers of value for the five-month period, mostly from device manufacturer Arthrex Inc. for payments identified as 'royalty or license.'

Dr. Burkhart couldn't be reached for comment. Arthrex said in a statement that it has 'financial relationships with a number of orthopedic surgeons and teaching hospitals,' like many manufacturers, for their advice and expertise.

Chitranjan Ranawat,a New York orthopedic surgeon, received about $4 million in nonresearch payments or transfers of value, mostly from DePuy Synthes unit for 'royalty or license,' according to the database. 

 Dr. Ranawat couldn't be reached for comment.

And those were payments made in a five month period.  Maybe the doctors have a reason to be uncomfortable.

Furthermore, ProPublica reported that 21% of the $3.5 billion in payments, approximately $735 million, reported by the system were for "promotional talks," a la "drug talks" as noted above.  Since "Dr Drug Rep," such talks have gotten something of a bad reputation, but are obviously lucrative, so those who got paid to give them may not be happy with their detailed disclosure.

The US Department of Health and Human Services

The Sunshine Act was but a small part of the huge ACA, most of which the US DHHS, and particularly the Center for Medicare and Medicaid Services (CMS) was charged with implementing, but probably with proportionately insufficient funding and time.  So no wonder that the Sunshine Act never seemed to find a vocal champion within DHHS.

Most likely money concerns, and the constant din of outside criticism of "government bureaucrats" by those demanding more "business-like" government lead CMS to outsource the work on the Sunshine Act database, as described by another ProPublica article,

While the payments database is a far cry from Healthcare.gov — and less complex – it's reasonable to expect some glitches. CGI Federal, the company that led what turned out to be the botched launch of Healthcare.gov, is also responsible for the release of the payment data.

Massachusetts also outsourced operation of its Health Connector to CGI Federal, with equally bad results.  The state had to terminate the contract (look here.)

So if lackadaisical bureaucrats outsourced the Sunshine Act to contractors of questionable competence, what result should have been expected?

Why the present administration, and the bureaucrats it supposedly commands, seemed so uninterested in this particular aspect of the ACA is not clear, but perhaps we should peer around some revolving doors for the answer.  (For example,  John Podesta, a current White House adviser, worked for non-profits funded by drug company Eli Lilly and device company Synthes [look here]; and Nancy-Ann DeParle, former White House "health czar," had previously served on the boards of of Boston Scientific, Cerner and Medco [look here], and now is involved in health care investments made by private equity, and is on the board of CVS [look here]).

Of course, the sort of conflicts of interest that were supposed to be revealed by the Sunshine Act are highly beneficial to the parties directly involved, whatever embarrassment they may cause.  Given the power of those parties, plus the lukewarm, outsourced effort by government perhaps influenced by government officials with their own "revolving door" conflicts of interest, is it any wonder that the Sunshine Act implementation was "rocky?"

Summary

Nonetheless, because of the Sunshine Act, we do now know a bit more about conflicts of interest involving drug, device, biotechnology and related companies on one hand, and physicians, other health care professionals and hospitals on the other.

Maybe throwing even veiled sunshine on some of these relationships will inspire some people to rethink whether they want to continue them.  There are other reasons they should do so.

We have called endlessly for full, detailed disclosures of all conflicts of interest, for honesty's sake if for no other reason.  We have also called for severe curtailment of all conflicts affecting clinical decision making, health care education, clinical and health care research, and health policy making.  But Health Care Renewal can easily be dismissed as a voice crying out in the wilderness.  However, we are really not alone.

The 2009 Institute of Medicine report set relatively tough standards for managing conflicts of interest affecting clinical research and teaching, which unfortunately since have largely been ignored.  It did call for senior institutional officials to disclose their conflicts of interest, and for institutional boards of trustees to form conflicts of interest committees that would exclude conflicted individuals, but otherwise did not address conflicts of interest affecting academic leaders or institutional trustees.  The 2013 Pew Charitable Trusts Conflicts-of-Interest Policies for Academic Medical Centers suggested restrictions on conflicts affecting faculty, trainees, and students, but again did not mention senior institutional leaders or boards of trustees.  Implementing even some of these recommendations would be true health care reform.

Maybe more publicity about the web of conflicts of interest that drapes of over health care will lead to some further steps in the needed direction. 

There They Go Again, Again... - Johnson and Johnson Loses Two Civil Cases, Makes $2.5 Billion Settlement Based on Claims it Withheld Safety Data on its Products

There has been some talk by US government officials that any day now they will actually get tough on corporate executives whose organizations are involved in multiply unethical actions (perhaps using the legally valid, but massively neglected responsible corporate officer doctrine, look here).  However, the march of legal settlements by such corporations continue without any hints of negative consequences for the people who might have actually been involved in unethical activity. 

So, we note another week, another multi-billion dollar settlement and another loss of a civil lawsuit by huge drug, device and biotechnology company Johnson and Johnson

The Articular Surface Replacement Metal-on-Metal Hip Prosthesis Settlement

After various rumors, the report of the settlement appeared in a New York Times article on November 19, 2013.  The basics were,

Johnson & Johnson and lawyers for patients injured by a flawed hip implant announced a multibillion-dollar deal on Tuesday to settle thousands of lawsuits, but it was not clear whether the deal would satisfy enough claimants.

Under the agreement, the medical products giant would pay nearly $2.5 billion in compensation to an estimated 8,000 patients who have been forced to have the all-metal artificial hip removed and replaced with another device. 

Separately, the company has agreed to pay all medical costs related to such procedures, expenses that could raise the deal’s cost to Johnson & Johnson to $3 billion, people familiar with the proposal said.

Under the plan, the typical patient payment for pain and suffering caused by the device would be about $250,000 before legal fees. Based on standard agreements, plaintiffs’ lawyers would receive about one-third of the overall payout, or more than $800 million, with those who negotiated the plan emerging as big winners.

The proposed settlement, which was submitted on Tuesday to a federal judge in Toledo, Ohio, must receive the support of 94 percent of eligible claimants to go forward.

An earlier NY Times article on a rumored version of the settlement emphasized that relevant litigation had featured strong allegations that Johnson  and Johnson's DePuy subsidiary hid what it knew about the faults of the device,

The A.S.R. hip was sold by DePuy until mid-2010, when the company recalled it amid sharply rising early failure rates. The device, which had a metal ball and a metal cup, sheds metallic debris as it wears, generating particles that have damaged tissue in some patients or caused crippling injuries. 

DePuy officials have long insisted that they acted appropriately in recalling the device when they did. However, internal company documents disclosed during the trial of a patient lawsuit this year showed that DePuy officials were long aware that the hip had a flawed design and was failing prematurely at a high rate.

Many artificial hips last 15 years or more before they wear out and need to be replaced. But by 2008, data from orthopedic databases outside the United States also showed that the A.S.R. was failing at high rates in patients after just a few years.

Internal DePuy projections estimate that it will fail in 40 percent of those patients in five years, a rate eight times higher than for many other hip devices. 

A later NY Times article about plaintiffs' sometimes negative reactions to the settlement added,

 The DePuy Orthopaedics division of Johnson & Johnson estimated in an internal document in 2011 that the device would fail within five years in 40 percent of patients. Traditional artificial hips, which are made of metal and plastic, typically last 15 years or more before replacement. 

 DePuy officials have insisted that they acted properly in handling the device, including waiting until 2010 to recall it. However, internal company documents show that company officials were warned years before by their own consultants that the device was so problematic they would not use it in their patients. 

In January, 2013, the NY Times had reported in more detail about how DePuy executives concealed evidence about safety issues with the hips,

. Johnson and Johnson executives knew years before they recalled a troubled artificial hip in 2010 that it had a critical design flaw, but the company concealed that information from physicians and patients, according to internal documents disclosed on Friday during a trial related to the device’s failure.

The company had received complaints from doctors about the device, the Articular Surface Replacement, or A.S.R., even as it started marketing a version of it in the United States in 2005. The A.S.R.’s flaw caused it to shed large quantities of metallic debris after implantation, and the model failed an internal test in 2007 in which engineers compared its performance to that of another of the company’s hip implants, the documents show.

Still, executives in Johnson & Johnson’s DePuy Orthopaedics unit kept selling the A.S.R. even as it was being abandoned by surgeons who worked as consultants to the company. DePuy executives discussed ways of fixing the defect, the records suggest, but they apparently never did so.

Plaintiffs’ lawyers introduced the documents on Friday in Los Angeles Superior Court during opening arguments in the first A.S.R.-related lawsuit to go to trial.

In particular, 

In 2007, DePuy engineers tested the A.S.R.’s rate of wear to see if it matched the wear rate of another all-metal hip implant made by the company. It did not.

'The current results for A.S.R. do not meet the set acceptance criteria for this test,' that report stated.

The same year, company officials began discussing ways to fix the problem, like redesigning the cup to eliminate the groove. But at the same time, it was actively marketing the A.S.R. to surgeons in the United States, who were implanting it into tens of thousands of patients.

'We will ultimately need a cup redesign, but the short-term action is manage perceptions,' one top DePuy sales official told a colleague in a 2008 e-mail. A DePuy executive, Andrew Ekdahl, who is now the unit’s president, was also told by a company consultant that the A.S.R. was flawed, according to another document. 

In mid-2008, DePuy apparently abandoned the redesign project, an internal document indicates. A company spokeswoman, Mindy Tinsley, declined to comment on the document. 

In the fall of 2009, the Food and Drug Administration rejected DePuy’s application to sell the resurfacing version of the A.S.R. in the United States, saying it was concerned about, among other things, “high concentration of metal ions” in the blood of patients who received it. 

DePuy executives soon started making financial estimates of when the company should stop selling the A.S.R., based on the time it would take to convert surgeons to another company implant, a document shows.

So the evidence introduced in litigation suggested that top DePuy executives knew the design was faulty, but chose to not disclose the evidence of this, and not to withdraw the product, but rather to "manage perceptions." 

As is typical of most settlements made by big health care corporations in the last 10 years, no one at DePuy or its Johnson and Johnson parent who might have authorized, directed, or implemented the continued sales of the device despite warnings that it might be unsafe would have to suffer any negative consequences.  In particular, apparently Mr Ekdahl will not suffer any such consequences (and was not obviously named in the few news reports of the settlement.)   Mr Ekdahl, now Worldwide President, DePuy Synthes Joint Reconstruction, was quoted in the official Johnson and Johnson news release about the settlement.

The Topamax Verdicts

This case, which was much smaller in terms of the monetary amounts involved, got much less coverage, but Bloomberg did report on November 18, 2013,

Johnson & Johnson's  Janssen Pharmeceuticals unit was ordered by a Philadelphia jury to pay $11 million in a case claiming its anti-seizure drug Topamax caused birth defects, the second such loss in less than a month.

Again, the case involved claims that the company withheld information about the safety of its product,

Janssen failed to adequately warn doctors for Haley Powell, a stay-at-home mother, of the risks of Topamax before she gave birth to a son with a cleft lip, jurors in state court in Philadelphia found today.

'Janssen has long known that this drug causes debilitating birth defects and yet intentionally kept this information from physicians and patients,' Shelley Hutson, an attorney for Powell, said after the verdict was read.

Furthermore,

 Janssen knew as early as 1997 that animal studies showed an increased risk for birth defects, especially oral clefts, Hutson said during closing arguments on Nov. 15.


Hutson accused Janssen of operating in a culture of secrecy and of intentionally concealing safety reports in 2003 and 2005. She rejected arguments by the company that it presented the information on poster boards, in abstracts and at medical conferences. Those actions “do not keep patients safe,” Hutson said.

'As early as 1997 in admission after admission, this company knew and they didn’t tell the doctors,' Hutson said.

A report in Law360 emphasized,

 Plaintiffs in the Pennsylvania suits alleged the company didn't fully, truthfully or accurately disclose Topamax data to the FDA, to them and to their doctors. As a result, Janssen intentionally and fraudulently misled the medical community, the public and herself about the risks to a fetus associated with the use of Topamax during pregnancy, plaintiffs claimed.

 Summary

There they go again....  So Johnson and Johnson has announced two multi-billion dollar settlements in one month (November, 2013, look here for the first).  It also announced a smaller settlement involving the marketing of Topamax, which is now in addition to a 2010 guilty plea for misbranding Topamax in 2010 (look here).  Note that all the November, 2013 legal actions involved allegations, often backed by seemingly convincing evidence produced in litigation (as noted above), of deceptive, unethical practices.  Both cases above included allegations that the company sold products without fully disclosing those products' harms to patients.  Furthermore, all the month's legal actions are now added to a long list of Johnson and Johnson's legal woes, often involving allegations and evidence of other unethical actions, sometimes involving guilty pleas to charges of such actions (see compilation of the record through July, 2013 here.)  (By the way, Synthes, which is now another Johnson and Johnson subsidiary, and is not run by the same individual on whose watch the ASR case occurred, has had its own legal and ethical woes, look here.) 

Yet despite this lengthy and sorry record, no individual manager or executive at Johnson and Johnson, including its many and confusing subsidiaries, seems to have suffered any negative consequences for authorizing, directing, or implementing any unethical activities, whether they risked harming patients, or whether they resulted in a guilty plea by a corporate entity.  Instead, as we have discussed most recently here, the top executives of the company have grown very rich. 

So since the US government seems to continue to recycle its policy of allowing corporate managers and executives impunity regardless of how repetitively harmful their actions might be to patients' and the public's health, I will recycle my comments from earlier in November, 2013,....

The latest settlement in the parade is another marker of the sort of conduct that big health care organizations have exhibited to increase revenue, and to use that revenue as a rationale for making their top insiders very rich.  The particular conduct alleged here could have put patients at risk, partly by deceiving health care professionals.  Yet in their wisdom, top US law enforcement saw fit not to try to hold any individuals accountable for this conduct, and allowed the company to deny any misconduct other than a single misdemeanor by a subsidiary.  This occurred despite the company's history of multiple legal settlements and findings of guilt in various courtrooms.

Yet none of these actions has resulted in any negative consequences for any individual within the company.  No one who authorized, directed, or implemented bad behavior will pay any penalty, even were the bad behavior to have lead to significant personal enrichment.

As we have said ad infinitum, and on the occasion of a previous Johnson and Johnson settlement, many of largest and once proud health care organizations now have recent records of repeated, egregious ethical lapses. Not only have their leaders have nearly all avoided penalties, but they have become extremely rich while their companies have so misbehaved.

These leaders seem to have become like nobility, able to extract money from lesser folk, while remaining entirely unaccountable for bad results of their reigns. We can see from this case that health care organizations' leadership's nobility overlaps with the supposed "royalty" of the leaders of big financial firms, none of whom have gone to jail after the global financial collapse, great recession, and ongoing international financial disaster (look here). The current fashion of punishing behavior within health care organization with fines and agreements to behave better in the future appears to be more law enforcement theatre than serious deterrent.  As Massachusetts Governor Deval Patrick exhorted his fellow Democrats, I exhort state, federal (and international, for that  matter) law enforcement to "grow a backbone" and go after the people who were responsible for and most profited from the ongoing ethical debacle in health care.

As we have said before, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior.

Roy M. Poses MD on Health Care Renewal