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 

It Was the Best of Times, It Was the Worst of Times ... for Synthes Executives

The latest news about the Synthes Norian XL bone cement case shows just how bizarre incentives for health care leaders can be. 

The Synthes Case

Synthes USA, the American branch of a Swiss based device company, first settled charges that it had been paying surgeons with company stock to use its products in its clinical trials in 2009 (see this post).  Then prosecutors alleged that these were not really rigorous trials. Instead, for marketing purposes, executives of Synthes subsidiary Norian persuaded surgeons to use its Norian XR product in a case series of spine surgery patients and then publish the results.  Three patients who received the product for this "off-label" use died.  This scheme was alleged to have been directed by "person no. 7," whom journalists identified as the company CEO, Hansjorg Wyss (see post here.)   In an unusual move, the prosecutors indicted four company executives, who then pleaded guilty.  They did not take any further action against Wyss, who turns out to be one of the world's richest men (see post here). 

Executives Sentenced

In late November, three of the executives were sentenced, as per the Philadelphia Inquirer:

Three former executives of medical-device manufacturer Synthes Inc. were sentenced to prison Monday. A fourth might have been if his attorney hadn't collapsed while standing at a lectern moments after saying that Synthes' unindicted board chairman was the ultimate authority and responsible for the illegal, sometimes fatal, bone-cement trial at the center of the proceedings.

Michael Huggins, 54, of West Chester, the former president of Synthes USA, was sentenced to nine months in prison and taken into custody immediately. Thomas Higgins, 55, of Berwyn, former leader of Synthes' spine division, got the same sentence. John Walsh, 48, of Coatesville, who was in charge of regulatory affairs, got five months.

U.S. District Judge Legrome D. Davis gave Higgins two weeks to report to prison so he could arrange for extra medical care for his wife. Davis gave Walsh until next Monday to report because Tuesday is his young daughter's birthday.

The three will pay $100,000 each in fines and be on supervised release after prison. All pleaded guilty to a single misdemeanor count under the responsible-corporate-officer doctrine.


Richard Bohner, 56, of Malvern, former vice president for operations, was the third of four defendants on Davis' docket Monday and might have gotten a sentence similar to those received by Huggins and Higgins.

No Penalty for the Former CEO

However, there were no penalties for the company CEO who was allegedly "person no. 7":

Hansjorg Wyss, the Synthes board chairman, who also was chief executive officer when the illegal bone-cement trial occurred, was not in the courtroom but still was part of Monday's events.

Gurney, Bohner's attorney, said Wyss was the undisputed leader of the company. 'He made some of the very critical decisions that put the trials on the ultimate pathway,' Gurney said. 'The culture of an organization is set at the top.'

Wyss could not be reached for comment.

Meanwhile, Mr Wyss continues to grow richer. Forbes currently lists him as number 164 on its list of the world's wealthiest people, estimating his assets at $6.4 billion.

A Golden Parachute for the Current CEO

Mr Wyss may be made even more wealthy because US health care corporate giant Johnson and Johnson has agreed to buy Synthes. Furthermore, as also reported by the Philadelphia Inquirer, the current Synthes CEO is in line to also greatly benefit from that deal:

Orsinger is getting $51.9 million for leaving the old company and a multimillion-dollar pay package from the new company. His new base salary of $700,000 will be a cut in pay from his old firm, but he will have some lucrative bonus opportunities. If he can make do clipping coupons for three years, he will get a stock package worth $17.2 million.

Orsinger is the chief executive officer of Synthes Inc., the medical-device manufacturer based in Switzerland but with U.S. headquarters and facilities in West Chester.

Implications

On one hand, up to now, it has been very rare for any top executives of health care corporations to suffer any negative consequences due to ethical missteps by their companies, much less to go to jail. The current case may be the first real example of government prosecutors using the responsible corporate officer doctrine in such a setting. We first discussed this concept here in 2010. As noted in Reuters about the Synthes case,

After decades in relative obscurity, a U.S. legal doctrine that holds corporate officers liable for company wrongdoing is finding its way back into some high-profile healthcare prosecutions.

The 'responsible corporate officer' doctrine allows for prison terms of up to one year for misdemeanor violations of the Federal Food, Drug and Cosmetic Act, but typically defendants have received only probation.

Recently, however, the government has sought to reinvigorate the doctrine, and some executives are facing stiffer penalties than they had ever imagined.

Why only now has this doctrine been dusted off, when it has been around for over 70 years, and validated by the Supreme Court over 35 years ago, remains unclear.
Does its use now signal the end of health care leaders' impunity? We have noted that despite all sorts of misbehavior leading to a march of legal settlements, almost no one who authorized, directed or implemented the bad behavior within a large health care corporation has ever paid any penalty for it. The penalties for the four Synthes executives are certainly a break in the pattern.

Moreover, while in the Synthes case the executives who pleaded guilty were aware of what was going on, the doctrine allows prosecution of responsible corporate officers who were not so aware. As in the Reuters article,

The principle behind the doctrine was validated by the Supreme Court in 1975, when it affirmed the conviction of John Park, the chief executive of a national food chain who had been charged with allowing warehoused food to be exposed to rodent contamination. The court held that, to convict Park, the jury did not have to find that he was aware of the unsanitary conditions, only that he was in a position of authority to prevent them.

However, in the Synthes case, there was no attempt made to prosecute even more highly placed "responsible corporate officers." As noted above, the past and current CEO were not charged, and meanwhile have engineered a merger that may make them even more wealthy (ironically, with a company, Johnson and Johnson, that has also had a troubled recent record).

Furthermore, as per Reuters, prosecutors are not exactly gung ho about using the responsible corporate doctrine:

Over the next few decades, prosecutors used the doctrine sparingly, concerned that overuse would bring unwanted judicial scrutiny, said Paul Hyman, formerly of the U.S. Food and Drug Administration's Chief Counsel's Office and now a director at the law firm of Hyman, Phelps & McNamara.

Also,

The future of the responsible corporate officer doctrine could depend on whether executives who plead guilty under the doctrine are able to find other employment.

Cory Andrews, a lawyer with the Washington Legal Foundation, which filed a friend-of-the-court brief on behalf of the Purdue defendants, said that as the severity of penalties increase for misdemeanors, so do the odds of a constitutional challenge.

'Arguably, where the deprivation is very small, the due process violations are not as significant,' Andrews said. 'But where the deprivation goes to someone's ability to earn a living -- I think that raises the constitutional temperature.'

Many of the legal settlements we have discussed involved activities that threatened the safety, health or even lives of patients. But if a corporate executive might not be able to get further lucrative employment as such after participating in such misbehavior, quelle horreur!

Let us hope that government officials, who have been so solicitous in the past about the financial well-being of the health care corporations they are supposed to oversee, will start thinking about the consequences of these corporations' misbehavior for the public to whom those officials are supposed to answer.

I conclude, de rigueur, 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. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.