A New, and Huge ($2.2 Billion) Settlement for Johnson and Johnson, but "No Individuals were Charged with Wrongdoing"

The march of legal settlements made by big health care organizations has resumed with a bang.  As reported in most major media outlets, giant drug/ device/ biotechnology company Johnson and Johnson has made a big settlement with the US Department of Justice.

The Basics of the Settlement

As reported by Bloomberg / Businessweek,

Johnson & Johnson agreed to resolve criminal and civil probes into the marketing of Risperdal, an antipsychotic drug, and other medicines by paying more than $2.2 billion, one of the largest U.S. health-fraud penalties. 

J&J’s Janssen unit will plead guilty to a misdemeanor criminal charge over misbranding Risperdal for uses not approved by the Food and Drug Administration, including treating elderly patients with dementia. Under a plea agreement announced today, Janssen will pay a $334 million fine and forfeit $66 million.

Janssen also settled civil claims that it marketed Risperdal without approval for the elderly, children and the mentally disabled, and that it paid kickbacks to physicians and to Omnicare Inc., the largest pharmacy for nursing homes. The civil accord covered off-label marketing of Risperdal; Invega, another antipsychotic; and Natrecor, a heart drug.

This settlement covered conduct that health care professionals ought to find particularly disturbing, including marketing Risperdal for elderly people with dementia without an approved indication, despite evidence that it could be particularly harmful to those patients; marketing Risperdal to adolescent boys without an indication, again despite evidence that it could be particularly harmful to those patients; and using kickbacks to market Risperdal.

Promoting Risperdal for Dementia Despite Increased Risk of Death

This issue was best summarized by the Wall Street Journal,

Prosecutors alleged that J&J's Janssen Pharmaceuticals unit promoted Risperdal to elderly patients suffering from dementia, despite no approval for that use. Prosecutors also alleged that J&J's 'ElderCare' sales force pushed Risperdal for use in these elderly patients, and sales representatives' bonus awards failed to distinguish prescriptions for schizophrenia or the unapproved dementia use.

In 2005, the FDA required the label warn that elderly patients suffering from dementia-related psychosis were at a higher risk of death.

The New York Times added,

 Johnson & Johnson officials tried to expand the market for Risperdal to older dementia patients soon after the drug was approved in 1993 to treat symptoms of psychiatric disorders, according to federal court filings. 

The drug, whose generic name is risperidone, was primarily tested in schizophrenia patients, and the Federal Drug Administration repeatedly rejected efforts by the company to expand the drug’s use to older dementia patients, according to the filings.

But Johnson & Johnson, federal officials said, actively pursued the market for geriatric patients. The company created a dedicated sales force, ElderCare, to promote the drug and others to doctors who primarily treated older patients.

The drug, the company claimed, could address symptoms that made treating these patients a challenge, especially in a nursing home setting, including agitation, confusion, hostility and impulsiveness. The company’s sales brochures highlighted these symptoms and minimized the fact that the drug was approved to treat schizophrenia, according to federal documents.

 Federal officials said the company knew that Risperdal posed serious health risks for older adults, like an increased risk of strokes, but it played them down. The drug’s label was later updated to warn against the use of the drug in older patients with dementia.

So the allegations were that the company pursued an elaborate and deceptive strategy to promote the drug for elderly dementia patients despite knowledge that the drug was particularly risky for such patients.

Promoting Risperdal for Adolescent Boys Despite Increased Risk of Gynecomastia

Again, per the WSJ,

Prosecutors also alleged that J&J promoted Risperdal for use by boys suffering from mental disabilities despite knowing that use could raise levels of a hormone stimulating breast development.

The NYT added,

Federal prosecutors also say, as part of the civil settlement, that Johnson & Johnson promoted the use of Risperdal in people with mental disabilities and children, even though the company did not receive F.D.A. approval to market to children until 2006. Janssen told its sales representatives to visit child psychologists and mental health facilities that mainly focused on children, promoting the drug as a safe treatment for disorders like attention deficit hyperactivity disorder and obsessive-compulsive disorder, the government said. 

Johnson & Johnson knew that children were susceptible to certain health risks from taking Risperdal, including the possibility that boys could develop breasts through elevated production of the hormone prolactin, federal officials said. 

Again, the allegations were that the company pursued an elaborate deceptive strategy to market the drug for children despite knowledge that the drug was particularly risky for such patients.  

No Executives were Discomfited by the Disposition of This Case

The company took pains to emphasize that the settlement only required a single guilty plea to a misdemeanor by a company subsidiary, and did not involve any other admissions of guilt, or any penalties to specific human beings.  For example, per Bloomberg/ Business Week,

'Today we reached closure on complex legal matters spanning almost a decade,' Michael Ullmann, J&J’s general counsel, said in a statement. 'This resolution allows us to move forward and continue to focus on delivering innovative solutions that improve and enhance the health and well-being of patients around the world.'

While Janssen 'accepts accountability' for the actions described in the misdemeanor plea, the civil settlement 'is not an admission of any liability or wrongdoing, and the company expressly denies the government’s civil allegations,' J&J said.

So why give up a perfectly good $2.2 billion (minus $400 million fine and forfeiture by the Janssen subsidiary for the single misdemeanor)?  Was "closure" all that valuable?

In addition, in the NY Times we found ,

Ernie Knewitz, a spokesman for Johnson & Johnson, noted that the misdemeanor charge was being entered on behalf of the company and no individuals were charged with wrongdoing. 'Mr. Gorsky [current CEO] has been an outstanding Johnson & Johnson leader for more than 20 years,' he said.

Would you expect someone who works for Mr Gorsky to say otherwise?  Yet it was on Mr Gorsky's watch that much of the alleged bad conduct actually happened. 

Alex Gorsky was promoted to chief executive officer of J&J in April 2012, in part because of his record of generating sales as leader of Janssen Pharmaceuticals.

Furthermore, the Inquirer noted that Mr Gorsky was deposed in one of the many civil lawsuits filed by patients against Johnson and Johnson.

The 60-page transcript of Gorsky's deposition in one of the Philadelphia suits was part of the publicly available court record. In the transcript, McCormick walks Gorsky through discussions from 2001 with Joseph Biederman, a Harvard medical school professor and a Massachusetts General Hospital pediatric psychiatrist who gained fame - and criticism - for advocating the use of pharmaceuticals to treat children with perceived mental illness. That was before the U.S. Food and Drug Administration approved, in still-limited ways, drugs such as Risperdal for children.

In a one-page letter dated Dec. 7, 2001, Biederman requested $500,000 to start what became the Johnson & Johnson Center for the Study of Pediatric Psychopathology. Gorsky said in the deposition that he approved that payment.

Gorsky was asked whether he had been hoping Biederman and, by extension, Massachusetts General Hospital and Harvard, would help J&J to get wider diagnosis and treatment for child and adolescent mental disorders.

'I think our goal was to, yes, have better diagnostic criteria for children who are in need of treatment and to have better therapeutic options for children who are in need of treatment,' Gorsky said.

Also in the transcript, McCormick discussed with Gorsky a document called the 'Annual Report 2002: The Johnson & Johnson Center for Pediatric Psychopathology at Massachusetts General Hospital.' Biederman was the director of the center, and one of the goals of its research, according to the report, was that 'it will move forward the commercial goals of J&J.'

Thus this testimony seems to imply that current Johnson and Johnson CEO Gorsky was involved in making large payments to an important key opinion leader (KOL) who was supposed to use his academic gravitas to "move forward the commercial goals" of Johnson and Johnson, specifically by promoting Risperdal for children.

Yet, as we discussed above, neither Mr Gorsky nor any other person at Johnson and Johnson who might have authorized, directed, or implemented the alleged conduct which was the subject of the settlement, conduct which Johnson and Johnson of course denies was misconduct, suffered any negative consequences.

Mr Gorsky's total compensation as CEO in 2012 was $10,977,109 according too the company's 2013 proxy statement. The retiring CEO, William Weldon, on whose overall watch the alleged events occurred, received $29,838,259 that year.  We last discussed their compensation and its contrast with the company's ethical track record here.

These payments also occurred despite all the other settlements Johnson and Johnson has had to make because of allegations about its marketing of Risperdal.  As described by Bloomberg/ Businessweek,

The settlement won’t resolve suits brought by attorneys general in Arkansas, Louisiana and South Carolina, where the company has appealed or has said it will appeal judgments over Risperdal sales.

Judges or juries in those states have ordered J&J to pay a total of about $1.8 billion in damages and fines over Risperdal marketing campaigns that were found to have misled doctors and patients about the drug’s health risks and effectiveness.

In 2012, a judge in Arkansas ordered the drugmaker to pay $1.2 billion in fines over Risperdal marketing. That verdict came three months after J&J decided to end a trial in Texas over the drug’s sales with a $158 million settlement. The Arkansas judge also awarded the state $180 million in attorney fees, J&J said in an August regulatory filing. The company is appealing the judgment.

In June 2011, a judge in South Carolina ordered J&J to pay $327 million in penalties for deceptively marketing the medicine. Ten months earlier, jurors in Louisiana ordered the drugmaker to pay almost $258 million to state officials over J&J’s Risperdal marketing campaign in the state. A Louisiana judge later ordered the drugmaker to pay an additional $73.3 million in attorney fees and costs.

The payments further occurred despite a previous settlement involving another drug whose marketing was at issue in the current settlement, according to Bloomberg / Businessweek,

In October 2011, J&J’s Scios unit pleaded guilty to a misdemeanor violation over Natrecor and paid an $85 million criminal fine.

Finally, the compensation was given despite other legal actions not having to do with Risperdal, Invega or Natrecor, as we most recently summarized,
- A guilty plea for misbranding Topamax in 2010 (look here)
- Guilty pleas to bribery in Europe in 2011 by J+J's DePuy subsidiary (look here)
 - Accusations that the company, which makes smoking cessation products, participated along with tobacco companies in efforts to lobby state legislators (see post here)

Summary

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.

Addendum - Other Comments

See also similar sentiments from 1BoringOldMan,

 J&J closes out the escrow fund set aside for this settlement. Alex Gorsky goes to his West Point Anniversaries and Boy Scout Board meetings an ongoing success story [shoveling…]. And what was this all about?

This is the way the world ends

This is the way the world ends

This is the way the world ends

Not with a bang but a whimper

and in a press release from Public Citizen,

Until more meaningful penalties and the prospect of jail time for company heads who are responsible for such activity become common, companies will continue defrauding the government and putting patients’ lives in danger.

There They Go Again - Omnicare to Settle for $120 Million

The march of legal settlements seems to be on its way again.


The Latest Settlement

The details, per Reuters,

Omnicare, Inc, a leading U.S. provider of pharmacy services to the elderly, has agreed to pay the U.S. government $120 million to settle allegations the company gave nursing homes steep discounts on prescription drugs in exchange for patient referrals.

Cincinnati-based Omnicare announced the settlement on Wednesday in a filing with the U.S. Securities and Exchange Commission, but denied any wrongdoing. The lawsuit, filed in 2010 by former Omnicare employee Donald Gale, had been scheduled to go to trial on October 28.

Gale accused the company of engaging in a kickback scheme called 'swapping' in which Omnicare allegedly gave nursing homes heavily discounted prescription drugs for inpatients covered by Medicare Part A. That federal benefit program pays skilled nursing facilities a fixed fee per patient, per day, for the first 100 days of a patient's stay, according to court filings.

In exchange, the nursing homes allegedly referred their other patients, many covered by other federal benefit programs, allowing Omnicare to bill the full price of their prescription drugs and pharmacy services, the lawsuit said.

As is usually the case, 

Omnicare's vice president of investor relations, Patrick Lee, said in an emailed statement that the company did not admit liability in settling the lawsuit.

'The Company agreed to settle the matter in order to avoid continued litigation and to focus on its mission of helping to ensure the health of seniors and other patient populations in a cost-effective manner,' he said.

He did not comment on the discrepancy between the alleged kickback scheme apparently meant to increase company revenue and that bit about ensuring health in "a cost-effective manner."

Will There be Still Others?

In addition, the Cincinnati Business Courier quoted another Omnicare executive,

'This settlement is not an admission of liability, and Omnicare continues to deny that there was any wrongdoing,' Robert Kraft, chief financial officer for Omnicare, said Wednesday in a conference call with market analysts regarding the company’s third-quarter earnings. 'When we agree to settle these types of matters, we have and will continue to make decisions in the best interest of our shareholders. …'

'We operate in a highly regulated industry, and we believe additional matters will likely arise against the company in the future,' Kraft said. 'We believe the matters of which we are now aware, including the aforementioned settlement, are manageable given the company's financial position and cash-flow characteristics.'

Was that an admission that the company often violates regulations?  It is hard to tell.  However, it is clear that this is not the first settlement of allegations of bad behavior that the company has made.

The Previous Settlements

The Cincinnati Business Courier article also stated,
 

I reported in August on the settlement of a lawsuit filed on behalf of Omnicare, which had alleged that a former president and CEO as well as some other former officers or directors of the company had violated federal laws related to kickbacks and false claims.

That settlement was for a mere $16.7 million.

In addition, as we discussed in 2010, in 2009, we discussed a $98 million settlement made by Omnicare, US based corporation that manages pharmacy-benefits, of allegations that it received kickbacks from generic drug manufacturers for buying and recommending their drugs.  Omnicare had previously submitted to a corporate integrity agreement in 2006, and paid $102 million to settle allegations it defrauded Medicaid.

So the count so far is four settlements for a total of approximately $337 million, and one corporate integrity agreement.

Summary

So Omnicare is yet another of the many large health care organizations which have been subject to various legal actions suggesting diverse kinds of bad behavior.  Omnicare, like many of these, has paid penalty upon penalty, yet each settlement seems to be made in a vacuum without reference to prior events.  Furthermore,  almost no settlement, and no settlement made by Omnicare, ever either imposed a large enough penalty on the company to deter further problems, or imposed any - I repeat any - negative consequences on anyone at the company who authorized, directed, or implemented the bad behavior.  So, as obliquely stated by the Omnicare CFO in this case, expect further "matters" to be addressed in the future.

So as we said on the subject of Omnicare in 2010,

 the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior by health care organizations. Even large fines can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich. 

 By Roy M. Poses on Health Care Renewal

Why Do People Think US Health Care is Corrupt? - The Examples of Amgen, Mallinckrodt Settling Charges of Giving Kickbacks to Doctors to Induce them to Prescribe Their Products, While No Individual Suffers Negative Consequences

We recently posted a discussion of the results of Transparency International's 2013 corruption barometer, focusing on the US results.  43% of survey respondents thought US health care is corrupt.  Our coverage, apparently the only substantial discussion of the US results published in the US, got star ranking for a while on Reddit.  But many anonymous commentators dismissed the survey results as coming from a naive public who does not understand health care economics.

I submit that one can recognize corruption without a degree in economics.  In fact, as we discussed in the initial post, there is a lot of evidence for the prevalence of health care corruption in the US, other developed countries, and globally.  It is just that such evidence rarely gets discussed in public (the anechoic effect, as we say on this blog), probably because doing so might make those who are profiting from the corruption uncomfortable.

So today let me summarize just the latest evidence about US health care corruption, as defined by Transparency International as the abuse of entrusted power for private gain.  (Note that the Transparency International definition of corruption, which is an ethical, not necessarily a legal definition, at least in most jurisdictions.)

Amgen

An article in the Thousand Oaks [CA] Acorn described the legal settlement,

Amgen Inc. paid the United States more than $15 million this month as part of a settlement agreement to resolve allegations that the biopharmaceutical company used financial kickbacks to persuade doctors to prescribe the cancer drug Xgeva to their patients.

The settlement resolves a qui tam, or 'whistleblower,' lawsuit filed Jan. 20, 2012, in federal court by William Davis and Spencer Miller—two Amgen employees who work at the company’s Thousand Oaks headquarters.

Davis, sales planning director for Amgen’s oncology business unit, and Miller, a senior marketing manager at the company, alleged their employer violated both the Medicare Anti- Kickback Statute and False Claims Act—two laws that aim to prevent Medicare fraud and abuse.

The allegations were that Amgen used a somewhat complex and deceptive strategy to pay doctors who prescribed its drug, using a survey about practice patterns as a cover story,

According to the U.S. attorney’s office, Amgen used what the company called 'Deep Dive' contracts—or data purchase agreements—in an effort to boost sales of Xgeva, which was approved by the FDA in late 2010 for use by certain cancer patients undergoing chemotherapy.

The drug is most commonly prescribed to prevent bone fractures in patients who have been diagnosed with a certain type of tumor after it has spread to the bones.

Under Amgen’s original Deep Dive program, the company paid doctors to fill out an Internet-based survey, which asked how they were treating patients with bone cancer and which drugs they used.

'That’s not illegal to do,' said Abraham Meltzer, assistant U.S. attorney in the Los Angeles civil fraud section. 'A lot of pharmaceutical companies purchase data legitimately on how various conditions are treated.'

But Amgen altered its Deep Dive program, Meltzer said, by increasing the amount of money it offered to pay the doctors who specifically prescribed Xgeva to their patients.

Also,

 The U.S. attorney’s office also alleged that Amgen paid oncologists and urologists to participate in market research surveys, audience response sessions and advisory programs that publicized the benefits of Xgeva.

As is typical in such cases, the settlement did not require any contrition on Amgen's part.  Instead,

In a prepared statement emailed to the Thousand Oaks Acorn on Tuesday, Amgen denied all allegations of wrongful conduct.

'Amgen settled this matter to avoid the delay, uncertainty, inconvenience and expense of protracted litigation,' the statement read.

As is also typical, there seemed to be no negative consequences for the human beings who must have engineered the "Deep Dive" contracts and the payments to the oncologists and urologists.  Nor was there any overt consideration of Amgen's sketchy recent ethical record, as described by the Acorn,

This month’s settlement is not the first time the biopharmaceutical giant has been held to answer for kickback allegations or false claims charges.

In December 2012, Amgen pleaded guilty to illegally selling the drug Aranesp, an anti-anemia drug, for uses or doses not approved by the FDA, according to the U.S. Department of Justice.

As part of the false claims case, which was also brought on by a whistleblower lawsuit, Amgen agreed to pay a $612-million civil settlement to the U.S. and individual states, as well as $150 million in criminal penalties.

Then in April, the Thousand Oaks-based company paid the U.S. another $24.9 million to settle whistleblower allegations that it gave financial kickbacks to long-term care pharmacy providers in exchange for switching Medicare and Medicaid benefi- ciaries from a competing drug to Aranesp, a DOJ press release states.

We discussed the guilty plea in the cases of Aranesp misbranding and alleged kickbacks to pharmacists.  Also, in 2013, we noted that Amgen settled allegations that it overpriced its products sold to government health programs in 36 states.  We also noted that despite, or perhaps because of all this misbehavior, the current CEO of Amgen received over $13 million in compensation in 2012, while his predecessor walked away with over $9 million that year.

Mallinckrodt

A small news item from the Associated Press, via the Nanaimo (MO) Daily News, outlined this legal settlement,

A St. Louis-based drug maker will pay $3.5 million to settle allegations that it paid doctors to prescribe 'outdated, third rate' antidepressants and sleep aids, the U.S. attorney's office in San Francisco announced.

In particular,

The lawsuit alleged the company targeted doctors who prescribed the type of antidepressants and sleep pills Mallinkrodt manufactured.

Again, the company was allowed to settle without admitting anything.

'While we deny the allegations in this matter, we are glad they are resolved,' company spokeswoman Erica Abbett said in a statement.

Again, although human beings would have had to engineer any payments to the doctors to induce them to prescribe, no human beings suffered any consequences as a result of this settlement.

Mallinckrodt, a storied corporate name, had been acquired by Covidien, and then was spun off again as a separate company in June, 2013 (look here).  It had been acquired in 2000 by Tyco International, which later spun off its health care operations as Covidien.   According to its 2013 proxy statement, Covidien's CEO received over $10 million in total compensation in 2012.


[Note that Tyco was the subject of one of the major scandal stories of the early 21st century.  In 2005, at a time when law enforcement authorities were still pursuing actions against elite corporate executives,  its former CEO and CFO were convicted of stealing millions from it (see USAToday summary)].

Summary - Why do People Think US Health Care is Corrupt?  

Again, the Transparency International definition of corruption is abuse of entrusted power for private gain.  I would argue that pharmaceutical companies are entrusted with the power to honestly sell drugs whose benefits to patients outweigh their harms.  I would further argue that paying physicians, who are entrusted with providing the best possible care to each individual patient, to prescribe drugs which may not be the best treatment for individual patients is an abuse of both the company's and the physicians' entrusted power.  Further, such payments provide private gain to the physicians.  They also may increase revenues for the company who makes these payments, and very likely these increased revenues lead to better compensation for those in the company who authorized, directed or directly provided the payments, that is to private gain for these corporate insiders.  Thus it seems that kickbacks to physicians to prescribe drugs is a form of corruption.

While both cases above were settled without admissions of guilt, such settlements do not refute the contentions that kickbacks were given.  Why would the law enforcement officials have brought the cases in the absence of evidence, and why would the companies have settled if the cases were completely baseless?  So I would argue that these settlements provide evidence, although not legal proof, that kickbacks were given.  People with far more legal knowledge than I possess have remarked on the absurdity of settling cases of alleged wrongdoing without any acknowledgement or statement of the facts (see posts here and here).

We have posted lots of instances of conflicts of interest affecting health care, many of which likely involved payments providing private gain that raised the risk of abuse of entrusted power.  We have also discussed many instances of crime, kickbacks, bribery, fraud other kinds of health care corruption.

So were the people who answered the Transparency International survey naive and foolish about health care corruption?  Or did they have reasonable beliefs about a topic that the powers that be really do not want to discuss?

A "Simply Outstanding," "Superb" Hospital CEO Cops a Plea to Two Felonies

In all the discussions of what is wrong with US health care, very rarely is the quality of the leadership of health care organizations questioned.  In fact, no major US health care organization seems to have leadership that is anything short of brilliant.  The amazing brilliance of these leaders serves as a rationale for the ever increasing compensation that they receive.  Yet while subordinates, friendly members of boards of trustees, and hard working public relations flacks may stress their leaders' wondrous qualities, there rarely is an opportunity to compare their proclamations with results.

A few small items in the New York media provide us one case study of how these proclamations may not square with reality.

Background

In 2005, the CEO of New York's renowned Hospital for Special Surgery announced his retirement.  In a hospital news release, we find these pronouncements about outgoing President and CEO John Reynolds,

HSS board Co-Chairman Aldo Papone said, 'John's guidance and devotion to the Hospital for Special Surgery these last two decades have been simply outstanding. Under his watch, the quality of care, fiscal health and scope of treatment for musculoskeletal disease at the hospital have reached the highest level in its history.  While we regret his decision, we can only offer a most grateful expression of thanks...'

Also, HSS board Co-Chairman Dean R. O'Hare said,

He is a superb leader and we appreciate his thoughtful approach to succession which is emblematic of his service to HSS.

I cannot find anything on the internet about Mr Reynolds' compensation prior to his retirement, but in 2006, after he took on the position of Co-CEO during the transition, a copy of the hospital's 2006 990 form filed with the US Internal Revenue service, (and still available here, note though that rather confusingly, the Hospital still files under its archaic original name, "The New York Society for the Relief of the Ruptured and Crippled,") showed that Mr Renynolds' total compensation was $1,310,603

The CEO as Crook

Nothing publicly appeared to challenge the notion that Mr Reynolds' leadership was less that "outstanding" and "superb" until a Bloomberg article in September, 2012,

.

John R. Reynolds, former chief executive officer of New York's Hospital for Special Surgery, was charged by federal prosecutors with taking $1.4 million in a decade-long illegal-kickback scheme.

Reynolds, 63, was arrested at his home in Massachusetts this morning, according to a statement from the office of U.S. Attorney Preet Bharara. An indictment unsealed today in Manhattan federal court charges Reynolds with racketeering and making false statements to the government. He faces as long as 25 years in prison if convicted.

Prosecutors claim that, from 1996 to 2007, Reynolds took money from at least two hospital vendors, a hospital employee and an unidentified health-care organization in the U.K.

Furthermore,

 The government claims Reynolds took a total of $420,000 in kickbacks from at least two hospital vendors, from 1996 to 2002, in exchange for steering hospital business to them. From 2000 to 2005, he extorted an additional $298,500 from a subordinate at the hospital after negotiating an annual bonus for the employee, according to the charges. Reynolds also received $670,000 for approving a clinical partnership between his hospital and the U.K. health-care organization, prosecutors claim.


Reynolds is also charged with lying in 2008 to an agent of the U.S. Department of Health and Human Services inspector general’s office.

'By allegedly exploiting his position at the helm of a world renowned hospital for his own personal gain, John Reynolds tarnished the hospital’s reputation and did a disservice to its employees,' Bharara said in the statement.

Not surprisingly,

 'Obviously, it was a shock to us,' said Deborah Sale, a hospital spokeswoman, referring to the charges.

Of course, in the US, people accused of crimes are assumed to be innocent until proven guilty.  So I am now writing about this case because yesterday Bloomberg published the follow up story,

The former chief executive officer of New York’s Hospital for Special Surgery, charged by federal prosecutors with taking $1.4 million in kickbacks, pleaded guilty to two felonies. 

John R. Reynolds, 64, today pleaded guilty to wire fraud and making false statements, admitting that he took payments from a hospital employee and lied to investigators about it.

He will be subject to a stiff fine, although less than what he was charged with extracting through his scheme, and may be imprisoned,

 Under a plea agreement with the government, Reynolds will forfeit $718,500. Both sides agreed that federal sentencing guidelines, which are advisory, call for him to serve 27 to 33 months in prison.

The story so far has also been covered briefly by two tabloids, the New York Post, and the Daily News.  To date, the Hospital for Special Surgery has not issued a news bulletin on this.

Summary

So yet another "outstanding," "superb" multimillion dollar CEO turned out to be something rather less, in  fact, to be a criminal.


We have frequently discussed how the leaders of large US health care organizations are often hailed as brilliant, and compensated hugely for their brilliance, but rarely publicly subject to any objective assessment of their performance.  In many cases, they seem unaccountable for leadership that may be ill-informed, hostile to the health care mission, or even criminal or corrupt.

 The good news is that this criminal was eventually caught.  The bad news is that it only happened 18 years after he began acting criminally, hardly an example of swift justice.  One wonders how many other brilliant health care leaders will years later turn out not to be so, and how many others' performance will never be publicly assessed.  

While we breathlessly await the rigorous prospective study that assesses public assessments of the leaders of large health care organizations against objective results, we are stuck with case studies as a means to do so.  This case study shows a particularly stark contrast between the public relations puffery and the sordid reality. 


Instead of "brilliant" leaders paid like royalty, we would do better with competently collegial leaders rewarded reasonably as part of a team all focused on the health care mission, which puts service to patients first.  As long as health care organizations appear to be a path to riches for their leaders, expect the people who want to lead them to be more interested in their own fortunes than patients' and the public's health.  As long as health care professionals, policy makers and the public assume that those who lead health care organizations are fully qualified, fairly paid, and always do what is right, expect the insiders to continue to run things for their own profit. 

The qualifications of those who would lead health care, how much they are paid, what they are doing and what the results of their work are ought to be publicly known and publicly discussed.  Health care professionals, policy makers, and the public should demand nothing less.  . 

C R Bard Settles Allegations of Kickbacks to Promote Radiation Treatment for Prostate Cancer

Screening for and aggressive treatment of prostate cancer has become an enormously lucrative business, if not necessarily a life-saving medical strategy.  The minimal media coverage of a recent settlement suggests that at least to some degree, it has been fueled by some questionable practices.

The CR Bard Settlement

As reported by the Atlanta Journal Constitution,

A medical device company on Monday agreed to pay a $48.2 million settlement to resolve claims by a Georgia employee that it paid kickbacks to doctors and customers who bought radiation treatment for prostate cancer.

C.R. Bard Inc., which is headquartered in New Jersey and has offices in Covington, resolved a whistle-blower suit filed by the employee in 2006. The suit alleged that the company paid off doctors and hospitals to induce them to prescribe brachytherapy seeds, which are implanted in the prostate and deliver a dose of radiation to cancer cells.

Another brief report in the Macon (GA) Telegraph gave a tiny bit more detail about what was given to physicians to get them to use Bard's radiation therapy products,

 Customers could order the seeds, used in brachytherapy to deliver a prescribed dose of radiation directly to cancer cells, from multiple companies. But Bard allegedly offered doctors grant money, rebates, free medical equipment and advertising campaigns to entice them to buy their product at inflated prices, according to a news release issued by [whistle-blower Julie] Darity’s legal team....

The Usual Elements of Legal Settlements of Allegations of Health Care Corporate Bad Behavior

The story, briefly told as it was, included many of the usual elements of stories of legal settlements of wrong-doing by large health care corporations.

Slow Justice

The settlement, hence justice, as it were, took a long time, about 7 years since the most recent behavior, and 15 years since its start.  Per the AJC,

 Bard employed its kickback scheme from 1998 to 2006, federal prosecutors said.

 Penalties Not as Big as They Appeared

The penalties were not as big as they seemed.  There was the seemingly large fine, $48.2 million dollars.  However, that should be compared to the company's net sales of over $2.95 billion and net income of $530 million in 2012, according to the company's annual report.  It should also be compared to the total compensation of the company's chairman and CEO in 2012, over $8.7 million, and to that of its president and chief operating officer, over $6.0 million, according to the company's 2012 proxy statement.   Apparently, the fine came out of the company's treasury, so its impact was diffused among all shareholders, employees, customers, and patients, not directed to those who may have authorized, directed or implemented the kickbacks to physicians. 

No Penalties for Individuals, No Acknowledgement of Wrong-Doing

The settlement did not involve any sort of direct penalties to those who authorized, directed, or implemented the kickbacks.

The corporation did not even acknowledge any bad behavior.  As per the AJC,

Bard is pleased to settle the claims, Scott Lowry, a company spokesman, said in a statement.

'This resolution allows the company to put this matter behind it and continue to focus on delivering life-enhancing medical devices and technologies to patients around the world,' he said. 'We remain committed to continuously enhancing and improving our compliance programs in accordance with industry standards.'

Suppression of Whistle-Blowing

It may not be part of all such settlements, but note that in this case there seemed to be an attempt to shut up the whistle-blower.  So, there is reason to think that justice, such as it was, was delayed because the company seemingly tried to punish the whistle-blower, rather than listen to what she had to say.  Per the Macon Telegraph,

 Darity, 56, said she first reported what she suspected as questionable activities to her supervisors.

'I did exactly what was outlined in the company ethics policy,' she said. 'I wanted to think things were being corrected.'
In time, she realized nothing had changed. She filed an internal whistle-blower complaint.

Her job was eliminated in November 2005, soon after an investigation was launched into her whistle-blower complaint, she said.

Darity had worked for Bard, which has an office in Covington, for more than 18 years. When her job was eliminated, she was a manager in the Brachytherapy Contracts Administration division.

Out of a job, Darity filed the lawsuit in U.S. District Court for the Northern District of Georgia in January 2006.

Read more here: http://www.macon.com/2013/05/14/2478611/medical-company-agrees-to-pay.html#storylink=cpy

Nonetheless, the government seemingly trusted C R Bard to fix its own behavior going forward, per the Wall Street Journal,

 As part of a non-prosecution agreement, C.R. Bard agreed to pay an additional $2.2 million and take remedial steps to enhance compliance. The company had said in a regulatory filing last year that it expected the settlement to include a corporate integrity agreement, which typically require companies to obey restrictions on their sales and marketing practices, but no such agreement was announced Monday. 

Note that here we discussed a case in which an academic medical institution seemingly tried to punish faculty members who questioned that organization's overly enthusiastic approach to prostate cancer.

Summary - the Profitable but Unsubstantiated Aggressive Approach to Prostate Cancer

So its just another day at the office. This was a typical settlement of allegations of unethical behavior by a large health care organization.    A large health care company allegedly bribed doctors to use its products.  It seemingly tried to shut up a whistle-blower.  Seven years later, the company got a financial slap on the wrist, but no one directly involved in the alleged kickbacks, and no one whose compensation may have been enlarged due to such apparently unethical activity paid a price.  Never mind that the alleged kickbacks may have induced doctors to use treatments that provided no overall benefit, but could have harmed patients. 

Before ending with our usual fulmination, I should note that this case appears to be one small piece in the puzzle of our national infatuation with an aggressive approach to prostate cancer, despite a lack of essentially any good evidence that this approach does any good.  Brachytherapy, the treatment pushed allegedly by kickbacks, is one kind of aggressive treatment for prostate cancer.  Yet there is no good evidence from randomized controlled trials that is prolongs life.  In fact, a recent (and the only major) randomized controlled trial of aggressive treatment of prostate cancer on initial diagnosis failed to show any overall survival benefit.(1)  There has been a huge push to screen all men of a certain age for prostate cancer.  Yet now two new trials also failed to show any overall survival benefit from screening.(2,3)   

But the prostate cancer business is very lucrative.  On the Reforming Health blog, a post summarized a lecture given by Dr Otis Brawley, chief medical officer of the American Cancer Society in which Dr Brawley described the financial scheme underlying the aggressive approach to prostate cancer,

Brawley recounts an experience he had on a site visit to a hospital in 1998 while an Assistant Director at the National Cancer Institute. During the visit a marketing executive explains to Brawley the publicity value and financial rewards of a free prostate screening program offered by the hospital at a local mall. The plan is to screen the first 1,000 men over 50 who come to the mall for testing. I’ve transcribed Brawley’s recollections from the video and they provide a great explanation for the profit-driven practices that continue to occur today, 14 years later:

'If they screen 1,000 men they’re going to have 145 abnormals. They’re going to charge about $3,000 to figure out what is abnormal about these abnormals, that’s how they pay for the free screening. About 10 of the 145 won’t come to this hospital so that’s business for their competitors, but they’ll get 135 times $3,500 on average. Of the 135, 45 are going to die of prostate cancer and the other percentage are going to get radical prostatectomy at about $30-40,000 a case; there’s a percentage that’s going to get seeds at about $30,000 a case; a percentage were going to get radiation therapy that (at the time) was about $60,000. Then [the marketing executive’s] business plan goes further, he knows how many guys are going to have so much incontinence that diapers aren’t going to do it so he had in his business plan how many artificial sphincters urologists were going to implant. And then he was a little apologetic because there was this new thing called Viagra that screwed up his estimates for how many penile implants he was going to sell because guys were upset about impotence related to prostate cancer treatment.'

Brawley says, 'this is 1998, I ask him, if you screen 1,000 people how many lives are you going to save? He took off his glasses and looked at me like I was some kind of fool and said, ‘Don’t you know, nobody’s ever shown that prostate cancer screening saves lives, I can’t give you an estimate on that.’'

Presumably because he was a marketing executive, the manager whom Brawley quoted did not have to feel doubt about all the men subjected to needless procedures, and who would be at risk of serious and unpleasant adverse effects of these procedures, all to make money but not to prolong their lives.  Of course, not only the hospitals make money, but also quite obviously the companies that sell them the drugs and devices needed for all this medical aggression make money, as do the doctors who go along with it all. 

Now we suspect that one small reason the doctors have gone along with it is that they may have gotten inducements from those companies.

Time to fulminate,...

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

References

1.  Wilt TJ, Brewer MK, Jones KM et al.  Radical prostatectomy versus observation for localized prostate cancer.  N Engl J Med 2012; 367: 203-13.  [Link here]
2.  Andriole GL, Crawford ED, Grubb RL et al.  Mortality results from a randomized prostate-cancer screening trial.  N Engl J Med 2009; 360: 1310-9. [Link here]
3.  Schroder FH, Gugosson J, Roobl MJ et al.  Screening and prostate-cancer mortality in a randomized European study.  N Engl J Med 2009: 360: 1320-8.[Link here]

Read more here: http://www.macon.com/2013/05/14/2478611/medical-company-agrees-to-pay.html#storylink=cp

Amgen CEOs Prosper Despite (or Because of) Continuing Ethical Questions

This is becoming a familiar narrative on Health Care Renewal: top health care leaders continue to enrich themselves while their organizations' behavior continues to raise ethical questions.

For our latest example we return to the ongoing adventures of biotechnology giant Amgen.

CEOs Get Richer

An AP story (via the LA Times) documented the continuing enrichment of its current CEO:

Amgen Inc's new chief executive, Robert A. Bradway, received total compensation of $13.6 million in 2012, more than his predecessor, according to an analysis of a company regulatory filing.

Bradway, who was promoted from chief operating officer to chief executive May 23, saw his compensation nearly double from $7.1 million in 2011.

Last year Bradway, 50, was paid a salary of $1.26 million and received stock awards worth $8.57 million, incentive payments of $3.32 million and miscellaneous compensation totaling $420,059. That included nearly $314,000 in retirement plan contributions, $65,000 for personal use of company aircraft, more than $20,000 for his personal expenses and those of guests during business travel, and $15,000 for financial planning services.

The former CEO also did very well in his final year in office.

Former CEO Kevin W. Sharer, who stepped down from his seat on Amgen's board when he retired Dec. 31, received compensation totaling $9.13 million last year.

Sharer was paid a 2012 salary of $1.81 million and received stock awards worth $3.66 million, incentive payments of $2.31 million and miscellaneous compensation totaling $1.36 million. That included $801,000 in retirement plan contributions, nearly $262,000 for personal use of company aircraft, more than $38,000 for his personal expenses and those of guests during business travel, $15,000 for financial planning services and more than $255,000 for secretarial, information technology and travel support. Much of that support runs through 2017.

You would think they could both afford financial planning on their own.

Legal Settlements Pile Up

Keep in mind that as we discussed in late 2012 and early 2013, Amgen pleaded guilty to a charge of misbranding for promoting its epoetin drug Aranesp for unapproved indications, and settled allegations of giving kickbacks to physicians to increase the drug's use, among other charges, for a total of $762 million.

Furthermore, soon after the CEOs' compensation was announced, tiny articles in local media announced two more settlements by Amgen.

A small AP story (again via the LA Times) noted another settlement regarding allegations of unethical promotion of Aranesp:

The US Department of Justice said Tuesday that biotech drug maker Amgen Inc. will pay $24.9 million to resolve claims it paid kickbacks to increase sales of its anemia drug Aranesp.

The Justice Department said Amgen paid kickbacks to Omnicare Inc. and PharMerica Corp., which sell drugs to long-term care providers such as nursing homes and hospitals, and Kindred Healthcare Inc., which runs long-term acute-care hospitals and nursing and rehabilitation centers.

Amgen wanted the companies to switch Medicare and Medicaid beneficiaries to Aranesp from competing drugs and tried to get consultant pharmacists and nursing home staffers to encourage the use of Aranesp in patients who didn't have anemia associated with kidney failure, the Justice Department said.

The Thousand Oaks company made payments based on the sales volume or market share of Aranesp, the agency said.

Then a few days ago, a story in the San Fernando Valley Business Journal described yet another Amgen settlement:
 

Thousand Oaks biotech Amgen Inc. has reached an $11 million settlement with 36 states over charges it inflated pricing data and caused Medicaid to overpay for six of its drugs, the New York State Attorney General said Monday.

The charges allege Amgen inflated cost benchmarks for drugs used to treat kidney disease and cancer patients. The drugs involved were Aranesp, Enbrel, Epogen, Neulasta, Neupogen and Sensipar. Those benchmarks are used to set pharmacy reimbursement rates for drugs dispensed to state Medicaid beneficiaries.

Keep in mind that all these recent settlements involved allegations of efforts made to oversell Aranesp.  As we noted previously, this drug carries a "black box" warning about serious and potentially fatal side effects.  The official Aranesp label states (in a black box warning, in capital letters):

 ESAs INCREASE THE RISK OF DEATH, MYOCARDIAL INFARCTION, STROKE, VENOUS THROMBOEMBOLISM, THROMBOSIS OF VASCULAR ACCESS AND TUMOR PROGRESSION OR RECURRENCE

So the overselling of Aranesp not only appeared unethical, it seemed to put short term revenue ahead of patient safety, and could conceivably have lead to patients dying so that the company could make more money.   

Summary

So while the evidence mounts that health care organizations, and in this case, Amgen, continue to aggressively pursue short-term revenue even is their means of doing so endangers patients.  However, legal efforts to challenge such reckless practices continue to fail to impose any negative consequences on those who personally profited from this behavior, and particularly those corporate executives who authorized and directed the bad behavior.  Moreover, while such evidence mounts, the top leaders of these organizations continue to pile up riches.  It seems that CEOs of health care organizations continue to prosper despite, or perhaps because of their organizations' continuing unethical and dangerous behavior.

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

How the "Revolving Door" and Other Aspects of Corporatism Benefited Amgen Just After its Settlement and Guilty Plea

At least here in these United States, our health care corporatism is bipartisan.  Here we present a sorry story of how a company that should have been shamed by dishonest behavior that likely harmed patients instead apparently was awarded special treatment through its cozy relationships with top government leaders
 
Accusations of Kickbacks and Deceptive Marketing of Aranesp 

Last month, biotechnology giant pleaded guilty to a charge of misbranding and settled civil charges with the US government for $762 million (look here).  Soon after, New York Times article described the unethical practices the company was alleged to have performed.  It opened with a vivid anecdote:

'I hope no one is taping this,' the Amgen manager remarked at a company sales meeting in 2005.

The manager then boasted of how she had given a $10,000 unrestricted grant to a pet project of a doctor who was an adviser to the local  Medicare contractor. In turn, she said, the doctor would help persuade the contractor to provide reimbursement for an unapproved use of Amgen’s anemia drug, Aranesp. 

Since that account appeared to be of a quid pro quo, it did sound like some a kickback or bribery.  In addition,

Amgen is also accused of offering kickbacks to doctors and clinics to induce them to use its drugs. These reportedly came as cash, rebates, free samples, educational and research grants, dinners and travel, and other inducements.   

Of course, since this was the usual sort of settlement we see of health care corporate wrongdoing, in which the reason the company is paying what appears to be a large fine remains ambiguous,

Except for those in the criminal count, Amgen denied the other accusations, though it did issue a statement on Wednesday acknowledging the settlement.

'The government raised important concerns in the criminal prosecution,' Cynthia M. Patton, chief compliance officer at Amgen, said in the statement. 'Amgen acknowledges that mistakes were made, and we did not live up to our standards.'

"Mistakes were made," what a handy phrase to avoid acknowledging that a real person or person made those mistakes.  Why government prosecutors did not leverage instances in which the mistakes were made by an identifiable person, for example, the manager in the anecdote above, to find out who ultimately authorized and directed the kickbacks and deceptive marketing, and then seek to indict them is a mystery.  The US Department of Justice now seems to be disinclined to ever pursue top  health care corporate executives who may have done wrong, while they exuberantly pursue fines from the companies they direct, fines which have almost no personal impact on those who authorized, directed or implemented the bad behavior.
  
The Times article also included a telling allegation that behind this apparent misbehavior was a changed corporate culture that put short-term revenue ahead of all other considerations.  

the corporate culture changed starting around 2000. That was when new management came in and Aranesp was approved, setting up a fierce marketing battle with Johnson & Johnson and its rival anemia drug, Procrit.

'It was more important to make your numbers than to follow the rules,' said [former Amgen sales representative and now whistle-blower Jill] ...Osiecki, who was based in Milwaukee and sold Aranesp. 

We have discussed how the "make your numbers" culture seems to have resulted from an over-generalization of the prevalent belief in business schools that "maximizing shareholder value," which usually seems to mean maximizing short-term revenue and/or doing whatever it takes to boost stock prices in the short-term (look here).  In companies which make potentially beneficial but also potentially hazardous drugs, the risks of "make your numbers" are obvious.

Shameful Consequences for Patients 

These were disconcerting revelations.  They showed that some unidentified employees, probably including top leaders of a major health care corporation seemed to use kickbacks and lies to deceptively market a drug just to "make their numbers," and thus most likely score healthy bonuses.  Yet this drug is clearly dangerous.  The official Aranesp label states (in a black box warning, in capital letters):

 ESAs INCREASE THE RISK OF DEATH, MYOCARDIAL INFARCTION, STROKE, VENOUS THROMBOEMBOLISM, THROMBOSIS OF VASCULAR ACCESS AND TUMOR PROGRESSION OR RECURRENCE

Thus deceptive and unethical marketing practices likely lead to overuse of the drug, and overuse of the drug likely lead to sick (via myocardial infarction [heart attack], stroke, venous thromboembolism or thrombosis of vascular access [drug clots], or tumor progression) or dead patients.

One would think that the consequences of the particular bad behavior alleged in this case would have lead to more zealous prosecution and to the pursuit of actual people who authorized, directed or implemented the bad behavior.  However, it did not.


One would also think that the nature and consequences of this bad behavior would harm the reputation of the company and its leadership.  Instead, it appears that soon after the settlement was announced, top US elected leaders were fawning over this company and its leadership, and rushing to legislate special treatment for it.

Special Treatment from Legislators

Yet soon after these disconcerting revelations that should have shamed Amgen and its leadership, it appears that the company benefited from legislation narrowly crafted mainly just for to suit its interests, and with the aid of allies from both parties within the US government.  That story was again just reported by the New York Times.  The basics are:

Just two weeks after pleading guilty in a major federal fraud case, Amgen, the world’s largest biotechnology firm, scored a largely unnoticed coup on Capitol Hill: Lawmakers inserted a paragraph into the "fiscal cliff"  bill that did not mention the company by name but strongly favored one of its drugs. 

 

The language buried in Section 632 of the law delays a set of Medicare price restraints on a class of drugs that includes Sensipar, a lucrative Amgen pill used by kidney dialysis patients.

The provision gives Amgen an additional two years to sell Sensipar without government controls. The news was so welcome that the company’s chief executive quickly relayed it to investment analysts.  But it is projected to cost Medicare up to $500 million over that period.[That would almost make up for the fine the company had to pay for illegal marketing and to settle kickback charges - Ed]

Amgen, which has a small army of 74 lobbyists in the capital, was the only company to argue aggressively for the delay, according to several Congressional aides of both parties. 

But the Times article noted that it was not just the size of its army of lobbyists that did it.  

 Amgen has deep financial and political ties to lawmakers like Senate Minority Leader Mitch McConnell, Republican of Kentucky, and Senators Max Baucus, Democrat of Montana, and Orrin G Hatch, Republican of Utah, who hold heavy sway over Medicare payment policy as the leaders of the Finance Committee. 

In particular, Amgen

has a deep bench of Washington lobbyists that includes Jeff Forbes, the former chief of staff to Mr. Baucus; Hunter Bates, the former chief of staff for Mr. McConnell; and Tony Podesta, whose fast-growing lobbying firm has unusually close ties to the White House.

Amgen’s employees and political action committee have distributed nearly $5 million in contributions to political candidates and committees since 2007, including $67,750 to Mr. Baucus, the Finance Committee chairman, and $59,000 to Mr. Hatch, the committee’s ranking Republican. They gave an additional $73,000 to Mr. McConnell, some of it at a fund-raising event for him that it helped sponsor in December while the debate over the fiscal legislation was under way. More than $141,000 has also gone from Amgen employees to President Obama’s campaigns.

What distinguishes the company’s efforts in Washington is the diversity and intensity of its public policy campaigns. Amgen and its foundation have directed hundreds of thousands of dollars in charitable contributions to influential groups like the Congressional Black Caucus and to lesser-known groups like the Utah Families Foundation, which was founded by Mr. Hatch and brings the senator positive coverage in his state’s news media.

Amgen has sent large donations to Glacier PAC, sponsored by Mr. Baucus in Montana, and OrrinPAc, a political action committee controlled by Mr. Hatch in Utah.

And when Mr. Hatch faced a rare primary challenge last year, a nonprofit group calling itself Freedom Path sponsored advertisements in Utah that attacked his opponent, an effort that tax records released in November show was financed in large part by the Pharmaceutical Research and Manufacturers of America, a trade group that includes Amgen.

In some cases, the company’s former employees have found important posts inside the Capitol. They include Dan Todd, one of Mr. Hatch’s top Finance Committee staff members on health and Medicare policy, who worked as a health policy analyst for Amgen’s government affairs office from 2005 to 2009. Mr. Todd, who joined Mr. Hatch’s staff in 2011, was directly involved in negotiating the dialysis components of the fiscal bill, and he met with 'all the stakeholders,' Mr. Hatch’s spokeswoman said, not disputing when asked that this included Amgen lobbyists.

In addition, a NY Times editorial today pointed out that Mitch McConnell, the Senate Minority Leader, (Republican - Kentucky) who "exerted great influence over the fiscal negotiations and praised the Medicare provisions" presumably including the specific provision that helped Amgen, also has "political and financial ties to Amgen."  Furthermore, Senator McConnell's willingness to use taxpayer's money to pay Amgen more seemed to contradict his "public statements [which] usually emphasize the need to cut federal spending on entitlement programs, as they did in Lexington Friday," as reported by WEKU (the National Public Radio Station at Eastern Kentucky University ).  

Can We Reform Health Care in the Corporatist States of America?  

 In summary, Amgen seems to have leveraged its use of former legislative aides affiliated with both political parties as lobbyists, and its presumed influence over former employees who are currently legislative aides, that is, to people who have transited revolving doors in both directions, to influence policy in its corporate favor.  It has also leveraged its contributions directly to politicians, to political action committees (PACs), and to non-profit advocacy groups to influence policy in its direction for this purpose.  All this leverage apparently resulted in continuing government favoritism to a company the government had just convicted of a crime, and to a company whose actions likely led to sick and dead patients.  Furthermore, legislators who publicly deplore excess government spending and enlarging government deficits supported spending more taxpayer money to favor a particular company that they ought to have shunned. 


The New York Times editorial deplored this case first as

a disheartening example of how intense lobbying and financial contributions can distort the legislative process in Washington

and second as

a classic example of the power of special interests to shape legislation and shows how hard it may be to carry out the reforms needed to cut health care costs. 

But it was really much worse than that.   This case certainly shows the ongoing coziness between big health care organizations and government (this time, mainly legislative) leaders, facilitated by the apparently very common "revolving door" interchange of influential people between corporate management and government.  Note that this coziness has now become bipartisan.  However, this was not merely expensive favoritism.  It was hypocritical expensive favoritism that benefited a corporation that ought to have been shamed and shunned for behavior that did not merely cost the government money, but likely harmed patients, sometimes even fatally. 

President Theodore Roosevelt condemned malefactors of great wealth.  Our current political leaders in both parties seem to put their ties to corporate insiders who work for executives of great wealth ahead of any consideration of what might be good for patients, public health, or the citizenry at large.  

So the US now seems to be run by a soft, informal version of corporatism, the system in which government and big corporations overlap and jointly rule the people.  Since these days big corporations are run largely without accountability by increasingly rich executives, this ends up meaning government by the oligarchs, for the oligarchs, and of the oligarchs.  President Lincoln and President Theodore Roosevelt might be rolling in their graves.  

To meaningfully reform health care, it seems like we need to meaningfully reform our entire political system, and both make leaders of health care organizations accountable, and make government again of the people, by the people, and for the people. 

'Tis the Season for Legal Settlements: GlaxoSmithKline, Eli Lilly, Orthofix, Sanofi all Settle

Reports of legal settlements by big health care organizations tend to dribble out towards the end of the year, maybe in a rush to finalize the year's accounting, maybe because the news will not register as well at times when people are distracted by holidays.  Here is a round-up in alphabetical order of some recent settlements of interest made by drug and device companies.

GlaxoSmithKline

Earlier this year GSK made the largest settlement, in monetary terms, ever by a pharmaceutical company (see this post).  At the end of the year it made two more.  Neither got much media attention.  The first was related to the earlier $3 billion settlement.  As reported by the [Great] Lebanon [Oregon] Express:

Oregon Attorney General Ellen Rosenblum announced in a press release that pharmaceutical giant GlaxoSmithKline has agreed to pay $90 million to Oregon and 37 other states to settle claims that it unlawfully promoted its diabetes drug, Avandia.

As the co-leader of the lawsuit, Oregon will receive $3.9 million of the settlement, according to the release.

The 38 attorneys general claimed in lawsuits filed Nov. 15 that GlaxoSmithKline misrepresented the cardiovascular risks posed by Avandia. A negotiated consent judgment was filed shortly thereafter.

 Avandia was a blockbuster drug for GlaxoSmithKline. First approved by the Food and Drug Administration in 1999, annual sales peaked at more than $2.5 billion in 2006.

Furthermore,

 Oregon and the 37 other states claim GlaxoSmithKline made safety claims about Avandia not supported by the scientific evidence.

The states allege the company failed to disclose negative information about Avendia’s cardiovascular health effects.

In addition to the monetary settlement, the agreement included all sorts of pledges by GSK:

As part of the consent judgment between the parties, GlaxoSmithKline agreed to reform how it markets and promotes diabetes drugs. It agreed to several conditions:
 • To refrain from making false, misleading, or deceptive claims about any diabetes drug;
• To refrain from making comparative safety claims not supported by substantial evidence or substantial clinical experience;
• To refrain from presenting favorable information previously thought of as valid but rendered invalid by contrary and more credible recent information;
•   To refrain from misusing statistics or otherwise misrepresenting the nature, applicability, or significance of clinical trials.

The Consent Judgment also has the following terms that are effective for at least eight years:
• GlaxoSmithKline must post summaries of all company sponsored observational studies or meta-analyses conducted by the company that are designed to inform the effective, safe, and/or appropriate use of its diabetes drugs;
• The company post summaries of company-sponsored clinical trials of diabetes products within eight months of the primary completion date;
• GlaxoSmithKline must register and post all company-sponsored clinical trials as required by federal law.

Even more under the radar was a second, unrelated settlement, only briefly chronicled by Reuters (here via the Chicago Tribune):

 British drugmaker GlaxoSmithKline Plc has reached a $150 million preliminary settlement with U.S. drug wholesalers who claimed the company improperly delayed entry to the market of generic alternatives to its nasal spray Flonase, according to court documents.

The settlement was reached with, among others, AmerisourceBergen Corp, Cardinal Health Inc, and McKesson Corp, who maintained that Glaxo had abused the citizen's petition process to maintain a market monopoly and overcharge for the spray by restricting access to less expensive generic versions.

Note that while the first settlement was clearly about misleading, deceptive marketing of a relatively dangerous drug as safe, a practice that likely lead to suffering and death of some patients, the second settlement which involved an unfair business practice that likely increased the cost of care to some patients, and decreased the profits of some competitors, lead to a monetarily larger settlement.

Again, these latter two settlements seem to just ice the cake of the $3 billion settlement earlier this year.

 Eli Lilly

Eli Lilly pleaded guilty to a misdemeanor charges and settled allegations about questionable marketing practices for its anti-psychotic drug Zyprexa for over $1 billion in 2009 (see post here).  The settlement provided some instructive information about how big pharmaceutical companies employ ghost writing to sell product (see this post).  Now at the end of 2012, Eli Lilly has settled charges that it bribed government officials in countries outside of the US.  The most colorful version of this story appeared in the Wall Street Journal.  In summary,

 Eli Lilly & Co. agreed to pay $29.4 million in a settlement of U.S. government allegations that the drug maker's units made improper payments to foreign government officials to win business.

Indianapolis-based Lilly didn't admit or deny the allegations, but agreed to have an outside consultant review the company's internal controls and its measures to comply with the U.S. Foreign Corrupt Practices Act, or FCPA. 

The colorful details were:

The SEC said in a civil complaint filed in U.S. District Court for the District of Columbia that employees of Lilly's China unit falsified expense reports to provide spa treatments, jewelry and other gifts and cash payments to government-employed doctors between 2006 and 2009.

The SEC also alleged: Lilly hired a drug distributor in 2007 that paid bribes to health officials in a Brazilian state to facilitate about $1.2 million in sales of a Lilly drug to the state; Lilly's Polish unit paid $39,000 between 2000 and 2003 to a charitable foundation run by the head of a regional government health authority and dedicated to restoring a castle in Chudow, Poland; and that its Russian unit paid millions of dollars between 1994 and 2005 to offshore entities that the SEC said 'appear to have been used to funnel money to government officials' to obtain business for the Lilly unit.

The SEC said Lilly didn't curtail the activities of its Russian unit for several years, even after an internal Lilly review raised questions about its use of these offshore arrangements.

As in the previous set of settlements, no individual was charged or had to pay any penalty for authorizing, directing, or implementing any unethical actions.  Note that the alleged bribery went on in multiple different countries, suggesting a systemic problem with the operations of the company.  Note also that the allegations involved bribing doctors as well as bureaucrats.

Orthofix

We discussed three settlements made by medical device company Orthofix only a month ago.  These involved various vivid details including bribes to physicians disguised as consulting and royalty agreements, bribes of foreign government officials disguised as chocolate, and a device sales representative turned stripper.  As best as I can tell, Orthofix just made yet another settlement, maybe not quite so picaresque.  As per Bloomberg,

Orthofix International NV won court approval of a settlement of federal regulators’ claims that the maker of bone-repair products defrauded Medicare through a kickback scheme involving doctors, prosecutors said.

U.S. District Judge William G. Young in Boston yesterday accepted an Orthofix unit’s offer to plead guilty to a felony count of obstructing an audit and pay a $7.6 million criminal fine....

This settlement like some of the previous ones involved allegations of payments to doctors to induce them to use Orthofix devices.

As part of the agreement, Orthofix also will pay $32.3 million plus interest to resolve civil claims first raised in a whistle-blower’s lawsuit that the company defrauded the federal Medicare program through payments to doctors who used its bone-growth stimulators....

This series of cases is unusual because they resulted in a guilty plea to a felony (but by a subsidiary of the company, not the company itself), and in guilty pleas by some company employees (but not apparently any penalties to top management).

Five Orthofix employees have pleaded guilty in connection with the probe, the U.S. Justice Department said. Thomas Guerrieri, a company vice president, pleaded guilty to violating the federal anti-kickback statute by setting up fake consulting agreements for doctors who used the company’s products. 

Sanofi

French multinational pharmaceutical corporation Sanofi-Aventis settled charges of overcharging the US Medicaid system in 2009 for over $90 million  (see post here),  and of overcharging the US Medicare system in 2007 for over $190 million (see post here).  Now it just settled charges that it gave kickbacks to doctors to induce them to prescribe its product.  Per Bloomberg,

 Sanofi,  France’s biggest drugmaker, reached a settlement to pay $109 million over allegations that its U.S. units gave doctors free doses of a medicine to win their business and subvert Medicare’s drug reimbursement system.

Sanofi sales representatives entered into 'illegal sampling arrangements' with physicians, giving them the arthritis drug Hyalgan as kickbacks and 'promising to provide negotiated' amounts of the medication to lower its effective price in violation of the False Claims Act, the U.S. Justice Department said yesterday in a statement.

'Kickback schemes subvert the health-care marketplace and undermine the integrity of public health-care programs,” Stuart Delery,  who heads the department’s civil division, said in the statement. 'We will continue to hold accountable those who we allege are providing illegal incentives to influence the decision-making of health-care providers in federal health-care programs.'

Again, no individual suffered any negative consequences for authorizing, directing or implementing the bad behavior in this case.

Summary

So here we go again, four more settlements by large, rich, well known pharmaceutical and device companies.  Most of the companies involved now have a history of recent settlements for a variety of ethical misadventures.  Most of the new settlements involved allegations of deceiving and bribing physicians.

As we have noted endlessly before, legal settlements like this are useful to provide documentation of how unethical the practices, particularly marketing practices of large health care organizations have become.  However, the increasing number of repeat settlers suggest that the settlements are not deterring bad behavior.  Since the fines involved are usually small compared to the revenues that can be generated by deceptive and unethical marketing of expensive drugs, and the fines are paid out of company coffers, and are thus spread out in their impact over employees and stockholders alike, they usually have no more impact than a lash with a wet noodle, maybe at best a slap on the wrist.  Since the people involved in authorizing, directing and implementing the bad behavior can likely greatly improve their "numbers" and hence generate big salaries and bonuses, but face a minimal risk of any individual negative consequences, they are likely to continue unethical practices.

Given that so many of these cases involve deception and/or bribery of health care professionals, I still hope that some will get upset at the effect on their professional values to take action.

Meanwhile, I repeat until blue in the face....   we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.