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 

Justice Delayed - Two Device Companies Still Settling Cases from 10 Plus Years Ago

Here we go again.  After a hiatus during which the US media and perhaps parts of the government were preoccupied with such issues as the ongoing controversy over health care reform, and a government shutdown apparently arising out of this controversy, the march of legal settlements involving big health care organizations has resumed.

In alphabetical order,...


Boston Scientific

From the Minneapolis Star-Tribune on 17 October, 2013, an account of a settlement arising from alleged misbehavior that started in 2002,

A $30 million settlement between the U.S. Department of Justice and Boston Scientific will likely end a case involving the sale of defective heart devices from 2002 through 2005 by subsidiaries Guidant, Guidant Sales and Cardiac Pacemakers.

Note that the allegations were particularly egregious since they involved a company selling products they knew to be defective in ways that could prove fatal as if they were quite safe,

The settlement closes a fraudulent-claims lawsuit that alleged Guidant knowingly sold defective implantable defibrillators to health care facilities that implanted them into thousands of Medicare patients. 

In particular,

The government’s complaint said that Guidant knew as early as April 2002 that its Prizm 2 line of devices was defective and knew in November 2003 that its Renewal 1 and 2 devices were capable of short-circuiting and delivering an electric shock that 'arcs' back onto the device instead of being directed to an irregularly beating heart.

According to Boston Scientific’s website, 83 malfunctions and nine reported deaths have been connected with the Renewal devices and 40 confirmed malfunctions and five patient deaths have been associated with the Prizm devices. About 500 Renewal devices remain implanted worldwide; about 1,400 Prizm devices remain in patients, according to the website.

Although Guidant took action to fix the defects, the government alleged that the company continued to sell its remaining stock of the old, defective versions of the devices. In fact, federal officials say that as Guidant learned about the cause of the defect, it took steps to hide the problem from patients, doctors and the Food and Drug Administration.

According to the government, Guidant did not fully disclose the problem until May 2005, when two Minneapolis doctors publicly aired their concerns about one of the defibrillators after it failed to revive a 21-year-old Grand Rapids, Minn., patient. Guidant later admitted it had known for three years that the device could short-circuit, but chose not to alert doctors or the public.

This is only the latest settlement made by Boston Scientific since 2005,

Boston Scientific paid $27.5 billion to acquire Guidant in 2006. It has been paying quite a bit since in relation to Guidant’s defective defibrillators.

In 2007, Boston Scientific paid $240 million to settle claims with thousands of patients who had sued Guidant after the defective devices were recalled. Later, in February 2010, Guidant pleaded guilty to misleading the FDA about problems with the devices and paid a fine of $296 million.

In fact, the then case of the allegedly concealed implantable cardiac defibrillators (ICD) was one of the first cases of apparently unethical health care corporate management behavior leading to bad patient outcomes we discussed on Health Care Renewal.  (Look here for a more recent summary of this case.)

Yet despite the fact that this apparently deeply unethical conduct lead to patient deaths, no individual who authorized, directed or implemented the bad behavior has suffered any negative consequences for it over the eight years since the details first became public.

One physician who helped bring this case to light was also apparently concerned about the impunity of those responsible,

 Dr. Robert Hauser, one of the doctors who went public back in 2005, criticized the settlement on Thursday.

'The $30 million should have little impact on their business,' Hauser said in an e-mail. 'I find it very disturbing that such a small settlement was accepted by the DOJ in view of the magnitude of wrongdoing by Guidant management.'

Stryker Corp

This week, MLive.com reported on another settlement involving allegations of unethical behavior by a device company dating back to 2003,

 An investigation by federal authorities found that Stryker Corp. subsidiaries in five foreign countries made illicit payments and tried for several years to bribe doctors, health care professionals and government-employed officials in order to obtain or retain business.

Stryker  has agreed to pay more than $13.2 million to settle the charges.

The SEC charged the Kalamazoo-based medical technologies company with violating the Foreign Corrupt Practices Act,  alleging that its subsidiaries in Argentina, Greece, Mexico, Poland and Romania made illicit payments totaling approximately $2.2 million 'that were incorrectly described as legitimate expenses in the company’s books and records.'

The SEC said descriptions of the payments varied from a charitable donation to consulting and service contracts, travel expenses, and commissions.

The SEC states that Stryker made about $7.5 million in illicit profits as a result of the improper payments. It did not specify during what year all of the events occurred, but indicated some as far back as 2003.

Note that the payments seemed deliberately designed to corrupt health care professionals and managers, for example,

According to the SEC’s order, Stryker’s subsidiary in Greece made a purported 'donation' of nearly $200,000 in 2007 to a public university in Greece to fund a laboratory that was a pet project of a public hospital doctor. In exchange for the payment, the doctor agreed to provide business to Stryker.

Also,

The SEC stated that its investigation also found that Stryker subsidiaries bribed foreign officials by paying their expenses for trips that lacked any legitimate business purpose.

'For example, in exchange for the promise of future business from the director of a public hospital in Poland, Stryker paid travel costs for the director and her husband in May 2004,' according to the SEC. 'This included a six-night stay at a New York City hotel, attendance at two Broadway shows, and a five-day trip to Aruba.'

As in the case above, it appears that no individual who authorized, directed or implemented the questionable payments will suffer any negative consequences.  In fact, as is usual in such cases,

 The settlement does not not require Stryker to admit or deny the allegations,...

However, an SEC official did say,

 Stryker’s misconduct involved hundreds of improper payments over a number of years during which the company’s internal controls were fatally flawed. Companies that allow corruption to occur by failing to implement robust compliance programs will not be allowed to profit from their misconduct.

While Health Care Renewal has not discussed this particular case before, it is hardly the first case of bad conduct by Stryker that we have discussed.  In the past we noted
-  In 2012, a Stryker subsidiary pleaded guilty to misbranding in response to allegations that its marketers conspired to defraud physicians in order to sell a product to promote bone growth that proved harmful to patients (look here).
-  In 2010, Stryker settled a case alleging unfair and deceptive sales practices again used for bone growth accelerators (look here).  
-  In 2009, some apparently low-level Stryker employees pleaded guilty to promoting off-label use of these same products (look here). 
- In 2007, Stryker made an agreement allowing federal supervision after charges one of its units had violated anti-kickback laws when making supposed "royalty" payments, often huge, to orthopedic surgeons in connection with its production of prosthetic hips and knees.  Several other device companies signed deferred prosecution agreements, and as a result, for a time all had to make public their payments to doctors and various non-profit organizations.  (See summary here.) 

Summary

 This recent crop of settlements has some features in common.  The settlements involved multinational device companies.  The settlements occurred at least a decade after the alleged bad behavior started.  The settlements required only small payments - at least on a corporate scale -from the companies involved, but no negative consequences for anyone who authorized, directed, or implemented the bad behavior.  Finally, the settlements were made by companies who had striking past records of previous settlements of bad behavior.

The march of legal settlements demonstrates the pervasiveness of unethical behavior, often involving harm to patients or sullying of health care professionals, involving large, rich health care corporations.  It also demonstrates the impunity of the top leaders of such corporations who often make huge amounts of money despite, or perhaps because of their companies' misconduct.  Despite intermittent threats by US government officials to get tough with unethical behavior by health care corporations, this pattern has continued for years, as we have documented. 

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

55 of Medtronic's Best Hospital Friends, Including HCA, Settle for $34 Million

The case of the over-marketing of Kyphon's kyphoplasty device (look here) just got more complicated, and now appears to have involved an amazing number of players.

The State of Play

 As reported by the AP (via the Washington Post),

 Fifty-five hospitals in 21 states have agreed to pay $34 million to the U.S. government to settle allegations that they used more expensive inpatient procedures rather than outpatient spinal surgeries to get bigger payments from Medicare, the U.S. Justice Department said Tuesday.

The settlement involves kyphoplasty procedures used to treat spinal fractures usually caused by osteoporosis. It can be done as an outpatient procedure, but he Justice Department said the hospitals performed the surgeries as inpatient procedures to increase Medicare billings.

The current media reports provided little detail about the allegations, but did note that this case has been litigated for a while,

 A similar settlement was reached last year, when 14 hospitals agreed to pay a settlement of more than $12 million. And in 2008, the Justice Department agreed to a $75 million settlement with Medtronic Inc.’s spine business. The government was investigating allegations that Kyphon, a company that had been acquired by Medtronic Spine in 2007, advised hospitals to do inpatient kyphoplasties to bulk up their Medicare payments.

The Players

Per the AP, there were quite a few

In the latest settlement, the largest payments are being made by Atrium Medical Center of Middletown, Ohio, which will pay $4.2 million; Mount Sinai Medical Center in Miami, $1.8 million; Altru Health System of Grand Forks, N.D., $1.5 million; Cedars Sinai Medical Center in Los Angeles, $1.5 million; Wayne Memorial Hospital in Goldsboro, N.C., $1.3 million; Trover Health System of Madisonville, Ky., $1.2 million; The Queen’s Medical Center in Honolulu, $1.1 million; and Des Peres Hospital in suburban St. Louis, $900,000.

Several multi-hospital organizations agreed to settlements, including:
—Twenty-three hospitals with HCA Inc. of Nashville, Tenn., paying a total of $7.1 million.
—Six hospitals with Lifepoint Hospitals Inc. of Brentwood, Tenn., $2.5 million.
—Five hospitals with Trinity Health of Livonia, Mich., $3.9 million.
—Four hospitals with Morton Plant Mease BayCare Health System of Clearwater, Fla., $2.4 million.
—Three hospitals with Baptist Memorial Hospital-Golden Triangle of North Columbus, Miss., $1.8 million.
—Two hospitals with Bayhealth Medical Center of Newark, Del., $1.1 million.

A Modern Healthcare report noted that the leadership of HCA, the hospital system with the largest liability, made it out to all be a misunderstanding,

Hospital executives say the allegations are prompted by  unclear Medicare rules on when spinal-surgery patients should be held overnight. And they note that even though the whistle-blowers and the government are targeting hospitals, the decision to admit patients is usually dictated by the treating physician.

'We are pleased to see new clarification of industry care standards, which help physicians make decisions regarding kyphoplasty patients,' HCA spokesman Ed Fishbough said in an e-mailed statement Tuesday. 'We are confident as a result that this issue has been resolved.'

However, the case appears to be more complicated than that.

What Really Happened, and Who Benefited?

In fact, we discussed the Medtronic settlement in 2008.  At that time, a New York Times article described the government's allegations about what went on this way,

A unit of Medtronic defrauded Medicare of hundreds of millions of dollars, according to a civil lawsuit that was unsealed Thursday and simultaneously settled with the Justice Department.

Two insiders had said Kyphon, which Medtronic acquired in 2007, improperly persuaded hospitals to keep people overnight for a simple outpatient procedure to repair small fissures of the spine. Medicare then reimbursed the hospitals much more generously than it otherwise would have for the procedure, which was developed as a noninvasive approach that could usually be done in about an hour.

By marketing its products this way, Kyphon was able to artificially drive up demand among hospitals, bolstering its revenue and driving up its stock price. Medtronic subsequently bought the company, its competitor, for $3.9 billion, greatly enriching Kyphon’s senior executives.

Furthermore,

 The scheme at Kyphon was based on Medicare’s practice of reimbursing hospitals more for complex inpatient back surgery than for outpatient care. The two whistle-blowers, Charles M. Bates and Craig Patrick, said Kyphon had deliberately urged doctors to admit patients overnight, knowing the admissions were unnecessary.

Hospitals saw the overnight admissions as a way to raise revenue, the two said, and bought Kyphon’s products, even though they were expensive, starting at $3,500 to repair one spinal fissure. The hospitals could recover the cost through the improper reimbursements for overnight stays.

Kyphon sold so much equipment this way that at one point it enjoyed a 90 percent profit margin, according to the two insiders, both of whom worked in sales positions.

The former employees said the scheme began in 1999, when Kyphon’s products first came to the market. Kyphon’s rapid sales growth and profitability eventually gave rise to a patent dispute with Medtronic, which was dropped when Medtronic acquired it. The acquisition richly rewarded Kyphon’s shareholders, particularly its top executives. The company said its top 15 executives stood to receive about $145 million by cashing in their options and restricted stock.

Note that at that time, Medtronic leadership, whose decision to purchase of Kyphon would end up so enriching Kyphon executives, seemingly had no worries,

A  spokeswoman for Medtronic, Marybeth Thorsgaard, said the company had known Kyphon was under investigation when it made the acquisition. She said it knew that Kyphon’s marketing strategy was being challenged, and took the risk of litigation into account. 'There were no surprises,' she said.

I can find no public record that any individual who authorized, directed, or implemented the arrangements above that lead to huge overcharges to Medicare, and huge revenues to Kyphon and the hospitals was subject to any negative consequences.  As noted above, it appears that the executives who lead Kyphon at the time it was acquired by Medtronic made substantial amounts of money apparently attributable to this scheme to allegedly "defraud Medicare of hundreds of millions of dollars" (as it was described above in the New York Times). 

Using the public record available on the internet, I tried to see how the top three Kyphon executives are doing now.  It appears they are not doing badly, and remain influential in health care.  According to its 2007 proxy statement, just before Kyphon was bought out, its CEO was Richard W Mott.  As best as I can tell, per Equilar, he currently runs a consulting firm (Walkabout Consulting LLC), and was previously chairman of PhotoThera, which just went out of business.  Kyphon's chief science officer was  Karen D Talmadge, PhD, who is now on the board of directors of the American Diabetes Association, and is also "Chair of the Board of Directors of Gynesonics, and serves on the Boards of Directors of Amplyx Pharmaceuticals, Velocity Pharmaceutical Development and Venous Health Systems."  Kyphon's chief operating officer was Arthur T Taylor, who is now on the board of directors of Providence Medical Technology.

The CEO of Medtronic at the time it bought out Kyphon, and the CEO of HCA at the time the arrangements began appear not to be doing badly either.  The CEO of Medtronic at the time it acquired Kyphon was Arthur D Collins Jr, who is now on the boards of directors of Boeing, Alcoa, and US Bancorp, also, according to his Boeing biography, he is a senior adviser to Oak Hill Capital Partners, and is on the Board of Overseers of the Wharton School.  The CEO of HCA at the time of its arrangement with Kyphon began was Dr Thomas Frist Jr, who is currently on the Forbes list of billionaires at number 262 in the world, with a total worth estimated at $4.3 billion.

Summary

In retrospect, this case allegedly involved arrangements between Kyphon, a device company, and multiple hospitals to increase the revenue of all parties by billing the US government for unnecessary hospitalizations occurring after the use of a device made by Kyphon.  The arrangements appeared to have been particularly lucrative for Kyphon's executives after a larger device company, Medtronic, chose to buy Kyphon. Medtronic ultimately paid a large fine and entered into a corporate integrity agreement nine years after the arrangements began.  Now fourteen years after the arrangements began, at least some of the hospitals involved have also paid fines.  The former Kyphon executives who benefited the most seemingly paid no penalties, nor seemingly did any managers of Medtronic or the hospitals who might have gotten larger compensation because of all the revenue that these arrangements generated.    

So initially, the big losers from this complex dance were the US government, and ultimately US tax payers.  Some patients may have also paid out of pocket for unnecessary services and thus lost money too.  Whether some patients suffered due to adverse effects of unneeded procedures was not clear.  Much later, Medtronic and some of the hospitals involved did pay big fines and thus lost some money.  However, it does not appear that they paid anything like what they made from the original scheme, and their payments were delayed for years.  However, the insiders who personally made a lot of money never apparently paid anything later.  So, this case appears to be a vivid example of how such insiders can walk away with piles of money from the misbehavior of their own corporations, while others pay the price.


Many of those of us of a certain age were brought up on myths that ultimately the good guys win and the bad guys lose.  We would all like to believe that the "arc of the moral universe ... bends toward justice."  History and this recent example suggest that it may not do so without our active intervention. 

In health care, as we have said many times (look here for examples), when bad behavior occurs within a large health care organization, rarely are the insiders who authorized or directed it, and who had the most to gain from the behavior ever made to suffer any negative consequences.  As long as health care leaders have such impunity, expect them to continue to personally profit from unethical behavior.  As a result, expect health care costs to continue to rise as quality and access get worse and worse.

True health care reform.needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Computer Viruses Are "Rampant" on Medical Devices in Hospitals

As if there weren't enough problems with hospitals as computing backwaters, now there's this:

Computer Viruses Are "Rampant" on Medical Devices in Hospitals

A meeting of government officials reveals that medical equipment is becoming riddled with malware.

Technology Review
Published by MIT
David Talbot
Wednesday, October 17, 2012

Computerized hospital equipment is increasingly vulnerable to malware infections, according to participants in a recent government panel. These infections can clog patient-monitoring equipment and other software systems, at times rendering the devices temporarily inoperable.

While no injuries have been reported, the malware problem at hospitals is clearly rising nationwide, says Kevin Fu, a leading expert on medical-device security and a computer scientist at the University of Michigan and the University of Massachusetts, Amherst, who took part in the panel discussion.

I note the seemingly universal refrain "no injuries have been reported" once more (see this query link to similar statements regarding IT malfunctions), which is irrelevant since reporting mechanisms for medical errors are noted to be deficient.

Software-controlled medical equipment has become increasingly interconnected in recent years, and many systems run on variants of Windows, a common target for hackers elsewhere. The devices are usually connected to an internal network that is itself connected to the Internet, and they are also vulnerable to infections from laptops or other device brought into hospitals.  [I note that it should be impermissible to connect "alien" machines to a hospital's network without authorization, and that attaining that level of security protection is not difficult - ed.]  The problem is exacerbated by the fact that manufacturers often will not allow their equipment to be modified, even to add security features.

In a typical example, at Beth Israel Deaconess Medical Center in Boston, 664 pieces of medical equipment are running on older Windows operating systems that manufactures will not modify or allow the hospital to change—even to add antivirus software—because of disagreements over whether modifications could run afoul of U.S. Food and Drug Administration regulatory reviews, Fu says.

In other words, let's run at high risk if it avoids the time and expense of FDA reviews that would ensure the equipment is safe and operates as expected with the software updates.

As a result, these computers are frequently infected with malware, and one or two have to be taken offline each week for cleaning, says Mark Olson, chief information security officer at Beth Israel.

It is unclear how the servers running the hospital information system, electronic health records systems, physician order entry systems etc. are immune to spread of the malware.

"I find this mind-boggling," Fu says. "Conventional malware is rampant in hospitals because of medical devices using unpatched operating systems. There's little recourse for hospitals when a manufacturer refuses to allow OS updates or security patches."

The worries over possible consequences for patients were described last Thursday at a meeting of a medical-device panel at the National Institute of Standards and Technology Information Security and Privacy Advisory Board, of which Fu is a member, in Washington, D.C. At the meeting, Olson described how malware at one point slowed down fetal monitors used on women with high-risk pregnancies being treated in intensive-care wards.

In its face, that is potentially catastrophic depending on the degree of "slowdown" and whether data is lost.

"It's not unusual for those devices, for reasons we don't fully understand, to become compromised to the point where they can't record and track the data," Olson said during the meeting, referring to high-risk pregnancy monitors. "Fortunately, we have a fallback model because they are high-risk [patients]. They are in an IC unit—there's someone physically there to watch. But if they are stepping away to another patient, there is a window of time for things to go in the wrong direction."

The reasons seem obvious to anyone who's had a serious malware infection on their PC.  I've only had one - a computer I bought at a fleamarket for $7 was so severely infected it was unusable for even basic tasks, and was resistant to virus removal.  I solved that problem by installing a fresh copy of the OS, immediately followed by all patches and the latest anti-malware software.

The computer systems at fault in the monitors were replaced several months ago by the manufacturer, Philips; the new systems, based on Windows XP, have better protections and the problem has been solved, Olson said in a subsequent interview.

This implies the older systems were running on Win 98 or earlier or an old version of Win NT.  Amazing.

At the meeting, Olson also said similar problems threatened a wide variety of devices, ranging from compounders, which prepare intravenous drugs and intravenous nutrition, to picture-archiving systems associated with diagnostic equipment, including massive $500,000 magnetic resonance imaging devices.

Olson told the panel that infections have stricken many kinds of equipment, raising fears that someday a patient could be harmed. "We also worry about situations where blood gas analyzers, compounders, radiology equipment, nuclear-medical delivery systems, could become compromised to where they can't be used, or they become compromised to the point where their values are adjusted without the software knowing," he said. He explained that when a machine becomes clogged with malware, it could in theory "miss a couple of readings off of a sensor [and] erroneously report a value, which now can cause harm."

I opine that harm could already have occurred; it just may not been recognized as such nor reported.  Disappearing data and other EHR failure modes known to have caused harm and/or deaths could be related to malware, for example.

... Malware problems on hospital devices are rarely reported to state or federal regulators, both Olson and Fu said. This is partly because hospitals believe they have little recourse. Despite FDA guidance issued in 2009 to hospitals and manufacturers—encouraging them to work together and stressing that eliminating security risks does not always require regulatory review—many manufacturers interpret the fine print in other ways and don't offer updates, Fu says. And such reporting is not required unless a patient is harmed. "Maybe that's a failing on our part, that we aren't trying to raise the visibility of the threat," Olson said. "But I think we all feel the threat gets higher and higher."

I note that health IT related problems are also rarely reported, with only one vendor being the exception (see my post on the FDA MAUDE voluntary reporting database here).  The reasons likely are not because "hospitals believe they have little recourse" - the real reasons may be fear, complacency and/or incompetence.

Speaking at the meeting, Brian Fitzgerald, an FDA deputy director, said that in visiting hospitals around the nation, he has found Beth Israel's problems to be widely shared. "This is a very common profile," he said. The FDA is now reviewing its regulatory stance on software, Fitzgerald told the panel. "This will have to be a gradual process, because it involves changing the culture, changing the technology, bringing in new staff, and making a systematic approach to this," he said.

Changing the culture would be nice, considering we are now entering a national rollout of complex enterprise clinical resource and workflow control systems anachronistically known as "electronic medical records."

In an interview Monday, Tam Woodrum, a software executive at the device maker GE Healthcare, said manufacturers are in a tough spot, and the problems are amplified as hospitals expect more and more interconnectedness. He added that despite the FDA's 2009 guidance, regulations make system changes difficult to accomplish: "In order to go back and update the OS, with updated software to run on the next version, it's an onerous regulatory process."

My comment is, if you can't take the heat of work in the real-world medical setting, if you cannot be part of the medical team, then get out of the clinic.  You're likely to do more harm than good.

John Halamka, Beth Israel's CIO and a Harvard Medical School professor, said he began asking manufacturers for help in isolating their devices from the networks after trouble arose in 2009: the Conficker worm caused problems with a Philips obstetrical care workstation, a GE radiology workstation, and nuclear medical applications that "could not be patched due to [regulatory] restrictions." He said, "No one was harmed, but we had to shut down the systems, clean them, and then isolate them from the Internet/local network."

He added: "Many CTOs [chief technology officers - ed.] are not aware of how to protect their own products with restrictive firewalls. All said they are working to improve security but have not yet produced the necessary enhancements."

Then why are they CTO's?  Is this the phenomenon of generic or underqualified managers rearing its head?

Fu says that medical devices need to stop using insecure, unsupported operating systems. "More hospitals and manufacturers need to speak up about the importance of medical-device security," he said after the meeting. "Executives at a few leading manufacturers are beginning to commit engineering resources to get security right, but there are thousands of software-based medical devices out there."

One can only wonder if others have done a Ford Pinto cost-benefit analysis and decided the costs of settlement from injured and dead patients is less than the cost of remediation.

-- SS

Back to the Future - Another Medical Device Company Accused of Hiding ICD Defects

Suppression of data about defects in and failures of implantable cardiac defibrillators (ICDs) was one of the big issues we featured in the early days of Health Care Renewal (2005-06). 

At that time, Guidant, later acquired by Boston Scientific, was accused of hiding data that certain of its defibrillator models failed, possibly leading to preventable patient deaths (see this post and follow links backward).  Boston Scientific, which acquired Guidant, settled a civil lawsuit and was put on probation in 2011 after it pleaded guilty to misdemeanor charges of failing to file required reports with the US Food and Drug Administration (see post here).   Similarly, in 2010, Medtronic settled multiple patients' lawsuits charging that it knowingly marketed a faulty ICD (see post here).

St Jude and the Obscure Riata Data

Now in 2012, A Wall Street Journal article suggested that St Jude Medical Inc hid problems with its Riata implanted cardiac defibrillator (ICD) for years.   

In December, 2010, St Jude Medical Inc issued a warning letter to doctors: Wires inside Riata defibrillator leads—cables that connect the heart to implantable defibrillators—were sometimes breaking through their insulation from the inside out.


The problem, which ultimately led to a recall last year, could cause defibrillators to send unnecessary jolts to the heart or fail to deliver lifesaving shocks to return chaotic heart rhythms back to normal. The company said it had identified dozens of cases with visible signs of the problem, and pulled Riata from the market.

For many doctors, this was the first notice of a problem with Riata.

But before that 2010 warning, physicians including Alan Cheng, director of Johns Hopkins Medicine's arrhythmia service; Samir Saba, chief of electrophysiology at the University of Pittsburgh Medical Center; and Ernest Lau at the Royal Victoria Hospital in Belfast, Ireland, say they had encountered this so-called "inside-out abrasion" in their own practices between 2006 and 2009. When these doctors brought the incidents to the attention of St. Jude they say they were told by company officials and field representatives that the incidents were isolated. The malfunctions described by the doctors didn't result in deaths.

St. Jude had been tracking the problem for several years, according to company documents collected by the Food and Drug Administration and reviewed by The Wall Street Journal. Cases involving the so-called inside-out abrasion date to at least October 2005, the documents show. Inside-out abrasion became a focus of an internal St. Jude audit, which examined multiple cases of the failure before April 2008.

The Journal article noted that more transparency about device failures might allow physicians to spot problems earlier and prevent harm to patients.

more than a dozen physicians and device-safety experts say that if St. Jude had acknowledged the inside-out failure earlier, physicians might have identified the scope of the problem sooner.


In some cases, doctors concede that they, too, believed the failures were isolated and therefore didn't act quickly to report problems to St. Jude or the FDA, which may have made it harder to spot the growing trend of failures. The leads were implanted in more than 13,000 patients since July 2008.

'Every time you have a failed lead, you assume it's an isolated event, but, you start to string together isolated events, and then you have a recall,' said Dr. Saba.

Summary

So, for Health Care Renewal, this is a straightforward case, at least so far.  Yet another health care organization, this time, a medical device company, failed to reveal data that might have reflected unfavorably on one of its products, and hence lead to decreases in short-term revenue.  However, by suppressing the information, the company may have allowed doctors to keep implanting a potentially faulty device, and exposed patients to risk, possibly of fatality. 

We have discussed many at least somewhat parallel cases of suppression of research (here), and many cases of other kinds of deception by health care organizations (here).  Yet these cases continue to occur, physicians and other health care professionals continue to be fooled by secrecy and data suppression, and patients continue to be harmed by drugs, devices, or other interventions made by people who knew, or ought to have known that they were more dangerous than they appeared to be. 

One problem may be that the people with the most influence on medical practice and health policy continue to cheer lead for the veracity of information about drugs, devices, and other health care interventions supplied by the people who most stand to gain from selling same.  A few weeks ago, the editor of the august New England Journal of Medicine, Dr Jeffrey M Drazen MD, scoffed at physicians' skepticism of pharmaceutical industry funded clinical research, claiming that there were only "a few examples of industry misuse of publications...." [Drazen JM. Believe the data. N Engl J Med 2012;  367:1152-1153.  Link here.]  In doing so, Dr Drazen seemed to ignore all the stories about suppression of medical research (some of which we have discussed here), manipulation of medical research (some discussed here), and deception (some discussed here) and secrecy (some discussed here) practiced by large health care organizations, including but not limited to drug, device, biotechnology, and health care information technology companies.

Instead, the possibility that St Jude kept hidden data about the failings of one of its ICD models reminds us how skeptical we ought to be about the information provided, or not provided by those with vested interests in selling health care goods or services.  Physicians, health care professionals, those interested in health policy, and the public at large need to collectively exert pressure on the leaders of health care organizations to promote greater transparency, especially about data reflecting on benefits and harms of health care goods and services.  . 

FDA: Software Failures Responsible for 24% Of All Medical Device Recalls

At "FDA: Software Failures Responsible for 24% Of All Medical Device Recalls" via Kapersky Labs, a software security company, it is observed (emphases mine):

Software failures were behind 24 percent of all the medical device recalls in 2011, according to data from the U.S. Food and Drug Administration, which said it is gearing up its labs to spend more time analyzing the quality and security of software-based medical instruments and equipment.

The FDA's Office of Science and Engineering Laboratories (OSEL) released the data in its 2011 Annual Report on June 15, amid reports of a compromise of a Web site used to distribute software updates for hospital respirators. The absence of solid architecture and "principled engineering practices" in software development affects a wide range of medical devices, with potentially life-threatening consequences, the Agency said. In response, FDA told Threatpost that it is developing tools to disassemble and test medical device software and locate security problems and weak design.

... "Manufacturers are responsible for identifying risks and hazards associated with medical device software (or) firmware, including risks related to security, and are responsible for putting appropriate mitigations in place to address patient safety," the agency said in an e-mail statement.

Health IT medical devices are the exception, of course.  A health IT virtual medical device is always of rock-solid architecture, always uses "principled engineering practices" in software development, and never has life-threatening consequences, of course.

Hence its special regulatory accommodations over non-virtual (tangible) medical devices.

-- SS

Hospital Executives - What Will They Think of Next?

Health care organizations are now most often run by people with management, not clinical backgrounds.  It seems like business schools have taught managers to sign on to whatever the latest management fashions are.  So what are the latest fashions in hospital management?  Here are a few hot items.

Retreading Pharmaceutical Representatives

My jaundiced reading of the business news suggests that most executives think that marketing is the most important part of their organizations, and that clever marketing can sell any product or service. For example, the pharmaceutical industry spends about twice as much on marketing as it does on research and development (despite pharma executives' protestations that they run research driven businesses) (see this post). So it should be no surprise that now hospitals are using "hospital representatives" to market referrals to their institutions to doctors.

From last week's USA Today:

n northwest Indiana, Carrie Sota visits five or six doctors' offices every workday as part of her new sales job.

But Sota isn't selling the physicians on a prescription drug or a medical device. She's promoting her hospital — the University of Chicago Medical Center.

Sota, 30, is one of four employees the academic medical center has hired in recent months to make 'sales calls' on physicians in the hope that they will send more patients to the hospital. 'We are trying to build meaningful relationships,' said Sota, who was previously a saleswoman for a small medical device company.

The University of Chicago Medical Center is one of a growing number of hospitals nationwide hiring former drug and device sales reps to visit doctors' offices to persuade them to use their services over competing facilities.

Rather than handing out samples of prescription drugs, the sales reps call on doctors armed with the latest information on how their facility is reducing hospital-acquired infections and improving patient-satisfaction scores.

In visits that can last five to 20 minutes, reps try to win doctors' loyalty by helping them get better times on operating room schedules or easier patient referrals to hospital-based specialists. The sales reps can also carry messages back to the hospital, such as a doctor's request for a new medical device to be available in surgery.

The article suggested a few problems with this approach. First, the point of the marketing is not to improve the match between patients' needs and the services the hospital provides. Rather, it is to generate referrals that have the potential to provide the maximum revenue:

While hospitals have always tried to woo doctors to refer patients to them, the institutions are growing more direct in their efforts. The hospitals mine data to see which doctors have the most profitable, well-insured patients, and then they assign those doctors to a sales rep.

So in particular,

Many of the physician liaisons focus on specialists, who bring in patients for services with the highest profit margins, including orthopedics, cardiac care and cancer care, [Duke University Health System physician liaison manager Christine] Perry said.

Second, the hospital reps have incentives based on revenue, not on value to the patient:

About two-thirds of Tenet's liaisons are former drug and device sales reps, and they can make tens of thousands of dollars in bonuses if doctors increase their referrals to the hospitals.

Third, across the system, the revenues generated may be much less than the costs incurred, since most of the marketing will only succeed in moving patients from one hospital to another:

Paul Ginsburg, president of the non-partisan Center for Studying Health System Change, said, 'When you look at the health system, this is a waste of resources. It's a zero-sum game.'

He added: 'The net results of changing physician-referral patterns is that one hospital gains at a cost of others, and all the hospitals burn resources to pay (sales)people who take up the doctor's time.'

Of course, the reps could succeed in persuading doctors to refer patients to specific hospitals for services the doctors originally did not think the patients needed. That would be good were the patients to need those services, but bad if they were not.
Fourth, we have discussed (for example, here and here) how pharmaceutical representatives use sophisticated psychological and emotional manipulation, despite claims that all they do is provide unbiased information and educational, to influence physicians to prescribe drugs. Again, this may result in patients getting drugs whose benefits do not outweigh their harms. It is possible that hospital representatives will do something similar:

'These people are really good and really assertive and very sophisticated,' said Stephen Newman, Tenet's chief operating officer.

Unbundling Payments

The airlines decided a while ago that they could make more money by charging passengers for each checked bag, and even for those little meals on plastic trays. It looks like hospital executives have discovered a new way to unbundle.

As reported last month by the St Louis Post-Dispatch, hospitals have begun charging often hefty "facility fees" for patients seen as outpatients in hospital clinics or hospital owned practices, even for very minor procedures or just office visits, and even for Medicare patients. (Private physicians who see patients in their own offices cannot charge such fees to Medicare patients, and most private insurance companies will not cover such fees.):

A few weeks after Allison Zaromb took her 4-year-old son Meir to see a dermatologist in an outpatient office at the SSM Cardinal Glennon Children's Medical Center campus, she received separate bills from the doctor and the hospital.

The cost for a 3-minute procedure to treat Meir's warts totaled $538, which included a $220 bill for physician services - and a separate bill for a $318 hospital 'facility fee.'

Zaromb, a periodontist who lives in University City, is now suing SSM Health Care Corp. and Cardinal Glennon Children's Medical Center in a proposed class action lawsuit on behalf of other patients

More generally,

With the proliferation of hospital-owned outpatient centers and hospital-owned physician practices, hospital 'facility fees' have become increasingly common. Such hospital facility fees often involve greater dollar amounts than the fees charged by physicians.

Technically, it all appears to be legal:

Under federal regulations, health systems are permitted to charge a hospital facility fee for an outpatient service if it's done in a clinic that is 'hospital-based' - meaning that the clinic is owned and operated as part of a hospital or health system, regardless of whether the clinic is physically located on the hospital grounds.

This technique does seem to be a way to increase revenue. But one person's revenue is another person's cost, so it also seems to be a great way to further increase the already high cost of US health care. It is not obvious, however, that these increased costs will lead to increased quality of care or value for the patient:

'From a consumer's perspective, when you go see your doctor, you go see your doctor - whether it's in an office inside a larger hospital complex or right across the street,' [Zaromb's lawyer John] Phillips said. 'The doctor's practice remains the same. ... They're making the doctor's office a ‘hospital-based' clinic for one reason: to make money by charging a facility fee, not to improve consumer service.'

Negotiating the Costs of Medical Devices

One of the favorite topics on Health Care Renewal, at least before we found even more outrageous subjects, was the stratospheric cost of medical devices. For example, look at posts from 2005 here, here, here, and here. So last month we found out that hospital executives have come up with a revolutionary idea to combat the high cost of devices. They will actually try to see what prices the device companies charge other hospitals, and then negotiate the prices down, as Reuters reported as big news in late November:

Implantable devices make up a sizable chunk of typical hospital budgets, and administrators are devising new ways to limit that cost as they brace for cuts to government reimbursement and treat more patients who can't pay for care.

That means methodically working through each category of device, from heart valve replacements and stents to spinal products, to see where they can negotiate lower prices. It also means creating databases of shared information on pricing between hospitals.

Imagine that! Of course, the notion that buyers ought to bargain with sellers to get the best price goes back a few years. However, only in 2011 did it apparently occur to hospital executives that they ought to negotiate the prices of one their most expensive purchases. This suggests that there has been something profoundly wrong with the basic assumptions underlying the commonly accepted wisdom that making the health care system more of a market will lead to more financially efficient care. 

Summary

In 1988, Alain Enthoven advocated in Theory and Practice of Managed Competition in Health Care Finance, a book published in the Netherlands, that to decrease health care costs it would be necessary to break up the "physicians' guild" and replace leadership by clinicians with leadership by managers (see 2006 post here). Thus from 1983 to 2000, the number of managers working in the US health care system grew 726%, while the number of physicians grew 39%, so the manager/physician ratio went from roughly one to six to one to one (see 2005 post here). Health care went from being controlled by clinicians to controlled by a growing volume of managers.  Most of these managers were generic, in that they had little if any knowledge of, experience in, or sympathy to the values of health care. These generic managers have used the same techniques advocated for the management of supermarkets or automobile manufacturers to manage health care organizations, despite all the obvious differences in context, goals, values, and people involved.

So these generic managers have brought us such "innovations" as the "hospital (marketing) representative," and the "facility fee" for outpatient visits, but only thought to negotiate device prices in 2011. But that is why we pay them the big bucks.

How many more arguments do we need that health care organizations ought to be lead by people who understand the health care context, share its core values, and are accountable for how these organizations affect patients' and the public's health?

Medtronic Settles, Yet Again

And the march of legal settlements continues... Circling around the block and coming in front of the viewing stand again is device manufacturer Medtronic. 

The Latest Medtronic Settlement

As Bloomberg reported:

Medtronic (MDT) Inc., the world’s biggest maker of heart rhythm devices, agreed to pay $23.5 million to settle claims it paid kickbacks to doctors who implanted its pacemakers and defibrillators in patients, the U.S. Justice Department said in a statement.

Medtronic agreed yesterday to settle two lawsuits filed in federal courts in California and Minnesota accusing the company of violating the federal False Claims Act by paying physicians $1,000 to $2,000 for each patient who was implanted with one of the company’s devices, according to the Justice Department.

'Patients who rely on their health-care providers to implant vital medical devices expect that those decisions will be made with the patients’ best interests in mind,' Tony West, assistant attorney general for the Justice Department’s Civil Division, said in an e-mailed statement. 'Kickbacks, like those alleged here, distort sound medical judgments with financial incentives paid for by the taxpayers.'

As usual, Medtronic did not admit doing anything wrong:

Medtronic said in an e-mailed statement that it makes no admissions that the studies were 'improper or unlawful.' The company also said it established a reserve for the anticipated payment in the fourth quarter of fiscal year 2011.

'We are happy that the investigation is behind us, so we can continue designing and executing clinical trials that generate evidence to improve patient care, outcomes and cost effectiveness,' Marshall Stanton, vice president of clinical research and reimbursement for the cardiac and vascular group....

Previous Legal Settlements by Medtronic
Note that this is not the first time Medtronic has been accused of paying doctors (kickbacks, this time, which seem to be the ethical equivalent of bribes) to use its products. The Bloomberg report also noted:

In 2006, Medtronic agreed to pay $40 million to settle allegations that its Sofamor Danek unit violated state laws and the False Claims Act by paying sham consulting fees and providing lavish trips to doctors who used its products from 1998 to 2003.

Perusing the Medtronic file on Health Care Renewal also showed that Medtronic has had to settle other lawsuits alleging misconduct:

- In 2008, Medtronic subsidiary Kyphon settled a suit for $75 million and signed a corporate integrity agreement for allegations that it defrauded Medicare through a scheme that lead to excessive hospitalization for patients who received the company's spine surgery device (link here)
- In 2010, Medtronic settled multiple civil lawsuits for $268 million for allegations that it marketed an implantable cardiac defibrillator with faulty leads whose failures lead to 13 deaths (link here)

Cases of Apparent Conflicts of Interest Generated by Medtronics' Payments
In fact, paging through the Medtronic file on Health Care Renewal, we also found these cases of apparent conflicts of interest that Medtronic caused by making payments to or otherwise creating financial relationships with:

- FDA advisory board members (2007 link here),
- health care professionals who appeared on public television programs about heart disease and treatments of it (2007 link here),
- members of a non-profit organization which was supposed to guide the FDA regarding drug development  (2007 link here),
- prominent academic orthopedic surgeons who were in positions to influence other physicians' choices of orthopedic devices (2008 link here and 2009 links here, here and here),
- a military surgeon who wrote questionable articles about the supposed virtues of a Medtronic bone growth product (2009 link here),
- a top leader of US Veterans Affairs Department who objected to the appointment of an industry critic as US Surgeon General (2010 link here),
- spine surgeons apparently who could promote Medtronics' spine surgery products in (2010 link here) and who did not disclose all such payments when writing ostensibly scholarly articles on the subject (2010 link here)

So prior to the current settlement for "alleged" kickbacks, Medtronic had a long history of allegations that it had financial relationships with physicians who were in a position to promote the use of its products or its policy interests.

Why the Bad Behavior Continues

The latest settlement by Medtronic illustrates why the anemic approach by US government agencies to health care corporate misbehavior does not deter bad behavior.

- The punishment was a fine not large enough to have any effect on the finances of the corporation.. Such a relatively small financial penalty might just be seen as a cost of doing business by company executives.  (See these comments on the current case by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.)
-  The punishment was not a result of any specific bad behavior.  In this case, like many others, the corporation did not have to admit to anything.  This leads to the paradox of a punishment meted out for apparently nothing other than "alleged" actions, making it appear that the actual punishment was just a payment by the company to allow it to continue the sorts of actions that were alleged with impunity.  (Such punishments without clear crimes happen all the time in cases affecting the finance sector.  See a federal judge's condemnation of this practice here.) 
-  The punishment seems unrelated to the corporation's historic behavior.  In this case, there was no reference to the company's previous settlements, or the other allegations of questionable payments to physicians and health care decision makers in other circumstances listed above.  (Keep in mind that Health Care Renewal strives to present interesting cases, but does not have the resources to report on every single case of bad behavior by health care organizations.  Hence the list above of apparent bad behavior may not be complete.)
-  The punishment applied to the corporation as a whole, and hence may disadvantage many people, stockholders and corporate employees in particular, who had nothing to do with the alleged bad behavior.  On the other hand, those who authorized, directed, or implemented the bad behavior were not subject to any negative consequences. 

So why on earth would corporate leaders cease bad behavior which could increase revenues short-term and hence increase their compensation (e.g., in 2011, the Medtronic CEO received $9,624,709 according to the 2011 proxy statement), when the likelihood of any negative consequences for them appears to be near zero? 

This would be bad enough if the bad behavior only causes financial disadvantage for stockholders or corporate employees.

However, the bad behavior in question seems to repeatedly involve paying physicians and other health care decision makers in ways likely to influence their decisions in favor of Medtronics' products and corporate well-being.  Making decisions this way, however, is unlikely to be good for patients' and the public's health, as it is likely to lead to excess use of expensive tests and treatments that may have adverse effects, sometimes severe.  Thus patients may suffer unnecessary morbidity and mortality, and the public at large may pay far too much for medical care.

So will we see in our lifetimes honest, tough policing of health care corporate behavior?  Will the punishments start to fit the crime, and will they be significant enough to deter future misbehavior?  Why do we continue to accept government actions that seem more solicitous of the executives of big corporations than the public for whose benefit government is supposed to be run?  Where is the outrage?   

So, once more, with feeling.... in my humble opinion, until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations.

ADDENDUM (15 December, 2011) - On the GoozNews blog, Merrill Goozner called Medtronic's actions "a crime against science."