The Pervasiveness of Health Care Corruption as Shown by Another Roundup of Legal Settlements

Legal settlements are one way to document unethical and even corrupt behavior by large health care organizations, even if they may not deter bad behavior in the future.  It is time for another roundup of settlements by large pharmaceutical and device companies, presented in alphabetical order

Abbott Laboratories

This one goes back to late December, 2013.  As described in the Chattanoogan (from Tennessee):

Abbott Laboratories, a global healthcare company, has agreed to pay $5.475 million to settle alleged violations of the False Claims Act, and other federal laws and regulations in connection with the operation of its medical device business which manufactures, markets and supplies carotid, biliary, and peripheral vascular products.

The US Justice Department accused Abbott of kickbacks to physicians,

 As alleged in the settlement agreement, between 2005 and 2010, through its employees and a third party continuing medical education providers, Abbott offered physicians paid teaching and training assignments, consulting arrangements, speaking engagements, and/or sponsorship grants for physician conferences, for the purpose of inducing physicians to arrange for or recommend that the hospitals with which they were affiliated purchase or order Abbott’s carotid, biliary and peripheral vascular products.

Note in particular that the kickbacks were disguised as payments for consulting or speaking. 

As is usual in such cases, no individual seems to have paid any penalty or been subject to any punishment.  Because this was a legal settlement, the company did not admit wrongdoing.

Abbott's previous issues are discussed here, including a $1.6 billion settlement in 2012. 

Baxter International

This was reported in April, 2014 by Modern Healthcare,

 Baxter International agreed to pay $64 million to settle a class-action lawsuit that alleged the Deerfield, Ill.-based company and some of its competitors colluded to raise prices of plasma-based therapies.

Unlike the other cases above and below, this seemed to be a purely financial misadventure, although one that clearly increased health care costs,

Hospitals and drug distributors, saying they bought the plasma products at inflated prices, sued in 2009 Baxter; Victoria, Australia-based CSL; and the Plasma Protein Therapeutics Association, an Annapolis, Md.-based trade group.

Once more, the company admitted no wrongdoing, and no individuals seemed to be subject to any negative consequences.  

Baxter International's previous misadventures are here, including the striking case of its marketing of contaminated and sometimes deadly heparin made from Chinese pigs. 

Endo Health Solutions

This one is from February, 2014, as reported by Bloomberg

Endo Health Solutions entered a deferred-prosecution agreement and will pay $193 million to settle whistle-blower claims that it marketed the shingles drug Lidoderm for unapproved purposes, the U.S. said.
Endo will pay $20.8 million in forfeitures and $171.9 million in civil false claims settlements with the states and the U.S. government, the Justice Department said today in a statement. 

This one was all about marketing for uses not approved by the US Food an Drug Administration,

Between 2002 and 2006, Endo sales managers instructed some representatives on how to expand 'sales conversations' with doctors beyond the treatment of shingles-related pain, the U.S. said. Under the deferred-prosecution agreement, Endo admitted that it intended Lidoderm to be used for uses not approved by the U.S. Food and Drug Administration, the Justice Department said. 

Note that this case involves false claims, that is, fraud, because it is illegal to bill government programs for unapproved uses.

Again, no individual suffered any consequences, and the company offered the usual kind of statement that admitted neither responsibility nor guilt,

'We are pleased to resolve this matter and are confident that we have robust programs in place to assist us in satisfying our legal and regulatory agreements,' Endo Chief Executive Officer Rajiv De Silva said in a statement.  

One wonders, as usual, why a company would pay so much merely to avoid the legal expenses of a trial, unless of course the lawyers suspected the trail would not go well?

Hospira

This one was about hiding quality problems due to cost-cutting from investors, as reported by Reuters in March, 2014.  

Hospira Inc has agreed to pay $60 million to resolve a class action lawsuit accusing the drug maker of misleading investors about quality control problems that undermined an initiative to improve the company's margins and operations.

The details included,

As Hospira was promising to address issues raised by the U.S. Food and Drug Administration following inspections, the plaintiffs said the company was 'making the problems worse by gutting quality control efforts through cost cutting aimed at boosting short-term profitability.'

The lawsuit said those cost-cutting moves stemmed from a March 2009 initiative called 'Project Fuel' intended to increase shareholder value by eliminating underperforming and duplicative units and reducing its global workforce.

Plaintiffs contended the cuts in the budget and workforce hurt Hospira's quality control efforts, particularly at Rocky Mount, the company's largest facility.

An FDA inspection in January 2010 of the Rocky Mount facility found a number of problems with the company's quality control and drug validation processes, the lawsuit said, and the agency issued a warning letter that April.

Note that this involved quality control problems presumably in drug or device production, possibly leading to safety risks for patients.  Yet it was investors who brought the lawsuit.

Note also that this seemed to be a clear case in which cost-cutting measures meant to improve short-term corporate revenue lead to problems that could have caused such risks.  

One interesting feature of this case was that company executives were named as defendant (presumably again because it was investors, not patients or law-enforcement officials who initiated the suit.)

The lawsuit ... also named executives including Chief Executive Officer Michael Ball as defendants,...

I cannot find any information about whether these executives were personally liable for any payments, however.   

Pfizer

This is yet another settlement involving the marketing of Neurontin, as reported by Bloomberg in April, 2014,

Pfizer Inc the world’s biggest drugmaker, agreed to pay $190 million to end a lawsuit claiming it violated federal antitrust laws by delaying generic versions of its Neurontin epilepsy drug. 

Pfizer agreed to settle the class-action litigation pending in federal court in Newark, New Jersey, according to a filing today. U.S. District Judge Faith Hochberg must approve the accord, which would cover purchasers of Neurontin from December 2002 to August 2008. 

Note that this settlement, like many others, is of matter from a long time ago.  When it comes to bad behavior by big health care corporations, any form of justice is not swift.

Note also that this is only the latest chapter in the long saga of Neurontin, for whose mis-marketing Pfizer has already shelled out a lot of money (see this post to start, and here for the collection).  Pfizer has an amazing record of bad behavior on view here.  In fact, it has had a conviction as a Racketeering Influenced Corrupt Organization (RICO) on the basis of its previous marketing of Neurontin (look here).

This particular bad behavior involved included,

 improperly listing certain patents with the U.S. Food and Drug Administration, engaging in illegal promotion and sales of Neurontin for unapproved uses, filing and maintaining sham litigations with respect to certain patents, and making misrepresentations to the patent courts,

Note that while much of this was legalistic, illegal marketing was in there too.

Once more, I found nothing about any negative consequences for individuals who authorized, directed, or implemented questionable actions.

Summary

So it is all drearily familiar.  Big health care organizations seem to repeatedly engage in deceptive marketing, providing kickbacks to health professionals, fraudulent billing, anti-competitive practices, etc, etc.  These practices increase health care costs, and may risk patients' health and safety.  Many of these practices are corrupt, at least according to the Transparency International definition of corruption, "abuse of entrusted power for private gain."  Drug and device companies, for example, are entrusted to provide safe and effective products.  Deceptive marketing, kickbacks to health professionals to encourage overuse, and cutting quality control to cut costs all seem to be examples of abuse of this entrusted power.  The private gain obviously goes to any managers and executives who score bigger bonuses due to the increases in revenue that result. 

Yet there are very few examples of any individuals who gained ever being subject to any negative consequences.  Given that lack, and the lack of any requirement for corporate leaders to admit responsibility, much less guilt, is it any surprise that these practices go on and on.  The failure of current limp legal efforts against such corruption is evident by how many corporations have become ethical repeat offenders.   (Note that in fact, as noted above, one of the pharmaceutical companies above actually was convicted of being a RICO, racketeering influenced corrupt organization, yet that conviction seemed to have no real negative consequences for the organization or any of the people involved.)

As I have said again and again, pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction.

So, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue.

Who Knew? ... Judge Finds that Hospital Takeover of Medical Practices Raised Prices

A story that caused only a few ripples in the media in late January, 2014, corroborates concerns about the increasing concentration of power in health care, and suggests new skepticism about the continuing transition of physicians from independent professionals to corporate employees.

The Judge Quashes a Hospital System's Acquisition of Physicians' Practices

The original story was carried, albeit briefly, in some national business news sources, e.g., the Wall Street Journal and Bloomberg news.   In summary, according to the WSJ,

A federal judge ruled Friday that an Idaho hospital system must unwind its acquisition of the state's largest independent doctor group, a decision that could have significant implications as health-care providers nationwide increasingly seek to join forces.

In particular,

 At issue was St. Luke's Health System's 2012 deal for the 40-doctor Saltzer Medical Group. The FTC argued the merger would reduce competition among primary-care physicians and give St. Luke's extra muscle to extract higher payments from health plans, which, in turn, could raise insurance prices for consumers.

The Judge seemed to agree,

U.S. District Judge B. Lynn Winmill ruled the deal anticompetitive, but offered comments that reflected current tensions in the debate over industry consolidation.

Judge Winmill said he was 'convinced' the deal would have improved the delivery of health care in the region. But he ruled that 'there are other ways to achieve the same effect that do not run afoul of the antitrust laws and do not run such a risk of increased costs.'

The judge said he would order St. Luke's to fully divest Saltzer's physicians and assets. The court made only a summary of the ruling public, sealing the full decision temporarily so confidential business information can be redacted. 

Furthermore, the Bloomberg coverage raised a related issue,

David Balto, an antitrust lawyer in Washington who has represented consumer groups, said the ruling could be read as conflicting with the Obama administration’s health care overhaul, which advocates reducing fragmentation of medical care to improve quality.
'
This is going to raise really difficult questions about the kind of integration that’s envisioned by the Affordable Care Act,' he said.

Winmill didn’t specify alternate means of improving patient outcomes and released only a summary of his ruling pending redaction of proprietary information in the full opinion.

Note several aspects to this coverage.  It implied that the deal was done solely for high-minded purposes, improving "health care delivery," and in response to the need for "integration" arising from the health care reform produced by the Affordable Care Act; that health care reform might be in jeopardy from this ruling in the absence of the judge's new prescription for "improving patient outcomes"; and that details of the ruling and the justification for it were kept secret as "confidential business information." 

So this initial coverage was difficult to interpret, raising more questions than it answered.  If the practice acquisition was made with such lofty goals, why couldn't it be legally saved?  How could health care reform possibly continue without Judge Winmill saying what should be done?  That last question was sarcastic, maybe the real question is why did anyone think it was the judge's job to explain how to improve health outcomes?  Finally, why was so much of the ruling and the details underlying it kept secret.

In a few days, local journalists came up with a better idea of what was really going on.

It Was All About the Money

The same day that the Wall Street Journal and Bloomberg covered the case, the Idaho Statesman reported more details about the judge's ruling that seem to suggest different interpretations,

Winmill said in his ruling that while it may not have been the goal of the acquisition, it 'appears highly likely that health care costs will rise as the combined entity obtains a dominant market position that will enable it to (1) negotiate higher reimbursement rates from health insurance plans that will be passed on to the consumer, and (2) raise rates for ancillary services (like x-rays) to the higher hospital-billing rates.'

Then only a week later, the Statesman covered the unveiling of some previously hidden portions of the ruling, first giving the background,

As St. Luke’s Health System aggressively added hospitals and doctors over the past several years, it commanded more money from Idaho’s largest insurer, and it planned to raise prices in order to give a newly acquired group of doctors a 30 percent raise, according to newly released court documents.

Unsealed Tuesday, the documents explain why U.S. District Judge B. Lynn Winmill last week ordered St. Luke’s to nullify its year-old merger with Nampa’s Saltzer Medical Group.

Lawyers for St. Luke’s and Blue Cross of Idaho asked the judge not to reveal some facts in the documents, arguing that they contained trade secrets. But Winmill denied the requests.

'The facts and figures sought to be redacted are crucial to the court’s analysis, and their removal would render the decision indecipherable,' Winmill said.

Then it got to the nitty gritty,

 Winmill said in his decision Tuesday to make his ruling public that when the trial started, he thought there were compelling reasons to keep parts of it veiled. But as it went on, those reasons seemed less compelling, he said.

Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy

Winmill immediately opened his entire decision.
 
St. Luke’s told Winmill that he should keep statements such as the following out of his public ruling:

• 'By 2012, St. Luke’s had three of the top five highest-paid hospitals, and its top hospital was receiving reimbursements 21 percent higher than the average Idaho hospital'
• 'After the acquisition, if St. Luke’s were to bill for (routine services such as lab tests or X-rays) at the higher ‘hospital-based’ rates, (Blue Cross of Idaho) estimates that costs ... would increase by 30 to 35 percent.'
• 'St. Luke’s own analysis projected that it could gain an extra $750,000 through hospital-based billing from Saltzer from commercial payers for lab work and $900,000 extra for diagnostic imaging.'
• 'Consultant Peter LaFleur prepared an analysis at the direction of St. Luke’s showing how office/outpatient visits could be billed for higher amounts if the visit was hospital-based rather than Saltzer-based. The hospital-based billings were more than 60 percent higher.'

Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy

Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy

Read more here: http://www.idahostatesman.com/2014/01/24/2989492/federal-judge-says-st-lukes-buyout.html#storylink=cpy

 Although it certainly makes sense that the hospital system would want to know what the financial implications of buying the physicians' practices might be, the implication certainly seems to be that making a lot more money faster, in addition to any hopes for better patient outcomes, might be a goal of the merger.


Trying to Keep Facts that Might Embarrass the Leaders out of Public View

It is hard to understand why the hospital leadership was so fixated on keeping such information private if it were not to forestall any impression that this was all about the money.  As the Statesman reported,

Much of the four-week trial happened behind closed doors, and many documents were sealed or heavily redacted. Lawyers for the hospitals — and for insurance companies and local employers — marked those parts of the trial private because they said they needed to protect trade secrets.

St. Luke’s spokesman Ken Dey said some underlying data from Blue Cross of Idaho on which Winmill based his decision was sealed, and St. Luke’s lawyers could not access it. St. Luke’s is concerned that data might have led to some 'misleading conclusions,' he said.

The Statesman and several other Idaho news outlets filed a lawsuit to pry open the court proceedings, and that lawsuit is now before the U.S. Ninth Circuit Court of Appeals.

It is obviously a matter of opinion whether revealing more information might have lead to misleading, or to accurate conclusions.  Note that local journalists were driven to file their own lawsuits just to gain access to records from a trial held in a government run court, and that many of those records are still secret.  

It will be interesting to see the results of these further proceedings, but it seems much more likely that the hospital system leaders tried so hard to keep everything secret to protect their own images as only caring about "patient outcomes," not money.  If these were trade secrets, given that the hospital system seems to have become dominant in the market, from what competitors were they hiding? 

Read more here: http://www.idahostatesman.com/2014/01/29/2997245/details-unveiled-in-st-lukes-case.html#storylink=cpy

Summary - Even More Reasons to be Concerned about Corporations Hiring Physicians to Take Care of Patients

This case suggests some interesting conclusions which we hope are not misleading.

Nationally or globally important health care issues are often still not well covered by national news media, much less the medical and health care literature.  Local journalists may doe a much better job, but local journalism is increasingly threatened.

One reason important cases may be anechoic is that people involved with them fear public discussion of what may prove to be embarrassing, uncomfortable or worse to them.  When those people are rich and locally influential, the likelihood of the anechoic effect swallowing discussion increases.

More specifically, we should be extremely skeptical of attempts at health care reform that add more bureaucracy to try to counter the effects of existing bureaucracy.  The main way current health care reform legislation seemed to address  the high costs and poor quality that we on Health Care Renewal contend may be due to concentration and abuse of power in health care is to further concentrate power without providing safeguards to prevent abuse.

Finally, while this case was about whether hospitals (and other large organizations) hiring physicians to provide medical care may command higher prices, the real concern is whether physicians who now have to answer to corporate executives and organizational bureaucrats, that is who have become corporate physicians,  may have to put their organizations' and their leaders' needs and wants ahead of their patients' and the public's health.

True health care reform would be informed by the core value that physicians are supposed to endorse: the individual patient comes first.  Health care should not be mainly about increasing corporate revenues, or pleasing corporate executives or government bureaucrats.  However, big organizations and the in-group who personally profit from their operations want to keep such concerns anechoic.

Instead, we all should start by appreciating the words of Judge Winmill and the information he has provided us.

Roy M. Poses MD on Health Care Renewal

The Camel's Aching Back - Johnson and Johnson and Novartis Fined 16 Million Euro for "Anticompetitive" Scheme to Delay Generic Fentanyl

Legal and regulatory actions unfavorable for giant pharmaceutical, biotechnology and device company Johnson and Johnson just keep coming.  We last discussed such a story only two weeks ago here. 

The Latest Case

This latest story got only desultory US coverage from the wire services.  The most complete version is in the European Commission press release. 

The basics were:

The European Commission has imposed fines of € 10 798 000 on the US pharmaceutical company Johnson & Johnson (J&J) and € 5 493 000 on Novartis of Switzerland. In July 2005, their respective Dutch subsidiaries concluded an anticompetitive agreement to delay the market entry of a cheaper generic version of the pain-killer fentanyl in the Netherlands, in breach of EU antitrust rules.

In more detail,

J&J initially developed Fentanyl and has commercialised it in different formats since the 1960s. In 2005, J&J's protection on the fentanyl depot patch had expired in the Netherlands and Novartis' Dutch subsidiary, Sandoz, was on the verge of launching its generic fentanyl depot patch. It had already produced the necessary packaging material. 

However, in July 2005, instead of actually starting to sell the generic version, Sandoz concluded a so-called 'co-promotion agreement' with Janssen-Cilag, J&J's Dutch subsidiary. The agreement provided strong incentives for Sandoz not to enter the market. Indeed, the agreed monthly payments exceeded the profits that Sandoz expected to obtain from selling its generic product, for as long as there was no generic entry. Consequently, Sandoz did not offer its product on the market. The agreement was stopped in December 2006 when a third party was about to launch a generic fentanyl patch.

The agreement therefore delayed the entry of a cheaper generic medicine for seventeen months and kept prices for fentanyl in the Netherlands artificially high - to the detriment of patients and taxpayers who finance the Dutch health system.

The obligatory colorful bits,

 Why did J&J and Novartis conclude that agreement? According to internal documents Sandoz would abstain from entering the Dutch market in exchange for 'a part of [the] cake'. Instead of competing, Janssen-Cilag and Sandoz agreed on cooperation so as 'not to have a depot generic on the market and in that way to keep the high current price'. Janssen-Cilag did not consider any other existing potential partners for the so-called 'co-promotion agreement' but just focused on its close competitor Sandoz. Sandoz engaged in very limited or no actual co-promotion activities.

So, 

 The Commission therefore concluded that the object of this agreement was anticompetitive and infringed Article 101 of the Treaty on the functioning of the European Union (TFEU). 

Johnson and Johnson's Ever Lengthening Unhappy Legal History

There have been so many settlements made by, fines assessed against, and other adverse legal actions affecting Johnson and Johnson in the recent past that we must make a major revision of our summary of such cases (see same appended at the end of this post.)

Yet despite all these actions, there is no hint that anything will change at the company.  After all, it is extremely profitable, and all the fines, while they individually appear large, are not a big fraction of the money it brings in.  And, as we have noted far too often, not one of these actions actually provides any negative consequences, much less severely punishes anyone at the company who authorized, directed, or implemented the bad behavior.  

Instead, the leadership of the company continues to make itself very rich. As we wrote here,  Mr William Weldon, the outgoing CEO on whose watch most of the misbehavior resulting in the legal actions listed in the appendix below occurred, retired with a huge retirement package, after receiving extremely generous compensation prior to that.  The new CEO as of April, 2012,  Mr  Alex Gorsky, per the company's 2013 proxy statement, already owns more than 190,000 Johnson and Johnson shares,  and received $10,977,109  total compensation in 2012.  Mr Weldon received over $29 million in total compensation just for 2012, the year in which he retired.  Other top executives received from over $3.5 million to over $8 million. One can only imagine how much top executives are making this year.

So Johnson and Johnson, once admired for proclaiming in its famous credo to "put the needs and well-being of the people we serve first," now seems to put its own hired managers first.  It boggles the mind that despite this amazing record of bad behavior, the executives who presided over it still have jobs, have made no obvious changes in how they manage the company, and in fact continue to get ridiculously rich.  The board of directors, which includes the President of the University of Michigan, a Professor and Emeritus Chancellor and Vice President of Health Affairs at Emory, a Professor at MIT, a former FDA Commissioner, and Senior Fellow at the Brookings Institute, and the Vice Chancellor of Health Sciences, Dean of the David Geffen School of Medicine at the University of California, Los Angeles (UCLA); Chief Executive Officer of the UCLA Health System, who seemingly ought to care about the integrity of evidence, protecting patients from harm, and the need for simple honesty, have not obviously done anything about the apparent massive violation of the company credo that has made its managers wealth.   Other than the stockholder lawsuit discussed below, the supposed owners of the company seem to be mute.

When will the straws break the camel's back?  In the absence of such a fracture, I repeat like an old, broken record... 

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.

Again, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior.

Appendix - Johnson and Johnson Recent Legal Record

2010

- Convictions in two different states in 2010 for misleading marketing of Risperdal
- A guilty plea for misbranding Topamax in 2010
2011

- Guilty pleas to bribery in Europe in 2011 by Johnson and Johnson's DePuy subsidiary
- A guilty plea for marketing Risperdal for unapproved uses in 2011 (see this link for all of the above)
- A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post here)
2012

- In 2012, testimony in a trial of allegations of unethical marketing of the drug Risperdal (risperidone) by the Janssen subsidiary revealed a systemic, deceptive stealth marketing campaign that fostered suppression of research whose results were unfavorable to the company, ghostwriting, the use of key opinion leaders as marketers in the guise of academics and professionals, and intimidation of whistleblowers. After these revelations, the company abruptly settled the case (see post here).
-  Also in 2012,  Johnson & Johnson was fined $1.1 billion by a judge in Arkansas for deceiving patients and physicians again about Risperdal (look here).
-  Also in 2012, Johnson & Johnson announced it would pay $181 million to resolve claims of deceptive advertising again about Risperdal (see this post). 

2013

-  In 2013, Johnson & Johnson settled case by shareholders alleging that management made misleading statements and withheld material information about manufacturing problems (see this post)

-  In 2013, Johnson & Johnson Janssen subsidiary pleaded guilty to a charge of misbranding Risperdal, and settled for a total of $2.2 billion allegations that it promoted the drug for elderly demented patients and adolescents without an indication, and despite evidence of its harms (see this post). 

-  In 2013, Johnson & Johnson DePuy subsidiary agreed to settle with multiple plaintiffs for $2.5 billion allegations that it sold defective mental-on-metal artificial hip, and hid evidence of its harms .

- In 2013, Johnson & Johnsonn Janssen subsidiary was found by two juries to have concealed harms of its drug Topamax (see this post for this and above case).

- In 2013, Johnson & Johnson Ethicon subsidiary's Advanced Surgical Products and two of its executives agreed to settle charges by US FDA that is sold mislabeled products used to sterilize equipment such as endoscopes (see this post).

- In 2013, Johnson & Johnson fined by European Commission for anticompetitive practices, that is, collusion with Novartis to delay marketing generic version of Fentanyl (in the current post above).