Princess Health and Will There Ever Be Enough Straws to Break Corporate Health Care Managers' Impunity's Back? - Novartis Settles Yet Again, This Time for Bribing Doctors. Princessiccia

Princess Health and Will There Ever Be Enough Straws to Break Corporate Health Care Managers' Impunity's Back? - Novartis Settles Yet Again, This Time for Bribing Doctors. Princessiccia

boards of directors bribery conflicts of interest deception executive compensation health care corruption impunity marketing Novartis

Gusty 09:40 Add Comment

Umpteenth verse, same as the first...

As just reported by Bloomberg,

Novartis AG said it agreed to pay $25 million to settle a U.S. Securities and Exchange Commission case that claimed the Swiss drugmaker paid bribes to health professionals in China to increase sales from 2009 to 2013.

In particular,

The SEC detailed a number of Foreign Corrupt Practices Act violations where Novartis employees provided items of value to health-care professionals in China, under the supervision of complicit managers. It also cited examples of how the company improperly recorded as legitimate expenses payments employees made for travel and entertainment, conferences, lecture fees, marketing events, educational seminars and medical studies.

For some vivid examples,

In one example cited in the SEC order on Novartis, a sales representative at the drugmaker�s Sandoz China subsidiary submitted a $1,154 receipt to buy holiday gifts for 25 health-care professionals, which was instead used to pay for their spa and sauna sessions. A regional sales manager approved the purchase, the SEC said.

The SEC order also cited how Sandoz China sponsored 20 health-care professionals to attend a 2009 medical conference in Chicago. During the trip, the company paid for the group�s recreational activities such as a Niagara Falls excursions, $150 in 'walking around' money for their spouses, and cover charges to a strip club. The group was accompanied by a Sandoz China senior manager and other staff, according to the SEC.

So, thus far, the allegations were that Novaris bribed Chinese physicians to use their products, and the bribes includes gifts, travel money, and admission to a strip club.  It is likely that these bribes induced the physicians to unnecessarily or excssively prescribe Sandoz drugs to patients, leading to excess expenses, overtreatment, and quite likely adverse effects that should have been prevented.

As per the Wall Street Journal, and as usually happens in such cases, Novartis was allowed to settle without "admitting or denying the findigs." In the Bloomberg article, a Novartis spokesperson gave the usual vague response,

'The issues raised by the SEC, which relate to our subsidiaries in China and go back as far as 2009, largely pre-date many of the compliance-related measures introduced by Novartis across its global organization in recent years,' Novartis spokesman Eric Althoff said in an e-mailed statement Thursday.

The implication was that the company no longer does these bad things, but did not include a promise not to do them. And, of course, just like in many, many other health care cases, and in many, many other cases involving big, powerful, or influential organizations, no one at a top management level went to jail, or even suffered any negative consequences, even for such sleazy allegations as those in this case.  Finally, partially because the amount of this settlement was so small related to the financial bulk of the company involved, this case was relatively anechoic, only reported in the small items in the business press.

Summary

As we are distracted by bloviating billionaires and other spectacles on the US 2016 campaign trail, we continue to accumulate evidence of the corruption of large health care organizations and the impunity of their leaders.  Yet this evidence remains anechoic, even given the apparent recidivism involved.  For example, it was only in last November that we discussed what were then the latest misadventures by Novartis and its leadership.  At that time, our post included these section headings covering 2014-15:

-  Japanese Health, Labor and Welfare Ministry Found that Novartis Concealed Serious Adverse Effects
- Novartis Executive Pleads Guilty to Bribing Polish Official
- Novartis Subsidiary Sandoz Settles Allegations that it Misrepresented Pricing Data to US Medicaid
- Express Scripts Settles Allegations that it Accepted Kickbacks from Novartis
- Novartis Settles US Allegations of Kickbacks to Enhance Sales of Multiple Drugs

Furthermore, in that post we also documented Novartis' previous record.   In March, 2014, we had noted:
- Italian authorities had fined Novartis and Roche for colluding to promote the use of an expensive opthamologic treatment
- the NY Times published interviews with physicians ostensibly showing how Novartis turned them into marketers for the drug Starlix
- Japanese investigators charged Novartis with manipulating clinical research
- Indian regulators canceled a Novartis import license, charging the company with fraud.

Also,  in 2013, Novartis was fined for anti-competitive practices in its marketing of Fentanyl by the European Commission (look here), and in 2011 its Sandoz subsidiary settled allegations of misreporting prices in the US for $150 million (look here)   Other Novartis misadventures from 2010 and earlier appear here.  So Novartis has quite an impressive, if not infamous record of ethical failures.

Yet no Novartis top manager suffered any negative consequences then (although one apparent mid-level company manager at the Polish subsidiary did plead guilty), and all these previous episodes apparently did not suggest a pattern of recidivism to US authorities this time sufficient to attempt to impose any negative consequences on higher level managers.  Meanwhile, Novartis executives continue to be paid handsomely.  The 2015 Novartis executive compensation report listed over 51 million Swiss francs paid

Also, this goes on while large health care companies continue to pay out dizzying amounts to physicians, health care professionals, hospitals and academic institutions, which partially may secure their loyalty.  Novartis, for example, which ProPublica lists as only the 28th biggest payer to physicians, paid out $31.7  million in 2013-14 just to US physicians.    The 2015 Novartis board of directors included Dr Nancy C Andrews, the Dean of the Duke Medical School and Vice-Chancellor for Academic Affairs at Duke University,  Dr Dimitri Azar, Dean of the College of Medicine at the University of Chicago, Illinois, and Dr Charles L Sawyers, a professor and department chair at Weill-Cornell Medical School.   I am unaware that anyone of them have publicly raised any concerns about Novartis' recent misadventures, although I am also unaware whether anyone has publicly asked them such questions. 

No wonder that ordinary US (and other countries' citizens) feel that they are trapped in a hopeless economic situation by rigged systems designed to benefit from the corrupt insiders.  No wonder that someone of them are seeking the protection of some of those powerful insiders.  But I digress...

In terms of health care, as we have said like a broken record (if anyone remembers what that means), or, if you prefer, where every verse is same as the first...

There seems to be increasing recognition that the continuing rise in US health care costs is unsustainable, and that these costs are not buying us good health care.  There are calls to avoid unnecessary, and sometimes harmful care.  Yet there is a persistent disconnect between how continuing dishonest behavior by health care organizations, impunity of their leaders, and lack of accountability by their board members fuel rising costs, shrinking access, and bad outcomes for patients.

To truly reform health care, we will have to at least recognize the causes of the current dysfunction.  Recognizing how health care dysfunction is created by unaccountable, dishonest leadership should lead to true reform that would promote well-informed, honest, accountable leadership that puts patients' and the public's health ahead of personal gain.

Our musical interlude ("second verse, same as the first,") Herman's Hermits, Henry VIII

Princess Health and Ho-hum, Another Month, Another Set of Multi-Million Dollar Settlements by Health Care Corporations Acting Badly. Princessiccia

Princess Health and Ho-hum, Another Month, Another Set of Multi-Million Dollar Settlements by Health Care Corporations Acting Badly. Princessiccia

adverse effects deception Fresenius health care prices impunity legal settlements Merck Pfizer Vioxx You heard it here first

Gusty 06:42 Add Comment

Amazingly, with a US presidential election looming, there is finally some public discussion here of the impunity of top corporate executives.  Columnist Gretcher Moregenson wrote on February 6, 2016 in the New York Times,

Ho-hum, another week, another multimillion-dollar settlement between regulators and a behemoth bank acting badly.

Then,

As has become all too common in these cases, not one individual was identified as being responsible for the activities. Once again, shareholders are shouldering the costs of unethical behavior they had nothing to do with.

It could not be clearer: Years of tighter rules from legislators and bank regulators have done nothing to fix the toxic, me-first cultures that afflict big financial firms.

Similarly, but more broadly, Senator Elizabeth Warren (D - Massachusetts) published a report in January, 2016, entitled "Rigged Justice: 2016 - How Weak Enforcement Lets Corporate Offenders Off Easy." She summarized its main conclusions in a New York Times op-ed,

Corporate criminals routinely escape meaningful prosecution for their misconduct.

Furthermore,

In a single year, in case after case, across many sectors of the economy, federal agencies caught big companies breaking the law � defrauding taxpayers, covering up deadly safety problems, even precipitating the financial collapse in 2008 � and let them off the hook with barely a slap on the wrist. Often, companies paid meager fines, which some will try to write off as a tax deduction.

The failure to adequately punish big corporations or their executives when they break the law undermines the foundations of this great country. Justice cannot mean a prison sentence for a teenager who steals a car, but nothing more than a sideways glance at a C.E.O. who quietly engineers the theft of billions of dollars.

These enforcement failures demean our principles. They also represent missed opportunities to address some of the nation�s most pressing challenges.

In particular, she cited this example involving health care.

When Novartis, a major drug company that was already effectively on federal probation for misconduct, paid kickbacks to pharmacies to push certain drugs, it cost taxpayers hundreds of millions of dollars and undermined patient health. Under the law, the government can boot companies that defraud Medicare and Medicaid out of those programs, but when Novartis got caught, it just paid a penalty � one so laughably small that its C.E.O. said afterward that it 'remains to be seen' whether his company would actually consider changing its behavior.

Note that we discussed the Novartis settlement here.  The case referred to by Senator Warren was just the latest in a series of ethical misadventures by Novartis which led to legal actions in the US and around the world, but feeble penalties.

But while Ms Morgenson wrote about financial institutions, now we can also write:

Ho-hum, another month, another set of multimillion-dollar settlements between regulators and  behemoth health care companies acting badly.

In chronological order, since mid-January, 2016...

For $830 Million, Merck Settled Shareholders Lawsuit Alleging Deceptions by Corporate Management

On January 15, 2016, the Wall Street Journal reported,

Merck said Friday it agreed to pay $830 million to resolve a class-action lawsuit brought by shareholders, alleging the drug maker and its executives made false and misleading statements about the safety of Vioxx between its introduction in 1999 and its market withdrawal in 2004.

The shareholders alleged they paid inflated prices for Merck shares because of the company�s conduct.

Note that if the company misled its shareholders, it also misled health care professionals and the public about the harms of Vioxx,  putting many patients at risk. Of course, the Vioxx case is now old news, but it continues to be an example of a case in which the corporation paid fines, presumably at the expense of shareholders, employees and patients, but in which no one who authorized or directed the bad behavior paid any penalty.

As is typical in such cases,

Merck, which is based in Kenilworth, N.J., said Friday the settlement of the shareholders� lawsuit doesn�t constitute an admission of liability or wrongdoing by the company or individual executives named as defendants in the case.

Merck has paid billions to settle multiple lawsuits related to Vioxx, yet what it paid was much less than the revenue produced by the drug.

The bulk of Merck�s Vioxx-related costs came from its 2007 agreement to pay $4.85 billion to settle thousands of product-liability lawsuits alleging that patients� use of Vioxx caused heart attacks and strokes, and that Merck failed to properly warn people of the risks. Merck didn�t admit liability in that settlement.

In addition, Merck agreed in 2011 to pay $950 million to resolve allegations by the U.S. Justice Department and state governments that the company deceived the government about the safety of Vioxx, and marketed it for uses not included in the prescribing label approved by the Food and Drug Administration.

Merck recorded more than $11 billion in Vioxx sales during the drug�s years on the market from mid-1999 to September 2004.

The company did plead guilty to one criminal charge related to Vioxx.

 As part of the 2011 settlement, Merck pleaded guilty to a misdemeanor criminal violation of a federal drug law, admitting that it promoted Vioxx to treat rheumatoid arthritis before that use was approved by the FDA.

But apparently no Merck manager was ever charged with a crime, much less convicted.  We have discussed the Vioxx case here, and other issues with Merck here.

Note that this settlement comes soon after a smaller settlement in 2015 that was barely mentioned in the press,Merck to pay $5.9 million for misleading marketing of pink eye drug: U.S [Reuters]

For $785 Million, Pfizer Settled Suit Alleging Overcharging of Medicaid

On February 16, 2016, per the Wall Street Journal,

Drugmaker Pfizer Inc. on Tuesday said it reached an agreement in principle to pay $784.6 million to settle a long-running U.S. government investigation of allegations that its Wyeth unit overcharged government Medicaid health programs for the heartburn drug Protonix.

Of course,

Pfizer said the agreement doesn�t include any admission of liability by Wyeth.

Much less did the agreement include any penalties for anyone at Wyeth or Pfizer who authorized or directed the overcharging. Yet some people must have.

Note that this settlement did not seem informed by Pfizer's amazingly lengthy record of legal settlements, and some guilty pleas and/or convictions (for illegal marketing/ misbranding, and for violating the racketeering influenced corrupt organization [RICO]  statute), as most recently summarized here.

Note also, pertinent to the report by Senator Warren mentioned above, every week people pay severe penalties for defrauding Medicaid, Medicare, or other federal health programs.  Today, a quick Google search for "medicaid fraud prison" found such stories from the last month as a woman sentenced to five years in Louisville, and another women sentenced again to five years in Dallas. Yet no person at Pfizer paid any penalty for for practices that deprived the government of hundreds of millions of dollars.  

For $250 Million, Fresenius Settled Lawsuits Alleging it Withheld Information About the its Products' Hazards

Per the New York Times, January 18, 2016,

The world�s largest provider of kidney dialysis equipment and services has agreed to pay $250 million to settle thousands of lawsuits from dialysis patients and their relatives claiming that the company�s products had caused heart problems and deaths.

The settlement was announced by Fresenius Medical Care, a German company whose North American division is one of the two large dialysis providers in the United States.

The lawsuits arose after Fresenius�s own medical office sent an internal memo to doctors in the company�s dialysis centers saying that failure to properly use one of the company�s products appeared to be causing a sharp increase in sudden deaths from cardiac arrest.

But the company did not warn doctors in non-Fresenius clinics who were also using the product, called GranuFlo. It did so only after the internal memo was sent anonymously to the Food and Drug Administration, which began an investigation.

 The company conducted a recall, which was actually a change in the label, not the removal of the product from the market.

Note that this settlement was of allegations not of financial chicanery, but of behavior that put patients in harms way. Nonetheless,

Kent Jarrell, a spokesman for the company, said the initial internal memo was actually incorrect and contradicted by further careful analysis. He said the warning language added to the GranuFlo label in 2012 was eventually removed. GranuFlo, and a related product called NaturaLyte, are used in dialysis machines to help cleanse patients� blood.

In the first case to go to trial, a jury in Massachusetts state court ruled that Fresenius was negligent, for not distributing the memo more widely, but that a patient�s death could not be attributed to GranuFlo, so no monetary damages were awarded, according to Mr. Jarrell and to Christopher Seeger, a lawyer who led the settlement negotiations for the plaintiffs.

But if the initial concern was unwarranted and Fresenius won the first trial, why would it pay $250 million to settle? Mr. Jarrell suggested that a reason was to put the more than 10,000 lawsuits behind it.

'Fresenius deeply regrets the confusion and concern temporarily generated by the November 2011 memorandum,' he said in an emailed statement.

Again, there were no admissions or findings of guilt, no apologies (except for causing "confusion and concern"), and no negative consequences for the corporate managers who authorized or directed the actions in question.  While the FDA apparently issued a recall notice for GranuFlo, no federal agency apparently took action against the company or any individuals within it.    Also, this settlement seemed uninformed by previous settlements made by Fresenius, which were made in 2011 of allegations of false claims, in 2010 again of allegations of false claims, and in 2007 of allegations of restraint of trade (look here).

Summary

We first discussed how legal settlements may serve as markers for misbehavior by large health care organizations, but not as deterrents to future bad behavior in 2006.  Then we wrote ...

 Why do the mainly monetary penalties seem mainly to come out of the hides of stock-holders and consumers, rather than the people who actually made the decisions that lead to the offenses?

In 2008, we wrote,

After all, a fine or settlement paid years later can just be written off as a cost of doing business. Furthermore, although such a payment may have a (minimal) effect on the company's bottom line, it has no real effect on the people whose decisions and actions lead to the problem.

So rather than repeating our usual verbiage about the impunity of health care leaders, let me defer to Senator Warren:

Laws are effective only to the extent they are enforced. A law on the books has little impact if prosecution is highly unlikely.

This country devotes substantial resources to the prosecution of crimes such as murder, assault, kidnapping, burglary and theft, both in an effort to deter future criminal activity and to provide victims with some degree of justice. Strong enforcement of corporate criminal laws serves similar goals: to deter future criminal activity by making would-be lawbreakers think twice before breaking the law and, sometimes, by helping victims recover from their injuries.

When government regulators and prosecutors fail to pursue big corporations or their executives who violate the law, or when the government lets them off with a slap on the wrist, corporate criminals have free rein to operate outside the law. They can game the system, cheat families, rip off taxpayers, and even take actions that result in the death of innocent victims�all with no serious consequences.

The failure to punish big corporations or their executives when they break the law undermines the foundations of this great country: If justice means a prison sentence for a teenager who steals a car, but it means nothing more than a sideways glance at a CEO who quietly engineers the theft of billions of dollars, then the promise of equal justice under the law has turned into a lie. The failure to prosecute big, visible crimes has a corrosive effect on the fabric of democracy and our shared belief that we are all equal in the eyes of the law.

Under the current approach to enforcement, corporate criminals routinely escape meaningful prosecution for their misconduct. This is so despite the fact that the law is unambiguous: if a corporation has violated the law, individuals within the corporation must also have violated the law. If the corporation is subject to charges of wrongdoing, so are those in the corporation who planned, authorized or took the actions. But even in cases of flagrant corporate law breaking, federal law enforcement agencies � and particularly the Department of Justice (DOJ) � rarely seek prosecution of individuals. In fact, federal agencies rarely pursue convictions of either large corporations or their executives in a court of law. Instead, they agree to criminal and civil settlements with corporations that rarely require any admission of wrongdoing and they let the executives go free without any individual accountability.

Keep in mind that the impunity of health care leaders, especially in contrast with the tough enforcement efforts against small fry health care offenders, not only has a corrosive effect on the fabric of democracy but endangers patients' and the public's health, and makes health care more expensive and inaccessible.

Maybe now that the impunity of corporate leaders is becoming a mainstream topic of discussion, we can start talking about, and then doing something about the impunity of corporate leaders in health care. 

Princess Health and A Small Challenge to Impunity - Lawsuit Against Former Synthes CEO Proceeds. Princessiccia

Princess Health and A Small Challenge to Impunity - Lawsuit Against Former Synthes CEO Proceeds. Princessiccia

anechoic effect impunity Johnson and Johnson legal settlements Synthes

Gusty 11:52 Add Comment

Numerous allegations of bad behavior by big health care organizations, some apparently causing patient harm, have resulted in legal settlements, sometimes of criminal charges.  Yet rarely do the individuals who apparently authorized, directed, or implemented the bad beahvior suffer any negative consequences.  In particular, the top executives on whose watch the bad behavior occured seem to have impunity.

Suing the Former Synthes CEO

So it is news that a lawsuit will proceed against the former CEO of medical device company Synthes,  alleging actions that led to the death of a patient.  The basics were reported by the Daily Caller,

Hansjorg Wyss ... will face charges of running a 'criminal profiteering enterprise' through the illegal use of a drug and in violation of federal patient safety rules that resulted in the death of a 67-year old woman....

Washington State Superior Court Judge Dean Lum agreed Oct. 30 that Wyss, a Swiss billionaire ... can stand trial under the state�s racketeering laws for leading a criminal enterprise that caused the death of Reba Golden. She died during an illegal drug test conducted by Wyss�s company in 2007.

The Washington suit charges Wyss, the former CEO of a Pennsylvania-based medical device company called Synthes and his co-defendants with murder in the second degree as a class A felony, second degree assault and criminal profiteering under the Washington Criminal Profiteering Act.

Wyss faces a statutory civil penalty of $250,000 for each violation, amounting to $9.2 million for 'personal injury to and death of Mrs. Golden.' He is charged in 37 violations.

The plaintiff is Reba Golden�s daughter, Cynthia Wilson, whose mother died in 2007 on the operating table after Synthes organized illegal 'market tests' for at least 50 persons across the country of an untested bone cement substance that the Food & Drug Administration banned for use in the spine.

Ultimately, five patients died during the illicit drug testing. Synthes failed to report the deaths to the FDA, as required by law, until the third fatality occurred.

Furthermore, 

Wyss 'entered into a criminal enterprise to perfo'rm illegal and experimental surgeries on patients,' Daniel Hannula, Golden�s attorney, told The DCNF.

Also,

'Mr. Hansjorg Wyss was the controlling stockholder and ranking executive of Synthes and Norian Corporation and the leader of a criminal enterprise,' the complaint states. 'The criminal enterprise engaged, for profit, in a pattern of criminal profiteering activity,' enticed by the prospect of a company forecast of $3 million in after-tax profit for the first year of sales.

Judge Davis agreed case was about profits, saying their behavior was 'generated by a desire to realize the immense profits.'

Hannula told the DCNF, 'they completely ignored what was required of them in order to get their product to the market as quickly as possible because they recognized that this was a market of huge financial potential.'

These are only allegations, of course. However, again, it is very rare for any top executive of a health care organization to personally face a lawsuit for his or her organization's conduct, no matter how bad that conduct may be. 

The Synthes Case Up to Now

We already knew that Synthes' conduct was particularly bad. We last discussed the Synthes case in 2011.  The case was already extraordinary in that it resulted in criminal convictions of several high-ranking Synthes executives.  At that time we wrote:

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

In 2011, Wyss agreed to sell Synthes to Johnson and Johnson, itself a company with a very chequered past (look here), thus making himself into a multi-billionaire, and one of the world's richest men.  (Currently, Forbes lists Wyss as number 240 on its list of the world's richest, estimating his fortune at $6.1 billion.)

The case then slipped into relative obscurity, although Fortune ran a long-form article on it in 2012, which called it a "medical horror story."

An Almost Anechoic Lawsuit

Because of the unusual nature of the ongoing lawsuit, one might expect that it would generate some public discussion.  One would be wrong.  The litigation against Mr Wyss so far has received almost no media coverage, demonstrating the ongoing anechoic effect.  We previous defined  the anechoic effect, as the phenomenon that information or discussion that could challenge or discomfit the powers that be in the US health care often generates no echoes.  

To date, I could only find coverage of the ongoing lawsuit against Mr Wyss in the Daily Caller.  And ironically the Daily Caller did not appear to cover this case because it specializes in malfeasance in health care.  It seemed to cover it because it may have indirectly reflected negatively on prominent members of the US Democratic Party.

Actually, the main focus of the article I quoted above was not health care.  It was that Mr Wyss appears to be a supporter of Hilary Clinton, the currently leading Democratic candidate for the US presidential nomination, and of ostensibly left-wing causes.  I put an ellipsis in the first sentence of the article to allow me to focus on its health care aspects.  What I removed was not a description of Mr Wyss not as an extremely rich former CEO of a medical device company, but as

Hansjorg Wyss, a prominent Clinton foundation donor and wealthy bankrolled of liberal activist groups, will face charges of running a 'criminal profiteering enterprise'....

And the article's title similarly did not mention health care at all: 

Major Clinton Donor Faces 'Criminal Profiteering' Charges

The Daily Caller actually specializes not in health care malfeasance, but in issues of interest to the right wing.  As Politico reported in 2014, Tucker Carlson, described as a "conservative pundit, who founded the Daily Caller, has said

What I despise most about the legacy media isn�t just that they�re mindlessly liberal, though they are.

The Columbia Journalism Review described the Daily Caller as having

carved out a cozy corner of the web in its short life. It�s a place for conservatives to read about the latest liberal scandal and the latest movements in the GOP presidential field.

So presumably if Mr Wyss was uninterested in politics, and did not donate to any remotely left wing causes, the Daily Caller would not have covered the ongoing lawsuit, leaving it totally anechoic.

But whether of not the Daily Caller had an axe to grind when making its choice to report on the ongoing litigation against Mr Wyss, why did every other media outlet to ignore the story?  Perhaps again the rule is in general it is simply not done to publicly discuss what might excessively embarass the people who have gotten very rich from the currently dysfunctional health care system?

Conclusions

The just revealed story of the lawsuit against the extremely rich former CEO of Synthes does suggest that perhaps individuals injured by our curent dysfunctional health care system could use the legal system to try to challenge those who get rich from enabling such injuries.  Or not, because the outcome of this lawsuit is uncertain.

Furthermore, the initiation of this lawsuit again reminds us that those who lead large health care organizations, and may profit mightily from them, regardless of the effects on patients' and the public's health, remain beyond the law.  It is not clear why the US Department of Justice chose not to even attempt to prosecute Mr Wyss, although they apparently believed he was responsible for directing the actions that led to patient deeaths.  But his impunity mirrors that granted to just about every top health care manager who authorized or directed corporate bad behavior that endangered patients. 

This impunity is further enabled by how anechoic stories of bad leadership of health care organizations, even of apparently criminal or corrupt leadership, are.  As long as most health care professionals and the public at large remain unaware of the dark side of health care, they are unlikely to seek light to shed upon it.

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

Princess Health and Their Cheating Hearts - Latest Allergan Settlement Is a Reminder of Merger Participants' Sketchy Pasts. Princessiccia

Princess Health and Their Cheating Hearts - Latest Allergan Settlement Is a Reminder of Merger Participants' Sketchy Pasts. Princessiccia

Allergan crime deception fraud impunity kickbacks legal settlements obstruction of justice Pfizer RICO

Gusty 12:17 Add Comment

A Huge, but Sketchy Merger

The announced merger and "tax inversion" of Pfizer and Allergan would be one of the largest corporate marriages in US history.  It has drawn more than its share of criticism.  For example, per the Los Angeles Times, former US Senator and Secretary of State, and current presidential candidate Hilary Clinton said "this proposed merger, and so-called inversions by other companies, will leave U.S. taxpayers holding the bag."

By creating the world's largest drug company, it could certainly further consolidate the US and global pharmaceutical market and raise already high drug prices.  While Pfizer in particular has benefited from US funding of biomedical research, including training of researchers and development of research infrastructure, (see this New Yorker article by John Cassidy) making the company pseudo-Irish may be "unpatriotic," as President Obama said with regard to tax inversions in general (per the Washington Post).

The nature of the merger, creating a company that would be Irish for tax purposes, but effectively run out of the US seems at least intellectually dishonest.  (Note that the CEO of its supposedly Irish component, Allergan, works out of Parsippany, NJ (per Bloomberg, here.)

The main beneficiaries of the merger appear not to be patients, or health care providers, or US taxpayers, but top company executives.  As John Cassidy wrote,

It's hard to avoid seeing the merger as a cynical move designed to boost Pfizer's stock price and generate a windfall for the company's senior managers....

But the latest settlement by Allergan, which I was just about to write about before the merger was officially announced, is a reminder that the companies are a good fit in one sense.  Both have long histories of shady behavior as marked by many legal settlements, and in some cases corporate guilty pleas and convictions.

The Latest Allergan Settlement

The beginnings of the latest Allergan settlement were noted back in July, 2015, but first not even connected to Allergan.  According to the US Federal Bureau of Investigation (FBI),

A former district manager of Warner Chilcott Sales U.S., LLC (Warner Chilcott), a pharmaceutical company based in Rockaway, N.J., pleaded guilty today in U.S. District Court in Boston in connection with a scheme to deceive insurance companies and Medicare so that they would cover the costs of Warner Chilcott�s osteoporosis medications, Actonel and Atelvia.

The idea was to promote two of Warner-Chilcott's products, osteoporosis medicines Actonel and Atelvia, by evading insurance company requirements for physicians to justify their use, given questions about their benefits versus harms, and availability of generic treatments for osteoporosis.

Beginning in 2010 and throughout 2011, Podolsky directed the sales representatives in his district to fill out prior authorizations for physicians who prescribed Actonel and Atelvia using false clinical justifications as to why the patient needed Warner Chilcott drugs and submit them to health insurance companies. In some instances, Podolsky�s sales representatives reviewed patients� medical charts to get the information necessary to fill out the prior authorizations, in violation of the Health Insurance Portability and Accountability Act (HIPAA). Podolsky also directed sales representatives to utilize a website to submit prior authorizations to insurance companies to disguise their identity as pharmaceutical sales representatives. Podolsky and the sales representatives that he supervised knew that they should not be involved in the preparation or submission of prior authorizations.

But Podolsky was not a lone wolf. At the end of October, 2015, the Boston Globe reported more fully on the scheme, and the large settlement made by Allergan, of which Warner-Chilcott was merely a subsidiary. US Department of Justice allegations involved top leaders of Allergan.

The drug reps bought the doctors lunches, dinners, drinks. They paid for speeches the doctors never made. And in exchange, the doctors prescribed drugs that boosted their sales.

Warner Chilcott, a unit of pharmaceutical giant Allergan PLC, will pay $125 million to settle these and other charges in an agreement announced Thursday by US Attorney Carmen M. Ortiz in Boston.

Ortiz said the company ran an elaborate scheme to prod doctors � including in Massachusetts � to prescribe its drugs in exchange for kickbacks.

Warner Chilcott�s former president, W. Carl Reichel, was charged in federal court for allegedly conspiring to pay kickbacks to physicians, and a Massachusetts physician, Dr. Rita Luthra of Longmeadow, was indicted for allegedly accepting payments.

Warner Chilcott illegally promoted at least seven drugs, including the osteoporosis treatments Actonel and Atelvia.

Court documents show that Warner Chilcott representatives promoted their drugs by wining and dining physicians and giving them money and gifts for participating in medical education events. These events often were held at 'upscale restaurants' and contained 'minimal or no educational component.'

The company made fraudulent requests to the federal government and to insurance companies to boost sales of their drugs, the US attorney�s office said, and employees also made unsubstantiated claims about the drugs� benefits.

Note that the charges were of actions that went well beyond financial fraud. They included dishonest marketing and kickbacks to physicians. The alleged actions could have harmed patients, by inducing physicians to prescribe unneeded drugs with known adverse effects.

Note further that unlike many other legal settlements about which we have written in the past, this one did not allow the company to escape by just paying some money and then claim that it did not confirm or deny the charges.  In this case, the company pleaded guilty.

Warner Chilcott has agreed to plead guilty to health care fraud. It will pay a $23 million criminal fine and $102 million to resolve false claims with state and federal governments. The case was brought by two whistle-blowers.

And as noted above, unlike many other legal settlements which did not entail any negative consequences for those who authorized, directed, or implemented the bad behavior, in this case a top executive (although not the highest executive in the overall corporate structure, and not a current executve) was charged with a crime and apparently actually physically arrested (although he has not been convicted of it, yet.)

Meanwhile, Reichel, the former Warner Chilcott president, was arrested in Boston on Thursday.

Prosecutors say in their indictment that Reichel designed a sales and marketing strategy to entice doctors to prescribe his company�s drugs with free dinners and bogus speaking fees. The physicians paid to give speeches often did not speak at all, and instead enjoyed expensive dinners with sales representatives, the indictment says.

Reichel left Warner Chilcott in 2011, according to a news release.

Furthermore, per a Forbes column, Mr Reichel was allegedly involved up to his proverbial eyeballs.

The Reichel indictment says that, while president of Warner Chilcott�s pharmaceuticals divisions from 2009 to 2011, he directed company sales staff to push physicians� to prescribe its drugs by throwing money at doctors� in various ways, such as expensive dinners for doctors and their spouses and 'speaker' fees to attend informal dinners without educational content.

Reichel also allegedly provided sales reps with a separate expense account to buy food and drinks for employees of physicians who prepared prior authorization forms certain insurers required to pay for patients� drugs.

Reichel hired 'Type A crazy' sales representatives, as he called them, who were provided with 'limited training concerning compliance with health care laws and otherwise de-emphasized the importance of compliance to the sales force,' the indictment says.

Of course, the top executive in the overall corporate structure said the usual, as likely written by his public relations spin doctors,

Brent Saunders, the chief executive of Dublin-based Allergan, said in a statement: 'We take seriously our responsibility and commitment to abide by all US and international laws that govern the sales, marketing, education, and promotion of our products, and recognize the tremendous impact that this responsibility has on the customers and patients we serve.'

Finally, two other middle managers involved in the case entered guilty pleas, according to the Department of Justice.

Thus this settlement may be regarded as much tougher than many previous legal settlements involving big health care organizations.

However, its bearing on the huge Prizer-Allergan merger has apparently not so far been publicly discussed.

Allergan's Previous Track Record

It is not that the new Allergan settlement is a one-off.   It needs to be viewed in the context of Allergan's previous history of misbehavior.

That history may be a bit obscure, especially because of Allergan's complex corporate structure.  However, a Wall Street Journal article on the merger provided a bit of Allergan's corporate back story,

Allergan itself is the result of a number of mergers in quick succession. It started off as a generic-drug company called Watson Pharmaceuticals Inc. In 2012, Watson acquired Swiss rival Actavis Group and adopted that name. It also absorbed Warner Chilcott PLC and Forest Laboratories Inc. in multibillion-dollar deals.

Mr. Saunders was CEO of Forest Labs, and became CEO of Actavis after that deal. Shortly after, Allergan�s predecessor was put into play when Valeant Pharmaceuticals International Inc. made an unsolicited offer to buy the California company.

Actavis then stepped in as a white knight and bought Allergan, taking the company�s name.

Allergan and its predecessor companies have an interesting record of misbehavior.  Just perusing Health Care Renewal one can find:

-  Actavis was convicted and fined more than $170 million in 2011 by a Texas jury of misrepresenting prices to the state's Medicaid program (see this post.)

-  In 2010, in case which included allegations that it paid kickbacks to physicians to promote its product, Allergan pleaded guilty to to federal charges of misbranding of Botox and agreed to penalties of about $600 million (see this post).

-  In 2010, Forest Laboratories settled allegations that it deceptively promoted drugs, particularly that it promoted anti-depressant Celexa for children by partially by covering up negative trial results about it.  This likely hurt patients, since anti-depressants like Celexa have been shown to have severe adverse effects, including suicidal ideation, for children.  The company also was charged with giving kickbacks to physicians to promote drugs.  The company pleaded guilty to a felony charge of obstructing justice, and two misdemeanors, including misbranding Celexa and illegal distribution of Synthroid.  The company paid over $300 million in penalties and submitted to a corporate integrity agreement.  (See this post)  The Department of Justice threatened to disbar the CEO of Forest Laboratories, but then inexplicably backed off (see this post). 

So the latest settlement by Allergan subsidiary Warner Chilcott is the fourth major settlement since 2010.  The company and its predecessors have pleaded guilty to crimes, at least once to a felony, and settled cases involving allegations of kickbacks and deceptive marketing practices. 

Pfizer's Previous Track Record

And things really get interesting when one considers Pfizer's track record, which seems much sorrier than Allergan's.  Our latest post, about Pfizer misbehavior was only one month ago (October, 2015).  A  UK judge found that the company threatened health care professionals for using a generic competitor.

Many posts on Pfizer can be found here.   The latest update of Pfizer's troubles since 2000 follows.

In the beginning of the 21st century, according to the Philadelphia Inquirer, Pfizer made three major settlements,
- In 2002, Pfizer and subsidiaries Warner-Lambert and Parke-Davis agreed to pay $49 million to settle allegations that the company fraudulently avoided paying fully rebates owed to the state and federal governments under the national Medicaid Rebate program for the cholesterol-lowering drug Lipitor.
- In 2004, Pfizer agreed to pay $430 million to settle DOJ claims involving the off-label promotion of the epilepsy drug Neurontin by subsidiary Warner-Lambert. The promotions included flying doctors to lavish resorts and paying them hefty speakers' fees to tout the drug. The company said the activity took place years before it bought Warner-Lambert in 2000.
- In 2007, Pfizer agreed to pay $34.7 million in fines to settle Department of Justice allegations that it improperly promoted the human growth hormone product Genotropin. The drugmaker's Pharmacia & Upjohn Co. subsidiary pleaded guilty to offering a kickback to a pharmacy-benefits manager to sell more of the drug.

Thereafter,
- Pfizer paid a $2.3 billion settlement in 2009 of civil and criminal allegations and a Pfizer subsidiary entered a guilty plea to charges it violated federal law regarding its marketing of Bextra (see post here).
- Pfizer was involved in two other major cases from then to early 2010, including one in which a jury found the company guilty of violating the RICO (racketeer-influenced corrupt organization) statute (see post here).
- The company was listed as one of the pharmaceutical "big four" companies in terms of defrauding the government (see post here).
- Pfizer's Pharmacia subsidiary settled allegations that it inflated drugs costs paid by New York in early 2011 (see post here).
- In March, 2011, a settlement was announced in a long-running class action case which involved allegations that another Pfizer subsidiary had exposed many people to asbestos (see this story in Bloomberg).
- In October, 2011, Pfizer settled allegations that it illegally marketed bladder control drug Detrol (see this post).
- In August, 2012, Pfizer settled allegations that its subsidiaries bribed foreign (that is, with respect to the US) government officials, including government-employed doctors (see this post).
- In December, 2012, Pfizer settled federal charges that its Wyeth subsidiary deceptively marketed the proton pump inhibitor drug Protonix, using systematic efforts to deceive approved by top management, and settled charges by multiple states' Attorneys' General that it deceptively marketed Zyvox and Lyrica (see this post).
- In January, 2013, Pfizer settled Texas charges that it had misreported information to and over-billed Medicaid (see this post).
- In July, 2013, Pfizer settled charges of illegal marketing of Rapamune (see this post.)
- In April, 2014, Pfizer settled allegations of anti-trust law violations for delaying generic versions of Neurontin( see this post).
- In June, 2014, Pfizer settled another lawsuit alleging illegal marketing of Neurontin (see this post).
- In 2015, a settlement by Pfizer of a shareholders' lawsuit stemming from charges of illegal marketing was announced (see this post).

Summary

So the proposed merger of Pfizer and Allergan would truly create a behemouth of bad behavior.  The combined company would have a staggering record of legal settlements, guilty pleas and convictions involving deceptive marketing, fraud, kickbacks, bribes and anti-trust violations, and even an obstruction of justice plea and a RICO conviction.  Yet the managers in charge of the two companies when the bad behavior occurred never had to suffer any negative consequences (although in one current case there is the possibility one executive might be convicted).  Many of these managers have become amazingly rich during the course of their leadership.  Is there any reason to think, absent any unexpected increase in the courage and resolve of government law enforcement, or any unexpected public protest, that the new company will not continue to misbehave as long as its executives are making money from the process?

The Pfizer Allergan merger is the true poster child for the amorality, and consequent dysfunction and decline of modern US and now global health care. As long as top managers of big health care organizations can act with impunity, can avoid all responsibility for their organizations' bad behaviors, and can personally profit wildly from their companies actions, the health care death spiral will continue.  Will we continue to cry out in the wilderness, or will anyone else see the writing on the wall?

A musical moment to partially alleviate the gloom. "Your Cheatin Heart" sung by Hank Williams Jr.



 

Princess Health and What They Really Think of Us (Swiss Version) - Novartis CEO Would Not Commit to Changing Company Behavior After Latest of Multiple Legal Settlements. Princessiccia

Princess Health and What They Really Think of Us (Swiss Version) - Novartis CEO Would Not Commit to Changing Company Behavior After Latest of Multiple Legal Settlements. Princessiccia

corporate integrity agreement deception Express Scripts impunity kickbacks legal settlements Novartis Switzerland what they really think of us

Gusty 08:50 Add Comment

The huge corporations which now dominate global health care are creating amazing records of repeated ethical misadventures.  We last discussed multinational Swiss based pharmaceutical manufacturer Novartis' escapades in early 2014.   Since then, the legal settlements and other legal findings just keep on coming, capped with a big one in late October, 2015.

We will summarize them in chronological order.


Japanese Health, Labor and Welfare Ministry Found that Novartis Concealed Serious Adverse Effects

In August, 2014, per the Japan Times, but apparently not reported widely outside of that country.

Novartis Pharma K.K. said it has failed to report at least 2,579 cases of serious side effects to the health ministry, including one that was fatal, related to its drugs for leukemia and other diseases, although employees were aware of the problems.

Of the total, 1,313 cases were related to Glivec and 514 to Tasigna, both drugs for leukemia treatment. Another 261 cases involved Afinitor, a cancer drug, the Japanese unit Swiss drug giant Novartis AG said Friday.

The findings were reported to the Health, Labor and Welfare Ministry the same day.

The marketing staff at Novartis Pharma recognized the side effects but failed to report them to the division in charge, breaking the drug firm�s internal rules, Novartis Pharma said. They were not fully aware of the importance of the problem and higher-ranking officials failed to supervise them properly, it said.

In February, per the PharmaLot blog, the Ministry decided to suspend the company for 15 days, after having issued a business improvement order to it.  More details of Novartis' problems in Japan can be found in the Japan Times.  I cannot find anything to suggest any one in a position of leadership at Novartis faced any negative consequences as a result, however.

Note that by allegedly hiding adverse effects of its drugs, it is possible that the company's alleged actions led doctors and patients to believe the drugs were safer than they really are, possibly leading to overuse of the drugs and resulting in even more adverse effects.  I did not see a discussion of possible patient harm in the discussion of this case.


Novartis Executive Pleads Guilty to Bribing Polish Official

In October, 2014, per a short Reuters (UK) article, and apparently not mentioned elsewhere,

An executive at a pharmaceutical company in Poland who pleaded guilty in a bribery case involving improper payment, works for Novartis, the Swiss drugmaker said on Thursday.

Poland's anti-corruption bureau said on Tuesday two women had appeared in court in a case in which a health fund official was given a tourist trip worth more than $1,000 (620.67 pounds) in exchange for backing the sale of a particular drug.

Both defendants pleaded guilty....

The drug involved was not clear, and the company suggested this was an individual act ("the enquiry relates to an individual and the company is not part of the enquiry.")  Why an individual would do something like this if not to advance her career is not clear, however.  I cannot find any followup coverage of this, nor anything to suggest the supervisors of the executives involved faced any negative consequences.

Again, by bribing an official to promote a particular drug, this case could have led to overuse of the drug, and potentially to patient harm from the drug's adverse effects. 

Novartis Subsidiary Sandoz Settles Allegations that it Misrepresented Pricing Data to US Medicaid

In March, 2015, per the PharmaLot blog,

In what the federal government says is the largest such settlement ever reached, Sandoz has agreed to pay $12.64 million to resolve allegations that it misrepresented pricing data on medicines that were provided to the Centers for Medicare & Medicaid Services.

Sandoz, which is owned by Novartis and markets hundreds of generic drugs in the U.S., allegedly misrepresented the average sales price data to Medicare between January 2010 and March 2012, according to a statement from the Office of the Inspector General of the U.S. Department of Health & Human Services.

A Novartis spokeswoman writes that the drug maker did not admit to any liability or wrongdoing. 'Sandoz continues to be committed to providing high-quality, affordable medicines to U.S. patients and conducting business with customers and the government with integrity.' As part of the settlement, Sandoz agreed to provide certification that it established a government pricing compliance program.

As the OIG explains, Medicare uses the pricing data to set payments for most drugs covered under Medicare Part B....

Again, no one who authorized, directed or implemented any price misrepresentation faced any negative consequences.  Futhermore, as often occurs in US cases, the company did not admit any wrongdoing, and provided the usual public relations boilerplate about upholding the highest principles, the allegations leading to the settlement notwithstanding.

Express Scripts Settles Allegations that it Accepted Kickbacks from Novartis

In May, 2015, also per the PharmaLot blog,

Express Scripts  has agreed to pay $60 million to resolve allegations by U.S. authorities that a business unit participated in a kickback scheme with Novartis that caused federal health care programs to pay for a medicine based on false claims, according to court documents and a regulatory filing.

The U.S. Department of Justice alleged that Novartis offered patient referrals to Accredo Health Group, which is a specialty pharmacy run by Express Scripts, in exchange for bolstering refills of Exjade, a drug used for reducing excess iron in patients who undergo blood transfusions....

Apparently other lawsuits involving allegations of Novartis payments to other pharmacies are pending. Note that the events alleged in some of these proceedings may have occurred while Novartis was already subject to a so-called corporate integrity agreement,

a key issue to watch is the extent to which a so-called Corporate Integrity Agreement that Novartis signed in 2010 factors into the proceedings. These agreements typically run for five years and require a company to establish an internal compliance program and report violations.

At the time that Preet Bharara, the U.S. Attorney in New York, announced the lawsuits against Novartis two years ago, he called the drug maker a 'repeat offender,' and the lawsuits noted that the violations alleged in the litigation took place before and after the CIA was signed.

Note that the settlement was with Express Scripts, although it involved allegations of misbehavior by Novartis.  Note also that this settlement throws into doubt one mechanism now widely used by law enforcement in the US to settle cases involving big corporations, the corporate integrity agreement or defererred prosecution agreement.  These are agreements made by corporations not to behave badly again.  Yet this case may yet demonstrate that these agreements do not deter future bad behavior.

Again, so far, this settlement did not involve any negative consequences for who may have authorized, directed or implemented the bad behavior either at Express Scripts or Novartis.

Novartis Settles US Allegations of Kickbacks to Enhance Sales of Multiple Drugs

In late October, 2015, a larger settlement, at least in monetary terms, of related issues was announced, per Reuters,

Novartis agreed in principle to pay $390 million to settle U.S. allegations that it used kickbacks to speciality pharmacies to push sales of some drugs, the Swiss company said on Tuesday, hitting third-quarter earnings.

Since this case involved hundreds of millions dollars, it got a bit more coverage than the others.  For example, Bloomberg provided some more specifics,

The payment covers all claims related to the medicines Myfortic, Exjade, Tasigna, Gleevec and TOBI, the company said. The U.S. had sought as much as $3.3 billion from Novartis for Exjade and Myfortic claims, claiming it had referred patients to specialty pharmacies and paid kickbacks in the form of rebates to get those pharmacies to recommend the drugs to patients and to increase sales.

It is customary in such settlements for them to allow the accused corporation to avoid any admission of guilt, often with some statement that the corporation neither confirms or denies the allegations.  In this latest cast, however, while the company issued the usual "neither confirm nor deny" statement, the Novartis CEO appeared to want to deny the allegations despite his willingness to pay so many millions to get them behind him, as per Reuters,

Chief Executive Joe Jimenez told reporters Novartis had made the disputed payments to ensure patients took their drugs, including treatments to prevent rejection of transplanted organs, but U.S. government attorneys disagreed.

'It's something we just believe we want to put behind us,' Jimenez said. Novartis said it neither admitted nor denied liability as part of the settlement.

How the payments or rebates to the pharmacies had anything to do with improving patient adherence is not clear.  Mr Jiminez's expertise in improving patient adherence is similarly not clear.  Per his official company biograpphy, his education was limited to business school, and before becoming a Novartis executive, he ran the Heinz company, makers of the famous ketchup (look here and here).  

Note that if, despite the protestations of the CEO to the contrary, the effect of the company's alleged actions was to over-promote use of the drugs, the results could have been excess adverse effects for patients. 

Furthermore, and despite this possibility, per the Wall Street Journal, the CEO also seemed unwilling to agree that the company would change any of its practices beyond paying the money,

Chief Executive Joe Jimenez said the rebates were designed to induce specialty pharmacies to ensure that patients completed a course of medicine. He added that Novartis still used this 'quite common' practice at specialty pharmacies in the U.S.

'We continue to maintain that specialty pharmacies must continue to play a role in ensuring patient adherence,' he said. 'How that is going to play out as to whether we change our behavior or not remains to be seen.'

This suggests that CEO Jiminez really thinks that the company should pay the money and then continue doing what it pleases, based on the rationale that the payments to or discounts given pharmacies were meant to improve patient adherence, not oversell the drugs.  This may reflect what he really thinks of what his company ought to be doing for, or to us, that is to or for the patients who take the drugs it manufactures. 

 Nonetheless, a public relations release tried to make those comments inoperative.

Some media coverage did not accurately reflect our position and the seriousness of the Company's commitment to working with the government to ensure our behaviors and interactions with specialty pharmacies meet the highest ethical standards. As such, we want to emphasize the following points:

Novartis will make detailed admissions of fact concerning the Government�s allegations as part of the final settlement.

Any reports suggesting that we are not addressing the Government�s concerns or the particular issues on which the litigation focused was not intended by the Company.

We remain committed to working with the government on corporate integrity obligations, including those relating to specialty pharmacies, and conducting our business in an ethical manner that is fully compliant with the law.

We await the statement of facts.  Maybe this statement will prove true, but given that the original statement came from the CEO, to whom the PR people who wrote the satement report, perhaps CEO and former purveyor of ketchup Jiminez meant what he said.  As noted in the Modern Healthcare blog,

Patrick Burns, co-director of the Taxpayers Against Fraud Education Fund, a not-for-profit funded by whistle-blowers and law firms that represent them, said he remains skeptical of the company's intentions.

Burns said Jimenez's original statements smack of disrespect for the U.S. Justice Department and the U.S. attorney general.

'It's a level of arrogance and ignorance which is jaw-dropping,' Burns said. 'You have the CEO coming out and brazenly saying we will not even change our practice. I think this really is the time for the attorney general to show her teeth.'

We also await any such dental findings. 


Summary

This set of misadventures are just the latest in a long series by Novartis.  In March, 2014, we noted:
- Italian authorities had fined Novartis and Roche for colluding to promote the use of an expensive opthamologic treatment
- the NY Times published interviews with physicians ostensibly showing how Novartis turned them into marketers for the drug Starlix
- Japanese investigators charged Novartis with manipulating clinical research
- Indian regulators canceled a Novartis import license, charging the company with fraud.

Also,  in 2013, Novartis was fined for anti-competitive practices in its marketing of Fentanyl by the European Commission (look here), and in 2011 its Sandoz subsidiary settled allegations of misreporting prices in the US for $150 million (look here)   Other Novartis misadventures from 2010 and earlier appear here.  So Novartis has quite an impressive, if not infamous record of ethical failures.

Nonetheless, the march of its legal cases continues.  Furthermore, after the latest case, the Novartis CEO suggested that he saw no clear need for the company to change its ways, even though his PR people later tried to recast his statements.

So we see that the big health care organizations which now dominate health care globally continue to misbehave, and current legal efforts centering on settlements and fines seem to do nothing to deter continued misbehavior.  Maybe it is time to end the impunity of the corporate managers who have become rich while such behavior continues on their watch.  Modern Healthcare quoted Mr Burns as saying

the financial penalty in this case didn't seem to be enough to fix the problem. He believes the government needs to begin excluding executives such as Jimenez from federal healthcare programs in order to better get its message across that such behavior won't be tolerated.

In the new PharmaLot blog, Ed Silverman was hopeful that things may really be getting ready to change. He first noted, as we have done many times previously,

Over the years, a parade of drug companies has reached settlements, mostly for paying physicians to favor their medicines or illegally marketing products. Rarely, though, do executives suffer any consequences.

Also,

Mostly, the federal government resorts to large fines, even though countless people may have been prescribed medicines unnecessarily � at great expense and sometimes great harm. And drug makers simply treat these penalties as a cost of doing business. The failure to come down harder is sadly reminiscent of the recent financial crisis in which most heads of the biggest banks escaped unscathed.

Lately, however, there are signs the government might be changing its approach toward recalcitrant executives, and such a move is long overdue. After all, if individuals are not held accountable, the senior officials who run these companies have little incentive to play by the rules.

One can only hope, I suppose.  But to conclude as I have so many times before....

There seems to be increasing recognition that the continuing rise in US health care costs is unsustainable, and that these costs are not buying us good health care.  There are calls to avoid unnecessary, and sometimes harmful care.  Yet there is a persistent disconnect between how continuing dishonest behavior by health care organizations, impunity of their leaders, and lack of accountability by their board members fuel rising costs, shrinking access, and bad outcomes for patients.

To truly reform health care, we will have to at least recognize the causes of the current dysfunction.  Recognizing how health care dysfunction is created by unaccountable, dishonest leadership should lead to true reform that would promote well-informed, honest, accountable leadership that puts patients' and the public's health ahead of personal gain.  

Princess Health and DaVita Settles Another Lawsuit Amidst Accusations of "Managing Witnesses to Provide False Testimony," After Justice Department Lost Interest in Participating. Princessiccia

Princess Health and DaVita Settles Another Lawsuit Amidst Accusations of "Managing Witnesses to Provide False Testimony," After Justice Department Lost Interest in Participating. Princessiccia

DaVita fraud impunity legal settlements

Gusty 08:18 Add Comment

The Latest Case

Less than a year since its last big settlement (look here), DaVita HealthCare Partners, the big for-profit dialysis provider, has to settle again.  The basics, according to the Denver Post, were:

DaVita HealthCare Partners said Monday it will pay up to $495 million to settle a whistle-blower lawsuit accusing the Denver company of defrauding the federal Medicare program of millions of dollars. 

The company, which said it does not admit any wrongdoing, has now settled its third whistle-blower lawsuit since 2012, with payouts totaling nearly $1 billion.

The civil suit, filed in Atlanta in 2011, revolves around a claim by Dr. Alon J. Vainer and nurse Daniel D. Barbir, who both worked for DaVita. They noticed that DaVita was throwing out good medicine that it then billed Medicare and Medicaid for, according to the lawsuit.

The details of the allegations about how the government was defrauded were:

The lawsuit cited DaVita's inefficient use and costly waste of the drugs Zemplar, or vitamin D, and Venofer, an iron supplement. If a patient, for example, needed 25 milligrams of Venofer, the physician would use that much and toss the rest of the 100 mg vial. Medicare would be billed for the 100 mg.

In other instances, if a patient needed 8 mg of Zemplar, DaVita doctors were instructed to a use a 10 mg vial, instead of four 2 mg vials.

According to the lawsuit, the National Centers for Disease Control and Prevention recommended against allowing multiple uses of the same vial in 2001, based on infection outbreaks caused by the re-entry of another drug, Epogen. But a year later, CDC changed its policy and allowed re-entry of single-use vials Epogen, Zemplar and Venofer if procedures were followed.

DaVita did not do this but 'should have,' according to the lawsuit, 'but they (DaVita) intentionally did not do so in order to purposefully create and maximize their waste and receive significantly higher reimbursements and revenue for Venofer and Zemplar usage.'

The US Department of Justice did not seem interested.

The case began as a sealed lawsuit filed with the federal government in 2007. But, after two years of investigating, the government decided not to join the lawsuit, according to The New York Times.

As is de rigeur in such cases, a company spokesperson proclaimed that the company only settled to avoid the expense and uncertainty of a trial,

'Although we believe strongly in the merits of our case, we decided it was in our stakeholders' best interests to resolve it,' DaVita's chief legal officer Kim Rivera said in a statement Monday. 'The potential mandatory penalties for being found in the wrong in even a small percentage of instances were simply too large.'

As best as I can tell, the penalties were only monetary, and accrued only to the company as a whole, not to any individuals who authorized, directed, or implemented the alleged misbehavior.

Meanwhile, as reported by Forbes this week,  DaVita CEO Kent Thiry's most recent yearly compensation was $17,099,257, and he continues to feel comfortable pontificating

'They don�t care how much you know,' he tells FORBES, 'until they know how much you care.'

The Forbes piece's timing may have not been coincidental, perhaps designed to put a smiling face on the company after yet more evidence of ethical problems.  If only Mr Thiry would show how much he cares about the ethics of his company's operations.

The company's integrity is particularly an issue since vulnerable patients entrust it with their care.  For example, the company's kidney care division claims it cares for 174,000 dialysis patients.  

However, there is still more to the story.


DaVita's Past Record 

We have often noted that big health care organizations get relatively lenient treatment from law enforcement compared to, say, small time Medicare and Medicaid fraudsters (e.g., look here.)  In this case, law enforcement was not just lenient.  The government law enforcers simply stepped away from the case, leaving it to proceed privately.  

What makes this particularly striking is DaVita's past record.  The Denver Post article included,

Since the case was filed, DaVita has settled on two other lawsuits brought on by whistle-blowers. In 2012, DaVita agreed to pay $55 million to the federal government and others over fraud claims that it medically overused and double-billed the government for Epogen, an anemia drug. The suit was filed by Ivey Woodard, a former employee of Epogen-maker Amgen, in 2002.

In October, the company paid $389 million to settle criminal and civil investigations into whether DaVita offered kickbacks to kidney doctors for patient referrals. David Barbetta, a DaVita senior financial analyst, filed the suit in 2009. The company in January paid an additional $22 million to settle related claims by five states, including Colorado. 

In fact, as we noted in a post last year, Gambro Inc, a company with which DaVita had a joint venture, and which was later acquired by DaVita, made multiple settlements, of alleged kickbacks and health care fraud, from 2000 - 2004.  And the proposed acquisition by DaVita of Gambro provoked charges by the Federal Trade Commission of anti-competitive practices.  

The federal authorities ought to have known about at least the 2000 - 2005 settlements and allegations, and the case filed in 2002 that was settled in 2012, at the time it decided not to pursue the current case.  So their conduct here seemed even more lenient than usual.

Questions of Witness Manipulation

Despite the company's protestations that it settled as a matter of expediency, there is reason to think there might have been other motivation.  A blog post on Reuters by Alison Frankel stated

[Plaintiffs' attorneys] Wood, Wilbanks and their team persuaded the judge overseeing the case, U.S. District Judge Charles Pannell of Atlanta, that DaVita had orchestrated what Judge Pannell called 'a disturbing pattern of alterations in witness testimony.'

At the time the case settled, the judge was contemplating a motion by the whistleblowers to lift attorney-client privilege under the crime-fraud exception. Even DaVita, in a post-hearing brief filed on March 31, conceded that 'regrettable mistakes have been made in this case.'

Those mistakes began to emerge in November 2013, when Wood and the other whistleblower lawyers filed a motion for sanctions against DaVita. They claimed, among many other things, that the witness DaVita designated as its expert on a computerized dosage system gave false testimony at his deposition in October 2012 and only admitted his mistakes when plaintiffs� lawyers confronted him with contradictions a year later. According to the sanctions motion, DaVita�s lawyers also improperly coached witnesses to change their deposition testimony about the dosage system. DaVita responded that its expert witness had corrected his testimony as soon as he realized his mistake, long before plaintiffs threatened sanctions. The company called the plaintiffs� coaching and conspiracy theories 'facially incredible and a complete fiction.'

Nevertheless, after discovery that Judge Pannell called 'a series of protracted fights resulting in furious rounds of briefing, hearings, and accusations' and a three-day hearing before the judge in July 2014, Pannell concluded the evidence of forgetfulness and changed testimony from several witnesses was 'highly suspect.' At best, he said, DaVita tacitly led the whistleblower lawyers astray by letting erroneous testimony from its computer expert stand for a year.

At worst, Pannell wrote, 'the defendants purposely manipulated the evidence and witnesses to hide the truth from the (plaintiffs) and the court.' He ordered discovery to be reopened and instructed DaVita to pay plaintiffs� lawyers their fees and costs for the sanctions litigation and the newly ordered discovery.

DaVita�s troubles still weren�t over, however. According to a November 2014 motion by the whistleblowers� lawyers, a former DaVita clinical services specialist admitted in a post-sanctions deposition that she lied under oath at one of her previous depositions. She said she couldn�t say why without revealing privileged communications, which prompted plaintiffs� lawyers to ask Judge Pannell to lift the privilege. 'DaVita�s scheme of managing witnesses to provide false testimony,' they wrote, 'will now collapse like a house of cards.'

The judge was sufficiently concerned to order an in camera review of communications between DaVita lawyers and three DaVita witnesses who changed their deposition testimony about the computer dosage system through errata filings or cited privilege in refusing to answer questions about it. He also held four days of hearings on the whistleblowers� crime-fraud motion, including in camera testimony from those three witnesses and from two DaVita defense lawyers.

So the judge in this case thought there were serious suspicions that DaVita lawyers manipulated witnesses.  If true, this would be a whole other order of unethical behavior. Yet again this case was not considered big enough to become a "federal case."

Summary

So yet again we see a large health care company settling a lawsuit that alleged unethical acts, and in this case, generated further allegations of unethical acts during the litigation itself.  The settlement was for what seemed a lot of money, but actually little money compared to the corporation's revenues.  The settlement did not take into account previous legal and ethical allegations against the company.  The settlement did not involve any negative consequences for any individual who might have authorized, directed or implemented any of the apparent bad behavior.

We have seen such settlements again and again in the US health care sphere, and indeed in other spheres, such as finance.  They appear, as I have said before, to be part of a larger, mannered Kabuki play, in which rituals are performed to show some symbolic acceptance of ethics and morality, but without any true deterrent effect on bad behavior.

Perhaps the origin of the script was in some neoliberal fantasy that big corporations and their leaders ought to be exempt from even slightly harsh justice because of their economic importance, e.g., that they are Too Big to Jail.  A recent review of the book "Too Big to Jail" in the Washington Monthly noted that Mr Eric Holder, the current US Attorney General has urged leniency for big, and hence economically powerful corporations,

a memo written by Holder in 1999, during his stint as deputy U.S. attorney general. The document, 'Bringing Criminal Charges Against Corporations,' urged prosecutors to take into account 'collateral consequences' when pursuing cases against companies, lest they topple and take the economy down with them. Holder also raised the possibility of deferring prosecution against corporations in an effort to spur greater cooperation and reforms�a policy, unsurprisingly, later supported by the Bush administration.

The attorney general angered many last year when he reiterated those concerns at a congressional hearing, admitting 'that the size of some of these institutions becomes so large that it does become difficult for us to prosecute' because of the potential nasty economic effects of a major company failure.

Relieving large corporations and their leaders from the need to follow the law is a recipe for impunity, if not oligarch, and goes against the fundamental spirit of the US Constitution.  But, hey, who's counting?

The impunity of large corporations and their leaders has become so routine as not to even be news anymore.  I cannot find any coverage of the current DaVita settlement so far beyond a few regional news outlets, and one business wire service.  The national media and as been as blase as was the Justice Department.  A short version of the story, similar to that in the Denver Post, did appear in a nephrology news service, but I saw nothing in the national medical news media.  Legal settlements like this remain relatively anechoic. 

So yet another marcher in the parade of legal settlements could inspire boredom.  However, the cumulative procession of demonstrations that neither the US government, the news media, the medical and health care literature, nor any medical societies, patient advocacy groups, accrediting organizations, health care foundations and the like seem to care about continuing, repeated unethical behavior by large health care organizations should chill the hearts of patients and health care professionals.  If we do not stand up for ethical, honest health care, what kind of swamp will health care become?

As I have said again, again, again,...  Leadership that cares not for honesty, transparency, or accountability, and that puts short term revenue, and usually personal enrichment ahead of patients' and the public's health may be the single most important reason that US health care is so dysfunctional.  Yet hardly anyone even dares discuss the damning facts about health care leadership, much less propose solutions.  If we do not reform our health care leadership so that it is transparent, honest, accountable, unconflicted, and it puts patients' and the public's health over personal enrichment, our health care system will continue to founder.  

Princess Health and Three More Settlements by Medtronic of Allegations of Deceptive Behavior, but No Umpire Says "You're Out". Princessiccia

Princess Health and Three More Settlements by Medtronic of Allegations of Deceptive Behavior, but No Umpire Says "You're Out". Princessiccia

anechoic effect deception fraud impunity kickbacks legal settlements Mark Leavitt Medtronic Victor Dzau

Gusty 17:34 Add Comment

Medtronic, the giant, previously US based device maker settled three lawsuits, all alleging deceptive practices, over three months in early 2015.  I will summarize the settlements in chronological order.

Medtronic Subsidiary EV3 Settled Suit Alleging it Coached Hospitals about How to Overbill Medicare

This was actually an old case, originally against a company that Medtronic bought out, but only settled this year, in February.  As reported by the Minneapolis Star-Tribune,

A Plymouth medical device company owned by Medtronic has agreed to pay $1.25 million to settle a federal lawsuit alleging that it wasted Medicare dollars.

The medical device company EV3 is settling a whistleblower�s claims that in 2006 and 2007, a company it acquired improperly coached hospitals across the country on how to overbill Medicare for minimally invasive procedures to remove hardened plaque from patients� arteries using one of its devices, called the Silver Hawk.

Specifically, former sales representative Amanda Cashi alleged that the company told hospitals that 80 percent of their patients for the Silver Hawk procedure should stay overnight in the hospital following an atherectomy, leading to higher Medicare payments. The promises of higher reimbursement were intended to drive sales of Silver Hawk devices. Cashi and federal prosecutors who joined her lawsuit said most of the patients should have gotten lower-paying same-day procedures in an outpatient setting.

As is standard operating procedure for such litigation,

[Irish Medtronic subsidiary] Covidien, which negotiated the settlement agreement, is not admitting wrongdoing and specifically denies the allegations in the six-year-old lawsuit, the settlement agreement says.

'Medtronic is committed to the highest standards of ethical conduct, and we take responsibility for delivering outstanding results to our partners, patients and colleagues,' a company statement said. 'The case relates to historical conduct that took place under Fox Hollow. � We are pleased to have the matter resolved.'

Of course, there may be a bit of irony there, since I doubt that the original manufacturer of Silver Hawk, FoxHollow, or its successors were pushing to get the case resolved quickly, and Medtronic likely ultimately financially benefited from the prolonged delay. 

Note that in 2005 we first posted about the questionable clinical research data that FoxHollow used to promote the device

Medtronic Settled Suit Alleging it Gave Kickbacks to Doctors to Promote Unjustified Procedure that Used Medtronic Neuromodulation Device

Just two days later, the Star-Tribune reported,

Medtronic PLC will pay $2.8 million to the U.S. Justice Department to settle a false-claims case that alleged that the Minnesota devicemaker made illegal payments to doctors to recommend a medical procedure that was neither safe nor effective.

In particular,

The case surrounds allegations of corporate promotion of uses of a neurostimulation device that were not approved by the U.S. Food and Drug Administration. The Justice Department said Medtronic paid doctors in 20 states 'tens of thousands of dollars' to encourage health providers to use the device off-label.

This 'created a new, rapidly expanding market for their devices and a potentially huge source of profit for themselves at the expense of the federal Treasury,' the government said in a federal lawsuit.

As in the previous case, the settlement allowed Medtronic to deny "it did anything wrong."

Medtronic Settled Suit that Alleged it Sold Chinese or Malaysian Spinal Surgery Devices as Made in the USA

Finally, in April, 2015, the Star-Tribune again reported,

In its third federal settlement in two months, Medtronic PLC has agreed to pay $4.4 million to settle allegations that it deliberately violated U.S. law requiring that devices sold to the military be manufactured in the United States or its international trading partners.

The False Claims Act lawsuit, handled by Minnesota U.S. Attorney Andrew Luger�s office, alleged among other things that the formerly Fridley-based med-tech company brought spinal surgery devices in from China and then relabeled them 'Manufactured in Memphis, TN,' where its spinal division is based, before selling them to the government.

Of course,

Medtronic spokeswoman Cindy Resman said that although the company has since improved its country-of-origin disclosures in government contracts, it 'makes no admission that any of its activities were improper or unlawful.'

The settlement focused on 'a limited number of accessories and surgical instruments used in spinal surgeries that were provided to Medtronic by third-party suppliers and were manufactured in China or Malaysia. The overwhelming majority of Medtronic�s products are manufactured in the United States or its trading partners, such as Mexico or Ireland,' she said in an e-mail.

But can you believe them now?

Discussion

Medtronic made three settlements over three months, all of allegations that it deceived, directly or indirectly, doctors, patients, or the government.  These settlements were not isolated events.  In June, 2014 we discussed a settlement Medtronic made of allegations that  Medtronic gave kickbacks (that is, bribes) to doctors to get them to use its cardiac devices.  Previously, as we noted then, ...   As Bloomberg summarized,

 Medtronic agreed in 2007 to pay about $130 million to settle consumer suits accusing the device maker of hiding defects in its defibrillators. The company agreed to a $268 million settlement of suits in 2010 over allegations that fractured wires in another line of defibrillators caused at least 13 patient deaths.

In fact, Medtronic has provided our blog with lots of material.  We first discussed detailed and vivid allegations that Medtronic had been paying off doctors starting in 2003 here in 2006.  Medtronic has been involved in other lawsuits alleging various kinds of deception.
-  In 2011, it settled for $23.5 million two other federal lawsuits alleging it paid kickbacks to encourage physicians to implant its devices (look here).  
- 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 2006, Medtronic subsidiary Sofamor Danek settled for $40 million allegations that it gave kickbacks to doctors in the form of sham consulting fees and lavish trips (look here).

One loses count of all the settlements and cases in which Medtronic was accused of deceptive practices.  Some settlements were for larger amounts, some for smaller.  Yet none of the settlements were large enough to really affect a company which reported earnings of just under $1 billion in 2014 (per this WSJ article.)   None of the later legal settlements seem to have taken into account the company's previous record.

But this is typical of how legal settlements made by large health care corporations are handled.  Almost never is the settlement big enough to have deterrent value.   

The revenues of the company could very well have been increased by the activities alleged to have occurred in the course of this litigation, and these revenues were likely used to justify outsize compensation for top corporate managers.  According to the company's 2014 proxy statement, in fiscal 2014, CEO Omar Ishrak got $12,118,846 in total compensation.  All other listed executives got at least $3.5 million.  In none of these cases did anyone at the company who might have authorized, directed, or implemented bad, and particularly deceptive behavior suffer any negative consequences.   

But this is typical of the impunity seemingly granted to top health care organizational managers.

In baseball, it's three strikes and you're out.  For the leaders of big health care corporations, however, no matter how many strikes your company makes, you never seem to be out.  Despite a continuing stream of ethical issues occurring on their watch, management usually succeeds in becoming filthy rich.


Maybe that would change if the public, or health care professionals, knew all about such things.  However, these settlements remain anechoic.  Although the latest Star-Tribune article did note that the latest 2015 settlement occurred after two previous settlements this year, none of the reporting about these settlements seems to have noted all the previous settlements.  Finally, the discussion of these cases involving a prominent device company and multiple allegations of deceptive, dishonest, unethical behavior never seems to go beyond business sections of media outlets.  Even though such continuing dishonest behavior could have corrosive cumulative effects on health care ethics, the morale of health professionals who have to deal with such deception, and patients' and the public's health, discussion of it never makes it into the medical and health care literature, a striking example of the anechoic effect.

Maybe if more health care professionals, and the public at large, knew the story better, they might ask what sort of stewardship was exerted by the Medtronic board of directors? Maybe they could ask current Medtronic board members, like Rensellaer Polytechnic Institute President Shirley Ann Jackson, and  former US Secretary of Health and Human Services Michael O Levitt,  and former board members, like Dr Victor J Dzau, who was pressured to leave the Medtronic board after he became President of the Institute of Medicine and this membership was noticed (look here)  These board members were making over $200,000 a year, and piling up Medtronic stock, supposedly for exerting stewardship over the company.

But typically board members of big health care organizations remain unaccountable.  

There seems to be increasing recognition that the continuing rise in US health care costs is unsustainable, and that these costs are not buying us good health care.  There are calls to avoid unnecessary, and sometimes harmful care.  Yet there is a persistent disconnect between how continuing dishonest behavior by health care organizations, impunity of their leaders, and lack of accountability by their board members fuel rising costs, shrinking access, and bad outcomes for patients.

To truly reform health care, we will have to at least recognize the causes of the current dysfunction.  Recognizing how health care dysfunction is created by unaccountable, dishonest leadership should lead to true reform that would promote well-informed, honest, accountable leadership that puts patients' and the public's health ahead of personal gain.