Ghosts in the Criminal Machine - How a Drug Company Can Plead Guilty to Federal Fraud, Yet No One is Held Responsible

We have often discussed how leaders of health care organizations have become increasingly unaccountable for their actions.  A recent, slightly obscure story shows how a corporate admission of guilt to a felony can be used to prevent anyone, including anyone in corporate management, from being held responsible for that fraud.

Basics of the Settlement

The case was that of ISTA Pharmaceuticals.  The basics appeared in brief wire service articles, like this one from Rueters (via Fox News):

Ista Pharmaceuticals pleaded guilty on Friday to charges it used kickbacks and improper marketing to boost sales of a drug meant to treat eye pain and agreed to pay $33.5 million to settle criminal and civil liability, the U.S. Department of Justice said.

The unit of eye care company Bausch & Lomb pleaded guilty to conspiracy to offer kickbacks to induce physicians to prescribe Xibrom, a drug meant to treat pain after cataract surgery, and conspiracy to promote that drug for unapproved uses, including after Lasik and glaucoma surgeries.

Ista agreed as part of a criminal settlement to a $16.63 million fine and an $1.85 million asset forfeiture. It also agreed to a $15 million civil settlement to resolve allegations that its marketing of Xibrom caused false claims to be submitted to government health care programs.

Kickbacks Disguised as Honoraria and Consulting Fees

Note that unlike many such legal settlements involving large health care organizations, this one involved admissions of guilt to felonious criminal offenses.  The severity of the charges apparently arose out of the egregious conduct of company executives.  Colorful details were supplied by the Buffalo (NY) News:

ISTA, which is based in California, admitted using kickbacks to doctors and an illegal marketing campaign as part of an elaborate scheme to increase its sales of Xibrom.

The scheme, outlined in detail in newly released court papers, ranged from company-provided instruction sheets for doctors to continuing medical education programs to promote the drug.

In many cases, ISTA employees were told not to leave printed materials behind in doctors’ offices or to keep records of their meetings with doctors in order to avoid detection by others.

The company went so far as to offer speaking engagements and consulting appearances to doctors in hopes that they might use Xibrom for non-authorized treatments.

Doctors can legally prescribe drugs for non-FDA approved treatments, but drugmakers are prohibited from promoting their products for those uses.

'Essentially they entered into consulting arrangements to induce physicians to prescribe their drug,' said Jeffrey I. Steger, a lawyer in the Consumer Protection Branch of the U.S. Department of Justice.

When [US District Judge Richard J] Arcara asked if money was the doctors’ motivation, Steger said yes.

'Thousands of dollars,' he told the judge.

So here we have a company admitting that it bribed doctors to prescribe its drug, and its techniques of administering bribes included paying the doctors honoraria to give talks, and paying the doctors as consultants.  As an aside, note that many defenders of "collaboration" among doctors and industry sign the praises of doctors "consulting" for industry, and often see nothing wrong with industry paying doctors for "educational" speeches.  Yet here is more evidence that such paid talks and consulting assignments may be nothing more than marketing, and at times are merely disguised bribery.

An Apparently Tough Penalty

An unusual feature of this settlement was that (per Reuters):

As part of the settlement, Ista will be barred from participating in Medicare and Medicaid,...

That would appear to be the death knell for the company, as reported by Reuters,

Bausch & Lomb, which is based in Rochester, New York, said it was pleased to settle the matter, which involved conduct between January 2006 and March 2011, and that it knew of the government probe well before it purchased Ista.

That purchase closed in June 2012 and Bausch and Lomb plans to wind down the Ista corporate entity by year end.

So Bausch and Lomb bought a company that turned out to be valueless?  But wait,...  there's a trick. 

As detailed in FiercePharma,

 ISTA will be barred from doing business with Medicare, Medicaid, et al, for 15 years. Luckily for Bausch + Lomb, however, it bought ISTA in June 2012,  late enough in the game to actually escape the ramifications of exclusion. The exclusion won't begin until 6 months after the settlement date, giving Bausch + Lomb time to transfer ISTA's products out of that subsidiary and shift the drugs over to the Bausch + Lomb label.

A Crime Committed by... No One?

So Bausch and Lomb gets ISTA's drugs, and essentially can resolve the company's felony convictions by relatively small fines, and through management sleight of hand, can finesse ISTA's disbarment from federal programs..  This will occur despite admissions that someone within ISTA, presumably within ISTA management, perhaps high up in ISTA management, per FiercePharma,

instructed reps to avoid leaving a paper trail of their off-label discussions with doctors. Prosecutors had enough evidence of this to persuade ISTA to plead guilty to a felony fraud charge. 'These instructions were given in order to avoid having their conduct relating to unapproved new uses being detected by others, the Justice Department said. 'ISTA agreed that this conduct represented an intent to defraud under the law.'

So felony fraud was committed, but no person apparently committed it.  It was as if a ghost committed the crime.

 

Not only was a crime committed, but apparently by nobody, the corporation within which the crime was committed also becomes obscure.  ISTA became responsible, but by being bought out by Bausch and Lomb, the more severe penalty directed against ISTA will be meaningless.  

 

Should Bausch and Lomb be responsible?  Of course, they claim they should not.  As reported by Bloomberg, 

 

 Rochester, New York-based Bausch & Lomb said the actions occurred 'well before' it acquired Ista in 2012. 

'Bausch & Lomb is committed to earning trust in everything that we do and is pleased to have resolved this pre-acquisition issue,' Bob Bailey, a Bausch & Lomb spokesman, said in a statement. 

In fact, The Hill reported that the bad behavior took place from 2005 to 2010: 

But consider that while ISTA recently became part of Bausch and Lomb, since 2007, Bausch and Lomb has been wholly owned by private equity firm Warburg Pincus.  In fact, as we discussed in in 2009, some people suspected that this maneuver would have allowed Baush and Lomb to settle multiple suits alleging that its products were faulty and dangerous out of the public eye.  So while ISTA is now really Bausch and Lomb is now really Warburg Pincus, no one in the management of ISTA, Bausch and Lomb, or Warburg Pincus apparently will be held responsible for criminal fraud and kickbacks to doctors, even though guilty pleas for these felonies have been made.  So somehow we have admissions that crimes were committed, crimes that compromised the integrity of doctors, and exposed patients to needless side effects, yet these crimes were apparently committed by ... nobody, by a ghost, and even the machine that ghost was in - was it ISTA, Bausch and Lomb, or Warburg Pincus? - becomes a mystery.  Where is Sherlock Holmes when we need him most?.

Summary

This case thus becomes a really striking example of the impunity of health care corporate managers.  They can commit crimes, even felonies, yet the company, but no human beings, is held responsible.  But the company being a company, it cannot go to jail.  And through the magic of obfuscatory corporate take-overs, which company is guilty is not even apparent. 

As we have said ad infinitum,

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

Six Years Later, Ranbaxy - Oops, Daiichi Sankyo - Pleads Guilty to Adulteration, Pays $500 Million

It only took until 2013, but the US Food and Drug Administration finally secured guilty pleas and fines.  The basics are in an Associated Press story (via the Washington Post):

 A subsidiary of India’s largest pharmaceutical company has agreed to pay a record $500 million in fines and penalties for selling adulterated drugs and lying to federal regulators in a case that is part of an ongoing crackdown on the quality of generic drugs flowing into the U.S.

Federal prosecutors say the guilty plea by Ranbaxy USA Inc. represents the largest financial penalty against a generic drug company for violations of the Federal Food, Drug and Cosmetic Act, which prohibits the sale of impure drugs.

Note that the company pleaded guilty to criminal charges.

 The subsidiary of Ranbaxy Laboratories Limited pleaded guilty to federal criminal charges and the company separately agreed to resolve civil claims with all 50 states and the District of Columbia. The company had earlier set aside $500 million to cover potential criminal and civil liability stemming from the Justice Department investigation.

It admitted as part of the deal that it sold adulterated batches of drugs — including an antibiotic and generic versions of medications used to treat severe acne, epilepsy and nerve pain — that were developed at two manufacturing sites in India. 

Ironies

Note that this resolution has certain ironies.

Lateness

There is a saying that justice delayed is justice denied.  Note that it took six years to obtain the guilty pleas.  As noted by the AP,

 The problems were largely revealed by a whistleblower in a federal lawsuit filed in Maryland in 2007. 

Ambiguities about Responsibility

First, note that while all the headlines are about Ranbaxy, Ranbaxy is not really an independent company.  As reported by Reuters (and only by Reuters so far as I can tell at this time),

Ranbaxy ... [is] majority-owned by Japan's Daiichi Sankyo.

Second, as per the AP, see the comment made by the Ranbaxy CEO,

'While we are disappointed by the conduct of the past that led to this investigation, we strongly believe that settling this matter now is in the best interest of all of Ranbaxy’s stakeholders; the conclusion of the DOJ investigation does not materially impact our current financial situation or performance,' Ranbaxy CEO and managing director Arun Sawhney said in a statement.

Maybe there was something lost in translation, but the CEO certainly spoke as if someone else was responsible for the "conduct of the past."  Incidentally, it does not appear that so far any journalist has even sought comment from the people really in charge, at Daiichi Sankyo.

Third, just like many other cases we have reported before, no individual, especially anyone who authorized, directed, or implemented the bad behavior, was held legally responsible.  The cost of the fines will no doubt be spread among the corporate structures involved.  Since a company pleaded guilty, no individual pays a fine, much less goes to jail.

It does appear that when the settlement was first announced in 2011, a cut in compensation for top executives of Daiichi Sankyo was announced, but the cuts were temporary, and apparently in response to the immediate financial consequences of the settlement, not any larger implications.  See Bloomberg's report:

 Chief Executive Officer Joji Nakayama and board members will receive 5 percent to 30 percent less compensation for six months in response to the cut in the earnings forecast, Daiichi Sankyo said today. The company has lost about half its market value since agreeing to buy a majority stake in Ranbaxy, India's largest drugmaker, in June 2008. 

 The Contrast with the Case of the Adulterated Heparin

Note that in this case, there have been no allegations that patients were harmed by the admitted adulteration,  Per the AP:

 It’s not known whether the problems with the drugs led to any health issues.... The government’s allegations against the company make no claims that the drugs, whose strength, purity or quality differed from the specifications, harmed anyone.

In 2008, we began blogging about how  US patients started to get sick and die after being infused with heparin, the common anti-coagulant drug. As we have discussed repeatedly  (look here, and see the summary at the end of the post), Baxter International was selling contaminated heparin under its label which was made in unregulated workshops in China, and then transmitted through a complex chain of Chinese and US companies.

The AP article stated,

 The case comes as federal regulators and prosecutors focus attention on the quality of ingredients of generics and other drugs manufactured overseas, said Allan Coukell, an expert on drug safety at The Pew Charitable Trusts. He said the 2008 deaths linked to tainted batches of the blood-thinner heparin that were imported from China served as a 'wake up call' about just how much of the nation’s drug supply comes from overseas.

So perhaps this wake up call helped propel the current case against Ranbaxy, that is, Daiichi Sankyo.  However, since 2008, if there has been a criminal investigation of the tainted heparin, which appears to have been much more consequential, sometimes fatally so, to patients, the results have not been made public.  A cynic might note that the contaminated heparin was sold by a US based manufacturer of branded pharmaceuticals, not a foreign based manufacturer of generic drugs.

Summary

The most fundamental obligation of a drug company is to produce pure, unadulterated drugs.  The first attempts to regulate the drug industry in the US were meant to ensure that these companies fulfilled this obligation.  Yet now there is increasing evidence that the contemporary pharmaceutical industry has trouble with this most basic responsibility. 

As we discussed here, the managers of pharmaceutical companies have been swept up in a dominant business management fad, outsourcing, as a means to cut costs to the bone.  (It seems that most health care managers are also caught up in the larger rage for financialization, to emphasize short term revenue over all other concerns, including patients' and the public's health.)  As the New York Times reported  re the Ranbaxy case,

Others say the company’s problems highlight how little oversight federal drug safety officials have of overseas plants. Studies that have shown the F.D.A. inspects foreign generic manufacturing plants about once every seven to 13 years, compared with once every two years for domestic manufacturers. A law passed last year will eventually require the F.D.A. to apply the same standards when inspecting all manufacturing plants, regardless of location. But some worry that federal budget cuts are slowing the adoption of that law. 

'They just happened to stumble across the Ranbaxy problem at those two plants in India,' said Joe Graedon, a pharmacologist who runs a consumer Web site, the People’s Pharmacy, which has raised questions about the safety of generic drugs. 'Ranbaxy was the biggest and one of the best in India. What about all the smaller ones? What does that say about them?'

Again, all pharmaceutical companies, not just generic drug manufacturers, have seen fit to outsource much, if not most of their production.

In our rush to market fundamentalism, we seem to have deregulated, at least de facto, most aspects of health care.  We now cannot trust the drugs we take to have been made by the companies whose labels they bear, or to be pure.  We now cannot trust that regulators will find that out, or having found that out, will do anything about it in a timely manner. 

To repeatedly reiterate, as long as the leaders of health care organizations are not held accountable for the results of their decisions on health care quality, cost, and access (even in such extreme quality violations as those resulting in multiple patient deaths), we can expect continuing decisions that sacrifice quality, increase costs, and worsen access, but that are in the self-interest of the people making them.

To really reform health care, we must hold health care organizations and their leaders accountable (and not blame all the problems on doctors, other health care professionals, patients, and society at large).

- Roy M. Poses MD for Health Care Renewal 


Appendix - Heparin Case Summary

- We have posted several times, recently here about the tragic case of suddenly allergenic heparin. Although heparin, an intravenous biologic anti-coagulant, has been in use for over 70 years, serious allergic reactions to it had heretofore been rare. Starting late in 2007, hundreds of such reactions, and 21 deaths were reported in the US after intravenous heparin infusions.All the heparin related to these events in the US was made by Baxter International.

- We then learned that although the heparin carried the Baxter label, it was not really made by Baxter. The company had outsourced production of the active ingredient to a long, and ultimately mysterious supply chain. Baxter got the active ingredient from a US company, Scientific Protein Laboratories LLC, which in turn obtained it from a factory in China operated by Changzhou SPL, which in turn was owned by Scientific Protein Laboratories and by Changzhou Techpool Pharmaceutical Co. Changzhou SPL, in turn, got it from several consolidators or wholesalers, who in turn got it from numerous small, unidentified "workshops," which seemed to produce the product in often primitive and unsanitary conditions. None of the stops in the Chinese supply chain had apparently been inspected by the US Food and Drug Administration nor its Chinese counterpart. (See posts here and here.)

- We found out that the Baxter International labelled heparin was contaminated with over-sulfated chondroitin sulfate, a substance not found in nature, but which mimics heparin according to the simple laboratory tests used in the Chinese facilities to check incoming heparin. (See post here.) Further testing revealed that the contamination seemed to have taken place in China prior to the provision of the heparin to Changzhou SPL. (See post here.) It is not clear whether Baxter International or Scientific Protein Laboratories had inspected most of the steps in the supply chain, or even knew what went on there.

- The Baxter and Scientific Protein Laboratories CEOs did not seem aware of where they got the heparin on which the Baxter International label was eventually affixed. But one report in the New York Times alleged that Scientific Protein Laboratories would not pay enough for heparin to satisfy any sources other than the small "workshops."

- Leaders of all organizations involved, Baxter International, Scientific Protein Laboratories, Changzhou SPL, the Chinese government, and the US Food and Drug Administration, and the US Congress assigned blame to each other, but none took individual or organizational responsibility. (See post here.)  Note that SPL was recently bought out and taken private, making its current leadership even less transparent (see post here).  A 2010 inspection of an SPL facility by the FDA revealed ongoing manufacturing problems (see post here).

- Researchers (who turned out to have financial ties to a company which is developing an anti-coagulant drug that could compete with the heparin made by Baxter International) investigated the biological mechanisms by which the contamination of the heparin lead to adverse effects, but no one investigated further how the contamination occurred, or who was responsible. (See post here.)

- Hundreds of lawsuits against Baxter have now been filed, so far without resolution. (See post here.)  Efforts to make documents to be used in these cases public so far have not succeeded (see post here).

- A government report which attracted little attention warned of the dangers of pharmaceutical ingredients made in China and subject to virtually no oversight. (See post here.)

-  Despite requests from the US, the Chinese government did not investigate the production of the heparin that lead to the deaths (see post here.)

-  In February, 2011, a congressional investigation of the case was announced, but results are so far unavailable (see post here.)

-  In June, 2011, a jury returned the first verdict in a civil case about the contaminated heparin, awarding money from Baxter International and Scientific Protein Laboratories to the estate of a man who apparently died due to tainted heparin (see post here).

-  If there was a criminal investigation of the case, its results have not yet appeared. 

The Dangers of Big Corporate Health Care: Deceptive Marketing of Cancer Treatments

A series of articles over the last few months, culminating in an investigative report by Reuters, provided the newest example of what can go wrong when corporations provide direct care to vulnerable patients.  In this case, the vulnerable patients had cancer, and the corporation that provided them care was the Cancer Treatment Centers of America (CTCA).  I will try to go through the case chronologically.

As Rueters reported, CTCA "was founded in 1988 by Richard J. Stephenson, who has been chairman ever since."

The Founder's Checkered Past

A Misdemeanor

As Reuters noted,

A graduate of Northwestern University Law School, Stephenson started out as an investment banker. In 1966 he became a trustee of Americans Building Constitutionally, an organization that helped wealthy individuals set up not-for-profit corporations and personal trusts to avoid paying federal income and inheritance taxes.

In 1969, a California state court found the group's top official and six others guilty of grand theft or conspiring to commit grand theft. Stephenson had pleaded no contest to false advertising, a misdemeanor, and testified for the state, according to media reports at the time.

Allegations of Use of Unproven Cancer Treatments

Stephenson seemingly stayed out of trouble until 1975, but

Stephenson ventured into healthcare in 1975, when he and partners bought Zion-Benton Hospital in Zion, Illinois, renaming it American International Hospital. By the late 1980s, American International was facing financial problems and its 'reputation had been severely damaged' by local press reports about its use of unproven cancer treatments, according to a 2004 court opinion on a successful petition by a former CTCA president seeking an increased valuation for his share of the company.

CTCA: No More Unsubstantiated Claims

Apparently around the time American International Hospital starting having major troubles, Stephenson branched out,

In 1988, Stephenson founded CTCA. He was motivated, said CEO Bonner, by the difficulty he had identifying and obtaining the best therapies for his mother after she developed bladder cancer. She died in 1982.

By 1996, CTCA got into trouble too,

 

Cancer Treatment Centers of America got in trouble with regulators in 1996, when the Federal Trade Commission accused it of, among other things, presenting survival claims it couldn't support. The company entered into a consent decree with the FTC and, without admitting any of the allegations, agreed not to make unsubstantiated outcomes claims.

"Unscientific Therapies"

As far as I can tell, all was then quiet until 2012.  Late that year, a Forbes columnist wrote,

 Alongside standard, science-based cancer therapies, CTCA also offers an array of questionable, unscientific therapies, which it proudly labels as part of its 'integrative cancer treatment.'  CTCA advertises many such treatments, including:

* Acupuncture
* Acupressure
* Chiropractic
* Naturopathy
* Homeopathy
* Mind-Body medicine (including Reiki and Qi Gong)

None of the treatments in this list has any scientific support showing that they provide a benefit to cancer patients.  Some of them carry a real risk of harm, as I’ve written about previously.

He further charged,

CTCA makes multiple unsupported, unscientific claims for its alternative treatments, such as:

• 'Naturopathic medicine can help reduce these [cancer-related] symptoms, strengthen the immune system and support the healing process throughout your brain cancer treatment.'
• 'Acupuncture may help to alleviate [cancer] treatment-related side effects, such as nausea and vomiting.'
• 'When used during your leukemia treatment, our chiropractic care services can help correct bone, muscle and joint problems and restore nerve function.'

These are just a few examples. These claims, and CTCA’s marketing of the therapies involved, present a huge ethical problem.

Manipulated Survival Statistics

Then, in March 2012, the Reuters investigative reporters charged that CTCA manipulated its survival statistics to make its results look better.

CTCA reports on its website that the percentage of its patients who are alive after six months, a year, 18 months and longer regularly tops national figures. For instance, 60 percent of its non-small-cell lung cancer patients are alive at six months, CTCA says, compared to 38 percent nationally. And 64 percent of its prostate cancer patients are alive at three years, versus 38 percent nationally.

Such claims are misleading, according to nine experts in cancer and medical statistics whom Reuters asked to review CTCA's survival numbers and its statistical methodology.

The experts were unanimous that CTCA's patients are different from the patients the company compares them to, in a way that skews their survival data. It has relatively few elderly patients, even though cancer is a disease of the aged. It has almost none who are uninsured or covered by Medicaid - patients who tend to die sooner if they develop cancer and who are comparatively numerous in national statistics.

Carolyn Holmes, a former CTCA oncology information specialist in Tulsa, Oklahoma, said she and others routinely tried to turn away people who 'were the wrong demographic' because they were less likely to have an insurance policy that CTCA preferred. Holmes said she would try to 'let those people down easy.'

Equally significant, CTCA includes in its outcomes data only those patients 'who received treatment at CTCA for the duration of their illness' - patients who have the ability to travel to CTCA locations from the get-go, without seeking local treatment first. That means excluding, for example, those who have exhausted treatment options closer to home and arrive at a CTCA facility with advanced disease.

Accepting only selected patients and calculating survival outcomes from only some of them 'is a huge bias and gives an enormous advantage to CTCA,' said biostatistician Donald Berry of MD Anderson Cancer Center in Houston.

Furthermore,

CTCA also appears to exclude the vast majority of its patients when it calculates survival data. In survival results from 2004 to 2008 posted on its website, CTCA reported 61 patients with advanced prostate cancer, 97 with advanced breast cancer, 434 with advanced lung cancer, and 165 with advanced colon or rectal cancer. These are the four most common solid tumors. In the same period, CTCA treated thousands of patients at its Zion facility alone, according to filings with state regulators.

'We agree that some of our sample sizes' are small 'and have always stated this as a limitation of our study,' said Xiong, the consultant to CTCA.

'I'd have some concerns about why and wonder if some cherry-picking was going on,' said Spectrum Health's Campbell.

Moreover, while the standard reporting period for cancer survival is five years after diagnosis, CTCA on its website doesn't go that far; for the four most common tumors, it reports survival up to four years at most. And as Reuters found, the company's advantage often diminishes as the five-year mark approaches

 
The Founder's Checkered Present

By the way, also in the last few months, watchdog groups have asked for an investigation of CTCA's founder for possible deceptive actions that might have violated US election laws.  In December, 2012, the Washington Post reported

In the weeks before the election, more than $12 million in donations was funneled through two Tennessee corporations to the FreedomWorks super PAC after negotiations with [CTCA Founder Richard J] Stephenson over a preelection gift of the same size, according to three current and former employees with knowledge of the arrangement.

Then,

 Two watchdog groups last week asked the Federal Election Commission and the Justice Department to investigate the donations from the two Tennessee companies. The groups, Democracy 21 and the Campaign Legal Center, say the arrangement could violate federal laws that prohibit attempting to hide the true source of a political contribution by giving it under another name.

Summary

In summary, there are now charges in the media that Cancer Treatment Centers of America manipulated its survival data to makes its advertised results appear better, while it also advertises unproven complementary and alternative medicine treatments  as effective.  In the past the company had signed a consent decree not to make (presumably any more) unsubstantiated claims.  Meanwhile, the company's founder, who has a past history of a no contest plea to false advertising, and who had previously run a hospital system also charged with making unsupported survival claims, has been accused of hiding political donations.

Thus this organization, run by someone who has his own history of deception, has been found to make exaggerated and/or unsubstantiated advertising claims of several types and at different times.  These claims could attract vulnerable patients who perhaps could get better care elsewhere, possibly leading to excess morbidity and even early mortality. 

So Cancer Treatment Centers of America seems to be the latest reason to worry about the laissez faire US system which allows lightly regulated for-profit corporations to provide direct "care" to our most vulnerable patients.   We have recently discussed how a for-profit hospital chain may have been over treating some patients and under treating others, possibly risking patients' health to increase revenues (look here);  how for-profit hospice corporations by enrolling patients who do not actually have terminal illness for palliative care only  could be denying potentially curative treatment to curable patients (look here); and how for-profit mental health clinics and drug treatment centers could be providing shoddy, and potentially dangerous care to boost revenues (look here and here).

We will see if the newest part of the pattern of news reports about CTCA and its founder, coupled with reports about other for-profit health care corporations that provide direct care to vulnerable patients provoke any official action.  However, the pattern is substantial enough so that it should make all health care professionals and all patients  reconsider whether ever to trust a for-profit hospital system, hospital, clinic or other site providing direct health care to patients.

On a policy level, as I have said before,....   In my humble opinion, before the health care bubble bursts, we need to challenge the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. Before market fundamentalism became so prominent, many states prohibited the corporate practice of medicine, and the American Medical Association forbade the commercialization of medicine.

 It is time to heed that wisdom. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Shameful Consequences for Patients 

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

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

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

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


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

Special Treatment from Legislators

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

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

 

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

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

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

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

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

In particular, Amgen

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

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

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

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

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

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

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

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

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


The New York Times editorial deplored this case first as

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

and second as

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

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

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

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

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

"Slap on the Wrist" for a "Too Big to Fail" Hospital - Judge Rejects WakeMed Settlement

Maybe we are reaching an inflection point in how misbehavior by big health care organizations is handled in the US legal system. 

We have frequently discussed the march of legal settlements made by big health care organizations.  Many of these settlements indicated severely bad behavior, often behavior that seemed overtly dishonest, sometimes criminal, and had the potential to harm patients.  Yet most of these settlements involved only fines, and sometimes written agreements that pledge the organization will do better in the future, often in the form of deferred prosecution or corporate integrity agreements.  Yet the fines were often small compared to the amount the organization stood to make from the bad behavior.  It is not clear that any written agreements were enforced, or caused major penalties if the organization did not fulfill them.  And almost never did any individual within the accused organization suffer any negative consequences for authorizing, directing or implementing the bad behavior, even if such individuals may have personally profited from high compensation partially fueled by the bad behavior.

Now and then, though, there are cases that are different.  Perhaps one has just come along that may signal things are going to change.

The Basics of the Case

The case was first reported by the Raleigh (NC)  News & Observer in December, 2012.  Here are the basics:

WakeMed has agreed to pay $8 million to settle an investigation into its practice of billing Medicare for expensive overnight care when the patients had been treated and discharged the same day.

The settlement came after a lengthy criminal investigation into Medicare billing procedures used by nurses at the private, not-for-profit hospital’s Heart Center Observation Area.

Nurses there, according to federal court documents, routinely ignored physicians’ orders for how a patient should be classified. Their actions resulted in the hospital receiving millions of unwarranted Medicare dollars for outpatients who were classified wrongly as inpatients.

Though some WakeMed managers were aware of the billing practices, according to court documents, investigators found no evidence of anyone personally benefiting from the system.

No one, according to WakeMed officials, lost their job or was disciplined because of the investigation. 

The US Attorney made the usual sort of announcement:

'This case will serve as a reminder that hospitals, just like individual health care providers, will be held accountable for their actions,' [Thomas] Walker, the U.S. Attorney for the Eastern District of North Carolina, said in a statement.

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

So far, this is pretty usual.  There were accusations of inflated billing, a monetary fine that might look big to the average citizen, but that pales next to the revenue of the offending organization (over $943 million in the 2010-2011 fiscal year according to the WakeMed 2011 US form 990),a stern statement by the US Attorney, but again no penalties for any individual, and here, a rather implausible statement that no one benefited from the deceptive practices.

However, there were also some immediately appreciable atypical elements to this case.

Atypical Elements

In addition to the fine to be paid, the case was to be settled using a deferred prosecution agreement:

The hospital faces two criminal charges – making material false statements relating to health care matters and aiding and abetting, but under the settlement reached Wednesday, prosecution will be deferred. If the hospital complies with provisions in the settlement agreement, such as paying $8 million and allowing further monitoring, the charges will be dismissed in two years, according to court documents.

As part of the agreement, which has yet to be approved in court, [Wakemed CEO Bill] Atkinson acknowledged the wrongdoing described by prosecutors. He further acknowledged that WakeMed was responsible for the acts of the health-care organization’s employees and officers.

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

While we have sometimes seen deferred prosecution agreements used in cases in which for-profit health care corporations were accused of violating the law, they are rarely used in cases involving non-profit hospitals.  (The biggest one I recall was that of the University of Medicine and Dentistry of New Jersey, a complex case we started discussing in 2005.  See relevant posts here.)  Criminal charges against a non-profit hospital are also unusual.  Note also that as stated above the hospital system CEO seemed to admit that the hospital did wrong, raising further doubt about the conclusion above that no individual personally profited.

The plot further thickened when the CEO seemed to contradict his own statement within the deferred prosecution agreement that acknowledged wrong-doing.

In an interview Wednesday, Bill Atkinson, WakeMed’s president and CEO, wavered between accepting the charges – saying repeatedly  'I don’t want to minimize it, and I don’t want you to hear me doing that' – and being adamant that the hospital’s actions were simply a misinterpretation of complicated federal Medicare guidelines.

Even though he endorsed a settlement agreement in which prosecutors contend two crimes occurred, Atkinson said he doesn’t believe the hospital’s actions were criminal.

'I don’t think so, but the federal government thinks they could certainly turn it that way,' he said. That description differs vastly from what prosecutors contend. 'They’re not going to minimize the media effect,' Atkinson said.

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

The plot thickened further when in the same interview Atkinson seemed to deny that any individual did anything wrong:

Heidi McAfee, who retired earlier this year, was director of Patient Access during much of the period when the problematic billing occurred. Efforts to reach McAfee on Wednesday were unsuccessful, but Atkinson praised her years of work with WakeMed.

'Do I think anybody intentionally did anything wrong?' Atkinson said. 'No, I don’t.'

He said WakeMed had not reported McAfee or any of the nurses to the N.C. Board of Nursing for ignoring doctor’s orders. 

So did the hospital acknowledge wrongdoing, or did it not?  If wrongdoing did occur, did any individual do it, or was it done by ghosts or spirits?  From this account, it was unclear.

This Time the Inconsistencies and Ambiguities are not Ignored

Many of the settlements we have discussed seem to have been based on similar illogic.  For example, they often involved accusations of bad behavior, often bad enough to put patients at danger, yet the settlements may included ritualistic statements by defendant organizations that they neither admitted nor denied wrongdoing.  Thus, the settlements left ambiguous and unknown what really happened, and their own appropriateness.  (Note that similar settlements are made all the time by big financial firms, and one intrepid judge did point out how little sense they make, see this post.)

Yet in most cases, the illogic is rapidly swept under the rug, noticed, if at all, by lowly outsiders like your humble bloggers on Health Care Renewal.

This time, though, it was different.

Why Would the Nurses Ignore Doctors' Orders?

An important part of the argument by the US Department of Justice in this case was that nurses "routinely ignored doctors' orders."  If it were true, this would be very unusual and would threaten the integrity of health care at the particular institution, since every hospital operates on the assumption that the doctors make management decisions and order tests, treatments, etc, and then the nurses, as well as technicians and therapists carry out these orders.

However, In this case, a local nurse immediately and publicly disputed the notion that the nurses were independently flouting the doctors' orders.  As reported again by the News & Observer in December, 2012,

When Vicki Hewitt-McNeil read about WakeMed’s $8 million settlement for wrong Medicare billing, the Raleigh nurse didn’t buy the story.

According to the settlement, a nursing director instructed her staff to admit patients as inpatients and ignore doctors’ orders to treat them on the less expensive outpatient basis.

With two decades of nursing experience, Hewitt-McNeil didn’t like that the blame was shifted down the totem pole to nurses, who don’t wield the power of administrators and doctors.

'I honestly cannot believe this was the nursing department that did this,' Hewitt-McNeil said. 'That’s just not possible.'

 Furthermore,

[Ms Hewitt-McNeil]  also worked shifts at WakeMed as a pool nurse, similar to working as a substitute teacher. 'Nurses at WakeMed don’t have the autonomy to do anything,' Hewitt-McNeil said. 'You have to call a doctor for everything.'

Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy

Again, the contention that the nurses systematically disobeyed doctors or pretended to be following non-existent orders implied a fundamental break-down of the system and widespread unprofessional, unethical behavior by the nurses.  In addition, the charges did not suggest why the nurses would do something so bad, especially since they were in no position to personally benefit from their actions.

 What Did the Hospital Leadership Actually Admit?

Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy

Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy

It took a few weeks, but someone - it is not clear who it was - noticed that while the Department of Justice asserted that the hospital CEO had admitted wrongdoing, the CEO's public statement seemed to equivocate.  So in mid January, 2013, as reported again by the News & Observer,

Deb Laughery, a spokeswoman for the hospital, issued a clarification on Monday.

'In an abundance of caution, WakeMed confirms that it has agreed to a settlement with the United States as set forth in the Deferred Prosecution Agreement,' the statement said, adding further that statements of fact laid out in the agreement were 'true and accurate.'

In the clarification, WakeMed officials acknowledged that the hospital formally faced federal criminal charges. The hospital also retracted any suggestions that the settlement only involved a small number of cases.

The hospital public relations person apparently could not bring herself to say that the hospital admitted wrongdoing, but by acknowledging that statements of fact in the deferred prosecution agreement were "true and accurate," she seemed to be indirectly admitting again that wrongdoing occurred, and that the hospital was responsible for the actions of its employees.

The Judge Notices the Emperor Has No Clothes

Despite their internal inconsistencies and illogic, most legal settlements of accusations of wrongdoing by big health care organizations are accepted by judges.  In this case, again things were different.  As reported yesterday, on 17 January, 2013 again by the News & Observer,

 WakeMed officials and federal prosecutors spent two years hammering out an $8 million proposal to settle a Medicare fraud investigation.

A federal judge shredded the 116-page agreement in less than 30 minutes on Thursday.

U.S. District Judge Terrence Boyle ticked off a list of his grievances about the proposal, forcing federal prosecutors into the unusual position of defending the defendants.

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Quelle surprise!  The judge took particular offense that the settlement seemed disproportionately lenient,

 The agreement, Boyle said, appeared to be a 'slap on the hand' for a 'too big to fail' corporate giant. Only the day before, Boyle told the lawyers, he sentenced a woman to a year in prison in a $235,000 insurance fraud case.

Furthermore, 

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Boyle was irked that no criminal charges had been filed in the case. He ended the hearing by telling the prosecutor either to fold his briefcase or take it to a federal grand jury for official indictments.

'There are lots of corporations that steal from the government,' Boyle said. 'Most of them are convicted, fined and banished.'

Also,

'Why are you coming to court if you tell me you don’t need me?' Boyle asked Gilmore, the prosecutor who rose before him Thursday. 'I’m just window dressing in this case.'

'Why not take a guilty plea, defer imposition of the judgment and sentence, and come back in two years later and take a post hoc dismissal?' Boyle asked later.

Boyle lamented the increased number of health care fraud cases across the country.

'Who are the victims in this case?' Boyle asked before answering his own question. 'Every American wage earner and every American citizen.'

Boyle continued: 'It’s very difficult for society and the court to differentiate between the everyday working Joe or Jane who goes to prison and the nonprofit corporate giant who doesn’t go to jail, who gets a slap on the hand and doesn’t miss a beat.'

Exactly.   And finally, just to demonstrate the sense of impunity of the leadership of this particular nonprofit corporate giant

Boyle, who’s been a federal judge for 28 years, also criticized WakeMed for failing to send a top administrator or a board member to answer his questions. It’s rare for a criminal case to be resolved without a defendant at the defense table.

Deb Laughery, a WakeMed spokeswoman, said after the hearing that none attended because the board approved a resolution earlier in the week supporting the proposed settlement.

Summary

For years now the leadership of large health care organizations have grown rich while denying accountability for their actions that made this so.  This denial has been largely abetted by governmental regulators and law enforcers, who while often recognizing that corporate misbehavior has occurred, have seemed unable or unwilling to pursue anything but the most lenient resolutions of such cases.  These resolutions are often fines that might appear big to gullible members of the public, but are actually small in comparison to the money to be made; sometimes deferred prosecution and corporate integrity agreements that rarely are enforced; and almost never any negative consequences for the people who authorized, directed, or implemented the bad behavior.  Thus the leaders of health care organizations have enjoyed impunity, have become the new untouchables, and thus health care organizations become ever better at raking in money and ever worse at providing good health care.

As I have said again and again,  until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations.

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/01/15/2607671/wakemed-clarifies-statements-on.html#storylink=cpy

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

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

GlaxoSmithKline

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

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

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

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

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

Furthermore,

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

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

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

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

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

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

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

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

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

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

 Eli Lilly

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

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

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

The colorful details were:

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

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

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

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

Orthofix

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

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

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

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

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

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

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

Sanofi

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

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

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

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

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

Summary

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

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

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

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

Amgen Settles, Pleads Guilty to Misbranding Aranesp

Now it's Amgen's turn to settle and plead.  Per the New York Times,

The biotechnology giant Amgen marketed its anemia drug Aranesp for unapproved uses even after the Food and Drug Administration explicitly ruled them out, federal prosecutors said on Tuesday.

 The federal charges were made public as Amgen pleaded guilty to illegally marketing the drug and agreed to pay $762 million in criminal penalties and settlements of whistle-blower lawsuits.

Amgen was 'pursuing profits at the risk of patient safety' Marshall L. Miller, acting United States attorney in Brooklyn, said in a telephone news briefing on Tuesday.

David J. Scott, Amgen’s general counsel, entered the guilty plea at the United States District Court in Brooklyn to a single misdemeanor count of misbranding the drug, Aranesp, meaning selling it for uses not approved by the F.D.A.

Amgen agreed to pay $136 million in criminal fines and forfeit $14 million, with about $612 million going to settle civil litigation. 

The article noted the key charge against Amgen,

 In court on Tuesday, prosecutors charged that Amgen had promoted the use of Aranesp to treat anemia in cancer patients who were not undergoing chemotherapy, even though the drug’s approval was only for patients receiving chemotherapy.

A subsequent study sponsored by Amgen showed that use of Aranesp by those nonchemotherapy cancer patients had actually increased the risk of death, and the off-label use diminished. 

Also,

 The federal charges also say Amgen promoted using larger but less frequent injection of Aranesp than stated in the label as a way of making the drug more attractive to doctors and patients than Procrit, a rival anemia drug from Johnson & Johnson. 

As is typical of such cases, the prosecutors could not figure out how to charge any individuals who might have authorized, directed, or implemented the bad behavior,

 Mr. Miller said that the evidence in the Amgen case was not sufficient to charge individuals. However, he said, Amgen agreed to sign a corporate integrity agreement that requires executives and board members to personally certify compliance with regulations. That would make it easier to prosecute individuals should violations occur again, he said. 

The Charges in Context

In some reports of the settlement, the issue appeared to be money.  For example, Pharmalot reported that after a whistle-blower filed suit against Amgen, "a subsequent investigation by the Justice Department found that these practices induced physicians to use Amgen medications unnecessarily when lower cost alternatives were available."

However, Amgen's practices could have had much worse effects than just removing money from the US Treasury.

Consider the context.  Only a few of the not very numerous articles in the media on this case noted that the key complaint was that Amgen was pushing use of Aranesp for patients with cancer, specifically those not receiving chemotherapy.   (Reuters made this explicit, for example, but not so the Los Angeles Times, or Bloomberg's initial coverage.)

 In fact, there has been concern about the adverse effects of Aranesp for patients with cancer for a while.  In 2007, Khuri noted in a commentary in the New England Journal of Medicine(1) that "concern about a detrimental effect of ESAs [erythropoiesis stimulating agents, a class of drugs of which Aranesp is a prominent member] in patients with cancer arose" after results of a small clinical trial of epoetin beta in patients with oral, pharyngeal or laryngeal cancer receiving radiation therapy showed worse survival in patients receiving that drug.  Subsequently, in 2008, a meta-analysis of multiple randomized clinical trials showed that patients with cancer receiving ESAs, including Aranesp, had an increased risk of venous thromboembolism (drug clots) and death.(2)  In 2009,  another meta-analysis showed that ESAs lead to decreased survival in patients with cancer.(3)

Recall, though, that Aranesp is meant to improve anemia.  It was not meant to cure cancer, or even put the disease into remission.  Its use therefore was mainly adjunctive.  Thus, it appears its benefits for cancer patients (improved anemia, and possibly decrease in such symptoms as fatigue) could not outweigh its harms (including hastening death).

So the issue was not merely that Amgen was promoting a drug in an instance in which its use had not been improved by the US Food and Drug Administration (FDA), or that such use of the drug was unnecessarily costly.  The issue was that Amgen was promoting a drug that had no proven benefits for the patients, but could hasten their death.  It appears that Amgen was pursuing profits at the expense of lives.

Summary

So it is particularly disturbing that no individual apparently will be held responsible for the promotion of Aranesp for patients for whom its use might prove fatal.  The assurance that the proposed corporate integrity agreement will prevent further abuse is notably hollow.  I can recall no recent case in which the government authorities have used such an agreement to pursue charges against individuals.  The likely deterrent effect of the monetary settlement will likely be minimal.  $762 million may look just like a cost of doing business when the drug in question was bringing in over $2 billion a year (per the Los Angeles Times). 

So the legal settlements march on and on.  The government continues to extract fines from health care organizations whose actions endanger not only the federal budget, but patients' well being and lives, without even trying to hold individuals responsible.  The impunity of health care corporate executives thus also continues.

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

References

1.  Khuri FR. Weighing the hazards of erythropoiesis stimulation in patients with cancer.  N Engl J Med 2007; 356: 2445-2447.  Link here.

2.  Bennett CI, Silver SM, Djulbegovic B et al.  Venous thromboembolism and mortality associated with recombinant erythropoietin and darbepoetin administration for the treatment of cancer-associated anemia.  JAMA 2008; 299: 914-924.  Link here.

3.  Bohlius J, Schmidlin K, Brillant C et al.  Recombinant human eryhtropoiesis-stimulating agents and mortality in patients with cancer: a meta-analysis of randomised trials.  Lancet 2009; 373: 1532-1542.  Link here.