Abbott Laboratories Settles, Again

In 2007, we discussed a scheme that Abbott Laboratories seemed to be using to boost the price of Kaletra, a combination of two protease inhibitors it markets to treat HIV and AIDS. Kaletra is a combination of rinoavir (Norvir, sold by Abbott as a single drug), and leponavir. Kaletra was apparently losing sales to the combination of Norvir with Reyataz (atazanavir), made by Bristol-Myers-Squibb. So Abbott increased the price of Norvir by 400%.

As reported so far only by Bloomberg, Abbott just settled a class-action lawsuit alleging that its price hike for Norvir was anti-competitive.

Abbott Laboratories agreed to pay $52 million to resolve claims by direct drug buyers that it tried to harm competition when it quadrupled the price of its HIV medicine Norvir in 2003.

The settlement, which is subject to court approval, would resolve a class-action lawsuit filed on behalf of Abbott customers that purchased Norvir, a boosting agent for other HIV drugs, and a second medicine Kaletra, which includes Norvir, according to an April 8 filing in federal court in Oakland, California. Abbott denied wrongdoing, according to the accord.

Abbott increased the wholesale price of a Norvir capsule containing 100 milligrams to $8.57 from $1.71, the Abbott Park, Illinois-based company said in court documents. GlaxoSmithKline Plc and drug retailers and distributors sued, claiming other drugmakers that used Norvir in their medicines couldn’t compete on price with Kaletra, and the price increase penalized drug customers that wanted to buy medicines that competed with Kaletra.

Note that, as we discussed here, this is the third significant settlement by Abbott in the last six months. In December, 2010, the company settled claims that it defrauded Medicare and Medicaid for $421 million, and claims that a subsidiary paid kickbacks to doctors to sell its products for $41 million. For other discussion of Abbott's recent misbehavior, look here.

So while we were discussing other issues, the parade of legal settlements continued. It is beginning to seem like every major pharmaceutical/ device/ and biotechnology company has settled or pleaded guilty to multiple allegations of significantly bad behavior in the last few years. This suggests how bad the leadership of most of these companies has become.

Nonetheless, in the current case, like nearly all others, the penalties were paid by the companies themselves, not the people who authorized, directed or implemented the bad behavior. We and others have commented repeatedly that the resulting relative impunity of leaders of health care organizations will hardly deter future bad behavior. (Note that this impunity seems similar to that employed by leaders of finance after the global financial collapse/ Great Recession.) Not only do the leaders not pay penalties, but they continue to become hugely rich at the expense of their companies. For example, Abbott CEO Miles D White enjoyed total compensation of $25,564,283 in 2010, down only slightly from the 26,213,996 he received in 2009, according to the 2011 Abbott proxy statement (available here). Threats by government officials to start to employ the "Responsible Corporate Officer Doctrine," (available since 1943) to hold individuals accountable for health care organizations' misdeeds so far appear to be empty (see this post).

So to repeat Cassandra-like,  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.

On the Interconnectedness of the Leadership of Health Care Organizations: the Abbott Laboratories Case

We just posted about some misbehavior by Abbott Laboratories: a physician Abbott paid as a "key opinion leader" to help market its cardiac stents was accused of inserting stents in many patients who had no need for them; Abbott settled for over $400 million a lawsuit alleging the company defrauded Medicare and Medicaid; and it settled an unrelated suit for over $40 million alleging the company paid kickbacks to physicians for prescribing its drugs.  I thus thought it would be interesting to see how well paid are the corporate leaders who presided over these activities, and who are the board members who were supposed to be providing stewardship of this company.

According to the company's 2010 proxy statement, the five highest-paid executives were:

Miles D White, Chairman of the Board and CEO - $26,213,966 total compensation
Thomans C Freyman, Executive Vice President, Finance, and CFO - $9,561,227
Olivier Bohuon, Executive Vice President, Abbott Pharmaceutica Group - $5,232,589
Laura J Schumacher, Executive Vice President, General Counsel, and Secretary - $5,724,060
James V Mazzo, Senior Vice President, Abbott Medical Optics - $10,394,085

Now, let us turn to the company's board of directors.  Note that I looked for board members who also held leadership positions in other health care organizations whose interests may not be aligned with the corporation.  I also looked for those who held leadership positions in the discredited financial services corporation who helped usher in the global financial collapse.  (I  used similar methodolgy here.)

Abbott currently has 12 board members, including

• Robert J Alpert MD - Ensign Professor of Medicine, Professor of Internal Medicine, and Dean of the Yale School of Medicine.  He also "serves as a Director on the Board of Yale-New Haven Hospital."
• Roxanne S Austin - President and Chief Executive Officer, Move Networks Inc, and President, Austin Investment Advisors
• William M Daley -"Vice Chairman and Head of the Office of Corporate Responsibility and Chairman of the Midwest, JP Morgan Chase & Co."  He is the board of directors of  "Loyola University of Chicago and Northwestern University."
• W James Farrell - Retired Chairman and Chief Executive Officer of Illinois Tool Works Inc
• H Laurence Fuller - Retired Co-Chairman of BP Amoco, former chief executive officer of Amoco
• William A Osborne - Retired Chairman and Chief Executive Officer of Northern Trust Corporation and the Northern Trust Company.  He is "Chairman of the Board of Trustees of Northwestern University."
• Rt Honorable Lord Owen - Chairman of Europe Steel Ltd
• Roy S Roberts - Managing Director, Reliant Equity Investors.
• Samuel C Scott III - Retired Chairman,  President and Chief Executive Officer of Corn Products International.  He "currently serves on the board of directors of Bank of New York Mellon Corporation."  He also is on the board of "Northwestern Healthcare."
• William D Smithburg - Retired Chairman, President and Chief Executive Officer of Quaker Oats Company.  He is on the "board of trustees of Northwestern University."
• Glenn F Tilton - Chairman, President and Chief Executive Officer of UAL Corporation and United Airlines Inc.  He is on the "board of directors of Northwestern Memorial Hospital."
• Miles D White - Chairman of the Board and Chief Executive Officer, Abbott Laboratories, "is on the board of trustees of "Northwestern University." 

Of Abbott's 12 directors, seven have leadership positions at teaching hospitals, academic medical centers, medical schools or their parent universities (Northwestern University, its medical school and teaching hospitals, in particular, are stewarded by six Abbott directors). 

Two have leadership positions in  financial services corporations that were implicated in the global financial collapse.  (Note that JP Morgan Chase staffers helped to invent some of the kinds of financial derivatives widely viewed as causative of the collapse, but the firm itself did not fail. [See Tett G. Fool's Gold.]  Through TARP, the US government took preferred equity stakes in both JP Morgan Chase and Bank of New York Mellon.  [See Ritholtz B.  Bailout Nation. p. 222]) 

Two more are leaders of financial services firms.  All but one are current or former high-level hired executives (seven are or were CEOs), or chairpersons or co-chair persons of corporations (the one exception is a dean of a medical school.) 

Note how similar our findings were here to those found after our perusal of the boards of Genzyme and Medtronic (see post here).   So we find again that executives of health care organizations who preside over various questionable activities not only rarely pay any penalty, but usually become extremely wealthy in the process.

We also find how interconnected is the leadership of health care.  The boards and leadership of drug and device companies overlap with the boards and leadership of medical schools, teaching hospitals, and their parent universities. 

Yet, as we have noted before, there are obvious conflicts.  In particular, teaching hospitals and medical schools are supposed to provide unbiased teaching, including about issues relevant to drug and device corporations, such as choice of diagnostic strategies and treatments, and relevant health policy.  They are supposed to perform unbiased research, including research that evaluates drugs and devices.  They are supposed to provide the best possible patient care at a reasonable cost, which relates to choices of and prices paid for drugs and devices. 

On the other hand, drug and device companies are supposed to put making a profit for their share-holders first.  The directors of such companies, like the directors of all for-profit corporations, are supposed to show an unyielding loyalty to their companies' financial health and profits, although contemporary corporate directors have been accused of acting more like cronies of the hired management.  (See this post.)

Also, we note that the vast majority of people chosen as stewards of a given health care organization are current or former top hired executives of other corporations.  The board members, that is, stewards of health care organizations, to whom the top hired executives reports, are usually not people with large ownership interests in the organizations (in the case of public, for-profit corporations.)  For the most part, they also do not seem to be people with clearly demonstrated devotion to the values of health care, in particular, putting the care of individual patients first, and advancing health care teaching and research.  Instead, they seem to be people with the perspective of hired executives, who may be prone to putting the interests of hired executives, rather than patients, doctors, teachers, scientists or the public at large, first.

So here is another admittedly limited case study of the board of directors, that is, the ostensible stewards of a health care corporation, selected this time because of its history of ethical missteps, which showed  - that the leadership of health care organizations is incredibly interrelated, interlocked, incestuous.  Again, it appears that top leaders of various health care organizations may be more familiar with and identify more with each other, and with other hired executives and managers, than with their organizations, their organizations' missions, and their organizations' professionals, staff, students, clients, and patients.

So to repeat-

I strongly believe that there needs to be much more investigation, academic, journalistic, and perhaps legal, of the identity, nature, and culture of the leaders of health care, and their relationships. A few bloggers cannot do it all. Obviously, the anechoic effect mitigates against medical and health care academics looking into their own leaders. However, failing to understand who is leading our march to the brink of health care failure ought not to be something such academics would want on their conscience.

Finally, and obviously, health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

Abbott Laboratories and Pig Roasts, the "Philly Mob," and Legal Settlements

Help.... The health care muck is now being raked so fast I can't keep up.

Abbott Laboratories, Prolific Stenters, Pig Barbecues, Etc

In the last week, multiple media outlets picked up the story of the cozy relationship between Abbott Laboratories and a doctor now accused of implanting too many cardiac stents for too much money.  The essentials were, as summarized from New York Times, Wall Street Journal, and Baltimore Sun articles -

Dr Mark Midei was a prolific user of cardiac stents for patient with coronary artery disease (blocked cardiac arteries)

In the June deposition, Dr. Midei estimated that in 2005 — before research revealed that many stents were unnecessary — he performed about 800 stent procedures. Instead of dropping in subsequent years, however, the number of stents Dr. Midei inserted rose to as many as 1,200 annually, he estimated. In a 2007 internal document, Abbott Laboratories ranked Dr. Midei’s use of stents behind only five other cardiologists in the Northeast, including those at hospitals four and five times St. Joseph’s size. [NYT]

Therefore, hospitals sought him out

He had been one of the most sought-after clinicians in his region. Trained at Johns Hopkins University, he was a co-founder of MidAtlantic, a practice with dozens of cardiologists that controlled much of the cardiac business in Baltimore’s private hospitals. Dr. Midei was one of the practice’s stars. When MidAtlantic negotiated a $25 million merger with Union Hospital in 2007, the deal was contingent on his continued employment.

St. Joseph was so concerned about losing Dr. Midei’s business that the hospital offered a $1.2 million salary if he would leave MidAtlantic and join the hospital’s staff. [NYT]

However, it appeared he performed the procedures on patients who would not benefit from them.

The hospital engaged a panel of experts who reviewed 1,878 cases from January 2007 to May 2009 and found that 585 patients might have received unnecessary stents.

When asked to review the cases himself, Dr. Midei found far less blockage than he had initially, according to the Maryland Board of Physicians. The hospital suspended his privileges and eventually sent letters to all 585 patients. Hundreds of lawsuits against Dr. Midei and St. Joseph followed, including from patients treated well before January 2007. [NYT]

Nonetheless, Abbott Laboratories had been rewarding him for frequent use of their products

Word quickly reached top executives at Abbott Laboratories that a Baltimore cardiologist, Dr. Mark Midei, had inserted 30 of the company’s cardiac stents in a single day in August 2008, 'which is the biggest day I remember hearing about,' an executive wrote in a celebratory e-mail.

Two days later, an Abbott sales representative spent $2,159 to buy a whole, slow-smoked pig, peach cobbler and other fixings for a barbecue dinner at Dr. Midei’s home, according to a report being released Monday by the Senate. The dinner was just a small part of the millions in salary and perks showered on Dr. Midei for putting more stents in more patients than almost any other cardiologist in Baltimore. [NYT]

When his over-use was alleged, Abbott continued to use him as a key opinion leader.

Abbott responded to the controversy by hiring Dr. Midei as a consultant. 'It’s the right thing to do because he helped us so many times over the years,' an Abbott executive wrote in a January e-mail cited in the Senate report. [NYT]

Also,

After St. Joseph barred Dr. Midei from practicing there in May 2009, Abbott arranged consultant work for him, according to emails released by the Senate committee.

In December 2009, an Abbott senior vice president wrote in an email that he was 'very open' to having Dr. Midei do consulting 'to see how it might go—either getting the word out in China/Japan, medical or safety work.'

The following month, the Sun reported on the allegations against Dr. Midei and St. Joseph. According to the Senate report, an Abbott executive subsequently said in an internal company email, 'We recommend that we not use Dr. Midei in the U.S. at this time (the press is just too hot).'

Charles Simonton, the medical director of Abbott's vascular division, said in another email cited by the report that Dr. Midei should 'clearly avoid' the Baltimore area, but Dr. Simonton encouraged colleagues to 'please find key physicians or cath labs you'd like him to get in front of with our data.' Abbott wanted to hire Dr. Midei 'because he helped us so many times over the years,' yet another Abbott executive said in an email.

Dr. Simonton didn't return phone calls seeking comment.

Abbott sent Dr. Midei to Japan to promote the Xience stent, but bad publicity caused that trip to be cut short in late January, the report says. In total, Abbott paid the doctor $30,623 to help market the Xience, the Senate investigators found. [WSJ]

When the relationship was criticized, Abbott executives responded with threats, or were they jokes?

I called David Pacitti, vice president of global marketing for Abbott Laboratories' cardiac-plumbing division, to ask why he seems to want goons to beat me up in the newspaper parking lot.

'Don't you have connections in Baltimore?????' Pacitti e-mailed a subordinate regarding a January column I wrote on heart-artery stents. 'Someone needs to take this writer outside and kick his ass! Do I need to send in the Philly mob?'

Pacitti and other Abbott execs apparently don't care for suggestions that their expensive vascular devices often do patients little good and that a star Baltimore doctor took their encouragement to be 'truly outstanding' a bit too much to heart. [Sun]

Furthermore,

Pacitti didn't return my phone calls, but an Abbott flack got in touch on Monday.

'We sincerely apologize if this caused you any concern or distress,' the company spokesman said. Pacitti's comment, he said, 'wasn't meant to be taken seriously.'

Yeah, that's what King Henry II said after they whacked Thomas Becket. [Sun]

So here is a particularly vivid case showing how big health care corporations make "key opinion leaders" out of doctors apparently just because they use or prescribe a lot of the company's products, regardless of the doctors' expertise, or ethics.  As we noted before, "key opinion leaders" are seen by corporate marketing executives as fellow travelers or useful idiots (see posts here, and here). It again appears is that all that health care corporate marketers care about is selling product. Whether their pitches are honest or ethical is besides the point. Those who get in their way are treated with contempt, and maybe, just maybe are threatened with violence

The physicians who are flattered at being called "key opinion leaders," or "thought leaders" have got to realize that the marketers think they are chumps. If they think they are providing honest information, or education, they are deluded.

This case has already been widely discussed in the blogsphere.  See, in particular, posts by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog, and Larry Husten on the CardioBrief blog.

But if that were not enough, on the heels of this story came several more about Abbott Laboratories

Abbott Laboratories Settles, Twice

As reported by the Los Angeles Times, while Abbott was trying to hide Dr Midei overseas, it was also busily negotiating settlements of completely separate charges:

Abbott Laboratories and two other pharmaceutical firms agreed to pay more than $421 million to settle claims of defrauding Medicare and Medicaid in the latest in a string of nine- and ten-figure health care fraud settlements announced by the Justice Department.

The drug companies charged one set of prices to doctors and pharmacies but reported another set of inflated figures that were used as benchmarks by government insurers reimbursing health care providers. The spread, or difference, amounted to kickbacks to the companies' customers, according to Tony West, assistant attorney general for the Justice Department's civil division, who announced the settlements on Tuesday.

In particular,

Abbott, of North Chicago, Ill, agreed to pay $126.5 million to settle accusations that it charged the government inflated prices for products ranging from sterile water and saline solution to vancomycin, an antibiotic.

An Abbott spokesman said the company believes 'that we have complied with all laws and regulations' and settled the case to avoid 'the uncertainty associated with continued litigation.'

At least he did not threaten the Department of Justice officials with an attack by the "Philly mob."

But that is not all. The Wall Street Journal reported that Abbott had to make a second, unrelated settlement:

Separately on Tuesday, the Justice Department announced an unrelated $41 million settlement with Abbott subsidiary Kos Pharmaceuticals Inc. on charges that it paid kickbacks to doctors and other health professionals to encourage them to prescribe or recommend the cholesterol drugs Advicor and Niaspan.

As part of that settlement, Kos entered into an agreement that will allow it to avoid prosecution on criminal charges. 'These actions occurred prior to Abbott's acquisition of Kos in 2006 and Abbott has not been accused of any wrongdoing,' an Abbott spokesman said.

However, Abbott chose to acquire a company that allegedly chose to pay kickbacks of this sort. The apparent resemblance to Abbott's payments to Dr Midei in the case above are striking.

By the way, the Los Angeles Times article also noted previous black marks on Abbott's record:

Abbott also paid $614 million in civil and criminal penalties in 2003 to end a federal investigation of the company's marketing practices and Medicaid and Medicare reimbursements.

In 2001, TAP Pharmaceutical Products Inc., of Lake Forest, Ill., an Abbott joint venture, agreed to pay $875 million and plead guilty to a criminal charge of conspiring with doctors to overbill Medicare.

At the time, the TAP penalty was the largest health care fraud settlement in U.S. history, but it has since been eclipsed by at least two others.

So we once again illustrate how punishing wrong doing by fining large corporations, when the fines are just seen as a cost of doing business, in the absence ofany negative consequences on the real people who authorized, directed, or implemented the bad behavior fails to deter future bad behavior.

This remarkable confluence of cases suggest how rotten are the ethical foundations of even large and previously respected health care organizations. I imagine, though, that as long as these corporations richly reward their executives regardless of the ethics of their actions, and regardless of the long term effects on the organizations' reputations, and as long as their are no externally imposed negative consequences on these leaders, the practices will continue, and will get worse.

Health care costs keep rising, access keeps declining, quality gets worse. We moan and wring our hands, but as long as we allow the rot to worsen, and the muck to grow, expect these trends to continue until the whole smelly mess collapses of its own weight (with all those rich executives escaping to their mansions.)

If we really want high quality accessible, reasonably priced health care, we need true health care reform that reduces concentration of power in large organizations, and makes health care organizations' leadership accountable, ethical, and transparent. That will not be easy.

ADDENDUM (8 December, 2010) - See also comments by Maggie Mahar on the HealthBeat blog, David Williams on the Health Business Blog, and Paul Thacker on the Project on Government Oversight blog.