UCB Settles, Pleads Guilty

Tromp, tromp, tromp.... the legal settlements keep marching along.  This latest story was reported by Reuters and Bloomberg.  The basics were, per Reuters:

The American unit of Belgian pharmaceutical company UCB SA (UCB.BR) pleaded guilty on Thursday and will pay $34.4 million to settle criminal and civil charges that it illegally promoted a drug for migraines.

The company pleaded guilty to one count of promoting the epilepsy treatment drug, Keppra, in the United States in 2004 for migraine treatment without the necessary approval from the Food and Drug Administration, the U.S. Department of Justice said.

One atypical element here is that the company actually pleaded guilty to a crime.

Another slightly off-key note came from the description of the activities constituting the illegal marketing, per Reuters:

The company was accused of promoting Keppra with posters that claimed it was safe and effective for migraines and cited studies that it also claimed were independent -- but in fact were sponsored by UCB, according to the Justice Department.

In those posters, UCB failed to disclose that its own trials had failed to demonstrate the drug was effective for migraines or that it had backed the studies, the agency said.

Furthermore, per Bloomberg,

UCB’s marketing included sponsorship of doctor-paid 'studies,' posters, publications and oral presentations about the supposed benefits of using Keppra to treat migraines. Prosecutors said UCB failed to disclose that a 2000 study showed that Keppra was not effective in preventing migraine.

So the company did not deny accusations of deceptive marketing, and the suppression of a clinical study that failed to conform to marketing objectives.

But most of the rest followed the usual routine.

The settlement involved some sort of promises of better corporate behavior in the future, per Reuters:

As part of the settlement, the company agreed to implement procedures and reviews to avoid and detect any future similar conduct. As a result, UCB will not face probation, according to the plea agreement filed in court.

The penalty for the company was a fine that appeared to be big:

UCB will pay about $8.6 million in criminal fines and forfeiture and another $25.8 million to settle parallel civil allegations involving false claims submitted to U.S. federal healthcare programs, according to the plea agreement.

However, it was a pittance compared to the revenues generate by the product whose marketing was illegal, per Bloomberg:

Keppra, with 942 million euros ($1.37 billion) in sales last year, is the company’s top-selling drug, according to data compiled by Bloomberg.

The spokesperson for the government basically said, "that ought to teach them," again per Bloomberg,

'UCB put its pursuit of profits ahead of its obligations to patients,' Ronald C. Machen Jr., U.S. attorney for the District of Columbia, said in an e-mailed statement. 'Today’s guilty plea and UCB’s $34 million payout should remind drug companies that try to cleverly design off-label marketing schemes that we will not allow them to compromise patient safety.'

However, the company's leaders did not seem the least bit fazed, or contrite for that matter, per Reuters,

'We are pleased to have resolved this matter and look forward to continuing to work with the many organizations with whom we partner to advance our mission of transforming the lives of people living with severe diseases,' said Greg Duncan, UCB's president for North American Operations.

The contrast between the crime his company admitted, involving deceptive marketing and the suppression and a study that failed to fit marketing objectives, and the high minded mission seemed to cause Mr Duncan no cognitive dissonance. Or perhaps "transforming the lives of people" was meant more ironically?

Left unsaid in the brief news reports was whether any individual who authorized, directed, or implemented the bad behavior, including, in this case, the deceptive marketing and suppression of clinical research, would pay any sort of penalty. It seems safe to assume that no one will go to jail, pay a fine, lose a job, or even be demoted.  Why the US Department of Justice thought that a small fine and no individual penalties would change corporate behavior, when the profits to be made are so large, in the absence of even a little bit of contrition by corporate leaders, was not exactly clear.

So on and on the march goes. The parade of settlements, sometimes even involving guilty pleas of criminal convictions, now indicates how low the ethical standards of health care organizations have fallen. However, the lack of any consequences to individuals suggests that they have no incentive to rise.

Again, despite promises of tougher treatment of individuals involved in health care corporate misbehavior from the government (see posts here and here), the same old script plays out again and again.

So I get to say twice in two days,,,, pervasive bad behavior by large health care organizations has got to be a major cause of our ongoing health care dysfunction.


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

Logical Fallacies to Defend CEOs from Responsibility for their Companies' Bad Actions

There is now quite a kerfuffle over the US Department of Health and Human Service's threat to to stop doing business with the CEO of Forest Laboratories.  As we noted here, his company pleaded guilty to obstruction of justice and misbranding, and agreed to pay a $313 million fine.  The major allegations by the government were that the company marketed antidepressants to children when they had only previously been approved for adults. Their marketing tactics allegedly included suppressing negative studies, and paying physicians to prescribe the drugs.

The kerfuffle involves a number of ostensible authorities and pundits defending the CEO, and challenging the government's attempts to hold him responsible for his company's actions.  The kerfuffle also provides some splendid examples of logical fallacies deployed in defense of the powers that be. 

Double Standards: Avoiding Blame for Failures While Taking Credit for Successes

The greatest angst seemed to be generated that Mr Solomon could be sanctioned for actions which he did not directly take. 

First, the Wall Street Journal reported that:

Forest Labs representatives said they were shocked when the intent-to-ban notice was received a few weeks later, because Mr. Solomon wasn't accused by the government of misconduct.

Forest is sticking by its chief. 'No one has ever alleged that Mr. Solomon did anything wrong, and excluding him [from the industry] is unjustified,' said general counsel Herschel Weinstein. 'It would also set an extremely troubling precedent that would create uncertainty throughout the industry and discourage regulatory settlements.'

Later in the same article, there was more dismay that Mr Solomon should suffer any negative consequences for the actions of someone else:

Lawyers not involved in the Forest case said the attempt to punish an executive who isn't accused of misconduct could tie up the industry's day-to-day work in legal knots.

'This 'gotcha' approach to enforcement runs the risk of creating a climate within organizations that is inconsistent with the spirit of innovation that is critical to the industry,' said Allen Waxman of Kaye Scholer LLP in New York, who was formerly an in-house counsel at a drug maker.

However, Mr Solomon is not a janitor.  He was the company CEO, and was paid a fortune ostensibly because he was responsible for everything going on in the company.

In fact, the most recent (2010) company proxy statement included this description of Mr Solomon:

We believe that Mr. Solomon's experience as a senior executive in our industry, his in-depth knowledge of our Company and its day-to-day operations, and his strong strategic vision for the Company qualify him to serve on the board. [italics added for emphasis]

These attributes presumably also justified his total compensation, which was $8,267,236 in 2010.

If Mr. Solomon's outsize compensation was based on his strategic vision, informed by his "in-depth knowledge of ... [the] Company and its day-to-day operations," how could his defenders claim he knew nothing and had no responsibility for its detailed and in-depth efforts to deceptively market antidepressants to children and adolescents? (See posts here and here for details of that marketing scheme as revealed in court documents.)  This appears to be a double-standard (as found in this alternative catalog of logical fallacies).

By the way, also note how Mr Waxman invoked the "innovation meme," i.e., that any regulation of the company or restrictions on its actions will prevent innovation. The same meme was invoked by a business school professor in one of the first attempts to defend this corporate executive from any attempts to hold him accountable for his company's bad behavior (see post here).  As I noted earlier, "innovation" is used so often to excuse almost any action by large health care corporations that I suspect the meme was developed by  corporate public relations.

Straw-Men and Double-Standards: Barring Mr Solomon vs "Imagined" Actions and Treatment of Foreign Leaders

Another protest was that the government's actions were disproportionate, especially how they treated other cases, as written by Robert Goldberg in the Spectator:

Now it turns out that Team O is tougher on drug company CEOs than it is on brutal dictators and a movement whose goal is wiping out Israel. The administration is applying a little used government approach to knee-capping executives it doesn't like by threatening that HHS won't allow Forest Laboratories to sell medications to Medicare, Medicaid, and other government health programs (which means every health plan under Obamacare) unless it tosses the company's CEO, Howard Solomon. According to news accounts, the action is being taken because government lawyers claim that just fining the company billions isn't stopping illegal behavior. But neither Mr. Solomon nor Forest has been found guilty of any wrongdoing.

Mr Goldberg also asserted, as in the examples above, that Mr Solomon was not personally found guilty.  This may be so, but given that his company gave him credit for all the good resulting from the company's day-to-day actions, denying his responsibility for day-to-day actions gone bad is a double standard.

Furthermore, Mr Goldberg's assertion that Forest was not found guilty is at best a quibble, and at worse, an untruth. As we noted above, the company pleaded (but was not "found) guilty to several charges, a felony and a misdemeanor.

Mr Goldberg then developed another kind of fallacy, this time by comparing the government's treatment of Mr Solomon with some hypothetical actions:

Can you imagine the administration using this tactic against health IT firms, unions, the New Black Panthers, ACORN, or investment banks? For different reasons for each, the answer is 'No.'

This appears to be a compounded set of straw men fallacies.  No one knows whether the government would use these tactics in future hypothetical cases.  What one may imagine could occur in such hypothetical cases is not directly comparable to what has occurred in the current case.  Invoking these imagined future actions amounts to invoking straw men.   
Mr Goldberg got even more imaginative, comparing the government's actions vis a vis Mr Solomon to its actions in the foreign policy realm:

Meanwhile the threat against Forest and its CEO is more draconian than actions the Obama administration is taking against Assad. The dictator who has slaughtered his people, aided Iran, built a uranium-enrichment facility, staged the Hezbollah takeover of Lebanon, and whose country is soon to be part of the UN Human Rights Council has received a stern warning from the president but nothing more.

Of course, it is one thing for a government agency to decide not to do business with an individual within the country whose company admitted to violating the law. It is another thing for a government to attempt to take "actions" against a foreign leader over whom the government has no legal authority.  So here is another kind of double-standard (see this alternative catalog of logical fallacies.)

Straw Man: The Case of Rituxan

Meanwhile, in Forbes, Charles L Hooper and David R Henderson argued that Forest Laboratories' actions do not merit any punishment at all, not of the company nor of Mr Solomon:

But it's bad to market unapproved drugs and to promote drugs for unapproved uses, right? Not exactly.

First, Hooper and Henderson argued that Forest Laboratories' off-label marketing of l-thyroxine (a thyroid hormone) was a mere technicality. This appears to be mainly a distraction, since most of the case involved marketing antidepressants.  In any case, they then argued that:

The fact is that off-label uses of drugs have saved lives. Consider Genentech and Biogen Idec's Rituxan, which the FDA approved in 1997 for relapsed or refractory CD20-positive B-cell low-grade non-Hodgkin's lymphoma (NHL).

Of course, the Forest Laboratory case did not involve punishing physicians for off-label uses of any drug. It involved punishing Forest Laboratories and possibly its CEO for the marketing of drugs for off-label uses. The drugs involved were obviously not Rituxan. They did include Celexa, an antidepressant, which no one ever claimed is a life-saving drug (but which is a member of a class of drugs that may be ineffective and may increase the risk of suicidal ideation or even action in children and adolescents, the groups for which it was marketed off-label by Forest Laboratories).   So the attempt to invoke Rituxan, as if someone was proposing restrictions on its off-label use, was another straw man.   

Summary

So once again we see how logical fallacies are used to defend the powers that be in health care.  Once again, note that the these logically challenged defenses come from those with financial ties to the same powers that be.  (In addition to the affiliations noted above, Mr Goldberg is Vice President of the Center for Medicine in the Public Interest, which SourceWatch describes as a "pharmaceutical industry front group," while Charles L Hooper is "president of Objective Insights, a company that consults for pharmaceutical and biotech companies.")

Let us see if anyone can offer a logical argument why health care corporate CEOs should not be held responsible for their corporations' misbehavior, or if anyone without financial ties to such corporations is willing to defend such lack of responsibility. 

Meanwhile, to repeat again and again,  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.

Will a Pharmaceutical CEO Finally Be Held Accountable for Misbehavior on His Watch?

It appears there may be a move afoot to have the leader of a large health organization suffer some negative consequences for the misbehavior of his organization.  As reported by the St Louis Post-Dispatch,

For the past 34 years, Howard Solomon has presided over Forest Laboratories Inc., a midsize pharmaceutical company that runs its national sales operations from Earth City.

Solomon, 83, took home $8.3 million last year as the company's chairman, president and chief executive officer. But his company's marketing arm also fell into trouble, pleading guilty to federal charges that its sales force illegally marketed the antidepressants Celexa and Lexapro to children and adolescents, even though these drugs had not been approved for minors.

Now, the federal Department of Health and Human Services is attempting to oust Solomon from his job. According to the company, the agency's Office of Inspector General advised Solomon, a Yale Law School alum, last week that it planned to exclude him from doing any business with federal Medicare and Medicaid programs.

The move — similar to the government's exclusion of KV Pharmaceutical's former chairman, Marc Hermelin — is part of a new effort by regulators to use this enforcement tactic to root out 'untrustworthy individuals' who knew or should have known that health care fraud was being committed on their watch.

This appears to be big news. As we have discussed ad infinitum, there has been a parade of legal settlements by large health care organizations of charges of various kinds of wrong-doing. Some of these settlements have involved apparently large monetary penalties. However, the settlements have almost never been accompanied by any negative consequences for the people who authorized, directed or implemented the bad behavior.

The concern all along has been that monetary settlements may just be regarded as a cost of doing business, and as long as misbehavior is lucrative, such settlements have no deterrent effect. In fact, the current practice seemed to grant impunity to corporate leaders. Actually barring a corporate executive from Medicare, which could result in the collapse of his company were he or she not to resign, would be a significant step towards accountability.

Note that the St Louis Post-Dispatch article documented the rarity of imposing any negative consequences on corporate health care executives:

Prosecutors have long been criticized for seldom filing charges against individuals associated with drug companies that are convicted of criminal conduct. Huge fines in recent years against Pfizer Inc. and Eli Lilly & Co., for example, did not stop their chief executives from continuing in their jobs.

Also,

Solomon, who joined the company in 1977, would become the second drug company executive barred from doing business with federal health care programs under a specific provision of the law that authorizes the exclusion of individuals who have not been convicted of a crime.

In October, the agency's Office of Inspector General posted 'guidance' saying that, when there is evidence that an owner/operator or company officer "knew or should have known" of his organization's criminal conduct, the agency 'will operate with a presumption in favor of exclusion.'

Hermelin, an owner/operator of KV Pharmaceutical, was excluded in November from federal health care programs for 20 years — and stepped down from the company's board of directors. He pleaded guilty last month to two criminal misdemeanors connected with his firm's shipment of oversized morphine tablets, and was sentenced to 30 days in the County Jail.

In addition, three executives of the Connecticut-based pharmaceutical company Pardue Frederick were excluded for 15 years from federal health programs under a different provision of the law, after their guilty pleas in 2007 in connection with the misbranding of the painkiller OxyContin.

Meanwhile, it seems that health care corporate CEOs can find academics who will defend their actions no matter what.  It was instructive to see one such defense of Solomon described in the Post-Dispatch article:

Jackson Nickerson, a professor of organization and strategy at Washington University's Olin Business School, said the agency's 'underlying model' for exclusion appeared to be an example of over-regulation.

'It's predicated on the assumption that if a company has done something wrong, it must mean the senior executives have done something wrong,' he said. 'You are branded as being unethical if a subordinate makes a decision that turns out to be a bad one.'

Nickerson said that to encourage innovation, company executives needed to delegate certain responsibilities to employees lower down in the organization. 'The dilemma is, how do you engage in global competition and decentralize, while at the same time be held accountable as an individual leader?'

It does seem that it would be hard for top corporate executives to keep their eyes on the actions of all subordinates. On the other hand, it also seems that top corporate executives have justified their out-sized compensation by taking personal credit for everything good that happens to their organizations. If they want such credit, why should they escape responsibility when some actions go wrong?

Note that Prof Nickerson played the "innovation" card. A common justification for many corporate health care practices is that they enable innovation. This argument is thrown around so often I begin to suspect it comes from corporate public relations' talking points. (See this post about the development of such talking points.) Of course, the more a corporation is truly decentralized to support innovation, the less it can argue that the top executives deserve huge salaries because of their close involvement in everything that goes on at that corporation.

Furthermore, while Forest Laboratories' previous marketing practices might have been innovative, that did not make them ethical. As we noted in an earlier post, the company was accused of marketing anti-depressants to children when they had only previously been approved for adults. Their marketing tactics allegedly included suppressing negative studies, and paying physicians to prescribe the drugs. The company pleaded guilty to obstruction of justice for lying to the FDA during a plant inspection, and to misdemeanor charges of misbranding and distributing an unapproved drug contrary to an FDA directive.

In addition, an earlier post summarized memos made public by a congressional investigation about Forest Laboratories' marketing of Lexapro. These included coopting medical education, "key opinion leaders," and medical associations for marketing purposes:
- The marketing plan from the marketing department paid for medical education as a "promotional objective," that is, to market, not to educate.
- Thought leaders and consultants were again paid by marketing to market, and sometimes to provide opinions about "promotional strategies" and "commercial development."
- Medical associations are funded by marketing "for commercial and policy activities."

So the facts in the Forest Laboratories case make protests that holding corporate leaders accountable for misbehavior on their watches will stifle innovation seem disingenuous. Furthermore, it makes no sense to pay top corporate leaders outrageous amounts for everything good that happens on their watch without similarly holding them accountable for everything bad that happens then.

If the US government is really going to hold one corporate leader responsible for misbehavior by his subordinates on his watch, that would be a step forward.  As we have said again and again, 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.

Why Weren't Existing Laws About Hospital CEO Compensation Enforced in Washington State?

Public radio station KUOW reported on the generous compensation given hospital CEOs in Washington:

KUOW has learned that 15 hospital executives in Washington made $1 million or more in 2009. That elite group includes 14 nonprofit executives and one head of a government hospital. CEOs at Multicare, Providence, Virginia Mason and Valley Medical each made more than $2 million.

Those numbers can be found in the hospitals' latest tax filings and other public records. The pattern was more lopsided in the two prior years. Nobody working at a public hospital cracked the top 10 list of the state's highest hospital paychecks in 2007 or 2008.

But then the story takes an interesting twist:

Most of Washington's largest hospitals are nonprofit organizations. The state gives the nonprofits a break on their business taxes to help reduce the cost of health care.

The hospitals have to jump through some hoops to qualify for the reduced taxes. For one thing, state law limits how much the hospitals can pay their executives. Their pay has to be comparable to what public servants in Washington make in similar jobs — or else no break on their B&O taxes.

Somehow everyone seems to have forgotten about this part of the law:

The limit on executive pay has been on the law books for 30 years.

Gowrylow: 'Frankly, I don't think it's something that's been on our radar since the mid–80s.'

Mike Gowrylow is a spokesman for the Washington Department of Revenue. He says the recent million–dollar incomes were news to the department.

Gowrylow: 'But it's certainly something that I think we need to take a look at again and examine whether these nonprofits are paying their executives excessively or not.'

Gowrylow says the agency only audits 2 or 3 percent of tax returns. It mostly relies on businesses to comply voluntarily with the state's tax laws.

Gowrylow: 'We can't be everywhere. If we become aware of a nonprofit or any other business that's underreporting their taxes, we investigate those complaints, and if tax is due, we will assess it.'

He says the agency can recover back taxes for the past four years, along with penalties and interest.

Although the article cited an unsuccessful legal action to enforce the law in a particular case in 1986, why the state government seemed to forget about it after that is unclear, and maybe deserving of further investigation.
Right  now, hospital management seems to be trying to avoid the issue, or is arguing about the meaning of "comparable,"

Several present day hospital officials declined to be interviewed on tape. They told KUOW they believe they are in compliance with the state law. But they generally provided little detail to back up that claim.

Providence and Group Health representatives both said their organizations are so large and complex that there may not be any comparable public service jobs in Washington.

Swedish spokeswoman Melissa Tizon told me that CEO Rodney Hochman's pay was generally comparable to what the highest paid public hospital executives made, at Valley and Evergreen hospitals.

On the other hand,

Harborview is the state's largest hospital. Eileen Whalen is its head and an employee of the University of Washington. She makes about $470,000.

[State Senator Karen] Keiser: 'That's really not comparable to the million dollar and more salaries of other hospital directors in our state. We are paying attention here in Olympia to that.'

Other executives at UW Medicine did make more than Whalen. Still, none of them, not even the president of UW, made as much as any of the 15 highest paid executives at nonprofit hospitals in 2009.

I searched high and low to find any public officials making as much as the top nonprofit CEOs.

The only one I found who consistently did so was the UW football coach. But it might be hard to argue that Steve Sarkisian's job is comparable to running a hospital system.

We have discussed numerous cases of executives of not-for-profit hospitals and hospital systems receiving lavish compensation and benefits that seem out of proportion to any reasonable measure of their performance or of their positions' difficulties.  (Remember that advocates of corpulent executive compensation love to cite the size of the company and the number of employees, but the CEO really has only to manage the next tier of executives, rarely numbering more than a dozen.)

As we have said before, far too often the leaders of not-for-profit health care institutions seem more interested in padding their own bottom lines than upholding the institutions' missions. They often seem entirely unaware of their duty to put those missions ahead of their own self-interest. Like the financial services sector in the era of "greed is good," health care too often seems run by "insiders hijacking established institutions for their personal benefit." True health care reform would encourage leadership of health care who understand health care and care about its mission, rather than those who see a quick way to make a small fortune.

However, the twist in this story is that it appears the lavish compensation of hospital executives in this particular state may have violated state law, or at least the tax breaks these hospitals got may have violated the law, given their leaders excessive compensation, and that the law in question is over 30 years old.  However, the law seems to have been forgotten or ignored for nearly all that time, for reasons that are unclear. 

This seems reminiscent of how the Responsible Corporate Officers' Doctrine seems to have been forgotten and ignored.  this post from June, 2010).  However, in the last 30+ years, this notion has been ignored and abandoned by US government regulators at least in so far as it applies to health care organizations, particularly drug, biotechnology and device companies.

The big question is why have such laws and legal practices, which have not been repealed or refuted, instead been ignored and forgotten?  Surely this cries out for investigation.

Of course, It seems that somehow in the brave new world of laissez faire, anything goes capitalism foisted on health care over the last 30 plus years, old practices and customs that limited the power and enrichment of top leaders may have seemed increasingly prudish, and those advocating them may have seemed to be old fuddy duddies to those bent on personal gain.  But unhipness and scorn of prudishness are not reasons to ignore an existing law. 

So it is not that there are no legal tools to prevent abuses by leaders of health care organizations.  Instead, there has been increasing forgetfulness of the existence of such tools, and perhaps a growing effeteness of enforcement that has lead to a reluctance to even try to use them.  So we can start truly reforming health care by simply enforcing the laws that are already there. 
  

More Legal Theater: Actavis Convicted, CareSource Settles

The march of legal settlements, and guilty pleas and verdicts continues.  The latest on parade, in alphabetical order, are:

Actavis

As reported by the (Austin, Texas) American-Statesman:

In what state officials describe as a record-setting verdict, a Travis County jury found Tuesday that a global drug manufacturer misrepresented prices to the state's Medicaid program and said the company should pay the state and federal government $170.3 million.

The verdict concluded a nearly three-week trial in state district court, where lawyers for the Texas attorney general's office argued that Actavis Mid-Atlantic LLC and co-defendant Actavis Elizabeth LLC artificially inflated the costs of medications to obtain more money. Medicaid reimbursed pharmacies at higher rates because of the falsely reported prices, officials said.

Actavis is apparently part of a multinational corporation based in Iceland that claims to have 10,000 employees. The company was taken private in 2007, and has not supplied financial reports since 2006 (see here), so the effect of the apparently large fine on its financial health is unclear, but I would guess not too severe.

Despite their conviction, Actavis leadership responded predictably, failing to admit any problem occurred:

Actavis officials said in a statement that they are disappointed by the verdict and 'are exploring our legal options.'

'Actavis remains, as always, committed to offering high-quality, lower-cost alternatives for health consumers, including the millions of Americans who participate in the Medicaid program,' said John LaRocca, the company's vice president and chief legal officer.

CareSource

As reported by the Columbus Dispatch,

A Dayton-based managed health care company agreed today to pay $26 million to settle allegations that it defrauded Ohio's Medicaid program.

CareSource, which provides managed care benefits to Medicaid recipients in Ohio and other states, was accused of failing to provide required screenings, assessments and case management for special-needs children and adults and submitting false data to make it appear as they had which allowed them to be reimbursed for services.

Once again, the amount of the fine was small in relation to the size of the company, which is actually a not-for-profit organization, and the magnitude of its revenues. According to a follow-up article in the Columbus dispatch:

The settlement is a fraction of the $2.3 billion the state paid the company last year.

The Attorney General said it was fraud:

'Medicaid program dollars need to be used to do what they are intended to do -- and that is to provide health care to some of our most vulnerable citizens,' Attorney General Mike DeWine said in a statement released by his office.

'The defendants in this case defrauded the state's Medicaid program by failing to provide critical health care services, which is both unconscionable and unacceptable.'

Again, company leaders denied there was a problem:

CareSource officials denied the allegations, saying they agreed to the settlement simply to end the matter.

'Because we are a mission-driven organization and because it is the right thing to do, we have always dealt with our relationship with the state of Ohio and the management of Medicaid funds with the highest integrity,' said Pamela Morris, chief executive officer of CareSource, in a statement.

State government officials also seemed unconcerned:

A spokesman for the Ohio Department of Job and Family Services, which oversees Medicaid, said CareSource will continue working for the state. 'The allegations are a cause for concern, but we are comfortable with the relationship and the terms of the settlement,' said Benjamin Johnson.

Summary

The continued march of legal settlements, and guilty pleas and convictions provide some measure of the current amorality of health care corporate leadership.  But I do not expect that these frequent legal proceedings will induce leaders to become more ethical.
These two cases, one involving a Icelandic, multinational generic pharmaceutical company, the other a US based managed care company, showed how corporate misdeeds lead to an elaborate, theatrical, but ultimately ineffective ritual. The prosecution denounces the vileness of the deeds and the severe consequences. The corporation pays a fine that seems big to those down on the farm, but in reality is a tiny fraction of revenues. Despite the prosecutorial assessment of the severity of the offense, no charges against any individuals are pursued. The corporation denies anything bad happened, but reaffirms its commitment to a somewhat vague mission. Since nothing bad happened, the corporation does not punish any employees who authorized, directed, or implemented the bad behavior. Finally, those in government who have to continue to work with the corporation plod on without fuss.

The impression is that no one in government is really serious about deterring corporate misdeeds.  Although there have been promises of a tougher approach that will actually hold corporate leaders  personally accountable for the misdeeds that occurred on their watch, the theater continues.

As long as the penalties to the corporation are relatively small, and can be diffused among stock-holders or owners, employees, and patients, clients or customers, as long as there is no compulsion to change how the corporation operates, and as long as no individual suffers any consequences, why should corporate leaders not continue to do what the government may call "unconscionable," but which results in net financial gains and no personal penalties?  (Note that we posted here about the large and increasing compensation given to CareSource's CEO, which had grown far faster than its revenues, and seemed to contrast with its stated mission to help the underserved.)

So I say again: 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.

Meanwhile, the continued unwillingness of government leaders to take on corporate leaders suggests how corporatist the US has become.  Government for the corporations, by the corporations, and of the corporations, bodes no good for the people whose rights are increasingly being displaced.   

Guidant (Boston Scientific) Gets Probation

The latest in the parade of legal settlements by health care corporations involves a new wrinkle. 

We have been writing about the case of Guidant Corporation's faulty implantable cardiac defibrillators (ICDs) in 2005, almost since the start of the Health Care Renewal blog.  A quick summary, via the Minneapolis Star-Tribune, is:

In 2005 Minneapolis Heart Institute doctors Barry Maron and Robert Hauser went public with concerns about a Guidant defibrillator called the Ventak Prizm 2 after a 21-year-old patient died when his defibrillator short-circuited and failed to revive him after he went into sudden cardiac arrest.

Guidant had known about the short-circuiting issue since 2002 and had made two attempts to fix the device, according to court documents. The company did not alert the FDA -- even though federal law requires manufacturers to report changes that may pose a health risk to patients.

In early 2004, Guidant discovered a similar short-circuiting problem in different defibrillator models called Contak Renewal 1 and 2. The company ordered its factory to stop making and shipping the models, but potentially faulty products on hospital shelves continued to be implanted in thousands of patients.

Although engineers at Guidant had recommended recalling the Contak Renewal devices, upper management rejected the proposal, court documents state. Instead, Guidant issued the 'least aggressive' form of communication, called a product update, in which sales representatives were told to tell doctors that 'nothing was broken' with the device.

Maron and Hauser met with top Guidant officials in May 2005 and urged the company to communicate the problem to doctors, but Guidant refused. The doctors then went to the New York Times, which published an article indicating that the company had known for three years that the Ventak Prizm model could short-circuit, but did not communicate that to doctors.

In June 2005, Guidant issued a public missive detailing safety issues with the defibrillators, which were later recalled by the FDA.

A longer version from a series of Health Care Renewal posts can be found here.

In 2010, Guidant, now a subsidiary of Boston Scientific, agreed to a settlement which would involve guilty pleas to misdemeanors and payment of a large ($296 million) fine, but the settlement was rejected by a federal judge who found it to be too lenient (see post here). Now the judge has approved a new version, again per the Star-Tribune,

In what is believed to be the largest criminal penalty ever imposed in a medical device case, a federal judge on Wednesday approved an agreement calling for Guidant Corp. to pay $296 million for concealing safety information about several of its heart devices.

The denouement in U.S. District Court in St. Paul ended a difficult chapter for one of the biggest players in Minnesota's signature medical technology industry. Thirteen patient deaths have been associated with faulty devices made by Arden Hills-based Guidant, which is now part of Boston Scientific Corp. The controversy lingered for almost six years and raised questions about how safety issues involving medical devices are communicated to the Food and Drug Administration, doctors and patients.

Last April, U.S. District Judge Donovan Frank rejected a previous $296 million settlement between the Department of Justice and the company. This time that fine remained intact, but Frank also called for Boston Scientific to serve three years' probation.


Boston Scientific will be required to make quarterly reports to the U.S. Probation Office regarding safety and compliance issues, as well as submit to regular, unannounced inspections of its records. Frank also called upon Boston Scientific to continue charitable programs intended to raise awareness about heart disease.

'I believe this serves not only the interests of the community and the interests of justice, but respect for the law and corporate responsibility,' Frank said.

The new wrinkle is, of course, probation. I have not previously heard of a US health care corporation put on probation in a criminal settlement. Presumably, the idea is that probation will involve court supervision of the company that might be less lenient than US Department of Justice oversight via a corporate integrity agreement.

So this is a small step forward, but once again, the extent that this settlement will deter future bad behavior seems small. Once again, although the fine imposed seems large, it is small compared to the money to be made by selling these very expensive devices. Moreover, the cost of the fine can be diffused over the entire company, and ultimately over all its employees, its stockholders, and its customers.

Since no individual will pay a penalty, and since it is likely some individuals made themselves rich or richer from the company's actions, it is likely that other individuals in the future will authorize, direct, and implement similar bad behavior to fatten their bonuses and total compensation.

Last June, we noted that some government officials were starting to talk tough about imposing penalties on individuals for misbehavior by health care corporations. In fact, in 1943, the US Supreme Court found that corporate leaders could be held responsible for corporate bad behavior, the so-called Responsible Corporate Officers doctrine. However, the laissez faire malaise that apparently infected most government officials starting in the 1980s seemed to prevent anyone from invoking this doctrine during the last 30 years of health care dysfunction. That malaise still seems to be rendering US federal law enforcement effete, at least when applied to wrong-doing by big, powerful, rich health care corporations.

So like Cassandra, fated to have her predictions always ignored, I repeat: When it comes to health care's leadership, society seems to have acceded to defining deviancy down. Until we start holding health care leaders to high standards, expect their organizations not to uphold high standards.  Further, expect organizations that did not uphold high standards in one instance to fail to uphold them in other instances.  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.

Executive Compensation at Non-Profit Hospitals: Pay for ... Fraud?

We have often discussed executive compensation at US hospitals and academic medical centers, which seems to run from generous to outrageous.  The usual explanation by organizational spokespeople, and occasionally boards of trustees is that this is the sort of compensation needed to attract the best and the brightest, a variation of the "pay for performance" meme that resounds throughout business schools and executive suites.  However, almost never does anyone at any hospital or AMC acknowledge that their leaders are not the best and brightest, although outside of Lake Woebegone, all cannot be above average.

Here are two recent stories about hospital executives whose compensation contrasted with their performance.

Danbury Hospital

We previously posted about how the former chief financial officer (CFO) of Danbury Hospital, now part of Western Connecticut Healthcare, was found in violation of a no-contact order that arose after he was charged with multiple counts of fraud.  It turns out that the William Roe, the former CFO, previously was paid $267,990, per the Danbury News-Times. 

This month, again according to the News-Times, he pleaded guilty:

William Roe, the former chief financial officer of Danbury Hospital arrested in August and charged with defrauding the hospital out of more than $100,000, pleaded guilty Tuesday to one count of wire fraud.

The plea reduces the charges against Roe. In September, in addition to the wire fraud charges, federal prosecutors charged him with two counts of interstate transportation of stolen money. Those charges have been dropped as part of the plea deal.

Along with the guilty plea, Roe has agreed to reimburse Danbury Hospital more than $140,000. He also will reimburse St. Rita Hospital in Lima, Ohio, where he worked as CFO before coming to Danbury Hospital, an additional $75,000 for funds he allegedly stole there.

Archbold Memorial Hospital

This is one of those cases it would be hard to make up. The Dow Jones News Service originally reported in December, 2010:

A Georgia hospital paid $13.9 million to settle allegations it submitted false claims to the state's Medicaid program, the Justice Department said Wednesday.

The settlement resolves allegations that between November 2002 and July 2008, Thomasville, Ga., John D. Archbold Memorial Hospital Inc. made false representations to the Georgia Department of Community Health, the state agency that administers the Medicaid program in Georgia, that it was a public hospital for Medicaid purposes in order to increase the amount of funds provided to the hospital.

Under Medicaid rules, only public hospitals may participate in the Medicaid Upper Payment Limit, or UPL program. Contrary to its state certification, Archbold Memorial was in fact a private hospital, the Justice Department said, and as a result received millions of dollars in funds to which it was not entitled.

A private not-for-profit hospital claimed to be a public hospital to Medicaid?  And it took years for anyone to figure out that was not the case?  It would have been hard to make that one up.
Two executives took the rap:

in early 2008, then-Chief Financial Officer William Sellers resigned after a three-month suspension and pleaded guilty to charges related to his role in the matter. Former Chief Executive Ken Beverly, who also resigned in February of that year, was recently convicted on charges regarding his involvement.

The Albany (Georgia) Herald reported that Mr Beverly did quite well between the time of his resignation and his conviction:

Former CEO Ken Beverly resigned from his post in 2008 and walked away with more than $6.1 million in compensation and benefits. He was later indicted by a federal grand jury.

Convicted Dec. 8, 2010, of six felony counts related to an indictment alleging he was part of a scheme to defraud Medicaid, Beverly remains free on bond and is awaiting a sentencing hearing.

So is that $1 million per felony count? At least we can be assured it was not a "golden parachute,"

Archbold Spokesman Mark Lowe said that the figure as noted in the hospital’s Form 990 for 2009 as filed with the IRS on August 2010 is the sum of Beverly’s deferred compensation and benefits package as it has accumulated over the course of his 30-plus year career with the hospital and was not a 'golden parachute,' as described in some media reports.

'The ‘other compensation’ is from his retirement program that accumulated deferred compensation over the entire term of his employment. In his case, that was in excess of 30 years of deferred compensation. It’s not severance; rather, it’s compensation that was earned but not paid out until retirement,' Lowe said.

Well, that is reassuring.  Of course, regardless of what you call the payment, a lump sum of $6.1 million is far more than most citizens ever will get for their retirement from any employer.  Having $6.1 million in one's retirement account would fit most peoples' definition of "rich." 

Summary

Again, almost all hospital and academic medical center executives seem to be well-paid, even if they work at small institutions, or at those with shaky finances. When their pay is noticed by the news media, the usual explanation is the executives' general brilliance and excellence, with little more than more vague adjectives supplied in justification.

Given the lack of clear evidence for most executives' large compensation, I believe it is reasonable to cite anecdotes where generous compensation was obviously, if retrospectively coupled with poor performance to challenge the rationale for ever-increasing executive compensation in health care. The two cases above are not of merely poor, but criminal performance, and so stand out.

As we have said before, far too often the leaders of not-for-profit health care institutions seem more interested in padding their own bottom lines than upholding the institutions' missions. They often seem entirely unaware of their duty to put those missions ahead of their own self-interest. Like the financial services sector in the era of "greed is good," health care too often seems run by "insiders hijacking established institutions for their personal benefit." True health care reform would encourage leadership of health care who understand health care and care about its mission, rather than those who see a quick way to make a small fortune.

Hackensack University Medical Center CEO's $5 Million Golden Parachute: "the Public Will Perceive the Institution as a Kind of Insider's Group"

Last year was an embarassing one for Hackensack University Medical Center (HUMC), a large academic medical center affiliated with the University of Medicine and Dentistry of New Jersey.  In April, former state senator Joseph Coniglio was convicted of fraud (against the public) and extortion for a scheme that involved him being paid $5000 a month for undefined consulting work for HUMC while he promoted the hospital's interests in the state legislature (see post here).  A subsequent investigative report revealed widespread self-dealing on the part of the HUMC board (see post here).  Soon after, the HUMC CEO, John Ferguson, announced his retirement, per the Newark Star-Ledger.

Scandal Leads to Apparent Reforms

So when I read an article from last week on NorthJersey.com entitled "Hackensack University Medical Center works to revamp reputation hurt by trial" I hoped that these travails lead to some real improvements in the leadership and governance of the institution.  Hope springs eternal, and the article did describe some apparent progress.

The medical center's board of trustees was streamlined:

the hospital's board of governors — once a 57-member behemoth run by a core group of powerful and politically connected members — was whittled to less than half its former size and is now overseen by what the hospital is calling a 'reinvigorated' parent company, Hillcrest Health Service System Inc.

Conflicts of interest and self-dealing were apparently banned

Members of the two boards may no longer do business directly with the hospital — a significant change because some of them own or work for companies that have been paid millions of dollars by Hackensack. In 2009 alone, these companies were paid $13.2 million by the hospital, according to its federal tax filings. They were paid $17.4 million in 2008.

The Devil in the Details
Although the board was reduced in size, it gained almost no new members, and the politically-connected members who previously were accused of self-dealing remained:

Serving as chairman of the board of governors is Joseph M. Sanzari, a construction magnate, multimillion-dollar donor and longtime board member. His company, a joint venture with former board Chairman J. Fletcher Creamer Jr., has been one of the highest-paid independent contractors at the medical center.

Also,

There were no new board members until Tuesday, when two were appointed. Many who held influential positions on the board of governors — including Sanzari, Creamer and Joseph Simunovich — are still in key roles.

Furthermore, there was a big loop-hole in the apparent ban on conflicts of interest and self-dealing:

members of both the board of governors and Hillcrest can still do business with the hospital as long as they work as subcontractors or move to the foundation board or a newly created advisory panel that doesn't have voting or fiduciary powers.

Also,

Members of the board of governors and Hillcrest still can be hired as subcontractors.

The ban on doing business with the hospital also doesn't cover members of the advisory panel or the board that oversees the foundation. About a dozen members of these two groups are affiliated with companies that have made money — millions, in some cases – in work with the hospital.

As one outside expert noted,

'They may have changed the structure, but if you don't change the people, you don't change the culture,' said Jamie Orlikoff, a governance expert who advises the National Hospital Association.

Furthermore,

'People who had influence and clout when they were members of a fiduciary board will still have influence and clout even if they are moved to an advisory board,' Orlikoff said.

So,

'The concern is that the public will perceive the institution as a kind of insider's group and things are being done to benefit them,' said Daniel Borochoff, president of the American Institute of Philanthropy.

The CEO's Golden Parachute

Hope spring eternal, but is too often crushed.  However, at least the former CEO is gone. But it turns out he got quite a going away present. As described in a companion article,

John P. Ferguson received a severance package of more than $5 million when he was forced out as president of Hackensack University Medical Center last year, bringing his total compensation for 2009 to $7.7 million, according to recent federal tax filings.

The other executives who presided over HUMC in 2009, the year that its former consultant was convicted, also did very well for themselves,

His senior vice president for operations, Doreen Santora, received $2.6 million — including more than $1.5 million in severance — when she left in the executive reshuffling that followed, the documents show.

In all, seven top executives at the non-profit hospital each received more than $1 million in total compensation in 2009, up from five the year before.

This extremely generous compensation could not be related to the financial success of the hospital at the time:

The compensation packages came in a year in which tax filings show the 775-bed medical center employed 317 fewer staff and Moody's Investors Service downgraded its credit rating to Baa1, leading to higher interest payments when new debt is issued.

If this was pay for performance, by what measure these executives' performance was measured was not clear. Actually, who even decided to award them such sumptuous pay was unclear:

only a handful of board members were aware of the millions of dollars in pay and perks that had been handed out to executives over the last few years. Several employees saw their overall compensation double or triple.

Board members expressed 'sticker shock' when they first learned of the compensation numbers at a fall 2009 meeting, said J. Fletcher Creamer Jr., who completed his term as chairman of the board of governors in March.

'We went through every single executive' whose salaries must be disclosed on the IRS form for non-profit institutions, Creamer said in an interview earlier this year. 'It's the first time they actually saw it. … We always made the numbers available if they wanted to come see it, but not everyone looked.'

Keep in mind that per the first NorthJersey.com article, Mr Creamer will still be in a "key role" at HUMC, his failure to think that top executives' compensation was something his fellow board members needed to consider notwithstanding.

Summary

Is this any way to run a hospital "which has a national reputation for quality care?" The hospital leadership did and still appears to be an "insider's group" which works to promote its own self-interest.

As we have said before, far too often the leaders of not-for-profit health care institutions seem more interested in padding their own bottom lines than upholding the institutions' missions. They often seem entirely unaware of their duty to put those missions ahead of their own self-interest. Like the financial services sector in the era of "greed is good," health care too often seems run by "insiders hijacking established institutions for their personal benefit." True health care reform would encourage leadership of health care who understand health care and care about its mission, rather than those who see a quick way to make a small fortune.

Exactech Settles, Its Regional Sales Director Pleads Guilty

The march of legal settlements by health care organizations continues.  Here is a curious story in two parts.  The first part was reported in the most detail by the Gainesville (FL) Sun:

Gainesville-based Exactech must pay $3 million and submit to a year of federal monitoring under a settlement to avoid prosecution on charges that resulted from an investigation into whether orthopedic implant manufacturers were paying kickbacks to surgeons to use their products.

The company announced the deferred prosecution agreement Tuesday after three years of an expanded federal probe.

The U.S. Attorney's Office for the District of New Jersey agrees not to prosecute charges of conspiracy to violate federal anti-kickback laws if the company avoids any violations for a year.

What did Exactech do to wind up in this pickle? It is not really clear. The article noted:

What the U.S. Attorney calls kickbacks Exactech calls consulting fees to surgeons to help develop better products — a common practice in the medical product field.

One can get a little better idea of what was going on by seeing what changes the company agreed to make:

Exactech will continue using surgeons as consultants, but under a more rigorous process that verifies that the work is needed, tracks the surgeons' work and pays them fairly.

The article went out of its way to say:

In accepting the agreement, Exactech does not admit to any wrongdoing and the U.S. Attorney acknowledges that the company's conduct did not hurt patient health or patient care.

Meanwhile, however, a short article appeared in the Parsipanny (NJ) Daily Record:

A salesman from Chester pleaded guilty to conspiring to violate a federal anti-kickback statute by entering into illegal financial deals to get surgeons to use his company's products, the US Attorney's Office said Tuesday.

Douglass Donofrio, 45, director of sales for Exactech Inc.'s northeast region, entered his guilty plea Tuesday before District Judge Garrett E. Brown in Trenton.

Exactech, a publicly traded, Gainesville, Fla.-based national manufacturer and distributor of orthopedic implant devices and supplies, simultaneously agreed to 12-month deal with the justice department to federal monitoring.

'This is a reasonable resolution, giving Exactech credit for positive steps it has taken while requiring continued reform and compliance to avoid more serious consequences,' acting U.S. Attorney Gilmore Childers said in a statement released by his office. 'The agreement does not erase the past, but supports a future corporate culture that will not tolerate kickbacks as business as usual. Unlawful consulting relationships compromise the integrity of our healthcare system, and we will continue to hold institutions and individuals accountable who are willing to put profits over patients.'

Exactech is charged in a criminal court complaint with conspiring to violate the federal anti-kickback statute.

The complaint alleges that from 2002 through late 2008, Exactech entered into consulting agreements with certain orthopedic surgeons — deals which were designed and implemented, in part, to induce the surgeons to use, and cause the purchase of, Exactech's hip and knee reconstruction and replacement products, according to Childers' office.

Note that probably because this case was small in monetary terms, reporting about it was fragmented and brief, making it very difficult to get a sense of what really was going on. 

So, while Exactech did not admit to any wrong-doing, one of its mid-level managers admitted to apparently just the sort of wrong-doing of which the company was accused. If that manager was only a lone loose cannon, why would the company have been pushed to change how it uses surgeon consultants, and why would it need "support" for "a corporate culture that will not tolerate kickbacks as business as usual?"

Nonetheless, only that one mid-level manager admits he did anything wrong.  If anyone else did anything wrong, who they were, and what they did remains unclear, hidden within a swirl of legalese.  Maybe unethical practices occurred, and maybe the new deferred prosecution agreement will prevent further unethical practices, but who can tell? 

If anything unethical did happen, there seems to no longer be any mechanism in health care to find out and  do something about it. 

This case appears to be a good example of how language can be tortured by legalistic parsing that avoids the fundamental ethical problems that now plague health care. As Dr Bernard Carroll posted recently, "legalistic charges and defenses are not the right way to go in exposing and ejecting bad actors from our field," because this approach "favors the bad actors, who flaunt their constitutional protections with the taunt, prove it."  Instead, as Dr Carroll implied, the standard in health care should require more than just avoiding felony convictions.

Even though the current case is small in monetary terms, it is a marker of unethical behavior.  The ongoing parade of legal settlements and criminal pleadings and convictions involving health care organizations, when viewed in its entirety, should convince professionals and policy-makers that health care is undergoing an ethical meltdown. 

The fines imposed by the settlements have never been large enough to be more than costs of doing business, and hence are unlikely to change behavior.  The legalistic approach has not resulted in more than a few people who authorized, directed, or implemented the bad behavior that lead to the settlements paying any personal penalties.  If we want the bad behavior to stop, we clearly need some other way to deter it.  Until we come up with one, expect it to continue, and to continue driving up costs, driving down access, and making patients' outcomes worse.

Elan, Eisai Settle for Related Reasons

The parade of legal settlements of bad behavior by major health care organizations marches on. The latest to shuffle by are Elan Corp, based in Ireland, and Eisai Inc, based in Japan, for actions taken in the US.  According to Bloomberg:

Elan Corp. will pay $203 million and a U.S. unit of the Irish drugmaker will plead guilty to a misdemeanor charge to resolve an investigation of its marketing of the epilepsy medicine Zonegran.

Elan will pay $102.9 million to resolve civil claims and $100 million in criminal fines and forfeitures, according to the U.S. Justice Department. Japanese drugmaker Eisai Inc., which bought the drug from Elan in 2004 for $128.5 million, also will pay $11 million to settle civil claims.

The Elan Pharmaceuticals unit will plead guilty in federal court in Boston to a charge of misbranding Zonegran, which was approved by U.S. regulators for treatment of epileptic seizures in adults over age 16, the Justice Department said yesterday in a statement. Dublin-based Elan promoted Zonegran for uses including mood stabilization, bipolar disorder, migraine headaches, weight loss and seizures in children.

'Elan’s off-label marketing efforts targeted non-epilepsy prescribers and the company paid illegal kickbacks to physicians in an effort to persuade them to prescribe Zonegran for these off-label uses,' according to the statement.

The details were:

In 2002, EPI [Elan Pharmaceuticals Inc] 'came under significant financial pressure' because of an investigation of its financial practices by the U.S. Securities and Exchange Commission that caused shares to drop to $2 from $65 in six months, according to the criminal charge. In evaluating its options, EPI 'decided to retain Zonegran because of its large potential for growth, particularly in unapproved areas,' prosecutors said.

EPI then trained its sales staff to promote Zonegran for off-label uses, including for children, pain, psychiatric disorders, migraines and movement disorders, prosecutors said. Letters sent to pediatricians described how to administer Zonegran to a child by putting a capsule’s contents into applesauce, according to the document, which EPI will admit to in its guilty plea.

Doctors with the potential to write many prescriptions were invited on expense-paid trips to Bermuda, Key Largo, Florida, Banff in Alberta and Tucson, Arizona, to hear speeches on off- label uses, according to the charge. Sales 'increased dramatically,' rising 80 percent from August 2001 to August 2002, while 2003 revenue increased 87 percent over the previous year, prosecutors said.

So here we ago again, another week, another multi-hundred million dollar settlement. Once again, the settlement is of charges of deceptive marketing practices and kick-backs to physicians. Once again, the settlement involves criminal charges and a corporate integrity agreement, but does not involve any negative consequences for any individual who authorized, directed, or implemented the unethical practices.

We have noted recent cases, one in which a corporate executive was banned from doing business with the federal government, another in which a corporate executive was indicted, but not yet tried on criminal charges.  However, in most cases, the parade of legal settlements made by health care organizations has just marched on, sometimes including guilty pleas to criminal charges, often involving charges of kickbacks, fraud, conspiracy, and other colorful offenses. Most of these settlements entailed fines or other payments by the organizations that may seem huge, but were fractions of the amounts made by the practices that lead to the charges that were settled.  With the few exceptions above, (plus one other known exception, the disbarment from federal business of three former executives of Purdue Pharma, story here), almost never have the cases involved penalties for any individuals who authorized, directed, or implemented the misbehavior.  We have also been saying (seemingly endlessly, but most recently here) that such settlements may be viewed by organizations as merely the costs of doing business, and so until the actual people who were involved in the bad behavior suffer some negative incentive or penalty, expect the behavior to continue. 

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.
(FULL DISCLOSURE - I own 3200 shares of Elan.  This is the only health care stock I own.  I have held it a long time, not bothering to sell since the shares have been worth little for years.  This has provided a lesson about how the share-holders of big health care corporations rarely profit from the executives' risk taking.) 

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.

Academic Medical Center Crime Wave?

Every large group or organization has a few bad apples.  My web searches constantly turn up stories of individuals working in health care who behave unethically or commit crimes.  I do not generally discuss these cases on Health Care Renewal, since they seem unavoidable, and their sporadic appearance does not necessarily have anything to do with systemic problems in health care.

However, in the last week, I noted four cases of rather exceptionally bad behavior by individuals working in large hospital systems, and the severity and proximity of these cases made me wonder if they reflect some new trend.

Pennsylvania State University Faculty Member Charged with Rape

As reported by PennLive.com,

Former Derry Township, Dauphin County, doctor Dr. Robert L. Yarwood stands accused of using his position and influence to addict two of his patients to painkillers and raping them multiple times.

Yarwood, 56, has been charged with more than 42 criminal counts, including rape and sexual assault, stemming from allegations made in 2008 by two women, ages 40 and 45.

He is accused of giving narcotics to the women to 'exert psychological force,' said Fran Chardo, Dauphin County first assistant district attorney.

'The case, speaking abstractly, is very disturbing because of the trust relationship between the patient and the doctor,' Chardo said. 'It’s a violation of trust.'

In an interview with The Patriot-News, one of the women said she had visited Yarwood several times over the course of a year. He was prescribing her pain medication, which she eventually became addicted to. Then, she said, he raped her. 'I was paralyzed. I was in shock,' she said. 'I trusted him.'

At the time of the allegations, Yarwood was an obstetrician and gynecologist at the Penn State Milton S. Hershey Medical Center, which he joined in the late 1990s. In August 2008, the medical center was apprised of the investigation and immediately suspended Yarwood from having contact with patients.

$5 Million Embezzlement from Columbia University Medical Center

As reported by the Wall Street Journal,

A 48-year-old Bronx man has been arrested and charged with grand larceny for allegedly stealing nearly $4.5 million from Columbia University over the course of two months, authorities said Monday.

George Castro is accused of adding a TD Bank account belonging to him as a payee in the Columbia University Medical Center's accounts payable system, netting payments of $3.4 million in October and $1 million in November, authorities said. Mr. Castro, whose relationship with the university is unclear, was arrested Wednesday.

A law-enforcement official familiar with the case said Mr. Castro had $200,000 in cash in his possession when he was arrested and had withdrawn $140,000 the day before his arrest. According to a criminal complaint, Mr. Castro told investigators the money 'just appeared' in his bank account and that he had gotten 'greedy.'

Duke Surgeon and Surgical Department Business Manager Accused of Embezzlement

As reported by WRAL.com,

A former Duke University surgeon and manager have been charged with stealing $267,000 from the university, police said Tuesday.

Dr. Eric Joel DeMaria, 51, of 1101 Tacketts Pond Drive in Raleigh, and John William Cotton, 39, of 7228 Loblolly Pine Drive in Raleigh, were each charged with embezzlement of more than $100,000. Cotton also was charged with obtaining property by false pretense.

Cotton was arrested last Wednesday, and DeMaria surrendered to police Tuesday morning. Both have been released on $25,000 bonds.

DeMaria was director of Duke's bariatric surgery program, while Cotton was a business manager in the surgical department at Duke University Hospital, according to Michael Schoenfeld, Duke's vice president for public affairs.

Office Worker Accused of Stealing $3.8 Million from Memorial Sloan-Kettering Cancer Center

As reported by the New York Post,

A former worker at Memorial Sloan-Kettering stole nearly $4 million from the cancer center in a massive scheme that involved ordering a boatload of unnecessary printer cartridges and reselling them, authorities said.

The loot from the elaborate scam was used to fund a lavish lifestyle that allowed $37,000-a-year receiving clerk Marque Gumbs to move from a Bronx housing project to a luxurious Trump high-rise in the suburbs.

Gumbs, 32 -- who was arraigned yesterday in Manhattan Criminal Court on charges of grand larceny and criminal possession of stolen property -- allegedly began his scheme in 2004 by ordering extra toner cartridges and reselling them.

In one astounding stretch from October 2009 through August 2010, Gumbs ordered $1.2 million worth of toner that wasn't usable for any machine at the hospital, authorities said.

His alleged ruse cost the hospital $3.8 million.

Summary

So here is the box-score. Reported in one week were three alleged theft/ embezzlement schemes with values from $267,000 to $5 million, and one alleged series of multiple rapes. The alleged perpetrators included two academic physicians (one in surgery, one in obstetrics-gynecology), two hospital staff, one in management, and a person with an unclear relationship to the hospital. All involved large, prestigious academic medical centers.

So, again, maybe these were just coincidences. However, it may be that there is a real trend toward bigger and more spectacular thefts and embezzlements from big, not for profit health care institutions.  The most likely explanation is simply that the increasingly huge amounts of money flowing through such institutions attracts those who go to where the money is, and that the increased complexity of the bureaucracy of ever-growing health care institutions makes it easier to hide such thefts.  At least, this odd string of cases should prompt more questions about the conventional wisdom that it is good for health care organizations to grow ever larger. 

However, just to be speculative, note that three of these incidents occurred at institutions whose leadership has attracted our attention before.  We discussed conflicts of interest affecting one Columbia academic leader here, and the prevalence of leaders of failed financial services companies on the New York-Presbyterian board here.  We discussed a leader of two of the firms most involved in the global financial collapse who was also the chairman of the board of Duke University here.  A quick skim of Memorial Sloan-Kettering's Board of Overseers (in its 2009 annual report) showed the presence of at least two leaders of failed financial services firms heavily involved in the global financial collapse (E Stanley O'Neal, former CEO of Merrill Lynch, and Sanford I Weill, former CEO of Citigroup).  The speculation is that as academic medical centers and hospital systems and their parent universities have increasingly been recipients of the "stewardship," and hence immersed in the culture of the financial services industry, particularly firms which contributed to the global financial collapse, the culture of health care became increasingly laissez faire, anything goes, wild, wild west, and so it got easier for the wrong people to be hired, and for the wrong people to pull off truly spectacular capers.

I submit that the first criterion for being a trustee or director, and hence ostensibly a steward of an academic medical institution should be devotion to the mission of the organization, not size of one's contribution.