Our Man in the NQF? - CareFusion Settles Kickback Allegations for $40.1 Million and Government Alleges They Meant to Manipulate National Quality Forum Standards

What appeared to be yet another entry in the march of legal settlements turns out to be more interesting than it first appeared.

The Basic Story: Off-Label Marketing 

The story was initially briefly reported in the media.  A report in the Seattle Post-Intelligencer on 9 January, 2014, was perhaps the most complete,

CareFusion, a manufacturer of medical and surgical supplies and medical devices, has agreed to settle charges of illegal marketing practices and kickback payments for promoting sales of the company’s surgical preparation solution, Chloraprep.

Under the terms of the settlement with Washington, other states, and the federal government, CareFusion will pay a total of $40.1 million.

In particular,
 

When the FDA approves a surgical solution such as Chloraprep as safe and effective, its manufacturer can’t market or promote it for an 'off-label' use – any use not approved by the FDA.

Chloraprep was approved for specific inpatient hospital procedures, including the preparation of a patient’s skin prior to surgery or an injection. The FDA rejected its use for prepping the skin prior to inserting catheters into veins for administering medications, or cleaning the skin as part of closing wounds.

The lawsuit alleges that from Sept. 1, 2009 to Aug. 31, 2011, CareFusion promoted Chloraprep for improper uses. CareFusion also allegedly publicized unverified information about Chloraprep during the same time period, Ferguson said.

So this follows a template we have seen before, most recently here.  A company promotes a drug or device for "off-label" uses.  While physicians are legally allowed to prescribe a drug or use a device for reasons other than its official indications, companies are not legally allowed to promote such uses.  Sometimes it turns out that the drug has benefits that outweigh its harms when used off-label, in which case the violation could be considered technical.  In other cases, the drug might turn out to be useless or even net harmful when used off-label, so the violation indicates putting revenue ahead of patients' welfare.  

The reporting on the CareFusion Chloraprep settlement did not clearly suggest that the off-label use was harmful to patients.

Allegations of Kickbacks to Promote Off-Label Use, but How?

It gets more interesting.  The Post-Intelligencer also noted,

The states also contend that in 2008 CareFusion’s predecessor corporation entered into agreements that CareFusion assumed legal and financial responsibility for. This included payments to Health Care Concepts Inc., payments that were allegedly made to hide kickbacks to the physician-owner of HCC for promoting and influencing providers to use Chloraprep, he said. This violates federal and state anti-kickback laws.

Now the allegations also include kickbacks to the "physician-owner" of a company to facilitate off-label promotion.  So the issue goes beyond a technical violation of the law.  The Post-Intelligence report, however, did not make clear what Health Care Concepts Inc actually did to contribute to off-label promotion.

A quick attempt to find out more about this company via the web was not fruitful.  There are lots of companies/ organizations called Health Care Concepts or some variant.  The most relevant may be this one, which lists CareFusion as a "partner" on its main web-page.  What this company actually does is a bit unclear.  Its business model is described as "a private incubator of early products, services, and technologies, as well as an accelerator of mature solutions that will be taken to scale." What that has to do with off-label promotion of a product of a big established company like CareFusion is not clear.  How this company could have influenced providers is not clear, given that it is not an advertising firm, public relations firm, or medical education and communication company (MECC).

So what is going on here?  

Allegations of a $11.6 Million Payment to Manipulate the National Quality Forum Standards


Yesterday, 21 January, 2014, Modern Healthcare began to explain the mystery.   

Many healthcare companies have been accused of paying kickbacks to influence physicians' medical decisions, but one major supplier allegedly tried to steer an entire industry by influencing the recommendations of the National Quality Forum

The NQF, which reviews medical evidence and makes recommendations for improving healthcare, acknowledges that a well-known patient safety advocate is alleged to have received millions of dollars to promote a surgical sterilization product while co-chairing an NQF committee that suggested hospitals use that product. 

Federal officials say Dr. Charles Denham, co-chair of NQF's Safe Practices Committee in 2010, received $11.6 million from San Diego-based CareFusion to promote the company's ChloraPrep line of skin-preparation products. Denham's committee at the NQF also recommended surgeons use ChloraPrep products to prevent surgical infections, the NQF said.

The allegations about the role of Dr Denham in the NQF also did appear in the the official US Department of Justice press release.

Allegations of Bogus Contracts, and Non-Denial Denials

The allegations produced some non-denial denials (in the phrase found in All the President's Men).

Dr Denham responded, but through a lawyer:

A statement from Denham's attorney, Larry Gondelman of Powers Pyles Sutter & Verville in Washington, said reports that the underlying lawsuit involved Dr. Denham were 'blatantly false.'

Denham was not accused of wrong-doing in the whistleblower lawsuit, and Gondelman said Denham has and continues to cooperate with investigators in the case.

Note that while the attorney denied that Dr Denham was named in the underlying lawsuit, he did not apparently specifically deny the allegations.

The NQF also reponded,

 An NQF review committee removed the reference to the specific product before final publication of 'Safe Practices for Better Healthcare' in 2010.

'An NQF ad hoc review did not find sufficient evidence to support one skin preparation over another,' a statement from the organization said. 'The ad hoc review effectively served its role of rapidly responding when a potential issue is identified.'

Note that the NQF press release did not deny that the CareFusion money was given to Dr Denham's organization, nor that the NQF report might have promoted the use of a class of products in which CareFusion's Chloraprep resides.

A follow-up story in Modern Healthcare noted that Dr Denham confirmed the payment of the money to his company, but not its purpose,

 Renowned quality expert Dr. Charles Denham confirms that CareFusion paid his company more than $11 million, but Denham says he was surprised to see the U.S. Justice Department describe the money as kickbacks intended to influence national quality-of-care guidelines published by the National Quality Forum.

Dr Denham's lawyer confirmed the payment, but did not further explain it:

Denham's lawyer, Larry Gondelman of Powers Pyles Sutter & Verville in Washington, acknowledged that CareFusion did pay Denham's company under two contracts. 

And,

Gondelman said the $11.6 million paid to Denham's company covered 'an array of services' and that he could not elaborate.

Again, note that Mr Gondelman did not specifically deny that the money served as a kickback.

Meanwhile, the Department of Justice alleged something more elaborate, and nefarious, 

The Justice Department, though, says the contracts were written to look as though CareFusion was buying consulting, software development and strategic marketing services, as well as the completion of three unnamed projects. The value of the deals, the government alleges, far exceeded the fair-market costs of those services, and that one of the actual purposes of the deals was to conceal kickbacks to Denham while he served on the National Quality Forum.

Interval Summary

So what is clear so far is that:
-  CareFusion agreed to a $40.1 million settlement of allegations that it provided kickbacks to promote off-label use of its product.
-  CareFusion paid $11.6 million to Health Care Concepts
-  Health Care Concepts is run (and possibly owned) by Dr Charles Denham, who chaired a National Quality Forum committee that recommended use of CareFusion's product ChloraPrep in a performance standard and the final version of the NQF standard recommended use of a group of products including ChloraPrep

We have frequently discussed how health care corporations may promote goods, particularly drugs and devices and services through deceptive and unethical practices, including inducements ranging form creation of conflicts of interest to outright bribes and kickbacks.   We have also discussed the influence of individual and institutional conflicts of interest on clinical practice guidelines.  This has become an important enough problem for the US Institute of Medicine to weigh in with standards for trustworthy guidelines that markedly limit such conflicts of interest. 

This case seems notable because it may link the problems of deceptive and unethical promotion with the influencing of clinical practice guidelines.  It is particularly notable because the organization generating the guidelines in question, the National Quality Forum, has become large, influential, and authoritative.  Re the latter point, the latest Modern Healthcare article affirmed,

The NQF is a standards-setting organization for the healthcare provider industry. It holds the exclusive contract to provide Medicare and Medicaid with recommendations on a national quality-of-care strategy and the measures used to gauge improvements.

In fact, while the NQF performance standards can function as guidelines, they also may be bases for pay for performance schemes that attach real incentives to guidelines, which could become perverse if the guidelines have been manipulated.

Can the NQF Defend Against Conflicts, and If Not, Should it Remain So Authoritative?

So the big question is whether the NQF, given its unique influence, has any meaningful approach to prevent its standards from being influenced by conflicts of interest?

The NQF does have a recent conflicts of interest policy. However, according to my reading, it neither bans committee members with conflicts of interest, nor even requires public disclosure of conflicts of interest.  All it seems to require is that committee members disclose conflicts internally and voluntarily recuse themselves from deliberations which may be affected by them.  Although the policy states that conflicts of interest may be made public, I could find nothing in the report which Dr Denham co-authored about conflicts of interest or competing interests affecting any of the authors, including Dr Denham

Furthermore, a very quick look at information publicly available on the NQF web-site suggests the organization itself may have major institutional conflicts of interest.  The NQF is one of those "public-private partnerships" that have become all the rage.  Several members of its board of directors have leadership positions in large health corporations, financial firms with large health care interests, or trade associations for large health care corporations: 

- Elizabeth J. Fowler, PhD, JD, is Vice President, Global Health Policy, in the Government Affairs & Policy group at Johnson & Johnson.

- Robert Galvin, MD, is Chief Executive Officer, Equity Healthcare, at The Blackstone Group.

 - Karen Ignagni, President and Chief Executive Officer of America’s Health Insurance Plans (AHIP), is the voice of health insurance plans....

- J Mark Overhage MD, PhD,  Chief Medical Informatics Officer, Health Services, Siemens Healthcare


Thus it is conceivable that they could personally profit, and that their organizations could institutionally profit from standards that favor their organizations' interests.  

Furthermore, NQF receives funding from the US government and private foundations, but also from pharmaceutical companies and their in-house foundations:

the Bristol-Myers Squibb Foundation, the Cardinal Health Foundation, Pfizer Inc., Sanofi-aventis,...

Unless the current case leads to big changes in the prevalence of conflicts of interest among the NQF board, the continuation of its institutional conflicts of interest generated by its sources of funding, and its weak policy on conflicts affecting committee members, the question becomes whether it should continue to have such an authoritative role?

As we have said over and over, pervasive conflicts of interest affect health care decision-makers and policy makers and the organizations within which they function.  Such conflicts threaten to put various private interests way ahead of patients' and the public's health.  If we really want health care that will put patients' and the public's health first, we need to end such arrangements that favor private gain.  

 Roy M. Poses MD on Health Care Renewal

ADDENDUM (23 January, 2014) - A closer re-reading of the NQF conflict of interest policy made it clear that recusal is not voluntary, and that conflicts of interest may be revealed publicly, but that such disclosure is not mandatory.  The paragraph above dealing with these issues was revised accordingly.  

More Pharmaceutical Misadventures - Actelion Damages Upheld, Genzyme (Sanofi Subsidiary) Settled, Merck Fined

The march of legal settlements by large health care organizations goes on, albeit with ever more quiet footsteps as the number of journalists available to amplify their sounds declines.  Last week we noted the shutdown of PharmaLot, a journalistic blog edited by Ed Silverman that was one of the few that reported fearlessly on the pharmaceutical industry, warts and all.

So we dedicate this round up of legal settlements by pharmaceutical companies announced last month, December, 2013, to Ed Silverman, who reported on two of the cases below, and whose reports have been silenced by the shutdown of the PharmaLot web-site by its corporate owner.

In alphabetical order by name of the pharmaceutical company,

Actelion $40.7 Million Damages for Keeping Possibly Competitive Drug Off the Market Upheld

This story was reported by Ed Silverman on Pharmalot, and by the San Francisco Chronicle.  The basics, according to the latter article, were:

A state appeals court has upheld $407 million in damages against the Swiss biotechnology giant Actelion and its executives for buying a Bay Area company and using it to thwart another firm's plans to market a competing hypertension drug in the United States.

The drug, Fasudil, is manufactured by Ashai Kasei Pharma Corp of  Japan for treatment of pulmonary arterial hypertension, an often fatal disease of the lung arteries. In June 2006, Asahi signed a licensing agreement with the South San Francisco biotech firm CoTherix, which agreed to develop oral and inhaled versions of Fasudil and seek regulatory approval in the U.S. and Europe.

Less than five months later, Actelion bought CoTherix, paying a premium price of more than $400 million, and announced soon afterward that it was dropping plans to develop Fasudil. Actelion's own drug, Tracleer, dominates the U.S. market for treatment of the same disease and generates more than $1 billion in revenue a year.

Note that the federal appeals court judge, Terence Bruiniers, found that the actions by Actelion were not only anti-competitive, but may have harmed patients,

'By impeding the development of Fasudil, Actelion not only sabotaged a competitive and foreseeably profitable commercial venture, but prevented a drug with the potential for alleviating the suffering of patients with life-threatening and debilitating diseases from reaching the market,' Bruiniers wrote.

Further note that in this civil lawsuit, it appears that the top executives who engineered the anti-competitive actions that may have harmed patients will actually face negative consequences.  The judge also said,

the jury was entitled to conclude that three Actelion executives - CEO Jean Paul Clozel, chief scientific officer Martine Clozel, and Simon Buckingham, director of corporate and business development - had shown a disregard for the rights of Asahi and its customers and were liable for $30 million in punitive damages, about 10 percent of the executives' net worth.

Sanofi Subsidiary Genzyme Settled Charges of Encouraging Unapproved Internal Use of SepraFilm for $22 Million

The longest version of this story appeared in the Tampa Bay Times.  The basics were: 

 A Massachusetts-based biotechnology company has agreed to pay $22.28 million to resolve allegations brought by whistle-blowers in Tampa and Miami that it marketed an inappropriate use for a surgery medication, U.S. government attorneys said.

Genzyme, a corporation known for its research into drugs for rare genetic diseases, is paying the settlement in a lawsuit over Seprafilm, a material it manufactures for use in the operating room.

According to court documents, Genzyme sales representatives encouraged doctors to use the product in a manner not approved by the U.S. Food and Drug Administration, leading to improper claims for reimbursement from hospitals.

The details were:

 According to court documents, Seprafilm is intended to be applied during open surgery to prevent organs and muscle tissue from sticking together. However, the whistle-blowers and lawyers for the federal government alleged that Genzyme sales representatives taught doctors to use it in less invasive procedures — such as laparoscopic or 'keyhole' surgeries — by mixing it into a liquidlike 'slurry' that could be injected into the body.

Apparently the sales representative who blew the whistle in this case "recognized that this was a potential danger."  It certainly seems possible that the unapproved use of this material modified to be injected within the body might have resulted in harm to patients, and that at least its harmfulness when used in this manner had had never been tested.  However, in this litigation as supported by the US Department of Justice the plaintiffs were "not required to prove ... that patients had been harmed."

Note that unlike the civil case above, and as is typical of federal lawsuits against big health care organizations, those company employees who authorized or directed the questionable actions did not suffer any negative consequences.

(Added on 19 January, 2013) - Further note that as the article implied, but did not emphasize, since 2011, Genzyme has been owned by Sanofi.  Sanofi's last three major settlements since 2007 were summarized here. 

Merck Fined 15.3 Million Euros for Smear Campaign Against Generic Competition

This case was reported by Ed Silverman on PharmaLot, and briefly by Reuters,

The French competition authority said on Thursday it had fined Schering-Plough, now owned by Merck, 15.3 million euros ($21 million) over what it called a smear campaign against generic competition to Subutex, its drug for opioid addiction.

It also handed out a fine of 414,000 euros to parent Merck and another of 318,000 euros to British supplier Reckitt Benckiser for anti-competitive behaviour in staging the campaign in late 2005.

Note that while this case did not involve any implications of physical harm to patients, it seemed to involve active deception.

Summary

First, as we have said for years, legal actions like those listed above may or may not result in huge financial penalties, and rarely result in penalties for individuals who authorized, directed or implemented the actions in question, but do serve as markers of the extent of misbehavior by large health care organizations.  Such misbehavior may have adverse consequences for patients and for public health and the health care system.

Second, also as we have said for years, such actions mark the problem, but are unlikely to deter future problems.  In fact, many large health care organizations have settled strings of cases since we started trying to keep track of them (and may not have done so completely).  For example, the Genzyme, hence Sanofi settlement this year is at least the fourth major settlement by this company since 2007. 

Settlements resulting in fines imposed on a company as a whole are diffused, paid by stockholders, employees, and patients, and hence are likely to be regarded as a cost of doing business by top  management.  Managers, however, often are given huge financial incentives for all actions that increase short term revenue.  So managers are likely to continue to enable or direct bad behavior as long as it can bring in lots of revenue at no personal risk.

Third, while there has been a modest increase in discussion of ill-informed, mission-hostile, self-interested, conflicted, or even criminal or corrupt management since we started Health Care Renewal, the increasing plight of journalism seems to be making these issues more anechoic.  The shutdown of PharmaLot and the silencing of its archives is another reminder of how public relations and marketing are now overwhelming disinterested reporting (see this report by Pro Publica).

If we really want to reverse the downward spiral of our ever more expensive, less accessible, and lower quality health care system, we first have to preserve our ability to identify and loudly discuss its problems.

Roy M. Poses MD for Health Care Renewal

How Many Straws? - Johnson and Johnson Settles Again, Again, Again...

It seems like a minor case, but is another straw for the camel.

The Latest Settlement

Reported in most detail by Modern Healthcare,

Two executives at a subsidiary of Johnson & Johnson have agreed to pay a total of $50,000 to resolve allegations that they knowingly sold mislabeled products used in the sterilization of gastrointestinal scopes and surgical drills.  The settlement also calls for the J&J subsidiary, Advanced Sterilization Products, to pay $1.25 million to resolve a civil complaint filed by the Food and Drug Administration. ASP President Bernard Zovighian will pay $30,000, while Richard Alberti, quality and compliance vice president, will pay $20,000. None admitted wrongdoing.

'ASP's actions violated the law and put patients at unnecessary risk for infection,' Steve Silberman, director of compliance at the FDA Center for Devices and Radiological Health, said in a statement.

Last year, ASP announced two recalls affecting a product called the Cyclesure 24 Biological Indicator, which is used to make sure that medical equipment sterilized using ASP's Sterrad low-temperature cleaning machines is free of bacteria, fungi and viruses.

FDA inspectors, according to a civil complaint last July, uncovered evidence that the company sold the Cyclesure 24 tests with 15-month expiration dates even though ASP's internal studies had not established the product's safe shelf life was that long.

After the issue was discovered, ASP shortened the shelf life of the Cyclesure indicators to six months. The company also recalled all lots of the products manufactured between February 2008 and December 2011.

Dirty endoscopes used during colon cancer screenings, for example, have been implicated in the transmission of hepatitis C and many types of bacteria, according to ASP's own website. 

Note that this case involves not just legal technicalities, but failures of disclosure that could have put real patients at risk of significant harm.

The Context

This case comes only one week after we discussed a huge ($2.5 billion) settlement by Johnson and Johnson of allegations that it withheld data about major safety problems affecting metal-on-metal hip prostheses, and two smaller settlements of allegations that it withheld safety data about the drug Topamax.


It is noteworthy that in this much smaller current settlement, two admittedly relatively low-level executives had to pay fines amounting to 4% of what the company had to pay. This is unusual.  Usually corporate executives escape any negative consequences, even in cases involving large amounts of money or possible harm to many patients.  If last week's settlement were to have imposed proportionate fines on executives, those fines would have totaled $100 million

The latest settlement does seem to follow the usual pattern: relatively small time individual offenders pay a penalty, while very rich and powerful individual offenders avoid all penalties. (For example, look here to see how one US prosecutor handled the case of Aaron Swartz versus the cases of misdeeds by big corporations)   Impunity by rich and powerful leaders of big organizations, and failure to enforce laws broken by such people is a very old story in American history, but that pattern was interrupted briefly after the great depression through the 1970s.  Now impunity for the rich and powerful is back, and maybe that is why 43% of the American population think our health care system is corrupt (look here).


Of course, the current settlement involved no admissions of wrongdoing.  Like most legal actions against big health care organizations, it is thus paradoxical.  Fines are paid, but at least on paper, not because of any wrongdoing.  So what were the penalties for?  Who knows?  But allowing a settlement without an admission of wrongdoing allows the next settlement to be made as if it were dealing with an isolated problem. 

As we mentioned in our last post on Johnson and Johnson, the latest settlement should be added to an increasingly  long list of the company's legal woes, often involving allegations and evidence of other unethical actions, sometimes involving guilty pleas to charges of such actions (see compilation of the record through July, 2013 here.)  Yet each settlement or action seems to take place in a vacuum, with no attention to what appears to be the company's record of ethical recidivism.  Of course, since nearly every action eschewed admissions of wrongdoing, on paper, there was no legal record of recidivism.  The whole situation is becoming so absurd that Jon Stewart on the Daily Show parodied the ability of Johnson and Johnson, and other big corporations, to escape any meaningful negative consequences of their actions.

The Daily Show
Get More: Daily Show Full Episodes,The Daily Show on Facebook

As quoted on the Wrap

'Holy sh**t. They knowingly bribed doctors to give useless drugs to old people, the disabled and babies,' a stunned Stewart said. 'You’re not even allowed to do that in ‘Grand Theft Auto.''

When these issues start becoming subjects of popular parody, maybe I can entertain a tiny hope that something might be done.

 Conclusion

So I get to say again, again again...  many of largest and once proud health care organizations now have recent records of repeated, egregious ethical lapses. Not only have their leaders have nearly all avoided penalties, but they have become extremely rich while their companies have so misbehaved.

These leaders seem to have become like nobility, able to extract money from lesser folk, while remaining entirely unaccountable for bad results of their reigns. We can see from this case that health care organizations' leadership's nobility overlaps with the supposed "royalty" of the leaders of big financial firms, none of whom have gone to jail after the global financial collapse, great recession, and ongoing international financial disaster (look here). The current fashion of punishing behavior within health care organization with fines and agreements to behave better in the future appears to be more law enforcement theatre than serious deterrent.  As Massachusetts Governor Deval Patrick exhorted his fellow Democrats, I exhort state, federal (and international, for that  matter) law enforcement to "grow a backbone" and go after the people who were responsible for and most profited from the ongoing ethical debacle in health care.

As we have said before, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior.

Roy M. Poses MD on Health Care Renewal 

There They Go Again, Again... - Johnson and Johnson Loses Two Civil Cases, Makes $2.5 Billion Settlement Based on Claims it Withheld Safety Data on its Products

There has been some talk by US government officials that any day now they will actually get tough on corporate executives whose organizations are involved in multiply unethical actions (perhaps using the legally valid, but massively neglected responsible corporate officer doctrine, look here).  However, the march of legal settlements by such corporations continue without any hints of negative consequences for the people who might have actually been involved in unethical activity. 

So, we note another week, another multi-billion dollar settlement and another loss of a civil lawsuit by huge drug, device and biotechnology company Johnson and Johnson

The Articular Surface Replacement Metal-on-Metal Hip Prosthesis Settlement

After various rumors, the report of the settlement appeared in a New York Times article on November 19, 2013.  The basics were,

Johnson & Johnson and lawyers for patients injured by a flawed hip implant announced a multibillion-dollar deal on Tuesday to settle thousands of lawsuits, but it was not clear whether the deal would satisfy enough claimants.

Under the agreement, the medical products giant would pay nearly $2.5 billion in compensation to an estimated 8,000 patients who have been forced to have the all-metal artificial hip removed and replaced with another device. 

Separately, the company has agreed to pay all medical costs related to such procedures, expenses that could raise the deal’s cost to Johnson & Johnson to $3 billion, people familiar with the proposal said.

Under the plan, the typical patient payment for pain and suffering caused by the device would be about $250,000 before legal fees. Based on standard agreements, plaintiffs’ lawyers would receive about one-third of the overall payout, or more than $800 million, with those who negotiated the plan emerging as big winners.

The proposed settlement, which was submitted on Tuesday to a federal judge in Toledo, Ohio, must receive the support of 94 percent of eligible claimants to go forward.

An earlier NY Times article on a rumored version of the settlement emphasized that relevant litigation had featured strong allegations that Johnson  and Johnson's DePuy subsidiary hid what it knew about the faults of the device,

The A.S.R. hip was sold by DePuy until mid-2010, when the company recalled it amid sharply rising early failure rates. The device, which had a metal ball and a metal cup, sheds metallic debris as it wears, generating particles that have damaged tissue in some patients or caused crippling injuries. 

DePuy officials have long insisted that they acted appropriately in recalling the device when they did. However, internal company documents disclosed during the trial of a patient lawsuit this year showed that DePuy officials were long aware that the hip had a flawed design and was failing prematurely at a high rate.

Many artificial hips last 15 years or more before they wear out and need to be replaced. But by 2008, data from orthopedic databases outside the United States also showed that the A.S.R. was failing at high rates in patients after just a few years.

Internal DePuy projections estimate that it will fail in 40 percent of those patients in five years, a rate eight times higher than for many other hip devices. 

A later NY Times article about plaintiffs' sometimes negative reactions to the settlement added,

 The DePuy Orthopaedics division of Johnson & Johnson estimated in an internal document in 2011 that the device would fail within five years in 40 percent of patients. Traditional artificial hips, which are made of metal and plastic, typically last 15 years or more before replacement. 

 DePuy officials have insisted that they acted properly in handling the device, including waiting until 2010 to recall it. However, internal company documents show that company officials were warned years before by their own consultants that the device was so problematic they would not use it in their patients. 

In January, 2013, the NY Times had reported in more detail about how DePuy executives concealed evidence about safety issues with the hips,

. Johnson and Johnson executives knew years before they recalled a troubled artificial hip in 2010 that it had a critical design flaw, but the company concealed that information from physicians and patients, according to internal documents disclosed on Friday during a trial related to the device’s failure.

The company had received complaints from doctors about the device, the Articular Surface Replacement, or A.S.R., even as it started marketing a version of it in the United States in 2005. The A.S.R.’s flaw caused it to shed large quantities of metallic debris after implantation, and the model failed an internal test in 2007 in which engineers compared its performance to that of another of the company’s hip implants, the documents show.

Still, executives in Johnson & Johnson’s DePuy Orthopaedics unit kept selling the A.S.R. even as it was being abandoned by surgeons who worked as consultants to the company. DePuy executives discussed ways of fixing the defect, the records suggest, but they apparently never did so.

Plaintiffs’ lawyers introduced the documents on Friday in Los Angeles Superior Court during opening arguments in the first A.S.R.-related lawsuit to go to trial.

In particular, 

In 2007, DePuy engineers tested the A.S.R.’s rate of wear to see if it matched the wear rate of another all-metal hip implant made by the company. It did not.

'The current results for A.S.R. do not meet the set acceptance criteria for this test,' that report stated.

The same year, company officials began discussing ways to fix the problem, like redesigning the cup to eliminate the groove. But at the same time, it was actively marketing the A.S.R. to surgeons in the United States, who were implanting it into tens of thousands of patients.

'We will ultimately need a cup redesign, but the short-term action is manage perceptions,' one top DePuy sales official told a colleague in a 2008 e-mail. A DePuy executive, Andrew Ekdahl, who is now the unit’s president, was also told by a company consultant that the A.S.R. was flawed, according to another document. 

In mid-2008, DePuy apparently abandoned the redesign project, an internal document indicates. A company spokeswoman, Mindy Tinsley, declined to comment on the document. 

In the fall of 2009, the Food and Drug Administration rejected DePuy’s application to sell the resurfacing version of the A.S.R. in the United States, saying it was concerned about, among other things, “high concentration of metal ions” in the blood of patients who received it. 

DePuy executives soon started making financial estimates of when the company should stop selling the A.S.R., based on the time it would take to convert surgeons to another company implant, a document shows.

So the evidence introduced in litigation suggested that top DePuy executives knew the design was faulty, but chose to not disclose the evidence of this, and not to withdraw the product, but rather to "manage perceptions." 

As is typical of most settlements made by big health care corporations in the last 10 years, no one at DePuy or its Johnson and Johnson parent who might have authorized, directed, or implemented the continued sales of the device despite warnings that it might be unsafe would have to suffer any negative consequences.  In particular, apparently Mr Ekdahl will not suffer any such consequences (and was not obviously named in the few news reports of the settlement.)   Mr Ekdahl, now Worldwide President, DePuy Synthes Joint Reconstruction, was quoted in the official Johnson and Johnson news release about the settlement.

The Topamax Verdicts

This case, which was much smaller in terms of the monetary amounts involved, got much less coverage, but Bloomberg did report on November 18, 2013,

Johnson & Johnson's  Janssen Pharmeceuticals unit was ordered by a Philadelphia jury to pay $11 million in a case claiming its anti-seizure drug Topamax caused birth defects, the second such loss in less than a month.

Again, the case involved claims that the company withheld information about the safety of its product,

Janssen failed to adequately warn doctors for Haley Powell, a stay-at-home mother, of the risks of Topamax before she gave birth to a son with a cleft lip, jurors in state court in Philadelphia found today.

'Janssen has long known that this drug causes debilitating birth defects and yet intentionally kept this information from physicians and patients,' Shelley Hutson, an attorney for Powell, said after the verdict was read.

Furthermore,

 Janssen knew as early as 1997 that animal studies showed an increased risk for birth defects, especially oral clefts, Hutson said during closing arguments on Nov. 15.


Hutson accused Janssen of operating in a culture of secrecy and of intentionally concealing safety reports in 2003 and 2005.She rejected arguments by the company that it presented the information on poster boards, in abstracts and at medical conferences. Those actions “do not keep patients safe,” Hutson said.

'As early as 1997 in admission after admission, this company knew and they didn’t tell the doctors,' Hutson said.

A report in Law360 emphasized,

 Plaintiffs in the Pennsylvania suits alleged the company didn't fully, truthfully or accurately disclose Topamax data to the FDA, to them and to their doctors. As a result, Janssen intentionally and fraudulently misled the medical community, the public and herself about the risks to a fetus associated with the use of Topamax during pregnancy, plaintiffs claimed.

 Summary

There they go again....  So Johnson and Johnson has announced two multi-billion dollar settlements in one month (November, 2013, look here for the first).  It also announced a smaller settlement involving the marketing of Topamax, which is now in addition to a 2010 guilty plea for misbranding Topamax in 2010 (look here).  Note that all the November, 2013 legal actions involved allegations, often backed by seemingly convincing evidence produced in litigation (as noted above), of deceptive, unethical practices.  Both cases above included allegations that the company sold products without fully disclosing those products' harms to patients.  Furthermore, all the month's legal actions are now added to a long list of Johnson and Johnson's legal woes, often involving allegations and evidence of other unethical actions, sometimes involving guilty pleas to charges of such actions (see compilation of the record through July, 2013 here.)  (By the way, Synthes, which is now another Johnson and Johnson subsidiary, and is not run by the same individual on whose watch the ASR case occurred, has had its own legal and ethical woes, look here.) 

Yet despite this lengthy and sorry record, no individual manager or executive at Johnson and Johnson, including its many and confusing subsidiaries, seems to have suffered any negative consequences for authorizing, directing, or implementing any unethical activities, whether they risked harming patients, or whether they resulted in a guilty plea by a corporate entity.  Instead, as we have discussed most recently here, the top executives of the company have grown very rich. 

So since the US government seems to continue to recycle its policy of allowing corporate managers and executives impunity regardless of how repetitively harmful their actions might be to patients' and the public's health, I will recycle my comments from earlier in November, 2013,....

The latest settlement in the parade is another marker of the sort of conduct that big health care organizations have exhibited to increase revenue, and to use that revenue as a rationale for making their top insiders very rich.  The particular conduct alleged here could have put patients at risk, partly by deceiving health care professionals.  Yet in their wisdom, top US law enforcement saw fit not to try to hold any individuals accountable for this conduct, and allowed the company to deny any misconduct other than a single misdemeanor by a subsidiary.  This occurred despite the company's history of multiple legal settlements and findings of guilt in various courtrooms.

Yet none of these actions has resulted in any negative consequences for any individual within the company.  No one who authorized, directed, or implemented bad behavior will pay any penalty, even were the bad behavior to have lead to significant personal enrichment.

As we have said ad infinitum, and on the occasion of a previous Johnson and Johnson settlement, many of largest and once proud health care organizations now have recent records of repeated, egregious ethical lapses. Not only have their leaders have nearly all avoided penalties, but they have become extremely rich while their companies have so misbehaved.

These leaders seem to have become like nobility, able to extract money from lesser folk, while remaining entirely unaccountable for bad results of their reigns. We can see from this case that health care organizations' leadership's nobility overlaps with the supposed "royalty" of the leaders of big financial firms, none of whom have gone to jail after the global financial collapse, great recession, and ongoing international financial disaster (look here). The current fashion of punishing behavior within health care organization with fines and agreements to behave better in the future appears to be more law enforcement theatre than serious deterrent.  As Massachusetts Governor Deval Patrick exhorted his fellow Democrats, I exhort state, federal (and international, for that  matter) law enforcement to "grow a backbone" and go after the people who were responsible for and most profited from the ongoing ethical debacle in health care.

As we have said before, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior.

Roy M. Poses MD on Health Care Renewal 

A New, and Huge ($2.2 Billion) Settlement for Johnson and Johnson, but "No Individuals were Charged with Wrongdoing"

The march of legal settlements made by big health care organizations has resumed with a bang.  As reported in most major media outlets, giant drug/ device/ biotechnology company Johnson and Johnson has made a big settlement with the US Department of Justice.

The Basics of the Settlement

As reported by Bloomberg / Businessweek,

Johnson & Johnson agreed to resolve criminal and civil probes into the marketing of Risperdal, an antipsychotic drug, and other medicines by paying more than $2.2 billion, one of the largest U.S. health-fraud penalties. 

J&J’s Janssen unit will plead guilty to a misdemeanor criminal charge over misbranding Risperdal for uses not approved by the Food and Drug Administration, including treating elderly patients with dementia. Under a plea agreement announced today, Janssen will pay a $334 million fine and forfeit $66 million.

Janssen also settled civil claims that it marketed Risperdal without approval for the elderly, children and the mentally disabled, and that it paid kickbacks to physicians and to Omnicare Inc., the largest pharmacy for nursing homes. The civil accord covered off-label marketing of Risperdal; Invega, another antipsychotic; and Natrecor, a heart drug.

This settlement covered conduct that health care professionals ought to find particularly disturbing, including marketing Risperdal for elderly people with dementia without an approved indication, despite evidence that it could be particularly harmful to those patients; marketing Risperdal to adolescent boys without an indication, again despite evidence that it could be particularly harmful to those patients; and using kickbacks to market Risperdal.

Promoting Risperdal for Dementia Despite Increased Risk of Death

This issue was best summarized by the Wall Street Journal,

Prosecutors alleged that J&J's Janssen Pharmaceuticals unit promoted Risperdal to elderly patients suffering from dementia, despite no approval for that use. Prosecutors also alleged that J&J's 'ElderCare' sales force pushed Risperdal for use in these elderly patients, and sales representatives' bonus awards failed to distinguish prescriptions for schizophrenia or the unapproved dementia use.

In 2005, the FDA required the label warn that elderly patients suffering from dementia-related psychosis were at a higher risk of death.

The New York Times added,

 Johnson & Johnson officials tried to expand the market for Risperdal to older dementia patients soon after the drug was approved in 1993 to treat symptoms of psychiatric disorders, according to federal court filings. 

The drug, whose generic name is risperidone, was primarily tested in schizophrenia patients, and the Federal Drug Administration repeatedly rejected efforts by the company to expand the drug’s use to older dementia patients, according to the filings.

But Johnson & Johnson, federal officials said, actively pursued the market for geriatric patients. The company created a dedicated sales force, ElderCare, to promote the drug and others to doctors who primarily treated older patients.

The drug, the company claimed, could address symptoms that made treating these patients a challenge, especially in a nursing home setting, including agitation, confusion, hostility and impulsiveness. The company’s sales brochures highlighted these symptoms and minimized the fact that the drug was approved to treat schizophrenia, according to federal documents.

 Federal officials said the company knew that Risperdal posed serious health risks for older adults, like an increased risk of strokes, but it played them down. The drug’s label was later updated to warn against the use of the drug in older patients with dementia.

So the allegations were that the company pursued an elaborate and deceptive strategy to promote the drug for elderly dementia patients despite knowledge that the drug was particularly risky for such patients.

Promoting Risperdal for Adolescent Boys Despite Increased Risk of Gynecomastia

Again, per the WSJ,

Prosecutors also alleged that J&J promoted Risperdal for use by boys suffering from mental disabilities despite knowing that use could raise levels of a hormone stimulating breast development.

The NYT added,

Federal prosecutors also say, as part of the civil settlement, that Johnson & Johnson promoted the use of Risperdal in people with mental disabilities and children, even though the company did not receive F.D.A. approval to market to children until 2006. Janssen told its sales representatives to visit child psychologists and mental health facilities that mainly focused on children, promoting the drug as a safe treatment for disorders like attention deficit hyperactivity disorder and obsessive-compulsive disorder, the government said. 

Johnson & Johnson knew that children were susceptible to certain health risks from taking Risperdal, including the possibility that boys could develop breasts through elevated production of the hormone prolactin, federal officials said. 

Again, the allegations were that the company pursued an elaborate deceptive strategy to market the drug for children despite knowledge that the drug was particularly risky for such patients.  

No Executives were Discomfited by the Disposition of This Case

The company took pains to emphasize that the settlement only required a single guilty plea to a misdemeanor by a company subsidiary, and did not involve any other admissions of guilt, or any penalties to specific human beings.  For example, per Bloomberg/ Business Week,

'Today we reached closure on complex legal matters spanning almost a decade,' Michael Ullmann, J&J’s general counsel, said in a statement. 'This resolution allows us to move forward and continue to focus on delivering innovative solutions that improve and enhance the health and well-being of patients around the world.'

While Janssen 'accepts accountability' for the actions described in the misdemeanor plea, the civil settlement 'is not an admission of any liability or wrongdoing, and the company expressly denies the government’s civil allegations,' J&J said.

So why give up a perfectly good $2.2 billion (minus $400 million fine and forfeiture by the Janssen subsidiary for the single misdemeanor)?  Was "closure" all that valuable?

In addition, in the NY Times we found ,

Ernie Knewitz, a spokesman for Johnson & Johnson, noted that the misdemeanor charge was being entered on behalf of the company and no individuals were charged with wrongdoing. 'Mr. Gorsky [current CEO] has been an outstanding Johnson & Johnson leader for more than 20 years,' he said.

Would you expect someone who works for Mr Gorsky to say otherwise?  Yet it was on Mr Gorsky's watch that much of the alleged bad conduct actually happened. 

Alex Gorsky was promoted to chief executive officer of J&J in April 2012, in part because of his record of generating sales as leader of Janssen Pharmaceuticals.

Furthermore, the Inquirer noted that Mr Gorsky was deposed in one of the many civil lawsuits filed by patients against Johnson and Johnson.

The 60-page transcript of Gorsky's deposition in one of the Philadelphia suits was part of the publicly available court record. In the transcript, McCormick walks Gorsky through discussions from 2001 with Joseph Biederman, a Harvard medical school professor and a Massachusetts General Hospital pediatric psychiatrist who gained fame - and criticism - for advocating the use of pharmaceuticals to treat children with perceived mental illness. That was before the U.S. Food and Drug Administration approved, in still-limited ways, drugs such as Risperdal for children.

In a one-page letter dated Dec. 7, 2001, Biederman requested $500,000 to start what became the Johnson & Johnson Center for the Study of Pediatric Psychopathology. Gorsky said in the deposition that he approved that payment.

Gorsky was asked whether he had been hoping Biederman and, by extension, Massachusetts General Hospital and Harvard, would help J&J to get wider diagnosis and treatment for child and adolescent mental disorders.

'I think our goal was to, yes, have better diagnostic criteria for children who are in need of treatment and to have better therapeutic options for children who are in need of treatment,' Gorsky said.

Also in the transcript, McCormick discussed with Gorsky a document called the 'Annual Report 2002: The Johnson & Johnson Center for Pediatric Psychopathology at Massachusetts General Hospital.' Biederman was the director of the center, and one of the goals of its research, according to the report, was that 'it will move forward the commercial goals of J&J.'

Thus this testimony seems to imply that current Johnson and Johnson CEO Gorsky was involved in making large payments to an important key opinion leader (KOL) who was supposed to use his academic gravitas to "move forward the commercial goals" of Johnson and Johnson, specifically by promoting Risperdal for children.

Yet, as we discussed above, neither Mr Gorsky nor any other person at Johnson and Johnson who might have authorized, directed, or implemented the alleged conduct which was the subject of the settlement, conduct which Johnson and Johnson of course denies was misconduct, suffered any negative consequences.

Mr Gorsky's total compensation as CEO in 2012 was $10,977,109 according too the company's 2013 proxy statement. The retiring CEO, William Weldon, on whose overall watch the alleged events occurred, received $29,838,259 that year.  We last discussed their compensation and its contrast with the company's ethical track record here.

These payments also occurred despite all the other settlements Johnson and Johnson has had to make because of allegations about its marketing of Risperdal.  As described by Bloomberg/ Businessweek,

The settlement won’t resolve suits brought by attorneys general in Arkansas, Louisiana and South Carolina, where the company has appealed or has said it will appeal judgments over Risperdal sales.

Judges or juries in those states have ordered J&J to pay a total of about $1.8 billion in damages and fines over Risperdal marketing campaigns that were found to have misled doctors and patients about the drug’s health risks and effectiveness.

In 2012, a judge in Arkansas ordered the drugmaker to pay $1.2 billion in fines over Risperdal marketing. That verdict came three months after J&J decided to end a trial in Texas over the drug’s sales with a $158 million settlement. The Arkansas judge also awarded the state $180 million in attorney fees, J&J said in an August regulatory filing. The company is appealing the judgment.

In June 2011, a judge in South Carolina ordered J&J to pay $327 million in penalties for deceptively marketing the medicine. Ten months earlier, jurors in Louisiana ordered the drugmaker to pay almost $258 million to state officials over J&J’s Risperdal marketing campaign in the state. A Louisiana judge later ordered the drugmaker to pay an additional $73.3 million in attorney fees and costs.

The payments further occurred despite a previous settlement involving another drug whose marketing was at issue in the current settlement, according to Bloomberg / Businessweek,

In October 2011, J&J’s Scios unit pleaded guilty to a misdemeanor violation over Natrecor and paid an $85 million criminal fine.

Finally, the compensation was given despite other legal actions not having to do with Risperdal, Invega or Natrecor, as we most recently summarized,
- A guilty plea for misbranding Topamax in 2010 (look here)
- Guilty pleas to bribery in Europe in 2011 by J+J's DePuy subsidiary (look here)
 - Accusations that the company, which makes smoking cessation products, participated along with tobacco companies in efforts to lobby state legislators (see post here)

Summary

The latest settlement in the parade is another marker of the sort of conduct that big health care organizations have exhibited to increase revenue, and to use that revenue as a rationale for making their top insiders very rich.  The particular conduct alleged here could have put patients at risk, partly by deceiving health care professionals.  Yet in their wisdom, top US law enforcement saw fit not to try to hold any individuals accountable for this conduct, and allowed the company to deny any misconduct other than a single misdemeanor by a subsidiary.  This occurred despite the company's history of multiple legal settlements and findings of guilt in various courtrooms.

Yet none of these actions has resulted in any negative consequences for any individual within the company.  No one who authorized, directed, or implemented bad behavior will pay any penalty, even were the bad behavior to have lead to significant personal enrichment.

As we have said ad infinitum, and on the occasion of a previous Johnson and Johnson settlement, many of largest and once proud health care organizations now have recent records of repeated, egregious ethical lapses. Not only have their leaders have nearly all avoided penalties, but they have become extremely rich while their companies have so misbehaved.

These leaders seem to have become like nobility, able to extract money from lesser folk, while remaining entirely unaccountable for bad results of their reigns. We can see from this case that health care organizations' leadership's nobility overlaps with the supposed "royalty" of the leaders of big financial firms, none of whom have gone to jail after the global financial collapse, great recession, and ongoing international financial disaster (look here). The current fashion of punishing behavior within health care organization with fines and agreements to behave better in the future appears to be more law enforcement theatre than serious deterrent.  As Massachusetts Governor Deval Patrick exhorted his fellow Democrats, I exhort state, federal (and international, for that  matter) law enforcement to "grow a backbone" and go after the people who were responsible for and most profited from the ongoing ethical debacle in health care.

As we have said before, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior.

Addendum - Other Comments

See also similar sentiments from 1BoringOldMan,

 J&J closes out the escrow fund set aside for this settlement. Alex Gorsky goes to his West Point Anniversaries and Boy Scout Board meetings an ongoing success story [shoveling…]. And what was this all about?

This is the way the world ends

This is the way the world ends

This is the way the world ends

Not with a bang but a whimper

and in a press release from Public Citizen,

Until more meaningful penalties and the prospect of jail time for company heads who are responsible for such activity become common, companies will continue defrauding the government and putting patients’ lives in danger.

There They Go Again - Omnicare to Settle for $120 Million

The march of legal settlements seems to be on its way again.


The Latest Settlement

The details, per Reuters,

Omnicare, Inc, a leading U.S. provider of pharmacy services to the elderly, has agreed to pay the U.S. government $120 million to settle allegations the company gave nursing homes steep discounts on prescription drugs in exchange for patient referrals.

Cincinnati-based Omnicare announced the settlement on Wednesday in a filing with the U.S. Securities and Exchange Commission, but denied any wrongdoing. The lawsuit, filed in 2010 by former Omnicare employee Donald Gale, had been scheduled to go to trial on October 28.

Gale accused the company of engaging in a kickback scheme called 'swapping' in which Omnicare allegedly gave nursing homes heavily discounted prescription drugs for inpatients covered by Medicare Part A. That federal benefit program pays skilled nursing facilities a fixed fee per patient, per day, for the first 100 days of a patient's stay, according to court filings.

In exchange, the nursing homes allegedly referred their other patients, many covered by other federal benefit programs, allowing Omnicare to bill the full price of their prescription drugs and pharmacy services, the lawsuit said.

As is usually the case, 

Omnicare's vice president of investor relations, Patrick Lee, said in an emailed statement that the company did not admit liability in settling the lawsuit.

'The Company agreed to settle the matter in order to avoid continued litigation and to focus on its mission of helping to ensure the health of seniors and other patient populations in a cost-effective manner,' he said.

He did not comment on the discrepancy between the alleged kickback scheme apparently meant to increase company revenue and that bit about ensuring health in "a cost-effective manner."

Will There be Still Others?

In addition, the Cincinnati Business Courier quoted another Omnicare executive,

'This settlement is not an admission of liability, and Omnicare continues to deny that there was any wrongdoing,' Robert Kraft, chief financial officer for Omnicare, said Wednesday in a conference call with market analysts regarding the company’s third-quarter earnings. 'When we agree to settle these types of matters, we have and will continue to make decisions in the best interest of our shareholders. …'

'We operate in a highly regulated industry, and we believe additional matters will likely arise against the company in the future,' Kraft said. 'We believe the matters of which we are now aware, including the aforementioned settlement, are manageable given the company's financial position and cash-flow characteristics.'

Was that an admission that the company often violates regulations?  It is hard to tell.  However, it is clear that this is not the first settlement of allegations of bad behavior that the company has made.

The Previous Settlements

The Cincinnati Business Courier article also stated,
 

I reported in August on the settlement of a lawsuit filed on behalf of Omnicare, which had alleged that a former president and CEO as well as some other former officers or directors of the company had violated federal laws related to kickbacks and false claims.

That settlement was for a mere $16.7 million.

In addition, as we discussed in 2010, in 2009, we discussed a $98 million settlement made by Omnicare, US based corporation that manages pharmacy-benefits, of allegations that it received kickbacks from generic drug manufacturers for buying and recommending their drugs.  Omnicare had previously submitted to a corporate integrity agreement in 2006, and paid $102 million to settle allegations it defrauded Medicaid.

So the count so far is four settlements for a total of approximately $337 million, and one corporate integrity agreement.

Summary

So Omnicare is yet another of the many large health care organizations which have been subject to various legal actions suggesting diverse kinds of bad behavior.  Omnicare, like many of these, has paid penalty upon penalty, yet each settlement seems to be made in a vacuum without reference to prior events.  Furthermore,  almost no settlement, and no settlement made by Omnicare, ever either imposed a large enough penalty on the company to deter further problems, or imposed any - I repeat any - negative consequences on anyone at the company who authorized, directed, or implemented the bad behavior.  So, as obliquely stated by the Omnicare CFO in this case, expect further "matters" to be addressed in the future.

So as we said on the subject of Omnicare in 2010,

 the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior by health care organizations. Even large fines can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: 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. 

 By Roy M. Poses on Health Care Renewal

Justice Delayed - Two Device Companies Still Settling Cases from 10 Plus Years Ago

Here we go again.  After a hiatus during which the US media and perhaps parts of the government were preoccupied with such issues as the ongoing controversy over health care reform, and a government shutdown apparently arising out of this controversy, the march of legal settlements involving big health care organizations has resumed.

In alphabetical order,...


Boston Scientific

From the Minneapolis Star-Tribune on 17 October, 2013, an account of a settlement arising from alleged misbehavior that started in 2002,

A $30 million settlement between the U.S. Department of Justice and Boston Scientific will likely end a case involving the sale of defective heart devices from 2002 through 2005 by subsidiaries Guidant, Guidant Sales and Cardiac Pacemakers.

Note that the allegations were particularly egregious since they involved a company selling products they knew to be defective in ways that could prove fatal as if they were quite safe,

The settlement closes a fraudulent-claims lawsuit that alleged Guidant knowingly sold defective implantable defibrillators to health care facilities that implanted them into thousands of Medicare patients. 

In particular,

The government’s complaint said that Guidant knew as early as April 2002 that its Prizm 2 line of devices was defective and knew in November 2003 that its Renewal 1 and 2 devices were capable of short-circuiting and delivering an electric shock that 'arcs' back onto the device instead of being directed to an irregularly beating heart.

According to Boston Scientific’s website, 83 malfunctions and nine reported deaths have been connected with the Renewal devices and 40 confirmed malfunctions and five patient deaths have been associated with the Prizm devices. About 500 Renewal devices remain implanted worldwide; about 1,400 Prizm devices remain in patients, according to the website.

Although Guidant took action to fix the defects, the government alleged that the company continued to sell its remaining stock of the old, defective versions of the devices. In fact, federal officials say that as Guidant learned about the cause of the defect, it took steps to hide the problem from patients, doctors and the Food and Drug Administration.

According to the government, Guidant did not fully disclose the problem until May 2005, when two Minneapolis doctors publicly aired their concerns about one of the defibrillators after it failed to revive a 21-year-old Grand Rapids, Minn., patient. Guidant later admitted it had known for three years that the device could short-circuit, but chose not to alert doctors or the public.

This is only the latest settlement made by Boston Scientific since 2005,

Boston Scientific paid $27.5 billion to acquire Guidant in 2006. It has been paying quite a bit since in relation to Guidant’s defective defibrillators.

In 2007, Boston Scientific paid $240 million to settle claims with thousands of patients who had sued Guidant after the defective devices were recalled. Later, in February 2010, Guidant pleaded guilty to misleading the FDA about problems with the devices and paid a fine of $296 million.

In fact, the then case of the allegedly concealed implantable cardiac defibrillators (ICD) was one of the first cases of apparently unethical health care corporate management behavior leading to bad patient outcomes we discussed on Health Care Renewal.  (Look here for a more recent summary of this case.)

Yet despite the fact that this apparently deeply unethical conduct lead to patient deaths, no individual who authorized, directed or implemented the bad behavior has suffered any negative consequences for it over the eight years since the details first became public.

One physician who helped bring this case to light was also apparently concerned about the impunity of those responsible,

 Dr. Robert Hauser, one of the doctors who went public back in 2005, criticized the settlement on Thursday.

'The $30 million should have little impact on their business,' Hauser said in an e-mail. 'I find it very disturbing that such a small settlement was accepted by the DOJ in view of the magnitude of wrongdoing by Guidant management.'

Stryker Corp

This week, MLive.com reported on another settlement involving allegations of unethical behavior by a device company dating back to 2003,

 An investigation by federal authorities found that Stryker Corp. subsidiaries in five foreign countries made illicit payments and tried for several years to bribe doctors, health care professionals and government-employed officials in order to obtain or retain business.

Stryker  has agreed to pay more than $13.2 million to settle the charges.

The SEC charged the Kalamazoo-based medical technologies company with violating the Foreign Corrupt Practices Act,  alleging that its subsidiaries in Argentina, Greece, Mexico, Poland and Romania made illicit payments totaling approximately $2.2 million 'that were incorrectly described as legitimate expenses in the company’s books and records.'

The SEC said descriptions of the payments varied from a charitable donation to consulting and service contracts, travel expenses, and commissions.

The SEC states that Stryker made about $7.5 million in illicit profits as a result of the improper payments. It did not specify during what year all of the events occurred, but indicated some as far back as 2003.

Note that the payments seemed deliberately designed to corrupt health care professionals and managers, for example,

According to the SEC’s order, Stryker’s subsidiary in Greece made a purported 'donation' of nearly $200,000 in 2007 to a public university in Greece to fund a laboratory that was a pet project of a public hospital doctor. In exchange for the payment, the doctor agreed to provide business to Stryker.

Also,

The SEC stated that its investigation also found that Stryker subsidiaries bribed foreign officials by paying their expenses for trips that lacked any legitimate business purpose.

'For example, in exchange for the promise of future business from the director of a public hospital in Poland, Stryker paid travel costs for the director and her husband in May 2004,' according to the SEC. 'This included a six-night stay at a New York City hotel, attendance at two Broadway shows, and a five-day trip to Aruba.'

As in the case above, it appears that no individual who authorized, directed or implemented the questionable payments will suffer any negative consequences.  In fact, as is usual in such cases,

 The settlement does not not require Stryker to admit or deny the allegations,...

However, an SEC official did say,

 Stryker’s misconduct involved hundreds of improper payments over a number of years during which the company’s internal controls were fatally flawed. Companies that allow corruption to occur by failing to implement robust compliance programs will not be allowed to profit from their misconduct.

While Health Care Renewal has not discussed this particular case before, it is hardly the first case of bad conduct by Stryker that we have discussed.  In the past we noted
-  In 2012, a Stryker subsidiary pleaded guilty to misbranding in response to allegations that its marketers conspired to defraud physicians in order to sell a product to promote bone growth that proved harmful to patients (look here).
-  In 2010, Stryker settled a case alleging unfair and deceptive sales practices again used for bone growth accelerators (look here).  
-  In 2009, some apparently low-level Stryker employees pleaded guilty to promoting off-label use of these same products (look here). 
- In 2007, Stryker made an agreement allowing federal supervision after charges one of its units had violated anti-kickback laws when making supposed "royalty" payments, often huge, to orthopedic surgeons in connection with its production of prosthetic hips and knees.  Several other device companies signed deferred prosecution agreements, and as a result, for a time all had to make public their payments to doctors and various non-profit organizations.  (See summary here.) 

Summary

 This recent crop of settlements has some features in common.  The settlements involved multinational device companies.  The settlements occurred at least a decade after the alleged bad behavior started.  The settlements required only small payments - at least on a corporate scale -from the companies involved, but no negative consequences for anyone who authorized, directed, or implemented the bad behavior.  Finally, the settlements were made by companies who had striking past records of previous settlements of bad behavior.

The march of legal settlements demonstrates the pervasiveness of unethical behavior, often involving harm to patients or sullying of health care professionals, involving large, rich health care corporations.  It also demonstrates the impunity of the top leaders of such corporations who often make huge amounts of money despite, or perhaps because of their companies' misconduct.  Despite intermittent threats by US government officials to get tough with unethical behavior by health care corporations, this pattern has continued for years, as we have documented. 

True health care reform would hold leaders of health care organizations accountable for their organizations' behavior, and its effects on patients and health care professionals. 

The Mystery of the Northwestern Settlement - the Plot Thickens

A few weeks ago, we wrote about this curious case.

How the Case Stood

Northwester University, a prominent research university, settled charges it had mismanaged US government grant funds.  While it did not admit guilt, and specifically exonerated the faculty leader on whose watch the mismanagement allegedly occurred, the settlement and most of its coverage strongly suggested wrongdoing by the faculty member in charge of the scientific conduct of the grants, Professor Charles L Bennett.  While the alleged financial mismanagement was of funds in the mere millions, a relatively small amount as federal fraud cases go, and there were no allegations of anything harmful to patients, or of any research misconduct, the investigation involved multiple federal agencies, including the Federal Bureau of Investigation.  The settlement of charges of financial mismanagement, not research misconduct,  included unfavorable references to Dr Bennett, who as Principal Investigator should have been in charge of the scientific conduct of the grants, but not of their financial management.  Much bigger cases of alleged fraud, involving hundreds of millions of dollars, and potentially harm to patients due to overuse of dangerous drugs or devices, have not involved the FBI, and not included any disparagement of individuals who could have authorized, directed, or implemented the alleged misbehavior.

None of the initial press coverage noted the peculiarity of these aspects of the case, nor provided any explanations for them.      

Days later, the Cancer Letter published a long article in this case, which is now available without a subscription.  This article includes even more curiosities that raise even more questions.

Dr Bennett Found Irregularities, Sangoleye Pleaded Guilty, Nobody Noticed

In the original media coverage, Dr Bennett was accused based on complaints by a whistle blower.  For example, in an article in the Chicago Sun-Times,

 A whistleblower suit filed under seal in 2009 by former Lurie Cancer Center worker Melissa Theis first alleged the wrongdoing by Bennett.

However, the story in the Cancer Letter suggests Dr Bennett had tried to blow the whistle himself.  First,

Bennett said the allegations that he spent NCI money on dinners and vacations were inaccurate. He said he had encountered administrative irregularities at Northwestern and reported them to compliance officials.

In addition,

'I reported administrative issues by Northwestern University with my grants to the university compliance officer in 2006, just prior to my long-term bout with cancer that was diagnosed there,' Bennett said to The Cancer Letter. 'I have never had a single administrative discussion about the matter with anyone.'

Specifically,

Bennett’s statement about lax administration of grants at Northwestern appears to be bolstered by an aspect of the scandal that has escaped media attention even as multiple news stories in Chicago and national outlets focused on the settlement.

The Cancer Letter has learned that days before the settlement with Northwestern was announced, a former research administrator at the Division of Hematology and Oncology at the university’s medical school pled guilty to felony charges stemming from administration of Bennett’s NCI grants.

According to documents filed in the U.S. District Court for the Northern District of Illinois, Feyifunmi Sangoleye, the rogue administrator, set up an elaborate scheme to divert $86,000 to her personal accounts.The proceeds financed a wedding and a honeymoon in Europe, court documents say.

The article later included more detail,

Bennett said that he saw irregularities in the actions of the research administrator who handled his Research for Adverse Drug Events and Reports and that he has alerted the administration of the Division of Hematology and Oncology.

That same administrator, Sangoleye, pled guilty to larceny and theft, admitting to having embezzled NCI funds from Bennett’s program into a checking account created in the name of a fictitious contractor.

According to court documents, Sangoleye created a vendor code for a fictitious entity she called ATSDATA.

Then she created 10 false invoices from that entity and paid them with Northwestern’s checks.

The checks were sent to the ATSDATA post office box, which Sangoleye had rented, and placed into a bank account she created.

Between June 29, 2007, and July 29, 2008, ATSDATA received eight Northwestern checks that added up to $86,000. 'Sangoleye converted the proceeds of the ATSDATA checks to her own use and to the use of another' individual, the plea agreement states.

'I knew nothing about ATSDATA,' Bennett said in response to questions from The Cancer Letter. 'The administrator told me that ATSDATA was the billing address for the University of Illinois Survey Research Laboratory, a formal subcontractor. I did not know that the Survey Research Lab had any particular billing name. I have documented this to Jonathan Licht [chief of Northwestern’s Division of Hematology/Oncology] in 2008.'

So in summary, Dr Bennett, who was responsible for the scientific integrity but not the financial management of his grants, reported financial irregularities to Northwestern managers.  These reports lead to a guilty plea by a former Northwestern manager who admitted embezzling money.  However, this guilty plea was anechoic.  It did not appear in any media accounts.  The settlement negotiated between Northwestern University and the government did not acknowledge it.   


According to the Cancer Letter, Northwestern managers did not want to discuss the crimes of Sangoleye when the Cancer Letter brought it up,

 Northwestern officials declined to discuss Sangoleye, saying only that she had been employed by the university as a research administrator from February 2006 through August 2009.

The Cancer Letter suggested why the university might have had an interest in keeping the Sangoleye crimes and its settlement of the allegations about Dr Bennett apart.

Legal experts say that the final plea agreement between Sangoleye and the government would have weakened Northwestern’s position in negotiating the settlement. The final version of the plea agreement with Sangoleye was filed on July 25, just five days prior to the announcement of the government’s $3 million settlement with Northwestern.

Northwestern University might have had an interest in keeping the Sangoleye criminal case and its civil case separate.  However, the government did not obviously have such an interest.

Why did the government not address Sangoleye's crimes in the settlement it made with Northwestern University?

The Ambiguities of the Named Whistle Blower's Work

As we noted in our earlier post on this case, the role of the named whistle blower, Melissa Theis, was unclear, especially vis a vis Dr Bennett.  Although Dr Bennett as Principal Investigator of some of the grants involved ought not to have had any direct control of the financial management of the grants, Ms Theis apparently worked in some financial management capacity.  Yet Ms Theis apparently blew the whistle on the university, and on Dr Bennett for alleged financial, not research mismanagement.

The Cancer Letter raised new doubts about Ms Theis' role,

Several observers were surprised to see that the relator, Theis, was never employed by the cancer center.

According to her 2009 suit, Theis came to Northwestern as a temp two years earlier, in 2007, serving as a purchasing coordinator for the Division of Hematology and Oncology. The division, which is separate from the cancer center, administered all but one of the grants in question, the NIH database shows.

After a year, in 2008, Theis was hired as a fulltime employee of the Northwestern Medical Faculty Foundation. The foundation, which runs the medical practice, is also separate from the cancer center. She left Northwestern in October 2008.

'Theis specifically noted that invoices were submitted for consultants and services that were never included in the initial grant budget,' the complaint states. 'Invoices were submitted for consultants and services that were significantly in excess of the amount budgeted for the grant, and many of the consultants and vendors failed to provide detailed information about the actual services rendered.'

Again, in the usual practice, such invoices might have been requested by a grant investigator, but the requests would have to have been vetted and then the invoices would have to have been generated by managers, not scientists or physicians. 

Who really administered these grants, and why did the settlement minimize the responsibility of university managers while apparently blaming scientists for bad financial management?

Dr Bennett's Supporters and Enemies

In our first post on this case, we had contrasted how the settlement and media coverage of it appeared to heap blame upon Dr Bennett alone, while not attaching any responsibility to his academic supervisor on one hand, or any university managers on the other.  We noted that Dr Bennett, after having been a consultant for Amgen,  had become known as a "pharmascold," a skeptic of pharmaceutical industry practices, and the author of research that suggested one Amgen product was more hazardous than had been previously thought.  His supervisor, on the other hand, had multiple ongoing financial ties to the pharmaceutical industry.

The Cancer Letter suggested others were trying to connect related dots. First, in general,

Making enemies is an exhaustively studied side effect of probing the safety of cancer drugs, and during much of the period in question, Bennett was producing more than his standard quota of foes.

In particular,

Now, researchers who worked with Bennett on the ESA issues are puzzled by his legal problems.

'Charlie has been an important voice in raising concerns regarding the use of erythropoietin in patients with cancer,' said Anthony Blau, co-director, Institute for Stem Cell and Regenerative Medicine at the University of Washington. 'In particular, his 2008 metaanalysis, published in JAMA, heightened awareness of the issue and helped to reduce the indiscriminate use of erythropoietin in cancer patients.'

Blau is a co-author on the JAMA paper [as noted in our previous post.]

'This doesn’t really fit in his picture,' said Michael Henke, a radiation oncologist in Freiburg, Germany, who was the first to stumble across potential problems stemming from overuse of ESAs.

'You might recall, we got in contact in 2003 when our group communicated potential dismal effects of erythropoietin on cancer patients—a story not really appreciated these days because of economic interests,'  Henke said referring to the pioneering paper in The Lancet. Henke was the senior author on the JAMA paper.

'However, Dr. Bennett and we consistently gathered additional data that were finally reported as a meta-analysis in 2008. Consequently, erythropoietin prescriptions dramatically decreased, eventually prolonging or even saving lives of cancer patients.'

'While collaborating, I did learn him as extraordinarily active, alert-eyed colleague who strictly adhered to serious scientific conduct and to the wellbeing of patients.'

Henke confesses to wondering whether the many powerful enemies Bennett made in the pharmaceutical and biotechnology industries have struck back.

'We shouldn’t feed paranoia,' Henke said.  'However, given the exclusively positive experience when collaborating with his group, makes me wonder whether this litigation might follow some very particular other issues.'

Did Dr Bennett's transformation from a consultant to to a fierce scientific skeptic of the pharmaceutical industry influence the handling of this case, and its media coverage?

Summary

The coverage by the Cancer Letter underscores our previous concerns, so I will simply repeat the summary from my last post.

The settlement by Northwestern University, which was mainly about allegations made against Dr Charles L Bennett, who was not a party to the settlement, was very different that the vast majority of the march of legal settlements whose continuation we have frequently discussed.

The settlement and its media coverage raised important questions whose answers would be important to the assessment of  our current regulatory and legal response to misbehavior by and within large health care organizations.  Health Care Renewal is about raising such issues by commenting on public information, media reports, and research.  I hope those with capacity to investigate will consider these questions.  Inquiring minds want to know.

ADDENDUM (27 August, 2013) - See also comments by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog.


Roy M. Poses MD in Health Care Renewal