"Drug companies are now No. 1 When it Comes to Defrauding the Government"

A new report from Public Citizen, as summarized by National Public Radio:

Drug companies are now No. 1 when it comes to defrauding the government, leaving defense contractors in the dust.

A report from the consumer group Public Citizen says financial penalties against drug companies under the federal False Claims Act far outstripped defense contractors between 2007 and 2010.

The problem has been getting worse recently:

Documented pharma fraud has been accelerating lately, Public Citizen says. It looked at fines and settlements paid by drug companies over two decades. Since 1991 those penalties totaled $19.8 billion. But three-quarters of those occurred over the past five years.

Regarding the biggest offenders:

Just four giant drug companies – GlaxoSmithKline, Pfizer, Eli Lilly and Schering-Plough – account for more than have the pharma penalties over the past two decades. They belong to the Billion Dollar Club — companies that have paid out settlements of $1 billion or more. Altogether the four have paid $10.5 billion back to the government.

Reading the report itself makes the acceleration of drug company fraud settlements even more apparent (p. 12):

Data from the Department of Justice shows that annual federal FCA settlement totals for all industries have increased dramatically over the past 20 years, from $341 million in fiscal year (FY) 1991 to $3 billion in FY 2010. The proportion attributed to all Health and Human Services (HHS) cases (i.e., cases that involve pharmaceuticals and other health care industries), increased from 4 percent of the total in FY 1991 to 84 percent in FY 2010.

Furthermore,

the pharmaceutical industry did not comprise a substantial portion of federal FCA penalties until FY 2002, when it overtook the defense industry for the first time. For every year since and including FY 2007, the pharmaceutical industry total has far exceeded the defense industry total.

As stated above, the total healthcare industry (as represented by HHS totals), has been the biggest defrauder of the federal government under the FCA for most of the past decade. Defense industry payments and the combined total for all other (non-defense and non-HHS) sectors each represent an amount smaller than the pharmaceutical industry total alone since FY 2007. In addition, since FY 2008, the pharmaceutical industry’s FCA payments have exceeded the total law-violation payments of each of the other sectors within the health industry.

Of course, data about settlements of US False Claims Acts claims is only one, limited measure of unethical and criminal behavior. However, in lieu of better data, it is striking that the vast majority of such settlements are now by the health care sector, and the pharmaceutical industry in particular accounts for the biggest share of such claims within that sector.  

In my opinion, these data illustrate just how unethical, if not corrupt, health care in the US has become. It is particularly appalling because health care is not just another "industry," but traditionally was regarded as a calling to relieve suffering, and when possible prevent or cure disease. Traditionally, health care practitioners and health care institutions were held to higher standards than other industries, like the defense industry, or the trash hauling industry. Now, however, it appears that the health industry holds itself to the lowest standards.  Is it any wonder that our health care system is dysfunctional, or that our costs constantly rise, while access and quality decline.

This data should prompt massive outrage, and lead to yet more ringing calls (like those we discussed recently here and here) for reform, at least of specific aspects of health care.  I doubt that will happen, however, because these data, like so much of the cases and data we discuss on Health Care Renewal, probably will be muffled by the anechoic effect.

Despite its striking results, this report has not been covered in print by any major market newspaper. (Duff Wilson did blog about it for the New York Times.) The only US newspaper coverage so far appears to be in the New London (CT) Day. There has been no coverage on US television.

The Public Citizen report noted that the largest settlement for clinically related reasons was by Pfizer of $2.3 billion for unlawful promotion and kickbacks (see blog posts here). Despite the apparently staggering size of this settlement, a Google Scholar search revealed only one mention of it, and that rather tangential, in a large circulation US medical journal, the New England Journal of Medicine.(1) It was mentioned in the news sections of two major journals outside of the US, the British Medical Journal(2) and the Canadian Medical Association Journal.(3)

So unless US health care is about to change drastically, I do not expect any discussion of this data in the medical and health care literature. The likelihood that this report will be noticed by most physicians, health care researchers, or health care policy makers is almost nil.

Why does such striking information create so few ripples?  It has never been formally studied, to may knowledge.

However, I suspect it has to do first with the vast web of conflicts of interest that now drapes over health care.  As we have mentioned before, the majority of US medical school faculty,(4) and the majority of US medical schools' department chairs(5) have significant financial relationships with industry, often the pharmaceutical industry.   Some leaders of US academic mission are simultaneous members of boards of directors of for-profit health care corporations (e.g., see this example), and thus have fiduciary responsibilities towards those corporations.  Thus, how many academics are going to want to offend their employers, or their colleagues' and supevisors' employers, by writing about such recent unpleasantness as billion dollar pharmaceutical settlements for fraud? 

Second, it probably has to do with the power derived from the wealth of the leaders of pharmaceutical corporations, wealth they seem to amass no matter what ethical violations their companies pile up.  For example, according to the 2010 Pfizer Proxy Statement, Mr Jeffry Kindler, the CEO of Pfizer through this year, currently owns the equivalent of  1,084,212 shares of Pfizer stock (worth $18,615,920 at today's price of $17.17/ share), has the rights to 1,996,000 stock options, and received $5,534,285 total compensation in 2009, $7,553,015 in 2008, and $4,469,760 in 2007.  

I can only hope that the anechoic effect eventually breaks down, and a movement to truly reform US health care eventually develops.  True reform will require holding health care organizations to higher, not lower standards than trash haulers and gambling casinos, and regarding working in health care as a calling, rather than a means to satisfy one's greed.  

Hat tip to Prof Margaret Soltan on the University Diaries blog.

ADDENDUM (21 December, 2010) - See also this comment by Prof Margaret Soltan on the University Diaries blog, and comments (here and here) by "Condor" on the Shearlings Got Plowed blog.

References


1. Kesselheim AS, Studdart DM, Mello MM. Whistle-Blowers' experiences in fraud litigation against pharmaceutical companies. N Engl J Med 2010; 362:1832-1839. Link here.
2. Tanne JH. Pfizer pays record fine for off-label promotion of four drugs. Br Med J 2009; 339:b3657. Link here.
3. Anonymous. Federal committee to review Pfizer v-p appointment to CIHR council. Link here.
4. Campbell EG, Gruen RL, Mountford J et al. A national survey of physician–industry relationships. N Engl J Med 2007; 356:1742-1750. Link here.
5. Campbell EG, Weissman JS, Ehringhaus S et al. Institutional academic-industry relationships. JAMA 2007; 298: 1779-1786. Link here.

Finding Out About Health Care Bureaucracy the Hard Way

A persistent theme for Health Care Renewal has been how concentration and abuse of power in health care trap patients and heath care professionals in a maze of bureaucracy, perverse incentives, deception, and conflicts of interest.  To anyone who has to make the transition from person to patient, some of these problems become immediately obvious.  Consider, for example, this account of "going into a hospital for a minor procedure":

The very idea of being a patient is anathema. To people of my generation -- the 'me' generation -- who like to be in control, the experience begins with loss of control. First the paperwork -- three or four times paperwork has to filled out and given to a succession of strangers. Then they take all of your belongings, they tell you to take your clothes off, and make you put on a gown that leaves you nearly naked, put in you in very small room, bring you inedible food according to a schedule they determine.

And if you try to sleep, they leave lights on, and do everything they can to make sure you can't. At the end, if you are lucky, they deign to discharge you. Those of us who are boomers, entering a period where we will be drawing the biggest healthcare expenditure, will not put up with this.

This description of health care in the real world may not seem surprising to readers of Health Care Renewal. When health care is run by business people with no experience or training in actual patient care, and controlled by a proliferation of managers and bureaucrats (whose numbers increased by a factor of 8.26x from 1983 to 200), usually with similar business backgrounds, all motivated by short-term financial incentives to "make the numbers" at all costs, what other result would one expect?

Of course, many people outside of health care may not appreciate these problems until they become patients themselves. The person who wrote the description above apparently had avoided in-patient hospital care until the events he described, so on that basis his surprise can be excused.  On the other hand, his outrage was understandable.

But wait - the above is actually a quote by a speech to the Innovation Forum by no other than Jeffrey Kindler, Esq, the current CEO of Pfizer, the world's largest pharmaceutical company.

So his apparent surprise at what he found when he became a patient is ample evidence how unfamiliar he had been with real health care on the ground until this experience.  In fact, that the CEO of the world's largest drug company was so unfamiliar with the real world of health care until he had to become a patient ought to prompt some outrage too. 

I am not recommending that all executives of health care organizations undergo procedures. However, making sure that no one gets to a top leadership position in a health care organization without some real world health care experience might lead to some salutary changes in how health care is run.

Also, we noted here that Mr Kindler had been rewarded last year by his board of directors for his "constructive participation in the US legislative process to advance Pfizer's goals of achieving a more rational operating environment...." Maybe had he had his minor procedure earlier, he might have also wanted to advance the goal of making health care less bureaucratic and more focused on the patients.

Hat tip to Jim Edwards' blog on BNet.

Corporate Proxies Suggest CEOs Rewarded for Influencing Health Care Reform

We have frequently discussed the often outsized, if not outrageous compensation awarded to top leaders of health care organizations.  Such compensation may seem disproportionate to the leaders' real-world achievements, and may contrast with organizational actions that seem inept, mission-hostile, or unethical.

In perusing this year's crop of proxy statements from some of the biggest US health care corporations, I noted that some provide some narrative, qualitative justification for their top leaders pay.  I was struck by three similar statements:

Johnson and Johnson

We recently discussed the contrast between Johnson and Johnson CEO William Weldon's gargantuan compensation and his detached response to the findings of an inspection of one of his company's factories that lead to its shutdown and the recall of its products.   According to the company's 2010 proxy statement, Mr Weldon's total compensation approved  in 2010 was $19,847,026.   The proxy statement included this overview of his performance:

The Board believes that Mr. Weldon generally exceeded expectations despite substantial economic, political, regulatory and competitive challenges as well as significant patent expirations. As referenced in the table above, the Company delivered solid financial results and positioned itself for future growth.

Under "strategic results" was this statement:

Mr. Weldon played an effective role in helping shape health care policy around the world and has been very involved with efforts on U.S. Health Care Reform. Mr. Weldon’s personal involvement with key leaders and organizations has ensured the interests of the Company are well represented.

Pfizer

We recently discussed the contrast between Pfizer Inc CEO Jeffrey Kindler's sizable compensation and the number and size of lawsuits alleging unethical conduct that the organization has settled, and its criminal conviction as a "racketeering influenced and corrupt organization" (RICO). According to the company's 2010 proxy statement, Mr Kindler's total compensation in 2009 was $14,898,038. The proxy statement included an Executive Compensation Discussion and Analysis. Its summary of Mr Kindler's performance was:

The committee believes that Mr Kindler's leadership was a significant factor in the continued progress made by Pfizer in 2009 in strengthening the foundation for future growth and long-term success.

It also specifically addressed Mr Kindler's "industry leadership":

During 2009, Mr Kindler was actively involved, through both Pfizer and external organizations, in developing and advancing US and global public policies that serve the overall interest of our Company and our shareholders, as well as doctors and patients. These efforts included constructive participation in the US legislative process to advance Pfizer's goals of achieving a more rational operating environment....

UnitedHealth Group

We recently discussed the contrast between UnitedHealth Group CEO Stephen J Helmsley's large total compensation and the profit he recently made from the sale of stock options and various questions raised about his company's ethical performance.  According to the company's 2010 proxy statement, his 2009 total compensation was $8,901,916. The company's 2010 proxy statement stated his compensation was based upon a variety of factors, including:

Positive participation and leadership of the Company in the health care reform and modernization debate

Summary

We have noted how health care organization may be gripped by "compensation madness," caused by "insiders hijacking established organizations for their personal benefit."  One could view the statements above as just one form of post-hoc justification for compensation madness.  It is possible that timid, if not crony boards are simply getting more inventive in their rationalizing CEOs' imperial pay scales.  On the other hand, those justifying the compensation of three extremely well-compensated health care corporate CEOs may really believe what they wrote about their CEOs roles in health care reform. 

We have posted little about the US health care reform effort because so much of it seemed irrelevant to the concerns mentioned on Health Care Renewal.  Health care reform legislation did little to address problems with health care leadership, governance and ethics, and how they challenge health care professionals' values and lead to higher costs, declining access, poor health care quality and disgruntled health care professionals (see this summary).  Maybe one reason this was so was that the top leaders of health care organizations did a good job pushing their personal and organizational priorities into the reform legislation, meanwhile discouraging any provisions that might threaten the way they were leading their organizations, and how much they were making while doing so. 

There a many reasons for the popular dissatisfaction with the recently enacted US health care reform legislation.  The influence of the leadership of top health care corporations in promoting their, rather than the populace's goals, ought to be a topic of further inquiry.  Meanwhile, it may be that the "superclass" has struck again. 

Leaders of Discredited Financial Rating Agencies as Leaders of Health Care

This is the latest in our informal series on the cross-linkages between the thinking and leadership that lead to the global financial collapse/ great recession and that current in health care.  Last month, a US Senate sub-committee held hearings on the role of the rating agencies, actually for-profit corporations that evaluated securities, including derivatives, in the collapse. 

The Fundamentally Conflicted Rating Agencies

To briefly provide some background, these agencies were hired by the firms that created these securities to evaluate them.  Because the securities were complex, they were hard for investors to evaluate.  Investors had become used to using the rating agencies' evaluations as benchmarks for the quality and riskiness of complex securities.  Many did not seem to realize that the agencies themselves were for-profit corporations, or subsidiaries thereof, which made more money the more securities they rated.  The rating agencies gave many of their highest ratings (AAA) to securities that later failed.  (See an informal video discussion by corporate governance expert Robert A G Monks here.)

Some key quotes from the news coverage follow.

Former credit rating agency officials said on Friday that the quest for market share fueled a drive for short-term profits, sacrificing credit quality in the process.

Eric Kolchinsky, who was in charge of the Moody's (MCO.N) unit that rated subprime CDOs, or collateralized debt obligations, said that people 'across the financial food chain, from the mortgage broker to the CDO banker, were compensated based on quantity rather than quality,' according to testimony prepared for a Senate panel.

'The situation was no different at the rating agencies.'

from Reuters

Former Moody’s Investors Service and Standard & Poor’s employees said they were excluded from assessing mortgage bonds if they questioned Wall Street’s conclusions and that credit-rating companies focused on protecting business at the expense of accurate grading.

Richard Michalek, a former managing director in Moody’s structured products derivatives group, told the Senate Permanent Subcommittee on Investigations at a hearing today that managers said he was 'not welcome on deals' involving certain banks.

Eric Kolchinsky, who led the Moody’s group that rated collateralized debt obligations made up of mortgage bonds, said he was berated by his boss when the company lost business after implementing more conservative ratings.

S&P wrongly concluded that its increasing profits amid an inflated U.S. housing market was based on 'superior management skill and insight,' said Frank Raiter, a former managing director at the company. In reality, regulators had made the firm part of 'an oligopoly' by requiring investors to hold assets it rated, Raiter said.

per Bloomberg

The documents show, sometimes in excruciating detail, the conflicts of interest that many claim lie at the heart of the ratings business model and the concerns of employees about what was happening inside the companies well before the crisis broke.

One employee at Standard & Poor's, the world's largest rating agency, said its handling of awkward questions in the summer of 2007 made it 'sound like the Nixon White House'.

And,

As one Moody's managing director wrote to his superiors in 2007, the company's errors, made it look 'either incompetent at credit analysis, or like we sold our soul to the devil for revenue, or a little bit of both'.

per the Financial Times

The two companies targeted by these hearings were Moodys, and Standard & Poors (a subsidiary of McGraw-Hill Inc).

Overlaps with Health Care Leadership: Moody's Corporation

Perusal of the roster of the Moody's board of directors in 2008, per that year's proxy statement, reveals the following overlaps with health care leadership, of its 8 directors.

Connie Mack - is also on the boards of EXACT Sciences Corporation (a biotechnology company), and Genzyme.  He is the chair of the H. Lee Moffitt Cancer Center.

Henry A McKinnell Jr - was chairman of the board and CEO from 2001-06 of Pfizer Inc.

Basil L Anderson - is a member of the board of directors of Becton Dickinson.

Overlaps with Health Care Leadership: McGraw-Hill Inc

Via the company's 2008 proxy statement, of 12 directors:

Sir Winfried Bischoff - is a director of Eli Lilly and Company.

Linda Koch Lorimer - is Vice President and Secretary of Yale University, and a Director of Yale-New Haven Hospital.

Kurt L Schmoke - is a Trustee of the Howard Hughes Medical Institute

Sidney Taurel - was chairman and CEO of Eli Lilly and Company.

Summary

So, in summary, the 20 board members of one for-profit "ratings agency," and of the corporation of which the other major "ratings agency" was a subsidiary, served on the boards of 2 biotechnology corporations (EXACT Sciences Corporation and Genzyme), one medical device company (Becton-Dickinson), one pharmaceutical company (Eli Lilly) , 2 major academic medical centers (Moffitt Cancer Center and Yale-New Haven), and one medical research institution (Howard Hughes).  Two were recent former CEOs and chairmen of the boards of 2 of the world's largest pharmaceutical companies (Pfizer and Eli Lilly). 

Most of these health care organizations have been involved with cases we have discussed on Health Care Renewal (see links above).

Given the serious concerns about the conflicts of interest that became the core of these corporations' business models, and their central role in the global financial collapse, one has to wonder why so many of the directors who presided over them still have such influential positions in health care organizations?

As we have pointed out, as the world economy was driven to near ruin by "masters of the universe," some of the same also became leaders of academia and academic medicine in their spare time. Maybe this made sense 10 or 20 years ago, but why does it still make sense? On the other hand, now that we understand how bad the leadership of finance really was, it is a little easier to understand why the leadership of health care has become so bad. It seems reasonable to hypothesize that some of the problems of academia, and particularly the problems of medical academia, may have been at least enabled by leadership more used to working in an increasingly amoral marketplace than to upholding the academic mission. The failures of the leadership and governance of finance thus suggest we need to re-examine the leadership of health care.

Pfizer Settles One Lawsuit, Loses Another, Pays its CEO $13.7 Million

It's deja vu all over again for Pfizer Inc, the world's largest pharmaceutical company.

Settlement of Suit Alleging Neurontin Risks Concealed

Pfizer has kept busy in court defending against charges that a company it acquired promoted Neurontin (gabapentin) for uses not approved by the US Food and Drug Administration (FDA), and not well supported by the evidence.  Most recently, it was convicted by a jury in California of being a racketeering influenced and corrupt organization (RICO) because of a long-term "racketeering conspiracy" involving Neurontin marketing (see post here). Now additionally, according to the Wall Street Journal,

Pfizer Inc. said it reached a settlement agreement in a wrongful-death lawsuit brought by a woman who claimed her husband's use of the antiseizure drug Neurontin caused him to commit suicide in 2002.

The suit was brought by Linda Shearer of Berkshire County, Mass., whose husband, Hartley Shearer, was prescribed Neurontin to control the effects of his paralysis. The suit alleged Pfizer promoted this use of the drug even though it wasn't approved by U.S. regulators. The suit alleged Pfizer knew the drug was associated with a risk of suicide, but failed to properly warn of the risk.

The new wrinkle here is that Pfizer did not defend a suit that alleged the company knew of a potentially fatal side-effect of the drug, but failed to disclose that risk.

Jury Awarded Damages for Treatment of Whistle-Blower

Meanwhile, the Hartford Courant reported:

A former Pfizer scientist who claims she has been paralyzed by a virus designed at the pharmaceutical company's laboratory in Groton was awarded $1.3 million by a federal jury in Hartford Thursday following a trial that raised questions about safety practices in the dynamic field of genetic engineering.

The amount of the settlement awarded to molecular biologist Becky McClain of Deep River will likely increase in coming days. After about day of deliberation, the jury also awarded McClain punitive damages, to be determined by U.S. District Judge Vanessa L. Bryant, and awarded fees to McClain's two Connecticut lawyers, Bruce E. Newman and Stephen J. Fitzgerald.

McClain claimed in her suit that she was inadvertently exposed through work by a former Pfizer colleague in 2002 or 2003, to an engineered form of the lentivirus, a virus similar to the one that can lead to acquired immune deficiency syndrome, or AIDS.


She further claimed that Pfizer wrongly fired her in 2005 for complaining about laboratory safety to the U.S. Occupational Safety and Health administration and to co-workers.

Ultimately, the jury was not permitted during the 12-day trial to hear argument supporting McClain's claim of a causal link between her disability and virus research done at her laboratory in Groton.

The jury based its verdict on evidence concerning McClain's two remaining claims: that her dismissal violated Connecticut's whistle blower law and McClain's free speech right. Her lawyers contended her complaint to federal safety regulators amounted to a whistle blower complaint and that her discussion of safety issues with fellow workers was free speech.

So, after being convicted by a jury of being a "racketeering influenced and corrupt organization," (RICO), and settling civil and criminal fraud charges for an unprecedented $2.3 billion (see post here), and after many other allegations, settlements, and convictions (look here),  Pfizer failed to defend one action, and lost another that argued Pfizer tried to hide information which put the company and/or its products in an unfavorable light.

In fact, Even Pfizer CEO Jeffrey Kindler could not put much of a spin on the company's recent record. As reported by Duff Wilson in the New York Times,

The world’s largest drug company, Pfizer, has handled mergers badly, invented too few drugs and left its reputation in disrepair after two criminal cases.

And that is the assessment of its own chief executive.

CEO's Multi-Million Dollar Compensation
But while all this was going on, the company did disclose (as mandated by the US Securities and Exchange Commission [SEC]) that CEO Kindler is continuing his acquisition of riches.  As reported by the AP (via USAToday).

The chief executive of drug giant Pfizer Inc., Jeffrey Kindler, received a 2009 compensation package valued by The Associated Press at $13.7 million, down 7.6% from 2008, as the board reduced the stock awards he received, citing economic pressures.

The world's biggest drugmaker paid Kindler, 54, a salary of $1.6 million, up just $25,000 from the year before. But his performance bonus was bumped up to $3.5 million from $3 million in 2008, according to a filing this week with the Securities and Exchange Commission.

Most of Kindler's compensation comes from long-term awards of stock options and restricted shares. The total fell 17% to $8.1 million in 2009, from $9.8 million, even though they were granted in late February, a month after Kindler announced plans to buy Wyeth for $68 billion, a sound strategy to counter Pfizer's looming revenue plunge.

Kindler's other compensation — a variety of perks — totaled $449,731. That included $190,725 for Kindler's use of corporate aircraft as required by Pfizer's board, $43,099 for use of a car, $7,690 for financial counseling and $1,217 for home security.

Even admitting that Kindler's compensation last year was slightly decreased from last year's not so small fortune, there still seems to be a huge disconnect between the company's ethical woes, legal settlements, and guilty pleas and its CEO's rewards. Once again, it seems that leaders of large health care organizations never face real accountability for their company's bad behavior. It almost goes without saying that in the two cases summarized above, no one who authorized, directed, or implemented the actions leading to the settlements or damages seems to have had any negative consequences.

So once more with feeling.... In the US, we have put much of our health care system in the hands of very large organizations, for-profit and not-for-profit, without holding these organizations and their leaders accountable for their actions. The results have been increasingly rich leaders who often behave like a new aristocracy, and repeated bad behavior by the organizations they lead.

Our latest effort at health care "reform" has continued to rely on large private organizations, while so far not adding to their or their leaders' accountability. In my humble opinion, if we really want to reform health care so as to improve quality, increase access, control costs, and support professionalism, we will have to make our new health care oligarchs accountable.

Postscript - Pay for Health Care Reform Lobbying?

By the way, a commentary in The [New London, CT] Day suggested an explanation for why Kindler was so richly paid last year:

It takes pages and pages of a company securities filing to explain and justify all the bells and whistles of Kindler's 'annual incentive award,' a complicated stew of stock options and deferred payments and plain old salary.

From all of this, Timothy P. Carney of the Washington Examiner found one juicy tidbit, which especially titillated industry bloggers.

It turns out Kindler's salary increase, from $1.57 million to $1.6 million, was based in part, the compensation committee suggested, on his success in making a deal with President Obama that protected the drug industry from some of the more onerous proposals of health care reform.

Praising Kindler as an effective lobbyist in, among other things, heading off legislation that would allow the importing of cheaper prescription drugs, the committee said: 'These efforts included constructive participation in the U.S. legislative process to advance Pfizer's goals of achieving a more rational operating environment.'

Or, he kept a finger in the dike against health care reform.

Indeed, a recent report by the Sunlight Foundation, a private nonprofit dedicated to more transparency in government, indicates Kindler's extensive role in negotiating a deal for the drug companies with the Obama administration and Senate Finance Committee Chairman Max Baucus.

It turns out Kindler's name turns up four times on last year's White House visitor logs.

The final deal Kindler helped craft promised $80 billion in cost cutting by the drug companies but blocked much more onerous reform measures for the industry, like lowering prescription drug prices through Medicare negotiations, re-importation of drugs from other countries with lower prices and quicker release of generics onto the market.

The cost-saving of such measures, if allowed to occur, could have been in the hundreds of billions of dollars, according to government analysis.

Kindler, as the pay committee says, did good.

Several of our fellow bloggers have suggested that an installment of the Public Broadcasting Service (PBS) program "Frontline" will show just how much of the recent US health care reform effort was the product of health care corporate CEOs (e.g., see this post on GoozNews, and this post on Managed Care Matters). We shall see once the program airs, but maybe Mr Kindler's salary was a good value for Pfizer, but a very bad one for the rest of the country.

The Settlement and Conviction Round-Up: Friday Frequent Flier Edition

It's time for one of our periodic round-ups of legal settlements and convictions of health care organizations.  This time, we report on three frequent fliers, in chronologic order of the appearance of the relevant news stories.

Robert Wood Johnson University Hospital Hamilton (UMDNJ)

We have written multiple times about the woes of the University of Medicine and Dentistry of New Jersey, which lead to a deferred prosecution agreement and operation under the watchful eye of a federal monitor for several years, and resulted in criminal convictions of a former Dean and the state legislative leader he hired.  Scroll through this for far too many details. 

Now, the redoubtable Newark Star-Ledger reports:

Robert Wood Johnson University Hospital in Hamilton has agreed to pay $6.35 million to settle allegations that the facility defrauded Medicare, Justice Department officials said today.

The Mercer County hospital was accused of inflating charges to Medicare patients to obtain bigger reimbursements from the federal government.

'Taxpayer dollars should go towards quality health care, not wasted on fraud and abuse,' said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice.

The hospital denied wrongdoing in the settlement, said Skip Cimino, the facility's president and CEO. 'Robert Wood Johnson University Hospital Hamilton has resolved the outstanding Medicare Reimbursement issue with the government and looks forward to continuing its service to the community,' he said.

Note that Robert Wood Johnson Medical School is one of the two medical schools contained within UMDNJ.

Fresenius

I admit that we last discussed Fresenius Medical Care Holdings Inc, a for-profit provider of kidney dialysis services, a while ago, back in 2007. At that time, the company settled charges made by the US Federal Trade Commission that it had tried to restrain competition. Last week, the Tennessean reported:

A long-running whistleblower complaint against the once-Nashville based Renal Care Group has led to a $19.3 million federal court judgment against the acquired dialysis supplier and the German company that bought it four years ago.

The lawsuit, which focused on improper claims submitted to Medicare for home dialysis supplies, named Renal Care Group Supply Co. and Fresenius Medical Care Holdings Inc., as co-defendants. The federal government joined the whistleblower complaint more than two years ago.

Renal Care operated a shell billing company solely to submit claims on behalf of itself in violation of federal law that requires suppliers to be independent of the dialysis facilities where patients are treated, the government said. Even after employees raised concerns, Renal Care continued to operate the billing company because of the 'illicit revenues it created,' the suit said.

One employee wrote: 'I do not wish to go to jail' and felt the company's plan 'was not in the best interests of patients,' said federal Judge William J. Haynes Jr. of Nashville in his ruling.

The billings reportedly occurred over a six-year period beginning in 1999. The Fresenius-Renal Care acquisition closed in 2006 at a sales price of $3.5 billion.

Pfizer

Pfizer Inc, which proclaims itself to be the world's largest pharmaceutical company, has provided an amazing amount of material for Health Care Renewal. In September, 2009, we discussed the huge, that is, $2.3 billion dollar settlement Pfizer made of criminal and civil fraud charges. At that time, this was the fourth settlement of charges of unethical marketing made by Pfizer since 2002.

Since then, we have discussed another fraud settlement in October, 2009, and yet another in January, 2010.

Today, Bloomberg reported:

Pfizer Inc. violated U.S. racketeering law in the marketing of its epilepsy drug Neurontin and should pay $142.1 million in damages, a jury decided.

Kaiser Foundation Health Plan Inc. and Kaiser Foundation Hospitals claimed in a monthlong trial in federal court in Boston that Pfizer illegally promoted Neurontin for unapproved uses. The insurer said it was misled into believing migraines and bipolar disorder were among the conditions that could be treated effectively with Neurontin, approved in 1993 by the U.S. Food and Drug Administration for epilepsy.

'The jury found Pfizer engaged in a racketeering conspiracy over a 10-year period,' Tom Sobol, a lawyer for Kaiser, said after yesterday’s verdict. 'That bodes well for future cases.'

Furthermore, this was a very special kind of verdict:

The jury, which deliberated for two days, found that New York-based Pfizer violated the federal Racketeer Influenced and Corrupt Organizations Act, or RICO, and California’s Unfair Competition Law. Under RICO, the amount of actual damages found by the jury, $47.36 million, will be tripled.

The RICO statute was meant to be used against organized crime.  A jury seems to have found that Pfizer is a "Racketeer Influenced and Corrupt Organization," that is, the moral equivalent of a crime syndicate. 

Summary

So this week's settlement and conviction round-up shows the impunity that many health care organizations have exhibited thus far.  Some organizations have been charged again and again with unethical behavior.  Now one of the most frequent of the fliers has been convicted under the RICO law, certainly a new low. 

Yet none of the affected organizations in this post, and precious few we have discussed at other times, seem to have suffered any major consequences.  All have paid fines, some which seemed large at the time, but which have never been large enough to seriously threaten the organizations' financial well being.  None of the organizations seems to have lost business, or even much reputation.  Very few of the people within the organizations who approved, lead or implemented unethical behaviors have suffered any sort of negative consequences.

There seems to be something very wrong here.  In the US, we have put much of our health care system in the hands of very large organizations, for-profit and not-for-profit, without holding these organizations and their leaders accountable for their actions.  The results have been increasingly rich leaders who often behave like a new aristocracy, and repeated bad behavior by the organizations they lead. 

Our latest effort at health care "reform" has continued to rely on large private organizations, while so far not adding to their or their leaders' accountability.  In my humble opinion, if we really want to reform health care so as to improve quality, increase access, control costs, and support professionalism, we will have to make our new health care oligarchs accountable. 

Physician Pleads Guilty to Fraud for Fabricating Celebrex (and Other) Study Data

As reported by the Springfield, MA, Republican:

A former chief of acute pain at Baystate Medical Center has agreed to plead guilty to falsifying medical research and must pay $420,000 in restitution to pharmaceutical companies, federal court records show.

Dr. Scott S. Reuben, of Longmeadow, was charged on Thursday with health care fraud. He signed a plea agreement with prosecutors a week earlier.

Reuben prompted a furor in the medical community in March, when he was accused of making up research results in at least 21 published studies and inventing patients in certain instances.

In one notable instance,

In 2005, Reuben received a $74,000 research grant from pharmaceutical giant Pfizer, agreeing to test Celebrex as a component of the multimodal therapy. He claimed to have treated 200 patients, 100 with Pfizer's product and 100 with a placebo.

'In fact, Reuben had not enrolled any patients into that study and the results reported both to Pfizer and to the Anesthesia and Analgesia Journal and in turn to the public were wholly made up by Reuben,' the charge states.

Albert said the fabrications were discovered by medical staff within the hospital during a routine review at the hospital's 'research week,' when clinicians design poster displays of their studies.

A report in the New London, CT, Day indicated the scope of Reuben's fake research:

Anesthesia & Analgesia later had to retract 10 papers authored by Reuben, and medical experts at the time said at least 21 journal articles by the anesthesiologist appeared to have been fabricated.

The agreement calls for Reuben to pay restitution of $296,557 to Pfizer and $16,000 to Wyeth Pharmaceuticals, two companies that merged last fall. Merck & Co. would receive $49,375 from the agreement, according to documents.

In addition to his fabricated Celebrex studies, Reuben had pretended to do research that backed the effectiveness of other pain drugs, including Pfizer's Bextra and Merck's Vioxx, according to prosecutors. Bextra and Vioxx later were pulled from the market because studies showed they increased the risk of death from heart attacks and strokes.

In addition, Reuben published data showing that Pfizer's antidepressant Effexor had exhibited painkilling properties.

Reuben's studies had been considered pioneering at the time they were published. His data had supported the use of two of Pfizer's major products - Celebrex and Lyrica - in combination to treat certain types of post-operative pain.

Reuben 'was a regular on the medical lecturing circuit,' according to court documents, and 'had become a well known figure in the anesthesia and pain management medical communities.'

Pfizer said previously that it had supported five of Reuben's research initiatives. Pfizer, which declined at the time to reveal how much it paid Reuben over the years to be part of its speakers' bureau, said the company played no part in the fraud.

Asked for a comment Friday, Pfizer was not able to provide a timely response.

Note that we usually do not post about stories of individual's clinical research misconduct, not because it is unimportant, but because individual misconduct may be related more to an individual's motives and character than to concentration and abuse of power in health care.

However, in this case it appears that Dr Reubens was enabled, at least in the psychological and logistical senses, by pharmaceutical companies happy to sponsor research which suggested the effectiveness of their products.  Since Dr Reubens apparently fabricated most of his data, notice that he apparently deliberately fabricated data that made Pfizer's Celebrex, Bextra, Lyrica, and Effexor, and Merck's Vioxx look good.  Perhaps there was careerism here.  Positive studies about "innovative" effective drugs are more likely to get published than negative studies or studies of old drugs.  However, we have noted before that pharmaceutical (and biotechnology and device) companies like to sponsor studies with results that make their products look good. 

One bit of good news in this story is that Reuben's colleagues at the hospital apparently were able to uncover the fabrications when they had an opportunity to critically look at data from several of his studies.

Certainly some Pfizer employees had easy access to the same data.  But perhaps they would not have thought to look at it critically as long as it was so unrelentingly positive about their company's products. 

As we have said before, health care professionals, policy makers and patients ought to be extremely skeptical of clinical studies sponsored (and often deeply influenced) by those with vested interests in the studies' turning out in certain ways.  We ought to reconsider national research policies that have turned over sponsorship of the majority of clinical research to those with such vested interests.

Hat tip to Prof Margaret Soltan on the University Diaries blog.

ADDENDUM (19 January, 2010) - see also comments on the Alison Bass Blog.

Pfizer CEO Now Acknowledges "We Need to be Straight with People"

Even the CEO of the world's largest pharmaceutical company is now conceding that unethical behavior by large health care corporations has lead to trouble.  As reported by The Day (New London, CT, US): 

Three months after his company paid the largest criminal fine in U.S. history, Pfizer Inc. chief executive Jeffrey B. Kindler called on government and business leaders Tuesday to face up to the 'real and legitimate anger' of citizens fed up with ethics breaches.

'If we fail to change, the future will not be pretty - for business or for society as a whole,' Kindler said in a keynote address to the Boston College Chief Executives' Club at the Boston Harbor Hotel. 'People have had enough, and the backlash is real.'

Kindler told the luncheon meeting of about 250 chief executives in the Boston area that a recent survey found two-thirds of the American people now have less trust in corporations than they did a year ago - and the decline in their faith in government and public officials has been even more drastic.

'When the majority don't trust you, they will find a way to force you to change,' he said. These changes, he added, could include limits on businesses' licenses to operate and might affect private-sector innovation.

Pfizer, he acknowledged, has had ethical lapses as well, capped by the $2.3 billion in fines imposed in September for the company's illegal marketing of various drugs. The company's $1.2 billion criminal fine was the largest corporate penalty in U.S. history.
'It was a real blow to our employees,' Kindler said. 'It did not reflect the company we all knew.'

The government of Switzerland also fined Pfizer and two other firms a total of $5.7 million Tuesday for alleged price-fixing of erectile dysfunction drugs.

Mr Kindler also pledged there would be some changes:

Kindler said he understood those in the audience who might wonder, in the wake of Pfizer's own ethical problems, 'Who are you to talk about trust?'

But he said Pfizer has changed. Golf trips, fancy dinners and tchotchkes left for doctors are now out, and there are fewer company sales representatives in the waiting rooms. Results of clinical trials are now posted for all to see.

Also, according to a Boston Herald article:

'We need to be straight with people,' said Kindler at a Boston College Chief Executives’ Club lunch.

'It’s up to us to earn back the trust we’ve lost,' Kindler said.

Already, the company is much more transparent with its operations, he said. It has begun disclosing a number of its business relationships on its Web site and has ceased the high-priced wooing of the doctors who might prescribe its products.

Let me applaud Mr Kindler's declaration that we "need to be straight with people," and in the spirit of constructive criticism, give him some unsolicited advice about ways the company could be more "straight."

First, he might start by admitting the scope of past problems.  As we posted previously,  the $2.3 billion settlement alluded to above was  the company's fourth major settlement of charges of unethical marketing behavior since 2002, and also as alluded to above, it is not the company's most recent ethical problem.  For a catalog of Pfizer's ethical pfailures, see this link. 

Second, he might acknowledge some responsibility for past problems, or indicate that someone will be held accountable for them.  Note that according to the biographical statement in the 2009 Pfizer proxy, Mr Kindler has held leadership positions at the company since 2002. 

Third, he might consider a more vigorous transparency effort, starting with the company's relationships with physicians, and other health care professionals and academics.  The company has pledged to put some sort of information about payments to such people online, but not until 2010.  Maybe that schedule could be sped up.  Furthermore, it is not clear how much information will be disclosed, but the company ought to consider making it clear what payments are for, what division of the company (e.g., research and development, or marketing or public relations) made the payments, and how the payments were linked to particular Pfizer products.

Fourth, he might make a more vigorous effort to disclose the results of all clinical research sponsored by Pfizer.  In the past, Pfizer has allegedly been a party to suppression of results of clinical research that turned out not to favor its products (e.g., see this post).  It is true that Pfizer pledged to post the results of at least some unpublished studies on ClinicalStudyResults.org, but the completeness of its reporting is questionable.  But a report by the German Institute for Quality and Efficiency in Health Care suggested that through this year Pfizer has been dragging its feet about disclosing results that may not make its products look good.  Consequently, the Institute is now calling for compulsory disclosure of the results of all clinical trials. 

I do hope that Mr Kindler and Pfizer management are serious about their commitment to "earn back the trust we've lost."  If so, more power to them.

The Editorial that Wasn't: Evidence for Systematic Research Manipulation Undetectable by Critical Review

Woe to those of us who have been advocates for evidence-based medicine.  A short description of the evidence-based medicine is medicine whose practice is informed by critical, rigorous review of the best available evidence from clinical research as revealed by systematic search of the published research literature, as well as by the clinician's understanding of biology and the medical and biopsychosocial context, and by the patient's own values.

Evidence-based medicine is based on some key assumptions.  One is that a systematic review will reveal all the results of research studies that are relevant to the issue at hand.  A second is that while the research studies may be flawed and imperfect, they are reported honestly.

Unfortunately, as we have repeatedly discussed, there is more and more evidence that a systematic review will not reveal all relevant results, because research studies may be suppressed, perhaps often, when their results are unfavorable to vested interests.  (Look here for further discussion.)  There is also considerable anecdotal evidence that the design, implementation, and analysis of research studies may be manipulated to make the results more likely to favor vested interests.  (Look here for further discussion.)

An article by Vedula et al just published in the renowned New England Journal of Medicine suggests that such manipulation might be systemic, and that the reporting of manipulated studies may not clearly show what manipulation was done. (1)

To summarize, the authors got access through legal proceedings to internal study protocols and research reports from clinical trials sponsored by Parke-Davis (later merged into Pfizer Inc) of gabapentin (Neurontin) for a variety of clinical problems other than seizures.  Gabapentin was originally marketed as an anti-seizure drug, but Pfizer later "admitted guilt for off-label marketing."  (We discussed the stealth marketing campaign for Neurontin here.)  Vedula et al compared the primary outcome variables specified in the original research protocols, internal research reports, and any publications of the trials' results.  They identified 21 trials, 13 of which were published.  For 12 of the 13, the authors had access to the internal protocol, report, or both.  The main results were:

For 8 of the 12 published trials, there was a disagreement between the definition of the primary outcome in the protocol and that in the published report.... Sources of disagreement included the introduction of an entirely new primary outcome in the published report (in the case of 6 trials); failure to distinguish between primary and secondary outcomes in the published report, even though the protocol did distinguish between them (2 trials); relegation of a primary outcome in the protocol to a secondary outcome in the published report (2 trials); and failure to include in the published report one or more primary outcomes specified in the protocol (5 trials).

Furthermore, it appeared that failure of published articles to clearly and fully report results in terms of the original, pre-specified primary outcome variables occurred when these comparisons were not favorable to gabapentin. As the authors summarized:

Thus, trials with findings that were not statistically significant (P≥0.05) for the protocol-defined primary outcome, according to the internal documents, either were not published in full or were published with a changed primary outcome.

As shown in Figure 3, all the changes that took place between what was specified in the protocol, what was known before publication (as presented in the internal company research reports), and what was reported to the public led to a more favorable presentation in the medical literature of gabapentin's efficacy for unapproved indications.

They concluded:

We are concerned that the reporting practices observed in our analysis do not meet the ethical standards for clinical research or maintain the integrity of scientific knowledge. Fair and honest treatment of patients enrolled in clinical trials of any kind requires full, open, and unbiased reporting. Journal publication, a formalized platform for scientific discourse and dissemination of knowledge, should not be used as a marketing tool for off-label drug use.

Reporting biases such as those we describe here increase the likelihood that interventions will appear to be effective when they are not. Such biases can lead to the omission of negative findings in systematic reviews of intervention effectiveness and in evidence-based guidelines. For example, the 2005 Cochrane systematic review regarding the effectiveness of gabapentin for acute and chronic pain concluded that it is effective on the basis of published findings and should now be updated with the inclusion of unpublished information made available through litigation.

I believe that the article by Vedula et al is particularly important because it shows what appears to be systematic manipulation of the analysis and reporting of multiple clinical trials of the same drug (but for different indications) that had the effect of making the drug appear efficacious when it likely was not. Furthermore, the manipulation was concealed. The published research articles did not completely describe what the intended primary efficacy outcome variables were, did not provide results in terms of these variables, and instead provided results only in terms of variables that were chosen post-hoc as new primary outcome variables.

To address that latter point, I independently reviewed three of the research publications cited by Vedula et al.(2,3,4) All three were noted to have reported significant results favoring gabapentin in terms of a primary efficacy outcome variable that was not identified as such in the corresponding studies' original research protocols or reports (see the supplementary data provided with the New England Journal article.) Per my review, none of the three published articles offered any hint that what they reported as primary outcome variables were not the variables originally chosen in that capacity, nor did they identify what those original primary outcome variables were, or how comparisons made using them turned out.

The implications of the article by Vedula et al are very important. Hence, I was surprised that the article appeared without an accompanying editorial to discuss these implications, and that its publication did not generate much media interest.

So that gives me an opportunity to comment further.

One could start with the implications for evidence-based medicine. As noted above, a short description of the evidence-based medicine is medicine whose practice is informed by critical, rigorous review of the best available evidence from clinical research as revealed by systematic search of the published research literature, as well as by the clinician's understanding of biology and the medical and biopsychosocial context, and by the patient's own values. Evidence-based medicine depends on critical, rigorous review, but the review process is generally done under the assumptions that research publications honestly describe what was done and what its results were. The review process was never designed to detect dishonest reporting or find information that was deliberately concealed. Manipulation of research (design, analysis, and implementation), concealment of that manipulation, and outright suppression of research threaten the foundations of evidence-based medicine. Yet the article by Vedula et al is part of a growing body of evidence that such manipulation, concealment and suppression are widespread, and done to serve vested interests, often commercial.

That is a huge problem for proponents of evidence-based medicine, but also for physicians who want their practices to be based on science, for patients who want their care to be based on science, and for all those in society who see the advancement of medical science as a way to improve peoples' lives.

As senior author Professor Kay Dickersin noted in an interview with Bloomberg "The trouble is, as a scientist, the publication has always been held up to me as the truth. It's the scientific record. What this study indicated is we can't believe that record."

Furthermore, to be a bit more concrete, most physicians, patients, and policy makers depend on what appears to be honest clinical research to make decisions about individual care and health policy. Deliberate and deceitful manipulation of clinical research to favor sponsors' products has likely lead to excessive use of and payments for drugs and devices that are less effective than advertised, if not useless or dangerous. Thus, it is likely that such manipulation is partially responsible for ever increasing health costs and poor health outcomes.

Finally, we need to start thinking about how we can detect and compensate for manipulation of clinical research in the past, and deter such manipulation in the future. One possible deterrent would be, as was noted by Vedula et al, detailed clinical trials registries that contain complete information about trial protocols.  For this to be effective, there need to be mechanisms to assure compliance, and penalties for non-compliance.  Moreover, since clinical research is now global, the registries must have global scope, and enforced assurance of compliance must also be global.

Registries might decrease future manipulation and suppression of research.   No one has suggested, as far as I know, a systematic way to detect and correct for previous manipulation. It would require a major, global investigative effort to uncover manipulation, and it would be a major scientific and policy endeavor to reveal most suppressed research and correct most manipulations.

However, before anything is done, patients, physicians and policy makers must acknowledge and understand the problem.  Yet it seems that even discussing these may be topics that are very uncomfortable for some of us. The longer we shrink from addressing them, however, the worse will be the results for patients, physicians, science and society.

References


1. Vedula SS, Bero L, Scherer RW, Dickersin K. Outcome reporting in industry-sponsored tirals of gabapentin for off-label use. N Engl J Med 2009; 361: 1963-1971. Link here.


2. Mathew NT, Rapoport A, Saper J et al. Efficacy of gabapentin in migraine prophylaxis. Headache 2001; 41: 119-128. Link here.


3. Vieta E, Goikolea JM, Martinea-Aran A et al. A double-blind, randomized, placebo-controlled, prophylaxis study of adjunctive gabapentin for bipolar disorder. J Clin Psychiatr 2006; 67: 473-477.  Link here.


4. Caraceni A, Zecca E, Bonezzi C et al. Gabapentin for neuropathic cancer pain: a randomized controlled trial from the gabapentin cancer pain study group. J Clin Oncol 2004; 22: 2909-2917. Link here.

The Kelo Case Redux Once More: Pfizer Pulls Out and the "Carefully Formulated" Development Plan Collapses

Four years ago we posted (here, here and here) about the controversial US Supreme Court decision in the Kelo case. Most discussion of the case at the time focused on individual property rights vs the power of the government to promote economic development, but the case had an important health care angle.

Briefly, the case centered on the taking of private property, including a house owned by Susette Kelo, by a not-for-profit organization, the New London (Connecticut) Development Corporation (NLDC) given the power of eminent domain by the New London city government. While the ostensible rationale for the taking was economic development, the action appeared to have been at the behest of Pfizer Inc, the world's largest pharmaceutical company, which had built a research and development facility in the city, and wanted a suitably upscale and sanitized environment for its workers.

As we previously posted, the NLDC's leadership had multiple conflicts of interest that involved ties to Pfizer. One board member was a Pfizer vice-president. The board president was married to another Pfizer vice-president. Pfizer wanted the part of New London that included Kelo's house made more attractive to complement its new research facility. The husband of the NLDC president had said, "Pfizer wants a nice place to operate. We don't want to be surrounded by tenements."

Kelo's and other property owners' protest of the taking went all the way to the US Supreme Court. As we posted here, the Court decided against the property owners by a 5-4 vote. Justice John Paul Stevens wrote for the majority that the city's "determination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference. The city has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including - but by no means limited to - jobs and increased revenues." This majority opinion is important, because the Fifth Amendment to the US Constitution provides "nor shall private property be taken for public use without just compensation." Many had interpreted this provision to mean that eminent domain could only be used to take property for public use, e.g., to build a road or a public school, but not for private purposes, like building upscale waterfront developments.

Two months ago, we posted on how the supposedly "carefully formulated" development plan had fallen apart.  The land on which the Kelo house stood had never been developed, and remained a weedy lot.
 
This week, the (New London) Day reported:

Eight years after opening its state-of-the-art global research-and-development headquarters in New London, Pfizer Inc. announced Monday it will close the nearly $300 million complex within the next two years and consolidate local operations into its Groton campus.

Why did Pfizer decide to close the facility?

Pfizer earlier this year said nearly 20,000 jobs would be cut as a result of its merger with the New Jersey-based Wyeth. The company said Monday that about 15 percent of its overall R&D work force would be cut as part of that downsizing.

The result apparently will be the complete dissolution of the "carefully formulated" development plan.

The announced closing of the New London site came as a blow to a city that had counted on Pfizer to help revive its fortunes.

The loss of Pfizer as a keystone business in New London could put in further jeopardy the Fort Trumbull development that started in conjunction with Pfizer's move into the city but has left little but flattened buildings and eminent-domain angst in its wake.

So, the unfortunate Kelo case has become a vivid demonstration how badly government does when it partners with businesses and tries to pick corporate winners and losers.  Unfortunately, it seems that much of what passes for US health care policy is such "corporate socialism."  As we said before, instead of trying to pick corporate winners and losers, government would do better to act like a combination of an honest policeman on the beat, deterring and punishing dishonest behavior, and in impartial referee, trying to make sure everyone is playing the game honestly. But no doubt government officials used to mingling with the corporate superclass would not be comfortable in the roles of honest cop or impartial referee.

See also comments on the Volokh Conspiracy blog.  Hat tip to the PharmaLot blog.

Pfizer (in the Guise of Pharmacia) Pfound to Violate Pfraud Law, While Pfizer CEO Made Pfederal Reserve Advisor

It was only a month ago that Pfizer Inc, the world's largest pharmaceutical company, submitted to a gargantuan $2.3 billion settlement and yet another corporate integrity agreement. As we posted here, this was the company's fourth major settlement of charges of unethical marketing behavior since 2002.

Now Pfizer is in trouble again. As reported by the AP,

A judge on Tuesday imposed $4.5 million in forfeitures on prescription drug company Pharmacia Inc.[a Pfizer Inc subsidiary] for misrepresenting prices and defrauding Wisconsin's Medicaid system.

A jury in February found that Pharmacia violated the state's Medicaid fraud law 1.44 million times over a decade. State Justice Department attorneys had demanded about $212 million in forfeitures, but Dane County Circuit Judge Richard Niess said jurors grossly overcalculated the number of violations.

After reviewing the evidence, the judge found the actual tally was 4,578.

He elected to set the forfeiture level at $1,000 per violation. The judge said he was concerned that if he ordered the maximum $68.6 million Pharmacia would pass the expense to consumers and nothing showed any of the fraudulent $7 million went directly to Pharmacia's profits.

On the other hand, the judge said, a $100 per violation forfeiture totaling $457,800 would 'not register so much as blip on Pharmacia's multibillion-dollar annual fiscal radar screen' and a higher amount would draw attention to the need to reform pharmaceutical reimbursement scales.

I must say that I do not understand the reasoning the judge used to set the penalties. If he thought that Pfizer would merely pass along a large penalty to patients, why would the company not pass along a smaller penalty to them.

In any case, this is just the latest in a long string of cases in which a health care corporation was found to have committed unethical or illegal acts, but the only the corporation itself, but not the people who actually performed, directed or authorized the acts, paid a penalty. And when the penalty is paid by the corporation, its impact can be spread over all stock-holders, all employees, and all patients, clients, or customers, thus diluting its effect, and protecting those who authorized, directed, or performed the acts in question.

I submit again that only when the people in health care leadership who perform, direct or authorize bad behavior pay penalties will bad behavior be deterred.

Note that while Pfizer may be the world's largest pharmaceutical corporation, it seems to be the corporation most often cited for, convicted of, or having to make settlements for bad behavior (see some recent examples here). (Although in the current case, you would have to read the news report very carefully to realize that Pfizer was involved. The fact that Pharmacia is a Pfizer subsidiary was only mentioned in passing.)

Nonetheless, one would think Pfizer's leadership would be ashamed, and their reputation would suffer. But no. At about the same time this latest settlement was announced, this report from Reuters appeared:

The Federal Reserve Bank of New York said on Thursday that Pfizer (PFE.N) chief executive Jeffrey Kindler and Loews Corp (L.N) chief executive James Tisch will fill the two vacancies on its board of directors.

Kindler was elected to finish a three-year term ending Dec. 31, taking the seat PepsiCo (PEP.N) chief executive Indra Nooyi resigned from in February.

Regional Federal Reserve banks' boards of directors offer recommendations on Fed policy, but have no policy-making powers. They also provide anecdotal information about the business conditions that help inform the central bank.

Regional Fed banks have three classes of directors: Class A, elected by member banks to represent banks; Class B, elected by member banks but representing the public; and Class C, which represent the public but are chosen by the Board of Governors in Washington.

Kindler and Tisch join Jeffrey Immelt, chairman and chief executive of General Electric (GE.N) as Class B directors.

I suppose Kindler could offer quite a bit of "anecdotal information" about bad behavior in the pharmaceutical industry. But it seems rather comic to think about the CEO of the world's biggest, and lately baddest pharmaceutical company as "representing the public." Rather, and more seriously, this is just the latest example of how leaders of health care organizations have joined the superclass, and how the superclass protects its own.

The Kelo Case Redux: Pfizer's "Nice Place" Ends Up Covered with Weeds

Four years ago we posted (here, here and here) about the controversial US Supreme Court decision in the Kelo case. Most discussion of the case at the time focused on individual property rights vs the power of the government to promote economic development, but the case had an important health care angle.

Briefly, the case centered on the taking of private property, including a house owned by Susette Kelo, by a not-for-profit organization, the New London (Connecticut) Development Corporation (NLDC) given the power of eminent domain by the New London city government. While the ostensible rationale for the taking was economic development, the action appeared to have been at the behest of Pfizer Inc, the world's largest pharmaceutical company, which had built a research and development facility in the city, and wanted a suitably upscale and sanitized environment for its workers.

As we previously posted, the NLDC's leadership had multiple conflicts of interest that involved ties to Pfizer. One board member was a Pfizer vice-president. The board president was married to another Pfizer vice-president. Pfizer wanted the part of New London that included Kelo's house made more attractive to complement its new research facility. The husband of the NLDC president had said, "Pfizer wants a nice place to operate. We don't want to be surrounded by tenements."

Kelo's and other property owners' protest of the taking went all the way to the US Supreme Court. As we posted here, the Court decided against the property owners by a 5-4 vote. Justice John Paul Stevens wrote for the majority that the city's "determination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference. The city has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including - but by no means limited to - jobs and increased revenues." This majority opinion is important, because the Fifth Amendment to the US Constitution provides "nor shall private property be taken for public use without just compensation." Many had interpreted this provision to mean that eminent domain could only be used to take property for public use, e.g., to build a road or a public school, but not for private purposes, like building upscale waterfront developments.

The Associated Press just published an ironic follow-up.

Weeds, glass, bricks, pieces of pipe and shingle splinters have replaced the knot of aging homes at the site of the nation's most notorious eminent domain project.

There are a few signs of life: Feral cats glare at visitors from a miniature jungle of Queen Anne's lace, thistle and goldenrod. Gulls swoop between the lot's towering trees and the adjacent sewage treatment plant.

But what of the promised building boom that was supposed to come wrapped and ribboned with up to 3,169 new jobs and $1.2 million a year in tax revenues? They are noticeably missing.

What happened?

New London the city's prized economic development plan has fallen apart as the economy crumbled.

The Corcoran Jennison Cos., a Boston-based developer, had originally locked in exclusive rights to develop nearly the entire northern half of the Fort Trumbull peninsula.

But those rights expired in June 2008, despite multiple extensions, because the firm was unable to secure financing, according to President Marty Jones.

So that was the result of the economic development plan the Supreme Court majority termed "carefully formulated." The lesson seems to be that when government makes policy to favor individual corporations, the results are bad policy and little public benefit. Government leaders often seem willing to favor specific health care organizations, rationalizing their actions in terms of economic development or promoting health and health care. Doing so may benefit the corporations involved, but rarely individual or public health.

Although US local and national government officials have have increasingly practiced such corporate socialism, they have neglected their regulatory roles. Instead of picking winners and losers, government would do better to act like a combination of an honest policeman on the beat, deterring and punishing dishonest behavior, and in impartial referee, trying to make sure everyone is playing the game honestly. But no doubt government officials used to mingling with the corporate superclass would not be comfortable in the roles of honest cop or impartial referee.

A Solution To Pharma's Repeated Drug Offenses: Incarceration

Some straightforward common sense follows. No spin, no indirection, no excuses:

Pfizer has recently paid a $2.3 billion dollar settlement on civil and criminal charges that potent drugs were being improperly promoted (i.e., pushed onto unsuspecting physicians and patients) for uses not approved by the regulatory agencies responsible for such matters.

What is the real world meaning of these charges?

The meaning is that patients - the final consumers - were ingesting drugs that were not only not indicated, but held possibilities of harming the drug taker.

We have seen negative outcomes from these practices before in the form of, for example, children in whom improperly pushed antidepressants caused suicidal thoughts and actual suicide (the teenage daughter of a friend of my mother hanged herself after starting such drugs, resulting in a lawsuit that the parents ultimately won).

It demonstrates reckless and malicious disregard for others to tamper with people's lives in this fashion. Perhaps sociopathy is an apt description of such behavior. One wonders about the adverse consequences to patients of this latest round of pharma fraud.

Ultimately, those engaging in these practices (usually at the group director or VP level) are doing the following:

They are gambling with the lives and well-being of countless patients.

In some of these cases, patients will have been harmed; in others, patients will have died. In the former case, the perpetrators of the fraud are facilitators of the injury. In the latter case, the perpetrators are accessories to murder.

Fining a corporation is a nearly useless exercise, as ultimately the conversation in the executive offices and Wall Street will be about the cost of doing business, not about crimes or morals. Terminating perpetrating individuals is also not extremely effective in motivating reform, even if terminated with prejudice, if those terminated have already made their fortune.

(The $2.3 billion could have been used, in fact, as a war chest to reduce the need for layoffs during economic downturns, like our current one, were it not wasted in paying fines due to the behaviors of unscrupulous executives.)

The solution to this problem is straightforward. Deal with the individuals involved in the following manner:

Where the executives behind these abuses belong: jail

Time in jail for these executives is a needed remedy.

The following, however, is the situation we have:




This is inexcusable. Healthcare advocacy groups and relatives of those injured need to lobby for the solution proposed in the first picture: long, stiff sentences for those committing medical fraud and quackery by proxy in the form of these industry abuses.

Finally, the Pfizer scenario causes me to ask:

Is the leadership of this company competent to manage its operations? Or, is that leadership - for instance a CEO lacking science and biomedical education and experience - an "enabler" of the creative marketing for drugs -- creative advertising campaigns being seen as a virtue in his prior industry?

-- SS

Pfour Legal Settlements for Pfizer - Why is the Company "Recidivist?"

We recently posted about Pfizer's $2.3 billion dollar settlement with the US government (here), which we first mentioned six months ago (here). It is worth reviewing what we know about this settlement. We will start with quoted from the article by Gardiner Harris writing in the New York Times. We will also use quotes from other articles listed below:

A Big Settlement

(from the NYT)

The pharmaceutical giant Pfizer agreed to pay $2.3 billion to settle civil and criminal allegations that it had illegally marketed its painkiller Bextra, which has been withdrawn.

It was the largest health care fraud settlement and the largest criminal fine of any kind ever.

The penalties include a very large criminal fine, an even larger civil fine, and a corporate integrity agreement (from the NYT).

Under the agreement with the Justice Department, Pfizer will pay a $1.3 billion criminal penalty related to Bextra and $1 billion in civil fines related to other medicines. In addition, a Pfizer subsidiary, Pharmacia and Upjohn, will plead guilty to violating the Food, Drug and Cosmetic Act for its promotion of Bextra. The company has agreed to sign another corporate integrity agreement that requires senior company executives to annually certify legal compliance and mandates that Pfizer post on its Web site many of its payments to doctors.

For Specific Unethical and Illegal Activities

The activities for which Pfizer incurred the penalties included marketing drugs for "off-label" indications for which the company did not have US Food and Drug Administration (FDA) approval, and other deceptive marketing practices (from the NYT).

The government charged that executives and sales representatives throughout Pfizer’s ranks planned and executed schemes to illegally market not only Bextra but also Geodon, an antipsychotic; Zyvox, an antibiotic; and Lyrica, which treats nerve pain.

[Acting US Attorney for Massachusetts] Mr. Loucks, the prosecutor, accused Pfizer of aggressive marketing tactics.

'Among other things, Pfizer did the following: Pfizer invited doctors to consultant meetings, many in resort locations. Attendees expenses were paid; they received a fee just for being there,' he said. Such weekend getaways for doctors are still common throughout the drug and medical device industries.

Also, per the Newark Star-Ledger,

The government said the company promoted four prescription drugs, including the pain killer Bextra, as treatments for medical conditions different from those the drugs had been approved for by federal regulators. Authorities said Pfizer's sales representatives often created phony doctor requests for medical information in order to send unsolicited information to doctors about unapproved uses and dosages.

The civil settlement covered Pfizer's promotions of Bextra, blockbuster nerve pain and epilepsy treatment Lyrica, schizophrenia medicine Geodon, antibiotic Zyvox and nine other medicines. The agreement with the Justice Department resolves the investigation into promotion of all those drugs, Pfizer said.

The government said Pfizer also paid kickbacks to market a host of big-name drugs: Aricept, Celebrex, Lipitor, Norvasc, Relpax, Viagra, Zithromax, Zoloft and Zyrtec.

Pfizer's Previous Unethical Behavior

Pfizer has previously been charged with unethical conduct, and the penalties it paid for this conduct did not seem to deter it (from the NYT).

It was Pfizer’s fourth settlement over illegal marketing activities since 2002.

'Among the factors we considered in calibrating this severe punishment was Pfizer’s recidivism,' said Michael K. Loucks, acting United States attorney for the Massachusetts district.

Much of the activities cited Wednesday occurred while Pfizer was in the midst of resolving allegations that it illegally marketed Neurontin, an epilepsy drug for which the company in 2004 paid a $430 million fine and signed a corporate integrity agreement — a companywide promise to behave.

Some more details of these settlements, from the Philadelphia Inquirer,

Repeat Offender: Previous Pfizer Settlements

April 2007: Pfizer agreed to pay $34.7 million in fines to settle Department of Justice allegations that it improperly promoted the human growth hormone product Genotropin. The drugmaker's Pharmacia & Upjohn Co. subsidiary pleaded guilty to offering a kickback to a pharmacy-benefits manager to sell more of the drug.

May 2004: Pfizer agreed to pay $430 million to settle DOJ claims involving the off-label promotion of the epilepsy drug Neurontin by subsidiary Warner-Lambert. The promotions included flying doctors to lavish resorts and paying them hefty speakers' fees to tout the drug. The company said the activity took place years before it bought Warner-Lambert in 2000.

October 2002: Pfizer and subsidiaries Warner-Lambert and Parke-Davis agreed to pay $49 million to settle allegations that the company fraudulently avoided paying fully rebates owed to the state and federal governments under the national Medicaid Rebate program for the cholesterol-lowering drug Lipitor.

On Health Care Renewal, we have posted about other instances of unethical behavior by Pfizer. Most recently, these included producing allegedly misleading direct to consumer (DTC) advertising about Lipitor (see post here), and conducting unethical research in Africa (see post here).

So it appears that Pfizer is, as the prosecutor put it above, recidivist. Why has the company repeatedly behaved unethically? One argument is that company executives have learned that the rewards of unethical behavior exceed its costs (thus, are responding to a form of perverse incentives.)

Perverse Incentives Favoring Unethical Behavior

The fines paid by Pfizer were not that large for a company of Pfizer's size (from the NYT).

While the government said the fine was a record sum, the $2.3 billion fine amounts to less than three weeks of Pfizer’s sales.

In lieu of other punishments, the company's managers may just look upon paying fines as the cost of doing business. Per ABC News,

Industry insiders say drug companies often forgo legal considerations in favor of profit.

If companies, people or entities 'are able to make that decision and determine that there's an economic incentive to break the law, they'll break the law,' said Reuben Guttman, attorney for Glen Demott, a former Pfizer drug representative.

Change in a financially driven industry depends on whether a few billion dollars of penalty will affect the company's net profits or share costs. In 2008, Pfizer earned $48.3 billion in revenue.

Bloomberg commentator Ann Woolner said one reason the penalties have not been stiffer is that somehow the government views the company as too big to fail.

So how does Pfizer get away with civil settlements given its history? The penalties have ranged from hand slaps to a light punch in the gut, none of which have hurt the company enough for things to change. Last year Pfizer earned $8.1 billion on sales of $48.3 billion.

The New York-based company repeatedly winds up as the target of government accusations. Its misdeeds cost federal and state programs hundreds of millions of dollars, says the Justice Department, not to mention the human suffering that comes with taking the wrong drug in the wrong dosage.

But Pfizer is the pharmaceutical equivalent of insurance giant American International Group Inc., which was too interwoven into the global economy to be allowed to fail. Likewise, if Pfizer were convicted of a crime, it would face debarment from federal programs. And that would mean that Medicaid and Medicare patients would have to either somehow pay pocket for vital medicines the company produces or go without.

'You have to balance the desire, an appropriate desire, to punish the company against the harm to patients,' says attorney Kelton.

This begs the question about why no people, save for two relatively low level managers, no individuals paid any penalties. The unethical behaviors listed above must have been implemented by scores of line personnel, lead by mid-level managers. They, in turn, were acting at the behest of a hierarchy of managers and executives, culminating in "C-level" officers, lead by the CEO. Finally, these executives all reported, in theory at least, to the board of directors.

So almost none of the people responsible for the unethical activities paid any penalty. No individuals had to pay fines, or even lose their jobs, much less face criminal proceedings. Maybe the apparent ability of company personnel, starting with those in the trenches, all the way up through levels of management to the CEO, and thence to the board of directors to act with impunity has lead to a culture of amorality.

A Culture of Amorality

Some evidence that the culture of the company is pathologic comes from former Pfizer insiders charged that the comany's culture promotes unethical behavior (from the NYT).

John Kopchinski, a former Pfizer sales representative whose complaint helped prompt the government’s Bextra case, said that company managers told him and others to dismiss concerns about the Neurontin case while pushing them to undertake similar illegal efforts on behalf of Bextra.

'The whole culture of Pfizer is driven by sales, and if you didn’t sell drugs illegally, you were not seen as a team player,' said Mr. Kopchinski

Also, per ABC News,

'At Pfizer, I was expected to increase profits at all costs, even when sales meant endangering lives,' Kopchinski said, in a statement. 'I couldn't do that.'

In light of the list of unethical behaviors documented above, that company leaders deny any big problems itself becomes a problem (from the NYT).

Amy W. Schulman, Pfizer’s general counsel, said that Pfizer had reformed — again.

'The reasons to trust Pfizer are because, as I have walked the halls at Pfizer, you would see that the vast majority of our employees spend their lives dedicated to bringing truly important medications to patients and physicians in an appropriate manner,' she said.

Note that the majority of Pfizer employees may be ethical, but all it takes to accomplish unethical behavior is a few people in key leadership positions willingo to direct unethical activities to increase sales and profits, and for their subordinates to be willing to just follow orders.

Also, per a report in Bloomberg News, Ms Schulman added,

This gives us a very important opportunity to put final closure on the universe of material open items involving our U.S.-based operations.

This is a significant opportunity because it allows Pfizer to return its attention to the things that really should matter most to a biopharmaceutical company, which is the practice of developing innovative medications and bringing them to market in an appropriate fashion.

Summary: What is to be Done?

So will even a $2,300,000,000 settlement and yet another corporate integrity agreement make Pfizer or any other health care corporation act more ethically? I doubt it.

Remember, Pfizer may be a corporation, and thus be before the law a sort of pseudo-person. However, it is not really a person.

In this settlement, like others before it, it was people who implemented the behavior, made the decisions which lead to the behavior, and condoned the behavior. The people involved ranged from those in the trenches, through layers of management, to C-level executives, to the board of directors. In my humble opinion, until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior.

Finally, I say again that we cannot improve health care until we address this sort of unethical behavior. As reported by ABC News,

'It won't make a dent if the conduct that led to the settlement is not addressed as part of health care reform,' said [Harvard Medical School faculty member Dr Jon]Abramson, who was the expert consultant for the plaintiff attorneys in the Bextra case in 2007.

'The real problem is this behavior is not isolated to Bextra nor Pfizer but in essence is the way the pharmaceutical industry expands the sales of its drugs,' Abramson said. 'Unless health care reform can address misrepresentations, withholding science and control claims made to consumers, Americans will continue to pay too much for health care that is not as effective and is expensive.'

PS - According to Bloomberg commentator Ann Woolner, one of the whistle-blowers in this case was a physician who noticed that a Pfizer drug representative was pushing him to use drugs off-label,

Pfizer Inc. sales folks had one tough customer in psychiatrist Stefan Kruszewski. He didn’t buy their pitch to prescribe the anti-psychotic drug Geodon to children, a use that hadn’t been approved by federal regulators.

Nor did he go for the so-called off-label uses they suggested, such as treating dementia in the elderly.

Kruszewski didn’t just say no. He went and checked the research and saw Geodon could have serious cardiac side effects not mentioned by the salesmen, who boasted of its relative safety, according to his lawyer, Brian Kenney. And he noticed that Pfizer was paying his peers to promote the drug to other psychiatrists.

But the worst for Pfizer was that Kruszewski didn’t keep it to himself. He found a lawyer, Kenney, who specializes in whistleblower cases, and they took what they had to the government.

So to all you physicians out there, this shows that you can succesfully blow the whistle on unethical practices by health care organizations. And you may even make some money doing so. Apparently several of the whistle-blowers in this case will get sizable payments under the US False Claims Act.

ADDENDUM (8 September, 2009) - See also comments by Alison Bass on the Alison Bass Blog, and by Dr Howard Brody on the Hooked: Medicine, Ethics and Pharma blog.