At the End of Summer, Everybody, Well, Nearly Everybody (Allergan, CVS Caremark, Stryker, WellStar) Settles

Many US health care organizations announced legal settlements as the dog days of summer drew to a close.  The hit parade included, in order of dollar amount:

Stryker Corp

As reported by Bloomberg News:

Sryker Corp., a maker of artificial hips and knees, will pay $1.35 million to settle claims it marketed items without regulatory approval and misled health care providers about the use of its products, the Massachusetts attorney general said.

Stryker’s biotech unit engaged in unfair and deceptive trade practices that boosted sales of products used to strengthen and promote growth of bones, Massachusetts said in a filing in state court in Boston.

'Stryker Biotech subverted review procedures designed to safeguard patients and promoted uses of its products that were not shown to be safe or effective,' Martha Coakley, the attorney general, said today in a statement.

Note that this appeared to be one of those rare cases in which allegations were made against individuals, as well as the company as a whole:

In October 2009, the biotech unit and former president Mark Philip were indicted by a federal grand jury for misleading the U.S. Food and Drug Administration about the use of the products. Philip, who was president from 2004 to 2008, was accused along with three sales managers of promoting therapeutics in a manner contrary to their FDA-approved use. They pleaded not guilty, according to the case docket.

However, the case has not yet gone to trial.

As usual, the company denied anybody did anything wrong:

As part of the Massachusetts settlement, Kalamazoo, Michigan-based Stryker didn’t admit any liability, the company said in an e-mailed statement.

As usual, the penalties were trivial compared to the company's revenues:

Under the agreement, Stryker will pay $325,000 in civil penalties, $875,000 to fund efforts to combat unlawful marketing and other programs to benefit health-care consumers, and $150,000 to cover attorney fees and investigative costs. The company reported 2009 revenue of $6.72 billion.

CVS Caremark

As reported very briefly by the Associated Press via the Boston Globe,

CVS Caremark Corp. has agreed to pay $2.65 million under a settlement with the Massachusetts attorney general’s office, which accused the pharmacy chain of overcharging public entities for prescription drugs.

CVS will pay Massachusetts and about 200 cities and towns in the state that were allegedly overcharged under the workers compensation insurance system, Attorney General Martha Coakley said yesterday in a prepared statement.

WellStar

This story was published in the Atlanta Journal-Constitution:

WellStar Health System has agreed to pay $2.7 million to settle allegations that it improperly billed the state Medicaid system, Attorney General Thurbert Baker announced Monday.

The agreement came after a six-month state investigation which found that WellStar mishandled claims involving patients covered by both Medicare and Medicaid. WellStar filed claims that did not properly reflect payments it received from Medicare, allowing it to receive excessive payments from Medicaid.

As expected, the hospital system denied it was anything more than a soft-ware glitch:

The allegations related to patients served at WellStar’s five hospitals: Cobb, Douglas, Kennestone, Windy Hill and Paulding.

'Upon learning from the state of this potential billing issue, WellStar immediately conducted an internal investigation and fully cooperated with the state,' WellStar said in a statement.

The hospital system said a flaw in claims processing software caused the problem. 'The State specifically found no intent to defraud,' WellStar said.

WellStar admitted no wrongdoing as part of the settlement , according to the attorney general’s office.

It is not entirely clear whether any individuals suffered any negative consequences because of this soft-ware "flaw" which went undiscovered until the state investigated. In another AJC story, which did not directly refer to the one above, published four days later:

WellStar Health System’s president and CEO Gregory Simone was fired by the system’s board on Thursday.

Board chairman and Marietta attorney Randall Bentley said the decision was a personnel matter and provided no information on the reason for Simone’s termination, which is effective immediately.

Earlier this week Bonnie Wilson, WellStar’s executive vice president and general counsel, received notice that her contract would not be renewed.

Bentley did not say if the terminations were related.

Then, in a third story, the hospital denied any relationship among the firings and the legal settlement:

WellStar Health System's board this week fired the Gregory Simone, president and chief executive of the non-profit operator of five north metro hospitals and dozens of other facilities.

Board chairman Randall Bentley, a Marietta attorney, gave no explanation other than to say Simone's termination was a personnel matter. It was announced Thursday and was effective immediately.

His firing follows the Aug. 31 departure of Bonnie Wilson, WellStar’s executive vice president and general counsel. She was told her contract would not be renewed, according to WellStar.

Bentley did not say if the Simone's firing and Wilson's departure were related.

WellStar and Bentley said Simone's firing was not related to a six-month Medicare and Medicaid investigation. In August, the hospital system agreed to pay $2.7 million to settle allegations that it improperly billed the state Medicaid system, resulting in excessive payments from Medicaid.

[sarcasm on] Of course, it was just a soft-ware "flaw," so no one was responsible, just the soft-ware. [sarcasm off]

Allergan

As reported again by Bloomberg:

Allergan Inc., maker of the wrinkle smoother Botox, agreed to pay $600 million and plead guilty to a misdemeanor in settling a U.S. investigation of its marketing practices.

Allergan will pay $375 million to the government as part of a 'misbranding' charge that the marketing of Botox from 2000 to 2005 led to use in treating headache, pain, muscle stiffness and juvenile cerebral palsy, purposes for which the Food and Drug Administration during that time hadn’t approved marketing. Allergan will also pay $225 million to resolve civil claims from the Justice Department, the company said today in a statement.

Once again, although the amount this time appears large, it is small compared to the revenues produced by the product in question. The total fines amount to about $100 million per year of sales, but:

Botox, [is] Allergan’s top product with $1.3 billion in annual sales,....

Once again, the company denied it did anything all that bad, (even though it did plead guilty to a crime), reported by the Wall Street Journal,

The company, meanwhile, said the settlement resolves the investigation while avoiding substantial litigation costs and other risks associated with a government enforcement action.

Allergan said its plea to the single misdemeanor 'misbranding' charge didn't involve 'false or deceptive conduct.' Specifically, the Botox marketing from 2000 to 2005 resulted in intended Botox use for four unapproved conditions, Allergan said. The drug didn't have directions for these uses, which means it was misbranded, the company said.

Got that? On the other hand,

Prosecutors alleged Allergan engaged in tactics to promote the drug for unapproved uses, including paying kickbacks to doctors. For example, the government charged that in 2005, Allergan hosted about 100 doctors at an invitation-only program at its corporate headquarters and a Newport Beach, Calif., resort while paying them $1,500 'to listen to off-label marketing presentations.'

I did not see anything in any news article that suggested any individual at Allergan would suffer any negative consequences as part of this settlement.

Summary

So, the parade of legal settlements marches on.  We have now documented a very large number of heretofore respectable health care organizations who have made legal settlements of all sorts of charges of wrong-doing.  As we have repeatedly noted, these settlements have certain characteristics.  The amount of money involved, although it may seem big to those paid less than CEOs, is usually much smaller than the amount of money that could be made by the bad behavior.  The settlement is usually paid by the organization as a whole, and so its effect may be diffused among the employees, the patients or clients, and the stock-holders, if any.  The settlement rarely involves any negative consequences for those who might have authorized, directed, or implemented the bad behavior.  Rarely is the settlement widely reported, and rarely does the organization involved seem to suffer any stain on its reputation.

So is it any wonder that the bad behavior that leads to such settlements continues?  Is it any wonder that health care organizational leaders now just seem to think of such settlements as a (relatively negligible) cost of doing business?

Inquiring minds may want to know how this state of affairs came to be.  Why are leaders of health care organizations (and other large organizations) able to behave with such relative impunity?  The answer may have to wait for more historical inquiry (although I recently saw what might be a clue, so stay tuned.) 

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.

Three Troubled Device Companies: ArthroCare, Stryker, AM2PAT

It was quite a week in the medical device business.

Arthrocare

Last week we discussed the shenanigans at ArthroCare Corporation here. Since then, more information has come out about in the Austin Business Journal provided more information about these improper practices:

While the internal review, being conducted with the assistance of outside counsel Latham & Watkins LLP, is not yet complete, the ArthroCare’s audit committee has reviewed evidence that indicates that the company’s spine unit engaged in and may have caused others to engage in improper practices in certain instances by:

* seeking separate reimbursement from insurers for company products in connection with procedures which were contractually reimbursed on a global basis;
* making inaccurate statements in claims submitted to insurers regarding the place where particular procedures were performed;
* providing physicians and insurers with descriptions of company technologies which had the effect of circumventing payor policies that did not cover such technologies;
* recommending and advocating to physicians the use of a Current Procedural Terminology code to identify its coblation nucleoplasty technology that was not approved by the American Medical Association and may have not properly described the procedure that was performed.

These improper practices identified so far may have occurred since at least 2006.

Investigators were informed that certain sales and marketing personnel within the spine unit provided physicians and their billing staff with merchandise and administrative services at no charge potentially in exchange for their utilization of the company’s products. The audit committee has determined that company personnel at all levels lacked adequate health care compliance training and that company billing personnel lacked adequate training and supervision in insurance reimbursement requirements. In addition to considering and implementing remediation efforts, the committee is undertaking a review of such practices in other business units.

Stryker

Meanwhile, the New York Times reported about Stryker:

A Justice Department inquiry into Stryker’s marketing of human bone growth products has resulted in guilty pleas by former company sales representatives.

One former sales official pleaded guilty two weeks ago, and another one did in November, court documents show.

Stryker, a leading maker of medical devices, and the United States attorney’s office in Boston, which is conducting the inquiry, declined to comment. A spokeswoman for the attorney’s office said the investigation was continuing.

The inquiry, which began last year, involves several issues, according to court papers and Stryker filings with the Securities and Exchange Commission. The questions include whether Stryker abused a federal exemption that authorized it to sell only limited quantities of its bone growth products for 'humanitarian' reasons, according to the documents.

The two former sales officials pleaded guilty to charges that they had promoted off-label use of the products even though they knew that such use had earlier caused problems in some patients.

The products in question are used by surgeons to aid the growth of bones that fail to heal properly.

This case is not the only one raising ethical questions about Stryker's management.

The inquiry poses new complications for Stryker, which is already operating under federal oversight as a result of an earlier Justice Department investigation of kickbacks paid by makers of artificial hips and knees to doctors.

We posted about this previous issue, first here, most recently here.

AM2PAT

Last, but most assuredly not least, was a story, (here reported by Newsday) about AM2PAT:

Federal authorities are hunting the mastermind behind a 'horrific case' in which bacteria-laden syringes shipped from an Angier, N.C., plant sickened hundreds of people and killed five.

Two men pleaded guilty Monday in U.S. District Court in Raleigh for their roles in ignoring sterility standards at the former AM2PAT Inc. plant. The court heard of conditions at the plant more consistent with a Third World textile factory than a pharmaceutical facility.

The men - plant manager Aniruddha Patel and quality control director Ravindra Kumar Sharma - were each sentenced to 4 1/2 years in prison for fraud and allowing tainted drugs into the marketplace. They were rewarded with a relatively light sentence in exchange for information about chief executive Dushyant Patel, whose company sold $6.9 million worth of heparin and saline syringes in 2006-07 that did not undergo proper sterility testing.

Dushyant Patel, indicted late last week on 10 charges that include fraud and selling adulterated medical devices, has not been arrested. Authorities think he may have fled to his homeland in India and are seeking help from Interpol.

Syringes from AM2PAT were pulled from the market early last year, and the Angier plant shuttered after an outbreak of Serratia, a bacterial infection, hit patients in Colorado, Texas, Illinois, Florida and other states.

On Monday, prosecutors laid out a scheme before Judge Terrence Boyle in which the plant's operators routinely failed to follow sterility rules to keep production running faster. The drugs were not produced at the plant, but were loaded into syringes there, then shipped.

The plant was subject to U.S. Food and Drug Administration requirements for its production. The syringes were supposed to be loaded in a 'clean room,' with employees in caps and gowns and air carefully ventilated to keep germs from spreading.

A photograph entered into evidence Monday shows a 'clean room' refreshed with a common window fan held together with duct tape. In another photo, women work on an assembly line under lamps, surrounded by what look like green plastic recycling bins.

Once the syringes were loaded with drugs, each batch was required to be held for two weeks, while employees tested for bacteria and other contaminants. If bacteria were cultured from the medicines, the whole batch should have been held back. That wasn't happening, court documents show.

Batches of syringes went straight from the production line into the marketplace, with Sharma falsifying manufacturing dates to make it appear to regulators that requisite quality tests had been done. And when tests were done, results were ignored.

Note first that none of these cases was isolated, in that each of these companies had questions raised about management behavior before (at Arthrocare, about accounting; at Stryker, about marketing and payments to doctors; at AM2PAT, raised by health care professionals about quality of its products.)

In the US, we are undergoing yet another great debate about health care reform. Two big issues are the high cost and questionable quality of our health care. All three of these cases involved behavior that could have raised costs. Two may have had indirect effects on quality. One may have directly caused patient death and disease.

Yet, even after executive arrogance, misbehavior, self-interest, and corruption have lead to the global financial meltdown, we are still not really addressing such behavior as a cause of our global health care crisis.

BLOGSCAN - Direct-to-Consumer Device Advertising on YouTube Sans Adverse Effects Information

On the PostScript blog, the Prescription Project announced the discovery of direct-to-consumer marketing videos released on YouTube by three device companies. The video from Abbott advertised the XIENCE-V drug eluting stent. That from Medtronic advertised the Prestige cervical disc. That from Stryker advertised its Cormet hip resurfacing technology. Apparently none of these brave new advertisements bothered to put in the discussion about adverse effects mandated by the US Food and Drug Administration (FDA). The new media obviously presents new opportunities for marketing, including marketing that gets around rules usually applied in other media. Kudos to the Prescription Project for blowing the whistle on this one.

According to this post, soon after the three companies pulled these ads. The issue of new media DTC advertising produced quite a bit of internet buzz. Amazingly, among those agreeing with the Prescription Project's position was none other than Mr Peter Pitts of the DrugWonks blog, the Center for Medicine in the Public Interest, and the Manning, Selvage and Lee public relations firm.

Now You See Them, Now You Don't: 2007 Lists of Payments Made by Orthopedic Device Companies Vanish Into Cyberspace

Starting last year, we posted (here, here, here, and here) about the payments, often huge, that five manufacturers of prosthetic joints (Biomet, DePuy Orthopaedics (a unit of Johnson & Johnson), Stryker Orthopedics,a unit of Stryker Inc, Zimmer Holdings, and Smith & Nephew) revealed they made to orthopedic surgeons and various academic and other organizations. We also noted that some of the leadership of the major orthopedic societies have received substantial amounts from these companies, as have the societies themselves.

The information we used in those posts about the payments came from lists posted on the internet by the five companies. The lists were posted under deferred prosecution agreements a US Attorney made with four companies (Biomet, DePuy Orthopedics, Smith & Nephew, and Zimmer Holdings) and an agreement allowing federal supervision of Stryker Orthopedics. The companies were charged with violating anti-kickback laws by paying orthopedic surgeons as "consultants" to use their products. The lists on which I based the above posts contained data from nearly all of 2007.

I recently had occasion to revisit this question, and decided to take another look at these lists. But lo and behold, when I used the links from my earlier posts (Biomet, DePuy, Smith & Nephew, Stryker, and Zimmer), I found that two of them now went to lists of data pertaining only to the early part of 2008. No 2007 data was available from the Biomet and Smith & Nephew lists. Furthermore, perusal of those companies' web-sites did not reveal any obvious way to access the 2007 data. [See addendum below. By 12 May, 2008, three days after this was posted, the Smith & Nephew list included all 2007 data, and the Biomet list included all 2007 data, but appears to have truncated its 2008 data alphabetically after "Wo...."]

When I reviewed the 2007 lists, I was struck by how many doctors, academic institutions, and other not-for-profit organizations were on the lists, and how much money some of them received. The potential for payments of hundreds of thousands or millions of dollars to influence the thinking and actions of these people and organizations was obvious. Many of the orthopedic surgeons involved were prominent practitioners or academics. The likelihood that their practice, teaching or research might have been influenced by financial entanglements of this magnitude was obvious. Similarly, the likelihood that large payments to academic institutions or professional societies might influence their actions and policies was also obvious.

But, two of these lists are now lost in cyberspace. So those wishing to use them to inform their thinking about the people and organizations involved are out of luck. Whether by the end of the year the 2008 lists will essentially provide the same information as the 2007 lists is unknown. Even if they do, the loss of the 2007 lists will make it difficult to determine whether the financial relationships revealed in 2008 were new or not. Furthermore, erasing the 2007 data would obviously reduce the perceived overall magnitude of some of the financial relationships. In summary, erasing the 2007 data off the internet suggests that the companies want to provide as little transparency about their payments to orthopedic surgeons, academic institutions, and professional societies as possible, and that the companies want to minimize perceptions of the magnitude and duration about these financial relationships.

We are only making slow progress in making the web of financial entanglements that pervades health care more transparent.

ADDENDUM (12 May, 2008) - As noted in the comments, the 2007 information from Biomet was apparently recently added to the list available on the web. It now begins after item 168, thus apparently truncating the 2008 data for recipients starting with names beginning with alphabetically after "Wo...." Also, Smith & Nephew has also loaded its 2007 information, apparently completely.