C R Bard Settles Allegations of Kickbacks to Promote Radiation Treatment for Prostate Cancer

Screening for and aggressive treatment of prostate cancer has become an enormously lucrative business, if not necessarily a life-saving medical strategy.  The minimal media coverage of a recent settlement suggests that at least to some degree, it has been fueled by some questionable practices.

The CR Bard Settlement

As reported by the Atlanta Journal Constitution,

A medical device company on Monday agreed to pay a $48.2 million settlement to resolve claims by a Georgia employee that it paid kickbacks to doctors and customers who bought radiation treatment for prostate cancer.

C.R. Bard Inc., which is headquartered in New Jersey and has offices in Covington, resolved a whistle-blower suit filed by the employee in 2006. The suit alleged that the company paid off doctors and hospitals to induce them to prescribe brachytherapy seeds, which are implanted in the prostate and deliver a dose of radiation to cancer cells.

Another brief report in the Macon (GA) Telegraph gave a tiny bit more detail about what was given to physicians to get them to use Bard's radiation therapy products,

 Customers could order the seeds, used in brachytherapy to deliver a prescribed dose of radiation directly to cancer cells, from multiple companies. But Bard allegedly offered doctors grant money, rebates, free medical equipment and advertising campaigns to entice them to buy their product at inflated prices, according to a news release issued by [whistle-blower Julie] Darity’s legal team....

The Usual Elements of Legal Settlements of Allegations of Health Care Corporate Bad Behavior

The story, briefly told as it was, included many of the usual elements of stories of legal settlements of wrong-doing by large health care corporations.

Slow Justice

The settlement, hence justice, as it were, took a long time, about 7 years since the most recent behavior, and 15 years since its start.  Per the AJC,

 Bard employed its kickback scheme from 1998 to 2006, federal prosecutors said.

 Penalties Not as Big as They Appeared

The penalties were not as big as they seemed.  There was the seemingly large fine, $48.2 million dollars.  However, that should be compared to the company's net sales of over $2.95 billion and net income of $530 million in 2012, according to the company's annual report.  It should also be compared to the total compensation of the company's chairman and CEO in 2012, over $8.7 million, and to that of its president and chief operating officer, over $6.0 million, according to the company's 2012 proxy statement.   Apparently, the fine came out of the company's treasury, so its impact was diffused among all shareholders, employees, customers, and patients, not directed to those who may have authorized, directed or implemented the kickbacks to physicians. 

No Penalties for Individuals, No Acknowledgement of Wrong-Doing

The settlement did not involve any sort of direct penalties to those who authorized, directed, or implemented the kickbacks.

The corporation did not even acknowledge any bad behavior.  As per the AJC,

Bard is pleased to settle the claims, Scott Lowry, a company spokesman, said in a statement.

'This resolution allows the company to put this matter behind it and continue to focus on delivering life-enhancing medical devices and technologies to patients around the world,' he said. 'We remain committed to continuously enhancing and improving our compliance programs in accordance with industry standards.'

Suppression of Whistle-Blowing

It may not be part of all such settlements, but note that in this case there seemed to be an attempt to shut up the whistle-blower.  So, there is reason to think that justice, such as it was, was delayed because the company seemingly tried to punish the whistle-blower, rather than listen to what she had to say.  Per the Macon Telegraph,

 Darity, 56, said she first reported what she suspected as questionable activities to her supervisors.

'I did exactly what was outlined in the company ethics policy,' she said. 'I wanted to think things were being corrected.'
In time, she realized nothing had changed. She filed an internal whistle-blower complaint.

Her job was eliminated in November 2005, soon after an investigation was launched into her whistle-blower complaint, she said.

Darity had worked for Bard, which has an office in Covington, for more than 18 years. When her job was eliminated, she was a manager in the Brachytherapy Contracts Administration division.

Out of a job, Darity filed the lawsuit in U.S. District Court for the Northern District of Georgia in January 2006.

Read more here: http://www.macon.com/2013/05/14/2478611/medical-company-agrees-to-pay.html#storylink=cpy

Nonetheless, the government seemingly trusted C R Bard to fix its own behavior going forward, per the Wall Street Journal,

 As part of a non-prosecution agreement, C.R. Bard agreed to pay an additional $2.2 million and take remedial steps to enhance compliance. The company had said in a regulatory filing last year that it expected the settlement to include a corporate integrity agreement, which typically require companies to obey restrictions on their sales and marketing practices, but no such agreement was announced Monday. 

Note that here we discussed a case in which an academic medical institution seemingly tried to punish faculty members who questioned that organization's overly enthusiastic approach to prostate cancer.

Summary - the Profitable but Unsubstantiated Aggressive Approach to Prostate Cancer

So its just another day at the office. This was a typical settlement of allegations of unethical behavior by a large health care organization.    A large health care company allegedly bribed doctors to use its products.  It seemingly tried to shut up a whistle-blower.  Seven years later, the company got a financial slap on the wrist, but no one directly involved in the alleged kickbacks, and no one whose compensation may have been enlarged due to such apparently unethical activity paid a price.  Never mind that the alleged kickbacks may have induced doctors to use treatments that provided no overall benefit, but could have harmed patients. 

Before ending with our usual fulmination, I should note that this case appears to be one small piece in the puzzle of our national infatuation with an aggressive approach to prostate cancer, despite a lack of essentially any good evidence that this approach does any good.  Brachytherapy, the treatment pushed allegedly by kickbacks, is one kind of aggressive treatment for prostate cancer.  Yet there is no good evidence from randomized controlled trials that is prolongs life.  In fact, a recent (and the only major) randomized controlled trial of aggressive treatment of prostate cancer on initial diagnosis failed to show any overall survival benefit.(1)  There has been a huge push to screen all men of a certain age for prostate cancer.  Yet now two new trials also failed to show any overall survival benefit from screening.(2,3)   

But the prostate cancer business is very lucrative.  On the Reforming Health blog, a post summarized a lecture given by Dr Otis Brawley, chief medical officer of the American Cancer Society in which Dr Brawley described the financial scheme underlying the aggressive approach to prostate cancer,

Brawley recounts an experience he had on a site visit to a hospital in 1998 while an Assistant Director at the National Cancer Institute. During the visit a marketing executive explains to Brawley the publicity value and financial rewards of a free prostate screening program offered by the hospital at a local mall. The plan is to screen the first 1,000 men over 50 who come to the mall for testing. I’ve transcribed Brawley’s recollections from the video and they provide a great explanation for the profit-driven practices that continue to occur today, 14 years later:

'If they screen 1,000 men they’re going to have 145 abnormals. They’re going to charge about $3,000 to figure out what is abnormal about these abnormals, that’s how they pay for the free screening. About 10 of the 145 won’t come to this hospital so that’s business for their competitors, but they’ll get 135 times $3,500 on average. Of the 135, 45 are going to die of prostate cancer and the other percentage are going to get radical prostatectomy at about $30-40,000 a case; there’s a percentage that’s going to get seeds at about $30,000 a case; a percentage were going to get radiation therapy that (at the time) was about $60,000. Then [the marketing executive’s] business plan goes further, he knows how many guys are going to have so much incontinence that diapers aren’t going to do it so he had in his business plan how many artificial sphincters urologists were going to implant. And then he was a little apologetic because there was this new thing called Viagra that screwed up his estimates for how many penile implants he was going to sell because guys were upset about impotence related to prostate cancer treatment.'

Brawley says, 'this is 1998, I ask him, if you screen 1,000 people how many lives are you going to save? He took off his glasses and looked at me like I was some kind of fool and said, ‘Don’t you know, nobody’s ever shown that prostate cancer screening saves lives, I can’t give you an estimate on that.’'

Presumably because he was a marketing executive, the manager whom Brawley quoted did not have to feel doubt about all the men subjected to needless procedures, and who would be at risk of serious and unpleasant adverse effects of these procedures, all to make money but not to prolong their lives.  Of course, not only the hospitals make money, but also quite obviously the companies that sell them the drugs and devices needed for all this medical aggression make money, as do the doctors who go along with it all. 

Now we suspect that one small reason the doctors have gone along with it is that they may have gotten inducements from those companies.

Time to fulminate,...

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.

References

1.  Wilt TJ, Brewer MK, Jones KM et al.  Radical prostatectomy versus observation for localized prostate cancer.  N Engl J Med 2012; 367: 203-13.  [Link here]
2.  Andriole GL, Crawford ED, Grubb RL et al.  Mortality results from a randomized prostate-cancer screening trial.  N Engl J Med 2009; 360: 1310-9. [Link here]
3.  Schroder FH, Gugosson J, Roobl MJ et al.  Screening and prostate-cancer mortality in a randomized European study.  N Engl J Med 2009: 360: 1320-8.[Link here]

Read more here: http://www.macon.com/2013/05/14/2478611/medical-company-agrees-to-pay.html#storylink=cp

"Slap on the Wrist" for a "Too Big to Fail" Hospital - Judge Rejects WakeMed Settlement

Maybe we are reaching an inflection point in how misbehavior by big health care organizations is handled in the US legal system. 

We have frequently discussed the march of legal settlements made by big health care organizations.  Many of these settlements indicated severely bad behavior, often behavior that seemed overtly dishonest, sometimes criminal, and had the potential to harm patients.  Yet most of these settlements involved only fines, and sometimes written agreements that pledge the organization will do better in the future, often in the form of deferred prosecution or corporate integrity agreements.  Yet the fines were often small compared to the amount the organization stood to make from the bad behavior.  It is not clear that any written agreements were enforced, or caused major penalties if the organization did not fulfill them.  And almost never did any individual within the accused organization suffer any negative consequences for authorizing, directing or implementing the bad behavior, even if such individuals may have personally profited from high compensation partially fueled by the bad behavior.

Now and then, though, there are cases that are different.  Perhaps one has just come along that may signal things are going to change.

The Basics of the Case

The case was first reported by the Raleigh (NC)  News & Observer in December, 2012.  Here are the basics:

WakeMed has agreed to pay $8 million to settle an investigation into its practice of billing Medicare for expensive overnight care when the patients had been treated and discharged the same day.

The settlement came after a lengthy criminal investigation into Medicare billing procedures used by nurses at the private, not-for-profit hospital’s Heart Center Observation Area.

Nurses there, according to federal court documents, routinely ignored physicians’ orders for how a patient should be classified. Their actions resulted in the hospital receiving millions of unwarranted Medicare dollars for outpatients who were classified wrongly as inpatients.

Though some WakeMed managers were aware of the billing practices, according to court documents, investigators found no evidence of anyone personally benefiting from the system.

No one, according to WakeMed officials, lost their job or was disciplined because of the investigation. 

The US Attorney made the usual sort of announcement:

'This case will serve as a reminder that hospitals, just like individual health care providers, will be held accountable for their actions,' [Thomas] Walker, the U.S. Attorney for the Eastern District of North Carolina, said in a statement.

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

So far, this is pretty usual.  There were accusations of inflated billing, a monetary fine that might look big to the average citizen, but that pales next to the revenue of the offending organization (over $943 million in the 2010-2011 fiscal year according to the WakeMed 2011 US form 990),a stern statement by the US Attorney, but again no penalties for any individual, and here, a rather implausible statement that no one benefited from the deceptive practices.

However, there were also some immediately appreciable atypical elements to this case.

Atypical Elements

In addition to the fine to be paid, the case was to be settled using a deferred prosecution agreement:

The hospital faces two criminal charges – making material false statements relating to health care matters and aiding and abetting, but under the settlement reached Wednesday, prosecution will be deferred. If the hospital complies with provisions in the settlement agreement, such as paying $8 million and allowing further monitoring, the charges will be dismissed in two years, according to court documents.

As part of the agreement, which has yet to be approved in court, [Wakemed CEO Bill] Atkinson acknowledged the wrongdoing described by prosecutors. He further acknowledged that WakeMed was responsible for the acts of the health-care organization’s employees and officers.

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

While we have sometimes seen deferred prosecution agreements used in cases in which for-profit health care corporations were accused of violating the law, they are rarely used in cases involving non-profit hospitals.  (The biggest one I recall was that of the University of Medicine and Dentistry of New Jersey, a complex case we started discussing in 2005.  See relevant posts here.)  Criminal charges against a non-profit hospital are also unusual.  Note also that as stated above the hospital system CEO seemed to admit that the hospital did wrong, raising further doubt about the conclusion above that no individual personally profited.

The plot further thickened when the CEO seemed to contradict his own statement within the deferred prosecution agreement that acknowledged wrong-doing.

In an interview Wednesday, Bill Atkinson, WakeMed’s president and CEO, wavered between accepting the charges – saying repeatedly  'I don’t want to minimize it, and I don’t want you to hear me doing that' – and being adamant that the hospital’s actions were simply a misinterpretation of complicated federal Medicare guidelines.

Even though he endorsed a settlement agreement in which prosecutors contend two crimes occurred, Atkinson said he doesn’t believe the hospital’s actions were criminal.

'I don’t think so, but the federal government thinks they could certainly turn it that way,' he said. That description differs vastly from what prosecutors contend. 'They’re not going to minimize the media effect,' Atkinson said.

Read more here: http://www.newsobserver.com/2012/12/19/2555092/wakemed-admits-to-false-medicare.html#storylink=cpy

The plot thickened further when in the same interview Atkinson seemed to deny that any individual did anything wrong:

Heidi McAfee, who retired earlier this year, was director of Patient Access during much of the period when the problematic billing occurred. Efforts to reach McAfee on Wednesday were unsuccessful, but Atkinson praised her years of work with WakeMed.

'Do I think anybody intentionally did anything wrong?' Atkinson said. 'No, I don’t.'

He said WakeMed had not reported McAfee or any of the nurses to the N.C. Board of Nursing for ignoring doctor’s orders. 

So did the hospital acknowledge wrongdoing, or did it not?  If wrongdoing did occur, did any individual do it, or was it done by ghosts or spirits?  From this account, it was unclear.

This Time the Inconsistencies and Ambiguities are not Ignored

Many of the settlements we have discussed seem to have been based on similar illogic.  For example, they often involved accusations of bad behavior, often bad enough to put patients at danger, yet the settlements may included ritualistic statements by defendant organizations that they neither admitted nor denied wrongdoing.  Thus, the settlements left ambiguous and unknown what really happened, and their own appropriateness.  (Note that similar settlements are made all the time by big financial firms, and one intrepid judge did point out how little sense they make, see this post.)

Yet in most cases, the illogic is rapidly swept under the rug, noticed, if at all, by lowly outsiders like your humble bloggers on Health Care Renewal.

This time, though, it was different.

Why Would the Nurses Ignore Doctors' Orders?

An important part of the argument by the US Department of Justice in this case was that nurses "routinely ignored doctors' orders."  If it were true, this would be very unusual and would threaten the integrity of health care at the particular institution, since every hospital operates on the assumption that the doctors make management decisions and order tests, treatments, etc, and then the nurses, as well as technicians and therapists carry out these orders.

However, In this case, a local nurse immediately and publicly disputed the notion that the nurses were independently flouting the doctors' orders.  As reported again by the News & Observer in December, 2012,

When Vicki Hewitt-McNeil read about WakeMed’s $8 million settlement for wrong Medicare billing, the Raleigh nurse didn’t buy the story.

According to the settlement, a nursing director instructed her staff to admit patients as inpatients and ignore doctors’ orders to treat them on the less expensive outpatient basis.

With two decades of nursing experience, Hewitt-McNeil didn’t like that the blame was shifted down the totem pole to nurses, who don’t wield the power of administrators and doctors.

'I honestly cannot believe this was the nursing department that did this,' Hewitt-McNeil said. 'That’s just not possible.'

 Furthermore,

[Ms Hewitt-McNeil]  also worked shifts at WakeMed as a pool nurse, similar to working as a substitute teacher. 'Nurses at WakeMed don’t have the autonomy to do anything,' Hewitt-McNeil said. 'You have to call a doctor for everything.'

Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy

Again, the contention that the nurses systematically disobeyed doctors or pretended to be following non-existent orders implied a fundamental break-down of the system and widespread unprofessional, unethical behavior by the nurses.  In addition, the charges did not suggest why the nurses would do something so bad, especially since they were in no position to personally benefit from their actions.

 What Did the Hospital Leadership Actually Admit?

Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy

Read more here: http://www.newsobserver.com/2012/12/22/2561738/nurse-rejects-wakemeds-claim-that.html#storylink=cpy

It took a few weeks, but someone - it is not clear who it was - noticed that while the Department of Justice asserted that the hospital CEO had admitted wrongdoing, the CEO's public statement seemed to equivocate.  So in mid January, 2013, as reported again by the News & Observer,

Deb Laughery, a spokeswoman for the hospital, issued a clarification on Monday.

'In an abundance of caution, WakeMed confirms that it has agreed to a settlement with the United States as set forth in the Deferred Prosecution Agreement,' the statement said, adding further that statements of fact laid out in the agreement were 'true and accurate.'

In the clarification, WakeMed officials acknowledged that the hospital formally faced federal criminal charges. The hospital also retracted any suggestions that the settlement only involved a small number of cases.

The hospital public relations person apparently could not bring herself to say that the hospital admitted wrongdoing, but by acknowledging that statements of fact in the deferred prosecution agreement were "true and accurate," she seemed to be indirectly admitting again that wrongdoing occurred, and that the hospital was responsible for the actions of its employees.

The Judge Notices the Emperor Has No Clothes

Despite their internal inconsistencies and illogic, most legal settlements of accusations of wrongdoing by big health care organizations are accepted by judges.  In this case, again things were different.  As reported yesterday, on 17 January, 2013 again by the News & Observer,

 WakeMed officials and federal prosecutors spent two years hammering out an $8 million proposal to settle a Medicare fraud investigation.

A federal judge shredded the 116-page agreement in less than 30 minutes on Thursday.

U.S. District Judge Terrence Boyle ticked off a list of his grievances about the proposal, forcing federal prosecutors into the unusual position of defending the defendants.

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Quelle surprise!  The judge took particular offense that the settlement seemed disproportionately lenient,

 The agreement, Boyle said, appeared to be a 'slap on the hand' for a 'too big to fail' corporate giant. Only the day before, Boyle told the lawyers, he sentenced a woman to a year in prison in a $235,000 insurance fraud case.

Furthermore, 

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Boyle was irked that no criminal charges had been filed in the case. He ended the hearing by telling the prosecutor either to fold his briefcase or take it to a federal grand jury for official indictments.

'There are lots of corporations that steal from the government,' Boyle said. 'Most of them are convicted, fined and banished.'

Also,

'Why are you coming to court if you tell me you don’t need me?' Boyle asked Gilmore, the prosecutor who rose before him Thursday. 'I’m just window dressing in this case.'

'Why not take a guilty plea, defer imposition of the judgment and sentence, and come back in two years later and take a post hoc dismissal?' Boyle asked later.

Boyle lamented the increased number of health care fraud cases across the country.

'Who are the victims in this case?' Boyle asked before answering his own question. 'Every American wage earner and every American citizen.'

Boyle continued: 'It’s very difficult for society and the court to differentiate between the everyday working Joe or Jane who goes to prison and the nonprofit corporate giant who doesn’t go to jail, who gets a slap on the hand and doesn’t miss a beat.'

Exactly.   And finally, just to demonstrate the sense of impunity of the leadership of this particular nonprofit corporate giant

Boyle, who’s been a federal judge for 28 years, also criticized WakeMed for failing to send a top administrator or a board member to answer his questions. It’s rare for a criminal case to be resolved without a defendant at the defense table.

Deb Laughery, a WakeMed spokeswoman, said after the hearing that none attended because the board approved a resolution earlier in the week supporting the proposed settlement.

Summary

For years now the leadership of large health care organizations have grown rich while denying accountability for their actions that made this so.  This denial has been largely abetted by governmental regulators and law enforcers, who while often recognizing that corporate misbehavior has occurred, have seemed unable or unwilling to pursue anything but the most lenient resolutions of such cases.  These resolutions are often fines that might appear big to gullible members of the public, but are actually small in comparison to the money to be made; sometimes deferred prosecution and corporate integrity agreements that rarely are enforced; and almost never any negative consequences for the people who authorized, directed, or implemented the bad behavior.  Thus the leaders of health care organizations have enjoyed impunity, have become the new untouchables, and thus health care organizations become ever better at raking in money and ever worse at providing good health care.

As I have said again and again,  until the people responsible for the bad behavior experience negative consequences from that behavior, they will continue to perform, direct, and condone bad behavior. We will not achieve real health care reform in the US until we effectively deter unethical, self-serving behavior by leaders of health care organizations.

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/01/17/2614178/judge-refuses-to-accept-wakemed.html#storylink=cpy

Read more here: http://www.newsobserver.com/2013/01/15/2607671/wakemed-clarifies-statements-on.html#storylink=cpy

Pfizer's Pforeign Pfiasco

Quelle surprise.  Giant international pharmaceutical company Pfizer managed to go for nearly 10 months without announcing a major legal settlement.  However, this month, as reported by Bloomberg, it was time for Pfizer to settle again.  The basics were:

Pfizer Inc., the world’s biggest drugmaker, agreed to pay $60.2 million to settle foreign bribery cases it brought to U.S. authorities involving alleged payments paid by employees and agents of subsidiaries.

Pfizer entered into two agreements with the Securities and Exchange Commission and the New York-based drugmaker reached a deferred prosecution accord with the Department of Justice, according to filings today in federal court in Washington.

Bribery

This case is worth perusing because of how it documents what the US government called not merely deceptive, but corrupt practices used by Pfizer to sell drugs. The practices were widespread around the world:

The settlements announced today include Pfizer operations in eight countries: Bulgaria, Croatia, Kazakhstan, Russia, Italy, China, the Czech Republic and Serbia. The Wyeth settlement, over its nutrition business, was for China, Indonesia, Saudi Arabia and Pakistan.

The practices involved, not to put too fine a point on it, bribing doctors. Furthermore, as part of the settlement Pfizer apparently admitted to some of the specific practices alleged by the government:

In Bulgaria, local representatives spent $28,000 to invite government doctors on 'incentive trips' to Greece, as a reward for the physicians who were the biggest prescribers of Pfizer’s products, Pfizer admitted according to the Justice Department filing. They also paid $17,000 to send doctors to medical conferences, again in exchange for commitments to prescribe Pfizer drugs.

In Croatia, the unit there had used a consulting agreement with a government doctor to help influence which drugs were allowed to be sold in the country, paying the physician in cash and travel expenses, Pfizer admitted.

Pfizer also admitted to what was called the 'hospital program,' in Russia, where doctors were given a 5 percent kick- back on certain drugs prescribed.

'Pfizer Russia used the Hospital Program to make cash payments to individual government healthcare professionals to corruptly reward past purchases and prescriptions of Pfizer products, and to corruptly induce future purchases and prescriptions,' the Justice Department said in the filing. Pfizer’s Russian unit also used intermediary companies to pay off doctors and government officials, the company admitted.

No Individual Penalties

Despite the shamefulness of these practices, as is now distressingly usual (look here), no individual seems to be obligated to suffer any penalty or negative consequences as a result of this settlement. While the US government alleged criminal behavior, beyond the fines imposed on the company, further prosecution will be deferred:

The Justice Department charged the Pfizer HCP Corp. unit with two criminal counts, conspiracy to violate the Foreign Corrupt Practices Act and a violation of the FCPA’s anti-bribery provisions. Prosecutors agreed to defer prosecution and drop the charges after two years if Pfizer continues to cooperate and take remedial steps.

The article contained a curious statement seemingly asserting that the payments were somehow made independent of any actions by individuals at Pfizer:

The SEC said the payoffs were made 'without the knowledge or approval of officers or employees of Pfizer, but the inaccurate books and records of Pfizer subsidiaries were consolidated in the financial reports of Pfizer.'

So were the payments made by machines acting autonomously? or by ghosts? Maybe this was just a typo. However, note that the de rigeur statement by Pfizer's internal counsel was phrased so as to imply the actions somehow occurred outside of the organization:

'The actions which led to this resolution were disappointing, but the openness and speed with which Pfizer voluntarily disclosed and addressed them reflects our true culture and the real value we place on integrity and meeting commitments,' Amy Schulman, Pfizer’s general counsel, said in an e-mailed statement.

Summary

This latest settlement reaffirms the poor ethical culture now prevalent in major health care organizations throughout the world.  It also affirms how deeply unethical the culture has become at some of our largest and most prominent and influential health care organizations.  This settlement is only the latest evidence of ethical missteps by Pfizer's leadership.

In the beginning of the 21st century, according to the Philadelphia Inquirer, Pfizer made three major settlements,

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.

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.

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.

Thereafter, Pfizer paid a $2.3 billion settlement in 2009 of civil and criminal allegations and a Pfizer subsidiary entered a guilty plea to charges it violated federal law regarding its marketing of Bextra (see post here).  Pfizer was involved in two other major cases from then to early 2010, including one in which a jury found the company guilty of violating the RICO (racketeer-influenced corrupt organization) statute (see post here).  The company was listed as one of the pharmaceutical "big four" companies in terms of defrauding the government (see post here).  Pfizer's Pharmacia subsidiary settled allegations that it inflated drugs costs paid by New York in early 2011 (see post here).   In March, 2011, a settlement was announced in a long-running class action case which involved allegations that another Pfizer subsidiary had exposed many people to asbestos (see this story in Bloomberg).  In October, 2011, Pfizer settled allegations that it illegally marketed bladder control drug Detrol (see this post).

Thus, it appears on 10 separate occasions between 2002 and 2012, Pfizer settled allegations of, pleaded guilty to, or was convicted for actions that represented seriously unethical behavior.  Note that these included a conviction that found the company to be a racketeer-influenced corrupt organization.

Yet the company has not failed or been restructured, and none of its leaders has ever faced any negative consequences.  In fact, last year its CEO made over $18 million, up from over $6 million the year before (see this post).   

So obviously it is not just that one company's culture has become seriously corrupt.  We seem to live in such a corrupt nation, and maybe such a corrupt global society that such corrupt cultures thrive in our major corporations and organizations.  Despite stories like this in health care, just like in finance despite the global financial collapse, as Charles Ferguson said at the Oscar awards last year, " not a single ... executive has gone to jail, and that's wrong."




Unless we hold leaders of health care organizations accountable for bad behavior and corruption, expect bad behavior and corruption to get worse.  Until we have political leaders with the courage to stand up for honesty and the law, expect continued dishonesty and the law to continue to be trampled by the rich and powerful. 

Conflicts of Interest or Bribes? - Biomet, Smith & Nephew Settle

More justifications of physicians' and other health care professionals' financial arrangements with industry have been appearing in the media and the medical literature (for recent examples, look here and here). Most commonly, the relationships they defended could be characterized as health care professionals consulting or sitting on advisory boards for industry, or receiving royalties from industry for their intellectual property.

In the last two months, two device manufacturers, Biomet and Smith & Nephew, accepted penalties for less defensible financial relationships with physicians. They entered into deferred prosecution agreement and settled charges that they bribed doctors employed by foreign governments. Some of these relationships, especially those involving Biomet, would have been prospectively indistinguishable from the sorts of conflicts of interest that have been so fervently defended.

Background

Starting in 2007, we posted (here, 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 in the US. All companies except Stryker were charged with "criminal conspiracy to violate anti-kickback laws," and all were subject to deferred prosecution agreements.  (Stryker entered into a voluntary compliance agreement.)  According to a US Department of Justice news release, the agreements required:

• A federal monitor will be in place at each company to review compliance with the DPAs and NPA and all new and existing consulting relationships with the companies;
• Each company is required to conduct a needs assessment to determine the reasonable needs for educational consulting services, and new product-development consultants.
• All new consulting agreements shall require physicians to disclose their financial engagements with any company to their patients and require the companies to disclose the name of each consultant and what they have been paid on the company website.

These agreements ended in 2009.

The Latest Settlements

As we noted, in 2011, Johnson and Johnson admitted its subsidiaries, including DePuy, had been bribing doctors in Europe through 2007, and agreed to yet another deferred prosecution agreement.

Smith & Nephew

Last month, Bloomberg reported:

Smith & Nephew Plc, Europe’s biggest maker of artificial hips and knees, agreed to pay $22.2 million to settle allegations by the U.S. Justice Department and Securities and Exchange Commission that it engaged in a scheme to pay bribes in Greece.

Smith & Nephew admitted in filings today in federal court in Washington that two of its units were involved in a scheme for more than a decade to make 'illicit payments' to doctors employed by government hospitals or agencies in Greece in violation of the Foreign Corrupt Practices Act.

The London-based company, which entered into a deferred prosecution agreement with the U.S., agreed to pay a $16.8 million fine to settle the criminal allegations and another $5.4 million to settle a civil suit filed by the SEC.

The colorful specifics were:

Smith & Nephew admitted that from 1997 until June 2008, its U.S. and German units bribed public doctors in Greece to win business. The bribes were paid through a person described in court documents as a 'Greek distributor.' This person used shell companies that masked bribes as 'marketing services,' according to the statement of facts filed in the criminal case.

The document cites a March 2002 e-mail from the Greek distributor to a Smith & Nephew vice president in Memphis, Tennessee, complaining that the 'marketing services' payments weren’t enough, noting that competitors were paying 30 percent to 40 percent more.

'I absolutely need this fund to promote my sales with surgeons,' the distributor said in the e-mail, according to prosecutors.

Reforming a corrupt and dysfunctional public health system was one of the conditions of Greece’s acceptance of a European Union and International Monetary Fund bailout package in 2010. Doctors also supplement their income with payments from patients, called 'fakelaki,' small envelopes with cash for prompt treatment.

In the SEC complaint, the payments made to the physicians were described as "commissions."
Note that the company made the usual sort of statement,

'We have what I believe to be a world-class compliance program, having enhanced it significantly since this investigation began in 2007,' Olivier Bohuon, Smith & Nephew’s chief executive officer, said in a statement. 'These legacy issues do not reflect Smith & Nephew today.'

He did not mention why the payments were continuing at a time when the company was already supposedly operating under the previous deferred prosecution agreement that arose out of the charges in the US discussed above.

Biomet

This week, the Indianapolis Star reported,

To sell its products abroad, medical device maker Biomet at times bribed doctors with cash, travel and meals, the federal government says.

The Warsaw, Ind.-based company agreed Monday to pay nearly $23 million to settle allegations that its payments to doctors violated the federal Foreign Corrupt Practices Act. The Securities and Exchange Commission alleges that Biomet, acting through four subsidiaries and its distributors, paid bribes from 2000 to 2008 to doctors in Argentina, Brazil and China in order to win business.

The settlement includes a $17.3 million criminal fine and $5.6 million to the SEC, the government and company said in separate news releases.

The details were,

he SEC accused Biomet of writing phony invoices to cover kickbacks as high as 20 percent of sales to push its products.

In other instances, Biomet provided doctors with money and travel in exchange for implanting artificial joints and other Biomet products in their patients, says the SEC complaint, which was filed in federal court in Washington. In China, Biomet vendors gave doctors cash upon completion of surgeries using Biomet implants, the lawsuit says.

'I've got to send him to Switzerland to visit his daughter,' a Biomet distributor wrote in a 2001 email to the company, describing a trip given as a reward to a Chinese doctor who implanted 10 Biomet hips and knees a month in patients.

The SEC said Biomet's compliance and internal audit functions failed to stop the practices even after determining they were illegal.

Note how Biomet accounted for the payments,

The payments were falsely recorded on company books as 'commissions,' 'royalties' and 'scientific incentives,' the Justice Department said.

Furthermore, the Fort Wayne Journal-Gazette added,

With the settlement announced Monday, the Justice Department found that Biomet and its subsidiaries covered up bribery payments by officially recording them as 'consulting fees' or 'commissions.'

Note that Biomet's official response was similar to Smith & Nephew's, as reported in another article from the Fort Wayne Journal-Gazette,

Jeffrey Binder, Biomet’s president and CEO, didn’t address the company’s guilt or innocence in a written statement released Monday.

Biomet has 'significantly enhanced' its procedures worldwide in recent years to ensure employees’ conduct is legal and ethical, he said.

'Moving forward, we intend to continue to adhere to our enhanced global compliance procedures, and to promote the company’s commitment to the highest ethical standards in all the markets that we serve,' Binder said.

Again, he did not explain why this time the enhanced compliance procedures are likely to work, given that the questionable conduct was still going on after the company had already entered into the 2007 deferred prosecution agreement.

Summary

Some Apparent Conflicts of Interest are Actually Bribes

In these cases, two medical device corporations paid doctors in several countries for implanting their products into patients. The resulting legal proceedings allow us to characterize these actions as bribes. Clearly both the companies' and the physicians' actions were unethical, since they lead to decisions that put the enrichment of the decision makers and those bribing them ahead of the patients' interests.

Some of the most common financial arrangements between health care professionals and industry that are thought of as conflicts of interest are paid consulting and payment of royalties for intellectual property. As we have discussed, e.g. here, conflicts of interest in medicine and health care are generally thought to raise the likelihood of corruption, but not necessarily to indicate corruption in specific instances. In the cases above, bribes were sometimes called "consulting payments or royalties." This suggests that some consulting payments and royalties which may commonly be thought of as conflicts of interest are outright bribes, that is, outright health care corruption.

Those who fervently defend conflicts of interest as inevitable, and necessary for collaboration and hence innovation (e.g., look here), often minimize the adverse effects of these conflicts (e.g., look here). In fact, any putative benefits of such conflicts ought to be contrasted with their possible harms. These cases make it clear that these harms include outright corruption which may be disguised as mere conflicts of interest.

This adds strength to arguments that conflicts of interest ought to be minimized or eliminated, not tolerated and "managed."

Current Measures to Enforce Laws Against Bribes and Kickbacks are More Theatre than Deterrent

The current cases are just the latest members in the march of legal settlements. We have noted that misbehavior in large health care organizations rarely leads to any negative consequences for the people who authorized, directed or implemented the offending actions. Instead, the penalties are, at most, fines paid by the organizations, not the people involved, and variants of deferred prosecution and/or corporate integrity agreements. We and others have previously argued without negative consequences affecting the people who authorize, direct or implement unethical actions, such actions will continue.

The current cases corroborate this. Corporations that had already paid fines and accepted deferred prosecution agreements for bribes to physicians continued to bribe other physicians. The failure of the offending corporations to admit any wrongdoing, or the need for specific changes of behavior in the future, suggests that the current fines and deferred prosecution agreements will not be any more effective than the previous ones. The current fashion of punishing behavior within health care organization with fines and agreements to behave better in the future appears to be more law enforcement theatre than serious deterrent.  

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