A Tenet of Impunity - Tenet Settles Kickback Allegations for $514 Million, No Individual Suffers Any Negative Consequences

anechoic effect corporate integrity agreement crime fraud health care corruption impunity kickbacks legal settlements Tenet

A Tenet of Impunity - Tenet Settles Kickback Allegations for $514 Million, No Individual Suffers Any Negative Consequences

Unknown 8/05/2016 Komentar

Tramp, tramp, tramp.  The march of legal settlements continues.  The latest entry is a corporation that has had a 20 plus year history of legal misadventures, allegations of unethical behavior, and actual crimes.  Here are the basics from the Atlanta Business Chronicle:

Tenet Healthcare Corp. (NYSE: THC) said Monday that it believes it has reached an agreement in principle with the government to resolve a long-running criminal investigation and civil litigation about a kick-back scandal involving an Atlanta medical clinic and three of the company's Atlanta-area hospitals.

Dallas-based Tenet said it has agreed to pay $514 million, has agreed to the appointment by the U.S. Department of Justice of a corporate monitor for a period of three years, and has agreed for two wholly owned subsidiaries that previously operated Atlanta Medical Center and North Fulton Hospital to each plead guilty to a single-count indictment.

In particular, regarding kickbacks,

The company's two subsidiaries will plead guilty to a single count of conspiracy to violate the federal anti-kickback statute and defraud the United States, Tenet reported.

Four hospitals owned by Tenet -- Atlanta Medical Center, North Fulton Hospital, Spalding Regional Medical Center and Hilton Head Hospital -- allegedly paid kickbacks to a Georgia company called Clinica de la Mama for Medicaid patient referrals. Clinica de la Mama operated medical clinics that provided prenatal care to predominantly undocumented Hispanic women in metro Atlanta and Hilton Head, S.C.

The contracts were in effect for various periods from 2000 to 2013 between the four hospitals.

Like many such settlements, this one evoked almost no media coverage, and what coverage there was appeared in the business, not health care news.  For example, the brief Wall Street Journal story focused almost entirely on the financial implications for Tenet of the settlement.  Thus the anechoic effect continues.  

Unpacking the Settlement

Bad Patient Care

First of all, the settlement included guilty pleas to charges of "conspiracy to violate the federal anti-kickback strategy."  The allegations were that the kickbacks were paid "for Medicaid patient referrals."  That means that Tenet was alleged to have paid the operator of medical clinics to send patients to Tenet hospitals.  This goes beyond financial crime.

Physicians swear oathes to put the care of individual patients ahead of all other concerns.  The new American Medical Association Principles of Medical Ethics states:

A physician shall, while caring for a patient, regard responsibility to the patient as paramount.

That means that decisions by physicians to refer patients to specific hospitals, specialists, etc should be based on what referrals would be best for individual patients, and certainly not on payments to the physicians by such hospitals, specialists, etc.  Kickbacks like those described above could send patients to hospitals that were not the most suitable for the patients' needs, thus potentially harming patients.  So this case raises big concerns about bad patient care, not merely unethical money transfers.

Yet in the minimal media coverage of the Tenet settlement, I see nothing about medical ethics, potential harms to patients, etc. 

Impunity

As is typical of such settlements, no individual who might have authorized, directed or implemented the kickbacks suffered any consequences.  While top managers of Tenet might have gotten even bigger bonuses because of the additional revenues supplied by the sorts of behavior discussed above, they  would suffer no financial penalties as a result of this settlement.  In fact, in 2015, the current Tenet CEO,  Mr. Trevor Fetter, who was an officer of the company in 2013, the last year kickbacks covered by the settlement ocurred, received total compensation of $15,354,283 according to the company's 2016 proxy statement.

Although in this settlement there were at least some corporate guilty pleas, allowing this case to be considered criminal, these pleas were not made by Tenet.  Instead they were by its subisidiaries.  This would allow Tenet itself  to avoid any non-financial penalties, such as being barred from participating in US government programs.  While the monetary size of the settlement appeared to be large, it was trivial compared to Tenet's annual earnings, which last year were over $18.6 billion according to Google Finance.

This settlement, like many others, included a corporate integrity agreement.  Such agreements, and conceptually similar deferred prosecution agreements, were heavily promoted, in part through the use of a logical fallacy, by then US Attorney, now Governor of New Jersey Chris Christie.  However, there seems to be little evidence that they deter future bad behavior (look here).  

Recidivism

Tenet actually has a long, dark record of misbehavior.  In 2012, we published our last post on Tenet.  It was about a $42.7 million dollar settlement the company made then of charges it overbilled the Medicare program from 2005-07.  As we wrote then:

While this story appeared briefly and without context in a few business news outlet, it really is part of a much bigger picture.

National Medical Enterprises

Published in 2006, Maggie Mahar's Money Driven Medicine was one of the important early works on health care dysfunction (see post here, the web-site of the documentary film based on it here).  One of the striking cases it discussed was that of Nartional Medical Enterprises.  NME was charged not only with run of the mill offenses like over-billing, but more exotic ones like kidnapping patients. NME eventually settled with federal authorities in 1994 for $379 million, and pleaded guilty to a variety of charges. The results were similar to many more recent cases. No one went to jail, and the CEO walked away with a golden parachute.  Despite the seriousness of the offenses, NME did not go out of business.  It simply changed its name - to Tenet Healthcare.

Legal Problems in the 21st Century

The "new" Tenet continued to have legal issues.  These included a $395 million settlement of the Redding Medical Center unnecessary heart surgery scandal in 2004 (look here), and a $21 million settlement of US government charges of kickbacks (look here), a $7 million settlement with the government of Florida of charges of fraudulent billing (look here), and a $900 million settlement of federal over-billing complaints (look here, and see our post here), all in 2006.  There was an apparent lull, and then in 2011 the company settled a class action suit brought after the deaths of 34 patients in a Tenet facility in New Orleans after Hurricane Katrina (see Bloomberg story here.)

Yet this more than 20 year history of repeated allegations, settlements, and crime did not apparently affect the latest settlement.

Conclusions

Nearly every big US health care corporation now seems to now have a long history of bad behavior, sometimes criminal behavior, that has not stopped the revenues from flowing, and the top managers from becoming millionaires, or billionaires.  Is it any wonder that a few years ago, nearly a majority of US respondents to a Transparency International poll declared our health care system to tbe corrupt (look here)?

Their dark musings may be partially due to their awareness that health care corruption is a taboo topic.  As we wrote about it in 2016 (look here)...

 Essentially, there is so much money to be made through pharmaceutical (and by implication, other health care corruption) that the corrupt have the money, power, and resources to protect their wealth accumulation by keeping it obscure.  In the Transparency International 2016 Report on health care corruption in the pharmaceutical industry,

However, strong control over key processes combined with huge resources and big profits to be made make the pharmaceutical industry particularly vulnerable to corruption. Pharmaceutical companies have the opportunity to use their influence and resources to exploit weak governance structures and divert policy and institutions away from public health objectives and towards their own profit maximising interests.

Keep in mind that the money made from corruption does not just go to innocent peoples' retirement funds that are invested in pharmaceutical stocks.  It predominantly goes to top corporate executives and managers, and their cronies who preside over the corrupt practices.

I might as well repeat myself once again.  As I wrote in 2015,

If we are not willing to even talk about health care corruption, how will we ever challenge it? 

So to repeat an ending to one of my previous posts on health care corruption....  if we really want to reform health care, in the little time we may have before our health care bubble bursts, we will need to take strong action against health care corruption.  Such action will really disturb the insiders within large health care organizations who have gotten rich from their organizations' misbehavior, and thus taking such action will require some courage.  Yet such action cannot begin until we acknowledge and freely discuss the problem.  The first step against health care corruption is to be able to say or write the words, health care corruption.

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Law and Order? - Bristol-Myers-Squibb Settles Case Alleging Fraud and Kickbacks, No Admissions of Guilt, No Individuals Charged

Abilify Bristol-Myers-Squibb crime impunity kickbacks legal settlements logical fallacies

Law and Order? - Bristol-Myers-Squibb Settles Case Alleging Fraud and Kickbacks, No Admissions of Guilt, No Individuals Charged

Unknown 7/22/2016 Komentar

Introduction 

Donald Trump, Republican candidate for the US presidency last week announced he is the "law and order" candidate, accompanied by then vice presidential contender and New Jersey Governor Chris Christie.



I wonder if all this interest in law and order will lead to increasing the effectiveness of enforcing laws when large US health care corporations are accused?

For years, we have been watching a parade of legal settlements made by big US health care organizations.  These have included the biggest drug companies, biotechnology companies, device companies, insurance companies, etc, etc.  Many involved accusations of fraud, kickbacks, and other seeming crimes.

In many cases, the alleged white collar crimes could have resulted in harms to patients.  For example giving physicians kickbacks to promote particular drugs or devices could have led them to prescribe treatments that could have been useless for particular patients, yet subjected those patients to risks of adverse effects.

Yet few of these cases were resolved with findings of guilt.  Many resulted in financial penalties for the accused organization, but which were tiny compared to that organization's revenue.  Almost none resulted in any consequences for the people in the organization who might have individually profited from the alleged actions, particularly the top executives who were making millions of bonuses, suggesting their apparent impunity.

This parade of settlements does not look like instantiation of law and order to me, in my humble opinion.

Bristol-Myers-Squibb Settles Allegations of Kickbacks

And the parade continues.  The latest case, which barely was noticed in the media, involved huge pharmaceutical company Bristol-Myers-Squibb.  It was best documented by Ed Silverman in Stat,

After nearly a decade of litigation, Bristol-Myers Squibb on Monday agreed to pay $30 million to settle charges by California officials of paying kickbacks to induce doctors to prescribe several of its medicines.

The settlement with the California Department of Insurance stemmed from a whistleblower lawsuit that was filed in 2007 by three former Bristol-Myers employees. They alleged that from 1997 through 2003, the drug maker used a wide variety of inducements to generate revenue. The state later joined the lawsuit in 2011 and, last year, the former employees were dismissed from the case by a state court.

The kickbacks included box seats at sporting events where doctors were given food, drinks, and parking; enrollment in a Los Angeles Lakers basketball camp for doctors and their children; prepaid golf outings at luxury courses; tickets for doctors and their families to see Broadway shows in California cities; and lavish dinners, resort hotel trips, and concert tickets for doctors who were especially big prescribers.

Among the many medicines for which doctors were persuaded to write more prescriptions were the Pravachol cholesterol pill; the Plavix blood thinner; the Abilify antipsychotic; the Glucophage diabetes treatment; and the BuSpar antianxiety drug.

A Bristol-Myers spokesman wrote us that the company denied any wrongdoing, but also noted that the firm began adhering to a voluntary industry marketing code in 2002. 'We are pleased to put this matter behind us so that we can focus on making transformational medicines for patients battling serious diseases,' he wrote.

Note that in this case, as is typical for such cases, the financial penalty seems to be minimal compared to the company's total revenues (more than $16.5 billion according to Google finance.)  The company was allowed to deny wrongdoing (although in absence of same, why should it pay a fine?)  No individuals who might have personally profited from the actions in question suffered any negative consequences.

Why Not More Severe Penalties for a Repeat Offender?

Furthermore, the outcome seems to have nothing to do with the accused's track record.  Anyone who follows the news knows that in general, penalties in criminal cases are likely to be different for first offenders and habitual criminals.  Penalties in civil cases also may depend on the defendant's track record.

However, this case, like most other cases involving big health care organizations, seems to have occurred in a vacuum, separate from the company's track record.  Yet a bit of searching reveals that BMS, like many other big health care corporations, seems to have a pretty bad record.


- In 2003, for $617 million, BMS settled suits alleging it tried to prevent competition from low cost generic versions of its products Taxol and Buspar (per the NY Times).
- In 2004, for $150 million, BMS settled suits by the SEC alleging accounting fraud (per the NY Times here).
- In 2007, BMS paid a $1 million dollar penalty while pleading guilty to lying to federal agents about a deal with the Canadian drug company Apotex (per Law360).   In 2009, it paid additional financial penalties in response to a US Federal Trade Commission charge about this case (per the FTC).
 - In 2007, for $515 million, BMS settled a suit alleging it used kickbacks to induce use of Abilify for dementia and by childeren, despite evidence that the drug was not suitable for either.  The settlement included a five year corporate integrity agreement.  (Look at our post here).
 - In 2014, BMS settled allegations its subsidiary Lantheus Medical Imaging Inc evaded state taxes (per the Corporate Crime Reporter)
 - In 2015, Bristol-Myers-Squibb settled allegations by the US Securities and Exchange Commission (SEC) that it bribed physicians in China to induce them to prescribe its drugs.  (Look at our post here).

(Parenthetically, I apologize that many of these previous cases have not been previously mentioned on Health Care Renewal.  For that I apologize.  Yet some simple Google searches were all that were required to find them.)

Why did none of the law enforcers involved in the later cases do similar searches, and why did the company's track record not figure into how the current case was resolved?

Chris Christie and the Rise of the Deferred Prosecution or Corporate Integrity Agreement for Too Big to Jail Organizations

The answer to that will not be easy.  At best, it now seems to be standard operating procedure for law enforcement to treat big health care organizations very gently.  However, there is one clue in BMS track record that it might be helpful to discuss in this political season.


Note that in one of the biggest settlements listed above, BMS agreed to a corporate integrity agreement.  According to a 2015 article in Time, the use of such agreements, coupled with apparently large fines but no other penalties, for corporate offenders was pioneered by none other than then US Attorney Chris Christie, (who spoke in the video above).

Christie was apparently horrifed by the criminal prosecution of Arthur Andersen, a big accounting firm, in the wake of the Enron scandal.  At that time, federal prosecutors acted so that

The company itself—not its employees who might have been responsible—was indicted and found guilty. The trial put the company out of business. The conviction was overturned on appeal, but not before the company’s reputation was destroyed and its employees forever branded with a Scarlet Letter, representing Andersen, not Adultery.

The article described Mr Christie's response:

Christie had watched wall-to-wall coverage of the case, and it made him uncomfortable. He decided he did not want to run his office in that way. Instead of bulldozing New Jersey companies facing smaller-scale fraud cases and leaving their employees out of work, Christie preferred to build a case against the firms and then bring their leaders in for a take-it-or-leave-it chat. Ultimately, seven New Jersey corporations accepted deferred prosecution agreements, or deals with the government that let them avoid trial in exchange for the companies hiring independent monitors to oversee operations and put in place guards against future wrongdoing.

Christie often was relieved they were open to the deals. 'Put the company itself out of business? Lose all the jobs?' Christie asked when asked about the alternatives. He pointed to a corruption case he built against St. Barnabas Health Care System, the state’s largest, for double- and over-billing Medicare and Medicaid services. St. Barnabas paid $265 million to settle the case. 'What are you going to do?' Christie asks. 'Close the hospital, the largest hospital that serves the poor?'

Neither Time, nor Mr Christie seemed to notice that this reasoning involved a logical fallacy, a false dilemma.  True, there are two options:
1) criminally prosecute the whole company
2) allow the company to operate under a deferred prosecution or corporate integrity agreement.
But there is a third option:
3) Criminally prosecute the individuals in the company who were most involved in and most benefited from the bad behavior.

So in the St Barnabas example, what he could have done was prosecute the people at St Barnabas who were most responsible for the over-billing, and let the hospital itself go with a fine. Mr Christie for some reason never seemed to think about that option.  Neither have most other US law enforcers who have dealt with large organizations since.

Ironically, Mr Christie has got himself into some ethical hot water because of how he managed corporate integrity or deferred prosecution agreements involving BMS and other health care organizations.  Some have alleged that Mr Christie found some other advantages to using such agreements, advantages that accrued mainly to Mr Christie and his cronies.  As the Time article noted, re BMS

As part of its penance, the company also proposed paying for a professor of business ethics at a law school. The company initially offered to pick up the tab at a school in New York. No way, Christie said. 'This is a New Jersey case. Pick a New Jersey school,' Christie replied. Rutgers already had such a program, and there was only one other law school in New Jersey. It just happened to be Christie’s alma mater, Seton Hall. 'It couldn’t have mattered less to me,' Christie says. 'I didn’t get anything out of it. I was long graduated from Seton Hall.' (The Justice Department signed off on the agreement, but would later limit U.S. Attorneys’ ability to negotiate such deals.)

Christie’s critics pounced on the $5 million payment to Seton Hall, and to this day are trying to use it as a way to suggest he is another pay-to-play New Jersey politician.

And in two other health care cases:

Christie hired former Attorney General John Ashcroft, his one-time boss, to monitor Zimmer Inc., one of the firms that settled with the government. In turn, Ashcroft’s company charged between $1.5 million and $2.9 million a month to monitor the medical device company. By the time Christie arrived in Washington to answer lawmakers’ questions, The Ashcroft Group had earned $52 million on that case. 'To me, that is outrageous,' Rep. Steve Cohen chided Christie. 'I don’t care what you did. It is not worth $52 million,' the Tennessee Democrat continued. 'Even if you took steroids and hit 70 home runs, it is not worth $52 million.'

Lawmakers also wanted to know why he named David Kelley to a post to oversee the Bristol-Myers Squibb settlement. Kelley two years earlier, as a former prosecutor, declined to bring securities fraud charges against Todd Christie, the future-Governor’s brother. Was this payback for sparing a Christie Family?

Mr Christie defended his conduct in the BMS case:

Christie to this day says he has no regrets about the deferred prosecution agreements, including the professor position. To him, it matters less about whether there was a conviction than whether the illegal behavior ended. 'The goal as the U.S. Attorney is to stop the conduct,' Christie says. 'If you’ve stopped the conduct, you’ve won.'

But of course the current case, and those involving BMS from 2014 and 2015, shows that Mr Christie's corporate integrity agreement did not "stop the conduct" at least in the case of BMS.  That rationale was fallacious too.


Summary

Now that political campaigners are once again shouting about law and order, maybe this is the time to call for effective and equal enforcement of the laws regarding white collar crime in health care.  For years, we have watched perpetrators of small scale Medicaid and Medicare fraud go to jail.  Yet when big companies are accused of big scale crime, almost no one ever goes to jail.

It is time for equal justice for all in health care.

Let me end with a quote from a report by Senator Elizabeth Warren (D - Massachusetts) published in January, 2016, entitled "Rigged Justice: 2016 - How Weak Enforcement Lets Corporate Offenders Off Easy."

 Laws are effective only to the extent they are enforced. A law on the books has little impact if prosecution is highly unlikely.

This country devotes substantial resources to the prosecution of crimes such as murder, assault, kidnapping, burglary and theft, both in an effort to deter future criminal activity and to provide victims with some degree of justice. Strong enforcement of corporate criminal laws serves similar goals: to deter future criminal activity by making would-be lawbreakers think twice before breaking the law and, sometimes, by helping victims recover from their injuries.

When government regulators and prosecutors fail to pursue big corporations or their executives who violate the law, or when the government lets them off with a slap on the wrist, corporate criminals have free rein to operate outside the law. They can game the system, cheat families, rip off taxpayers, and even take actions that result in the death of innocent victims—all with no serious consequences.

The failure to punish big corporations or their executives when they break the law undermines the foundations of this great country: If justice means a prison sentence for a teenager who steals a car, but it means nothing more than a sideways glance at a CEO who quietly engineers the theft of billions of dollars, then the promise of equal justice under the law has turned into a lie. The failure to prosecute big, visible crimes has a corrosive effect on the fabric of democracy and our shared belief that we are all equal in the eyes of the law.

Under the current approach to enforcement, corporate criminals routinely escape meaningful prosecution for their misconduct. This is so despite the fact that the law is unambiguous: if a corporation has violated the law, individuals within the corporation must also have violated the law. If the corporation is subject to charges of wrongdoing, so are those in the corporation who planned, authorized or took the actions. But even in cases of flagrant corporate law breaking, federal law enforcement agencies – and particularly the Department of Justice (DOJ) – rarely seek prosecution of individuals. In fact, federal agencies rarely pursue convictions of either large corporations or their executives in a court of law. Instead, they agree to criminal and civil settlements with corporations that rarely require any admission of wrongdoing and they let the executives go free without any individual accountability.

And end with a video of her speaking on the subject.

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Their Cheating Hearts - Latest Allergan Settlement Is a Reminder of Merger Participants' Sketchy Pasts

Allergan crime deception fraud impunity kickbacks legal settlements obstruction of justice Pfizer RICO

Their Cheating Hearts - Latest Allergan Settlement Is a Reminder of Merger Participants' Sketchy Pasts

Unknown 11/25/2015 Komentar

A Huge, but Sketchy Merger

The announced merger and "tax inversion" of Pfizer and Allergan would be one of the largest corporate marriages in US history.  It has drawn more than its share of criticism.  For example, per the Los Angeles Times, former US Senator and Secretary of State, and current presidential candidate Hilary Clinton said "this proposed merger, and so-called inversions by other companies, will leave U.S. taxpayers holding the bag."

By creating the world's largest drug company, it could certainly further consolidate the US and global pharmaceutical market and raise already high drug prices.  While Pfizer in particular has benefited from US funding of biomedical research, including training of researchers and development of research infrastructure, (see this New Yorker article by John Cassidy) making the company pseudo-Irish may be "unpatriotic," as President Obama said with regard to tax inversions in general (per the Washington Post).

The nature of the merger, creating a company that would be Irish for tax purposes, but effectively run out of the US seems at least intellectually dishonest.  (Note that the CEO of its supposedly Irish component, Allergan, works out of Parsippany, NJ (per Bloomberg, here.)

The main beneficiaries of the merger appear not to be patients, or health care providers, or US taxpayers, but top company executives.  As John Cassidy wrote,

It's hard to avoid seeing the merger as a cynical move designed to boost Pfizer's stock price and generate a windfall for the company's senior managers....

But the latest settlement by Allergan, which I was just about to write about before the merger was officially announced, is a reminder that the companies are a good fit in one sense.  Both have long histories of shady behavior as marked by many legal settlements, and in some cases corporate guilty pleas and convictions.

The Latest Allergan Settlement

The beginnings of the latest Allergan settlement were noted back in July, 2015, but first not even connected to Allergan.  According to the US Federal Bureau of Investigation (FBI),

A former district manager of Warner Chilcott Sales U.S., LLC (Warner Chilcott), a pharmaceutical company based in Rockaway, N.J., pleaded guilty today in U.S. District Court in Boston in connection with a scheme to deceive insurance companies and Medicare so that they would cover the costs of Warner Chilcott’s osteoporosis medications, Actonel and Atelvia.

The idea was to promote two of Warner-Chilcott's products, osteoporosis medicines Actonel and Atelvia, by evading insurance company requirements for physicians to justify their use, given questions about their benefits versus harms, and availability of generic treatments for osteoporosis.

Beginning in 2010 and throughout 2011, Podolsky directed the sales representatives in his district to fill out prior authorizations for physicians who prescribed Actonel and Atelvia using false clinical justifications as to why the patient needed Warner Chilcott drugs and submit them to health insurance companies. In some instances, Podolsky’s sales representatives reviewed patients’ medical charts to get the information necessary to fill out the prior authorizations, in violation of the Health Insurance Portability and Accountability Act (HIPAA). Podolsky also directed sales representatives to utilize a website to submit prior authorizations to insurance companies to disguise their identity as pharmaceutical sales representatives. Podolsky and the sales representatives that he supervised knew that they should not be involved in the preparation or submission of prior authorizations.

But Podolsky was not a lone wolf. At the end of October, 2015, the Boston Globe reported more fully on the scheme, and the large settlement made by Allergan, of which Warner-Chilcott was merely a subsidiary. US Department of Justice allegations involved top leaders of Allergan.

The drug reps bought the doctors lunches, dinners, drinks. They paid for speeches the doctors never made. And in exchange, the doctors prescribed drugs that boosted their sales.

Warner Chilcott, a unit of pharmaceutical giant Allergan PLC, will pay $125 million to settle these and other charges in an agreement announced Thursday by US Attorney Carmen M. Ortiz in Boston.

Ortiz said the company ran an elaborate scheme to prod doctors — including in Massachusetts — to prescribe its drugs in exchange for kickbacks.

Warner Chilcott’s former president, W. Carl Reichel, was charged in federal court for allegedly conspiring to pay kickbacks to physicians, and a Massachusetts physician, Dr. Rita Luthra of Longmeadow, was indicted for allegedly accepting payments.

Warner Chilcott illegally promoted at least seven drugs, including the osteoporosis treatments Actonel and Atelvia.

Court documents show that Warner Chilcott representatives promoted their drugs by wining and dining physicians and giving them money and gifts for participating in medical education events. These events often were held at 'upscale restaurants' and contained 'minimal or no educational component.'

The company made fraudulent requests to the federal government and to insurance companies to boost sales of their drugs, the US attorney’s office said, and employees also made unsubstantiated claims about the drugs’ benefits.

Note that the charges were of actions that went well beyond financial fraud. They included dishonest marketing and kickbacks to physicians. The alleged actions could have harmed patients, by inducing physicians to prescribe unneeded drugs with known adverse effects.

Note further that unlike many other legal settlements about which we have written in the past, this one did not allow the company to escape by just paying some money and then claim that it did not confirm or deny the charges.  In this case, the company pleaded guilty.

Warner Chilcott has agreed to plead guilty to health care fraud. It will pay a $23 million criminal fine and $102 million to resolve false claims with state and federal governments. The case was brought by two whistle-blowers.

And as noted above, unlike many other legal settlements which did not entail any negative consequences for those who authorized, directed, or implemented the bad behavior, in this case a top executive (although not the highest executive in the overall corporate structure, and not a current executve) was charged with a crime and apparently actually physically arrested (although he has not been convicted of it, yet.)

Meanwhile, Reichel, the former Warner Chilcott president, was arrested in Boston on Thursday.

Prosecutors say in their indictment that Reichel designed a sales and marketing strategy to entice doctors to prescribe his company’s drugs with free dinners and bogus speaking fees. The physicians paid to give speeches often did not speak at all, and instead enjoyed expensive dinners with sales representatives, the indictment says.

Reichel left Warner Chilcott in 2011, according to a news release.

Furthermore, per a Forbes column, Mr Reichel was allegedly involved up to his proverbial eyeballs.

The Reichel indictment says that, while president of Warner Chilcott’s pharmaceuticals divisions from 2009 to 2011, he directed company sales staff to push physicians’ to prescribe its drugs by throwing money at doctors’ in various ways, such as expensive dinners for doctors and their spouses and 'speaker' fees to attend informal dinners without educational content.

Reichel also allegedly provided sales reps with a separate expense account to buy food and drinks for employees of physicians who prepared prior authorization forms certain insurers required to pay for patients’ drugs.

Reichel hired 'Type A crazy' sales representatives, as he called them, who were provided with 'limited training concerning compliance with health care laws and otherwise de-emphasized the importance of compliance to the sales force,' the indictment says.

Of course, the top executive in the overall corporate structure said the usual, as likely written by his public relations spin doctors,

Brent Saunders, the chief executive of Dublin-based Allergan, said in a statement: 'We take seriously our responsibility and commitment to abide by all US and international laws that govern the sales, marketing, education, and promotion of our products, and recognize the tremendous impact that this responsibility has on the customers and patients we serve.'

Finally, two other middle managers involved in the case entered guilty pleas, according to the Department of Justice.

Thus this settlement may be regarded as much tougher than many previous legal settlements involving big health care organizations.

However, its bearing on the huge Prizer-Allergan merger has apparently not so far been publicly discussed.

Allergan's Previous Track Record

It is not that the new Allergan settlement is a one-off.   It needs to be viewed in the context of Allergan's previous history of misbehavior.

That history may be a bit obscure, especially because of Allergan's complex corporate structure.  However, a Wall Street Journal article on the merger provided a bit of Allergan's corporate back story,

Allergan itself is the result of a number of mergers in quick succession. It started off as a generic-drug company called Watson Pharmaceuticals Inc. In 2012, Watson acquired Swiss rival Actavis Group and adopted that name. It also absorbed Warner Chilcott PLC and Forest Laboratories Inc. in multibillion-dollar deals.

Mr. Saunders was CEO of Forest Labs, and became CEO of Actavis after that deal. Shortly after, Allergan’s predecessor was put into play when Valeant Pharmaceuticals International Inc. made an unsolicited offer to buy the California company.

Actavis then stepped in as a white knight and bought Allergan, taking the company’s name.

Allergan and its predecessor companies have an interesting record of misbehavior.  Just perusing Health Care Renewal one can find:

-  Actavis was convicted and fined more than $170 million in 2011 by a Texas jury of misrepresenting prices to the state's Medicaid program (see this post.)

-  In 2010, in case which included allegations that it paid kickbacks to physicians to promote its product, Allergan pleaded guilty to to federal charges of misbranding of Botox and agreed to penalties of about $600 million (see this post).

-  In 2010, Forest Laboratories settled allegations that it deceptively promoted drugs, particularly that it promoted anti-depressant Celexa for children by partially by covering up negative trial results about it.  This likely hurt patients, since anti-depressants like Celexa have been shown to have severe adverse effects, including suicidal ideation, for children.  The company also was charged with giving kickbacks to physicians to promote drugs.  The company pleaded guilty to a felony charge of obstructing justice, and two misdemeanors, including misbranding Celexa and illegal distribution of Synthroid.  The company paid over $300 million in penalties and submitted to a corporate integrity agreement.  (See this post)  The Department of Justice threatened to disbar the CEO of Forest Laboratories, but then inexplicably backed off (see this post). 

So the latest settlement by Allergan subsidiary Warner Chilcott is the fourth major settlement since 2010.  The company and its predecessors have pleaded guilty to crimes, at least once to a felony, and settled cases involving allegations of kickbacks and deceptive marketing practices. 

Pfizer's Previous Track Record

And things really get interesting when one considers Pfizer's track record, which seems much sorrier than Allergan's.  Our latest post, about Pfizer misbehavior was only one month ago (October, 2015).  A  UK judge found that the company threatened health care professionals for using a generic competitor.

Many posts on Pfizer can be found here.   The latest update of Pfizer's troubles since 2000 follows.

In the beginning of the 21st century, according to the Philadelphia Inquirer, Pfizer made three major settlements,
- In 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.
- In 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.
- In 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).
- In August, 2012, Pfizer settled allegations that its subsidiaries bribed foreign (that is, with respect to the US) government officials, including government-employed doctors (see this post).
- In December, 2012, Pfizer settled federal charges that its Wyeth subsidiary deceptively marketed the proton pump inhibitor drug Protonix, using systematic efforts to deceive approved by top management, and settled charges by multiple states' Attorneys' General that it deceptively marketed Zyvox and Lyrica (see this post).
- In January, 2013, Pfizer settled Texas charges that it had misreported information to and over-billed Medicaid (see this post).
- In July, 2013, Pfizer settled charges of illegal marketing of Rapamune (see this post.)
- In April, 2014, Pfizer settled allegations of anti-trust law violations for delaying generic versions of Neurontin( see this post).
- In June, 2014, Pfizer settled another lawsuit alleging illegal marketing of Neurontin (see this post).
- In 2015, a settlement by Pfizer of a shareholders' lawsuit stemming from charges of illegal marketing was announced (see this post).

Summary

So the proposed merger of Pfizer and Allergan would truly create a behemouth of bad behavior.  The combined company would have a staggering record of legal settlements, guilty pleas and convictions involving deceptive marketing, fraud, kickbacks, bribes and anti-trust violations, and even an obstruction of justice plea and a RICO conviction.  Yet the managers in charge of the two companies when the bad behavior occurred never had to suffer any negative consequences (although in one current case there is the possibility one executive might be convicted).  Many of these managers have become amazingly rich during the course of their leadership.  Is there any reason to think, absent any unexpected increase in the courage and resolve of government law enforcement, or any unexpected public protest, that the new company will not continue to misbehave as long as its executives are making money from the process?

The Pfizer Allergan merger is the true poster child for the amorality, and consequent dysfunction and decline of modern US and now global health care. As long as top managers of big health care organizations can act with impunity, can avoid all responsibility for their organizations' bad behaviors, and can personally profit wildly from their companies actions, the health care death spiral will continue.  Will we continue to cry out in the wilderness, or will anyone else see the writing on the wall?

A musical moment to partially alleviate the gloom. "Your Cheatin Heart" sung by Hank Williams Jr.



 

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The Corporate Physicians' Dilemma - Three Hospital Systems Settle Cases Alleging Pressure on Employed Physicians to Refer Patients Within the System

Adventist Health System Broward Health corporate physician crime Stark Law Tuomey Healthcare System

The Corporate Physicians' Dilemma - Three Hospital Systems Settle Cases Alleging Pressure on Employed Physicians to Refer Patients Within the System

Unknown 10/28/2015 Komentar

Physicians are sworn to provide the best possible care to each individual patient.  Yet in the US, physicians increasingly practice as employees of large organizations, sometime for-profit corporations.  Physicians may be in a bind when their bosses pressure them to make patient level decisions so as to increase revenue, regardless of their effects on the patients.

In particular, physicians' oaths may suggest that patients who require referrals for consultation, diagnosis or treatment should go to the professionals and facilities best suited to their particular problems.  However, physicians bosses may want physicians to refer patients within their organizations.

Three recent cases illustrate this sort of bind for corporate physicians.  All cases involved large monetary settlements by hospital systems of allegations that they paid physicians incentives to refer patients within the system, apparently without regard to patients' needs.  They are discussed in roughly   chronological order of media coverage.

Broward Health  (North Broward Hospital District)

The reports of the settlement appeared in mid-September, 2015.

The Actual Settlement

According to the Miami, FL, Sun-Sentinel,

Broward Health, the taxpayer-financed system of hospitals and health care facilities, will pay $69.5 million to settle federal charges that it made illegal payments to staff physicians, using a secret compensation system that rewarded doctors for patient referrals and penalized them for accepting charity cases.

In addition, according to the Miami Herald,

Broward Health Chief Executive Dr. Nabil El Sanadi signed a 46-page Corporate Integrity Agreement with the Department of Health and Human Services (HHS) that requires the district to establish a compliance program. Among other things, the agreement imposes new duties on both commissioners and staff to monitor, report and certify that its financial arrangements with physicians and vendors meet federal requirements.

Note, however, that the Adventist system admitted only to "oversights."

Physicians' Incentives

According to the Sun-Sentinel, the filing by whistle-blower Dr Michael Reilly stated,

the hospital district maintained secret compensation records called Contribution Margin Reports for cardiologists, oncologists and orthopedic surgeons, who collected salaries of $1 million and higher. These records rewarded physicians for referrals to hospital services, such as radiology and physical therapy, and penalized them for taking on low-paying charity cases. Tying compensation to referrals could raise medical costs by generating unnecessary work and could compromise patient care, the lawsuit stated.

In one case, the lawsuit stated, orthopedic surgeons expressed concern about the quality of the hospital district's radiology and MRI services and tried to refer patients to outside providers. But they were pressured by the district's financial officials to keep the referrals within the district.

'Broward Health's scheme to overcompensate physicians in exchange for referrals over the last eight years has been a deliberate strategic plan to boost hospital admissions and outpatient visits for all paying patients, including patients with Medicare and Medicaid coverage,' the lawsuit states. 'Broward Health's financial strategists have personally profited from bonus payments based in part on hospital revenues.'

Furthermore, according to a later Sun-Sentinel article,

The title of medical director brought salary increases to several cardiologists at Broward Health, topping off pay packages that often went north of $1 million.

But according to a whistleblower's lawsuit that led to a $69.5 million settlement with the federal government this week, these doctors did little work for their extra compensation from the tax-supported hospital system.

The medical directors' contracts provided hourly compensation for work done in that position and required them to submit time records. One physician counted his personal exercise routine as his medical director's time, according to the lawsuit. Another double-dipped by counting time spent performing medical procedures that would have been performed anyway. Such 'medical director' jobs, the lawsuit said, were 'largely sham arrangements designed to boost physician compensation with little or no substantive work required in return.'

 Failure of Oversight

Also according to the Sun-Sentinel,

Reilly said he first learned of the compensation agreements when he considered taking a job with the district. When his lawyer saw the proposed contract, he told him to tear it up and stay away from such compensation schemes.

He said he brought up the issue in two public meetings and in a private conversation with the district's then-CEO, and was brushed off. He blamed 'the ignorance that made them interpret the law to fit their financial interests and the arrogance to think they could get away with it.'

Adventist Health System

This case came to light a few days later, as reported by the Orlando Sentinel, and was conceptually similar,

The Actual Settlement

In what's considered one of the largest health-care-fraud settlements involving physician referrals to hospitals, Adventist Health System is paying the U.S. government and four states, including Florida, a $118.7 million settlement.

A large portion of the settlement amount — $47 million — is based on allegations involving Florida Hospital Medical Group, which is owned by Adventist, and nearly three dozen Florida Hospitals in the state. That includes the Florida Hospitals in Orlando, Altamonte, Apopka, Celebration, east Orlando, Kissimmee and Winter Park.

Physicians' Incentives

Again from the Orlando Sentinel,

The complaints allege that Adventist initiated a corporate policy that directed its hospitals to purchase physician practices and group practices or employ physicians in their surrounding areas in order to control all patient referrals in those locations.

'To convince doctors to sell their practices to Adventist hospitals or to become hospital employees, Adventist hospitals allegedly provided excessive compensation, perks and benefits to the physicians,' according to the Phillips & Cohen complaint. 'The hospitals were willing to pay doctors more compensation than considered fair market value and absorb persistent losses in those deals because of the revenue the doctors' stream of referrals generated for Adventist from government healthcare programs and elsewhere.'

The complaint listed a number of ways Adventist allegedly rewarded doctors, including leasing a BMW and a Mustang for a surgeon; a $366,000 base salary for a family physician because of his high level of referrals for X-rays and blood tests; and a bonus of $368,000 for a dermatologist who worked only three days a week.

 To conceal this and avoid refunding payments, the health system then falsely said that the services identified in its annual cost reports were in compliance with the federal law, the lawsuits allege.

Failure of Oversight

Sherry Dorsey, who joined Adventist in 2012, was a corporate vice president whose responsibilities included oversight of physician compensation, and she found widespread problems with how the nonprofit health system compensated doctors who referred patients to Adventist hospitals, according to a statement by Marlan Wilbanks of Wilbanks & Gouinlock in Atlanta who represented Dorsey.

She complained to top health-system officials 'to no avail,' said Wilbanks.

More details  about the goings on at the local Adventist owned Park Ridge Hospital were reported by the Asheville (NC) Citizen-Times,

Hospital executives knew about serious billing and miscoding problems on Medicare and Medicaid cases, as well as overcompensation of doctors, and one executive even expressed concerns about possible jail time, terming as 'insane' the amount of money Park Ridge would owe the federal government if overbilling came to light.

Tuomey Healthcare System

This case has been in the works for years, but an apparently final outcome was announced in October, 2015.

The Actual Settlement

 As reported by the Charleston (SC) Regional Business Journal,

The Justice Department said it has resolved a $237 million judgment against Sumter-based Tuomey Healthcare System for illegally billing the Medicare program for services referred by physicians with whom the hospital had improper financial relationships.

Under the terms of the agreement, the United States will receive $72.4 million....

Unlike the other two cases, this one involved a jury finding of guilt,

On May 8, 2013, after a month-long trial, a South Carolina jury determined that the [hospital's contracts with physicians]  ... violated the Stark Law. The jury also concluded that between 2005 and 2009 Tuomey had submitted 21,730 false claims to Medicare with a total value of $39,313,065.

On Oct. 2, 2013, the district court trebled the actual damages and assessed an additional civil penalty under the False Claims Act in favor of the United States for a total of $237 million.

The United States Court of Appeals for the Fourth Circuit affirmed the judgment on July 2.

Having to pay the $237 million fine would force it to file for bankruptcy, Tuomey officials said.

The Physicians' Incentives

 The case arose from a lawsuit filed on Oct. 4, 2005, by Michael K. Drakeford, an orthopedic surgeon who was offered, but refused to sign, one of the illegal contracts.

So,

 The government argued that Tuomey, fearing that it could lose lucrative outpatient procedure referrals to a new freestanding surgery center, entered into contracts with 19 specialist physicians that required the physicians to refer their outpatient procedures to Tuomey and, in exchange, paid them compensation that far exceeded fair market value and included part of the money Tuomey received from Medicare for the referred procedures.

Failure of Oversight

The government argued that Tuomey ignored and suppressed warnings from one of its attorneys that the physician contracts were 'risky' and raised 'red flags.'

Summary

In the US, physicians increasingly practice medicine as employees, often of large organizations, rather than as individual professionals or within professional groups.  Such employed practitioners must answer to leaders who are now usually generic managers rather than health care professionals.

In three recent legal cases, there was evidence that a hospital system provided financial incentives for employed physicians to refer patients within the system, apparently without regard to the appropriateness of such referrals to individual patients.  In several cases, hospital management ignored physicians' protests, or lawyers' or even their own middle managements' warnings.  In one case, hospital middle managers seemed to acknowledge the problematic nature of physician's incentives, but seemed powerless to protest to higher managers.   In one case, there was a jury finding of violation of US law.

These three cases, all announced within a few weeks, suggest that US hospital system management may frequently push employed physicians to keep referrals within the system , regardless of  individual patients' conditions or needs.  The reason may be to increase system revenue, and sometimes to increase the managers' own compensation.

This is another reason to think that the corporate practice of medicine, which was once banned in the US, is an increasing threat to physicians' values and an increasing cause of health care dysfunction.

Dr Arnold Relman reminded us that physicians used to shun the commercial practice of medicine (look here).  Physicians and other health professionals who sign on as full-time employees of large corporate entities have to realize that they are now beholden to managers and executives who may be hostile to their professional values, and who are subject to perverse incentives that support such hostility, including the potential for huge executive compensation. 

Neoliberals promised us that treating health care like a business, and an unregulated one at that, would lead to a new golden age.  The age has been golden, but mainly for the top managers of corporate medicine. 

The recent flurry of cases alleging that corporate physicians may be pushed by management into inappropriate referrals to make more money for their employees is another reason to rethink whether corporate practice of medicine should again be banned

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Phooled Again - More Settlements Suggesting Bad Behavior by Big Pharma/ Biotech

adulterated devices bribery Bristol-Myers-Squibb crime deception deferred prosecution agreement Genzyme intimidation legal settlements Pfizer Sanofi-Aventis

Phooled Again - More Settlements Suggesting Bad Behavior by Big Pharma/ Biotech

Unknown 10/16/2015 Komentar

Once again, here is a roundup of cases showing big multi-national pharmaceutical and biotechnology companies are up to their usual tricks.

Presented in alphabetical order...

Bristol-Myers Squibb Settles Charges of Bribery of Chinese Hospitals.

The best version of this I could find was in USA Today, in early October, 2015,

Pharmaceutical manufacturer Bristol-Myers Squibb has agreed to pay more than $14 million in fines to settle charges that its joint venture in China paid cash and other benefits to state-owned hospitals in exchange for prescription sales, the Securities and Exchange Commission announced Monday.

After its investigation, the SEC found that the New York-based company violated the Foreign Corrupt Practices Act in its dealings with Chinese hospitals and doctors and 'reaped more than $11 million in profits from its misconduct.'

Bristol-Myers Squibb neither admitted nor denied the findings, the SEC said.

The details, such as they were:

Chinese sales representatives at BMS China, the Chinese joint venture that is majority-owned by Bristol-Myers, paid bribes — including cash, jewelry, meals, travel, entertainment, sponsorships and other gifts — to health care providers between 2009 and 2014 to generate more sales. And Bristol-Myers Squibb 'failed to respond effectively to red flags' indicating such practices, the SEC said.

Apparently, some lower level Chinese employees were fired, although it is not clear whether they were involved in bribery, or in whistle-blowing about it, but top company management did not look too hard to see who might have authorized or directed the bad behavior,

Several BMS China employees who were fired by the company made claims that faked invoices, receipts and purchase orders were widely used to bribe health care providers. But Bristol-Myers Squibb did not investigate their claims, the SEC said.

Bristol-Myers Squibb was aware of improper payments as early as 2009, when an internal audit highlighted the problem. But the company was 'slow to remediate gaps in internal controls' over dealing with Chinese health care providers and monitor payments to them, the SEC said.

Needless to say, no one who might have authorized or directed the bad behavior, and who conceivably might have personally gotten bigger bonuses based on the revenue it brought it, suffered any negative consequences. Despite the settlement, of charges of bribery, no less, company public relations produced the usual,

We have resolved this matter with the United States Securities and Exchange Commission, and are committed to the highest standards of business integrity, vigilance and ethics across our organization.

Well then, that clears it up.

I cannot find any information about what BMS allegedly bribed the hospitals to do, and hence can draw no conclusions whether patients may have been harmed by receiving inappropriate medications.

UK Judge Found Pfizer Threatened Health Professionals

The most thorough coverage of this was, amazingly, in a medical journal, namely the British Medical Journal (Kmietowicz A. Pfizer loses UK patent for blockbuster pain drug after threats to doctors.  Brit Med J 2015; 351: h4918.  Link here.)  The background was,

The patent for the use of Lyrica for epilepsy and generalised anxiety disorder expired in July 2014, and manufacturers of generic versions already have licences for these two indications. But the manufacturer, Warner-Lambert (a subsidiary of Pfizer), holds a 'second medical use' patent for the use of pregabalin to treat peripheral and central neuropathic pain, which expires in July 2017. A second medical use patent is one that relates to a new medical use for a known compound.

Lyrica is one of Pfizer’s most successful products, with global sales in 2013 of some $4.6bn (£3bn; €4.1bn).

So apparently Pfizer set out to scare physicians away from prescribing generic pregabalin [generic Lyrica].

In his 174 page ruling Mr Justice Arnold said, 'Since late September 2014, Pfizer has taken extensive steps to try to ensure that generic pregabalin is neither prescribed nor dispensed for the treatment of pain.' This included sending a letter to the BMA and pharmacists stating that doctors and pharmacists risked infringing the patent if they supplied generic pregabalin for the pain indication and that this would be an unlawful act.

A letter sent to clinical commissioning groups in December 2014 was described by Arnold as 'calculated to have a chilling effect on the sales of Lecaent [the version of pregabalin made by Actavis].'

These letters would be seen by the recipients as a threat, said Mr Justice Arnold.

The Justice ultimately "overturned Pfizer's UK patent for pregabalin for pain control," in part because the "company made 'groundless claims' that its patent for Lyrica would be infringed if doctors did not specify Lyrica as opposed to a generic alternative when prescribing...."

This case was apparently only about the patent (and is subject to appeal), so it appears no one who apparently tried to authorize, direct or implement apparent intimidation of health care professionals with "groundless threats" will suffer any negative consequences.

This case does not seem to involve any obvious harms to patients.  However, "groundless threats" to health care professionals could have obviously demoralized them and clearly challenged their autonomy and professional values.

Sanofi Again Settles Charges of Misbranding Seprafilm

We discussed the first civil settlement the company made of this case in 2014 here.  A relatively clear summary of the new settlement was given by Reuters in September, 2015.

Genzyme Corp agreed to pay $32.59 million, admit wrongdoing and enter a deferred prosecution agreement to resolve U.S. criminal charges over its marketing of the surgical implant Seprafilm, the Department of Justice said on Thursday.

The biotechnology unit of French drug company Sanofi SA (SASY.PA) was accused of two misdemeanor counts of violating the federal Food, Drug and Cosmetic Act from 2005 to 2010 by allowing Seprafilm to be adulterated and misbranded while being sold. Sanofi bought Genzyme in 2011.

Seprafilm is a clear film used to reduce abnormal internal scarring that can cause organs and tissues to stick together following pelvic and abdominal surgeries known as laparotomies.

But the Justice Department said some sales representatives taught surgeons how to turn Seprafilm into a 'slurry' for use in increasingly popular laparoscopic surgery, even though U.S. regulators had never approved the film for that use.

According to papers filed with the federal court in Tampa, Florida, Genzyme admitted and accepted responsibility for the facts underlying the two criminal counts.

The two-year deferred prosecution agreement calls for improved oversight, and steps to halt Seprafilm sales for off-label uses. If Genzyme complies, the government will dismiss the charges.

Note that at least in this case, there was some admission by the company of the truth of the facts charged, and no protestation that "we adhere to the highest standards of integrity," or some such.

It seems possible that the use of the Seprafilm slurry in patients without clear evidence of its safety or effectiveness may have lead to patient harms, but I cannot find clear discussion of this.

Summary

So while big health care corporations, especially large drug and biotechnology companies, are always protesting how their main goal is to benefit patients, and how they support health care professionals, here are more cases in which it appears they at best set out to manipulate patients and health care professionals to maximize revenue.

Note that this is hardly the first time any of these companies have apparently misbehaved.  See our previous posts on BMS, on Genzyme (now a Sanofi subsidiary), and on Pfizer.  Note that our last discussion of the ever troubled Pfizer was only one month ago.

We have discussed endlessly how the march of legal settlements and other legal rulings affecting big health care corporations has raised questions about whether they are in it for patients and health care professionals, or just for the money.  That almost none of these legal actions has resulted in any real consequences for the individuals within the corporations who profited most from the misbehavior has allowed health care corporate managers' continued impunity, and has suggested how cozy health care corporate managers and goverment regulators and law enforcement officials have become, partially through the mechanism of the revolving door.

While these latest three cases have appeared, the mainstream media have begun to feature more discussion about how widespread managerial and corporate misbehavior is fueling the decline of the global economy, and perhaps of global society.  For example, as discussed in srticles in The Guardian, and more recently in the New York Times, Nobel Prize winners Robert Shiller and George Akerlof's new book, Phishing for Pfools: The Economics of Manipulation and Deception, suggests that widespread bad behavior in supposedly "free," and mainly unregulated markets can cause all sorts of evil.  In the Guardian, Shiller used the examples of how

 Most of us have suffered 'phishing': unwanted emails and phone calls designed to defraud us.  A 'phool' is anyone who does not fully comprehend the ubiquity of fishing.  A phool sees isolated examples of phishing, but does not appreciate the extent of professionalism devoted to it, nor how deeply this professionalism affects lives.  Sadly, a lot of us have been phools - including Akerlof and me, which is why we wrote this book

As Shiller wrote in the NYT, while he is a "free market advocate,"

we both believe that standard economic theory is typically overenthusiastic about unregulated free markets. It usually ignores the fact that, given normal human weaknesses, an unregulated competitive economy will inevitably spawn an immense amount of manipulation and deception.

Shiller and Akerlof believe that various kinds of manipulation and deception are enabled by technological advances, and that they are contagious,

When you realize that your competitor has used sophisticated and effective marketing tricks, then you will fall behind if you don’t follow suit.

This is really not a new idea,

In 1918, Irving Fisher, the Yale economist, argued that what people maximize in their actions is something that could better be described as 'wantability' rather than utility, for they are subject to temptation and mistakes in the vast array of purchases they make, leading profit-maximizing marketers to take advantage of them on a systematic basis.

In the first half of the 20th century, such critiques were of general interest. But they are little discussed today.

In the Guardian, Shiller warned that failure to address this problem in the financial sector could lead to "a new Dark Age." I fear that we are already close to a dark age for health care.

Similarly, in the Wall Street Journal, of all places, Charles Moore, the authorized biographer of Margaret Thatcher, and former editor of the conservative UK Daily Telegraph, wrote:

The relationship between money and morality, on which the middle-class order depends, has been seriously compromised over the past decade.  Which means that the mass bourgeoisie (a phrase that Marx and Engles would have thought a contradiction in terms) start to feel like the new proletariat.

Furthermore,

To the extent that people cheat in markets, they are not real markets, any more than antifreeze labeled 'wine' is real wine.  Too many advocates of markets have allowed themselves to be suborned into becoming apologists for business.  And too many businesses now operate as if their responsibilities are only to themselves and not to consumers.

See the above examples, and all we have written about bribery, kick-backs, fraud, other crime, and corruption to show how prevalent cheating is in health care.

Shiller concluded,

Marx did have an insight about the disproportionate power of the ownership of capital. The owner of capital decides where money goes, whereas the people who sell only their labor lack that power. This makes it hard for society to be shaped in their interests. In recent years, that disproportion has reached destructive levels, so if we don’t want to be a Marxist society, we need to put it right.

I would add that if we do not put these things right in health care, ending up with a Marxist system will be the least of our worries.

So as a start, to quote Shiller, we need more

heroic effortsw of campaigners for better values, both among private organizations and advocates of government regulation

Who will step up?

Our musical diversion, "Won't Get Fooled Again," the Who, 1978 live version:

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The Troubles at Cooper Continue, Lately Gruesomely, But Will Its Leadership and Governance Change This Time? - Part II: the History since 2005

boards of trustees conflicts of interest Cooper Hospital/ UMC crime kickbacks legal settlements revolving doors

The Troubles at Cooper Continue, Lately Gruesomely, But Will Its Leadership and Governance Change This Time? - Part II: the History since 2005

Unknown 4/03/2015 Komentar

In our most recent post, we noted the latest tragic, and gruesome development at Cooper Health System, the largest hospital system in southern New Jersey.  Months after the system CEO, John F Sheridan, and his wife Joyce were found dead after a fire in their home, local law enforcement concluded that Mr Sheridan murdered his wife, set fire to the house, then committed suicide.  It turns out this is just the latest, albeit possibly most tragic and grisly, troubling news from that health care system.

Our last post summarized the history from 1978, including:
-  Seven people, including the hospital system chief financial officer, confessed to and/or found guilty of participating in an embezzlement scheme that cost the hospital more than $21 million
-  An internal investigation was suppressed for years, but later revealed several severe management problems
-  The media revealed multiple conflicts of interest affecting the system's board of trustees, including members of the committee that performed the investigation
-  One member of the board of trustees who participated in the internal investigation was later convicted of arranging his wife's murder
-  Resulting financial losses caused layoffs and service reductions, some of which affected the hospital system's charitable mission
-  The stories received little attention outside the region, and apparently did not result in any fundamental changes in governance or the structure of leadership.

Since 2005, there have been other troubles at Cooper.

Conflicts of Interest Involving Local and State Politics

Board Chairman George E Norcross III

In 2006, the Philadelphia Inquirer found close ties between NJ politicians and hospital leaders (see this post).  In particular, the story noted "the board of South Jersey's major hospital, Cooper University Hospital in Camden, is chaired by the region's most powerful political figure, Democratic power broker George E. Norcross III."

In 2012, as we posted here, Mr Norcross' relationships became more evident.   The New York Times reported that a story about his conflicts of interest had been held from publication by the Inquirer because Mr Norcross was part of a business group seeking to purchase that newspaper.  When the Inquirer story finally came out, it stated firms with financial relationships to the hospital under Norcross had donated generously to Norcross' political allies, and that Norcross had influenced the creation of relationships with these firms.  It suggested that Norcross' political influence had resulted in an unusual level of state financial support for the hospital system.  It noted that the law firm for which Cooper CEO John F Sheridan had previously worked did lobbying for the hospital.  It noted that the hospital did millions of dollars of business with firms tied to hospital trustees, including Mr Norcross.

Trustee Emeritus Peter Driscoll

Recent reporting after Mr Sheridan's death suggested the rehabilitation of former board chairman Peter Driscoll under Chairman Norcross.  Mr Driscoll was the former board chair who resigned in 1999 after the embezzlement scandal report and revelations about conflicts of interest affecting the board were finally made public, and the hospital system was in financial difficulty.  However, by 2014, he was identified by the board as a "trustee emeritus."  Per the Philadelphia Inquirer, after the fire at the Sheridan house was attributed to arson,

'If they had died because the house was on fire, that would be a terrible, terrible tragedy,' said Cooper Health System trustee Peter E. Driscoll, a senior member of the Haddonfield law firm of Archer & Greiner. '. . .I don't know what to make of it. I can't imagine anybody that would want to do something like this.'

New Vice President Kevin O'Dowd and his Family

Also after Mr Sheridan's death, the hospital system hired a new top manager with his own extensive political connections and conflicts of interest.  Per the Inquirer,

Gov. Christie's chief of staff, Kevin O'Dowd, will step down this month to work for Cooper University Hospital in Camden, nearly a year after the governor named O'Dowd his pick for attorney general.

O'Dowd, whose selection as attorney general never moved forward after controversy arose over lane closures on the George Washington Bridge, will serve as senior executive vice president and chief administrative officer at Cooper, where he will focus on business development, Christie officials said. He will start at Cooper in January.

The conflict was

 O'Dowd's wife, Mary, serves as commissioner of the state Department of Health.

A NJ.com story made that more explicit,

 State Health Commissioner Mary O’Dowd will refrain from making decisions that would directly affect Cooper University Hospital in Camden after her husband accepted a senior management job there, officials said Friday night.

The move was made to avoid any conflicts of interest as the state Department of Health licenses and inspects hospitals, and doles out money to compensate them for treating uninsured charity care patients. Cooper will receive $37.3 million in charity care payments from the state this year, the fifth highest amount in the state.

A story in the NJ Spotlight suggested that would not solve the problem,

The question that the O’Dowds will have to face is whether they can overcome even the perception of a conflict of interest when their jobs so pervasively present opportunities for such a situation.

'It’s a very, very tenuous situation,' said William Schluter, a former longtime member of the State Ethics Commission and state senator.

He noted that nearly everything that senior hospital executives do in their jobs is influenced by state regulations.

'It’s a situation that I sure as heck wouldn’t want to be in,' said Schluter, adding that he expects second-guessing in the media and by elected officials as the state handles issues affecting Cooper.

Just to ice the cake for Mr O'Dowd, the Courier-Post noted that Mr O'Dowd's job at Cooper could be considered an example of the revolving door, albeit delayed,

O'Dowd, previously the governor's deputy chief counsel, also worked under Christie at the U.S. Attorney's Office for New Jersey.

During seven years as an assistant United States attorney, O'Dowd oversaw a securities and healthcare fraud unit. He also prosecuted cases ranging from child pornography distribution, cybercrime and drug trafficking.

O'Dowd served earlier as a state Deputy Attorney General, where his responsibilities included providing legal counsel to the state Department of Health.

As US Attorney, Christie, possibly with the aid of Mr O'Dowd, pursued a deferred prosecution agreement for UMDNJ, then Cooper's primary academic affiliation, for a complicated set of allegations that we discussed extensively in the past (look at this post and follow links backward).  

Late CEO John F Sheridan and Family


Apparently only after Mr Sheridan's death did the media report extensively on his political connections.  The earliest report I found was in the Philadelphia Inquirer from September 28, 2014.  He served

on Gov. Christie's health-care transition subcommittee in 2010.

The statement said he was New Jersey commissioner of transportation under Gov. Thomas H. Kean and served as New Jersey deputy attorney general and assistant counsel for the New Jersey Turnpike Authority, and was counsel for the New Jersey Senate majority.

Also,

 his son Mark - a prominent lawyer ... has represented Christie in the Bridgegate scandal 

NJ.com added,

John Sheridan Jr., the CEO of Cooper University Health System ... previously spent 40 years in New Jersey government

Also,

He has held positions on Gov. Thomas Kean's cabinet as transportation commissioner and chairman of the New Jersey Transit board, as well as held roles on transition teams for Gov. Chris Christie and Gov. Christine Todd Whitman. 

Furthermore,

 Earlier in his career, he served as Deputy Attorney General of the State of New Jersey, Assistant Counsel to Gov. William T. Cahill, General Counsel to the New Jersey Turnpike Authority and Counsel to the New Jersey Senate Majority.

Finally, his son

Mark Sheridan, a partner at Squire Patton Boggs, acts as general counsel for the New Jersey Republican State Committee.

 So, in the years since conflicts of interest at the board of trustees level were noted as part of the investigation after the management embezzlement scandal at Cooper, many more apparent conflicts affecting top managers and board members have appeared, most recently in late 2014. 


Settlement of Allegations of Kickbacks

In 2013, the media reported that Cooper settled federal allegations that it gave kickbacks to doctors to induce referrals.  As reported by the Inquirer,

The Cooper Health System in Camden has agreed to pay $12.6 million to settle a whistle-blower lawsuit alleging that it made improper payments to doctors in an effort to build its cardiology business, the U.S. attorney for the District of New Jersey said Thursday.

From October 2004 through 2010, local doctors were paid $18,000 to attend four meetings of the Cooper Heart Institute Advisory Board in any given year under 'consulting' and 'compensation' agreements, in possible violation of antikickback laws, state and federal law enforcement officials contended.

The whistle-blower was South Jersey cardiologist Nicholas L. DePace. He attended an advisory board meeting in 2007 and was convinced that the board's purpose was not to provide advice to Cooper, but to be a source of patient referrals to the Heart Institute, according to a lawsuit he filed in 2008.

'He was invited to be a member of the advisory board. He attended a meeting and it quickly became apparent to him what the advisory board really was. It was sitting and listening to lectures and not providing advisory services,' said Michael A. Morse, a partner in Pietragallo, Gordon, Alfano, Bosick & Raspanti L.L.P. in Philadelphia, one of DePace's lawyers.

As is typical of legal settlements involving prominent health care organizations,

Cooper admitted no liability.

'After more than three years of extended discussions with government lawyers, we decided, in the best interests of Cooper, to settle our dispute without the admission of wrongdoing to avoid the burdens and uncertainties of a protracted litigation,' Cooper president and chief executive officer John P. Sheridan Jr. said. 'This allows us to focus our full energies on serving our community.'

In a note to Cooper employees, Sheridan said the board was established to 'improve the quality and responsiveness of our cardiac programs' and 'was reviewed by outside legal counsel before it began operations.

However, given that the Inquirer reported that "the $12.6 million penalty is financially significant for Cooper," one wonders why it was made if hospital leadership felt that the case against it was poor.  

So years after the embezzlement scandal, another scandal involving allegations of illegal behavior was settled.  This time, there was no trial, but since the settlement was financially burdensome for the hospital, it is plausible that it resulted from managers' realization that they would not have a good defense against the charges at trial. 

The Death of the Sheridans

Mr Sheridan became CEO of Cooper in 2008.  As noted in the Gloucester County Times,

On Feb. 7 John P. Sheridan Jr., was appointed president and chief executive officer of The Cooper Health System by the Cooper Board of Trustees. Sheridan joined Cooper as senior executive vice president in July 2005 and has served as president of Cooper University Hospital since September of 2007.

'Cooper has grown dramatically in recent years and is positioned as the academic medical leader of South Jersey,' said George E. Norcross III, chairman of the Board of Trustees at Cooper.  'John Sheridan is a proven leader. He has the skills required to build-out our $500 million health care campus in Camden, implement our suburban strategy and achieve our vision of creating the premier academic health care system in South Jersey and the Delaware Valley.'

As of early 2014, he was getting substantial compensation typical for a hospital system CEO, per NJBiz, "John T. Sheridan Jr. (of the $913 million Cooper Health System) received $963,433."

In late September, 2014, Mr Sheridan and his wife were found dead in a house fire.  Initial reports suggested the fire was accidental.  Then it was declared to be arson.  Then Joyce Sheridan's death was found to be the result of a homicide.  Finally, as we posted here, law enforcement declared that Mr Sheridan killed his wife, set the fire, and then committed suicide.

That news was so horrendous that it dumbfounded Cooper insiders.  As reported by the Inquirer,

 'It's not something I can imagine,' said Peter Driscoll, a Cooper Health System trustee emeritus and a senior member of the Haddonfield law firm Archer & Greiner. 

Also,

In a brief statement, Cooper University Health Care called the prosecutor's findings 'unfathomable to us.'

I can only hope that they will get over their shock and realize that the institution really has some big problems. 

Summary

Since 1978, there have been multiple stories about mismanagement, conflicts of interest affecting managers and board members, and crimes committed or alleged to have been committed by management and at least one trustee at Cooper Hospital/UMC which then became Cooper Health System.  Despite these often lurid stories, there is no indication that there has been a fundamental change in the governance of the institution.  While managers have come and gone, sometimes under difficult circumstances, there is no indication that how managers were hired has changed.  Since the early 1990s, there has been no obvious effort made by management or board members to change, at least not one announced publicly.  There has been no outside investigation.

Given that the hospital system has long enjoyed a cozy relationship with state government, including both the legislative and executive branch, maybe it has been easy to go along to get along.  More cozy relationships, including some with ownership of the news media, may have helped to keep this story anechoic outside of the region.

Yet the cumulative story is so striking that it should prompt national attention, and inspire some real hard thought about how health care leadership and governance has gotten so bad.

To repeat what I have said all too often, and I admit with little impact so far....

True health care reform requires governance that is accountable, transparent, true to the organization's mission, and honest, ethical, and without conflicts of interest; and leadership that understands health care, upholds its values, is honest, ethical, and without conflicts of interest, is transparent and open, and is willing to be accountable and subject to appropriate incentives. 

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