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

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:

11:09 AM

Department of Justice Throws (at Least a Small Paperback) Book at Bio-Rad Laboratories - $55 Million Settlement, Admission of Wrongdoing, Employees Fired

Hard on the heels of our recent roundup of legal cases involving medical device companies comes a notable settlement by Bio-Rad Laboratories Inc, a company that makes equipment and supplies for clinical diagnostic testing. 

The Basics

As reported by Reuters,

Bio-Rad Laboratories Inc will pay $55 million to end U.S. investigations into whether it failed to prevent bribery of government officials in Russia and other countries, and falsified records to conceal payments, U.S. authorities said on Monday.


The company, which makes medical diagnostics products, entered a non-prosecution agreement with the U.S. Justice Department to resolve charges that it violated the Foreign Corrupt Practices Act by recording fake payments in connection with sales in Russia.

It also entered a civil settlement with the U.S. Securities and Exchange Commission, which said units of the Hercules, California-based company made $7.5 million in improper payments to officials in Russia, Vietnam and Thailand to win business.

Some Sordid Details
 
Some details of the unseemly conduct were reported by the San Jose, California, Mercury News,

The Department of Justice and the SEC said Bio-Rad subsidiaries in Europe and Asia bribed government officials from 2005-10 with payments to phony middleman companies. Bio-Rad executives ignored the payments, which were so obvious that they should have spotted them, the federal investigators said. One Russian middleman company even used a phony address that was actually the address of a Russian government building, according to the SEC.

Large commissions to companies that didn't have the resources to perform any of the contracted services should have raised an alarm, the complaints said. Also, the payments were made through banks in Latvia and Lithuania, another alleged red flag. Yet several 'high level' Bio-Rad managers approved the payments, the Justice Department said.


In Vietnam, a sales representative of Bio-Rad authorized payment of bribes to government officials, including the hiring of a middleman to pay the bribes, according to the SEC. Bio-Rad's sales manager agreed to the practice fearing that the company would lose 80 percent of its sales if it stopped paying bribes, the SEC's complaint said.

In Thailand, Bio-Rad invested in a local company in 2007 that had an ongoing bribery scheme. An agent of the company received inflated commissions which were split with Thai government officials, the complaint said.  

 Admissions of Wrongdoing, Firing of Employees

Note that the $55 million was not just a civil fine, according to Reuters,

 

Bio-Rad's payout includes a $14.35 million criminal fine to the Justice Department, and $40.7 million representing illegal profit and interest to the SEC....

Moreover, the penalties could have been worse,

The Justice Department said the criminal sanctions were not more severe because Bio-Rad disclosed the misconduct and fully cooperated in its probe, including by making employees available for interviews and producing documents from overseas.

Bio-Rad also bolstered its internal compliance processes, and said it fired employees responsible for the misconduct.

If the company disclosed the misconduct, that meant they acknowledged there was misconduct.  Furthermore, in this case, the company at least indirectly admitted the wrongdoing,

'The actions that we discovered were completely contrary to Bio-Rad's culture and values and ethical standards for conducting business,' Bio-Rad Chief Executive Norman Schwartz said in a statement.

Summary

In summary, employees of Bio-Rad Laboratories bribed officials in various countries to induce more sales.  Upper level managers seemed to disregard fairly obvious signs that this was happening, but eventually someone in upper level management discovered what was going on and reported it to authorities.  The activities were unethical, but the crimes were financial and did not appear to directly risk patients.  The company paid a moderate sized fine, but part of the fine was criminal.  Top management acknowledged wrongdoing, and apparently some employees involved suffered negative consequences: they were fired.

So this case appears a bit different from the majority of the settlements we have discussed.  Bad behavior was acknowledged by managers, and some individuals involved in the bad behavior suffered modest negative consequences.  However, after reviewing the last set of cases we discussed, it does confirm the pattern.  The bigger the company, the proportionately SMALLER the penalties to the company, and the LOWER the likelihood and severity of any negative consequences to an individual.  (This was a moderate sized company, so the penalties were moderate.)  Also, financial misadventures lead to harsher penalties than actions that primarily harm patients.

At least this case shows that the US Department of Justice is capable of making a settlement of a case involving unethical behavior by a health care organization that does not allow the organization to deny misbehavior, and leads to at least some negative consequences for individuals who authorized, directed or implemented the bad behavior.

The question remains, though: why are cases involving really big organizations, and hence often lots of money, and/or cases that involve clinical rather than financial risks treated so leniently?  

The usual pattern, at least for large companies, is: settlements that involve fines that appear large, but are not proportionate to the size and revenue of the company; fines that are imposed on the company as a whole, but no penalties for the people who authorized, directed, or implemented the bad behavior, and likely personally profited from it; and no findings of guilt or acknowledgement of wrong doing.  This lenient approach allows large health care organizations to treat such settlements as costs of doing business.  Hence, it is unlikely to deter future bad behavior, especially given that the people most likely to make the most money from it can expect impunity.  

Note that the pattern of law enforcement and regulation for health care in the US is similar to the pattern of law enforcement and regulation of the finance sector.  And that helped bring us the global financial collapse.  Meanwhile, our health care system has become the most expensive, but clearly not the best in the world.

To repeat, the Kabuki play that is regulation of and law enforcement for large health care organizations goes on.  As our society is being increasingly divided into a huge majority in increasingly difficult economic circumstances and a small and  increasingly rich minority, it also seems to be increasingly divided into little people who may be ruined by lawsuits, and imprisoned for even minor infractions, and big people who have impunity. 

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

8:53 AM

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. 

10:32 AM

Novo Nordisk Accepts Deferred Prosecution Agreement, Settles, Pays Fine

Back in early 2007, we noted that several large drug companies were under investigation for possible involvement in the Iraq oil-for-food sanctions scandal. More than two years later, a US Department of Justice press release from last week includes the following:

Novo Nordisk A/S (Novo), a Danish corporation based in Bagsvaerd, Denmark, has agreed to pay a $9 million penalty for illegal kickbacks paid to the former Iraqi government. Novo agreed to pay the fine as part of a deferred prosecution agreement with the Department. The matter is part of the Justice Department’s ongoing investigation into the U.N. Oil-for-Food program.

A criminal information was filed today against Novo in U.S. District Court for the District of Columbia charging Novo with one count of conspiracy to commit wire fraud and to violate the books and records provisions of the Foreign Corrupt Practices Act (FCPA). Novo, an international manufacturer of insulin, medicines and other pharmaceutical supplies, has acknowledged responsibility for improper payments made by its agents to the former Iraqi government in order to obtain contracts with the Iraqi ministry of health to provide insulin and other medicines. The agreement requires the company and its subsidiaries to cooperate fully with the Justice Department’s ongoing Oil-for-Food investigation.

According to the agreement and the information filed today, between 2001 and 2003, Novo paid approximately $1.4 million to the former Iraqi government by inflating the price of contracts by 10 percent before submitting the contracts to the United Nations for approval and concealed from the United Nations the fact that the price contained a kickback to the former Iraqi government. Novo also admitted it inaccurately recorded the kickback payments as 'commissions' in its books and records.

In recognition of Novo’s thorough review of the illicit payments and its implementation of enhanced compliance policies and procedures, the Department has agreed to defer prosecution of criminal charges against Novo for a period of three years.

Also,

In a related matter, Novo reached a settlement today with the U.S. Securities and Exchange Commission (SEC) on a complaint and agreed to pay $3,025,066 in civil penalties and $6,005,079 in disgorgement of profits, including pre-judgment interest, in connection with contracts for which it paid kickbacks to the former Iraqi government.

Note that so far I can only find coverage of this story in this brief piece from Reuters.

So here we go again. Yet another big health care corporation, in this case, an international pharmaceutical company, admits to criminal conduct, and agrees to operate under a deferred prosecution agreement, while also paying additional millions in a civil settlement. In this case, the amounts of money paid were not particularly large, but the nature of the conduct involved, involving paying to play with a particularly notorious dictator, was striking.

Like most cases involving settlements for unethical behavior, or even deferred prosecutions or convictions for criminal behavior, this one has attracted almost no attention. Have such stories become like "dog bite man" stories, so commonplace that they deserve no notice from a public that has become cynical?

As we have said before, while human beings authorized or committed the acts that got the organization in trouble, rarely do these people seem to suffer any negative consequences. At most, the organization may pay a fine. In this case, the fine was, in corporate terms, tiny. However, even a large fine, however, may come out of dividends or the stock price, dispersing the cost to stock-holders, or out of salaries across the board. Thus, those who got the organization into trouble are unlikely to feel pain from it. Perhaps because of reverence for all organizations related to health care, and fear that the bankruptcy of any health care organization, even a health care insurance company, will leave patients in the lurch, prosecutors do not seem inclined to actually prosecute such organizations. The net effect, though, seems to be that dishonest executives of health care organizations can continue to act with impunity.Until bad leadership of health care organizations leads to negative consequences for those practicing it, health care leadership can be expected to continuously degrade.

Hat Tip to the White Collar Crime Prof Blog.

2:58 PM

WellCare Settles, Accepts Deferred Prosecution Agreement

'Tis the season for deferred prosecution agreements for health care organizations. As reported by the Wall Street Journal:

WellCare Health Plans Inc. agreed to pay $80 million to settle a Florida Medicaid fraud investigation that has embroiled the company since the fall of 2007, previously prompting a management shake-up and restatement of more than three years of the company's earnings.

The settlement resolves federal and state criminal probes into allegations that WellCare defrauded Florida benefits programs for low-income adults and children of about $40 million by improperly inflating what it spent on care.

WellCare, based in Tampa, Fla., administers medical benefits for about 2.5 million enrollees in government-sponsored plans in several states.

Under a deferred prosecution agreement, the U.S. Attorney's Office for the Middle District of Florida in Tampa filed a fraud conspiracy charge against the company but said it wouldn't prosecute the case if WellCare meets all of the deal's terms.

U.S. Attorney A. Brian Albritton said in a news conference Tuesday that his office could have pursued a conviction but that it likely would have put the insurer out of business, hurting customers, innocent employees and shareholders. In penalizing the company, 'we have, at the same time, tried to avoid crushing it,' he said.

Under the terms, WellCare must forfeit $40 million and pay another $40 million in restitution to Florida's Medicaid and 'Healthy Kids' plans. WellCare also has agreed 'to accept and acknowledge full responsibility for the conduct that led to the government's investigations,' according to the deferred prosecution agreement. The company declined to elaborate.

In addition, the company also must retain an independent monitor to review its business operations, cooperate with the government's ongoing investigations and implement new procedures within 60 days to prevent future abuse or faulty reports to state health care programs.

This was not the first bit of trouble WellCare got itself into. We posted here about how the state of Connecticut stopped WellCare from running a plan for poor children after the company refused to reveal what it was paying physicians, and why it was failing to pay for particular services.

So, as we have found from blogging on Health Care Renewal for a while, organizations that are found to be committing one sort of mischief often are also found to be committing another sort.

We also see some other familiar patterns. While human beings authorized or committed the acts that got the organization in trouble, rarely do these people seem to suffer any negative consequences. At most, the organization may pay a seemingly large fine. This, however, may come out of dividends or the stock price, dispersing the cost to stock-holders, or out of salaries across the board. Thus, those who got the organization into trouble are unlikely to feel pain from it. Perhaps because of reverence for all organizations related to health care, and fear that the bankruptcy of any health care organization, even a health care insurance company, will leave patients in the lurch, prosecutors do not seem inclined to actually prosecute such organizations. The net effect, though, seems to be that dishonest executives of health care organizations can continue to act with impunity.

Until bad leadership of health care organizations leads to negative consequences for those practicing it, health care leadership can be expected to continuously degrade.

By the way, one member of the WellCare board of directors is Regina Herzlinger, a well known and prolific health policy expert, and holds the Nancy R. McPherson Professor of Business Administration Chair of the Harvard Business School. As far as I know, Prof Herzlinger is one of the many health policy experts who avoids discussing the sorts of problems with the accountability, integrity, and transparency of health care leadership which is grist for the mill here at Health Care Renewal. Yet under the stewardship of such an august expert, WellCare had to "accept and acknowledge full responsibility for ... conduct" that included fraud. Perhaps, Prof Herzlinger, like many other main stream health policy experts, should learn to acknowledge that health care leadership may be unaccountable, opaque, dishonest, and sometimes flagrantly corrupt. Furthermore, Prof Herzlinger, like many other well-paid board members of health care organization, should pay a bit more attention to the mischief being committed by those who answer to her.

12:21 PM