We posted a number of times about questionable practices Eli Lilly used to market its atypical anti-psychotic drug Zyprexa (olanzapine). A post from 2007, with links backward, is here, and our most recent post is here. The company remains entangled in litigation over its marketing of this drug. That litigation has lead to the release of numerous internal documents that provide quite a view of Lilly's marketing practices. Bloomberg continued its reporting on these documents, with its latest effort here via the Boston Globe, describing yet another surprising way this drug was sold:

A unit of CVS Caremark Corp. used its access to doctors to market Eli Lilly & Co.'s Zyprexa antipsychotic while it was under contract to bargain with the drug maker on behalf of health insurers, internal Lilly files disclosed in a multibillion-dollar lawsuit by insurers show.

The subsidiary of CVS, the largest US drugstore chain, touted Zyprexa starting in 2003, according to e-mails made public by lawyers suing Lilly for overpayment. CVS's AdvancePCS, a pharmacy benefit manager, or PBM, offered to send 120,000 letters to doctors promoting the drug, Lilly's top-seller with $4.7 billion in sales last year, according to a confidential 2004 proposal. The CVS unit said it would charge $5 per letter.

AdvancePCS, acquired by Woonsocket, R.I.-based CVS in 2007, said in the documents that the direct-mail campaign was 'designed to influence key prescribers' as part of a 'tactical plan for Zyprexa.'

Furthermore,

In AdvancePCS's 2004 pitch to Lilly offering to send out letters promoting Zyprexa, Kevin Aholt, the company's assistant vice president in charge of strategic alliances, said he could target physicians based 'on the most recent AdvancePCS claims data,' according to the unsealed documents.

Aholt also said that one of the 'key issues' in the market for antipsychotic drugs was finding ways to 'accelerate the growth of new patient starts,' according to the proposal.

Also,

Steven Fuchs, an official at the PBM, asked Lilly officials in an April 2004 e-mail whether he should include information about Zyprexa's ability to calm agitated patients in the next round of letters to doctors.

'Would a discussion of that be something you would want to include?' Fuchs asked, according to the document.

Lilly marketing executive Scott Dell responded in an e-mail that officials at the drug maker had discussed asking AdvancePCS to include material highlighting 'the new bipolar maintenance indication for Zyprexa.'

AdvancePCS was not the only pharmacy benefits manager (PBM) that offered to help sell Zyprexa.

CVS rival Express Scripts Inc. also sent out Zyprexa marketing letters, according to the unsealed documents and also isn't named as a defendant in the suits.

So here we have at least two pharmacy benefit managers (PBMs) offering to help market a particular drug, for money, of course. What is the problem here?

CVS's contracts with insurers and pensions meanwhile place it in an adversarial posture with Lilly, requiring it to use its buying power as leverage in drug-price negotiations.

'The problem is that PBMs are negotiating these hidden deals while at the same time telling employers that they represent them at the negotiating table,' said Gerry Purcell, a former PBM executive who advises companies on their drug plans. 'These documents will add fuel to the perception that the companies and the PBMs are in cahoots with each other.'

Also,

While PBMs negotiate on behalf of insurers, most states don't designate them as agents of the benefit plans, said Robert Garis, a pharmacy professor at Creighton University in Omaha who studies the industry. As a result, they aren't legally required to act only in the best interest of their clients, he said. Maine is one of a few states that have specified PBMs as fiduciaries, or agents, he noted.

'The companies have gotten around that by adding language to their contracts that exclude them from having to meet those fiduciary duties,' Garis said.

Apparently, in this case, one PBM said it disclosed its relationship to the drug company to physicians, but it is not clear whether it was disclosed to the health care insurers and managed care organizations which paid the PBM to reduce the costs of drugs:

CVS, which isn't a defendant in the Lilly suit, said that it tells doctors when it has 'financial relationships' with drug makers and that they are free to opt out of mailings.

'To engage in a point/counterpoint in a media outlet rather than in court would not be productive,' said Lilly spokeswoman Marni Lemons.

Lemons declined to answer specific queries about the CVS or Express Scripts letters, whether Lilly paid for the practice, or other questions raised by the unsealed documents....

CVS said in its e-mailed statement that it has 'no active educational programs' related to Zyprexa.

'CVS Caremark discloses to its PBM clients that it may have financial relationships with pharmaceutical manufacturers in connection with these educational programs,' said Christine Cramer, a spokeswoman for the chain. 'CVS Caremark's PBM clients are aware of these programs and have the opportunity to opt out.'

Maria Palumbo, a spokeswoman for Express Scripts, didn't respond to eight telephone and e-mail requests seeking comment.

CVS covers 82 million people, with a market share of 12 percent, and is the largest pharmacy benefit manager, according to Atlantic Information Services. Express Scripts, which covers 55 million people, is the fifth largest. PBMs process about 75 percent of the retail prescriptions written annually in the United States, according to the insurance plans.

The insurance plans sued the drug maker in 2005, contending it used researchers, pharmacy benefit managers, advocacy groups, and public agencies to promote Zyprexa.

Whether or not the PBMs disclosed their relationships to the pharmaceutical company to everyone who might be interested, it does seem that having PBMs who are supposed to help insurers and managed care organizations control drug costs be paid by pharmaceutical companies to market drugs is yet another new species of institutional conflict of interest. Like the many other conflicts of interest, individual and institutional, we have discussed, this one appears to be mutually advantageous to the parties involved. However, it could have adverse consequences for physicians, patients, and the health care system. If the organizations that are supposed to be controlling drug costs are also promoting expensive drugs, the likely result would be excess prescription of expensive drugs to patients who may not derive benefits from the drugs outweighing their harms.

This is another reminder how much we need more sunshine shone on the multitudinous conflicts of interest affecting just about every type of actor within the current US health care system.

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

Stryker Corp

As reported by Bloomberg News:

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

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

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

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

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

However, the case has not yet gone to trial.

As usual, the company denied anybody did anything wrong:

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

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

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

CVS Caremark

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

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

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

WellStar

This story was published in the Atlanta Journal-Constitution:

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

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

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

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

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

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

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

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

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

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

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

Bentley did not say if the terminations were related.

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

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

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

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

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

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

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

Allergan

As reported again by Bloomberg:

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

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

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

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

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

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

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

Got that? On the other hand,

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

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

Summary

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

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

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

My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

The march of settlements and other unfavorable legal results for health care organizations continued last week, in alphabetical order

CVS Settles for $77.6 Million for Violating the Controlled Substances Act

As reported by Bloomberg,

CVS Caremark Corp. agreed to pay $77.6 million to settle claims that some of its stores in California and Nevada allowed criminals to buy cold medications that were used to make methamphetamine.

The pharmacy chain will pay a $75 million fine, the largest civil penalty ever paid under the Controlled Substances Act, and forfeit $2.6 million in profits from the illegal sales, the U.S. Attorney’s Office in Los Angeles said today in a statement.

Between September 2007 and November 2008, CVS failed to ensure that stores in Southern California complied with laws limiting sales of over-the-counter drugs made with pseudoephedrine, which allowed methamphetamine traffickers to buy large amounts of the drugs, according to the statement. CVS changed its sales practices only after it became aware of the investigation, prosecutors said.

What was unusual about this case is that the company's CEO actually seemed to acknowledge that it did something wrong, and vowed change:

'While this lapse occurred in 2007 and 2008 and has been addressed, it was an unacceptable breach of the company’s policies and was totally inconsistent with our values,' CVS Chief Executive Officer Thomas Ryan said in a statement. 'We have strengthened our internal controls and compliance measures and made substantial investments to improve our handling and monitoring of PSE.'

Amazing, a CEO acknowledging that his corporation's values include complying with the law... [sarcasm off]
Note that we most recently posted about a settlement by CVS, one by CVS Caremark for improperly charging a public entity, in September, 2010, here.

Johnson & Johnson Found Liable for $257.7 Million for Fraud

As reported by Bloomberg,

Johnson & Johnson lost a $257.7 million jury verdict in Louisiana for making misleading claims about the safety of the company’s Risperdal antipsychotic drug.

J&J officials defrauded the state’s Medicaid system by wrongfully touting Risperdal as superior to competing antipsychotic drugs and minimizing its links to diabetes, said jurors in state court in Opelousas, Louisiana.

Specifically,

The jury found 35,542 violations of the state’s Medical Assistance Programs Integrity Law and imposed a penalty of $7,250 for each. The total $257.7 million verdict is the fifth- largest in the U.S. so far in 2010, according to data compiled by Bloomberg.

'You can’t come into Louisiana and disseminate false and misleading information,' Patrick Morrow, who represented the state, said after the verdict in a phone interview. 'I’m sure this matter will be in the appellate courts for years to come. This is the first step.'

The state’s case centered on drug safety claims that J&J and Ortho-McNeil Janssen made in November 2003 correspondence to 700,000 doctors. In those letters, J&J touted Risperdal as safer than competing antipsychotics such as Indianapolis-based Eli Lilly & Co.’s Zyprexa and London-based AstraZeneca Plc’s Seroquel. Risperdal global sales peaked at $4.5 billion in 2007, declining after the company lost patent protection.

The U.S. Food and Drug Administration responded with a warning letter saying J&J made false and misleading claims that minimized the potentially fatal risks of diabetes and overstated the drug’s superiority to rival medicines.

Lawyers for the state asked jurors to hold J&J liable for the 7,604 letters it sent to Louisiana doctors and regulators making those claims along with more than 27,542 sales calls in the state made by the drugmaker’s representatives in 2003 and 2004.

Note that we last discussed problems at Johnson and Johnson, those being manufacturing issues leading to contaminated drugs, in September, 2010, here.

Medtronic Settles for $268 Million for Personal Injuries

As reported by the Minneapolis Star Tribune,

Medtronic Inc. has agreed to pay $268 million to settle thousands of lawsuits that patients filed after a 2007 recall of a faulty heart defibrillator wire that caused at least 13 deaths.

The settlement announced Thursday covers some 8,100 personal injury lawsuits in both federal and state courts over Medtronic's popular Sprint Fidelis lead, which was implanted in some 235,000 people when the company recalled the device after a small number fractured. The malfunction could cause the defibrillator to stop working or to inappropriately shock patients -- a frightening and uncomfortable experience, but usually not life-threatening.

The cases had been lingering in a kind of legal limbo that began with a 2008 U.S. Supreme Court decision involving another Medtronic case that prevented many patients with faulty medical devices from filing suit against the makers of those products.

Rather than wait for a definitive resolution to various legal appeals, the Fridley-based medical technology giant agreed to end the three-year legal battle with a settlement.

Note that we last discussed Medtronic's payments to physicians, in June, 2010, here.

Summary

Ho-hum, another week, another set of settlements, convictions, and/or verdicts unfavorable to large, important health care organizations. Although all the actions above would result in seemingly large payments by the companies involved, all of the payments were trivial in size compared to the companies' revenues. Note that in none of the cases above did any individual pay any penalty. In only one of the cases did a corporate leader acknowledge that bad things were done, but should be done no more.

As we have noted infinitum, penalties that only appear to be (relatively small) costs of doing business are unlikely to deter future bad behavior. Until the people who actually authorized, directed and implemented the bad behavior have to suffer some negative consequences, expect the bad behavior to continue. Note that each of the companies discussed above have had their previous ethical lapses discussed in previous Health Care Renewal posts.

The continuing march of settlements, and sometimes criminal convictions involving major health care organizations should be regarded merely as providing a floor to estimates of the extent of bad behavior by large health care organizations. Bad behavior may not be reported, or lead to legal action, and legal action may not lead to settlements or convictions. However, it is amazing how many organizations that were once regarded as exemplary have had to settle, or plead guilty, or been convicted.

When it comes to health care's leadership, society seems to have acceded to defining deviancy down. Until we start holding health care leaders to high standards, expect their organizations not to uphold high standards.