Again, 'tis the season for legal settlements. From the Newark Star-Ledger,

New Jersey and Pennsylvania-based medical company Synthes reached a settlement today over the company's alleged financial conflicts of interest, which officials are calling a landmark deal, state officials announced today.

The attorney general's office launched an investigation early 2008 into Synthes, which produces devices for treating spinal trauma, to determine whether physicians were financially benefiting from conducting clinical trials on the company's products. Under the agreement, Synthes will no longer pay trial physicians with company stock and must disclose all payments to the physicians and whether the physicians have a financial stake in the outcome of the trial.

Attorney General Anne Milgram, who said such provisions were the first of their kind, said conflicts of interest are common within the medical community.

'It is outrageous that doctors who are testing and, in many cases, recommending the use of certain high-risk medical devices are being compensated with stock in the very companies that make the devices,' said Milgram. 'All patients -- but especially those considering high-risk devices such as spinal disc replacements -- deserve honest, objective clinical trial information about the products available.'

She also criticized the Food and Drug Administration, saying the federal agency was not vigilant enough in regulating Synthes, a $3.2 billion global company.

'Medical device makers have a duty to make certain that clinical trial results are accurate and unbiased,' Milgram said. 'In creating these financial incentives for doctors, Synthes and the rest of the industry have done the exact opposite. Going forward, if the industry will not address this problem voluntarily, we most certainly will.'

What will they think of next? We have seen plenty of cases in which physicians have been given payments that could influence their clinical decision making by companies with products or services to sell. Often, such payments are not disclosed. This is one of the few times I have seen physicians other than those on corporate boards, however, receiving payments in company stock. This would seem to be a new low. It surely would provide a more powerful incentive to make the studies' results favor the company's products than would mere cash payments. At least the settlement will stop this practice, and force disclosure of company payments.

The statements by the state Attorney General were particularly and admirably direct.

However, once again we see some 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 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.

In December, 2009, we updated the story of Swiss-based medical device company Synthes and the marketing by its Norian division of a bone cement. At that time, US authorities charged the company with use of an unapproved product in about 200 patients, three of whom suffered untimely deaths. At that point, four US based Synthes executives had pleaded guilty to charges related to this affair.

Last week, another shoe dropped. As reported by the Associated Press,

A medical devices company will admit criminality and pay the maximum $23 million fine for illegally testing bone cement on about 200 spinal patients, three of whom died in surgery, U.S. prosecutors said Monday.

Norian Corp. trained surgeons to conduct unapproved clinical tests of its bone cement from 2002 to 2004, subverting U.S. Food and Drug Administration safeguards, prosecutors said. The trials were stopped after the third patient death, they said.

The cement, which is used to fill in bone defects, is approved for use in the arm but not the load-bearing spine, authorities said. The surgeries often involved older patients with compression fractures, they said.

The results are:

Norian will plead guilty to conspiracy to impede FDA functions, a felony, and 110 misdemeanor counts of interstate shipping of misbranded Norian XR. Synthes will plead guilty to the same misdemeanor shipping count.

As part of the agreement, Norian will be sold to an outside buyer, the parent company said.

Imposing divestiture of the offending subsidiary was unusual, according to the Philadelphia Inquirer:

Forcing a divestiture of a business unit in a plea agreement was precedent-setting for the U.S. Attorney General's Office in the Philadelphia area, spokeswoman Patricia Hartman said Monday.

Officials with the Office of the Inspector General in DHHS said the divestiture should send a message to other health-care companies that Synthes' behavior had grave consequences.

'Criminal conduct can result in a company getting rid of part of their business,' Greg Demske, a top official with the Inspector General, said Monday. 'This is an egregious case, and it made us firm in our belief that we should draw a line here,' he said.

If it remained a subsidiary of Synthes, Norian would be excluded from participating in Medicare and other government-funded health care programs, which would be potentially devastating to its business. According to a divestiture agreement released Monday by the U.S. Attorney in Philadelphia, Synthes has to sell Norian by May 24.

The assets of Norian would not be allowed to be transferred to another part of the Synthes 'corporate family' as part of the divestiture, Demske said.

Synthes will update the government monthly on its plans to divest Norian, and if it fails to sell the company by the May deadline, it can be fined $10,000 a day.

So does this case signal a new toughness by US authorities in cases of bad behavior by health care corporations?

According to the Wall Street Journal, Synthes officials were not exactly quaking in their boots because of these penalties, as their spokesperson said Synthes "does not expect this settlement to have any significant financial impact." Synthes would only be liable for fines of "about $24.3 million in total." That pales in comparison to the "company['s] posted total sales of $3.4 billion last year." As for the divestiture of Norian, the WSJ reported, "a spokesman said Monday that the Norian unit is mostly active in product development and isn't actively selling products. That business has fewer than 100 employees,...."

In fact, company leadership did not seem to realize that they did anything wrong, despite the company and four executives pleading guilty to crimes, actions involving the death of three patients,

'Synthes remains committed to operating in accordance with the highest legal and ethical standards, and bringing closure to this matter will permit the company to focus on its mission to improve patient care,' the company said.

Furthermore, while this is one of the few cases in which some company executives actually may have to pay penalties (after pleading guilty to at least misdemeanors), the big fish appeared to get away. As we discussed last year, an unindicted "person no. 7" was alleged to have set up the scheme to "test" the bone cement in a clinical series. Person No. 7 was at that time identified as the company CEO. That CEO, according to the Philadelphia Inquirer last year, was one Mr Hansjorg Wyss, noted to have a fortune estimated at $5.7 billion, making him the richest man in Philadelphia, and the 83rd richest man in the world, according to Forbes magazine. (See this post.) The settlement of this case would apparently have no impact on his immense wealth.

So although this case has some unusual wrinkles, and may yet yield some negative consequences for some of the people involved in the direction and implementation of the wrong-doing, it would appear to leave unscathed the person who has personally profited the most from the company, and its actions, including its less savory actions. There is progress here, but only a little.

Once again, it appears that in the eyes of the law, top corporate leaders are different from you and me. They appear immune from the penalties that lesser individuals may suffer. They have impunity to continue to amass wealth even wealth that results from actions that were deemed illegal. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.