St Jude Medical Settles Again

Here we go again to kick off the week, legal settlements, cardiac devices, alleged kickbacks, manipulated research, as reported by Bloomberg:

Another Legal Settlement by St Jude Medical

St. Jude Medical Inc. agreed to pay $16 million to settle a U.S. government probe of claims the company paid kickbacks to doctors who implanted its heart devices in patients.

The accord resolves a five-year investigation of St. Jude’s marketing practices for defibrillators and pacemakers.

This was not even the first recent settlement by this particular company:

In June, St. Jude agreed to pay the federal government $3.7 million to resolve a separate whistleblower case over claims that it made illegal payments to hospitals in Kentucky and Ohio that used the company’s heart devices.

Our relevant post about that previous settlement was here.

Kickbacks, Manipulated Research

The $16 million settlement stemmed from a case filed by Charles Donigian, a former St. Jude technician from St. Louis, who accused the company of using kickbacks to market products.

The kickbacks, which ranged as high as $2,000 per patient, came in the form of 'sham fees' for phony clinical-research studies on the devices, Donigian said in his suit.

There was slightly more detail in a report in TheHeart.org:

According to the DoJ, the company used postmarketing studies and a registry as vehicles to reward physicians participating in those studies to implant the devices. 'In each case, St Jude paid each participating physician a fee that ranged up to $2000 per patient,' a statement from US Attorney Carmen M Ortiz notes. 'The United States alleges that St Jude solicited physicians for the studies in order to retain their business and/or convert their business from a competitor's product.'

The statement also observes: 'Although St Jude collected data and information from participating physicians, it knowingly and intentionally used the studies and registry as a means of increasing its device sales by paying certain physicians to select St Jude pacemakers and ICDs for their patients.'

Summary

It all is getting so old, isn't it? Yet another pharmaceutical, biotechnology or device company settles a case alleging payments to physicians to induce them to use its products. The twist here is that the form of the payment allegedly also manipulated the clinical research process.

There have been other cases of manipulation or suppression of research about cardiac devices. For example, see our recent post about how Guidant, now a subsidiary of Boston Scientific, was put on probation for its actions in another such case.

The allegations amounted to serious external threats to physicians' professionalism: payments to promote use of health care products whether or not their implantation was in patients' best interests, and manipulation of clinical research that could have further corrupted the clinical evidence base, and presumably could have broken the trust of clinical research subjects. Left unsaid in the brief articles is how willingly the physicians gave in to these threats to their professionalism for the dollars involved.

Yet despite the apparently corrosive quality of the bad behavior, the penalties to the company were trivial. Per St Jude Medical's most recent financial profile, its yearly revenue was over $4.5 billion.  Two settlements totaling less than $20 million amount to a relatively small cost of doing business.  And note that St Jude Medical is not admitting it did anything wrong.  Per TheHeart.org, its statement was:

We are pleased to have reached a settlement agreement with the DoJ that fully resolves the postmarket-study matter in Boston. The company maintains that its postmarket studies and registries are legitimate clinical studies designed to gather important scientific data, and St Jude Medical does not admit liability or wrongdoing by entering into this agreement. The company entered into a settlement agreement to avoid the potential costs and risks associated with litigation. This settlement brings the previously reported postmarket-study investigation to a close.

So it all gets so tiresome. The continuing march of legal settlements like this do provide evidence of how professionalism and evidence-based medical practice are under threat. However, as we have said ad infinitum, such settlements are likely to do nothing to alleviate that threat.

To repeat the conclusion of our last post about St Jude Medical, the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior. Even large fines (and the one described above would be peanuts to a large health care corporation) can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. 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.

Why is Johnson and Johnson "Spinning Out of Control?"

Last week, a New York Times article by Natasha Singer and Reed Abelson cataloged some of the problems afflicting the giant health care corporation Johnson and Johnson. 

Little red flags jut out from the shelves at a CVS drugstore in suburban Boston, alerting shoppers to shortages of nearly a dozen Johnson & Johnson products. Among them are Motrin, Rolaids, children’s Tylenol liquid and adult Tylenol, Mylanta, Pepcid AC and even some Neutrogena skin care products.

'Looking for Tylenol pain relief products?' asks one of the signs. The notices at CVS serve as a stark reproof to Johnson & Johnson, whose brands have for more than a century been synonymous with quality. Some of its products are in short supply at drugstores and supermarkets because the McNeil Consumer Healthcare unit of J.& J. last year recalled about 288 million items, including about 136 million bottles of liquid Tylenol, Motrin, Zyrtec and Benadryl for infants and children.

Johnson & Johnson has had to recall such a variety of products because of quality-control problems across product lines, in multiple factories and in several units last year. Some of its consumer products, for instance, may have contained bits of metal. Others came in bottles with a moldy smell. And some products have gone missing from stores with hardly an explanation. All of this has put the company and its manufacturing under the intense scrutiny of lawmakers and officials at the Food and Drug Administration.

'It looks like a plane spinning out of control,' says David Vinjamuri, a former J.& J. marketing employee who now trains brand managers at his company, ThirdWay Brand Trainers.

The article noted how the current widespread manufacturing problems at J+J seem to contradict the company's famous credo.

dating from 1943, saying that the company owed its first responsibility to the mothers and fathers, doctors, nurses and patients who use its products.

The article noted that the company's problems

have not been limited to its over-the-counter products, which could suggest that the company may suffer from even broader problems. Last year, its DePuy medical device unit recalled two kinds of hip implants, affecting tens of thousands of patients worldwide. Its vision care unit recalled millions of soft contact lenses sold abroad.

In fact, the company also has had major ethics problems. We noted here, for example, that last October J&J and Ortho-McNeil Janssen, a Johnson and Johnson subsidiary,were found by a jury to have defrauded the Lousiana Medicaid system by minimizing safety problems with the atypical anti-psychotic drug Respirdal, with a penalty of over $250 million.

Moreover, the NY Times summary is already out of date. The Los Angeles Times just reported yesterday even more recalls.

Why does the company seem to be in a tail-spin? Ms Singer and Mr Abelson listed several possible causes:

The reasons for McNeil’s woes remain unclear. Some critics, including former employees, say Johnson & Johnson has lost sight of its credo, while others suggest that the company decentralized its oversight of manufacturing and quality control in error.

Others say it was simply a matter of cost-cutting. The December lawsuit, for example, cited two unnamed former employees who contended that the company failed to address the manufacturing problems at McNeil because it was trying to save money.

Other former employees who are not involved in the lawsuit say that J.& J. seemed to hesitate in recent years to invest in new manufacturing equipment.

'It takes a lot of money to buy equipment and maintain quality,' says Patrick Bols, who left Johnson & Johnson’s pharmaceutical division in the late 1990s and owns stock in the company.

Why, however, would the company lose sight of its sacred credo? Why would it excessively cut costs in a way that would diminish its ability to carry out its most basic function, to produce pure and unadulterated drugs?

I submit that one clue can be found in a recent news article in Nature Biotechnology about the march of drug and biotechnology companies forced into legal settlements. [Ratner M. Crossing the line. Nature Biotech 2010; 12: 1232-1235. Link here.]

People are rewarded for improving a firm's financial performance - right up the chain to the CEO, [former US Department of Justice and current Vogel, Slade & Goldstein attorney Ms Shelley] Slade says. 'Their concerns are pleasing Wall Street and shareholders, and bonuses are driven by financial performance. There's a real conflict between what the compliance folks want them to do and what's in their immediate financial self-interest. Sometimes the compliance people don't get the full story from the people in operations.

So what we have here is another argument for the importance of perverse incentives as drivers of health care dysfunction. It is likely that all the management of nearly all health care organizations are driven, not by mythic credos or high-minded mission statements, but by the impetus for short-term revenues driven by desire to earn big bonuses and keep their total compensation in six- through eight-figures. These sorts of incentives will predictably lead to excess cost-cutting, unethical behavior, and outright crime.

So, to repeat like a broken record (if anyone remembers what that means, a broken vinyl audio recording skipping due to surface scratches) - if we really want health care reform, if we really want to lower costs, improve access, and improve quality, we need to abolish the perverse incentives that drive managers of health care organizations.  Somehow we need to make the leadership of health care organizations accountable for fulfilling their credos, mission statements, and really their basic responsibilities.  The patients' interests need to come first.  Drug companies must make pure, unadulterated drugs, and promote them honestly and ethically, and their leaders must first be accountable for doing so.