How the "Revolving Door" and Other Aspects of Corporatism Benefited Amgen Just After its Settlement and Guilty Plea

At least here in these United States, our health care corporatism is bipartisan.  Here we present a sorry story of how a company that should have been shamed by dishonest behavior that likely harmed patients instead apparently was awarded special treatment through its cozy relationships with top government leaders
 
Accusations of Kickbacks and Deceptive Marketing of Aranesp 

Last month, biotechnology giant pleaded guilty to a charge of misbranding and settled civil charges with the US government for $762 million (look here).  Soon after, New York Times article described the unethical practices the company was alleged to have performed.  It opened with a vivid anecdote:

'I hope no one is taping this,' the Amgen manager remarked at a company sales meeting in 2005.

The manager then boasted of how she had given a $10,000 unrestricted grant to a pet project of a doctor who was an adviser to the local  Medicare contractor. In turn, she said, the doctor would help persuade the contractor to provide reimbursement for an unapproved use of Amgen’s anemia drug, Aranesp. 

Since that account appeared to be of a quid pro quo, it did sound like some a kickback or bribery.  In addition,

Amgen is also accused of offering kickbacks to doctors and clinics to induce them to use its drugs. These reportedly came as cash, rebates, free samples, educational and research grants, dinners and travel, and other inducements.   

Of course, since this was the usual sort of settlement we see of health care corporate wrongdoing, in which the reason the company is paying what appears to be a large fine remains ambiguous,

Except for those in the criminal count, Amgen denied the other accusations, though it did issue a statement on Wednesday acknowledging the settlement.

'The government raised important concerns in the criminal prosecution,' Cynthia M. Patton, chief compliance officer at Amgen, said in the statement. 'Amgen acknowledges that mistakes were made, and we did not live up to our standards.'

"Mistakes were made," what a handy phrase to avoid acknowledging that a real person or person made those mistakes.  Why government prosecutors did not leverage instances in which the mistakes were made by an identifiable person, for example, the manager in the anecdote above, to find out who ultimately authorized and directed the kickbacks and deceptive marketing, and then seek to indict them is a mystery.  The US Department of Justice now seems to be disinclined to ever pursue top  health care corporate executives who may have done wrong, while they exuberantly pursue fines from the companies they direct, fines which have almost no personal impact on those who authorized, directed or implemented the bad behavior.
  
The Times article also included a telling allegation that behind this apparent misbehavior was a changed corporate culture that put short-term revenue ahead of all other considerations.  

the corporate culture changed starting around 2000. That was when new management came in and Aranesp was approved, setting up a fierce marketing battle with Johnson & Johnson and its rival anemia drug, Procrit.

'It was more important to make your numbers than to follow the rules,' said [former Amgen sales representative and now whistle-blower Jill] ...Osiecki, who was based in Milwaukee and sold Aranesp. 

We have discussed how the "make your numbers" culture seems to have resulted from an over-generalization of the prevalent belief in business schools that "maximizing shareholder value," which usually seems to mean maximizing short-term revenue and/or doing whatever it takes to boost stock prices in the short-term (look here).  In companies which make potentially beneficial but also potentially hazardous drugs, the risks of "make your numbers" are obvious.

Shameful Consequences for Patients 

These were disconcerting revelations.  They showed that some unidentified employees, probably including top leaders of a major health care corporation seemed to use kickbacks and lies to deceptively market a drug just to "make their numbers," and thus most likely score healthy bonuses.  Yet this drug is clearly dangerous.  The official Aranesp label states (in a black box warning, in capital letters):

 ESAs INCREASE THE RISK OF DEATH, MYOCARDIAL INFARCTION, STROKE, VENOUS THROMBOEMBOLISM, THROMBOSIS OF VASCULAR ACCESS AND TUMOR PROGRESSION OR RECURRENCE

Thus deceptive and unethical marketing practices likely lead to overuse of the drug, and overuse of the drug likely lead to sick (via myocardial infarction [heart attack], stroke, venous thromboembolism or thrombosis of vascular access [drug clots], or tumor progression) or dead patients.

One would think that the consequences of the particular bad behavior alleged in this case would have lead to more zealous prosecution and to the pursuit of actual people who authorized, directed or implemented the bad behavior.  However, it did not.


One would also think that the nature and consequences of this bad behavior would harm the reputation of the company and its leadership.  Instead, it appears that soon after the settlement was announced, top US elected leaders were fawning over this company and its leadership, and rushing to legislate special treatment for it.

Special Treatment from Legislators

Yet soon after these disconcerting revelations that should have shamed Amgen and its leadership, it appears that the company benefited from legislation narrowly crafted mainly just for to suit its interests, and with the aid of allies from both parties within the US government.  That story was again just reported by the New York Times.  The basics are:

Just two weeks after pleading guilty in a major federal fraud case, Amgen, the world’s largest biotechnology firm, scored a largely unnoticed coup on Capitol Hill: Lawmakers inserted a paragraph into the "fiscal cliff"  bill that did not mention the company by name but strongly favored one of its drugs. 

 

The language buried in Section 632 of the law delays a set of Medicare price restraints on a class of drugs that includes Sensipar, a lucrative Amgen pill used by kidney dialysis patients.

The provision gives Amgen an additional two years to sell Sensipar without government controls. The news was so welcome that the company’s chief executive quickly relayed it to investment analysts.  But it is projected to cost Medicare up to $500 million over that period.[That would almost make up for the fine the company had to pay for illegal marketing and to settle kickback charges - Ed]

Amgen, which has a small army of 74 lobbyists in the capital, was the only company to argue aggressively for the delay, according to several Congressional aides of both parties. 

But the Times article noted that it was not just the size of its army of lobbyists that did it.  

 Amgen has deep financial and political ties to lawmakers like Senate Minority Leader Mitch McConnell, Republican of Kentucky, and Senators Max Baucus, Democrat of Montana, and Orrin G Hatch, Republican of Utah, who hold heavy sway over Medicare payment policy as the leaders of the Finance Committee. 

In particular, Amgen

has a deep bench of Washington lobbyists that includes Jeff Forbes, the former chief of staff to Mr. Baucus; Hunter Bates, the former chief of staff for Mr. McConnell; and Tony Podesta, whose fast-growing lobbying firm has unusually close ties to the White House.

Amgen’s employees and political action committee have distributed nearly $5 million in contributions to political candidates and committees since 2007, including $67,750 to Mr. Baucus, the Finance Committee chairman, and $59,000 to Mr. Hatch, the committee’s ranking Republican. They gave an additional $73,000 to Mr. McConnell, some of it at a fund-raising event for him that it helped sponsor in December while the debate over the fiscal legislation was under way. More than $141,000 has also gone from Amgen employees to President Obama’s campaigns.

What distinguishes the company’s efforts in Washington is the diversity and intensity of its public policy campaigns. Amgen and its foundation have directed hundreds of thousands of dollars in charitable contributions to influential groups like the Congressional Black Caucus and to lesser-known groups like the Utah Families Foundation, which was founded by Mr. Hatch and brings the senator positive coverage in his state’s news media.

Amgen has sent large donations to Glacier PAC, sponsored by Mr. Baucus in Montana, and OrrinPAc, a political action committee controlled by Mr. Hatch in Utah.

And when Mr. Hatch faced a rare primary challenge last year, a nonprofit group calling itself Freedom Path sponsored advertisements in Utah that attacked his opponent, an effort that tax records released in November show was financed in large part by the Pharmaceutical Research and Manufacturers of America, a trade group that includes Amgen.

In some cases, the company’s former employees have found important posts inside the Capitol. They include Dan Todd, one of Mr. Hatch’s top Finance Committee staff members on health and Medicare policy, who worked as a health policy analyst for Amgen’s government affairs office from 2005 to 2009. Mr. Todd, who joined Mr. Hatch’s staff in 2011, was directly involved in negotiating the dialysis components of the fiscal bill, and he met with 'all the stakeholders,' Mr. Hatch’s spokeswoman said, not disputing when asked that this included Amgen lobbyists.

In addition, a NY Times editorial today pointed out that Mitch McConnell, the Senate Minority Leader, (Republican - Kentucky) who "exerted great influence over the fiscal negotiations and praised the Medicare provisions" presumably including the specific provision that helped Amgen, also has "political and financial ties to Amgen."  Furthermore, Senator McConnell's willingness to use taxpayer's money to pay Amgen more seemed to contradict his "public statements [which] usually emphasize the need to cut federal spending on entitlement programs, as they did in Lexington Friday," as reported by WEKU (the National Public Radio Station at Eastern Kentucky University ).  

Can We Reform Health Care in the Corporatist States of America?  

 In summary, Amgen seems to have leveraged its use of former legislative aides affiliated with both political parties as lobbyists, and its presumed influence over former employees who are currently legislative aides, that is, to people who have transited revolving doors in both directions, to influence policy in its corporate favor.  It has also leveraged its contributions directly to politicians, to political action committees (PACs), and to non-profit advocacy groups to influence policy in its direction for this purpose.  All this leverage apparently resulted in continuing government favoritism to a company the government had just convicted of a crime, and to a company whose actions likely led to sick and dead patients.  Furthermore, legislators who publicly deplore excess government spending and enlarging government deficits supported spending more taxpayer money to favor a particular company that they ought to have shunned. 


The New York Times editorial deplored this case first as

a disheartening example of how intense lobbying and financial contributions can distort the legislative process in Washington

and second as

a classic example of the power of special interests to shape legislation and shows how hard it may be to carry out the reforms needed to cut health care costs. 

But it was really much worse than that.   This case certainly shows the ongoing coziness between big health care organizations and government (this time, mainly legislative) leaders, facilitated by the apparently very common "revolving door" interchange of influential people between corporate management and government.  Note that this coziness has now become bipartisan.  However, this was not merely expensive favoritism.  It was hypocritical expensive favoritism that benefited a corporation that ought to have been shamed and shunned for behavior that did not merely cost the government money, but likely harmed patients, sometimes even fatally. 

President Theodore Roosevelt condemned malefactors of great wealth.  Our current political leaders in both parties seem to put their ties to corporate insiders who work for executives of great wealth ahead of any consideration of what might be good for patients, public health, or the citizenry at large.  

So the US now seems to be run by a soft, informal version of corporatism, the system in which government and big corporations overlap and jointly rule the people.  Since these days big corporations are run largely without accountability by increasingly rich executives, this ends up meaning government by the oligarchs, for the oligarchs, and of the oligarchs.  President Lincoln and President Theodore Roosevelt might be rolling in their graves.  

To meaningfully reform health care, it seems like we need to meaningfully reform our entire political system, and both make leaders of health care organizations accountable, and make government again of the people, by the people, and for the people. 

Amgen Settles, Pleads Guilty to Misbranding Aranesp

Now it's Amgen's turn to settle and plead.  Per the New York Times,

The biotechnology giant Amgen marketed its anemia drug Aranesp for unapproved uses even after the Food and Drug Administration explicitly ruled them out, federal prosecutors said on Tuesday.

 The federal charges were made public as Amgen pleaded guilty to illegally marketing the drug and agreed to pay $762 million in criminal penalties and settlements of whistle-blower lawsuits.

Amgen was 'pursuing profits at the risk of patient safety' Marshall L. Miller, acting United States attorney in Brooklyn, said in a telephone news briefing on Tuesday.

David J. Scott, Amgen’s general counsel, entered the guilty plea at the United States District Court in Brooklyn to a single misdemeanor count of misbranding the drug, Aranesp, meaning selling it for uses not approved by the F.D.A.

Amgen agreed to pay $136 million in criminal fines and forfeit $14 million, with about $612 million going to settle civil litigation. 

The article noted the key charge against Amgen,

 In court on Tuesday, prosecutors charged that Amgen had promoted the use of Aranesp to treat anemia in cancer patients who were not undergoing chemotherapy, even though the drug’s approval was only for patients receiving chemotherapy.

A subsequent study sponsored by Amgen showed that use of Aranesp by those nonchemotherapy cancer patients had actually increased the risk of death, and the off-label use diminished. 

Also,

 The federal charges also say Amgen promoted using larger but less frequent injection of Aranesp than stated in the label as a way of making the drug more attractive to doctors and patients than Procrit, a rival anemia drug from Johnson & Johnson. 

As is typical of such cases, the prosecutors could not figure out how to charge any individuals who might have authorized, directed, or implemented the bad behavior,

 Mr. Miller said that the evidence in the Amgen case was not sufficient to charge individuals. However, he said, Amgen agreed to sign a corporate integrity agreement that requires executives and board members to personally certify compliance with regulations. That would make it easier to prosecute individuals should violations occur again, he said. 

The Charges in Context

In some reports of the settlement, the issue appeared to be money.  For example, Pharmalot reported that after a whistle-blower filed suit against Amgen, "a subsequent investigation by the Justice Department found that these practices induced physicians to use Amgen medications unnecessarily when lower cost alternatives were available."

However, Amgen's practices could have had much worse effects than just removing money from the US Treasury.

Consider the context.  Only a few of the not very numerous articles in the media on this case noted that the key complaint was that Amgen was pushing use of Aranesp for patients with cancer, specifically those not receiving chemotherapy.   (Reuters made this explicit, for example, but not so the Los Angeles Times, or Bloomberg's initial coverage.)

 In fact, there has been concern about the adverse effects of Aranesp for patients with cancer for a while.  In 2007, Khuri noted in a commentary in the New England Journal of Medicine(1) that "concern about a detrimental effect of ESAs [erythropoiesis stimulating agents, a class of drugs of which Aranesp is a prominent member] in patients with cancer arose" after results of a small clinical trial of epoetin beta in patients with oral, pharyngeal or laryngeal cancer receiving radiation therapy showed worse survival in patients receiving that drug.  Subsequently, in 2008, a meta-analysis of multiple randomized clinical trials showed that patients with cancer receiving ESAs, including Aranesp, had an increased risk of venous thromboembolism (drug clots) and death.(2)  In 2009,  another meta-analysis showed that ESAs lead to decreased survival in patients with cancer.(3)

Recall, though, that Aranesp is meant to improve anemia.  It was not meant to cure cancer, or even put the disease into remission.  Its use therefore was mainly adjunctive.  Thus, it appears its benefits for cancer patients (improved anemia, and possibly decrease in such symptoms as fatigue) could not outweigh its harms (including hastening death).

So the issue was not merely that Amgen was promoting a drug in an instance in which its use had not been improved by the US Food and Drug Administration (FDA), or that such use of the drug was unnecessarily costly.  The issue was that Amgen was promoting a drug that had no proven benefits for the patients, but could hasten their death.  It appears that Amgen was pursuing profits at the expense of lives.

Summary

So it is particularly disturbing that no individual apparently will be held responsible for the promotion of Aranesp for patients for whom its use might prove fatal.  The assurance that the proposed corporate integrity agreement will prevent further abuse is notably hollow.  I can recall no recent case in which the government authorities have used such an agreement to pursue charges against individuals.  The likely deterrent effect of the monetary settlement will likely be minimal.  $762 million may look just like a cost of doing business when the drug in question was bringing in over $2 billion a year (per the Los Angeles Times). 

So the legal settlements march on and on.  The government continues to extract fines from health care organizations whose actions endanger not only the federal budget, but patients' well being and lives, without even trying to hold individuals responsible.  The impunity of health care corporate executives thus also continues.

As we have said far too many times, 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.

References

1.  Khuri FR. Weighing the hazards of erythropoiesis stimulation in patients with cancer.  N Engl J Med 2007; 356: 2445-2447.  Link here.

2.  Bennett CI, Silver SM, Djulbegovic B et al.  Venous thromboembolism and mortality associated with recombinant erythropoietin and darbepoetin administration for the treatment of cancer-associated anemia.  JAMA 2008; 299: 914-924.  Link here.

3.  Bohlius J, Schmidlin K, Brillant C et al.  Recombinant human eryhtropoiesis-stimulating agents and mortality in patients with cancer: a meta-analysis of randomised trials.  Lancet 2009; 373: 1532-1542.  Link here.

Back to the Future - Another Medical Device Company Accused of Hiding ICD Defects

Suppression of data about defects in and failures of implantable cardiac defibrillators (ICDs) was one of the big issues we featured in the early days of Health Care Renewal (2005-06). 

At that time, Guidant, later acquired by Boston Scientific, was accused of hiding data that certain of its defibrillator models failed, possibly leading to preventable patient deaths (see this post and follow links backward).  Boston Scientific, which acquired Guidant, settled a civil lawsuit and was put on probation in 2011 after it pleaded guilty to misdemeanor charges of failing to file required reports with the US Food and Drug Administration (see post here).   Similarly, in 2010, Medtronic settled multiple patients' lawsuits charging that it knowingly marketed a faulty ICD (see post here).

St Jude and the Obscure Riata Data

Now in 2012, A Wall Street Journal article suggested that St Jude Medical Inc hid problems with its Riata implanted cardiac defibrillator (ICD) for years.   

In December, 2010, St Jude Medical Inc issued a warning letter to doctors: Wires inside Riata defibrillator leads—cables that connect the heart to implantable defibrillators—were sometimes breaking through their insulation from the inside out.


The problem, which ultimately led to a recall last year, could cause defibrillators to send unnecessary jolts to the heart or fail to deliver lifesaving shocks to return chaotic heart rhythms back to normal. The company said it had identified dozens of cases with visible signs of the problem, and pulled Riata from the market.

For many doctors, this was the first notice of a problem with Riata.

But before that 2010 warning, physicians including Alan Cheng, director of Johns Hopkins Medicine's arrhythmia service; Samir Saba, chief of electrophysiology at the University of Pittsburgh Medical Center; and Ernest Lau at the Royal Victoria Hospital in Belfast, Ireland, say they had encountered this so-called "inside-out abrasion" in their own practices between 2006 and 2009. When these doctors brought the incidents to the attention of St. Jude they say they were told by company officials and field representatives that the incidents were isolated. The malfunctions described by the doctors didn't result in deaths.

St. Jude had been tracking the problem for several years, according to company documents collected by the Food and Drug Administration and reviewed by The Wall Street Journal. Cases involving the so-called inside-out abrasion date to at least October 2005, the documents show. Inside-out abrasion became a focus of an internal St. Jude audit, which examined multiple cases of the failure before April 2008.

The Journal article noted that more transparency about device failures might allow physicians to spot problems earlier and prevent harm to patients.

more than a dozen physicians and device-safety experts say that if St. Jude had acknowledged the inside-out failure earlier, physicians might have identified the scope of the problem sooner.


In some cases, doctors concede that they, too, believed the failures were isolated and therefore didn't act quickly to report problems to St. Jude or the FDA, which may have made it harder to spot the growing trend of failures. The leads were implanted in more than 13,000 patients since July 2008.

'Every time you have a failed lead, you assume it's an isolated event, but, you start to string together isolated events, and then you have a recall,' said Dr. Saba.

Summary

So, for Health Care Renewal, this is a straightforward case, at least so far.  Yet another health care organization, this time, a medical device company, failed to reveal data that might have reflected unfavorably on one of its products, and hence lead to decreases in short-term revenue.  However, by suppressing the information, the company may have allowed doctors to keep implanting a potentially faulty device, and exposed patients to risk, possibly of fatality. 

We have discussed many at least somewhat parallel cases of suppression of research (here), and many cases of other kinds of deception by health care organizations (here).  Yet these cases continue to occur, physicians and other health care professionals continue to be fooled by secrecy and data suppression, and patients continue to be harmed by drugs, devices, or other interventions made by people who knew, or ought to have known that they were more dangerous than they appeared to be. 

One problem may be that the people with the most influence on medical practice and health policy continue to cheer lead for the veracity of information about drugs, devices, and other health care interventions supplied by the people who most stand to gain from selling same.  A few weeks ago, the editor of the august New England Journal of Medicine, Dr Jeffrey M Drazen MD, scoffed at physicians' skepticism of pharmaceutical industry funded clinical research, claiming that there were only "a few examples of industry misuse of publications...." [Drazen JM. Believe the data. N Engl J Med 2012;  367:1152-1153.  Link here.]  In doing so, Dr Drazen seemed to ignore all the stories about suppression of medical research (some of which we have discussed here), manipulation of medical research (some discussed here), and deception (some discussed here) and secrecy (some discussed here) practiced by large health care organizations, including but not limited to drug, device, biotechnology, and health care information technology companies.

Instead, the possibility that St Jude kept hidden data about the failings of one of its ICD models reminds us how skeptical we ought to be about the information provided, or not provided by those with vested interests in selling health care goods or services.  Physicians, health care professionals, those interested in health policy, and the public at large need to collectively exert pressure on the leaders of health care organizations to promote greater transparency, especially about data reflecting on benefits and harms of health care goods and services.  . 

More Hospices Pretending Patients are Terminally Ill

In the US, we have been engaged in an experiment involving handing over an ever increasing proportion of direct patient care to for-profit corporations, and non-profit organizations that act increasingly like for-profit corporations (as opposed to mission oriented non-profit organizations or individual health care professionals).  The results have been particularly striking for the care of one of the most vulnerable patient groups, the chronically ill. 

Over the last months, a number of stories about the hospices enrolling patients who are not terminally ill have accumulated.  Keep in mind that hospices are supposed to provide compassionate palliative care to the terminally ill.  While they are supposed to make such patients as comfortable and free of pain as is possible, they are not supposed to otherwise aggressively treat other medical problems (based on the assumption that such treatment would benefit dying patients.)  However, such treatments could benefit, or even save the life of patients who are not dying.  (See posts here and here.)

Hospice of the Bluegrass

Back in March, there was very brief report on Kentucky.com that the non-profit Hospice of the Bluegrass "agreed to pay the federal government $685,000 for submitting claims to Medicare to receive reimbursements for services it provided patients who did not qualify for Medicare services,..."  Note that the main requirement for Medicare payments for hospice services is that the patients receiving these services have no more than six months of survival expected.

However, then in June a detailed investigative report also on Kentucky.com recounted numerous conflicts of interest affecting that hospice's board,

The non-profit Hospice of the Bluegrass has spent more than $1.82 million since 2005 on business deals with several of its board members and the spouses of its executives.

In particular,

On its tax returns from 2005 to 2010, Hospice reported paying at least:

■ $540,178 for political lobbying and legal representation to the law firm of McBrayer, McGinnis, Leslie & Kirkland. One of the firm's partners and co-owners, Lisa English Hinkle, was a Hospice board member and a former board chairwoman. Hinkle rotated off the board at the end of 2011. She was preceded on the board by another partner in the firm, James Frazier.

■ $837,999 for insurance to the firm of Powell-Walton-Milward, whose managing director, John Milward, is a Hospice board member. His brother Greg Milward, who also works at the insurance firm, previously was on the Hospice board and was board chairman in 2007.

■ $392,042 for printing to Pat Byrne Printing, owned by the husband of Deede Byrne, Hospice's chief clinical officer.

■ $22,506 for heating and air conditioning to Gary Merckle, husband of Carol Ruggles, Hospice's chief financial officer.

■ $28,577 for advertising to the Lexington Herald-Leader while then-editor Marilyn Thompson sat on the board.

The article also noted that the hospice CEO seems very well-paid given the context,

CEO Gretchen Marcum Brown, whose 2010 compensation was $238,650 in base pay, $10,570 in bonus pay and $84,978 in other reportable compensation. The other compensation included Hospice's payment into Brown's deferred-compensation account, from which she can draw in the future.

Hospice also paid for a membership in Brown's name at The Club at Spindletop Hall, which offers swimming, tennis and dining.

Such a pay package may provide incentives to maximize revenue by maximizing enrollment, regardless of whether enrolled patients really should be in hospice.
Hospice Family Care

As reported by the Phoenix Business Journal in May,

Hospice Family Care Inc. has agreed to pay the federal government $3.7 million to settle civil allegations that the Mesa-based company violated the False Claims Act by submitting false bills to Medicare.

Also,

The U.S. Attorney’s Office had alleged that Hospice Family Care submitted claims for payment to Medicare for patients who were either completely or partially ineligible for hospice,...

So this settlement is partly for charges that the hospice enrolled patients who were not terminally ill.

Note that in this particular case, the government made an effort to punish the owners of the company, who found a way to evade such punishment:

However, on the day the U.S. Attorney’s Office announced that settlement, Hospice Family Care’s owners closed on a deal to sell the company.

So,

Neither the company’s attorney, Frederick Petti, nor government officials would disclose the name of the buyer.

“Unfortunately, I can’t provide that information because it’s not in the public domain,” said Assistant U.S. Attorney Bill Solomon.

The company’s co-owners, Nancy Smith and Nancy Turner, deferred all comments to Petti.

'Believe me, if my clients weren’t in the process of selling this company, we would have fought this to the bitter end,' Petti said. 'We would have prevailed. This is a business decision.'

He emphasized that the settlement agreement was not an admission of guilt.

Smith and Turner agreed to be excluded from Medicare and Medicaid and all other federal health care programs for seven years, effective immediately. However, Petti said the company’s new owners will not be affected by that settlement agreement and will be free to accept reimbursement from government payers.

Such maneuvers obviously reduce any deterrent effect of settlements like this on bad behavior, and particularly on the behavior of enrolling patients who are not terminally ill in hospice.
Harden Healthcare

Then in June the Wichita (Kansas) Eagle reported,

A Kansas hospice care provider and its Texas-based parent company will pay $6.1 million to resolve allegations that they submitted false claims to the federal Medicare program. The case arose from a whistleblower lawsuit filed by a nurse more than six years ago, the U.S. Justice Department said Thursday.

Justice officials said in a news release that they hope the settlement with Wichita-based Hospice Care of Kansas LLC and Fort Worth-based Voyager HospiceCare Inc. will serve as a warning to other hospice providers.

Prosecutors alleged the companies submitted false claims to the federal health care program for the elderly and disabled between 2004 and 2008 for patients who weren’t expected to die in less than six months, a requirement for the benefits in question.

Note that this report makes very explicit the allegation that the hospice was enrolling patients who were not terminally ill. Further note that while the beginning of the report makes it appear that the company that owns the hospice is regional, it actually is larger

The agreement includes no admission or determination of wrongdoing, Harden Healthcare, the owner of Voyager HospiceCare and Hospice of Kansas, said in a statement.

Harden Healthcare, according to the Austin (Texas) Business Journal, is the largest private employer in that city, with over 3800 employees and revenues of over $810 million.

Hospice of the Comforter

The Orlando Sentinel reported in late August,

The federal government is taking over a whistleblower lawsuit against the Altamonte Springs-based Hospice of the Comforter — a suit that alleges the nonprofit routinely over-billed Medicare for patients who didn't qualify as terminally ill, sometimes keeping them in hospice care for as long as five years.

These are allegations of course, but it turns out that both sides of the action agree on certain facts of interest,

Both sides agree that Hospice of the Comforter officials discharged a large number of Medicare patients after the federal government began scrutinizing the ballooning number of hospice patients nationwide.

In fact, Stone said, the initial sampling by government auditors showed Hospice of the Comforter had an error rate of 18 percent, just slightly over the 15-percent rate the government allowed and therefore triggering a second, more intense review.

That phase, in January 2010, revealed a troubling 77 percent denial rate, Stone said — meaning that Medicare officials believed the hospice was improperly billing the government in 77 percent of the cases it reviewed. According to the government, hospice care should be limited to patients certified by a hospice physician as having six months or less to live.

Meanwhile, though, an internal hospice committee did its own review of patients, discharging more than 133 of them and noting they were, 'no longer terminally ill,' the lawsuit states. Some had been designated 'FOB' for 'Friends of Bob [Wilson, the CEO of the hopsice],' and Wilson later insisted some be readmitted and their care billed to Medicare, the lawsuit says.

Let me just note that for someone truly terminally ill, the way to become no longer terminally ill is to die.

A column in the Orlando Sentinel suggested that the hospice CEO had a strong personal incentive to enroll patients who were not terminally ill,

there are facts not in dispute — such as Wilson's financial incentive to keep his patient counts high: bonuses of $50,000 every three months on top of his base salary of $120,000.

Again, maintaining lucrative compensation could be an inducement for hospice executives to sanction enrollment of patients who were not really terminally ill.
Summary

Hospices arose to provide compassionate care for among the most vulnerable of patients, the terminally ill.  Hospices began as mission oriented non-profit organizations, often affiliated with hospitals or religious groups.  However, the generous payments for hospice care provided by Medicare and commercial insurance, and the increasingly laissez faire supposedly "market-based" health care context lead to the growth of for-profit hospices, and the emulation of their management by ostensibly non-profit organizations.  In the Orlando Sentinel, Scott Maxwell used the example of the Hospice of the Comforter to assert

you've been duped when it comes to waste, fraud and abuse in America's health-care system.

Politicians love to rant about it. They often do so when explaining why they're about to cut your benefits.

They're right that fraud happens. But the individual scammers they portray as the problem are nothing compared to the systemic white-collar fraud perpetrated by corporations — and, yes, faith-based nonprofits.

This is America's dirty little health-care secret.

We all know health-care costs are soaring. But we have done little to address the organized fleecing — often because the fleecers are either campaign donors or nonprofits wrapped in a cloak of altruism.

In this country, you can go to prison for stealing a TV. But if companies get caught stealing millions from taxpayers, the fines are simply viewed as the cost of doing business.

We have made similar assertions about systemic misbehavior in the US health care system, and how failure of local through national government to impose any penalties on the individuals who authorize, direct or implement bad behavior just allow the problem to get worse. However, the consequences of increasing hospice enrollment (hence short-term revenue, and hence the compensation of top hospice executives) by enrolling patients who are not terminally ill go well beyond just increasing health care costs. As we have said before, enrolling patients into hospice who are not already really doomed to die soon denies them the possibility of treatment for new acute illnesses and worsening of chronic illnesses, which then could hasten their deaths. (Pretending those patients were terminally ill could have fooled their relatives into thinking those deaths were inevitable, instead of results of bad practice and potentially fraud.)

So the pattern of fraud now increasingly documented to be taking place in for-profit and even non-profit hospices is particularly reprehensible. It preys on vulnerable patients, and may cost some patients their lives who otherwise might have lived for a long time. This is a prime example of what goes wrong when our main health care policy seems to be based on letting the good times roll.

I hope that the realization that enrollment of patients who are not terminally ill into hospices can result in their untimely death may lead to some reconsideration of our experiment in lightly regulated, "market based" health care. Those who directly care for patients ought to be motivated by professional values, not short-term revenue.

Who Really Makes Brand-Name Pharmaceuticals?

A striking illustration of the hazards to patients' and the public's health from health care organizational leaders using fashionable management techniques to maximize short-term revenue appeared in Reuters. 

Background: The Contaminated Heparin from China

The particular issue got public notice after US patients started to get sick and die after being infused with heparin, the common anti-coagulant drug. As we have discussed repeatedly starting in 2008 (look here, and see the summary at the end of the post), Baxter International was selling contaminated heparin under its label which was made in unregulated workshops in China, and then transmitted through a complex chain of Chinese and US companies.  What helped to further obscure the problem was what Baxter was buying was called the active pharmaceutical ingredient (API), which actualy means it was buying the active drug from poorly documented foreign sources.  In other words, it had entirely outsourced the manufacturing of a drug it sold as if it had been made by Baxter in the US.

Continued Outsourcing to Questionable Drug Manufacturers

Reuters reported on a new investigation of outsourcing of drug manufacturing to China.  The main point was:

Four years ago, Beijing promised to clean up its act following the deaths of at least 149 Americans who received contaminated Chinese supplies of the blood-thinner heparin. But an examination by Reuters has found that unregulated Chinese chemical companies making active pharmaceutical ingredients (API) are still selling their products on the open market with few or no checks.

Interviews with more than a dozen API producers and brokers indicate drug ingredients are entering the global supply chain after being made with no oversight from China's State Food and Drug Administration (SFDA), and with no Good Manufacturing Practice (GMP) certification, an internationally recognized standard of quality assurance.

'There is falsification of APIs going on, we know it,' said Lembit Rago, coordinator for Quality Assurance and Safety in Medicines with the World Health Organisation (WHO).

In fact, the article made the point that the majority of drugs sold worldwide are the product of outsourced, often unregulated, and potentially contaminated and adulterated manufacturing:

'Illegal ingredients in bulk are a big problem, but nobody talks about it,' said Guy Villax, chief executive of Hovione, an API supplier based in Portugal with factories there and in China, the United States and Ireland.

About 70 to 80 percent of all active drug ingredients - the biologically active component in medicines - originate in China and India, estimate industry experts, with China accounting for the lion's share. Its export market in these products is worth $22 billion in annual sales, according to the China Chamber of Commerce for Import and Export of Medicines and Health Products.

'If China for some reason decided to stop exporting APIs, within three months all our pharmacies would be empty,' said Villax.

How Dodgy Manufacturers Continue to Operate

Apparently, a particular problem in China is that APIs, that is, the particular drugs in question, can be made by chemical as opposed to officially designated "pharmaceutical" companies, and these chemical companies are not regulated,

A key regulatory weakness in China is the distinction between pharmaceutical and chemical companies. While the former are regulated by the SFDA, the latter, making everything from sweeteners to solvents, are not. Yet many chemical companies also churn out drug ingredients, exploiting a loophole by describing the products as chemicals, which they are, rather than the more specific designation of APIs.

For example, the article recounted how an unregulated chemical company was apparently a source for a well-known branded pharmaceutical sold by two big pharmaceutical companies headquartered in developed countries,

[A]company, Jinan Hongfangde Pharmatech (JHP), of Jinan city in Shandong province, had a product list showing at least five patented products for sale. They included tiotropium bromide, a blockbuster lung drug co-promoted by Boehringer-Ingelheim and Pfizer Inc and sold under the name Spiriva,...

Both Boehringer-Ingelheim and Pfizer spokespeople claimed that they only bought drugs from known sources, but then it would be pointless for Jinan Hongfangde Pharmatech to manufacture tiotropium bromide.

The Use of Brokers

More questions were raised by the pharmaceutical company's apparently common practice of buying drugs through brokers,

The rise of the Internet has facilitated exports of drug ingredients. An online search brings up websites offering hundreds of Chinese API sellers. Those not GMP-certified or SFDA-registered are not necessarily substandard, but buyers lack independent quality assurance.

The pervasive presence of brokers in the supply line is another risk. Pharmaceutical companies looking to source APIs in China typically hire middlemen to help them navigate the language, red tape and protocol. That system helps Chinese companies making substandard APIs avoid detection.

The reason corporate executives choose to buy drugs in China rather than having their companies manufacture them themselves seems to be to reduce costs. A post on the In-Pharma blog quoted Lembit Rago, the same WHO official quoted by Reuters, thus,

There are Chinese manufacturers supplying APIs of high quality to multinational companies, but there are also companies producing APIs of poor or not defined quality.

So,

As long as there are customers for substandard APIs they will be produced and sold.

The cheapest Chinese drugs, of course, come from the most questionable manufacturers, and that may not be apparent to companies who use brokers to facilitate purchases.

'Any number of foreign pharmaceutical companies go no further than looking for API suppliers at CPhI (an international pharmaceutical fair) based only on price,' [manaing director of Samsara Biopharma Consulting Robert] Walsh said.

Reuters spoke to brokers who said an API made by an unregulated chemical company would cost less than one from a company that had a GMP certificate.

'Different (API) grades have different prices. Sometimes we accept an order sheet and we happen to find a factory that can do it cheaper than our factory, we will outsource to them and make a bigger margin,' said one broker based in China who sources for a South African outsourcing firm.

In China there are few legal repercussions for broker firms who relabel or misrepresent products, and tracing counterfeit and substandard APIs is extremely difficult.

'There are a lot of brokers who are relabeling (APIs) which means you can't trace where the API comes from and that adds to the risk,' said the WHO's quality assurance expert Rago.

Andre, the Belgian drug detective, estimates he has uncovered fraud or misrepresentations in as many as 25 percent of cases where he has been hired to audit factories all over China. 'If you can substitute an API that is expensive to make and manufactured at a high level with something that costs much less, then that can happen,' Andre said. 'It's impossible to give an exact number, but it's not rare. It's a minority, but not tiny minority.'

Use of Substandard Raw Materials

Meanwhile, a post on PharmaLot suggested that the supposedly regulated Chinese "pharmaceutical" companies may implement questionable manufacturing practices,

A subsidiary of the Joincare Pharmaceutical Group reportedly used reprocessed cooking oil – otherwise known as ‘gutter’ oil – to make a widely used antibiotic in China. If the term gutter oil is unfamiliar, this refers to reprocessed oil made from kitchen waste dredged from gutters behind restaurants. The State Food and Drug Administration is now investigating the charge after media reports over the past several days, China Daily reports.

Why might gutter oil be purchased to produce antibiotics? The oil is cheaper than the more expensive soybean oil used to make 7-aminocephalosporinic acid, or 7-ACA, a chemical for produce cephalosporins. Joincare produces 25 percent of the total amount of the chemical, although up to a dozen other drugmakers may have purchased gutter oil from various suppliers, according to various Chinese media reports. For its part, Joincare reportedly denied using gutter oil.

The companies reportedly bought the recycled cooking oil from a company called Huikang Grease Co., which is facing prosecution over its alleged processing and selling of thousands of tons of gutter oil in 2010 and 2011. The Shanghai Daily reported that Huikang received around $22.5 million for roughly 14,700 tons of gutter oil sold to Jiaozuo Joincare Biological Product, a unit of Joincare.

Summary

There is increasing evidence that a substantial proportion, probably the majority of drugs sold by big pharmaceutical companies based in developed countries were actually made by often poorly regulated firms based elsewhere, often China or India. To put it more directly, most so called pharmaceutical companies in the US and other developed countries have outsourced the actual manufacturing of drugs. Thus, most companies that appear to be pharmaceutical manufacturing companies are really just pharmaceutical marketing and development companies. (And not so much the latter, look here:  Light DW, Lexchin JR. Pharmaceutical R&D; what do we get for all that money? Brit Med J 2012; 345: 22-25.  Link here.) Pharmaceutical companies appear to be abandoning their core essence, but are content to market drugs  under their logos without telling the patients who take them the real source of these products.  This would appear to be a big scandal, but one that stays curiously anechoic.

I have yet to see any discussion with pharmaceutical executives about why their companies hardly make drugs anymore. In the absence of such discussion, I can only speculate that most likely, this is first a product of financialization. Drug company executives, like most organizational leaders, have fallen under the spell that says their only goal should be to increase short-term revenues. It may be cheaper to buy drugs from perhaps dodgy outsourced suppliers rather than manufacturing them them themselves. Continuing stories like those above, and that of the contaminated Chinese heparin suggest that these outsourced drugs are cheap for a reason. It appears that to save money short-term, pharmaceutical executives may be abandoning their most central mission, to provide pure, unadulterated drugs.

The continuing story of outsourced pharmaceutical manufacturing provides yet more evidence that current management dogma may be literally toxic. Once again, I suggest that true health care reform requires leadership of health care organization who put patients' and the public's health ahead of short-term revenue (and the personal enrichment that may result).

It is likely that a number of policy changes will be needed to reduce the threats posed by contaminated or adulterated outsourced pharmaceuticals.  There is one simple step that ought to be taken quickly to at least make the problem more transparent.  In the US, most manufactured products have a label disclosing the country of origin.  In parallel with that, all pharmaceutical containers, and all pharmaceutical labels and marketing materials ought to disclose the country in which the active pharmaceutical ingredient was manufactured, and the name and location of the company responsible for that manufacture. 


Appendix - Heparin Case Summary

- We have posted several times, recently here about the tragic case of suddenly allergenic heparin. Although heparin, an intravenous biologic anti-coagulant, has been in use for over 70 years, serious allergic reactions to it had heretofore been rare. Starting late in 2007, hundreds of such reactions, and 21 deaths were reported in the US after intravenous heparin infusions.All the heparin related to these events in the US was made by Baxter International.

- We then learned that although the heparin carried the Baxter label, it was not really made by Baxter. The company had outsourced production of the active ingredient to a long, and ultimately mysterious supply chain. Baxter got the active ingredient from a US company, Scientific Protein Laboratories LLC, which in turn obtained it from a factory in China operated by Changzhou SPL, which in turn was owned by Scientific Protein Laboratories and by Changzhou Techpool Pharmaceutical Co. Changzhou SPL, in turn, got it from several consolidators or wholesalers, who in turn got it from numerous small, unidentified "workshops," which seemed to produce the product in often primitive and unsanitary conditions. None of the stops in the Chinese supply chain had apparently been inspected by the US Food and Drug Administration nor its Chinese counterpart. (See posts here and here.)

- We found out that the Baxter International labelled heparin was contaminated with over-sulfated chondroitin sulfate, a substance not found in nature, but which mimics heparin according to the simple laboratory tests used in the Chinese facilities to check incoming heparin. (See post here.) Further testing revealed that the contamination seemed to have taken place in China prior to the provision of the heparin to Changzhou SPL. (See post here.) It is not clear whether Baxter International or Scientific Protein Laboratories had inspected most of the steps in the supply chain, or even knew what went on there.

- The Baxter and Scientific Protein Laboratories CEOs did not seem aware of where they got the heparin on which the Baxter International label was eventually affixed. But one report in the New York Times alleged that Scientific Protein Laboratories would not pay enough for heparin to satisfy any sources other than the small "workshops."

- Leaders of all organizations involved, Baxter International, Scientific Protein Laboratories, Changzhou SPL, the Chinese government, and the US Food and Drug Administration, and the US Congress assigned blame to each other, but none took individual or organizational responsibility. (See post here.)  Note that SPL was recently bought out and taken private, making its current leadership even less transparent (see post here).  A 2010 inspection of an SPL facility by the FDA revealed ongoing manufacturing problems (see post here).

- Researchers (who turned out to have financial ties to a company which is developing an anti-coagulant drug that could compete with the heparin made by Baxter International) investigated the biological mechanisms by which the contamination of the heparin lead to adverse effects, but no one investigated further how the contamination occurred, or who was responsible. (See post here.)

- Hundreds of lawsuits against Baxter have now been filed, so far without resolution. (See post here.)  Efforts to make documents to be used in these cases public so far have not succeeded (see post here).

- A government report which attracted little attention warned of the dangers of pharmaceutical ingredients made in China and subject to virtually no oversight. (See post here.)

-  Despite requests from the US, the Chinese government did not investigate the production of the heparin that lead to the deaths (see post here.)

-  In February, 2011, a congressional investigation of the case was announced, but results are so far unavailable (see post here.)

-  In June, 2011, a jury returned the first verdict in a civil case about the contaminated heparin, awarding money from Baxter International and Scientific Protein Laboratories to the estate of a man who apparently died due to tainted heparin (see post here).

Another Story of Unaccountable Leadership from UC-Davis: "World Famous" Neurosurgeon Banned from Research, but Still Department Chair

The University of California - Davis just keeps supplying us with lessons about problems with leadership and governance in major health care organizations.

Our latest example comes from a story in the Sacramento (CA) Bee.

A Bizarre Series of Surgical Experiments

It started with two neurosurgeons who embarked on an extremely unorthodox treatment program,

Documents show the surgeons got the consent of three terminally ill patients with malignant brain tumors to introduce bacteria into their open head wounds, under the theory that postoperative infections might prolong their lives. Two of the patients developed sepsis and died, the university later determined.

First,

In 2008, the doctors proposed treating a glioblastoma patient with bacteria applied to an open wound to 'attack the tumor,' then later withholding antibiotics and letting the bacteria do its work.

The FDA responded that animal studies would have to be done before any human research could be considered. Apparently the surgeons intended to do some animal research, but what they did, and what its results were remain unclear. Nevertheless,

Between October 2010 and March 2011, the physicians went forward with three procedures on humans with malignant brain tumors, surgically introducing probiotics into their open head wounds.

One surgeon did get

IRB permission to move forward on Patient No. 1 with a 'one-time procedure' that was 'not associated with any research aim,' the letter states.

University documents show that the physicians believed they had been given the go-ahead for all three surgeries, but officials later determined that they had been misinformed or were misunderstood by the doctors.

No patient lived very long. Two developed sepsis before they died. After hearing that the surgeons were then planning to do the procedure on five more patients,

The university threw on the brakes.

On March 17, 2011, the IRB director ordered the doctors to immediately stop their probiotic treatments, according to university documents.

I should point out that deliberately introducing bacteria into an otherwise sterile surgical site is a very radical and seemingly periolous step. Furthermore, a blog post in Nature News suggests that the reasoning used by the surgeons to support this approach was based on extremely weak evidence,

researchers at the Catholic University of Rome examined the records of 197 patients treated for glioblastoma between 2001 and 2008, of which ten developed pathogenic infections after surgery. Those patients had a median survival rate of 30 months, whereas patients who did not become infected had a median survival rate of 16 months. However, the authors concluded that the association was 'not definitive'. [De Bonis, P. et al. Neurosurgery 69, 864–868 (2011). Link here. ]

A 2009 report considered 382 patients with malignant brain cancer, 18 of whom developed infections. Infected patients lived longer on average, but the difference was not statistically significant. What’s more, the researchers reasoned that infection may correlate with longer survival not because infection prolongs survival but because patients who live longer are more likely to develop infections. [Bohman, L. E. et al. Neurosurgery 64, 828–834 (2009). Link here. ]

The University Investigation

Then,

The internal investigation began.

Six months later, the university concluded its probe – ordering the doctors to halt all human research activity 'except as necessary to protect the safety and welfare of research participants.'

In the case of Patient No. 1, the investigation found, ... [one surgeon] had made an 'incorrect statement' about restrictions on the bacteria's use, leading IRB staff to incorrectly conclude that such review was not necessary, Lewin told the FDA.

As for Patients 2 and 3, the university found that treating them with an 'unapproved biologic' amounted to human-subjects research – and thus required prior review and approval.

The junior neurosurgeon defended their conduct by claiming

We believed that this was innovative treatment, not research, and that IRB approval was not needed

The senior surgeon asserted that he

believed the FDA gave its permission early on, if the doctors thought the treatment was 'beneficial to the patients.' He described the research ban as an "overreaction" by the university.

'And I understand it,' he said. There are people who blatantly break the rules that endanger all of their research programs. We certainly didn't blatantly trample any rules.'

However,

A renowned U.S. bioethicist, describing the alleged violations as 'a major penalty,' said the university's IRB was right to intervene – and quickly.

Arthur Caplan, director of medical ethics at New York University's Langone Medical Center, said that desperate people are especially vulnerable and need added protections.

'If you're dying, you're kind of like reaching out to anything that anybody throws in front of you,' said Caplan

Furthermore, per a Sacramento Bee follow-up article, Elizabeth Woeckner, founder and director of Citizens for Responsible Care and Research, or CIRCARE, said the surgeons' "experiment" was

the worst thing I've seen in my 12 years with CIRCARE

An Overreaction, or an Under reaction?

So far, this story seems different from many of those discussed on Health Care Renewal. The questionable conduct it describes, after all, appears to have resulted in serious negative consequences. Furthermore, it seems to have been conduct by two loose cannons, rather than to be a sign of systemic problems with leadership or governance. However, there is more to the story.

First, the senior surgeon held a substantial leadership position at the time the events in question occurred. He is

[Dr J Paul] Muizelaar, 65, who has been a department chairman at the School of Medicine since 1997

He is pretty well paid, earning

more than $800,000 a year as chairman of the department of neurological surgery

In fact, a companion article in the Sacremento Bee noted,

In 2010 – the same year Dr. J. Paul Muizelaar first performed an experimental treatment on a dying brain cancer patient at UC Davis Medical Center – the neurosurgeon made more money than 99.9 percent of all employees in the University of California system.

With a total compensation package of $801,841 in 2010, he was the 35th highest earner, behind 27 other physicians, four athletic coaches and three executives, according to the most recent UC salary data.

More importantly, even though the university's internal investigation was done in the fall of 2011, and at that time Dr Muizelaar was immediately banned from human research, he did not lose his leadership position. Instead, according to the first Sacramento Bee article,

Despite the disciplinary action imposed last fall, Muizelaar was honored this spring with an additional academic role at UC Davis. He was named the first holder of the Julian R. Youmans endowed chair in the department of neurological surgery, according to an April 19 news release from the UCD School of Medicine.

It is not the first time he has received special treatment. The companion article noted that Dr Muizelaar was able to attain and keep his position even though he never obtained a state medical license,

Muizelaar, who previously was a professor of neurosurgery at Wayne State University in Detroit, was hired directly into the top post at UC Davis – even though he lacked a California medical license.

A native of the Netherlands, where he was educated, Muizelaar was brought into the UC Davis School of Medicine under a 'special faculty permit' issued by the Medical Board of California.

The provisional permit allows a foreign doctor who has been recognized as 'academically eminent' in a specific field to practice at a sponsoring California medical school and its formally affiliated hospitals.

Currently, only 15 doctors at six of California's eight medical schools eligible to receive them hold special faculty permits.

When asked why he never bothered to obtain a California medical license

Muizelaar said he has not gotten a California license because he already works 80 to 100 hours a week and the step is 'not necessary.'

'I'll be frank with you, I'm world famous, so they gave me the license to practice here,' he said. 'I can go sit for the exams, but why would I do that?'

Although Dr Muizelaar continued as department chair and in his endowed professorship for approximately 10 months after he was banned from human research, things happened fast after the stories appeared in the local media. Again according to the Sacramento Bee, three days later, the CEO of the UC-Davis campus, Chancellor Linda P B Katehi

ordered a top campus official to conduct a 'comprehensive review' of accusations that two university neurosurgeons conducted unauthorized research on dying brain cancer patients, as reported in Sunday's Bee.

Ralph J. Hexter, the provost and executive vice chancellor, will lead another investigation into the actions of Dr. J. Paul Muizelaar, the longtime chairman of the department of neurological surgery, and his colleague, Dr. Rudolph J. Schrot, according to a university spokesman.

A day after that, the Sacramento Bee reported,

A UC Davis neurosurgeon accused of performing unauthorized research on humans has 'temporarily relinquished' his position as chairman of the department of neurological surgery, the university confirmed Friday.

However, do not expect to hear much more about this,

A spokeswoman for UC Davis Health System said 'there will be no further system statement on this or other personnel actions.'

Summary: A Culture of Unaccountable Leadership

To sum up, the highly paid chair of neurosurgery at UC-Davis performed bizarre, and potentially dangerous experiments on three patients with terminal cancer, all of whom died, without obtaining permission from the institutional review board. After internal investigation, the chair was banned from performing further human research, but kept his well-paid position, and was given a new endowed professorship.  He only was forced to temporarily step down about nine months later, after reports of the affair appeared in the media. 

So, a la George Orwelll's Animal Farm, doctors may think themselves as equals, but doctors who are health care leaders are more equal than others. After conduct that would likely lead to the dismissal of more ordinary doctors, those who are also in high management positions may just collect more honors.  Then again, Dr Muizelaar considered himself to be "world famous," so why should be be expected to play by the rules under which the common folk labor?

This story also suggests a more general culture of unaccountable leadership at University of California - Davis. Note that the Chancellor who let the neurosurgeon continue in his leadership role despite his strange research conduct and the consequent research ban has appeared in Health Care Renewal before. Specifically, she attained some notoriety last year after campus police who report to her pepper-sprayed unarmed and apparently non-violent students at her own institution who were protesting as part of the "occupy" movement at that time. (See post here.) A later investigation of the incident blamed Chancellor Katehi and her subordinates for "poor decision making," and some editorialists concluded that she showed "incompetence," or worse. Yet Chancellor Katehi retains her top leadership position.

We have discussed how leaders of other health care organizations are rarely held accountable for bad behavior by their organizations. At times, this bad behavior has been criminal, and the leaders' unaccountability has seemed more like impunity.  This seems to parallel a larger phenomenon in society.  Increasingly the wealthy and powerful seem unrestricted by the rules that us common folk are expected to follow.  As Charles Fergusson famously noted on receiving his Oscar,

three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail and that’s wrong

Health care, particularly in the US, continues to be increasingly expensive and inaccessible, yet its quality appears increasingly dubious. True health care reform would hold health care leaders accountable for upholding the health care mission.

Private Equity vs Patient Care - a Bainful Example

A long investigative report in Salon summarized allegations about the quality of care in various treatment centers owned by Aspen Education, and its parent company, CRC Health Group, in turn wholly owned by a private equity firm, Bain Capital.  The article provides examples of what can go wrong when health care organizations are taken over by remote leadership focused overwhelmingly on short-term revenue.   

A Death from a Treatable Disease
The report opened with the investigation of a 14 year old resident at Youth Care, in Salt Lake City, and Aspen Education treatment center.  Brendan Blum "died of a twisted-bowel infaction," according to the local medical examiner, which allegedly went untreated because "two poorly paid monitors on duty," were slow to seek approval to call for emergency services, and "were too low on the totem pole to call 911 themselves."

The article cited "previously unreported allegations of abuse and neglect in at least 10 CRC residential drug and teen care facilities across the country."  It charged, "such incidents have largely escaped notice because the programs are, thanks to lax state regulations, largely unaccountable." 

Allegations of Toxic Corporate Culture

The article noted numerous other reports of unexplained and allegedly wrongful deaths, and other allegations of mistreatment of patients.

Furthermore, the article noted allegations "that such incidents reflect, in part, a broader corporate culture at Aspen's owner, CRC Health Group, a leading national chain of treatment centers.  Lawsuits and critics have claimed that CRC prizes profits, and the avoidance of outside scrutiny, over the health and safety of its clients." 

We have frequently discussed how the corporate culture of the finance industry, the industry that brought us the global financial collapse/ great recession, has influenced health care, and how this culture may be related to extensive problems with the leadership of health care, including lack of understanding of or even outright hostility to the health care mission, the prioritization of self-interest over the mission, conflicts of interest, and even outright criminal behavior, such as fraud, and kick-backs (bribery).  One way that finance may influence health care is the presence of finance leaders on the boards of trustees of non-profit health care institutions (see recent examples here and here). 

A more direct way the culture of finance can influence health care is for private equity firms (that is, re-branded leveraged buyout firms, look here) to purchase organizations that actually take care of patients.  The Salon article noted:

CRC’s corporate culture, in turn, reflects the attitudes and financial imperatives of Bain Capital, the private equity firm founded by Mitt Romney. (The Romney campaign also did not reply to written questions.) Bain is known for its relentless obsession with maximizing shareholder value and revenues. Indeed, this has become a talking point of late on the Romney campaign trail; he bragged to Fox in late May that '80 percent of them [Bain investments] grew their revenues.' CRC, a fast-growing company then in the lucrative field of drug treatment, was perhaps a natural fit when Bain acquired it for $720 million in 2006. In conversations with staff and patients who spent time at CRC facilities since the takeover, there are suggestions that the Bain approach has had its effects. 'If you look at their daily profit numbers compared to what they charge,' Dana Blum [the mother of the boy who died in the incident discussed above] said of CRC’s Aspen division in 2009, 'it’s obscene.' That point, ironically enough, was underscored by the glowing reports in the trade press about its profitability.

The article discussed how Bain Capital's acquisition of CRC Health Group further tilted the balance towards short-term revenue and away from quality care:

When Bain purchased CRC, it looked like an investment masterstroke. The company, founded in the mid-’90s with a single California treatment facility, the Camp Recovery Center, had quickly grown into the largest chain of for-profit drug and alcohol treatment services in the country, with $230 million in annual revenue. Under Bain’s guidance, its revenue has nearly doubled, to more than $450 million. CRC now serves 30,000 clients daily — mostly opiate addicts — at 140 facilities across 25 states. In the first five years after its acquisition, Bain had already extracted nearly $20 million in management-related fees from the chain, although Bain investors haven’t cashed in yet through dividends or an IPO. Bain’s purchase, a leveraged buyout, also saddled CRC with massive debt of well over $600 million.

According to company executives and independent analysts, hands-on oversight of subsidiary companies is a hallmark of both Bain and CRC. Romney’s campaign literature boasts about Bain taking exactly this sort of direct role in helping to turn around failing companies. 'Over the life of an investment, they have a strong management team willing to participate,' Sheryl Skolnick, an analyst with CRT Capital, a leading institutional brokerage firm, says of Bain.

The CRC acquisition immediately made Bain owner of the largest collection of addiction treatment facilities in the nation. Unlike some Bain Capital acquisitions, which led to massive layoffs, the company’s approach with CRC was to boost revenues by gobbling up other treatment centers, raising fees, and expanding its client base through slick, aggressive marketing, while keeping staffing and other costs relatively low. But that rapid pace of acquisition couldn’t be sustained in the mostly small-scale drug treatment industry alone. So Bain Capital and CRC set their sights on an entirely new treatment arena: the multibillion-dollar 'troubled teen' industry, a burgeoning field of mostly locally owned residential schools and wilderness programs then serving, nationwide, about 100,000 kids facing addiction or emotional or behavioral problems.

One of CRC’s first acquisitions under Bain ownership was the Aspen Education Group. Founded in 1998 with about six schools, Aspen Education had expanded to 30 troubled-teen and weight-loss programs by 2006, including Youth Care of Utah. With Bain’s backing, CRC purchased Aspen for nearly $300 million in the fall of 2006.

Less than a year later, Brendan Blum was dead.

At the time of the CRC acquisition, Aspen already had a history of abuse allegations, including at least three lawsuits, and two known patient deaths, one by suicide. Featured on 'Dr. Phil,' it grew out of schools inspired by the 'tough-love' behavior-modification approach of the discredited Synanon program, which was eventually exposed as a cult. By 2006, Aspen was facing a wrongful death lawsuit, later settled, over an incident in 2004 in which a 14-year-old boy, Matthew Meyer, perished from heat stroke just eight days into his stay at its Lone Star Expeditions wilderness camp in Texas.

This just underscores concerns we raised here about how ownership by private equity could undermine the ability of health care organizations to fulfill their missions. At the time we worried that private equity's short time horizon would clash with health care's long-term focus, how standardized cost-cutting approaches, including emphasis on individual employees' "productivity," could undermine patient care, and how private equity's obsession with secrecy is the antithesis of the transparency required to make health care accountable.

The Increasing Influence of Private Equity

Ironically, the reason that the problems at CRC have gotten such public attention is that the former leader of the private equity firm that controls it is now running for the US presidency. His candidacy emphasizes just how influential the culture of private equity has come.

The purchase of CRC came seven years after [former Massachusets Governor and now Republican presidential hopeful Mitt] Romney publicly announced his retirement as CEO of Bain Capital, where he had been in charge since its founding in 1984. But at the time of his departure, Romney worked out an arrangement to continue to share in Bain’s profits as a limited partner in the firm. Today, he is still an investor in 48 Bain accounts. Though he has refused to disclose their underlying assets, some information about them can be gleaned. For example, he has reported at least $300,000 to $1.2 million, if not more, in fluctuating annual earnings from Bain Capital VIII, the convoluted $3.5 billion array of related funds that owns both name-brand companies such as Dunkin’ Donuts and the lesser-known CRC Health Group. Most of these funds were made more attractive to privileged investors by being registered in the Cayman Islands tax haven. And Romney’s connections to CRC run even deeper: Of the three Bain managing partners who sit on CRC’s board, two, John Connaughton and Steven Barnes (with his wife), gave a total of half a million dollars to Restore Our Future, the super PAC supporting Romney. They also each donated the $2,500 maximum directly to his campaign.

Furthermore, it provides a warning about much more influential it might become, particularly in regard to health care:

Romney has been outspoken about his belief that for-profit health care companies can flourish only without onerous regulations. 'I had the occasion of actually acquiring and trying to build health care businesses,' he said during a primary debate last year. 'I know something about it, and I believe markets work. And what’s wrong with our health care system in America is that government is playing too heavy a role.'

The allegations against one of those health care businesses suggest another viewpoint.

I have frequently repeated a contention that true health care reform would emphasize leadership of health care organizations that understand and uphold the values of health care, starting with prioritizing the needs of patients and the public's health over all other concerns. Instead, there is a danger that health care leaders will be ever more removed from patients and the public, and their health needs, while they become ever more concerned with making as much money as possible in the short-run, and after that, the Devil take the hindmost.

Gentiva's Odyssey Healthcare Settles Again, Signs Yet Another Corporate Integrity Agreement

The Milwaukee Journal-Sentinel reported a legal settlement worth noting.  Here are the basics:

One of the nation's largest providers of hospice care has agreed to pay $25 million to settle a Medicare fraud case initiated after a former company nurse in Milwaukee filed a whistle-blower suit.

It was the second such settlement in six years for Odyssey Healthcare Inc., which paid the federal government $12.5 million in 2006 after another Wisconsin-based employee sued.

Also,

Medicare provides a benefit meant to cover hospice care for the terminally ill. It covers 24-hour in-home nursing service only during limited crisis periods. But from 2006 to 2009, Odyssey practiced a pattern of enrolling and recertifying non-terminal patients, and billing for continuous care that wasn't necessary or reasonable, according to the False Claims Act suit filed in 2008 but just unsealed Thursday.

As is usual in such cases, Odyssey's parent company denied that it did anything wrong:

Odyssey, which operates in 26 states, is now part of Atlanta-based Gentiva Health Services, which runs hospice offices in West Allis and Burlington. Gentiva officials declined to comment, but referred to an announcement it posted on its investor relations website last month.

'Gentiva cooperated fully with this investigation, which covered a period prior to our acquisition of Odyssey, and the settlement is consistent with our efforts to instill Gentiva's culture of compliance throughout the company,' said John Camperlengo, general counsel and chief compliance officer.

The statement said the firm is proud of the care its thousands of hospice clinicians provide, and of Gentiva's efforts to ensure strict compliance with all regulatory requirements.

The Implications of the Need for a New Corporate Integrity Agreement

However, there are some disturbing aspects of this case that require a bit more explanation. First, as noted by the Associated Press (in a story available here from the Dubuque [Iowa] Telegraph-Herald),

Besides agreeing to pay the $25 million settlement, Odyssey entered a five-year corporate integrity agreement with the federal government.

Now corporate integrity agreements are not known for their effectiveness. In fact, as we noted in this blog post, according to Gentiva's 2010 annual report, its Odyssey subsidiary had been subject to a corporate integrity agreement arising from its 2006 settlement, one which was apparently not effective in preventing its misbehavior from 2006 to 2009.

However, corporate integrity agreements do serve as markers for the need to improve the integrity of the corporations who need to make them. In this case, why would Gentiva be asked to sign such an agreement if its integrity were already beyond reproach? So Gentiva's current "culture of compliance" is open to question.

The Implications of "Enrolling and Recertifying Non-Terminal Patients"

A quick read of the Journal-Sentinel and Associate Press stories above might give the impression that what Odyssey did wrong involved a billing technicality, admittedly, one that allowed it to collect more money that that to which it would otherwise be entitled.

This story actually goes beyond the issue of fraud, and raises important concerns about patient care.

The enrollment  by a hospice of patients who are actually not terminally ill could have serious adverse effects on such patients. As we noted in this post, hospices are meant for patients with very limited life expectancies. The goal of hospice is to provide comfort and palliation, not active treatment of illnesses. So if patients who actually do not have such severely limited life expectancies are admitted to a hospice, they might be denied therapy that could actually make them feel better, or even cure acute illnesses or prolong their lives. For example, a hospice patient who developed an open wound might not get maximal wound therapy, as in an example (allegedly involving a different commercial hospice provider) in the post above.

So it is possible that Odyssey's enrolling and re-certifying of non-terminally ill patients could have lead to failure to provide some of these patients with the care they should have had. Whether this did or did not occur in individual cases, and what adverse effects may have been produced is not clear from the coverage of this case.  

Summary

As I wrote in 2011, .... There has been a lot of blather from politicians in the US about "death panels" in debates about health care reform. Many such politicians seem worried that the US government has or will have death panels under the new health care reform legislation. We have criticized that legislation for not addressing many important health care problems. No one, however, has convincingly demonstrated how its provisions would convene "death panels."


Wendell Potter argued in his book, Deadly Spin, (see this post) that for-profit insurance companies had their own "death panels." The Bloomberg article strongly suggests that for-profit hospices may also act like death panels. In search of more revenue, for-profit hospices may enroll patients who are not at the end of life, but then provide them only "comfort care," so that if they develop new conditions that are treatable, they are likely to die in the absence of treatment.

I am waiting for the politicians who so enthusiastically condemned the supposed "death panels" to be found in health care reform legislation to condemn for-profit hospices for behaving like death panels.

In my humble opinion, the case discussed above are the strongest argument yet that we need to reconsider our headlong rush to turn health care, particularly the direct care of patients, over to relatively unregulated, for-profit corporations. The cases above suggest that the pursuit of revenue ahead of patients' welfare by such organizations may lead to sick and dead patients.

I cannot see how for-profit direct patient care can be made safe for patients without intense government regulation. If any of those vocal advocates of "free market" health care (in the absence of any good explanation of how health care can ever be an ideal free market, see this post) can explain to me how for-profit hospices can be made safe for patients without such regulation, I would welcome their attempts.

Meanwhile, this just calls out for legislative and legal investigation, and urgent policy changes.
 
By the way, the case above also shows how the current approach used by the government to address misbehavior in health care does not work.  We have noted previously how these legal settlements often only lead to financial penalties imposed on companies, not individuals, which diffuses their impact, and provides no disincentives to future bad behavior by individuals.  Sometimes corporate integrity agreements are added, but as in the current case, they also seem not to deter future bad behavior.   So, I further conclude, de rigueur, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.