Justice Delayed - Two Device Companies Still Settling Cases from 10 Plus Years Ago

Here we go again.  After a hiatus during which the US media and perhaps parts of the government were preoccupied with such issues as the ongoing controversy over health care reform, and a government shutdown apparently arising out of this controversy, the march of legal settlements involving big health care organizations has resumed.

In alphabetical order,...


Boston Scientific

From the Minneapolis Star-Tribune on 17 October, 2013, an account of a settlement arising from alleged misbehavior that started in 2002,

A $30 million settlement between the U.S. Department of Justice and Boston Scientific will likely end a case involving the sale of defective heart devices from 2002 through 2005 by subsidiaries Guidant, Guidant Sales and Cardiac Pacemakers.

Note that the allegations were particularly egregious since they involved a company selling products they knew to be defective in ways that could prove fatal as if they were quite safe,

The settlement closes a fraudulent-claims lawsuit that alleged Guidant knowingly sold defective implantable defibrillators to health care facilities that implanted them into thousands of Medicare patients. 

In particular,

The government’s complaint said that Guidant knew as early as April 2002 that its Prizm 2 line of devices was defective and knew in November 2003 that its Renewal 1 and 2 devices were capable of short-circuiting and delivering an electric shock that 'arcs' back onto the device instead of being directed to an irregularly beating heart.

According to Boston Scientific’s website, 83 malfunctions and nine reported deaths have been connected with the Renewal devices and 40 confirmed malfunctions and five patient deaths have been associated with the Prizm devices. About 500 Renewal devices remain implanted worldwide; about 1,400 Prizm devices remain in patients, according to the website.

Although Guidant took action to fix the defects, the government alleged that the company continued to sell its remaining stock of the old, defective versions of the devices. In fact, federal officials say that as Guidant learned about the cause of the defect, it took steps to hide the problem from patients, doctors and the Food and Drug Administration.

According to the government, Guidant did not fully disclose the problem until May 2005, when two Minneapolis doctors publicly aired their concerns about one of the defibrillators after it failed to revive a 21-year-old Grand Rapids, Minn., patient. Guidant later admitted it had known for three years that the device could short-circuit, but chose not to alert doctors or the public.

This is only the latest settlement made by Boston Scientific since 2005,

Boston Scientific paid $27.5 billion to acquire Guidant in 2006. It has been paying quite a bit since in relation to Guidant’s defective defibrillators.

In 2007, Boston Scientific paid $240 million to settle claims with thousands of patients who had sued Guidant after the defective devices were recalled. Later, in February 2010, Guidant pleaded guilty to misleading the FDA about problems with the devices and paid a fine of $296 million.

In fact, the then case of the allegedly concealed implantable cardiac defibrillators (ICD) was one of the first cases of apparently unethical health care corporate management behavior leading to bad patient outcomes we discussed on Health Care Renewal.  (Look here for a more recent summary of this case.)

Yet despite the fact that this apparently deeply unethical conduct lead to patient deaths, no individual who authorized, directed or implemented the bad behavior has suffered any negative consequences for it over the eight years since the details first became public.

One physician who helped bring this case to light was also apparently concerned about the impunity of those responsible,

 Dr. Robert Hauser, one of the doctors who went public back in 2005, criticized the settlement on Thursday.

'The $30 million should have little impact on their business,' Hauser said in an e-mail. 'I find it very disturbing that such a small settlement was accepted by the DOJ in view of the magnitude of wrongdoing by Guidant management.'

Stryker Corp

This week, MLive.com reported on another settlement involving allegations of unethical behavior by a device company dating back to 2003,

 An investigation by federal authorities found that Stryker Corp. subsidiaries in five foreign countries made illicit payments and tried for several years to bribe doctors, health care professionals and government-employed officials in order to obtain or retain business.

Stryker  has agreed to pay more than $13.2 million to settle the charges.

The SEC charged the Kalamazoo-based medical technologies company with violating the Foreign Corrupt Practices Act,  alleging that its subsidiaries in Argentina, Greece, Mexico, Poland and Romania made illicit payments totaling approximately $2.2 million 'that were incorrectly described as legitimate expenses in the company’s books and records.'

The SEC said descriptions of the payments varied from a charitable donation to consulting and service contracts, travel expenses, and commissions.

The SEC states that Stryker made about $7.5 million in illicit profits as a result of the improper payments. It did not specify during what year all of the events occurred, but indicated some as far back as 2003.

Note that the payments seemed deliberately designed to corrupt health care professionals and managers, for example,

According to the SEC’s order, Stryker’s subsidiary in Greece made a purported 'donation' of nearly $200,000 in 2007 to a public university in Greece to fund a laboratory that was a pet project of a public hospital doctor. In exchange for the payment, the doctor agreed to provide business to Stryker.

Also,

The SEC stated that its investigation also found that Stryker subsidiaries bribed foreign officials by paying their expenses for trips that lacked any legitimate business purpose.

'For example, in exchange for the promise of future business from the director of a public hospital in Poland, Stryker paid travel costs for the director and her husband in May 2004,' according to the SEC. 'This included a six-night stay at a New York City hotel, attendance at two Broadway shows, and a five-day trip to Aruba.'

As in the case above, it appears that no individual who authorized, directed or implemented the questionable payments will suffer any negative consequences.  In fact, as is usual in such cases,

 The settlement does not not require Stryker to admit or deny the allegations,...

However, an SEC official did say,

 Stryker’s misconduct involved hundreds of improper payments over a number of years during which the company’s internal controls were fatally flawed. Companies that allow corruption to occur by failing to implement robust compliance programs will not be allowed to profit from their misconduct.

While Health Care Renewal has not discussed this particular case before, it is hardly the first case of bad conduct by Stryker that we have discussed.  In the past we noted
-  In 2012, a Stryker subsidiary pleaded guilty to misbranding in response to allegations that its marketers conspired to defraud physicians in order to sell a product to promote bone growth that proved harmful to patients (look here).
-  In 2010, Stryker settled a case alleging unfair and deceptive sales practices again used for bone growth accelerators (look here).  
-  In 2009, some apparently low-level Stryker employees pleaded guilty to promoting off-label use of these same products (look here). 
- In 2007, Stryker made an agreement allowing federal supervision after charges one of its units had violated anti-kickback laws when making supposed "royalty" payments, often huge, to orthopedic surgeons in connection with its production of prosthetic hips and knees.  Several other device companies signed deferred prosecution agreements, and as a result, for a time all had to make public their payments to doctors and various non-profit organizations.  (See summary here.) 

Summary

 This recent crop of settlements has some features in common.  The settlements involved multinational device companies.  The settlements occurred at least a decade after the alleged bad behavior started.  The settlements required only small payments - at least on a corporate scale -from the companies involved, but no negative consequences for anyone who authorized, directed, or implemented the bad behavior.  Finally, the settlements were made by companies who had striking past records of previous settlements of bad behavior.

The march of legal settlements demonstrates the pervasiveness of unethical behavior, often involving harm to patients or sullying of health care professionals, involving large, rich health care corporations.  It also demonstrates the impunity of the top leaders of such corporations who often make huge amounts of money despite, or perhaps because of their companies' misconduct.  Despite intermittent threats by US government officials to get tough with unethical behavior by health care corporations, this pattern has continued for years, as we have documented. 

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