Novartis Settles..., But Wait, There's More

Back in January, 2010, we posted about Novartis' settlement of charges that it promoted its anti-seizure drug, Trileptal, (Oxcarbazepine) for off-label uses, agreeing to plead guilty to one charge of violating the US Food, Drug and Cosmetic Act.  This week, the full story of the settlement just came out, and yes, but wait, there's more.  Per the New York Times article by Duff Wilson, the story is not only about Trileptal:

The Swiss drug giant Novartis is paying $422.5 million to settle criminal and civil investigations into the marketing of the antiseizure medicine Trileptal and five other drugs, federal officials said on Thursday.

The other drugs were:

Diovan, a hypertension drug that is the company�s top-selling product, at $6 billion last year; Sandostatin, a drug to treat a growth hormone disorder that had worldwide sales of $1.2 billion last year; Exforge, a hypertension drug that sold $671 million; Tekturna, a blood pressure medicine that sold $290 million; and Zelnorm, a medicine for irritable bowel syndrome and constipation that was later withdrawn from the United States market.

And the issue was not solely off-label marketing:

Federal prosecutors accused Novartis of paying illegal kickbacks to health care professionals through speaker programs, advisory boards, entertainment, travel and meals. But aside from pleading guilty to one misdemeanor charge of mislabeling in an agreement that Novartis announced in February, the company denied wrongdoing.

While the allegations were much more broad than those originally announced, the penalties were the usual suspects:

The settlement includes a $170 million criminal fine and $15 million in criminal forfeiture by Novartis Pharmaceuticals, its United States subsidiary.

Also,

Novartis settled the investigation into the other drugs for $237.5 million.

However,

Prosecutors said top management at Novartis had approved illegal marketing from July 2000 to June 2004. No individual, however, was named or charged.

Back in June, we posted about how US law enforcement was supposedly going to start getting tougher with the people who authorized, directed or implemented wrong doing by health care organizations. Back then, federal officials said that executives would be held accountable, and forced to leave their jobs or even be disbarred from working in the industry.

However, here we are, four months later, and even a case that mushroomed from involving allegations of off-label promotion of one drug to off-label promotion of six drugs, allegations of kickbacks to physicians, and allegations that top management knew about what was going on results in no negative consequences to any individuals.

So it still seems that if misdeeds, such as promotion of drugs for off-label uses, and giving kickbacks to doctors disguised as honoraria for talks, consulting fees, and meals and travel payments, are done under the auspices of a large health care organization, no one is ultimately responsible for them.  The organization may have to pay what appears to be a big fine, but one that pales against the profits to be made from the misdeeds.

So, if an ordinary person commits fraud, he or she is likely to have to pay a big fine and go to jail.  If a physician commits fraud, he or she is likely to have to pay a big fine and go to jail, and incidentally to lose his or her medical license.  But if a corporate executive authorizes a fraudulant practice, he or she is likely not to pay any penalty (but may well have already collected a big bonus).

We have repeated endlessly that by limiting penalties to only modest increases in the costs of doing business for organizational malfeasance in health care, we just encourage more bad behavior.  But with each new example like this, I agree more that the fundamental problem has become corporatism, (or Corpocracy, as Robert A G Monks put it).  Government and corporate leaders find that they have more in common with each other than with the little people.  Or as Barry Ritholtz just blogged:

The new dynamic, however, has moved past the old Left Right paradigm. We now live in an era defined by increasing Corporate influence and authority over the individual. These two 'interest groups' � I can barely suppress snorting derisively over that phrase � have been on a headlong collision course for decades, which came to a head with the financial collapse and bailouts. Where there is massive concentrations of wealth and influence, there will be abuse of power. The Individual has been supplanted in the political process nearly entirely by corporate money, legislative influence, campaign contributions, even free speech rights.

This may not be a brilliant insight, but it is surely an overlooked one. It is now an Individual vs. Corporate debate � and the Humans are losing.

Furthermore,

There is some pushback already taking place against the concentration of corporate power: Mainstream corporate media has been increasingly replaced with user created content � YouTube and Blogs are increasingly important to news consumers (especially younger users). Independent voters are an increasingly larger share of the US electorate. And I suspect that much of the pushback against the Elizabeth Warren�s concept of a Financial Consumer Protection Agency plays directly into this Corporate vs. Individual fight.

But the battle lines between the two groups have barely been drawn. I expect this fight will define American politics over the next decade.

Keynes vs Hayek? Friedman vs Krugman? Those are the wrong intellectual debates. Its you vs. Tony Hayward, BP CEO, You vs. Lloyd Blankfein, Goldman Sachs CEO. And you are losing . . .

Read More

Novartis Settles, Again

We certainly could not go another week without discussing another settlement of charges of unethical behavior by a major health care organization.  This time, as reported by the Wall Street Journal, it was Swiss pharmaceutical company Novartis:

Novartis AG will pay $72.5 million to settle U.S. Justice Department allegations it submitted false claims for off-label uses of a cystic-fibrosis drug.

The drug, tobramycin or TOBI, joined the Novartis portfolio as part of its 2005 takeover of biotechnology firm Chiron Corp.

In a release Tuesday, the Justice Department said that, between 2001 and 2006, Chiron, and then Novartis, marketed unapproved uses for TOBI, which the Food and Drug Administration approved as an inhaled antibiotic for treating certain cystic-fibrosis patients.

This is not even the first US legal settlement this year for Novartis:

Earlier this year, Novartis said its U.S. subsidiary struck an agreement with the U.S. Attorney's Office in Pennsylvania to settle a criminal investigation of the company's marketing of the epilepsy drug Trileptal. Novartis agreed to plead guilty to violating the U.S. Food, Drug and Cosmetic Act, and to pay a $185 million fine.

We had posted on that previous settlement here.

So the march of legal settlements continues.  It seems that practically every major pharmaceutical corporation has participated in multiple settlements since we started Health Care Renewal.  Yet the process does not seem to deter continuing bad behavior. 

In the current case, like nearly all the others, the corporation will pay what seems to be a huge fine. However, the amount is a pittance compared to the corporation's revenue, and is likely to be viewed as only a small cost of doing a very lucrative business by corporate executives. In very few cases does any individual suffer any negative consequence for approving, ordering or implementing the unethical behavior.  A large fine's impact can be spread among share-holders, employees, and clients/ customers/ patients, and hence poses no threat to executives planning the next bit of unethical behavior.
As I have said before, endlessly, 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.

Read More

Cardinal Health Settles, Novartis Settles

And the march of settlements continues....

As reported by the Tulsa (Oklahoma) World,

A company that provides hospital pharmacy management services in Tulsa has agreed to pay $1 million in civil penalties for failing to account for large amounts of missing prescription drugs, the U.S. Attorney's Office in Tulsa announced Friday.

Cardinal Health Pharmacy Services agreed to settle allegations with the federal prosecutors' office, which alleged that the company's two Tulsa pharmacies were negligent and violated several provisions of the Controlled Substances Act.

An audit showed that nearly 400,000 dosage units of hydrocodone, a painkiller, and 234,000 units of alprazolam, an anti-anxiety drug, were unaccounted for at the Hillcrest Medical Center pharmacy from October 2005 through June 2007, according to a news release.

The investigation also revealed that more than 30,000 doses of drugs at the Oklahoma State University Medical Center pharmacy were unaccounted for between April 2007 and July 2008.

Meanwhile, as reported by Associated Press (via Nj.com),

Federal prosecutors say a Princeton-based pharmaceutical company has agreed to pay $3.5 million to settle allegations that it claimed its heart drug was eligible for Medicaid reimbursement.

The U.S. attorney's office in Boston said Monday that Eon Labs Inc., a subsidiary of Swiss company Novartis AG, submitted false reports to the government between April 1999 and September 2008 that misrepresented Nitroglycerin SR's regulatory status and failed to advise that the drug did not qualify for Medicaid coverage.

Prosecutors say Eon Labs did so even after the Food and Drug Administration determined that there was a lack of evidence that Nitroglycerin SR was effective.

Note that we most recently discussed a settlement by Novartis last month (January, 2010). 

The march of settlements continues. To repeat, seemingly ad infinitum, these are just the latest in a now long parade of settlements that serve as reminders of poor behavior by myriad health care organizations. As we have previously noted, these settlements seem to have little deterrent effect on future bad behavior. (Note that many large health care organizations have settled or plead guilty in several major cases since we started commenting on such settlements.)  Usually, the companies involved only need to pay fines, and no individual who performed, directed or approved unethical or illegal acts will suffer any negative consequences. I submit once again that such fines are viewed merely as costs of doing business by the affected companies, and do not deter future bad behavior. Until the people who approve, direct, and perform unethical or illegal acts pay some penalties, expect such acts to continue. I again suggest that to truly reform health care, we need rigorous regulation of health care organizations that has the power to deter unethical behavior that may risk patients' health.

Read More

Green Ketchup for Novartis?

We recently commented on the challenges facing the large, Swiss based multinational pharmaceutical company Novartis.  From Business Week came an interview with the new CEO of Novartis, in which he revealed why he thinks he is especially qualified for the job:

Joe Jimenez says that more than 20 years selling Clorox (CLX) bleach and Heinz ketchup taught him to make decisions quickly. Now, as CEO of Novartis (NVS), Europe's second-largest drugmaker, he'll try to prove that speed can also make a difference in the pharmaceutical business.

Jimenez, an American with degrees from Stanford and the University of California at Berkeley, believes his consumer-products background will help. He started his career at Clorox, the world's largest maker of bleach, ran two divisions of ConAgra Foods (CAG), and oversaw H.J. Heinz' (HNZ) European operations. With consumer packaged goods, 'Decisions have to be made quickly because the market moves quickly,' he says. But pharmaceutical businesses have long development lead times, which 'tends to slow decision-making in areas where it doesn't need to.'

Jimenez oversaw the introduction of kid-friendly green ketchup when he was Heinz' North America chief executive,....

Further explanation of why supervising the selling of cleaning or food products would be good experience for the chief executive of a pharmaceutical company, which faces technical, regulatory, and clinical issues very different from the challenges of selling bleach or ketchup, was not forthcoming.

The reason for citing Jiminez's responsibility for green ketchup was more obscure.  According to the authoritative medical journal, Woman's Day magazine, Heinz's green ketchup was one of the "7 Biggest Food Product Duds," in the US, and was discontinued in 2006.

As we have discussed before, the current culture of US and global business includes the belief that someone trained in finance or marketing is the most suitable leader of every type of organization.  Such leadership has lead the US biggest automobile manufacturer into bankruptcy.  We have discussed numerous examples of leaders of health care organizations with no health background or experience who seem to be most expert at making sure their compensation is hugely larger than that of most of their employees.

We hope Novartis does not end up trying to sell the pharmaceutical equivalent of green ketchup. 

I say again, to really reform health care, we need to have leaders of health care organizations who actually understand health care and share its values.

Read More

Drowning our Sorrows in Ketchup: Novartis Settles, Appoints Former Heinz Executive CEO

Here's the latest corporate health care marcher in the legal settlement parade, as reported in the Wall Street Journal.

Swiss drug giant Novartis AG said its U.S. subsidiary struck a plea agreement with U.S. investigators to resolve criminal allegations regarding the company's promotion of the epilepsy drug Trileptal, and agreed to pay a $185 million fine.

Federal investigators have been carrying out civil and criminal investigations of Novartis' marketing of the drug, including allegations that it promoted the drug for uses for which it is not approved by the Food and Drug Administration, an illegal practice known as 'off-label' marketing, Novartis said in a statement Tuesday as it announced fourth-quarter results.

To resolve criminal allegations, Novartis said it agreed to plead guilty to a violation of the U.S. Food, Drug and Cosmetic Act, and to pay a fine of $185 million.

It has become a drearily familiar ritual. We have now discussed numerous instances of large health care corporations pleading guilty to criminal charges and/or settling civil allegations of unethical behavior.  In the current case, like nearly all the others, the corporation will pay what seems to be a huge fine.  However, the amount is a pittance compared to the corporation's revenue, and is likely to be viewed as only a small cost of doing a very lucrative business by corporate executives.  In very few cases does any individual suffer any negative consequence for approving, ordering or implementing the unethical behavior. 

Thus, I would argue that these cases remind us how unethical the health care "business" has become, but the way they have been resolved will fail to deter future bad behavior.  A large fine's impact can be spread among share-holders, employees, and clients/ customers/ patients, and hence poses no threat to executives planning the next bit of unethical behavior. 

In fact, the most notable aspect of the current case is that the corporation involved in not run out of the US, but rather out of Switzerland, showing that this pattern is not exclusively an American one.

There is an interesting juxtaposition to this case, however.  At the same time this settlement was announced, Novartis disclosed its new CEO.  A Wall Street Journal commentary opined, that the " New Novartis Chief Needs Surgery Skills."  Ironically, the new CEO is hardly a surgeon.  Here is a summary of his background.

Mr. Jimenez began his career in the United States at The Clorox Company, and later served as president of two operating divisions at ConAgra. In 1998, he joined the H.J. Heinz Company, and was named President and Chief Executive Officer of the North America business. From 2002 to 2006, he served as President and Chief Executive Officer of Heinz in Europe.

Before joining Novartis, he was a NonExecutive Director of Astra-Zeneca plc, United Kingdom, from 2002 to 2007; and was an advisor for the private equity organization Blackstone Group, United States. Mr. Jimenez joined Novartis in April 2007 as Head of the Consumer Health Division and was appointed to his present position in October 2007.

Mr. Jimenez graduated with a bachelor�s degree from Stanford University in 1982 and with an M.B.A. from the University of California, Berkeley, in 1984.

I would guess that all that expertise marketing ketchup will come in handly preventing the need for more settlements of illegal marketing practices.  Seriously, we have discussed the logic and evidence behind the assertion that health care corporations ought to be run by people with relevant experience and values.  We wish Mr Jimenez well, but hope that he realizes that if he is to prevent future events that could throw his company into disrepute, he ought to lean heavily on people who understand medicine and biomedical science, and who support physicians' core values.

More broadly, I again suggest that real US health care reform would need to deal with both these issues.  We need to have rigorous regulation of health care organizations that has the power to deter unethical behavior that may risk patients' health.  We need to have leaders of health care organizations who actually understand health care and share its values. 

Two hat tips to the PharmaGossip blog (here and here).

Read More