St Jude Medical Settles Again

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

Another Legal Settlement by St Jude Medical

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

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

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

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

Our relevant post about that previous settlement was here.

Kickbacks, Manipulated Research

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

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

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

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

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

Summary

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

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

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

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

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

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

To repeat the conclusion of our last post about St Jude Medical, the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior. Even large fines (and the one described above would be peanuts to a large health care corporation) can be regarded just as a cost of doing business. Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

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St. Jude Medical Settles

We could not let more than a week go by without discussing another legal settlement by a major health care organization.  From the Pioneer Press,

Little Canada-based St. Jude Medical will pay $3.7 million to resolve allegations the medical device company provided kickbacks to hospitals in Kentucky and Ohio to secure sales of heart devices, the U.S. Department of Justice announced Friday.

The government alleged that St. Jude Medical provided rebates that were retroactive and paid based on a hospital's previous purchases of heart device equipment from the company. Prosecutors also charged that St. Jude Medical paid rebates for purchases of heart-device equipment sold by its competitors to induce purchases of similar equipment from St. Jude Medical in the future.

As I understand it, the issue was that the rebates did not amount to a simple volume discount, but were given only if the hospital allowed St. Jude to become its dominant supplier of certain devices, for example,

One such rebate was offered to Parma Community General Hospital in Parma, Ohio, a suburb of Cleveland, according to settlement papers made available by the government on Friday. The medical center could earn discounts on products if it gave St. Jude Medical 90 percent of its annual usage of mechanical heart valves, 80 percent of its annual usage of conventional pacemakers and 50 percent of its annual usage of conventional implantable defibrillators, according to the settlement agreement.

The two-year contract began in April 2003 and St. Jude Medical at the time did not have government approval to sell newer 'biventricular' pacemakers and ICDs. A rival company, however, did have approval for such products, and the settlement agreement asserts that St. Jude agreed to give the Ohio hospital a rebate for each biventricular pacemaker and ICD purchased from the competitor so long as Parma hospital maintained market share targets on St. Jude Medical products.

'The contract also mandated that once (St. Jude Medical) gained Food and Drug Administration approval for its own biventricular devices, the rebates would end, and (Parma) could earn discounts by giving (St. Jude Medical) 80 percent of its annual usage of biventricular pacemakers, and 50 percent of its annual usage of biventricular ICDs,' the settlement agreement states.

What was the problem with this?

'Hospitals should base their purchasing decisions on what is in the best interests of their patients,' Tony West, assistant attorney general for the Justice Department's civil division, said in a statement.

St. Jude's response was that it was all so trivial and so long ago,

In a statement issued Friday, St. Jude Medical said: 'The allegations centered on small, isolated product rebates that the company paid more than five years ago. The company entered into a settlement agreement in order to avoid the potential costs and risks associated with litigation.'

So add another marcher in the parade of legal settlements. While most of the marchers in this parade seem to be pharmaceutical companies, it appears that device manufacturers are trying to catch up.

We have been noting new entrants to this parade for a while mainly as a way to document how often health care organizations, including some of the largest and seemingly most respectable organizations, have been accused of unethical conduct.  Often this conduct seems likely to increase health care costs, by driving up the prices of goods or services, or by encouraging the use of expensive tests or treatments when perhaps something simpler and cheaper would be just as good for the patient.  Sometimes, this conduct seems likely to decrease health care quality, and worsen patient outcomes because the tests or treatments being pushed by the unethical behavior may be less effective, and/or more likely to cause harm than other credible alternatives.

We also have repeatedly said that the usual sorts of legal settlements we have described do not seem to be an effective way to deter future unethical behavior.  Even large fines (and the one described above would be peanuts to a large health care corporation) can be regarded just as a cost of doing business.   Furthermore, the fine's impact may be diffused over the whole company, and ultimately comes out of the pockets of stockholders, employees, and customers alike. It provides no negative incentives for those who authorized, directed, or implemented the behavior in question. My refrain has been: we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

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