Private Equity, Obfuscatory Advertising, and Making Health Care a Commodity: Lessons from Cerberus Capital Management

The use of advertising by Steward Health Care, currently a regional hospital system here in New England, continues to provide lessons about how public relations and marketing may be used to shape the health care policy debate.  Stand by because the story is convoluted.

Steward Promotes "New Health Care," Whatever That May Be

This week, Commonwealth reported on Steward's latest high profile advertising campaign in the Boston area,

Steward Health Care is using the Olympics to hone its image. The Boston-based chain of 10 community hospitals, many of which were on the verge of going under when Steward acquired them, is running a series of ads on WHDH-TV (Channel 7) during Olympics coverage that cast the company as a delivery system for a new type of world-class health care.

While visible, the advertisements are notably vague. One features

a Steward employee who says she believes 'world class health care is here.' Another of the initial ads features individual doctors and technicians pledging to be stewards of 'the new health care,' which is the tagline for all of the Steward ads.

What the 'new health care' means is never fully explained in the ads

One local health care expert

Paul Levy, the former CEO of Beth Israel Deaconness Medical Center, said he thinks the ads are part of a campaign by [Steward Health Care owner] Cerberus [Capital Management] to make Steward more attractive to would-be buyers. 'This has very little to do with anything other than establishing the image and the brand of the Steward hospitals so when the day comes when Cerberus sells the company it will be better received in the public markets,' Levy said.

The article had noted that

Cerberus Capital Management, a New York private equity firm, owns Steward,...

So it is possible that no one at Steward really has any idea what sort of "new health care" the organization is promoting

Steward's CEO Promotes Health Care as a Commodity

However, there is reason to think that the top leadership of Steward, and probably of Cerberus Capital Management, the private equity group that owns it, actually does have a clear idea what new health care they are promoting.

Almost simultaneous with the Commonwealth article and the Olympic advertising campaign an interview appeared with Steward's CEO in Fortune. CEO Dr Ralph de la Torre first pitched medicine as science,

A lot of us physicians went into medicine because we loved the art aspect of it. There wasn't a lot of real hard-core science when many of today's doctors went into medicine. It was your intuition, your abilities, the gestalt of what was going on. But something happened in medicine along the way. It started becoming a real science, and a lot of studies have come out that guide what we do and how we do it. We as a society need to understand that science has to guide our practice of medicine. Not everyone with a headache needs a CAT scan; not everybody with a sprained ankle needs an MRI.

This sounds like it could be an affirmation of evidence-based medicine, the approach that attempts to base medicine on systematic search for and critical review of the best clinical research, among other things. However, De la Torre takes it a big step further, citing:

In deference to those who love the individual hospital, you have to look back at America and the trends in industries that have gone from being art to science, to being commodities. Health care is becoming a commodity. The car industry started off as an art, people hand-shaping the bodies, hand-building the engines. As it became a commodity and was all about making cars accessible to everybody, it became more about standardization. It's not different from the banking industry and other industries as they've matured. Health care is finally maturing as an industry, and part of that maturation process is consolidation. It's getting economies of scale and in many ways making it a commodity.

Apparently Dr De la Torre does not see a distinction any longer between health care, or to use an old-fashioned word, medicine, traditionally considered an art or practice of caring for individual patients, and making automobiles on an assembly line. Dr De la Torre may be deeply misinterpreting evidence-based medicine, which is about evidence from clinical research, but also much more. Consider how the Cochrane Collaboration discusses it:

Evidence-based health care

Evidence-based health care is the conscientious use of current best evidence in making decisions about the care of individual patients or the delivery of health services. Current best evidence is up-to-date information from relevant, valid research about the effects of different forms of health care, the potential for harm from exposure to particular agents, the accuracy of diagnostic tests, and the predictive power of prognostic factors [1].

Evidence-based clinical practice is an approach to decision-making in which the clinician uses the best evidence available, in consultation with the patient, to decide upon the option which suits that patient best [2].

Evidence-based medicine is the conscientious, explicit and judicious use of current best evidence in making decisions about the care of individual patients. The practice of evidence-based medicine means integrating individual clinical expertise with the best available external clinical evidence from systematic research [3].

[1] Cochrane AL. Effectiveness and Efficiency : Random Reflections on Health Services. London: Nuffield Provincial Hospitals Trust, 1972. Reprinted in 1989 in association with the BMJ. Reprinted in 1999 for Nuffield Trust by the Royal Society of Medicine Press, London, ISBN 1-85315-394-X.[2] Gray JAM. 1997. Evidence-based healthcare: how to make health policy and management decisions. London: Churchill Livingstone.
[3] Sackett DL, Rosenberg WMC, Gray JAM, Haynes RB, Richardson WS. 1996. Evidence based medicine: what it is and what it isn't. BMJ 312: 71–2 [3] [Full text]

Note the emphasis on making decisions for individuals based on what is best for each, and the integration of evidence from clinical research with clinical expertise. This is far from commoditization.

Nonetheless, Dr De la Torre seems to envision "new health care" like a 1930s automobile assembly line, with the physicians and other health professionals cast as assembly line workers, and the patients cast as automobiles.

Our next example may provide some explanations for this point of view.

Steward's Advertising Raises Questions of Whose Hands Should be on Health Care

As we discussed earlier, Steward Health Care has been working on acquiring a struggling local Rhode Island hospital system, and in doing so is in a dispute with the statewide non-profit Blue Cross health insurance company. Steward had been putting daily full-page advertisements in the local paper. A recent version (27 July, 2012), had this text:

RHODE ISLAND TO BLUE CROSS:
GET YOUR HANDS OFF OUR HOSPITALS

With 80% of the market under its control, Blue Cross & Blue Shield of Rhode Island thinks it can decide which hospitals survive or fail. The people of Rhode Island beg to differ.

For the past decade, they've watched Blue Cross starve Landmark Medical Center of its funding. And this year, when Blue Cross issued an ultimatum to terminate the hospital, Rhode Islanders heard enough.

In a poll conducted this week by John Marttila, a nationally recognized leader on public attitudes concerning health care, 76% of respondents said that Blue Cross shouldn't be allowed to use their monopoly to dictate the fate of Rhode Island hospitals. They also felt, by a 2-1 margin, that if Landmark did indeed close, Blue Cross would be to blame.

However, soon after, investigative reporting by the Providence Journal's Ms Felice Freyer revealed that maybe the poll should have been interpreted differently. Not unexpectedly, Ms Freyer revealed the poll to have been "commissioned by Steward." Its basic results were really:

Just over half the respondents knew that Landmark was being sold to Steward, and of those, 58 percent did not have an opinion, 29 percent supported the sale, and 13 percent opposed it. However, among those who knew about the sale and also live in northern Rhode Island, the approval rating was higher –– 37 percent support the sale, with 15 percent disapproving and 48 percent having no opinion.

The pollster than provided prompting, perhaps in an attempt to get results more favorable to its client:

One of the questions starts with this statement: 'Blue Cross Blue Shield provides health insurance to 80 percent of Rhode Island. By refusing to negotiate on reimbursement rates, Blue Cross can essentially determine if hospitals in the state stay open or if hospitals close.' Based on that statement, 76 percent of respondents agreed that 'Blue Cross should not be allowed to use its monopoly to dictate which hospitals stay open and which close their doors.'

Unfortunately, it appears that the prompting statement was perhaps not fully accurate:

In 2011, Blue Cross covered 66 percent of Rhode Islanders with private health insurance, not 80 percent, according to a report by the Office of the Health Insurance Commissioner.

Blue Cross denies that it has refused to negotiate.

'We have negotiated in good faith and have offered a fair contract to Landmark Hospital that is consistent with our reimbursement arrangements for other independent hospitals,' Blue Cross said in a statement. 'Unfortunately, Steward has been unwilling to enter into a contract under those conditions.'

While they touted probably methodologically biased survey results, Steward's local advertising campaign's headline might prompt some people to think about whose hands should really be on their health care. The advertising tries to limit this question to Blue Cross' influence. However, one might also ask whose hands control Steward Health Care?

Whose Hands are on Steward Health Care?

As the Commonwealth article above pointed out, Steward Health Care is a wholly owned subsidiary of Cerberus Capital Management, a New York based private equity firm.

Cerberus' top leadership includes
- CEO Steven A Feinberg, who, as we noted previously, was listed as number 21 on a list of the 25 most powerful businessmen in 2007 by Fortune, at that time running through Cerberus 50 companies with total revenues of $120 billion.  On Wikipedia, his net worth was estimated as $2 billion in 2008.
- Chairman John W Snow, who, as we noted previously, resigned as Treasury Secretary in the administration of President George W Bush "in 2006 only because it was revealed that he had not paid any taxes on $24 million in income from CSX, which had forgiven Snow's repayment of a gigantic loan that the company had made to him," according to Chareles Ferguson in Predator Nation.
- Chairman, Cereberus Global Investments J Danforth Quayle, the controversial former US Vice President during the George H W Bush administration.

Furthermore, Cerberus Capital Management, which wholly owns Steward Health Care, owns several other businesses.  As we noted here, these include, DynCorp (see their web-site), which has been called one of the "leading mercenary firms," by an article in the Nation.  As reported by Bloomberg, DynCorp, and hence indirectly about Cerberus, and Steward Health Care, in 2011 settled accusations that it overbilled the US government for construction work in Iraq.   Furthermore, as we noted here, Cerberus also owns the biggest manufacturer of firearms and ammunition in the US. As reported by BusinessWeek in 2010, Cerberus owns 13 brands of fire-arms and munitions under the umbrella Freedom Group.

So while Cerberus Capital Management would like us to believe that Rhode Island residents question the hands of Blue Cross Blue Shield of Rhode Island on a struggling local hospital system, it seems to be trying to avoid questions about whose hands would be on the hospital system were Cerberus Capital Management's subsidiary Steward Health Care to acquire it. 

Summary

So, to recapitulate this winding story....   A regional hospital system has been pushing its "new health care" idea.  However, its former surgeon CEO promotes new health care as commoditized health care, assembly line health care, in which doctors become assembly line workers and patients become widgets.  This seems bizarre until one realizes that the CEO actually works for a huge private equity firm whose goal is to make a lot of money in the short-term.  Standardized, commoditized health care is likely to be cheaper to provide than individualized health care.  Private equity firms thrive by cutting their subsidiaries' costs, and then selling them quickly, sometimes before the long-term consequences of these cuts become apparent.  (Look here.)

So there are two lessons.

To repeat the lesson from our earlier post, everybody, doctors, other health care professionals, health policy makers, patients, and the public ought to be extremely skeptical of the marketing and public relations efforts of big health care organizations.  Based on the examples above, they ought to be particularly skeptical of organizations that are overtly for profit, and/or have a clear focus on short-term revenue generation.  As a society we need to think about how to best counter these biased, incomplete, sometimes grossly deceptive efforts to manipulate public psychology and opinions through our rights to free speech and a free press.

To add a lesson, everybody, doctors, other health professionals, health policy makers, patients and the public ought to be extremely wary of the ongoing corporatization of medicine and health care.  Corporate leaders who often get large incentives for maximizing short term revenue are likely to be enthused about turning our health care into a commodity.  Doctors and health care professionals should not want to be assembly line workers, and patients surely should not want to be widgets. 

Steward Health Care vs Rhode Island Blue Cross Blue Shield: How Public Relations Twists the Narrative

Negotiations between a local RI hospital system and the largest RI health insurer have now become very public. An advertising campaign by the larger hospital system that is set to absorb our local one provides lessons on how important health care policy issues are publicly discussed.

Simplified Background

Landmark Medical Center is a small health care system in northern Rhode Island.  It has been in financial difficulty, and hence management negotiated a buyout  [see comment of 19 July, 2012 below] while in receivership a buyout was negotiated.  It is now in the process of being acquired by Steward Health Care, a regional hospital system based in Massachusetts (summarized here and here).  Meanwhile, Landmark has been in negotiations with Rhode Island Blue Cross Blue Shield, the largest RI health insurance company.  The negotiations have not been going well, so RI BCBS notified its policy-holders that it is possible Landmark will not be in its network in the future.  This difficult negotiation prompted Steward Health Care to make the discussion more public.

The Steward Health Care Advertisements

Steward Health Care has run a series of full-page advertisements in the Providence Journal.  One advertisement that has run at least three times, by my count, includes the following text:

WHAT KIND OF CHARITABLE ORGANIZATION SPENDS $120 MILLION ON ITS HEADQUARTERS
BUT DENIES SERVICES TO ITS POOREST COMMUNITIES?

Blue Cross & Blue Shield of Rhode Island is designated as a "charitable organization." But they certainly don't spend like one. They invested a small fortune on their opulent corporate offices in Providence. They dish out million each year in executive salaries. And for all that exorbitant spending, they pay absolutely nothing in Rhode Island state taxes.

Then, in May of this year, they refused to give Landmark Medical Center in Woonsocket a long-term contract without Steward Health Care participating. Steward, trying to be helpful, proposed base rates that were 5% below the state median, quality metrics used by the federal government, and a commitment to payment reform. But suddenly, the coffers had run dry. Blue Cross refused to even discuss the proposal.

Instead, they issued their response: Terminate Landmark Medical Center.

Never mind the residents who would lose their only hospital, the employees who would lose their jobs, or the elderly who would have to travel for care. Blue Cross was only interested in protecting the one group they serve most effectively, themselves.

This pretty plainly was a David vs Goliath narrative, with poor, small Landmark Medical Center and Steward Health Care, whose only goals were to serve local residents, as David, and huge, wealthy Blue Cross Blue Shield of RI, whose only goal is allegedly to serve its executives' interest, as Goliath.

Given that we have frequently discussed how self-interested, over-compensated executives may fail to uphold, or may even undermine their health care organizations' missions, this seemed like a narrative primed for further discussion on Health Care Renewal. In addition, Blue Cross Blue Shield of Rhode Island was beset by a scandal before we began Health Care Renewal (look here), involving allegations of excess compensation given to and conflicts of interest affecting its CEO.

Blue Cross Blue Shield of RI: Executive Compensation, Budget and Taxes

In fact, the most recent figures made public by RI BCBS on executive compensation showed that CEO Peter Andruszkiewicz was offered total compensation of $600,000 a year when he started in 2011 (look here.)  Also, as suggested by the advertisement above, there has been considerable local controversy about the size, scale, and price of the new RI BCBS headquarters (e.g., here).   Apparently, however, Blue Cross Blue Shield of Rhode Island does pay state taxes (per this report).

On the other hand, keep in mind that RI BCBS is one of the few health insurance companies to provide community (age-adjusted only) rated individual health insurance even for people with pre-existing conditions, (look here) at the behest of state law, to be sure. So perhaps RI BCBS is not quite the ogre oppressing the poor that the advertisement implies it to be.

But wait, there is more. This all started as a contract negotiation between a health insurer and a local hospital system which is about to be acquired by a regional hospital system. If Steward Health Care saw fit to bring up the executive compensation practices, budget, and taxes of Blue Cross Blue Shield of Rhode Island as relevant to the dispute, might Steward Health Care's executive compensation practices, budget, and taxes also be relevant?

Steward Health Care and Cerberus Capital Management: Executive Compensation, Budget, and Taxes

The problem is that we know very little about Steward Health Care's executive compensation practices, budget, and taxes. While the advertisement above (and Steward's own web address, steward.org) imply that Steward is only about providing health care to the poor and needy, and perhaps that Steward, like Rhode Island BCBS, is non-profit, neither is quite true.

In fact, Steward Health Care is the new name for what was once Caritas Christi Health Care, formerly a Catholic non-profit health system that was acquired in 2010 by Cerberus Capital Management, a private equity firm (look here).

Private equity firms are notably secretive. Neither Cerberus, nor its new health care acquisition, has seen fit to publish any details about executive compensation practices, budgets, or taxes.

We do have a few clues, however.

Executive Compensation
Caritas Christi at the time it was acquired by Cerberus was lead by CEO Ralph de la Torre.  His compensation in 2009 prior to the acquisition was $2.2 million a year.  He is still leading Steward Health Care. It is reasonable to expect that his compensation is not less than it was before, and probably more (look here).  It is reasonable to guess that Dr de la Torre's total compensation is currently several times larger than that of the BCBS of RI CEO. 

The leadership of Cerberus Capital Management includes, according to its web-site, John W Snow, chairman and senior managing director.  Mr Snow, former Secretary of the US Treasury, was listed in 2009 on the Virginia 100 web-site as having a net worth of approximately $90 million, although not with much confidence in the precision of the figure.  He is also a director of the Marathon Petroleum Corporation, from which he received $300,000 in compensation in 2011, according to the company's proxy statement, and of Amerigroup, from which he received at least $170,000 in equities, and additional amounts in fees and deferred compensation in 2011, per that company's proxy statement.  Stephen A Feinberg, founder, CEO, and senior managing director, described as a "recluse" in the New York Times, was listed as number 21 on a list of the 25 most powerful businessmen in 2007 by Fortune, at that time running through Cerberus 50 companies with total revenues of $120 billion.  On Wikipedia, his net worth was estimated as $2 billion in 2008.  These figures suggest that leaders of Cerberus Capital Management can make very large amounts of money, orders of magnitude larger than the compensation of the BCBS of RI CEO.

Budget
There is little public information on the budget of Cerberus Capital Management, but note again the estimate above that in 2007, it controlled 50 companies with $120 billion in revenues.  There is also little public information about the budget of its subsidiary, Steward Health Care.  Estimates from a recent article in Commonwealth suggested that Cerberus invested $251.5 million in Steward, but that Steward's 2011 budget had a net loss of $57 million.  According to the Woonsocket Call, an apparently short-term balance sheet from March 31, 2012 showed that Steward Health Care had assets of $1.1279 billion, liabilities of $1.0259 billion, and stockholder equity of $102 million.

Taxes
There seems to be no significant public information on taxes paid by Steward Health Care or Cerberus Capital Management.  According to Chareles Ferguson in Predator Nation, Cerberus chairman John W Snow resigned as Treasury Secretary "in 2006 only because it was revealed that he had not paid any taxes on $24 million in income from CSX, which had forgiven Snow's repayment of a gigantic loan that the company had made to him."

So while RI BCBS can be faulted for paying relatively high executive compensation, using its funds to build a rather lavish headquarters building, but not for failing to pay RI taxes, at least all these have been issues for public discussion. Furthermore, Cerberus Capital Management, and Steward Health Care which is its creature, while explicitly bringing these issues into the public debate about the Landmark negotiation with Blue Cross Blue Shield of RI, have not seen fit to reveal their own executive compensation, budget, or taxes. There is reason to think that their executive compensation and management budgets could be far more bloated that those of RI BCBS. We have no idea whether they have paid what might be considered their fair share of taxes, but note that their current chairman has had issues in the past with his personal tax payments.

Summary

The vigorous advertising/ public relations campaign by Landmark Medical Center, Steward Health Care, and ultimately Cerberus Capital Management to get a more successful outcome of the negotiation between Landmark and RI BCBS seems to be an example of the tactics used in support of the public relations by large, for-profit health care organizations. In the absence of any transparency about the executive compensation, budget, and tax payments by Cerberus Capital Management and its subsidiary, Steward Health Care, lavish public advertising faulting the executive compensation, budget, and tax payments of its counter-party suggests a rather crude attempt to twist the narrative so as to divert public attention from relevant issues.

If this was not the intention, perhaps Cerberus and Steward will make their executive compensation, budgets, and tax returns fully transparent?  We wait with bated breath.

In the absence of such transparency, skepticism about their public discourse remains warranted.

There is more and more public discussion of health policy from the local to the global levels. Much of this discussion, like much political discussion in general, seems dominated by expensive public relations efforts on behalf of the richer health care organizations. Physicians, other health care professionals, health policy researchers and leaders, and the public at large should be alert to the possibility that these communications will use psychological manipulation to divert its narratives in directions favored by these large health care organizations. Anyone listening or viewing communications coming out of such public relations efforts ought to consciously think about the relevant facts and issues they ignore, and why they may have been consciously omitted.

Giant GSK Settlement Provides Reminder of the Pervasiveness of Stealth Marketing

The latest  and biggest legal settlement involving health care to hit the news, that of GlaxoSmithKline (GSK) and the US government, has many familiar elements. As summarized by the New York Times,

In the largest settlement involving a pharmaceutical company, the British drugmaker GlaxoSmithKline agreed to plead guilty to criminal charges and pay $3 billion in fines for promoting its best-selling antidepressants for unapproved uses and failing to report safety data about a top diabetes drug, federal prosecutors announced Monday. The agreement also includes civil penalties for improper marketing of a half-dozen other drugs.

As was the case for nearly every other legal settlement we have discussed,

No individuals have been charged in any of these cases.

Thus, how well even such a large settlement will deter future wrong-doing is not clear.

Nonetheless, the documents released with it provide good documentation about how pervasive systematic, deceptive stealth marketing campaigns have become in health care. 

In particular, the official "complaint" filed by the US Department of Justice emphasized all these elements in the stealth marketing of paroxetine (Paxil, Seroxat in the UK) to adolescents.

Manipulation of Clinical Research

We have frequently discussed how health care corporations, particularly pharmaceutical, biotechnology and device companies, now sponsor  the majority of clinical research.  Their control of the design, implementation, analysis and dissemination of clinical research allows manipulation that increases the likelihood that the results will be favorable to their vested interests, usually the products and services they sell. 

We have previously discussed the manipulation of Study 329 to promote the marketing of Paxil (look here and here).  However, the US DOJ document makes these concerns more official.  It included:

Manipulation of Study Endpoints

Study 329 was a randomized controlled trial of Paxil vs imipramine vs placebo for depression in adolescents. The two primary endpoints pre-specified to the US Food and Drug Administration were "the degree to which a patient's Hamilton Rating Scale for Depression ('HAM-D') total score changed from baseline"; and "the patient's 'response' to medication, as defined as (a) a 50% or greater reduction in the patient's HAMD-D score, or (b) a HAM-D score of less than or equal to 8." However, initial analysis by GSK failed to show that Paxil improved either of these two end-points. The company concluded "it would be commercially unacceptable to include a statement that efficacy had not been demonstrated, as this would undermine the profile of [Paxil]."

So the analysis emphasized secondary outcomes, the "Study 329 investigators later added several additional efficacy measures not specified in the protocol. Paxil separate statistically from placebo on certain of these measures." Adding numerous post-hoc measures increased the likelihood of finding a difference on at least one due to chance alone.

Manipulation of Data

Initial analysis of the data suggested that patients given Paxil experienced 11 serious adverse events, including five that appeared related to suicidal ideation or action. When the FDA later reexamined the data, "upon closer examination the number of possible suicide-related events among the Study 329 Paxil patients increased beyond the five patients GSK described in the JACAAP article as having 'emotional lability.' While collecting saftey information for the FDA, GSK admitted that there were four more possible suicide-related events among Paxil patients in Study 329. In addition the FDA later identified yet another possible suicide-related event in the Study 329 Paxil patients, which was also not among the 11 serious advents listed in the JAACAP article. Thus, altogether, 10 of the 93 Paxil patients in Study 329 experienced a possible suicidal event, compared to one in 87 patients on placebo. This is a fundamentally different picture of Paxil's pediatric safety profile than the one painted by the JAACAP article...." 

Manipulation of Dissemination

The report describing the results of Study 329 (Keller MB, Ryan ND, Strober M et al.  Efficacy of paroxetine in the treatment of adolescent major depression: a randomized controlled trial.  J Am Acad Child Adolescent Psychiatry 2001; 40: 762-772.  Link here. ) was written under the control of GSK. "In April 1998, GSK hired Scientific Therapeutics Information, Inc (STI) to prepare a journal article about Study 329. GSK worked closely with STI on the article by providing a draft clinical report to 'serve as a template for the proposed publication.'"

The published report of Study 329 "mischaracterized the results." "Although the ... article identified the study's two primary endpoints in the abstract, the article did not explicitly state that Paxil failed to show superiority to placebo on either of the primary efficacy measures." Also, "the article did not explicitly identify the two protocol-specified primary outcome measures - or that Paxil failed to show superiority to placebo on these two measures. Instead the article claimed that there were eight efficacy measures and that Paxil was statistically superior to placebo on four of them." In addition, "while the article listed the five protocol-defined secondary endpoints, the text of the article omitted any discussion regarding three of the secondary measures on which Paxil failed to statistically demonstrate its superiority to placebo and instead focused on the five secondary measures that GSK added belatedly and never incorporated into the Study 329 protocol. The article claimed that these finve secondary measures had been identified 'a priori,' therefore incorrectly suggesting that all secondary endpoints had been part of the original study protocol." In other words, the final published articles contained multiple outright falsehoods about the drug's efficacy that exaggerated that efficacy.

Furthermore, initial analysis showed that patients given Paxil had more serious adverse events than others. An initial draft of the study article stated, "serious adverse events occurred in 11 patients in the paroxetine group, 5 in the imipramine group, and 2 in the placebo group." These included "headache during down-titration(1 patient), and various psychiatric events (10 patients): worsening depression (2); emotional lability (e.g., suicidal ideation/ gestures, overdoses), (5); conduct problems or hostility (e.g., aggressiveness, behavioral disturbance in school) (2); and mania (1)." As noted above, the number of suicide related events was actually double that noted in this draft as "emotional lability."  However, the published version of the report "falsely state[d] that only one of the 11 serious adverse events in Paxil patients was considered related to treatment...."  Nor did it mention the true number of events related to suicidal ideation or action.

The article only "listed at most five possibly suicidal events among Paxil patients, brushed those off as unrelated to Paxil, and conclude that treating children with Paxil was safe."

Later, GSK marketing materials described the results of the study thus,

This 'cutting-edge,' landmark study is the first to compare efficacy of an SSRI and a TCA with placebo in the treatment of major depression in adolescents. Paxil demonstrates REMARKABLE Efficacy and Safety in the treatment of adolescent depression."

Thus the conrol exerted by GSK over the published article, despite its apparent academic authorship, enabled it to promote a drug that was not efficacious and had major adverse events as remarkably safe and effective, a totally deceptive result that would mislead any health care professional who used the article to guide clinical practice. 

Suppression of Clinical Research

GSK sponsored two other studies of Paxil in pediatric populations, Studies 377 and 701. As stated in the Department of Justice's Criminal Complaint against GSK,

GSK Did Not Publicize the Results of Studies 377 and 701
43. GSK learned the results of Study 377 in 1998 and the results of Study 701 in 2001. Paxil failed to demonstrate efficacy on any of the endpoints of either study.
44. GSK did not hire a contractor to help write medical articles about the results of Studies 377 and 701, as it had with Study 329.
45. GSK did not inform its sales representatives about the results of Studies 377 and 701.

Thus, GSK managed to conceal the fact that the majority of the studies it sponsored about Paxil used for adolescent patients showed no evidence that the drug worked, again seriously distorting the evidence-base on which clinicians made decisions, and doubtless leading to the use of a dangerous, ineffective drug by numerous vulnerable patients.

Bribing Physicians to Prescribe

GSK's sales representative reflected in their call notes their use of money, gifts, entertainment and other kickbacks to induct doctors to prescribe GSK drugs....

One really creative way to pay physicians to be exposed to marketing:

For example, in or about 2000 or 2001, GSK used 'Reprint Mastery Training Programs' or 'RMTS' to further promote drugs by purporting to pay physicians to train sales representative to review reprints of studies. Although the training was purportedly for the representatives, in fact, the sales force was already familiar with the materials. GSK typically paid physicians $250 to $500 to review the reprints.

Thus GSK simply paid physicians to use its drug, a practice characterized as kickbacks in the official complaint.  An article in the Guardian noted that the US Attorney involved in the case put it even more bluntly,

The sales force bribed physicians to prescribe GSK products using every imaginable form of high-priced entertainment, from Hawaiian vacations [and] paying doctors millions of dollars to go on speaking tours, to tickets to Madonna concerts.

Use of Key Opinion Leaders as Disguised Marketers

GSK also created a group of national 'key opinion leaders' ('KOLs') who were paid generous consulting fees. GSK selected many of these physicians based on their prescribing habits and influence within the community and used the speaker fees paid to these physicians to induce and reward prescribing of GSK's products. GSK used these individual to communicate marketing messages focused on the drug's marketing campaigns at the time, including off-label uses. Some physicians on GSK's speaker's board have been paid more than a million dollars for speaking on behalf of the company and recommending its drugs.

Thus key opinion leaders were paid specifically to market drugs, and as a reward, a bribe for prescribing drugs.

Consulting Fees as Kickbacks

In general,

In order to induce physicians to prescribe and recommend its drugs, GSK paid kickbacks to health professionals in various forms, including speaking or consulting fees, travel, entertainment, gifts, grants, and sham advisory boards, training,....

In particular,

During 2000 and 2001 at least, GSK also utilized events termed 'advisory boards' or consultant meetings and forums to disseminate its promotional message. Although these boards were purportedly composed of 'thought leaders' for the purpose of obtaining advice from the physicians, in fact, the 'advisory boards' were little more than promotional events coupled with financial inducement to prescribing and influential physicians.

Also,

GSK typically paid the physician between $250 and $750 to attend each local 'advisory' meeting. The payments did not reflect the value of services. The physician was not required to do anything but show up. GSK had no legitimate business reason to hire thousands of 'advisors' to 'consult' with the company about a single drug.

Manipulation of Continuing Medical Education

GSK also used so-called CME and CME Express programs and other sham training for marketing purposes, and to promote off-labe uses for the GSK prescription drugs.

Furthermore,

These CME programs purported to be independent eduaction free of company influence, but in fact functioned as GSK promotional programs disguised as medical education. GSK maintained control and influence over the purportedly independent CME programs through speaker selection, and influence over content and audience, among other things. Although third party vendors were usually also involved, they served only as artificial 'firewalls' that did not insulate the program from GSK's influence.

Summary

The legal documentation of the GSK settlement demonstrated how one drug company used an integrated, systematic campaign incorporating deception and bribery to sell drugs. Its elements included manipulation and suppression of the clinical research it sponsored, paying key opinion leaders to be disguised drug marketers, outright payments to physicians to prescribe drugs, and manipulation, again using payments to physicians, of supposedly independent continuing medical education. 

Note that while I summarized the elements of the stealth marketing campaign to sell Paxil, particularly for use in pediatric patients, the US government complaint also documents similar activities used to sell other drugs.  Furthermore, other stealth marketing campaigns have come to light through legal action, and many other instances of manipulation and suppression of clinical research, use of KOLs as disguised marketers, kickbacks and bribes, and manipulation of CME have been documented.

This means that any claims that:
- commercially sponsored clinical research provides clear, unbiased data that should drive clinical decisions
- health care professionals and academics paid as consultants by commercial health care firms are not influenced by these payments, and can provide clear, unbiased opinions
- commercially sponsored medical education provides clear, unbiased teaching
unfortunately must be viewed with extreme skepticism. This is particularly unfortunate given that most clinical research is now supported by commercial sponsors, and the majority of influential academics in medicine get some form of payments from the health care industry (look here).

Of course, there are some physicians who consult for commercial firms who actually provide clinical or scientific advice or assistance, and some commercially sponsored activities are honest. But we must wonder what garden path all those advocates for increasing industry "collaboration" to promote "innovation," and who regard conflicts of interest as "inevitable" and "manageable" are taking us down (e.g., look here and here).

Although the current settlement will require a huge payment, as I have said many times before (as early as 2008, here), do not expect such settlements to deter future bad behavior like that listed above.  The cost of the settlement will actually be spread among all company shareholders, all company employees, and likely patients and taxpayers.  However, the settlement will entail no specific negative consequences to the people who authorized, directed, or implemented the bad behavior.  In particular, executives whose remuneration was swollen by proceeds from the sales of affected drugs, and the health care professionals who willingly accepted what the US Attorney called bribes will not pay any sort of penalty.  The bad behavior listed above was doubtless personally very profitable for some people.  Unless people who indulge in such behavior face the possibility of penalties worse than their expected gains, expect such bad behavior to continue.

In fact, as the New York Times reported,

critics argue that even large fines are not enough to deter drug companies from unlawful behavior. Only when prosecutors single out individual executives for punishment, they say, will practices begin to change.

'What we’re learning is that money doesn’t deter corporate malfeasance,' said Eliot Spitzer, who, as New York’s attorney general, sued GlaxoSmithKline in 2004 over similar accusations involving Paxil. 'The only thing that will work in my view is C.E.O.’s and officials being forced to resign and individual culpability being enforced.'

True health care reform would strive to eliminate important conflicts of interest affecting clinical research and medical education.  Specifically, it would prevent corporations that sell health care products or services from controlling clinical research meant to evaluate these products or services.  It would seek to eliminate serious conflicts of interest affecting health care professionals.  Finally, it would prevent vested interests from controlling medical education.  Not that I expect any such reform in the near future, it would be too threatening to those who have personally benefited from the current system.

Hat tip to Dr Howard Brody whose Hooked: Ethics, Medicine and Pharma blog scooped me on the details of the settlement relevant to study 329.

ADDENDUM (11 July, 2012) - see also this post on the 1BoringOldMan blog.

"More Marketing Than Science" - An Anonymous Confession About Deceptive Marketing Published in the British Medical Journal

The British Medical Journal just published an anonymous article by a pharmaceutical company insider that explained once again how pharmaceutical companies turn research studies, apparently scholarly articles, and medical education into stealth marketing efforts.  (See Anonymous.  Post-marketing observational studies: my experience in the drug industry.  Brit Med J 2012; 344: 28.  Link here.)

We have previously discussed examples of health care corporate insiders confessing their individual efforts to turn medical research and education into marketing.  For example, peruse this.  We have also discussed how documents made public through litigation have revealed marketing plans for specific drugs that used apparently academic, educational, or scholarly publications and venues to market without revealing this transformation.  For example, see the Neurontin marketing plan (see post here), and the Lexapro marketing plan (see post here).  We have also discussed numerous examples of manipulation of particular research studies by those with vested interests, and outright suppression of studies whose results did not favor such vested interests.

Yet I suspect majorities of health care academics and professionals, health care policy makers, and the public at large do not realize, or would not admit that the evidence base for making health care decisions, and the general academic and professional discourse has been so corrupted.  So it is worthwhile to review once again how an insider summarized this corruption.

Research Studies Designed Primarily as Marketing Vehicles

In general, the anonymous author suggested that at least some studies were done for marketing, not scientific purposes:

some of the studies I worked on were not designed to determine the overall risk:benefit balance of the drug in the general population. They were designed to support and disseminate a marketing message.

Whether it was to highlight a questionable advantage over a 'me-too' competitor drug or to increase disease awareness among the medical community (particularly in so called invented diseases) and in turn increase product penetration in the market, the truth is that these studies had more marketing than science behind them.

Furthermore, the studies were supervised not by physicians or scientists, but by marketers in the marketing department,

Although the medical department developed the publication plans, designed the study, performed the statistical analysis, and wrote the final paper (which when published was passed on to marketing and sales to be used as marketing material), the marketing team responsible for that product were directly involved in all stages. They also closely supervised the content of other educational 'scientific' materials produced in the medical department and intended for potential prescribers. Instructions from marketing to the medical staff involved were clear: to ensure that the benefits of the drug were emphasised and the disadvantages were minimised where possible.

Manipulation of Research Design, Implementation, or Analysis

The author described how the marketers manipulated research studies so they would produce the results desired from a marketing perspective, regardless of their underlying truth,

Since marketing claims needed to be backed-up scientifically, we occasionally resorted to 'playing' with the data that had originally failed to show the expected result. This was done by altering the statistical method until any statistical significance was found. Such a result might not have supported the marketing claim, but it was always worth giving it a go to see what results you could produce. And it was possible because the protocols of post-marketing studies were lax, and it was not a requirement to specify any statistical methodology in detail. On the other hand, the studies were hypothesis testing (such as cohort studies, case-control studies) rather than hypothesis generating (such as case reports or adverse events reports), so playing with the data felt uncomfortable.

Other practices to ensure the marketing message was clear in the final publication included omission of negative results, usually in secondary outcome measures that had not been specified in the protocol, or inflating the importance of secondary outcome measures if they were positive when the primary measure was not.

So to summarize, the marketers would control the statistical analyses, promoting multiple analyses to attempt to come up with the "right" result that would support the marketing message (although the more kinds of analyses one tries, the more likely one is likely to come up with false results by chance alone). Presumably the marketers did not care whether or not the results were really true, which is perhaps why even they felt "uncomfortable" in some circumstances.

They would also foster the suppression of negative results, and the dredging of data for extra outcome measures when analysis showed no advantage in terms of the real primary outcomes. Suppression of negative results could be viewed as plain lying. Deliberate analysis of multiple end-points again risks identifying random error as true results.

The Role of Key Opinion Leaders

The author described how key opinion leaders, that is, health care professionals thought to be especially influential on practice or policy, were hired to become marketers presumably without revealing this intention.

Every big international observational study had a large advisory board. This was critical since the success of a newly launched drug in the market would depend on how many key opinion leaders were part of the study. Not only would they add credibility to the results, but they would also be key in influencing decision makers and other prescribers. In regional studies with thousands of patients, the study’s advisory board was formed by at least one key opinion leader from each country in that region, ensuring that areas important in terms of possible sales were covered. The contributions of the key opinion leaders to the study were always positive, but in my experience more directed towards designing new studies to answer their specific clinical questions rather than critically appraising our results and conclusions. In general, the relationship was amicable. We took them to the best hotels and restaurants during our advisory board meetings, and they appeared as authors in our research. Later, they would act as the company’s 'ambassadors,' giving conferences, teaching doctors, or talking to the media about the benefits of the drug.

Note that even the anonymous author could not bring him or herself to call the key opinion leaders salespeople, or marketers, but used the ambiguous wterm "ambassadors." Nonetheless, the role of key opinion leaders described would clearly be that of marketers or salespeople. However, it is extremely doubtful that any of these KOLs felt they had to declare that they were paid salespeople when presenting at conferences, teaching doctors, or talking about the media.

I would suggest that their actions would therefore fit Transparency International's definition of ethical corruption, "abuse of entrusted power for private gain." The KOLs are entrusted to be professional, and in many cases, scholarly. Using a professional or scholarly guise to act as a salesperson appears to be abuse of that entrusted power, in my humble opinion. In nearly every case, KOLs are paid, often handsomely, by the companies whose products they are selling. Thus, key opinion leaders acting as described by the anonymous author appear to be ethically corrupt.

Summary

The evidence of unethical marketing practices by commercial health care firms is mounting. Although I am most familiar with evidence from the US, there is mounting evidence that these practices are global, often done by companies that are not US based, and meant to influence practice and policy world-wide.

As the evidence mounts, it becomes increasingly clear that many such marketing practices are corrupt, at least in an ethical sense. Whether they may break laws in particular countries is a question for someone else.

The latest BMJ article is a reminder how skeptical the shrinking group of health care professionals who do not have conflicts of interest, are not biased in favor of particular products, and who put patients' interests first must be about ALL published research, scholarly publications, and apparently educational activities. Advocates of true evidence-based medicine must be extremely careful to try to use the least biased and manipulated parts of the evidence-base.

The mounting evidence suggests that at a minimum, all research reports, scholarly articles, media reports, conferences, and educational programs should provide full, detailed disclosure of all conflicts of interest. Perhaps having to make a declaration like "I am paid 50,000 Euros a year by the marketing department of company X to help market drug Y" before a supposedly educational talk would make some health care professionals think twice about such relationships.

However, even such detailed disclosure may not be sufficient to hamper marketing practices that now appear overtly corrupt. In my humble opinion, it is time to consider a global ban on the funding or influencing of human research by companies and other organizations which stand to gain financially according to the results of the research, or whose products and services are subject of such research. It is also time to consider a global ban on the funding or influencing of health care education by such organizations.

However, so many people are making so much money from the current practices that I doubt such proposals would get much support, or even public notice beyond this humble blog.

The Case of the Vanishing Graduate Medical Education Funds

While primary care falters in the US, those who teach it seem to feel increasingly poverty stricken.  Now it appears that one reason for this is an amazing example of multiple failures of transparency and accountability.  Let me work through it, begging your pardon for a little bit of "inside baseball," medical education style.  The results suggest how we desperately need some medical disciples of Sherlock Holmes.

Background

My personal experience and increasing data suggests that most medical school faculty believe that their teaching is not valued by their institutions because teaching brings in no external funds.  In 2004, Dr Catherine DeAngelis, then the editor of JAMA, wrote "few medical schools provide adequate, if any, reimbursement for teaching time."(1)  (See this 2005 post.)   This seems absurd on its face, since what are medical schools for if it is not to provide teaching. 

However, there is evidence of this mission-hostile behavior.  In 2007, we quoted from a revealing interview with Dr Lee Goldman, Executive Vice President for Health and Biomedical Sciences at Columbia University,(2) who stated that "taxpayers," faculty who "generate more [money] than they cost," are valued most, and implied that faculty who focus on teaching are regarded as "welfare recipients," who bring in less external funding, and are valued least.  In 2010, we noted the results of a large-scale survey presented by Dr Linda Pololi in which 51% of faculty felt that the administration only valued them for the money that they brought in, and half felt that their institutions did not value teaching.(3)

Yet while faculty seem to believe that educational institutions receive little if any money to pay for teaching, it is not clear why the believe something so counter intuitive, and it is less clear what money actually goes to pay for medical education.

US Government Funding for Graduate Medical Education

However, several recent publications affirm that actually a lot of money goes towards one important form of medical education, yet the specifics of the money flows are shrouded in secrecy.  In the May, 2012, SGIM Forum, Dr Mark Liebow and colleagues summarized some of what is known about federal support of graduate medical education, that is, education of interns, residents, and other house officers.(4)  There are two streams of money that flow from Medicare to US hospitals:

Direct GME (DGME) payments help hospitals pay the salaries of residents, teaching faculty, and support staff. DGME is the product of three numbers: a per resident amount that varies by hospital, adjusted annually for inflation; the number of residents in the hospital (capped for each hospital at 1997 levels); and the fraction of discharges from the hospital that are Medicare beneficiaries. The Indirect Medical Education (IME) payment is a percentage amount added on to each DRG payment. The percentage is calculated via a complex formula (the only US statute containing an exponent!), where the key factor is the ratio of interns/residents to beds (IRB ratio).

These two streams are of considerable size:

Of the $9.2 billion Medicare paid for GME in 2010, $3 billion was for DGME and $6.2 billion for IME. The money is paid to hospitals sponsoring training programs rather than to the training programs or other hospitals where training occurs. While about 1,100 hospitals receive GME payments, 66% goes to the 200 hospitals that have the largest numbers of residents.

So, the 200 largest hospitals get about $2 billion in direct GME money (and presumably about another $4 billion in indirect money). This averages then to about $10 million DGME and $20 million indirect GME per hospital.

Thus, teaching, at least the teaching of interns, residents, and other house-staff does pay, and much more than trivial amounts. (Note that these amounts are not for teaching of medical students, which ought to be supported by other funding streams.)

Why then do faculty think that teaching does not bring in any money?

The GME Money Vanishes

An article by Dr Saima I Chaudhry and colleagues in the American Journal of Medicine begins to explain, although the explanations are found between the lines.(5)

First of all, while the graduate medical education money is paid by the government to the hospitals, the government does not publish what it pays to individual hospitals:

It has been previously reported that the amount of GME funding individual hospitals receive is not publicly reported by the Centers for Medicare and Medicaid Services,....

The government also does not hold the hospitals accountable for how they spend this money, nor for the quantity or quality of education they supply in exchange for it.

Remarkably, Chaudhry et al imply that that the people who run graduate medical education teaching programs also may not know how much money their hospitals receive from the government to fund their programs. The introduction to their article noted:

It is unclear how much program directors know about the amount and flow of DME funds to their programs. Program directors' beliefs about the transparency of funding to their programs, or their desire to influence how funds are distributed to them, also are unknown.

The article reported on a survey of internal medicine residency program directors which asked about "their knowledge of D[G]ME funding for their programs, the transparency with which funds are distributed to them, and their desire to influence this disbursement." The researchers sent surveys to 372 member programs, representing 97.1% of all US internal medicine residencies. They got 268 responses, a 72.0% response rate.

The main results were that only 159/268 (59.3%) of program directors had tried to find out how much DGME money their programs received, and of those, only 84 (52.8% of those enquiring, but only 31.3% of all respondents) actually knew how much money their programs got.

Of the 92 program directors who did not even try to discover how much money their programs received, approximately 21% said that "no one would tell me," 21% said that the "information would be inaccurate," 14% said they "don't know who to ask," and 2% were "afraid to ask."

Summary

US medical school faculty, especially those in primary care, increasingly feel pressured to perform activities that they perceive brings in money from external sources. They tend to believe that their own teaching somehow does not bring in any money, and that their careers will fail if they do not put more emphasis on other activities that the institution views as more profitable.

However, literally billions of US government dollars go to support the education of house staff, including the salaries of faculty who teach interns and residents, who probably are the majority of physician faculty. Faculty probably do not know this, because the government does not publish the amounts given to individual hospitals, nor demand of the hospitals any accountability for how they spend the money they receive.

Presumably, the top executives of each hospital know how much money the government gives them. Nonetheless, the majority of physician leaders of residency programs are never told these amounts, apparently because their hospital executives kept the amounts secret. Many of those educators who have tried to find out the figures were unsuccessful. Some did not even try to find out based on beliefs that their attempts would be unsuccessful, any amounts they discovered would be inaccurate, the people who knew the amounts were hidden, or that it would be dangerous to their careers to even try.

Thus billions of dollars of money flowing from the government to fund graduate medical education seems to have vanished in an amazing example of widespread deficiencies in accountability and transparency.

There are many people who blame government for many social ills. In this case, one can blame the US Congress for not writing a law that makes the money flows transparent and hospitals accountable for providing good educational value for the money provided. One can also blame the executive branch, particularly the Center for Medicare and Medicaid Services (CMS) of the US Department of Health and Human Services (DHHS) for not making the money flows and the values received for them transparent.

There are a few people, including this author, who also blame the leadership of health care organizations for many of the problems besetting health care. In this case, one can blame top leadership, presumably CEOs and chief financial officers (CFOs) of hospitals for hiding the amounts of money they receive from Medicare to finance graduate medical education. One can also blame the physician leaders of residency programs for not insisting that they know the true sources of financial support for their programs, obtain budgets that reflect this support, and recognition that their faculty really do bring in external funds for their teaching of house staff (and are thus valuable "taxpayers" in Dr Goldman's parlance.)

It is amazing that such amounts of money have been flowing for years mostly in secret. The secrecy has fueled incorrect, and in retrospect, bizarre ideas about the funding of medical education, and the value of medical educators to their institutions. This secrecy, in turn, has helped suppress the morale of medical educators, support the control of managers of health care professionals, and distort the flow of money within academic institutions and to compensation for certain favored individuals.

Would our dysfunctional health care system not be better off if we demanded transparency and accountability from its leaders?  In particular, the US government should make payments to hospitals for graduate medical education completely transparent, and develop a system to hold these hospitals accountable for how they spend the money.  Meanwhile, top leaders of hospitals receiving this money should make the amounts transparent, first to the people who are supposed to be doing the education that the money pays for, and to the public at large.  This would allow those running the relevant educational programs to develop reasonable and realistic budgets, to treat their faculty with respect, and to demonstrate what value they provide for the money received. 
The ongoing anechoic effect, and related deception and secrecy fostered by leaders in health care are major reasons our health care system is so dysfunctional, that costs are so high, and access and quality so poor.  True health care reform would ensure health care leaders put the mission before their personal enrichment, and act ethically with accountability, transparency, and honesty. 
References
1.   DeAngelis CD. Professors not professing. JAMA 2004; 292: 1060-1.  Link here.
2.  Goldman L, Halm EA.  A view from the top: general internal medicine from the perspective of a chair and dean.  SGIM Forum, April, 2007.  Link here.
3.  Pololi L, Ash A, Krupat E.  Faculty Values in the Culture of Academic Medicine: Findings of a National Faculty Survey. Link here.
4.  Liebow M, Jaeger J, Schwartz MD. How does Medicare pay for graduate medical education? SGIM Forum, May, 2012.  Link here.
5. Chaudhry SI, Khanijo S, Halvorsen AJ, McDonald FS,Patel K. Accountability and transparency in graduate medical education expenditures. Am J Med 2012; 125: 517-522. Link here.

Abbott Pleads Guilty, Settles for $1.6 Billion, but No Individuals Suffer Negative Consequences

Once again, another big US health care organization is set to make a (monetarily) huge legal settlement.  As reported by Bloomberg, Abbott Laboratories will settle allegations about its marketing of Depakote (valproic acid), nominally an anti-seizure medication:

Abbott Laboratories (ABT) (ABT) said it will pay $1.6 billion to settle federal and state claims resulting from an investigation into its epilepsy medication Depakote, the second-largest drug-marketing settlement in U.S. history.

The company will pay $800 million to resolve civil allegations split among federal and state governments, $700 million for a criminal penalty, the Justice Department said in a statement. Abbott marketed the drug, approved for epilepsy, bipolar mania and migraine prevention, for unapproved uses including dementia, the U.S. said.

Note that we discussed preliminary reports of this settlement here.

Huge, but not Compared to Sales

The story included all the obligatory pieces. The settlement is huge, the second largest such financial settlement made by a drug company. However, compared to the money made by the product in question, it was not so large, as noted by the Wall Street Journal,

Depakote was once one of Abbott's best-selling drugs, racking up $1.6 billion in sales for 2007, before patent expirations cleared the way for cheaper generic copies.

A Guilty Plea, of Sorts

The settlement did require the company to

plead guilty to a criminal misdemeanor violation of a federal drug law

per the WSJ, but not to a felony. Nor did it appear that any individual would be charged with anything in connection with this settlement.

Admitting to Deception, Covering Kickbacks

This was so even though the allegations involved more than "misbranding." In fact, the Bloomberg story stated that the company admitted to active deception of physicians and health professionals,

'Abbott admits that from 1998 through 2006, the company maintained a specialized sales force trained to market Depakote in nursing homes for the control of agitation and aggression in elderly dementia patients, despite the absence of credible scientific evidence that Depakote was safe and effective for that use,' the Justice Department said in its statement today.

Abbott also marketed the drug to be used with certain antipsychotic drugs to treat schizophrenia, 'even after its clinical trials failed to demonstrate that adding Depakote was any more effective than an atypical antipsychotic alone for that use,' the Justice Department said.

In addition, the settlement also "covers" allegations of what amounts to bribery.

The settlement also covers allegations that Abbott paid kickbacks to health-care professionals and long-term care pharmacy providers to induce them to promote or prescribe Depakote, the Justice Department said in its statement today.

We Promise Not to Do Such Bad Things for Five Years

Yet despite these implications of massive deception and bribery of health care professionals, the only other punishment is a sort of probationary period during which the company promises not to do such things, per the WSJ.

Under the settlement, Abbott agreed to a five-year probationary period. During this term, Abbott will report any probable violations of the Food, Drug and Cosmetic Act to the probation office, according to the Justice Department.

Also, its chief executive will certify compliance with this reporting requirement, and its board will report annually on the effectiveness of the company's compliance program.

In addition, Abbott agreed not to compensate sales reps for off-label sales and take other steps during the probationary period.

A Bland Admission of Nothing

As is customary, an Abbott spokesperson provided a bland, positive statement that admitted no wrong-doing, per the WSJ,

'We are pleased to resolve this matter and are confident we have the programs in place to satisfy the requirements of this settlement,' Abbott General Counsel Laura Schumacher said in a news release. 'The company takes its responsibility to patients and health care providers seriously and has established robust compliance programs to ensure its marketing programs meet the needs of health care providers and legal requirements.'

Previous Misbehavior

Apparently not taken account into stories about or the crafting of the current settlement was Abbott's previous record of legal misadventures:

Obstructing Justice - In 2003, an Abbott subsidiary settled civil allegations and pleaded guilty to obstructing a federal criminal investigation of its marketing practices, resulting in fines of $614 million (mentioned in this post, and see the Los Angeles Times.)
Suppressing Reports of Drug Contamination - In 2009, the FDA charged that an Abbott subsidiary failed to report bacterial contamination of an optic product (see post here).
Blocking Generic Competition - In 2010, Abbott settled with the New York state Attorney General allegations that the company conspired to block generic competition for its lipid lowering drug TriCor (see Reuters and our post here).
Inflating Charges - In 2010, Abbott also settled with the US Justice Department for $421 million charges that it defrauded Medicare and Medicaid (see post here).
Paying Kickbacks to Doctors - In 2010, an Abbott subsidiary also settled with the US government charges it paid kickbacks to physicians to prescribe other cholesterol lowering drugs (see post here).
Anti-Competitive Pricing Practices - In 2011, Abbott settled lawsuits alleging that its anti-competitive practices inflated prices of anti-viral drugs (see post here).

More Richs for the CEO

Despite this now long record of ethical missteps, the Abbott CEO gets richer every year. In 2009, his total compensation was over $26 million (see this post). According to the company's 2012 proxy statement, his pay has gone down ever so slightly, from $25,564,283 in 2010 to $24,010,902 in 2011, but still approximately 480 times the median earning of a US family.

Summary

The march of legal settlements progresses. Despite its showy finery of legal language, it fails to include meaningful negative consequences for any individuals, and particularly for those who authorized, directed or implemented unethical actions. It provides the illusion of financial punishment of the organizations involved. However, the amounts paid, albeit large, never approach how much money was brought in by the bad behavior. Furthermore, the costs are diffused among many employees, and for publicly held for-profit corporations, among the nominal owners, the stock-holders. Yet the top executives who personally gained the most almost never have had to answer for the misbehavior, and despite of, or perhaps because of the misbehavior continue to collect voluminous compensation.

Despite promises of tougher action, nothing seems to be changing in this parade. However, without real penalties for individuals involved in bad behavior, expect to deterrent of future bad behavior.

So once more,.... if we really want to reform health care, we must make the leaders of health care organizations accountable for their organizations' effects on patients' and the public's health, and make sure they get reasonable, not royal compensation reasonably related to their organizations' performance, including ethical performance.

A Conference on the Psychology of Deception and Unethical Behavior

The Deception, Incentives and Behavior Conference at the Rady School of Management, University of California - San Diego, was attended by over 100 people, including me, indicating that there is real interest in studying deception and unethical behavior in the real world. 

Several presentations had implications for health care, summarized below by theme (titles of presentations follow entries in parentheses).

Context

Several presentations discussed how context affects peoples' inclination to be honest or dishonest. 

Alexander Cappelan,  Norwegian School of Economics, showed evoking a market context, that is, asking people to think about buying or selling something, increased dishonesty, while a personal or intuitive context decreased dishonesty (When do people tell white lies?).

John List, University of Chicago, USA, gave the first plenary talk, suggesting that simply reminding charity fund raisers about the mission of their organization decreased their likelihood of stealing contributions.

Shahar Ayal, Interdisciplinary Center Herzliya, Israel, suggested that when people can present themselves as ethical, sometimes extremely, maybe harshly ethical in one context, they may then act unethically in another context. (Moral cleansing strategies for ethical dissonance.)

Erin Krupka, University of Michigan, suggested that the availability of voluntary regulation may increase cheating: those who do not cheat may volunteer for regulation, while those who do cheat may point to the availability of regulation. (License to cheat: voluntary regulation and ethical behavior.)

Chen-Bo Zhong, University of Toronto, Canada suggested that being able to delegate increases the likelihood of deception (Deception: an unintended consequence of delegation.)

Keith Murningham, Kellogg School of Management, suggested that priming people by asking them to perform mathematical calculations increases lying, while priming them by reminders about social awareness or family values does not. (The social and ethical consequences of a calculative mindset.)

Incentives

Several  presentations suggested various ways in which incentives may affect honesty.

David Cooper, Florida State University, USA, suggested that the need for long-term credibility may decrease lying.  (Managing credibility: an experiment in leadership and coordination.)

Jan Potters, Tilburg University, Netherlands, suggested that increasing size of incentives to advisors increases the likelihood of their dishonesty when giving advice. (Disclosing advisors' interests neither helps nor hurts.)

Anastasia Danilov, University of Cologne, Germany, suggested that people who get incentives as part of a team who identify most strongly with the team are more likely to lie.  (The dark side of team identity: expermiental evidence from financial service professionals.)

Bill Nielson, University of Tennessee, USA, suggested that people will respond to short-term incentives even at the cost of long-term outcomes. (Temptation, learning and backward induction in sequential decision tasks.)

Michael Vlassopoulos, University of Southampton, UK, suggested that people who get random bonuses, that is, whose incentives are not clearly tied to particular outcomes, are more likely to cheat employers.  (The impact of bonuses on effort provision and cheating.) 

Lisa Ordonez, University of Arizona, USA, suggested that basing incentives on achievement of short-term goals (pay for performance) increases lying about performance. (The impact of goals on ethical behavior.)

Conflicts of Interest

Two presenations discussed conflicts of interest and its effects.

Jan Potters (see above) also found that disclosure of payments to advisors did not not lead them to give more honest advice.

Miriam Mezger, University of Cologne, Germany, presented a poster that suggested that when people must make decisions based on a mixture of advice from unbiased lay-people and conflicted individuals who do not disclose their conflicts, addition of advice from unbiased experts leads to better decisions.(Can experts reduce the impact of deceptive ratings on the internet? - an experiment on product choice with recommendations by managers and experts.)

Summary

The enthusiasm and level of intellectual engagement at the meeting suggested the importance of this field.  However, it was disappointing, but not surprising that the attendance at this meeting did not suggest this topic is yet of concern in health care.  Although the opening remarks by the Dean of the Rady School included a call for participation by people from health care, and other fields such as environmental science, I may have been the only person attending with a health care affiliation. 

Health care could benefit from increased attention to deception, dishonesty and unethical conduct in the field, how it happens, and what can be done to prevent it.  However, as we have often suggested, discussion of such topics is often anechoic because its capacity to offend or threaten those who most benefit from the status quo in health care. 

It was striking that presentations suggested that many practices in our current US commercialized, business-focused health care system may be leading to increased dishonesty and other unethical behavior.  These include thinking about health care in business and quantitative contexts, not in the context of the health care mission to help patients and the public, focus and incentives based on short-term goals, often revenue, and acceptance of conflicts of interest as inevitable and necessary to increase innovation.

Of course, these particular ideas may not make many of our current health care leaders happy.

They do suggest that we could improve honesty and ethics in health care by reminding peole with decision-making authority of the centrality of the health care mission, and the need to improve patients' and the public's health, and to de-emphasize focus and incentives on short-term goals, particularly financial ones.  We also ought to try to minimize, not just tolerate and "manage" conflicts of interest.

Some of WellPoint's Owners (Stockholders) Allege Their Hired Executives Hid Political Contributions

We have frequently had reason to question the actions of WellPoint, the second largest for-profit health insurance company/ managed care organization in the US. 

Hidden Political Contributions

The Washington Post reported yet another one,

Health insurance giant WellPoint is the latest target of an increasingly aggressive campaign to force disclosure of corporate political and lobbying expenditures, including payments to the U.S. Chamber of Commerce, which has become more active in elections over the past decade.

The WellPoint campaign, set to be formally announced Thursday by a coalition of activist investor groups, demands the resignation of two WellPoint board members, including Susan Bayh, the wife of former senator Evan Bayh (D-Ind.), for allegedly failing to oversee 'high risk political spending.'

The shareholder coalition cited WellPoint’s reluctance to answer questions about a transfer of $86 million from the health insurers trade association to the U.S. Chamber of Commerce in 2010, when the Chamber was actively opposing President Obama’s health-care overhaul. WellPoint is a member of the association, America’s Health Insurance Plans.

'This is the most egregious clandestine campaign funding we have ever seen,' said Michael Pryce-Jones of the CtW Investment Group, a labor-affiliated organization that is part of the shareholders’ coalition, referring to the payments from the trade association to the Chamber of Commerce.

However,

At WellPoint, officials dismissed the notion that the company has been secretive about its political giving. On the contrary, spokeswoman Kristin Binns said, the firm discloses a great deal on its Web site.

'WellPoint complies with all disclosure requirements under federal, state and local laws,' she said, noting that the company publishes a 'very extensive' annual report on its political contributions.

But,

That report does not include details of the sort of special payment that the shareholders coalition said WellPoint made to the health insurers association.

So, to summarize, WellPoint management is accused of spending tens of millions on political lobbying while hiding the spending from the public and from the company's nominal owners, that is, its stock-holders, by laundering it through a third party.

WellPoint's Sorry Ethical Record

This is just the latest questionable behavior by WellPoint we have discussed. Previously, we have noted incidents in which the company  ...
 

• settled a RICO (racketeer influenced corrupt organization) law-suit in California over its alleged systematic attempts to withhold payments from physicians (see 2005 post here).
• subsidiary New York Empire Blue Cross and Blue Shield misplaced a computer disc containing confidential information on 75,000 policy-holders (see 2007 story here).
• California Anthem Blue Cross subsidiary cancelled individual insurance policies after their owners made large claims (a practices sometimes called rescission).  The company was ordered to pay a million dollar fine in early 2007 for this (see post here).  A state agency charged that some of these cancellations by another WellPoint subsidiary were improper (see post here).  WellPoint was alleged to have pushed physicians to look for patients' medical problems that would allow rescission (see post here).  It turned out that California never collected the 2007 fine noted above, allegedly because the state agency feared that WellPoint had become too powerful to take on (see post here). But in 2008, WellPoint agreed to pay more fines for its rescission practices (see post here).  In 2009, WellPoint executives were defiant about their continued intention to make rescission in hearings before the US congress (see post here).
• California Blue Cross subsidiary allegedly attempted to get physicians to sign contracts whose confidentiality provisions would have prevented them from consulting lawyers about the contracts (see 2007 post here).
• formerly acclaimed CFO was fired for unclear reasons, and then allegations from numerous women of what now might be called Tiger Woods-like activities surfaced (see post here).
• announced that its investment portfolio was hardly immune from the losses prevalent in late 2008 (see post here).
• was sanctioned by the US government in early 2009 for erroneously denying coverage to senior patients who subscribed to its Medicare drug plans (see 2009 post here).
• settled charges that it had used a questionable data-base (builty by Ingenix, a subsidiary of ostensible WellPoint competitor UnitedHealth) to determine fees paid to physicians for out-of-network care (see 2009 post here). 
• violated state law more than 700 times over a three-year period by failing to pay medical claims on time and misrepresenting policy provisions to customers, according to the California health insurance commissioner (see 2010 post here).
• exposed confidential data from about 470,000 patients (see 2010 post here) and settled the resulting lawsuit in 2011 (see post here).
• fired a top executive who publicly apologized for the company's excessively high charges (see 2010 post here).
• California Anthem subsidiary was fined for systematically failing to make fair and timely payments to doctors and hospitals (see 2010 post here).

Yet despite this amazing recent record, WellPoint's top executives continue to prosper.  Earlier this month the Indianapolis Star reported that WellPoint Chair and CEO Angela,

Braly, 50, received 2011 compensation valued at $13.2 million, according to an Associated Press analysis of the Indianapolis company's annual proxy statement. That represents a 2 percent drop compared with 2010.

Braly, who has served as CEO for nearly five years, received a $1.1 million salary in 2011, a total that has stayed flat since 2008. Her compensation also included a performance-related bonus of nearly $1.9 million, stock and option awards totaling about $10 million and $216,279 in other compensation.

While her compensation dropped 2%,

WellPoint's earnings fell in the final three quarters of last year compared with 2010, capped by a 39 percent drop in the fourth quarter. In total, the insurer's earnings sank 8 percent compared with 2010.

The compensation above did not take into account that

Braly also made about $6.9 million last year mostly from previously awarded restricted stock units that had vested.

Summary

WellPoint CEO Angela Braly, like many of her fellow top hired managers of health care organizations, has become more wealthy every year despite her company's record of questionable conduct, and out of proportion to her company's financial results.

Based on illusory promises of greater efficiency that would benefit everyone, we have handed health care over to large, increasingly for-profit organizations, and we have handed control over these organizations to hired managers. We have made these managers accountable to no one, so they seem to run their organizations to benefit themselves first. Is it any surprise that organizations run to benefit top insiders do not much benefit patients' or the public's health?

Maybe the campaign by some of WellPoint's nominal owners to at least make what the company pays to influence politics transparent is a tiny first step to making the leadership of health care organizations accountable both to the organizations' owners (when they exist) and to patients and the public at large. Until they become so accountable, do not expect any improvements in health care cost, quality or access.