New Investigations of Boston Scientific, but New CEO Made $33.5 Million for Half a Year's Work

It appears that device-maker Boston Scientific has a new set of troubles.  The Boston Globe just reported:

Stepped-up government scrutiny of Boston Scientific Corp. stems from heightened concern over medical safety and disappointment that the company made new missteps after resolving previous problems with the Food and Drug Administration, analysts said yesterday.

The Natick medical-device maker, which has been working to settle patent suits and federal investigations dating back years, recently was notified of fresh investigations begun by the Department of Justice and the Securities Exchange Commission into problems that forced it to recall implantable heart defibrillators this month.

Boston Scientific said March 15 that it had halted shipments and recalled unsold units of seven brands of cardioverter and cardiac resynchronization therapy defibrillators. The products represented roughly 15 percent of the company’s $8.2 billion in 2009 sales.

On March 15, the company belatedly filed a notice informing the FDA of the production changes.

Larry Biegelsen, a senior analyst for Wells Fargo Securities, estimated Boston Scientific could lose $5 million in revenue every business day until defibrillator sales resume.

The Boston Globe article noted that:

Boston Scientific’s latest woes are reminiscent of an earlier round of friction with the FDA when defibrillator problems came to light after the company bought Guidant. The agency issued a 'warning letter' in 2006, citing multiple manufacturing violations and limiting Boston Scientific’s ability to get new devices approved until it fixed the problems. The restrictions were gradually loosened over the next two years, as the company strengthened its compliance, and the letter was lifted in 2008.

That summary actually soft-pedaled Boston Scientific's previous woes.

We started posting about the company's travails in 2005, starting with allegations that Guidant, which is now a Boston Scientific subsidiary, hid information about defects in the implantable cardiac defibrillators (ICDs) the company manufactured. As we noted in early 2005 here, Guidant executives allegedly knew that ICDs made from 2000-2002 were at risk for short-circuiting and failing, thus making them unable to deliver potentially life saving electrical shocks meant to prevent cardiac arrests, but the company only revealed the problem in 2005. By failing to notify physicians and the public, Guidant executives let expensive and profitable, but potentially useless devices to continue to be implanted, potentially increasing the risk of sudden death for the patients who received them. Then here we noted reports that Guidant continued to ship failure-prone devices even after it had designed and started to manufacture new ICDs that were supposed to be less likely to fail. By June, 2005 we posted that Guidant had recalled thousands of ICDs, including models that were previously not identified as likely to fail. Later that year, the case rated an article by Robert Steinbrook in the New England Journal of Medicine. Towards the end of 2005, we noted that Eliot Spitzer had sued Guidant for fraud.  At the end of the year, more information appeared, suggesting that Guidant knew the ICDs were flawed, but continued to sell them. Still more appeared early in 2006. Then the business media became interested in the bidding war between Johnson and Johnson and Boston Scientific for Guidant, provoking a bit more interest in the tale of the suppression of data about the flawed ICDs.

Then all was quiet until 2009, when Guidant, now a Boston Scientific subsidiary, plead guilty to two criminal misdemeanor charges that it failed to properly notify the FDA about problems with its ICDs (see post here). Later, the Guidant subsidiary of Boston Scientific settled charges that it gave doctors kickbacks as part of a "seeding study" to use its devices. At that time, it came to light that Boston Scientific had made another settlement, in 2007, of civil lawsuits alleging that the company hid problems with its products (see post here).

However, just as the latest questions about Boston Scientific were revealed, the Boston Globe also reported about how the company compensated its new CEO, who started in the middle of 2009:

Boston Scientific Inc. gave its new top executive an unforgettable welcome gift.

The Natick medical device maker said it paid chief executive J. Raymond Elliott, who replaced former CEO James Tobin last summer, $33.5 million in total compensation last year, making him one of region’s highest-paid corporate leaders.

Elliott’s pay package includes a salary of more than $598,000 for six months, a $1.5 million signing bonus, nearly $608,000 in other incentive awards, and $29.4 million in stock awards and options that will vest over the next few years. He also received other benefits, including a $12,500 executive allowance, nearly $198,000 for personal use of the corporate jet, and more than $1 million in relocation expenses.

Tobin, who retired last year after running the medical device company for about a decade, earned $13.7 million last year, roughly six times his pay level in 2007 and 2008.

And by the way, the compensation paid both these men did not exactly correlate with the company's financial, as opposed to ethical performance:

In February, the company agreed to pay $1.7 billion to settle patent infringement charges from rival Johnson & Johnson.

And for years, the company has struggled with anemic sales growth. Last year, the company reported it lost $1 billion, its fourth straight year in the red. Sales rose 2 percent to $8.2 billion.

The company’s stock rose 16 percent in 2009, reflecting the broader stock market recovery. But shares have slipped 20 percent this year.

You just cannot make this stuff up.

How could the company possible justify paying over $30 million for half a year's work by its CEO at a time when the company is facing multiple investigations, has had to settle civil cases and criminal charges, has had to stop production of one of its most important products due to its failure to meet regulatory requirments, and has lost money for four years? 

This illustrates how leaders of big health care organizations are able to make themselves extremely rich at the expense of share-holders, employees, patients, and ultimately society, completely out of proportion to any claims they can make about their or their companies' performance.  This indicates the collective lack of accountability of many health care leaders, and the perverse incentives that now drive health care. 

But is it any wonder that health care costs continue to rise uncontrollably? Once again, I submit that true health care reform needs to make health care leaders accountable, and subject to clear ethical standards, and to eliminate the sorts of perverse incentives that are transforming them (and other corporate CEOs) into a new aristocracy.  Without such measures, we in the US may have near universal health care insurance, but soon no one will be able to afford access to any sort of quality health care. 

Meetings and Conferences of Interest

There are a number of upcoming conferences, and sessions within conferences which may be of interest to Health Care Renewal readers. In chronological order, and with apologies for somewhat tooting our own horn,...

Annual Meeting, Society of General Internal Medicine
Minneapolis, MN, USA, 28 April - 1 May, 2010.

Those attending this meeting who read this blog may want to come to the meeting of the SGIM Professionalism Sub-Committee of the Clinical Practice Committee, which I chair, which will be on Friday, 30 April, 7:30-8:30am, Convention Center Room 102C, during the Annual Meeting. We would like to liven up the sub-committee, so please think about attending even if you are not now a member. See the whole meeting program here.

Annual Scientific Meeting, Rhode Island Chapter, American College of Physicians
Warwick, RI, 13 May, 2010.

I will be giving a session on external threats to ethical practice. The whole meeting program is here.

European meeting of the Society for Medical Decision Making
Hall in Tyrol, Austria, 30 May - 2 June, 2010.

Wally Smith and I will be giving a short course on recognizing external threats to rational decision making. The meeting brochure is here. 

PharmedOut.org Conference, "Prescription for Conflict: Should Industry Fund Continuing Medical Education?"
Washington, DC, 25 June, 2010.

The entire content should be of interest to our readers. The conference site is here.

 Healthy Skepticism conference,"Selling Sickness; Influence on influence"
Amsterdam, Netherlands, 7-8 October.

Again, the entire content should be of interest. The conference site is here.

The Settlement and Conviction Round-Up: Friday Frequent Flier Edition

It's time for one of our periodic round-ups of legal settlements and convictions of health care organizations.  This time, we report on three frequent fliers, in chronologic order of the appearance of the relevant news stories.

Robert Wood Johnson University Hospital Hamilton (UMDNJ)

We have written multiple times about the woes of the University of Medicine and Dentistry of New Jersey, which lead to a deferred prosecution agreement and operation under the watchful eye of a federal monitor for several years, and resulted in criminal convictions of a former Dean and the state legislative leader he hired.  Scroll through this for far too many details. 

Now, the redoubtable Newark Star-Ledger reports:

Robert Wood Johnson University Hospital in Hamilton has agreed to pay $6.35 million to settle allegations that the facility defrauded Medicare, Justice Department officials said today.

The Mercer County hospital was accused of inflating charges to Medicare patients to obtain bigger reimbursements from the federal government.

'Taxpayer dollars should go towards quality health care, not wasted on fraud and abuse,' said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice.

The hospital denied wrongdoing in the settlement, said Skip Cimino, the facility's president and CEO. 'Robert Wood Johnson University Hospital Hamilton has resolved the outstanding Medicare Reimbursement issue with the government and looks forward to continuing its service to the community,' he said.

Note that Robert Wood Johnson Medical School is one of the two medical schools contained within UMDNJ.

Fresenius

I admit that we last discussed Fresenius Medical Care Holdings Inc, a for-profit provider of kidney dialysis services, a while ago, back in 2007. At that time, the company settled charges made by the US Federal Trade Commission that it had tried to restrain competition. Last week, the Tennessean reported:

A long-running whistleblower complaint against the once-Nashville based Renal Care Group has led to a $19.3 million federal court judgment against the acquired dialysis supplier and the German company that bought it four years ago.

The lawsuit, which focused on improper claims submitted to Medicare for home dialysis supplies, named Renal Care Group Supply Co. and Fresenius Medical Care Holdings Inc., as co-defendants. The federal government joined the whistleblower complaint more than two years ago.

Renal Care operated a shell billing company solely to submit claims on behalf of itself in violation of federal law that requires suppliers to be independent of the dialysis facilities where patients are treated, the government said. Even after employees raised concerns, Renal Care continued to operate the billing company because of the 'illicit revenues it created,' the suit said.

One employee wrote: 'I do not wish to go to jail' and felt the company's plan 'was not in the best interests of patients,' said federal Judge William J. Haynes Jr. of Nashville in his ruling.

The billings reportedly occurred over a six-year period beginning in 1999. The Fresenius-Renal Care acquisition closed in 2006 at a sales price of $3.5 billion.

Pfizer

Pfizer Inc, which proclaims itself to be the world's largest pharmaceutical company, has provided an amazing amount of material for Health Care Renewal. In September, 2009, we discussed the huge, that is, $2.3 billion dollar settlement Pfizer made of criminal and civil fraud charges. At that time, this was the fourth settlement of charges of unethical marketing made by Pfizer since 2002.

Since then, we have discussed another fraud settlement in October, 2009, and yet another in January, 2010.

Today, Bloomberg reported:

Pfizer Inc. violated U.S. racketeering law in the marketing of its epilepsy drug Neurontin and should pay $142.1 million in damages, a jury decided.

Kaiser Foundation Health Plan Inc. and Kaiser Foundation Hospitals claimed in a monthlong trial in federal court in Boston that Pfizer illegally promoted Neurontin for unapproved uses. The insurer said it was misled into believing migraines and bipolar disorder were among the conditions that could be treated effectively with Neurontin, approved in 1993 by the U.S. Food and Drug Administration for epilepsy.

'The jury found Pfizer engaged in a racketeering conspiracy over a 10-year period,' Tom Sobol, a lawyer for Kaiser, said after yesterday’s verdict. 'That bodes well for future cases.'

Furthermore, this was a very special kind of verdict:

The jury, which deliberated for two days, found that New York-based Pfizer violated the federal Racketeer Influenced and Corrupt Organizations Act, or RICO, and California’s Unfair Competition Law. Under RICO, the amount of actual damages found by the jury, $47.36 million, will be tripled.

The RICO statute was meant to be used against organized crime.  A jury seems to have found that Pfizer is a "Racketeer Influenced and Corrupt Organization," that is, the moral equivalent of a crime syndicate.

Summary

So this week's settlement and conviction round-up shows the impunity that many health care organizations have exhibited thus far.  Some organizations have been charged again and again with unethical behavior.  Now one of the most frequent of the fliers has been convicted under the RICO law, certainly a new low.

Yet none of the affected organizations in this post, and precious few we have discussed at other times, seem to have suffered any major consequences.  All have paid fines, some which seemed large at the time, but which have never been large enough to seriously threaten the organizations' financial well being.  None of the organizations seems to have lost business, or even much reputation.  Very few of the people within the organizations who approved, lead or implemented unethical behaviors have suffered any sort of negative consequences.

There seems to be something very wrong here.  In the US, we have put much of our health care system in the hands of very large organizations, for-profit and not-for-profit, without holding these organizations and their leaders accountable for their actions.  The results have been increasingly rich leaders who often behave like a new aristocracy, and repeated bad behavior by the organizations they lead. 

Our latest effort at health care "reform" has continued to rely on large private organizations, while so far not adding to their or their leaders' accountability.  In my humble opinion, if we really want to reform health care so as to improve quality, increase access, control costs, and support professionalism, we will have to make our new health care oligarchs accountable.

Hospitals Under the Knife: Sacrificing Hospital Jobs for the Extravagance of Healthcare IT?

A WSJ article on the financial condition of NY hospitals, and specifically a line by NY Mayor Bloomberg, caught my eye:

Wall Street Journal
Mar. 26, 2010
Hospitals Under the Knife
New York City System Aims to Cut 2,600 More Jobs as State Funding Drops
By MICHAEL HOWARD SAUL and SUZANNE SATALINE

NEW YORK—The nation's largest public hospital system plans to slash its work force—including doctors and nurses—by about 10% over two years as government aid drops and the number of uninsured patients jumps.

With its budget deficit set to top $1 billion, New York City's Health and Hospitals Corp. plans to eliminate 2,600 jobs in the fiscal year that begins July 1. That comes on top of 1,300 positions to be eliminated this year."No hospital system in the country is exempt from the crushing economics facing the health-care industry," said New York Mayor Michael Bloomberg. He noted that New York had been early to adopt electronic medical records but said that state budget cuts were hitting the system hard.

... Previous job cuts focused on trimming support staff, but the new measures will include physicians and nurses, Alan Aviles, the corporation's president, said in an interview.

"Early to adopt EMR's BUT the budget cuts were hitting the system hard?"

To the knowledgeable, this seems a non sequitur. Its message is clearly that yes, we spent hundreds of millions of dollars on EMR's, but the adoption of EMR's should have saved us jillions of dollars, helping insulate us from economic downturns.

Yet some very serious researchers say this is not the case.

For starters, there's, Ashish Jha’s research at the Harvard School of Public Health that compared 3,000 hospitals at various stages in the adoption of computerized health records and found little difference in the cost and quality of care. A New York Times story "Little Benefit Seen, So Far, in Electronic Patient Records" on those findings is here. Was anyone in the Governor's office or hospital governance reading their own newspaper?

Then, there's the Nov. 2009 “Hospital Computing and the Costs and Quality of Care: A National Study” (Amer J Med 123:1; 40-46) by Himmelstein and Wololhandler at Harvard Medical School, that also concluded “as currently implemented, hospital computing might [very] modestly improve process measures of quality but not administrative or overall costs."

There's the June 2009 Wharton School of Business article "Information Technology: Not a Cure for the High Cost of Health Care" that I wrote about at this HC Renewal post. Senior Wharton professors wrote:

Technology could increase health care costs without markedly improving quality, according to experts at Wharton.

... "No one has done the careful research to indicate that if one health care system has information technology and the other doesn't, then the care is different. There are no controlled trials," says Mark Pauly, a health care management professor at Wharton. All that technology is no panacea, he warns. In fact, he believes IT could actually raise costs because of culture clashes, training, the implementation of the systems [I would say "the mayhem that often goes on during the implementation" - ed.] and the labor required to maintain the new technology.

"The best-case scenario is that information technology will improve quality but not lower costs. The worst case is that there's no difference at all."

... That opinion is echoed by other experts at Wharton and the University of Pennsylvania. "The focus on IT in health care is a good thing, but there's way too much hype about it and misunderstanding about what the benefits will be and how quickly they will come," says Peter Gabriel, medical director of clinical information systems at the University of Pennsylvania Health System.

[Kevin Volpp, professor of medicine and health care management] agrees that tracking real cost savings from health care IT is a difficult task, but he expects there to be some benefits from spotting and eliminating redundant care. But those benefits aren't likely to add up to big savings, says Lawton R. Burns, director of the Wharton Center for Health Management and Economics. "I agree that information technology is important, but it's not the slam dunk it's portrayed to be," he says. The chase to reduce costs, improve quality and expand coverage is deemed the "iron triangle of health care. A lot of us wince [at that goal]," Burns notes. "It's arguable that we can't do any of those things well."

David A. Asch, a Wharton health care management and economics professor, agrees that technology is a big part of reform. "No one is arguing against it, but that doesn't mean that it's not oversold," he says. Gabriel likens the fascination over IT in health care to a shiny new object that's easier to focus on relative to more daunting issues.

... In addition, it's unclear what cultural issues [a big theme in my writings - ed.] will emerge as information technology is adopted. These cultural issues are in the forefront of primary care physician relationships. Experts at Wharton and Penn say physicians are generally skeptical of the technology movement. How much will a technology overhaul add to operating costs? How much will it cost to retrain workers? What's the electronic record learning curve? And what happens when a doctor has a laptop between him and the patient?

"Individual physicians just don't know where the money is going to come from," says Pauly. "If IT is tied to reimbursements it could work, but [many] are skeptical." Burns adds that the physician-patient relationship can also be altered. "Technology adoption changes the way you practice. What happens when your primary care physician is looking at his screen instead of you?"

There are the concerns of Abraham Verghese, Professor and Senior Associate Chair for the Theory and Practice of Medicine at Stanford, who wrote in the Wall Street Journal in a June 2009 article "The Myth of Prevention" that:

... I have similar problems with the way President Obama hopes to pay for the huge and costly health reform package he has in mind that will cover all Americans; he is counting on the “savings” that will come as a result of investing in preventive care and investing in the electronic medical record among other things. It’s a dangerous and probably an incorrect projection.

Finally, this is an experimental technology whose benefits and risks are not well known.

In the article "Electronic Health Record Use and the Quality of Ambulatory Care in the United States" (Arch Intern Med. 2007;167:1400-1405), the authors examined electronic medical records use throughout the U.S. and the association of EMR use with 17 basic quality indicators. They concluded that “as implemented, EMRs were not associated with better quality ambulatory care.”

Further, the FDA recently testified that this technology can actually harm and kill patients, but the extent is unknown. Existing FDA data is likely the "tip of the iceberg", testified FDA official Jeffrey Shuren MD, JD at the HIT Policy Committee, Adoption/Certification Workgroup, special meeting on health IT safety on February 25, 2010.

I described Shuren's testimony in my HC Renewal post "FDA on Health IT Adverse Consequences: 44 Reported Injuries And 6 Deaths, Probably Just 'Tip of Iceberg'." Considering FDA is nearly unknown as the go-to for such reports, and the low reporting of medical errors related to computing noted by Koppel at the same meeting, the actual rates of injury and death could be much, much larger.

In effect, NY hospital physicians, nurses and support staff will lose their job due to budget shortfalls, at the same time the NY hospitals have been spending hundreds of millions of dollars on the extravagance of experimental clinical IT systems whose benefit is still an unknown.

Perhaps some of those millions could have been better spent on human beings, such as employees or better yet, patient care.

As I've written before, the health IT industry seems to be staging an invasion of healthcare to its own benefit. Now, clinical personnel are losing their jobs as a result, and patient care is likely to suffer.

While I'm supportive of EMR experimentation when finances are stable (when performed with patient safety considerations as paramount, of course), this is not the time for such extravagance in NY, especially when jobs - both support and clinical - are threatened.

Irrational exuberance in technology is bad enough - it's far worse when you can't afford the objects of your affection.

One suggestion is that the healthcare IT experiments be put on hold as unaffordable under current conditions, and resumed when finances are more stable. The money could be diverted to keeping physicians, nurses and support staff employed. The risks could also be studied further. However, this might cause some executives somewhere to have to forgo their pet contracts with their friendly HIT vendors and management consultant companies.

Computers are more important than people, after all.

At a time of massive international economic difficulty, "Blood for Computers!" can be the new rallying cry.

Since many of the layoffs will involve union members of District Council 37, the city's largest municipal employee union, perhaps the rallying cry "Computers for Union Busting!" could also apply.

(Some people would have no problems with that, but these are real, live hospital staff being put out of work, and the patients they care for being affected.)

-- SS

3/26/10 Addendum:

The advice above may apply to an entire country, the UK, that seems to have spent about £13 billion (about $19 billion U.S.) on health IT that doesn't work.

Per the Telegraph article today "Hospital wards to shut in secret NHS cuts":

Tens of thousands of NHS workers would be sacked, hospital units closed and patients denied treatments under secret plans for £20 billion of health cuts.

... The proposals could lead to:

• 10 per cent of NHS staff being sacked in some areas.
• The loss of thousands of hospital beds.
• A reduction in the number of ambulance call-outs.
• Medical professionals being replaced by less qualified assistants.

At least the IT industry is alive and well.

-- SS

New Resources To Check Out!

Hi,
While you seniors are intersessioning, you might want to check out the three new lectures that WHEP has created this year - Gender Differences In Cardiac Disease: Gender Differences in Pain; Gender Differences in Substance Abuse. They are IFM Year II Lectures that you can view on webcampus.drexelmed.edu. Might be useful material for you heading forward.

Gender Differences: Cardiac 
Gender Differences: Pain

Gender Difference: Substance Abuse: http://webcampus.drexelmed.edu/ifm/search.asp#1%2F12%2F2010

Stay tuned!

Happy MATCH!!!

Congratulation WH Pathwayers (Maire, Edwina, Tikki, Orion, Caroline, Kristin, Neha, Nancy, Erin, Kelly and Jennifer) and Honorary Pathwayers (Chelsea, Luke) for your accomplishments today!! Missing in celebratory action from being captured on-camera - Orion, Kristin and Luke.
I wasn't fast enough on the shutter for Kristin and Luke. Orion (sporting his new look) we missed you upstairs! Congrats to all.
We are planning a post Match celebration during intersession. Stay tuned for details!

The slide show is suppose to link to more pictures - if it doesn't, check out the group I created for you Women's Health Pathway DUCOM Class of 2011 (oops typo!) at
Women's Health Pathway DUCOM