Pfizer's 13th Legal Settlement - Will it be Enough to End the Impunity?

It has been almost two months since we lasted noted misbehavior by giant global pharmaceutical firm Pfizer Inc. With little fanfare, however, a few small news items noted the corporation's latest legal settlements.

Deceptive Marketing of Protonix

The first settlement merited only a few paragraphs from Reuters.  The gist was:

Pfizer Inc will pay $55 million plus interest to settle charges that Wyeth promoted its acid reflux drug Protonix for unapproved uses and made unproven claims about the medicine, the U.S. Department of Justice said on Wednesday. 

The infractions took place between February 2000 and June 2001, long before the world's largest drugmaker acquired Wyeth in 2009 for $68 billion.

A report in the examiner explained that Wyeth did not merely go beyond the label in promoting Protonix, it went beyond the evidence.

Wyeth allegedly promoted Protonix as the 'best PPI for nighttime heartburn' even though there was never any clinical evidence that Protonix was more effective than any other PPI for nighttime heartburn. 

Furthermore, the charges were that systemic efforts to mislead were sanctioned by top management:

 The allegations in the complaint are that this superiority slogan was formulated at the highest levels of the company. Wyeth retained an outside market research firm, at the cost of tens of thousands of dollars, to ensure that sales representatives delivered that misleading superiority message.

Finally, the government asserted that Wyeth corrupted physicians' continuing medical education in the process:

Finally, the government alleges that Wyeth used continuing medical education (CME) programs to promote Protonix for unapproved uses. CME programs are sponsored by accredited independent providers, such as universities, nonprofit organizations, or specialty societies. Pharmaceutical companies are permitted to provide financial support for CME programs, but they are not permitted to use CME programs as promotional vehicles for off-label indications.

According to the complaint, Wyeth spent millions of dollars providing 'unrestricted educational grants' to CME providers, and these grants invariably included promises that Wyeth would not attempt to influence the content of the program in any way. Nevertheless, the government alleges that one of Wyeth’s core marketing tactics for Protonix was to use CME programs to drive off-label use of the drug. According to the complaint, the Protonix 'brand team' influenced virtually every aspect of these CME programs: program topics, speaker selection, organization, and content. In addition, the government alleges that Wyeth even insisted that the CME program materials use the same color and appearance as Protonix promotional materials–a tactic that Wyeth and the vendor called 'branducation.'

So it seemed that the company put on quite an effort to promote what we have called elsewhere pseudo-evidence based medicine, yet, like many other legal settlements involving large health care organizations, this one involved no penalties of any type against the people within the organization who authorized, directed, or implemented the bad behavior. 

 Misleading Marketing of Zyvox, Lyrica 

Another settlement, for a few dollars less, got even less attention.  Fox Business news did report this:

 Pfizer Inc. (PFE) agreed to pay a combined $42.9 million to North Carolina and 32 other states in a settlement of allegations that the drug maker used unfair and deceptive practices in the marketing of antibiotic Zyvox and nerve-pain medicine Lyrica.

I could find no detail about the sorts of deception allegedly involved in the news media.  What little more Fox provided did suggest that this case also involved pitching drugs in instances in which their use was unsupported by good evidence:

The states had alleged that Pfizer had marketed Zyvox as superior to another antibiotic in fighting certain types of infections, though there allegedly wasn't substantial evidence to support superior results for some uses that Pfizer claimed.

The states also alleged that Pfizer marketed Lyrica for some off-label, or unapproved, uses.

There was no hint that again any individual would suffer any negative consequences for this particular set of deceits either.

Avoiding Impunity as a Topic of Polite Discussion

We have discussed a seemingly endless parade of legal settlements by large health care organizations.  In almost none was there any consequence beyond a fine paid by the company, and sometimes a pledge that the company would thereafter behave better.  While these relatively small costs were diffused throughout the organizations, almost never did the people who authorized, directed, or implemented the bad behavior pay any price or suffer any penalty.  Thus we have opined again and again (e.g., most recently here) that these settlements have become just another cost of doing business, and have no power to deter future bad behavior.

In addition, we have noted not only have multiple organizations made such settlements, some organizations have settled again and again.  Yet even in the cases of these multiple organizational offenders, the individuals involved maintain their immunity from any negative consequences.  Thus these are examples of impunity.  

Transparency International declared 23 November, 2012, as the International Day to End Impunity, explained as follows:

At Transparency International we view impunity as getting away with bending the law, beating the system or escaping punishment. Impunity is anathema to the fight against corruption.

However, impunity is one of those concepts which never seems to be a subject of polite conversation in health care, or, as we say, it has become anechoic.  

Therefore, it is fascinating that while these two Pfizer settlements were announced almost simultaneously, each was discussed, such as it was, as if it occurred in a vacuum.  Moreover, it also seems that each settlement was crafted by law enforcers without any attention to the record of the company making the settlement.  Thus, any implications about impunity were avoided.

Pfizer's Multiple Ethical Opfenses

In fact, during the time we have been posting on Health Care Renewal, Pfizer has become one of the great repeat ethical offenders in the health care arena.  Its track record since the beginning of the 21st century, (with yello colored background below, compiled from this post), is remarkable.

In the beginning of the 21st century, according to the Philadelphia Inquirer, Pfizer made three major settlements,

October 2002: Pfizer and subsidiaries Warner-Lambert and Parke-Davis agreed to pay $49 million to settle allegations that the company fraudulently avoided paying fully rebates owed to the state and federal governments under the national Medicaid Rebate program for the cholesterol-lowering drug Lipitor.

May 2004: Pfizer agreed to pay $430 million to settle DOJ claims involving the off-label promotion of the epilepsy drug Neurontin by subsidiary Warner-Lambert. The promotions included flying doctors to lavish resorts and paying them hefty speakers' fees to tout the drug. The company said the activity took place years before it bought Warner-Lambert in 2000.

April 2007: Pfizer agreed to pay $34.7 million in fines to settle Department of Justice allegations that it improperly promoted the human growth hormone product Genotropin. The drugmaker's Pharmacia & Upjohn Co. subsidiary pleaded guilty to offering a kickback to a pharmacy-benefits manager to sell more of the drug.

Thereafter, Pfizer paid a $2.3 billion settlement in 2009 of civil and criminal allegations and a Pfizer subsidiary entered a guilty plea to charges it violated federal law regarding its marketing of Bextra (see post here).  Pfizer was involved in two other major cases from then to early 2010, including one in which a jury found the company guilty of violating the RICO (racketeer-influenced corrupt organization) statute (see post here).  The company was listed as one of the pharmaceutical "big four" companies in terms of defrauding the government (see post here).  Pfizer's Pharmacia subsidiary settled allegations that it inflated drugs costs paid by New York in early 2011 (see post here).   In March, 2011, a settlement was announced in a long-running class action case which involved allegations that another Pfizer subsidiary had exposed many people to asbestos (see this story in Bloomberg).  In October, 2011, Pfizer settled allegations that it illegally marketed bladder control drug Detrol (see this post). Finally, in August, 2012, Pfizer settled allegations that its subsidiaries bribed foreign (that is, with respect to the US) government officials, including government-employed doctors (see this post). 

By my count, the two current settlements would be numbers twelve and thirteen.  Of course, while I believe this list is accurate, it may be incomplete.

Since none of these posts involved any negative consequences for any individuals who authorized, directed, or implemented the bad behavior, or who profited from it, and none involved any changed in the leadership or organization of the company, this becomes an amazing record of the impunity of Pfizer leadership over time and space. 

Will Impunity Finally Lead to Outrage?

Impunity, though, is a concept that is beginning to command some attention.

The Brasilia Declaration which was published at the conclusion of the 15th International Anti-Corruption Conference (hosted by Transparency International) included:

it is clear we all face a common challenge in our work: impunity for those who abuse positions of power. 

If impunity is not stopped, we risk the dissolution of the very fabric of society and the rule of law, our trust in our politics and our hope for social justice.

Activists, businesspeople, politicians, public officials, journalists, academics, youth and citizens who gathered in Brasilia to discuss the threat of corruption made it clear that impunity undermines integrity everywhere.

Whether we are investing collective efforts and resources in fighting poverty, human rights violations, climate change or bailing out indebted economies, we need to give the people a reason to believe that impunity will be stopped.

While the two latest Pfizer settlements barely got media coverage, maybe a $1.9 billion dollar settlement in the US by international banking giant will get more attention.  The charges in this case were not merely deceiving some doctors and patients about drug efficacy and safety.  The company was accused of aiding money laundering by drug cartels, and facilitating rogue regimes get around international sanctions.  As the New York Times reported,

State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.

Instead, HSBC announced on Tuesday that it had agreed to a record $1.92 billion settlement with authorities. The bank, which is based in Britain, faces accusations that it transferred billions of dollars for nations like Iran and enabled Mexican drug cartels to move money illegally through its American subsidiaries.

Unlike Pfizer's slow-motion impunity, this example got attention.  The Los Angeles Times noted,

The massive penalty still was not enough to appease some critics. No bank executives were charged as part of the investigation, leading some analysts to question the government's willingness to hold powerful Wall Street firms accountable.

'It's mind-boggling how they think you can have a financial system and allow this kind of impunity,' said William Black, a former banking regulator who aided federal prosecutors during the savings and loan crisis of the 1980s and 1990s. HSBC 'put the world at enormous risk.'

A NY Times editorial opened,

It is a dark day for the rule of law.   Federal and state authorities have not to indict HSBC, the London-based bank, on charges of vast and prolonged money laundering, for fear that criminal prosecution would topple the bank and, in the process, endanger the financial system.  They have also not charged any top HSBC banker in the case, though it boggles the mind that a bank could launder money as HSBC did without anyone in a position of authority making culpable decisions.

Clearly, the government has bought into the notion that too big to fail is too big to jail.  When prosecutors choose not to prosecute to the full extent of the law in a case as egregious as this, the law itself is diminished.  The deterrence that comes from the threat of criminal prosecution is weakened, if not lost.

So maybe this huge financial case will prove to be the straw that breaks impunity's back.  So I will close by quoting the end of the Brasilia Declaration, in the hope that a few people will take it to heart in the context of health care, as well as in finance.

To take this important struggle forward the international anti-corruption community should promote greater people engagement and find ways to provide greater security for anti-corruption activists.

Reducing impunity also requires independent and well-resourced judiciaries that are accountable to the people they serve.

We call on leaders everywhere to embrace not only transparency in public life but a culture of transparency leading to a participatory society in which leaders are accountable.

We call on the anti-corruption movement to support and protect the activists, whistleblowers and journalists who speak out against corruption, often at great risk.

It is up to all of us in government, business and society to embrace transparency so that it ensures full participation of all people, bringing us together to send a clear message: We are watching those who act with impunity and we will not let them get away with it.

Just Another Day at the Office: Boehringer Ingelheim Settles Allegations of Deceptive Off-Label Marketing, Kickbacks

Legal settlements by pharmaceutical companies for less than $100 million now seem to barely rate as news in the US. The best report, albeit short, of a by Boehringer Ingelheim for a mere $95 million, seems to be in the Hartford (CT) Courant. The summary was:

Boehringer Ingelheim, a German company with U.S. headquarters in Ridgefield, has agreed to pay $95 million to settle allegations that it promoted four drugs for uses unsupported by research, and that it paid kickbacks to doctors to prescribe the drugs, the U.S. Department of Justice has announced.

It included most of the usual elements.

Off Label Marketing

Two of the drugs in the case are for treating chronic bronchitis and emphysema, and were suggested for children with asthma and coughs from the flu. The drugs had not been tested on children.

'I was concerned that doctors were basing their treatment decisions on false information,' [former Boehringer Ingelheim pharmaceutical representative and whistle blower Ron] Heiden said in the released statement. 'Promoting off-label treatments with potential serious consequences just to increase sales is heinous behavior.'

I note parenthetically that some industry apologists belittle the possible harms of truthful off-label marketing (e.g., look here).  However, at least in this case, the marketing was alleged to be based on falsehoods. 

Furthermore, some industry apologists may also decry the regulation of off-label marketing as a violation of the US Constitutional guarantees of freedom from government infringement on individual free speech.  Note, however, that Boehringer Ingelheim in this case got exclusive rights to market these drugs for many years from the government.  In exchange for these rights, the law restricted their right to market the drugs to approved indications.  

Promotion Beyond the Evidence

The company told doctors Aggrenox was better than Plavis to reduce the risk of heart attacks, but there was no evidence to support that claim, the Justice Department said. The drug had FDA approval to prevent secondary strokes.

Again, the truthfulness of the premises underlying the marketing apparently was questionable, to use charitable phrasing.  

Kickbacks to Physicians

This information came from the AP version of the story, here via the Washington Post:

the settlement resolved allegations that Boehringer Ingelheim paid kickbacks to health care professionals to induce them to prescribe all four of the drugs. These kickbacks included payments for participating in advisory boards, speakers’ training programs, speaker programs and consultant programs.

 Note further that apologists for industry also belittle the importance of the effects of conflicts of interest on health care (e.g., look here).  In this case, activities that are often referred to as species of conflicts of interest, e.g., advisory board membership, speakers board membership, consulting, apparently were meant as vehicles for payments to induce prescribing.  That is, apparently what some might have called conflicts of interests were allegedly kickbacks, or bribes.  As we have discussed before, it is one thing to be paid for legitimate clinical, educational, or scientific activity when such payments might influence professional, educational, or scientific judgments or activities about other matters.  It is entirely another thing to be paid a kickback to favor a drug company's marketing campaign instead of making decisions that put patients first.

A Corporate Integrity Agreement

[From the Hartford Courant]

Also as part of the settlement, Boehringer agreed to enter into an expansive Corporate Integrity Agreement to avoid such marketing in the future.

 We have noted before that such agreements do not seem to deter future bad behavior, (e.g., look here).

No Admission of Wrongdoing by the Company

[from the AP]

'The pharmaceutical industry as a whole has undergone significant changes over the past decade and continues to be under intense scrutiny,' said Greg Behar, president and chief executive officer of Boehringer Ingelheim. 'Likewise, our internal processes and compliance practices have evolved significantly over the years.' The company said it has been cooperating with the government investigation.

Again, if there is no acknowledgement by the company that it did wrong, do we expect it not to do wrong in the future?

Summary

Here was yet another legal settlement that documents the pervasiveness of the influence of marketing and public relations over physicians' professional responsibilities.  This is just one of several recent posts (e.g., here and here) about the malevolent influence of deceptive marketing or public relations on the evidence that health care professionals should be using to make the best possible decisions for individual patients.

Such legal settlements seemingly have had no effect on the bad behavior of big health care organizations, while they continually erode trust in these organizations and their leadership, and trust in physicians to put patients ahead of personal gain. 

Furthermore, these cases seem to be part of a larger social problem.  It seems that nowadays the leadership of large, powerful organizations feels free to promote their own interests using psychologically sophisticated but deceptive marketing and public relations strategies no matter what their effect on the public welfare.

As we have said all too many times before, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Hype, Spin and Health Care: the Case of an Apparently Failed Hospital Purchase by Steward Health Care

Health care is drowning in a sea of hype and spin.  We have frequently posted about deceptive marketing used to sell drugs, devices, and health care services.  We have also posted about deceptive public relations and lobbying used to sell policy positions and strategies favorable to health care organizations, and usually most favorable to their leaders.

Nevertheless, there rarely is much public skepticism about or criticism of such marketing and public relations messages when they appear.  Rather, often the media and other public voices, including those of politicians with power over the relevant public policy issues, seem to accept the messages at face value.

The Case of Steward Health Care and Landmark Medical Center

The Buy-Out Falls Apart

Therefore, it is instructive to look at examples of how such messages in retrospect appear to be fallacious, to use a polite term.  A local example that just popped into view was documented in two short news items by Felice Freyer in our own Providence Journal.  (Web access to a longer version story that appeared in the print version of the journal is here.)  The first item included,

The deal to sell Landmark Medical Center to Steward Health Care System may be falling apart. In a court filing this week, Jonathan N. Savage, the special master in charge of the hospital, made reference to the possibility that Steward would withdraw. The Boston hospital group faces a Sept. 30 deadline to complete the sale.

The Message Promoted by Steward Health Care 

We have blogged about the rapid expansion of Steward Health Care, despite the name, a for-profit company owned by private equity/ leveraged buyout firm Cerberus Capital Management. Steward has hyped its supposedly world class "new health care" model in its advertising (look here). In promoting its bid for Landmark, Steward's well-paid CEO (look here), displayed his vision for promoting the medical center through "economies of scale," "right-siting," and emphasizing ties with the community: "it's not a community hospital system. It's really a health care system," as reported by Felice Freyer in April, 2012 (Freyer F. Landmark Medical Center. A Leap into the unknown. Providence Journal, April 22, 2012.)

 In a dispute over payment rates with Rhode Island Blue Cross Blue Shield, Steward ran full-page newspaper advertisements claiming that insurance companies leaders issued an order to "terminate Landmark Medical Center," because they did not care if "residents would lose their only hospital, ... employees ... would lose their jobs, or the elderly ... would have to travel for care." (Look here.) That implied, of course, that Steward, which did not mention that it is a for-profit corporation owned by a private equity firm in the ads, cared deeply about the health care of residents of Woonsocket.

Some Skepticism, but More Acceptance

The article by Felice Freyer above did feature journalistic skepticism and include interviews with some local physicians who questioned whether Steward could possibly fulfill all its promises to simultaneously increase the quality of care and reduce costs.

However, the article showed that there was lots of positivity about Steward's track record in neighboring Massachusetts. Predictably, the President of Steward owned Quincy Medical Center boasted, "Not one person has been laid off. We have not reduced any service lines. Our focus is on enhancing." However, some people who were apparently independent of Steward also had favorable views.  A Massachusetts consumer advocate said "as far as we know, it's going fine." A Brandeis University Professor said, "it's impressive how successful they've been."

The Politicians' Buy In

Elsewhere, there were plenty of statements of support for Steward by local politicians.  The Mayor of Woonsocket supported Landmark (and implicitly Steward) it its dispute with RI BCBS, as reported by the Providence Journal, saying that the proposed buyout by Steward "is far too critical for our city, and I must take every step possible to ensure that the interests of the city and those who rely upon Landmark (Medical Center) for healthcare are being protected [by taking Steward's side in the dispute.]" Also, as reported by the Woonsocket Call, RI Congressman David Cicilline said, "I look forward to working with Landmark's new administration [that is, Steward] to ensure that it continues to deliver affordable, quality health care and well-paying jobs for hardworking Rhode Islanders." To fulfill Steward's wishes, The Rhode Island state legislature rushed to make its laws about for-profit conversion of non-profit hospitals more lenient (see the Providence Business News).

The Attorney General Later Says it was All About the "Bottom Line"

However, now Steward has apparently pulled out of the deal with nary a public mention of the reason why, much less demonstration of its concern for the poor people of Woonsocket. As reported in a second small item in the Providence Journal,

Steward Health Care System, which is apparently backing out of its deal to buy Landmark Medical Center, 'has left the hospital, its patients and its employees in a worse position,'

Attorney General Peter F. Kilmartin said in a statement today. 'It has become very clear that Steward's only interest was the bottom line, not, as the Company claimed, the patients, the employees or the Woonsocket community,' Kilmartin said.

Summary

This is just one local kerfuffle about a small hospital system. However, looking at it in granular detail says a lot about how big health care organizations, like the one that here attempted to buy the local hospital system, push misleading messages to secure their private interests. These misleading messages often promote these organizations' commitments to the traditional health care mission, often in the modern argot of quality, access, and affordability), when their leaders may really care more about short term revenue. This case also shows how at least some local policy makers may be drawn in by such messages, and how the few skeptics get lost in the shuffle.

An important feature of the modern, commercialized, laissez faire health care system in the US is the role of opinion manipulation through modern, sophisticated marketing and public relations in promoting the short-term financial interests of health care organizations and their leaders at the expense of patient's and the public's health. This role seems rarely to be discussed, particularly in health care research and policy circles. It may be that some members of the public, health care professionals, and health policy makers are naturally skeptical of marketing and public relations hype, spin, and deception. However, we have seen too many examples of health care leaders promoted as "visionaries" who are anything but.

Health care professionals, patients, policy makers, and the public at large ought to be extremely skeptical of the self-serving messages packaged by marketing and public relations. Academics ought to be dissecting these messages more often. Skeptics need to make their voices heard.

Meanwhile, look out for the next "visionary," or the next "new health care" promotion. They may not turn out to be what is advertised.

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. 

Who Cares if The Patients Die? - Apparently Not Some Hospice Marketers

An article in USA Today suggests that marketers for hospices are pushing even more aggressive measures to recruit patients, regardless of the consequences.

Marketing Hospice to Prevent Re-Admission

Per USA Today,

Hospice marketers, exploring possibilities for new revenue to help continue the industry's remarkable growth, are looking to exploit a provision in the 2010 health care law by persuading hospitals to send Medicare patients into end-of-life hospice care instead of readmitting them to the hospital.

Such a move, the hospice marketers say, will enable hospitals to avoid paying the Medicare penalties required by the new law when hospitals discharge patients and then have to readmit them within 30 days: Instead of readmitting the patients, hospitals should send them to hospice care, which also is covered by Medicare, according to a USA TODAY analysis of marketing materials.

Patients with severe heart problems and pneumonia tend to decline quickly and often move in and out of hospitals, said hospice marketing specialist Rich Chesney, who proposed the idea.

It might be better, Chesney said, if a hospital CEO hired people to talk to family members about hospice, instead of a doctor, who is more focused on not losing a patient. Chesney made his proposal recently at a conference sponsored by the National Hospice and Palliative Care Organization, an industry trade group. [Chesney is apparently the President of Healthcare Market Resources, whose slogan is "growing bottom lines with information." - Ed]

'If (hospices) make that part of their business and their revenue stream, that's sound business,' said Stan Massey, chief marketing officer for Transcend Hospice Marketing in Holland, Ohio. Massey recently wrote a blog recommending hospice marketers talk to hospital CEOs instead of the doctors who usually decide who is eligible for hospice care. Those conversations, he wrote, 'must be framed heavily in terms of financial benefit.'

Ignoring the Hospice Mission

Lost in the marketers' thinking seems to be any notion of the hospice mission. Hospices are supposed to provide compassionate palliative care to patients at the end of life who do not want any further aggressive intervention. Good hospice care is likely to make the last days of such patients more tolerable.

However, generally hospices intentionally do not provide any care beyond palliation, such as, for example, antibiotics for acute infections, transfusions in the case of acute blood loss, or surgery for acute trauma. Should a patient who is not at the end of life be erroneously admitted to hospice, and then suffer some new acute problem, that patient is at risk of bad outcomes, including death because of denial of the sort of care available in acute care settings. Thus, admitting patients to hospice who are not at the end of life or have not given truly informed consent for hospice care may lead to patients dying prematurely, or suffering suffering preventable complications of treatable diseases and injuries.

Aggressive marketing of hospice, particularly pushing hospice for patients just because they seem likely to be re-admitted to a hospital, especially by having marketers try to go around patients' own physicians, risks admitting patients to hospice who should not be in hospice. Thus such aggressive hospice marketing may lead to needless, and wrongful deaths of, injuries to, and morbidity for patients who should have received more aggressive treatment.

The USA Today article did note:

Health care analysts and ethicists, however, say such proposals are contrary to the intent of the health care law, which is to provide better care, not to put more patients into hospice care for which they are not ready.

The proposals warp the 'whole idea behind hospice,' said Josh Perry, a business and ethics professor at Indiana University.

In addition,

Good hospices have been working with hospital CEOs for years, said Carolyn Cassin, president of the National Hospice Work Group, a coalition of the 25 largest not-for-profit hospice organizations. But the goal, she said, was to make sure patients received the care they needed. She said she was surprised to hear it characterized as a marketing approach to cut costs.

While hospice care costs less than hospital care, at $151 a day for Medicare patients, it's meant for people who are going to die. In hospice care, patients agree not to seek care to improve their health, such as more surgeries, hospitalizations or chemotherapy. After a doctor certifies that he expects a person to die within six months, Medicare covers hospice care.

Experts say they fear patients will be sent to hospice before their time and miss the proper care that could restore their health. Penalties, Perry said, are a 'good thing' to hold hospitals accountable. 'This isn't about extending hospice.'

Summary

We have previously discussed, most recently here, allegations that specific for-profit hospice corporations were admitting patients who were not at the end of life just to make more money. The current USA Today article suggests that the phenomenon of hospices enrolling inappropriate patients just to enhance revenue could be more widespread than previously appreciated. The more often hospices enroll patients who are not at the end of life, and/or have not given true informed consent for hospice care, the more patients are likely to suffer needless and wrongful morbidity and injuries, and the more patients are likely to needlessly, and wrongfully die prematurely.

It seems to me that unexpected morbidity of, injuries to, or premature death of hospice patients who were not obviously already at the end of life could lead to civil litigation, and even criminal investigation.

Furthermore, the realization that hospices, once considered the most humane of health care institutions, are more frequently run for profit, and may put profit ahead of their mission should provoke re-examination of our haste to encourage more and more patient care to be given by for-profit organizations in an era of "greed is good."

If we really want better health care, we will have to change policies, practices, and laws so that leaders of health care organizations are motivated more by the desire to help patients than by the desire to become rich.

The Pittsburgh Experiment - I - Caught in the Crossfire

In our increasingly dysfunctional health care system, patients, health care professionals and the public are often caught in the crossfire between big health care organizations.  Such organizations are often led by people who do not seem to put the interests of patients and the public, and the values of professionals first.  (Note that we have been writing about this since at least 2003, when the concept appeared in my article: Poses RM. A cautionary tale: the dysfunction of the American health care system. Eur J Int Med 2003; 14: 123-130. Link here.)

Last week, Anna Wilde Matthews and John W Miller wrote in the Wall Street Journal about an amazing example of such a crossfire that pitted the two dominant health care organizations in Western Pennsylvania against each other.  The case turns out to touch on many of the most dysfunctional aspects of US health care.  So rather than try to cram it into an overly long blog post, I plan to periodically discuss it over the next few weeks, starting now with an overview of the grappling titans.

The Basic Conflict

Per the Wall Street Journal article,

In Pittsburgh, the acrimonious battle between Highmark, the region's most powerful health insurer, and UPMC, the dominant health-care provider, is drawing national attention as a test case on the impact of consolidation in the health-care industry.

At the heart of the dispute is Highmark's effort to acquire a financially troubled local hospital group, West Penn Allegheny Health System, as the centerpiece of what it says will be a lower-cost and more efficient health-care operation. UPMC, which has its own insurance arm as well as 19 area hospitals and 3,240 doctors, says it doesn't want to bolster a company it now considers a direct rival. It has vowed not to sign a new contract to treat patients covered by Highmark, which would mean those patients generally would pay high out-of-network rates to use UPMC hospitals and doctors.

As we will see, the dispute is between a dominant hospital system that is trying to muscle into the insurance business, and a dominant insurer that is trying to muscle into the hospital business. If either were to succeed, it would become the dominant health care organization in the Pittsburgh area.

A Personal Fight Amongst Two CEOs

However, the fight soon seemed to be more among the CEOs of the two organizations. Per the WSJ,

In Pittsburgh, the battle has become unusually bitter, spearheaded by the two companies' chief executives, UPMC's Jeffrey A. Romoff, 66, and Highmark's Kenneth Melani, 58. Mr. Romoff, who has built UPMC into a $9 billion juggernaut and put its initials on the tallest skyscraper in the city, calls Highmark a 'monopoly.' Dr. Melani uses the same term in warnings about UPMC's power and referred to Mr. Romoff in a local newspaper as 'trying to rape the commercial marketplace to build his empire.'  (A spokesman for Mr. Romoff said the comment 'lacked both substance and dignity.')

An article from December, 2011 in the Pittsburgh Tribune-Review had illustrated other aspects of the bitterness about and between the CEOs.

UPMC CEO Jeffrey Romoff's satiric, fake Twitter profile lists his favorite games as Monopoly and Risk.

In recent tweets, the anonymous author wrote under his name, 'New York State, here we come!' and said he wants to take Highmark CEO Dr. Kenneth Melani 'outside to settle things -- but it would be unfair competition if (we) could BOTH use our fists.'

The month-old Fake Jeffrey Romoff persona, whose author declined to be interviewed but said it's 'no laughing matter,' depicts the head of Western Pennsylvania's dominant health care system as a greedy tyrant with an angry avatar. It counts fewer than 40 followers, but its existence points to a public relations failure for UPMC in its fight with Highmark Inc., media experts say.

'Nobody feels sorry for Romoff,' said Andrea Fitting, president of Downtown marketing firm Fitting Group. 'If you ask anyone on the street, they'll say Romoff is a monster. There's no person who's trustworthy and sympathetic who they've enlisted as a spokesman.'

Romoff could not be reached for comment.

UPMC spokesman Paul Wood said he is not concerned about the profile's effect on the hospital network's image.

'Not something that has virtually no followers,' he said.

There's no fake Twitter handle lampooning Melani, but experts say the state's largest insurer is not doing a great job of managing its public image either.

As found in the WSJ article,

'There's no white hat here,' says Don White, a Republican who chairs the state Senate committee overseeing insurance. 'They're both concerned about their self-preservation and domination.'

Neither CEO seems satisfied that his organization has become dominant in its field, and both seem to resent the success of the other organization in another field. Let us briefly review the backgrounds of both systems.

UPMC as Dominant Hospital System

The WSJ article started to probe the complexity of the situation:

The struggle in Pittsburgh has roots that go back decades. UPMC, led since 1992 by Bronx native Mr. Romoff, has grown on his watch to $9 billion in annual revenue from $797 million when he took over. Today, UPMC has around 58% inpatient market share in Allegheny County and a brand buoyed by its identification with nationally known research and treatment centers like Hillman Cancer Center, where Ms. Wyckoff is being treated. The nonprofit system, with around $406 million in operating income in its most recent fiscal year ended June 30, is also Pennsylvania's biggest private employer.

UPMC's initials dominate the Pittsburgh skyline from the top of the U.S. Steel Tower, the city's tallest building. The nonprofit leases a private jet that is used to fly executives and doctors to its facilities in Ireland and Italy. Mr. Romoff has become one of the city's most prominent business leaders. Poking fun at a local nickname for his boss, a staffer once presented Mr. Romoff with a Darth Vader action figure. In 2009, UPMC published a glossy history of its own expansion titled 'Beyond the Bounds.'

Highmark as Dominant Insurer

On the other hand,

As UPMC grew, its main hospital rival, West Penn Allegheny, withered. The five-hospital group emerged from the ashes of a Pennsylvania hospital system that filed for bankruptcy in 1998 after piling on too much debt and acquiring money-losing assets. It struggled for years.

By 2011, West Penn Allegheny was in the red, with heavy debt and pension obligations. To cut costs, it shut down much of its Western Pennsylvania Hospital. At one point, filmmakers took over its empty intensive-care unit to film a scene for a coming Tom Cruise movie.

In June, Highmark's Dr. Melani unveiled his plan to acquire West Penn Allegheny for a combination of loans and grants valued at as much as $475 million. Like UPMC, nonprofit Highmark was a dominant presence in its market, formed from the merger of a Blue Cross and a Blue Shield plan in 1996. By 2011, it had market share of around 60% in Allegheny County, with annual revenue of $14.8 billion, and it was sitting on reserves of about $4.1 billion.

Still, it was a bold and risky stroke for Dr. Melani, a blunt-spoken internal-medicine physician who himself trained at West Penn.

Marketing Rather than Substance

The two sides launched a marketing and public relations battle which did not seem to have much to do with quality of, access to, and cost of health care. As the WSJ article noted,

The spat quickly got nasty. Highmark highlighted UPMC's rate request in ads, and hired a Washington lobbying firm to pull together a coalition of churches, patient groups and others that would press for a deal. UPMC's own ad campaign urged patients to 'Keep your doctor. Check your plan.' Highmark sued, arguing the ads were misleading. UPMC bought Google ads that called up its site when a user searched for 'Highmark.'

The Pittsburgh Tribune-Review article included,

Public relations experts agree that Highmark faces a daunting challenge: People might see UPMC -- and by extension, Romoff -- as a bully, but they don't want to lose access to the system's 19 hospitals and 3,000 doctors in Western Pennsylvania.

UPMC's 'Keep Your Doc' ad campaign, produced by South Side agency GatesmanMarmion+Dave, is successful because it furthers the organization's business objectives, said Dale Leibach, an associate with Prism Public Affairs in Washington. This year, for the first time, UPMC gave four national insurers full access to its facilities and doctors, an arrangement previously granted only to Highmark.

'I would give points to UPMC for consistency and transparency, in promising more competition and then delivering on that promise by giving people in Pittsburgh and in the region many more options in terms of insurance providers,' said Leibach, who reviewed news accounts about the dispute.

David Kosick Sr., senior associate at KMA Public Relations in Canonsburg, takes the opposite stance, saying Highmark receives greater sympathy from a public that views UPMC as an insensitive corporate titan. Mullen Advertising in the Strip District produces Highmark's 'Accepted. Everywhere' ad campaign for TV, radio, publications, billboards and the Internet.

'Highmark's winning the PR battle,' Kosick said, citing threats by state lawmakers to intervene and public criticism directed at UPMC, including Allegheny County Council's refusal last month to issue $335 million in bonds for UPMC because of public opposition.

Wood said the health system recognizes its reputation 'may have taken a bit of a short-term hit locally,' but 'UPMC is focused on the longer term.'

'We've used our PR and marketing to fundamentally change the health care market in Western Pennsylvania,' Wood said.

Gene Grabowski, senior vice president of Washington-based public relations firm Levick Strategic Communications, said that strategy could backfire.

Also,

In addition to online social media, the public relations campaigns have ramped up on television and in other advertising.

UPMC placed its TV ads on major networks and cable and estimates they will reach the average Pittsburgh viewer four times a week, Wood said. He declined to say how much UPMC is spending on the ad campaign or what it budgets for advertising, but he said the budget has not changed since last year.

The ads, Fitting said, target 'what people are really worried about.'

Highmark stepped up its campaign in response to UPMC's, Weinstein said. He would not say how much Highmark pays Mullen Advertising or what it budgets for advertising.

'UPMC launched an aggressive, multifaceted misinformation campaign targeted at employers and consumers who subscribe to Highmark's health plans,' Weinstein said.

Caught in the Crossfire

Meanwhile, of course, patients and doctors are trying to avoid being stomped by the wrestling titans. The Wall Street Journal article opened with this theme,

Trish Wyckoff is struggling with stage-four breast cancer, but now the 53-year-old Pittsburgh resident has another worry: a possible divorce between the hospital system that is treating her, the University of Pittsburgh Medical Center, and Highmark Inc., the health insurer that pays for her care. If the two companies can't agree, she fears she won't be able to keep seeing the doctors who she believes are keeping her alive.


'We are absolutely stuck in the middle,' she says. This is a really scary time.'

Here is another anecdote,

With local newspapers chronicling each tit-for-tat, Pittsburgh residents like Dan Glasser say they have been acutely aware of the battle. Mr. Glasser, a 46-year-old lawyer, says he is alarmed and annoyed at the potential split between his insurer and UPMC. If forced to choose a side, he says, he would switch health plans to ensure access to UPMC. He has been seeing the same doctor there since he graduated from law school. 'That's almost my whole adult life,' he says.

Doctors are equally unhappy.

For his part, Kenneth Gold, Mr. Glasser's primary care physician, says he has been telling worried patients that 'all of us are pawns in this fight,' which he hopes gets resolved. If Highmark and UPMC do break up, 'it is going to be mass chaos,' he says.

Even employers are unhappy,

Employers, for their part, say they feel trapped in the middle, worried about health-care costs and also under pressure from employees to lock in access to UPMC. Cheryl Melinchak, director of benefits at Pittsburgh-based Westinghouse Electric Co., says the firm is likely to offer a new health plan this fall, in addition to Highmark and a high-deductible Aetna version, to ensure workers can use UPMC.

The standoff is 'frustrating,' she says. 'We need competition on both sides,' insurers and health providers.

Summary

So here we have the brave new world of the US health care system, a system that some people in other countries seem to think is worthy of emulation. Increasing concentration of power has lead to health care dominated by ever larger organizations lead by ever more egocentric executives. Organizations that are dominant in one area seek to dominate other areas. Caught in the crossfire are patients, doctors, employers, and the public. While more money goes to advertising, public relations, and lawyers, nothing about the fight seems to be about improving care or making it more accessible.

Further considering how this particular fight came to be will reveal various interlocking facets of health care dysfunction. If we can start to address them, we may be able to accomplish real health care reform.  Clearly we need health care organizations to concentrate on health care, not on increasing their power and domination.  We need them using most of their resources for health care, not on marketing, public relations, legal services, administrative support, and executive compensation. 

Stay tuned to Health Care Renewal as we continue this series.

Despite Recalls, Legal Settlements and Guilty Pleas - A $143.5 Million (or Perhaps $197 Million) Golden Parachute for the Former Drug Representative Who Is Now CEO of Johnson and Johnson

After 30 separate product recalls since 2009, and multiple legal settlements and guilty pleas, we noted that the former pharmaceutical representative who is now the CEO of Johnson and Johnson will be retiring. 

The $143.5 Million (or Perhaps $197 Million) Golden Parachute

The Wall Street Journal just reported his retirement will come with an immense golden parachute:

Johnson & Johnson Chairman and Chief Executive William Weldon stands to collect pension benefits and deferred compensation currently valued at $143.5 million after his retirement, according to new details released by the health-care conglomerate.

The details were:

Mr. Weldon, who will be succeeded as CEO by Vice Chairman Alex Gorsky, stands to collect benefits from two main sources. The present value of his accumulated pension benefits is $48.4 million, portions of which are paid out as a monthly annuity for life, according to Wednesday's filing with the Securities and Exchange Commission.

His pension's value places Mr. Weldon well into the top 10% of CEOs of Standard & Poor's 500 companies, said Paul Hodgson, chief communications officer and senior research associate at GMI Ratings, which tracks corporate-governance information.

Mr. Weldon also has amassed $95.1 million in nonqualified deferred-compensation plans. This represents parts of his salary and bonus that had been deferred in prior years, as well as company contributions to savings plans. Portions of Mr. Weldon's deferred compensation have been recorded each year as part of his total annual pay.

Of the $95.1 million, more than $70 million represents Mr. Weldon's accumulated balance from a legacy cash-incentive plan that J&J has discontinued and replaced with a new executive-compensation plan. This sum would be paid to Mr. Weldon at retirement, J&J said. All deferred compensation is subject to taxes.

Actually, an argument that the $143.5 million figure is an major under-estimate appeared in the Shearlings Got Plowed blog:

The MSM reports calculate only the cash values for soon to be Ex-CEO Weldon, not the present value of his stock options, at today's NYSE closing price for J&J of $65.08. So, that -- plus the vesting of his February 2012 JNJ RSUs and Stock Option awards [see page 45 of the link (but such amounts are ommitted from the year end 2011 proxy, on which the WSJ relied)] -- add about $53.47 million to the Weldon walkaway haul.

Thus, Mr Weldon's golden parachute may be as big as $197 million.

The Board's Justification for the Riches

Of course, the Johnson and Johnson board justified the latest additions to Mr Weldon's wealth, as reported by the WSJ:

In a regulatory filing Wednesday, the board said Mr. Weldon 'successfully managed our company through a challenging economic environment in 2011,' with solid financial results and advances in J&J's pharmaceutical pipeline.

The board added that while J&J made progress in addressing manufacturing-quality issues in 2011, 'continued focus is needed to address critical product supply and quality issues that impact our responsibility of being able to deliver products to patients and customers who need them.'

Johnson and Johnson's Recent Record

The board's upbeat assessment sharply contrasts with Johnson and Johnson's actual recent record.

As we discussed recently, Johnson and Johnson seems to have lost the ability to manufacture high quality products. It has had to make 30 separate product recalls since 2009. The latest was Liquid Infant Tylenol. (The current WSJ Health Blog list of recalls can be found here.)  This seems to be more than a "rough patch," which is how the WSJ article described the manufacturing problems.

In addition, the WSJ article failed to mention that Johnson and Johnson also has an amazing recent record of ethical lapses and guilty pleas, including:
- Convictions in two different states in 2010 for misleading marketing of Risperdal
- A guilty plea for misbranding Topamax in 2010
- Guilty pleas to bribery in Europe in 2011 by J+J's DePuy subsidiary
- A guilty plea for marketing Risperdal for unapproved uses in 2011 (see this link for all of the above)
- Accusations that the company, which makes smoking cessation products, participated along with tobacco companies in efforts to lobby state legislators (see post here)
- A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post here)
- More recently, in 2012, testimony in a trial of allegations of unethical marketing of the drug Risperdal (risperidone) by the Janssen subsidiary revealed a systemic, deceptive stealth marketing campaign that fostered suppression of research whose results were unfavorable to the company, ghostwriting, the use of key opinion leaders as marketers in the guise of academics and professionals, and intimidation of whistleblowers. After these revelations, the company abruptly settled the case (see post here).
-  Most recently, there are reports that the company is in negotiation with the US Department of Justice to settle other lawsuits about the marketing of Risperdal, perhaps for as much as $1.8 billion (see this BusinessWeek story.)

Meanwhile, an article from the Wharton Business School suggested that the problems at Johnson and Johnson stemmed directly from former drug representative Weldon's management approach, which put short term revenues, "making the numbers," ahead of everything else, apparently including good manufacturing practices, or ethical business practices:

[University of Michigan Ross School of Business Professor Erik] Gordon argues that CEO Weldon's relentless focus on the bottom line -- the company's website touts its record of 27 consecutive years of adjusted earnings increases and 49 consecutive years of dividend increases -- is the reason for the current woes. 'Bill Weldon sets the priorities and the culture for the company,' says Gordon. And the problems, from overly aggressive marketing to underinvestment in safety and quality systems, reflect 'people trying to get their bonuses, hit their numbers and keep their job.'

No doubt the global economic collapse in 2008 put renewed pressure on managers at multinationals like Johnson & Johnson. John Kimberly -- a Wharton management professor and executive director of the Wharton/INSEAD Alliance who has worked with J&J executives in Europe since the late 1990s -- says he detected a shift among those managers starting in 2008. 'I got the sense that there were some things happening at corporate, and that messages were being sent about the need to deliver profitability,' Kimberly notes. 'It seemed as though the people I was working with were feeling pressure from above to pay closer attention to the bottom line. It was a palpable, tangible change.'

Wharton's Donaldson gives J&J management credit for the aggressive steps the company is now taking to overhaul its manufacturing processes and plants. But he also notes that the balance between profits and patients is a tricky one. Managers at J&J, he says, 'are juggling a lot of balls. In the credo, they say they put patients first and stockholders further down the line. But there is a red ball that every manager knows about, [which is] profit -- and they don't let that red ball drop.' Figuring out how to serve patients well and still deliver for Wall Street is not easy. 'J&J believes they can do both those things,' Donaldson says. 'But if the weight of one side of that formula gets too heavy, the entire structure collapses.'

Summary

The ongoing news from the once proud Johnson and Johnson, whose credo famously states:

We believe our first responsibility is to doctors, nurses and patients, to mothers and fathers, and all others who use our products and services. In meeting their needs, everything we do must be of high quality.

suggests that instead, the company's first responsibility is now to the hired managers, to obey their dictates no matter how they undermine the credo, and most importantly, to pay them so much as to make them some of the most wealthy people in the world. Johnson and Johnson has become exemplary, not of putting patients or health care professionals first, but of how hired managers took over health care, and turned it to their own advantage.

So should we trust Johnson and Johnson to do better, now that another former pharmaceutical representative will be its new CEO?

The case of Johnson and Johnson indicates why we need a huge change in how health care organizations are lead.

Health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

Courses and Conferences on Health Care Ethics, Corruption, Marketing

Two courses and two conferences of interest to Health Care Renewal readers are coming soon.

Short Course: Why Do Physicians Not Make Rational, Evidence Based Decisions?


A full-day course at the 14th Biennial European Meeting of the Society for Medical Decision Making on Sunday, 10 June, 2012 in Oslo, Norway. Taught by bloggers Dr Roy Poses and Dr Wally Smith, the course will address both the effects of cognitive psychological limitations and of external influences by vested interests leading to less than optimal decisions.

A full description of the course is here.
 
Online Course: Corruption in the Health Sector

A 30 hour online course given by the U4 Anti-Corruption Resource Center, offered in collaboration with the Boston University School of Public Health.  The course is "on causes and consequences of corruption in the health sector; vulnerabilities in drug supply systems, informal payments, and strategies to minimise the problems." 

A full description is here. 

Conference: Deception, Incentives and Behavior

A two-day conference given by the Rady School of Management, University of California - San Diego, on 20-21 April, 2012 in San Diego, California, USA.  This will be a multidisciplinary meeting to facilitate "research of deception and related unethical behavior in the fields of economics and psychology/judgment and decision making (JDM)."

The conference web-site is here. 

Conference: Third Annual PharmedOut Conference on How Patient Harms May Result from Industry Promotion

A two-day conference given by PharmedOut at Georgetown University in Washington, DC on
14-15 June, 2012.  The conference will focus on the how industry promotion may lead to under-use, over-use, or mis-use of drugs and devices.

The conference web-site is here.

Semi-Retirement of a Salesman - Weldon to Retire as Johnson and Johnson CEO

The extremely well compensated CEO and Chairman of Johnson and Johnson, the huge and recently hugely troubled US based pharmaceutical and device company, is going to retire, at least as CEO.  Reporting on this event may shed a little more light on the sorts of leadership problems that now commonly afflict health care organizations.

The Credo

Johnson and Johnson was once one of the US' most respected companies.  Its credo, written in 1943 by Robert Wood Johnson, bravely begins:

We believe our first responsibility is to doctors, nurses and patients, to mothers and fathers, and all others who use our products and services. In meeting their needs, everything we do must be of high quality.

Dishonoring the Credo

Yet in the last few years the company has not honored this credo.

It seems to have lost the ability to manufacture high quality products. It has had to make 30 separate product recalls since 2009. The latest was Liquid Infant Tylenol. (The current WSJ Health Blog list of recalls can be found here.)

Johnson and Johnson also has an amazing recent record of ethical lapses and guilty pleas, including:
- Convictions in two different states in 2010 for misleading marketing of Risperdal
- A guilty plea for misbranding Topamax in 2010
- Guilty pleas to bribery in Europe in 2011 by J+J's DePuy subsidiary
- A guilty plea for marketing Risperdal for unapproved uses in 2011 (see this link for all of the above)
- Accusations that the company, which makes smoking cessation products, participated along with tobacco companies in efforts to lobby state legislators (see post here)
- A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post here)
-  Most recently, in 2012, testimony in a trial of allegations of unethical marketing of the drug Respirdal (risperidone) by the Janssen subsidiary revealed a systemic, deceptive stealth marketing campaign that fostered suppression of research whose results were unfavorable to the company, ghostwriting, the use of key opinion leaders as marketers in the guise of academics and professionals, and intimidation of whistleblowers.  After these revelations, the company abruptly settled the case (see post here).

Disconnect Between Leadership Performance and Rewards

Nonetheless, until very recently, the top leadership of the company continued to collect outrageous compensation, and to be regarded as a font of health care wisdom, even by the current US administration.

In 2010, the company gave CEO and Chairman William Weldon over $29 million in compensation, saying he "met expectations," (see this post).

In 2011, just days after the company pleaded guilty in the Risperdal marketing case (above), CEO and Chairman Weldon was invited to the White House to discuss health care (see this post.)

Just after his resignation was announced a few days ago, the Wall Street Journal reported that Weldon would get an increased bonus for 2011 ($3.1 million, up from $1.98 million in 2010), and an increased base salary ($1.97 million up from $1.92 million.)  His total compensation for 2011 was not yet revealed. 

Swapping One Salesman for Another

A single New York Times article suggested one reason why Weldon's reign was ultimately so unsuccessful, and perhaps why his successor may not do better.

Alex Gorsky, the newly named chief executive of Johnson & Johnson, shares a crucial biographical detail with William C. Weldon, the man he is succeeding. Both got their starts as pharmaceutical sales representatives, a notoriously grueling job that — because it demands stamina, charisma and a near devotion to making the sale — has become a crucible for future drug company executives in recent years.

Indeed, Mr Weldon's official biography indicates he "served in several sales, marketing and international management positions." The official biography of CEO-to-be, Alex Gorsky, stated he "began his Johnson & Johnson career as a sales representative with Janssen Pharmaceutica in 1988. Over the next 15 years, he advanced through positions of increasing responsibility in sales, marketing, and management." Previously, he earned "a Bachelor of Science degree from the U.S. Military Academy at West Point, N.Y., and spent six years in the U.S. Army, finishing his military career with the rank of Captain. Alex earned a Master of Business Administration degree from The Wharton School of the University of Pennsylvania in 1996."

Apparently neither current nor nominated CEO had any direct experience in patient care, nor in biomedical or clinical science, nor in chemistry, engineering or manufacturing. So both are generic managers, that is, health care leaders without any direct experience in health care, or in the science and technology underlying it.

"Making the Numbers" Versus the Credo

Moreover, they are both a particular type of generic manager, salespeople. As the Times reported:

Mr. Gorsky, who is 51, fits the mold of someone who once 'carried the bag' — industry slang for working as a sales representative. He is known as a polished speaker and an intense yet likable manager who is a quick study when it comes to learning new topics.

However, while sales people may be personable, they often have goals that have nothing to do with responsibilities "to doctors, nurses and patients, to mothers and fathers,...." As the Times article also noted,

But the ethos of the sales representative may not be what Johnson & Johnson needs right now, said Erik Gordon, who teaches business at the University of Michigan. 'That culture was very much the Weldon culture writ large — we will make our numbers for the analysts, period,' he said. 'And if that means we have to cut costs on things that affect quality, then by God, we’re going to make those numbers.'

So while Johnson and Johnson for years prided itself as a company that put the needs of patients and health professionals first, it hired leaders from the culture of sales where the impetus is to "make the numbers," to fulfill short term revenue goals, no matter what. This illustrates how generic management given perverse incentives in an era that honors greed and puts short-term economic goals ahead of all others had hollowed out health care.

We wish Mr Gorsky well, but worry that if he too focuses just on making the numbers, the result will be only mischief.

The Moral of the Story

Health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.


If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.