Schering-Plough Settles, Again, Again

'Tis the season to settle, so it seems...

Multiple media sources just reported that Schering-Plough has settled civil and criminal charges. Representative coverage is by the Boston Globe, and AP via the Houton Chronicle. The essence, quoted from the AP, follows:

Schering-Plough Corp. on Tuesday agreed to pay $435 million and plead guilty to conspiracy to settle a federal investigation into marketing of its drugs for unapproved uses and overcharging Medicaid for certain drugs.

Kenilworth, N.J.-based Schering-Plough said it will pay $255 million to resolve civil aspects of the previously disclosed investigation. A subsidiary, Schering Sales Corp., will pay a criminal fine of $180 million and plead guilty to one count of conspiracy to make false statements to the government. The agreement is subject to court approval.

Schering-Plough said the settlement resolves an investigation by the U.S. Department of Justice and the U.S. Attorney's Office in Boston that began before a new management team took over at the company in April 2003.

'With this agreement, we are putting issues from the past behind us,' said Brent Saunders, senior vice president for compliance and business practices.

The agreement comes two years after Schering-Plough agreed to pay $346 million to settle charges that it paid a kickback to a big health insurer to protect the market for its allergy drug, Claritin.

U.S. Attorney Michael Sullivan, who announced Tuesday's settlement in a news conference in Boston, said health care corruption 'erodes public confidence, compromises the patient/physician relationship and adds costs to important government programs.'

Investigators found evidence that Schering-Plough marketed drugs for so-called 'off-label' uses.... One such drug was Temodar, which the Food & Drug Administration in 1999 approved to treat anaplastic astrocytoma, a type of brain tumor, in patients who hadn't responded to other drug regimens. Sullivan said Schering promoted the drug to treat several other types of brain cancers and cancer that spread to the brain from elsewhere, which the FDA had not approved.

Saunders said the company has agreed to plead guilty to making false statements in marketing Temodar, related to its sales people promoting the drug to doctors for uses other than the approved one.

Investigators said they also found evidence of unapproved promotion of Intron A for the treatment of cancer on the surface of the bladder.

Drug manufacturers are required to report their best price on drugs provided to commercial customers, including HMOs, to the Health Care Financing Administration and to pay rebates to the Medicaid program to make sure Medicaid obtains the benefit of that low price.

Prosecutors said that from April 1998 through 1999, Schering Sales reported a false best price to HCFA to avoid paying millions of dollars in additional rebates to Medicaid.

The investigation also found evidence of pricing manipulation involving K-Dur, used to treat stomach conditions.

Notet that this was the second biggest settlement by Schering-Plough in two years. According to the Globe, it was the third big settlement in five years. The total that the company will pay out from all will be "about $1.3 billion."

It all is becoming so familiar, almost wearisome, yet the questions remain. Why do the mainly monetary penalties seem mainly to come out of the hides of stock-holders and consumers, rather than the people who actually made the decisions that lead to the offenses? And after all the indictments, prosecutions, settlements, and convictions involving large health care organizations, when will academics, policy makers and politicians, much less company CEOs and other organizational leaders admit we have a systematic problem here?

Post Title → Schering-Plough Settles, Again, Again

Serono Pleads Guilty

From the Boston Globe, pharmaceutical manufacturer Serono SA will pay $704 million to settle civil and criminal charges. The company's Serono Labs Ltd subsidiary in Massachusetts agreed to plead guilty to conspiracy to market the drug Serostim by "supplying doctors diagnostic software that was not fully approved by the [US] Food and Drug Administration [FDA]. The software, prosecutors said, led to an increase in deman for the drug...." Serostim is an injectable version of human growth hormone approved for the wasting syndrome of AIDS. According to the Globe, "Serono violated federal laws that prohibit companies from making false claims about their products and from offering bribes to win government business such as drug sales whose costs are covered by the federal government."
Michael J. Sullivan, US attorney for Massachusetts, stated, "the pharmaceutical industry will not be allowed to benefit from the criminal misconduct such as that in which Serono engaged, putting patients' best interests second to profits."
The Serono general counsel, of course, said "we are pleased to put the matter behind us." There was nothing in the Globe story to suggest any individuals would pay any penalty for their previous actions.
Conspiracy, false claims, bribery ... just another day at the office here in the dysfunctional world of US health care.
This is now one of very many examples we have posted on Health Care Renewal, just in the last 10 months, of mismanagement and criminal misconduct by leaders of a wide variety of US health care organizations. This has to be part of the explanation of why US health care keeps costing more, becomes less accessible and fails to improve quality, while health care professionals become more demoralized. But where is the outrage?

Post Title → Serono Pleads Guilty

Former Fletcher Allen Health Care CEO Sentenced for Conspiracy

As reported in the Rutland Herald and the Burlington Free Press....
William Boettcher, the former CEO of Fletcher Allen Health Care, an academic medical center affiliated with the University of Vermont, was sentenced to two years in jail for federal conspiracy. He was convicted of misleading the Vermont state legislature about the true cost of the "Renaissance Project," a massive hospital renovation project ostensibly budgeted for $173 million, but actually costing $367 million. Boettcher kept two sets of books on the project, one for the legislature's benefit, and one that reflected the true cost.
As the judge put it:

• "'You're here because you orchestrated a scheme to lie to state regulators,' Judge Sessions scolded Boettcher. 'That goes to the heart of purpose and functions of state. How would government function when it is treated so dismissively and with such deceit? 'Most of us approach our jobs with a keen sense of humility and pride," Sessions continued. "Mr. Boettcher approached his job with arrogance and deceit.'"

Furthermore,

• "In court Monday, Boettcher was hardly recognizable as the man whom prosecutors have portrayed as a boss who bullied and intimidated his managers into doing his bidding. In a nearly 50 minute statement, the former CEO wept openly, apologizing for his and his co-conspirators' lies to state regulators. "

David Demers, a former Fletcher Allen Senior Vice President, described Boettcher in this way:

• "He controlled those around him and managed those around him by fear and intimidation and I would say that as a manager he's a 'Theory X,' a management style that assumes people need to be frightened and threatened in order to perform."

Is this the sort of manager that rises to a leadership position in today's large health care organizations? Before dismissing this case as an aberration, consider a story in yesterday's New York Times about the excessive number of beds in Buffalo, NY. When asked for an explanation, William D. McGuire, CEO of Kaleida Health, commented about his peers,

• "But an awful lot of the obstacle is CEO ego. We're kingdom builders as a group: 'I've got to have more beds than you do. I've got to have more hospitals than you do. I've got to have the biggest empire."

Again, this suggests that the new corporate culture of health care often attracts as leaders the sorts of people least suited to run organizations whose goal is taking care of individual patients.

Post Title → Former Fletcher Allen Health Care CEO Sentenced for Conspiracy