The latest news about the Synthes Norian XL bone cement case shows just how bizarre incentives for health care leaders can be.
The Synthes Case
Synthes USA, the American branch of a Swiss based device company, first settled charges that it had been paying surgeons with company stock to use its products in its clinical trials in 2009 (see this post). Then prosecutors alleged that these were not really rigorous trials. Instead, for marketing purposes, executives of Synthes subsidiary Norian persuaded surgeons to use its Norian XR product in a case series of spine surgery patients and then publish the results. Three patients who received the product for this "off-label" use died. This scheme was alleged to have been directed by "person no. 7," whom journalists identified as the company CEO, Hansjorg Wyss (see post here.) In an unusual move, the prosecutors indicted four company executives, who then pleaded guilty. They did not take any further action against Wyss, who turns out to be one of the world's richest men (see post here).
Executives Sentenced
In late November, three of the executives were sentenced, as per the Philadelphia Inquirer:
No Penalty for the Former CEO
However, there were no penalties for the company CEO who was allegedly "person no. 7":
Meanwhile, Mr Wyss continues to grow richer. Forbes currently lists him as number 164 on its list of the world's wealthiest people, estimating his assets at $6.4 billion.
A Golden Parachute for the Current CEO
Mr Wyss may be made even more wealthy because US health care corporate giant Johnson and Johnson has agreed to buy Synthes. Furthermore, as also reported by the Philadelphia Inquirer, the current Synthes CEO is in line to also greatly benefit from that deal:
Implications
On one hand, up to now, it has been very rare for any top executives of health care corporations to suffer any negative consequences due to ethical missteps by their companies, much less to go to jail. The current case may be the first real example of government prosecutors using the responsible corporate officer doctrine in such a setting. We first discussed this concept here in 2010. As noted in Reuters about the Synthes case,
Does its use now signal the end of health care leaders' impunity? We have noted that despite all sorts of misbehavior leading to a march of legal settlements, almost no one who authorized, directed or implemented the bad behavior within a large health care corporation has ever paid any penalty for it. The penalties for the four Synthes executives are certainly a break in the pattern.
Moreover, while in the Synthes case the executives who pleaded guilty were aware of what was going on, the doctrine allows prosecution of responsible corporate officers who were not so aware. As in the Reuters article,
However, in the Synthes case, there was no attempt made to prosecute even more highly placed "responsible corporate officers." As noted above, the past and current CEO were not charged, and meanwhile have engineered a merger that may make them even more wealthy (ironically, with a company, Johnson and Johnson, that has also had a troubled recent record).
Furthermore, as per Reuters, prosecutors are not exactly gung ho about using the responsible corporate doctrine:
Also,
Many of the legal settlements we have discussed involved activities that threatened the safety, health or even lives of patients. But if a corporate executive might not be able to get further lucrative employment as such after participating in such misbehavior, quelle horreur!
Let us hope that government officials, who have been so solicitous in the past about the financial well-being of the health care corporations they are supposed to oversee, will start thinking about the consequences of these corporations' misbehavior for the public to whom those officials are supposed to answer.
I conclude, de rigueur, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.
The Synthes Case
Synthes USA, the American branch of a Swiss based device company, first settled charges that it had been paying surgeons with company stock to use its products in its clinical trials in 2009 (see this post). Then prosecutors alleged that these were not really rigorous trials. Instead, for marketing purposes, executives of Synthes subsidiary Norian persuaded surgeons to use its Norian XR product in a case series of spine surgery patients and then publish the results. Three patients who received the product for this "off-label" use died. This scheme was alleged to have been directed by "person no. 7," whom journalists identified as the company CEO, Hansjorg Wyss (see post here.) In an unusual move, the prosecutors indicted four company executives, who then pleaded guilty. They did not take any further action against Wyss, who turns out to be one of the world's richest men (see post here).
Executives Sentenced
In late November, three of the executives were sentenced, as per the Philadelphia Inquirer:
Three former executives of medical-device manufacturer Synthes Inc. were sentenced to prison Monday. A fourth might have been if his attorney hadn't collapsed while standing at a lectern moments after saying that Synthes' unindicted board chairman was the ultimate authority and responsible for the illegal, sometimes fatal, bone-cement trial at the center of the proceedings.
Michael Huggins, 54, of West Chester, the former president of Synthes USA, was sentenced to nine months in prison and taken into custody immediately. Thomas Higgins, 55, of Berwyn, former leader of Synthes' spine division, got the same sentence. John Walsh, 48, of Coatesville, who was in charge of regulatory affairs, got five months.
U.S. District Judge Legrome D. Davis gave Higgins two weeks to report to prison so he could arrange for extra medical care for his wife. Davis gave Walsh until next Monday to report because Tuesday is his young daughter's birthday.
The three will pay $100,000 each in fines and be on supervised release after prison. All pleaded guilty to a single misdemeanor count under the responsible-corporate-officer doctrine.
Richard Bohner, 56, of Malvern, former vice president for operations, was the third of four defendants on Davis' docket Monday and might have gotten a sentence similar to those received by Huggins and Higgins.
No Penalty for the Former CEO
However, there were no penalties for the company CEO who was allegedly "person no. 7":
Hansjorg Wyss, the Synthes board chairman, who also was chief executive officer when the illegal bone-cement trial occurred, was not in the courtroom but still was part of Monday's events.
Gurney, Bohner's attorney, said Wyss was the undisputed leader of the company. 'He made some of the very critical decisions that put the trials on the ultimate pathway,' Gurney said. 'The culture of an organization is set at the top.'
Wyss could not be reached for comment.
Meanwhile, Mr Wyss continues to grow richer. Forbes currently lists him as number 164 on its list of the world's wealthiest people, estimating his assets at $6.4 billion.
A Golden Parachute for the Current CEO
Mr Wyss may be made even more wealthy because US health care corporate giant Johnson and Johnson has agreed to buy Synthes. Furthermore, as also reported by the Philadelphia Inquirer, the current Synthes CEO is in line to also greatly benefit from that deal:
Orsinger is getting $51.9 million for leaving the old company and a multimillion-dollar pay package from the new company. His new base salary of $700,000 will be a cut in pay from his old firm, but he will have some lucrative bonus opportunities. If he can make do clipping coupons for three years, he will get a stock package worth $17.2 million.
Orsinger is the chief executive officer of Synthes Inc., the medical-device manufacturer based in Switzerland but with U.S. headquarters and facilities in West Chester.
Implications
On one hand, up to now, it has been very rare for any top executives of health care corporations to suffer any negative consequences due to ethical missteps by their companies, much less to go to jail. The current case may be the first real example of government prosecutors using the responsible corporate officer doctrine in such a setting. We first discussed this concept here in 2010. As noted in Reuters about the Synthes case,
After decades in relative obscurity, a U.S. legal doctrine that holds corporate officers liable for company wrongdoing is finding its way back into some high-profile healthcare prosecutions.Why only now has this doctrine been dusted off, when it has been around for over 70 years, and validated by the Supreme Court over 35 years ago, remains unclear.
The 'responsible corporate officer' doctrine allows for prison terms of up to one year for misdemeanor violations of the Federal Food, Drug and Cosmetic Act, but typically defendants have received only probation.
Recently, however, the government has sought to reinvigorate the doctrine, and some executives are facing stiffer penalties than they had ever imagined.
Does its use now signal the end of health care leaders' impunity? We have noted that despite all sorts of misbehavior leading to a march of legal settlements, almost no one who authorized, directed or implemented the bad behavior within a large health care corporation has ever paid any penalty for it. The penalties for the four Synthes executives are certainly a break in the pattern.
Moreover, while in the Synthes case the executives who pleaded guilty were aware of what was going on, the doctrine allows prosecution of responsible corporate officers who were not so aware. As in the Reuters article,
The principle behind the doctrine was validated by the Supreme Court in 1975, when it affirmed the conviction of John Park, the chief executive of a national food chain who had been charged with allowing warehoused food to be exposed to rodent contamination. The court held that, to convict Park, the jury did not have to find that he was aware of the unsanitary conditions, only that he was in a position of authority to prevent them.
However, in the Synthes case, there was no attempt made to prosecute even more highly placed "responsible corporate officers." As noted above, the past and current CEO were not charged, and meanwhile have engineered a merger that may make them even more wealthy (ironically, with a company, Johnson and Johnson, that has also had a troubled recent record).
Furthermore, as per Reuters, prosecutors are not exactly gung ho about using the responsible corporate doctrine:
Over the next few decades, prosecutors used the doctrine sparingly, concerned that overuse would bring unwanted judicial scrutiny, said Paul Hyman, formerly of the U.S. Food and Drug Administration's Chief Counsel's Office and now a director at the law firm of Hyman, Phelps & McNamara.
Also,
The future of the responsible corporate officer doctrine could depend on whether executives who plead guilty under the doctrine are able to find other employment.
Cory Andrews, a lawyer with the Washington Legal Foundation, which filed a friend-of-the-court brief on behalf of the Purdue defendants, said that as the severity of penalties increase for misdemeanors, so do the odds of a constitutional challenge.
'Arguably, where the deprivation is very small, the due process violations are not as significant,' Andrews said. 'But where the deprivation goes to someone's ability to earn a living -- I think that raises the constitutional temperature.'
Many of the legal settlements we have discussed involved activities that threatened the safety, health or even lives of patients. But if a corporate executive might not be able to get further lucrative employment as such after participating in such misbehavior, quelle horreur!
Let us hope that government officials, who have been so solicitous in the past about the financial well-being of the health care corporations they are supposed to oversee, will start thinking about the consequences of these corporations' misbehavior for the public to whom those officials are supposed to answer.
I conclude, de rigueur, to really deter bad behavior, those who authorized, directed or implemented bad behavior must be held accountable. As long as they are not, expect the bad behavior to continue. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.
PLEASE HELP US SHARE THIS ARTICLE
About Health Care
0Awesome Comments!