Health Science

We have devoted a lot of bytes over the years to the stream of allegations and ethical questions about Johnson and Johnson, the giant pharmaceutical/ biotechnology/ device company, and resulting legal actions.  Meanwhile, the company has bestowed a gushing stream of money on its top executives.  Its almost spring, 2015, and it seems nothing has changed.

Johnson and Johnson's Latest Legal Misadventures

Jury Verdict that Company Concealed Harms of Risperdal

Let us start with the latest legal news about J&J.  In late February, 2015, as reported on the PharmaLot blog by Ed Silverman,

In a setback to Johnson & Johnson , a Philadelphia jury decided the health care giant must pay $2.5 million in damages for failing to warn that its Risperdal antipsychotic could cause gynecomastia, which is abnormal development of breasts in males. The lawsuit was brought by the family of an autistic boy who took the drug in 2002 and later developed size 46 DD breasts, according to a lawyer for the family.

The case has drawn attention for a few reasons. For one, this was the first lawsuit claiming J&J hid the risks of gynecomastia to go to trial after a handful of cases were settled in recent years. The trial also served as a reminder that J&J paid $2.2 billion two years ago to resolve criminal and civil allegations of illegally marketing Risperdal to children and the elderly.

Moreover, former FDA commissioner David Kessler served as a paid expert witness for the family and testified that J&J knew about the risks associated with Risperdal, but failed to disclose the data showing the extent to which youngsters may develop gynecomastia. In a report prepared for a 2012 case that was settled, Kessler wrote that J&J’s Janssen unit, which marketed the drug, had violated the law.

Note that the central allegation in this case was not simply that the drug had adverse effects, but that the company knew about these effects, and hid them.  In my humble opinion, since we entrust pharmaceutical companies to provide safe and effective products, withholding information about adverse effects is a fundamental violation of this trust. 

As noted above, this follows on another case with a much bigger financial settlement about questionable marketing of Risperdal. In addition, as the PharmaLot post noted, there are many more individual cases like this one waiting in the wings, "J&J says there are about 1,200 such lawsuits filed in courts around the country,..."

Jury Verdict that Company Concealed Harms of  Vaginal Mesh Device

Similarly, as reported by Reuters in early March, 2015,

A California jury on Thursday ordered Johnson & Johnson's Ethicon Inc unit to pay $5.7 million in the first trial over injuries blamed on the TVT Abbrevo, one of numerous transvaginal mesh products that are the subject of thousands of lawsuits.

Following more than three days of deliberations in Kern County, California, jurors found Ethicon liable for problems with the TVT Abbrevo's design and for failing to warn about its risks, according to a lawyer for plaintiff Coleen Perry.

Perry was awarded $700,000 in compensatory damages and an additional $5 million in punitive damages after jurors in the Bakersfield court found Ethicon's conduct amounted to 'malice,' her lawyer said.

Again, note that this lawsuit was not merely about the adverse effects of, in this case, a device, but about allegations that the company knew about these effects, but hid them.  My comments about violation of a fundamental trust above apply. 

Again, this is but one of the earlier cases of a cohort that may number 36,000.

Company Pleads Guilty to Selling Adulterated Tylenol

Finally, as reported in mid-March, 2015, by Reuters,

A Johnson & Johnson subsidiary pleaded guilty on Tuesday to selling liquid medicine contaminated with metal and agreed to pay $25 million to resolve the case, the U.S. Department of Justice said on Tuesday.

The subsidiary, McNeil Consumer Healthcare, pleaded guilty to one federal criminal charge in the case.

In 2010, the company launched mass recalls of certain children's over-the-counter-medicines, including Infants' Tylenol and Children's Motrin, made at its Fort Washington, Pennsylvania plant.

It was the latest in a series of recalls at the time. There were far-reaching multiple recalls from 2008 to 2010 involving hundreds of millions of bottles and packages of consumer brands such as Tylenol, Motrin, Rolaids, Benadryl and other products due to faulty manufacturing. The recalls kept widely used products such as Children's Tylenol off pharmacy shelves and seriously tarnished J&J's once-sterling reputation.

In addition to metal particles getting into liquid medicines, there were moldy odors and labeling problems.

Furthermore, as emphasized in a report in the Philadelphia Business Journal, this case also involved allegations that the company seemed to conceal the problem.

McNeil, after receiving the consumer complaint, did not initiate or complete a 'corrective action preventive action' plan as required by the federal government.

The federal government also alleged other instances in which McNeil found metal particles in bottles of infants' Tylenol at its Fort Washington facility, but failed to initiate or complete a corrective action plan.

Note that in this case, the company pleaded guilty and so could not claim it was merely settling to put the case behind it.  Furthermore, note that this was not the first case arising from charges that the company sold adulterated products made in the Pennsylvania and other factories (for example, see this post.)   We posted frequently about a long string of recalls of presumed defective or adulterated Johnson and Johnson products (here, here, here and here).  Again, in my humble opinion, we we trust drug companies to sell pure, unadulterated products.  Selling adulterated products again fundamentally violates this trust.

Unfortunately, these three cases, like many of the legal settlements we discuss, involved relatively small penalties that only accrued to the company as a whole.  The monetary penalties, while they may seem large to regular citizens, could appear as relatively trivial costs of doing business to company management.  Furthermore, no individual who authorized, directed, or implemented the behavior identified in these cases suffered any kind of penalty.  So these cases added to the many examples of the impunity of managers of large corporations who almost never seem to bear any legal responsibility for their actions.  In the case of Johnson and Johnson managers, this is all the more striking, since the current cases are just the latest in a very long string.  (See Appendix below for a list of Johnson and Johnson legal misadventures we have discussed since 2010.)


Johnson and Johnson CEO's Latest Raise


Finally, a day later, the Wall Street Journal reported on the continuing good fortune of the Johnson and Johnson CEO, to be contrasted with the company's poor fortunes in the courts of law.

Johnson & Johnson said Chairman and Chief Executive Alex Gorsky’s total compensation jumped 48% to $25 million last year, lifted by an increase in stock and option awards. Mr. Gorsky’s stock and option awards rose to a total value of $13.6 million from $8.7 million a year earlier. The board also raised Mr. Gorsky’s base salary to $1.5 million from $1.45 million in 2013, and the CEO also benefited from a jump in pension value.

In a filing Wednesday, the pharmaceutical giant said Mr. Gorsky’s compensation increase was based on the board’s conclusion that J&J successfully executed near-term priorities, exceeded financial goals and built on momentum in its pharmaceutical business.

As a result, J&J awarded Mr. Gorsky an annual performance bonus of 135% of target and long-term incentives at 130% of target. Awards at J&J are capped at 200% of target.

The article noted that at least one other top Johnson and Johnson manager also was raking it in.

Paulus Stoffels, world-wide chairman of Pharmaceuticals, made $18.3 million last year, more than double his 2013 total compensation, boosted by a stock award of $10.7 million.

Funny, the board's rosy view of Mr Gorsky's performance seemed totally uninformed by the company's latest legal misadventures.

(By the way, to anyone who would argue that many of these misadventures were the results of behavior that occurred before Mr Gorsky became CEO, note that his official company biography stated that he joined the company's Executive Committee in 2009, implying some shared responsibility for overall company management since then.)

Same Old, Same Old

A few weeks back, one of our commentators complained that our posts have a certain sameness.  Unfortunately, we agree.  We keep seeing variants of the same sorts of outrageous stories in the news media that we began to post about in 2004.   The problems are not getting better.  Perhaps they are getting worse.

In particular, we have previously contrasted this particular company's recurrent legal and ethical problems with its top managers' accumulating wealth.  In 2011 we posted about the contrast between previous Johnson and Johnson CEO William Weldon's enlarging fortune and political influence with some of the earlier legal cases that raised questions about the trustworthiness of the company.

But the point of this blog is not to come up with titillating stories to make people chuckle.  The point is to challenge the continuing, severe problems afflicting the leadership and governance of health care, the resulting incompetent, unethical, and sometimes criminal behavior, and the downstream effects on patients' and the public's health.  Do not blame the messenger for the sameness of the problem.  Blame those who are getting wealthy and powerful from the ongoing decline in health care. 

If we truly want to see more accessible, more effective, less costly health care in our life times, we need to first call out the bad leadership that has kept such aspirations at bay for so long, and second start to hold current leadership accountable for the mess they have made.


Appendix - Johnson and Johnson Legal Record since 2010-
2010
- Convictions in two different states for misleading marketing of Risperdal
- A guilty plea for misbranding Topamax
2011
- Guilty pleas to bribery in Europe  by Johnson and Johnson's DePuy subsidiary
- A guilty plea for marketing Risperdal for unapproved uses  (see this link for all of the above)
- A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post here)
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).
-  Johnson & Johnson was fined $1.1 billion by a judge in Arkansas for deceiving patients and physicians again about Risperdal (look here).
-  Johnson & Johnson announced it would pay $181 million to resolve claims of deceptive advertising again about Risperdal (see this post).
2013
-  Johnson & Johnson settled case by shareholders alleging that management made misleading statements and withheld material information about manufacturing problems (see this post)
-  Johnson & Johnson Janssen subsidiary pleaded guilty to a charge of misbranding Risperdal, and settled for a total of $2.2 billion allegations that it promoted the drug for elderly demented patients and adolescents without an indication, and despite evidence of its harms (see this post).
 -  Johnson & Johnson DePuy subsidiary agreed to settle with multiple plaintiffs for $2.5 billion allegations that it sold defective mental-on-metal artificial hip, and hid evidence of its harms .
- Johnson & Johnsonn Janssen subsidiary was found by two juries to have concealed harms of its drug Topamax (see this post for this and above case).
- Johnson & Johnson Ethicon subsidiary's Advanced Surgical Products and two of its executives agreed to settle charges by US FDA that is sold mislabeled products used to sterilize equipment such as endoscopes (see this post).
- Johnson & Johnson fined by European Commission for anticompetitive practices, that is, collusion with Novartis to delay marketing generic version of Fentanyl (see this post).
2014 
- Johnson & Johnson DePuy subsidiary settled Oregan state charges that it marketed the ASR XL metal-on-metal hip joint prosthesis without disclosing its high failure rate (see this post). 

How many legal cases suggesting failures of leadership of large health care corporations will it take to break the back of health care? 

$60 Million Settlement of Class Action Alleging Cost Cutting Led to Poor Manufacturing of Drugs and Devices

Earlier this year, we posted about the $60 million settlement of a class action lawsuit brought by investors in Hospira Inc,  a drug and device manufacturer.  The plaintiffs had contended that "cost cutting aimed at boosting short-term profitability," and ostensibly "shareholder value" lead to "gutting quality control efforts," and ultimately to quality problems discovered by inspections by the US Food and Drug Administration (FDA).

This case was brought not by law enforcement officials or regulators, but by stock holders who believed that their investments were degraded by management misbehavior. Nonetheless, as is usual in most settlements of civil cases involving big health care organizations, according to Law360, Hospira managers were able to assert,

Defendants deny that they have violated the federal securities laws or any laws and maintain that their conduct was at all times proper and in compliance with all applicable provisions of law.

Note also that company executives, including CEO Michael Ball, were named as defendants, but I could find no record that they had to pay anything themselves.

So this, like many other legal settlements we have discussed, only seemed to serve as a marker of probable, but not definite misbehavior by the leadership of a big health organization that led to problems with the manufacture of drugs or devices. This is concerning since the public and health care professionals trust drug and device manufacturers to proffer products of good quality.  Yet the resolution of the case left lingering uncertainty because the defendants could settle without admitting any wrongdoing.

FDA Warnings, and Punitive Damages for Firing a Whistleblower

Some more evidence that there really were quality problems in Hospira's manufacturing operation appeared in October, 2014, when the FDA warned the company about particles found in drugs manufactured in its Australian factory (per the Chicago Tribune).  

Furthermore, in November, 2014, a story appeared that not only corroborated the existence of important issues with manufacturing quality at Hospira, but suggested that the company had tried to cover up these problems.  As reported by Crain's Chicago Business,

A Lake County jury awarded almost $10 million to a former Hospira employee, finding that the company fired him because he raised concerns that it covered up quality and safety issues with a product. 

In particular, 

The former employee, Angel Estrada, was a vice president of quality systems and compliance for the Lake Forest-based pharmaceutical company from September 2010 to September 2011, when the company fired him, according to a lawsuit filed in Lake County Circuit Court.

Estrada raised concerns to supervisors that Hospira was not addressing issues in one of its medical pumps that a hospital in Spain reported to the company. The hospital reported that air bubbles had occurred in the device when used on children, which can cause fatalities, according to the complaint.

The lawsuit alleges that Estrada reached out to his superiors, including Hospira CEO Michael Ball, to address the reported issues and notify the FDA and European regulators of the pump's alleged defects.

The lawsuit alleges that on the same day Estrada sent Ball a report, two employees under Estrada were fired 'purportedly for altering a record during the course of an audit.' Hospira fired Estrada 'under the pretext of not properly investigating' one of the employee's conduct during the audit, the lawsuit says.

The real reason he was fired 'was to quash his reporting of the dangers associated' with the pump, the suit alleges.

The jury issued its verdict earlier this month. Of the almost $10 million Estrada was awarded, $7 million was punitive damages.

So in this case, a high ranking corporate executive tried to blow the whistle because of quality problems affecting the manufacture of a medical device.  These problems put patients at risk, and pediatric patients at that. His whistleblowing was vigorous, going as high as the company CEO.  Yet, the jury found that the company responded by firing the whistleblower.  

Still, not surprisingly,

Hospira said it will appeal and that it maintains that the allegations are 'fully without merit.'

That remains management's contention, but the jury found otherwise, and emphasized this finding with punitive damages.

Summary

These cases, added to all our other discussions of legal settlements, crime, and corruption in health care, suggests that bad behavior by leaders of large health care organizations is rampant.  Yet these cases also suggest how hard it is to understand the scope of the problem.  Each of the cases above involving Hospira seemed to proceed in a vacuum, uninformed by previous cases.  None got much media attention.  (For example, the latest jury findings only appeared in two media outlets, as far as I can tell, and both were in Chicago.)  There have been few efforts, beyond those of your humble servant, to try to link various civil, criminal, and regulatory cases involving large health care organizations together in any sense.  Continued lack of awareness of the scope of the problem of management misbehavior in health care mitigates against finding any effective solutions.

Furthermore, the cases above, like most others we have discussed, did not lead to any negative consequences to any individuals for authorizing, directing, or implementing the bad behavior, even though the behavior may have lead to their individual enrichment.  Managers in this era of "shareholder value" are often lavishly awarded for cost cutting that increases short term revenue.  Note that the top executives of Hospira have been lavishly rewarded.  According to the company's 2014 proxy statement, its five top executives each had total compensation exceeding $2,750,000 in 2013.  CEO Michael Ball, who was named as a defendant in the case settled earlier this year, and allegedly ignored the whistleblower's warnings in the most recent case, received $9,892,283.  It is quite possible that all these executives at least indirectly benefited financially from the cost cutting that lead to the quality problems implied by the cases above. Yet as long as there is no accountability for any person who was directly involved in authorizing, directing, or implementing the bad behavior, or who might have benefited from being furnished plausible deniablity about it, future bad behavior will not be deterred.

So how many more cases will it take before we start holding the leaders of large health care organizations accountable?  Will we do so before the back of our health care system is broken?