Monday, November 12, 2012

Corporate Integrity? Professionalism? Give Us a Break

"The rich are different from you and me."
"Yes, they have less integrity."

I'll return at the end to this exchange that never happened between F. Scott Fitzgerald and Ernest Hemingway. The thread begins, however, with this post by our friend Dr. Roy Poses on Health Care Renewal: http://hcrenewal.blogspot.com/2012/11/phony-consulting-and-royalty-agreements.html

Dr. Poses reviews the recent legal difficulties of the firm Orthofix, which seems to be headquartered down in my neck of the woods, in Lewisville, TX. Orthofix makes stuff that orthopedists implant in patients and so getting surgeons to choose their products over competitors' is huge for Orthofix profits. Some of the wrongdoing occurred in a subsidiary company, Blackstone Medical, which Orthofix bought out in 2006.

Some of the legal issues, in four separate legal actions, are summarized in a Bloomberg News release:
http://www.bloomberg.com/news/2012-11-02/orthofix-will-pay-u-s-30-million-to-settle-kickbacks.html
Others came from an SEC news release that Dr. Poses quotes.

Not to get overly fancy about which legal action is which, basically Orthofix was implicated in all of the following:
  • Having to pay a total of $121.4M to the Feds in all the actions combined
  • Paying docs sham consulting fees and kickbacks for using Orthofix products
  • Paying bribes to Mexican government officials to obtain sales contracts with Mexican government-owned hospitals
Health Care Renewal has made a big deal of how drug and device companies repeatedly are caught violating laws and committing fraud, but they pay fines that amount to small percentages of their total take on the products they were peddling illegally, and have no real financial incentive not to do it again, which they then routinely do. Dr. Poses has stated that until executives of these companies do jail time we can expect this behavior to continue. So it is therefore worthy of particular note that in this case, the behavior was apparently so egregious that 5 Orthofix employees, including a vice president, have pleaded guilty to criminal charges in the kickback allegations.

What do we mean by "egregious"? Well, even if you are now jaded by all the repeated accounts of company wrongdoing, this stuff may get your attention. Here's the partial rundown:
  • Docs were paid as much as $8000/month under fictitious consulting agreements, and some were awarded phony research grants for up to $18,000
  • Blackstone sales tactics routinely included wining and dining docs, taking them to strip clubs, and paying for prostitutes
  • One Blackstone female sales manager was urged by two surgeons whom she took to a strip club to disrobe and join the strippers on stage--after she complied, she was demoted but not fired
  • The bribes paid to Mexican government officials were referred to in Orthofix documents as "chocolates," but consisted of cash, laptop computers, TVs, and appliances given directly to the officials or via front companies
Somewhere in the mix of all the legal actions back and forth, there was mention of Orthofix being forced to agree to a corporate integrity pact with the Feds. One has to wonder what possible meaning an "integrity" agreement could have in this type of situation. It is sort of like going to the local garbage dump and getting them to sign a "smell nice"" agreement.

That brings us back to the non-quote with which I began. We would like to talk about corporate integrity, on the industry side, and professionalism on the physicians' side. What does corporate integrity mean when companies act in the way that Orthofix has--apparently as a standard business arrangement? What does professionalism mean when a company offers strippers and prostitutes as well as funny money to surgeons, and expects that this will gain them points with their customers, instead of enraging and offending the surgeons? ("We've already established what you are; we're just haggling over the price"?) And what does professionalism mean when a company assumes that surgeons will find these offers attractive and acceptable--and the surgeons, in fact, do accept them, eagerly?

Well, it turns out that one problem we may be facing here is that both the corporate leaders and their surgeon-customers are wealthy. And going back to Health Care Renewal again:
http://hcrenewal.blogspot.com/2012/07/quantitating-corruption-of-finance.html
--we're reminded that there is starting to be a body of experimental and survey literature that documents a general trend of rich folks to be less honest and more likely to feel entitled to bend the rules in their favor than average people.

This is the opposite of what the popular political discourse proclaims. When we hear mention of "entitlement programs," we are not likely to think of corporate welfare for the rich, but rather of programs that aid the poor and middle class, and make those nasty people into bad folks who feel "entitled" to things they did not properly earn. But the available research suggests that it's rather those who grew up under privilege that somehow are conditioned to believe that they earned every bit of that advantage and that they can expect it to keep rolling in. (Which is what F. Scott Fitzgerald, in the legitimate quote, actually did say about the rich.)

So I conclude that for some corporations to develop integrity, and for some physicians to develop professionalism, would require a dose of anti-entitlement pills. The drug company that seeks to market that particular product might get my blessing.

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