The Year ('97) in Corporate Crime
Drugs, Dogs and Quacks
Slowly, slowly, the Justice Department continues to try to catch up with the crooks who, according to the General Accounting Office, defraud the government out of $100 billion a year. There are reportedly 1,000 current investigations into health care fraud.
Like insurance companies, medical supply companies seemed to be competing for the title of crookedest. In September the Journal reported that SmithKline Beecham's clinical laboratory unit was "close" to an agreement to pay more than $300 million to the government to settle charges that it had bilked Medicare for unneeded blood tests. That settlement would still be less than the record $379 million paid by National Medical Enterprises in 1994 for alleged fraud in psychiatric services.
Far back in the field, but closing fast, is Corning Inc., which paid $6.8 million to settle allegations that its Bioran Medical Laboratory in Cambridge, Massachusetts, regularly billed Medicare for blood tests that doctors hadn't asked for. That was in February. Eight months later Corning was forced to pay up again, this time a whopping $119 million to settle charges of fraudulent billing by one of its subsidiaries, Damon Clinical Laboratories. That must have been a proud moment for Corning--the penalty pushed it past the $110 million in civil and criminal penalties paid for similar misconduct by a San Diego firm, National Health Laboratories. The WSJ indicates that Corning is an old hand in this game. It paid $39.8 million in 1993 and $8.6 million in 1995 to settle federal charges of Medicare fraud.
In 1996 the medical industry provided the Journal with plenty of misconduct to write about, some that was criminal and some that was just plain corporate sleaze--such as Eli Lilly & Co.'s use of homeless, often alcoholic, men to test the safety of experimental drugs, paying them the lowest rate per diem in the human guinea pig business. The Food and Drug Administration's deputy director of drug evaluation told the Journal that using homeless drunks violates the agency's rule that drugs can be tested only on people who are able to make a "truly voluntary and uncoerced decision" to participate. Other test experts told the newspaper that using alcoholics could distort the evaluation of an experimental drug's safety. That may not worry Eli Lilly; after all, it's the company that put Oraflex on the U.S. market without telling the F.D.A. that the same drug had already killed several people in Europe.
The Journal medical story that takes the prize for describing pure gutter-level greed and callousness is the one about the British drug maker Boots and its main product, Synthroid. About 8 million Americans spend $600 million a year on drugs to control hypothyroidism, and Synthroid gets 84 percent of their money. It has been around since 1958 and was the first synthetic thyroid drug. When it came on the market, the F.D.A. approved it without asking for trial data. That oversight has made it extremely difficult for rival thyroid drug manufacturers. Since there is no benchmark data on Synthroid, how could they persuade doctors that their products are just as good and are absorbed into the blood the same way Synthroid is?
In recent years the rivals began making some inroads in Boots's virtual monopoly by getting on state drug-approved lists. To beat them back, Boots hired a University of California research team to perform extensive tests comparing Synthroid with three rival--and much cheaper--thyroid drugs. If Boots thought the $250,000 contract would persuade the scientists to tout the superiority of Synthroid, it was in for a big surprise. In fact, the researchers found that the four drugs were essentially interchangeable and that F.D.A. support of the cheaper drugs would save thyroid patients $356 million a year. Furthermore, the researchers were going to say so in a paper that the Journal of the American Medical Association was ready to publish.
Curses! At that very moment Boots was about to sell itself to Germany's giant BASF, for $1.4 billion, and the research findings might queer the deal. But the solution was simple. The contract the university team had signed forbade publication of their findings without Boots's approval. It didn't approve, of course, and that was that. Synthroid still sits on top of the market, and millions of thyroid patients will pay for its being there.
Odds and Ends. Claiming that maybe as many as 25 million consumers were overcharged $600 million between 1989 and 1994, attorneys general in twenty-two states sued the biggest contact lens companies--Bausch & Lomb, Johnson & Johnson Vision Products and Ciba Vision Corporation--as well as several optometry trade organizations for price conspiracy.... The world's largest drug companies paid $350 million to appease thousands of retail druggists who claimed they were being overcharged. But the feud isn't over, and the Federal Trade Commission is investigating for signs of a conspiracy.... The Florida nursing home industry takes in $3.2 billion a year. But state inspectors give the lowest possible rating to one out of every twenty-six homes, and $2.5 million in fines have been levied for poor care. Trouble is, only one violator (poetically named Ambrosia Home) has paid up, a trifling $19,500. The big chains just appeal the fines and drag out the cases forever.... In one of the stiffest warnings issued in recent years, the F.D.A. told Pfizer that it must immediately stop making misleading promotional claims for Zoloft, a popular anti-depressant (worldwide sales of $1 billion a year).... Sick or dead, you're a good target for fraud. The F.T.C. requires the nation's 20,000 funeral homes to give itemized price lists to prospective clients. But in a test run the commission found that as many as 8,000 undertakers are ignoring the rule. The F.T.C., timid as usual, has threatened only twenty of them.