A Practitioner's View of Institutional Corruption Through the Lens of the Health Care System: an Essay

• Publication year: 2018

A Practitioner's View of Institutional Corruption Through the Lens of the Health Care System: An Essay

Reuben Guttman

A PRACTITIONER'S VIEW OF INSTITUTIONAL CORRUPTION THROUGH THE LENS OF THE HEALTH CARE SYSTEM: AN ESSAY

Reuben A. Guttman^*

These interdisciplinary invaders have come to dominate the faculties of the elite law schools and to influence a great many of the other law schools. The interdisciplinarians are valuable additions to law faculties, but they should not be allowed to displace faculty who bring to the teaching of and research into law a rich background of legal practice in lieu of expertise in a scholarly field or fields outside of law.

—Richard A. Posner, The Federal Judiciary Strengths and Weaknesses, Harvard University Press 2017

Introduction

Think about this: some of the largest drug companies in the world—the one's that we rely on for life saving treatments—are convicted criminals.¹ Hospital chains and large entities that distribute drugs to the elderly have been charged with defrauding the government and have paid fines, or entered guilty

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pleas to resolve allegations of conduct that have placed patients at risk.² Healthcare fraud is so rampant that each year the government has recovered billions of dollars under the False Claims Act from companies whose television advertising attempts to portray a different image; an image of a benevolent and caring corporate citizen.

Yet, with so many employees inside the company, how do these entities do what they do for so many years before their wrongful conduct is exposed, perhaps by a whistleblower who wakes up one day and questions what others have never thought about questioning? The answer to this question involves an analysis of how people behave when they are part of an institution—or in this case, a large corporation.

In contemplating this matter, I am reminded of the air raid drills at my grade school in the 1960s. Do stay with me because there is a point to be made here.

In second grade, we were marched in double rows, holding hands, to the edge of the school property where we were told that when "the big one" comes, we should immediately vacate school grounds and walk home. Perhaps it is the influence of three decades of practicing law, but I surmise that this air raid protocol was cooked up by the lawyers and the insurance companies. Why would our school principal—a caring but unwitting fellow—not question why a mere exit from school property would protect little tikes from an enemy onslaught? The answer is obvious; the protocol was unassailable because it came by way of a superior institution, the Board of Education.

It is not so much that I believe that all people are motivated by self-interest or greed; it is that institutions have a way of corrupting even those who are inherently principled, or creating a dynamic where unwitting players—even principals—are lulled into complicity. To very loosely paraphrase a line used by a former Assistant Secretary of Energy in testimony before a House of Representatives oversight committee, institutions have a way of causing individuals to check their brains at the door.

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The problem starts with un-checked institutional allegiance. Too often we define ourselves not by our own accomplishments, but by our institutional affiliations. We align ourselves with schools, employers, social clubs, and sports teams and we too often define our own worth by their accomplishments. We even subject ourselves to their branding; we wear school t-shirts, don team hats, carry brief cases and travel bags with the logo of our employers and we otherwise boast about the accomplishments of our institutional affiliations.

There is an externality to all of this; when institutional allegiance checks in, individual moral or ethical compasses too often check out. For some, there is no need to question the conduct of the institution because the beauty of the institution is that someone else—perhaps in the ethics department or general counsel's office—takes care of anything that could be of concern. Affiliation with an institution is a convenient excuse for abdication of individual responsibility.³ And for those who play the odds, this makes complete sense. Rarely are individuals held criminally or civilly responsible in direct proportion to the wrongdoing that they orchestrate under cover of institutional affiliation.⁴ For those who might gather an inkling of suspicion about misconduct within the institution, there is often no incentive to act on the suspicion. In simple terms, why make waves when the institution is good to its members? If everyone encompassed by the institution thinks things are good, then things must be good—especially where the institution has super smart people who exist to ensure compliance with law.⁵ Through years of litigation against large corporations, I theorize that this is the thought process for those within an institution who are confronted with blowing the whistle on wrongdoing.

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Of course, if institutions were truly proficient at compliance with the law, there would be no Enron, WorldCom, or Tyco—and certainly Bernie Madoff would have been sentenced to a life in government housing long before he financed his wrist watch collection with money siphoned from the accounts of his clients.⁶

A continuing pattern of corporate wronging that has caused major publicly traded companies to plead guilty to some form of criminal conduct leads one to infer the obvious; corporations balance the penalties for non-compliance against the potential economic rewards reaped from skirting the law while factoring in the chances of getting caught with some consideration for whether there is any colorable defense for the conduct (albeit if only for public relations purposes and as a mechanism to leverage a favorable settlement). In theory, this formula has generated a long list of convicted criminals, including Pfizer, Abbott, Glaxco-Smith-Klein, and Amgen.

I cannot say the root of my cynicism stems solely from my litigation against the healthcare industry. I spent years representing industrial and service unions and their members; the average working person—or hardcore union member—has no allusions about the power of institutions to corrupt. They often view their own employer and their union with the same gimlet eye.

Yet, my litigation against the healthcare industry has, at the very least, been a policy laboratory for the understanding of institutional wrongdoing and deficiencies in compliance enforcement. While the lessons I have learned are in the first instance about "fraud, waste and abuse," in the delivery of healthcare, they are transferrable and thus have meaning elsewhere.

I. Motive, Money and Public Reporting

Motive is the reason that anyone does anything—and anything includes things that are wrong or just plain illegal. In proving any case, motive can be defined by a set of facts that have a tendency to make the ultimate allegation of wrongful conduct more or less probable.⁷

For publicly traded Pharmaceutical companies, motive starts with Wall Street promises. Too often, promises can only be kept through illegal conduct,

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which may include marketing a drug for unapproved purposes, offering money or things of value to induce utilization, or generating—under color of scholarship—writings that are designed for the purpose of driving prescriptions.

How does this work? Companies make representations to investors about their overall revenue streams, the revenue streams attributable to different drugs, and the bona fides of certain products. These promises are made, for the most part, by business people and not scientists. And sometimes, they are made without proper attention to the scientific details of studies, FDA approved package inserts, and support from the Centers of Medicare and Medicaid Services (CMS), identified "compendia," which provide some guidance for government reimbursement for uses outside the FDA approved label.⁸

For their part, the Wall Street analysts rarely get into the nitty gritty of the science; they report on company puffery about trials and studies—always noting a share price increase or decline—but seldom drilling down and comparing facts and data with an eye toward inconsistencies. Too often, the obvious is ignored.

PharMerica, for example, is a company that provides long term care pharmacy services to nursing homes. It is an intermediary between thousands of homes, caring for the elderly and the infirm, and the drug industry.⁹ The company's 2016 Third Quarter 10k indicates that it received rebates from Pharmaceutical companies. Rebates are payments based, in general, on the volume of drugs distributed to patients.¹⁰ The matter of rebates is a sensitive issue, opening scrutiny as to whether at least one purpose of such payments—which is all it takes—is to induce the ordering of drugs where "payment may

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be made in whole or in part under a Federal Health Care program." This is, in part, the language of the Anti-Kickback Statute,¹¹ which criminalizes payments, or any granting of an in-kind benefit, which has—as one purpose—inducing the use of healthcare "items" or "services" which are in whole or part paid for with Federal dollars.

PharMerica, well aware that its conduct implicates scrutiny under the Federal Anti-Kickback statute (AKS), notes the following in its 2016 Third Quarter 10k: "[w]hile we believe our practices comply with the Anti-Kickback statute, we cannot assure our practices that are outside of a safe harbor will not be found to violate the Anti-Kickback statute." And the Third Quarter 10k also states: "[w]e believe our contract arrangements with other healthcare providers and our pharmaceutical suppliers and our pharmacy practices are in substantial compliance with applicable federal and state laws. These laws may, however, be interpreted in the future in a manner inconsistent with our interpretation and application."

A complete...