Synthes and its Subsidiary Plead Guilty, Boss Remains Billionaire.

In December, 2009, we updated the story of Swiss-based medical device company Synthes and the marketing by its Norian division of a bone cement.  At that time, US authorities charged the company with use of an unapproved product in about 200 patients, three of whom suffered untimely deaths.  At that point, four US based Synthes executives had pleaded guilty to charges related to this affair. 

Last week, another shoe dropped.  As reported by the Associated Press,

A medical devices company will admit criminality and pay the maximum $23 million fine for illegally testing bone cement on about 200 spinal patients, three of whom died in surgery, U.S. prosecutors said Monday.

Norian Corp. trained surgeons to conduct unapproved clinical tests of its bone cement from 2002 to 2004, subverting U.S. Food and Drug Administration safeguards, prosecutors said. The trials were stopped after the third patient death, they said.

The cement, which is used to fill in bone defects, is approved for use in the arm but not the load-bearing spine, authorities said. The surgeries often involved older patients with compression fractures, they said.

The results are:

Norian will plead guilty to conspiracy to impede FDA functions, a felony, and 110 misdemeanor counts of interstate shipping of misbranded Norian XR. Synthes will plead guilty to the same misdemeanor shipping count.

As part of the agreement, Norian will be sold to an outside buyer, the parent company said.

Imposing divestiture of the offending subsidiary was unusual, according to the Philadelphia Inquirer:

Forcing a divestiture of a business unit in a plea agreement was precedent-setting for the U.S. Attorney General's Office in the Philadelphia area, spokeswoman Patricia Hartman said Monday.

Officials with the Office of the Inspector General in DHHS said the divestiture should send a message to other health-care companies that Synthes' behavior had grave consequences.

'Criminal conduct can result in a company getting rid of part of their business,' Greg Demske, a top official with the Inspector General, said Monday. 'This is an egregious case, and it made us firm in our belief that we should draw a line here,' he said.

If it remained a subsidiary of Synthes, Norian would be excluded from participating in Medicare and other government-funded health care programs, which would be potentially devastating to its business. According to a divestiture agreement released Monday by the U.S. Attorney in Philadelphia, Synthes has to sell Norian by May 24.

The assets of Norian would not be allowed to be transferred to another part of the Synthes 'corporate family' as part of the divestiture, Demske said.

Synthes will update the government monthly on its plans to divest Norian, and if it fails to sell the company by the May deadline, it can be fined $10,000 a day.

So does this case signal a new toughness by US authorities in cases of bad behavior by health care corporations?

According to the Wall Street Journal, Synthes officials were not exactly quaking in their boots because of these penalties, as their spokesperson said Synthes "does not expect this settlement to have any significant financial impact." Synthes would only be liable for fines of "about $24.3 million in total." That pales in comparison to the "company['s] posted total sales of $3.4 billion last year." As for the divestiture of Norian, the WSJ reported, "a spokesman said Monday that the Norian unit is mostly active in product development and isn't actively selling products. That business has fewer than 100 employees,...."

In fact, company leadership did not seem to realize that they did anything wrong, despite the company and four executives pleading guilty to crimes, actions involving the death of three patients,

'Synthes remains committed to operating in accordance with the highest legal and ethical standards, and bringing closure to this matter will permit the company to focus on its mission to improve patient care,' the company said.

Furthermore, while this is one of the few cases in which some company executives actually may have to pay penalties (after pleading guilty to at least misdemeanors), the big fish appeared to get away. As we discussed last year, an unindicted "person no. 7" was alleged to have set up the scheme to "test" the bone cement in a clinical series. Person No. 7 was at that time identified as the company CEO. That CEO, according to the Philadelphia Inquirer last year, was one Mr Hansjorg Wyss, noted to have a fortune estimated at $5.7 billion, making him the richest man in Philadelphia, and the 83rd richest man in the world, according to Forbes magazine.  (See this post.)   The settlement of this case would apparently have no impact on his immense wealth.

So although this case has some unusual wrinkles, and may yet yield some negative consequences for some of the people involved in the direction and implementation of the wrong-doing, it would appear to leave unscathed the person who has personally profited the most from the company, and its actions, including its less savory actions.  There is progress here, but only a little.

Once again, it appears that in the eyes of the law, top corporate leaders are different from you and me.  They appear immune from the penalties that lesser individuals may suffer.  They have impunity to continue to amass wealth even wealth that results from actions that were deemed illegal.   Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Synthes and its Subsidiary Plead Guilty, Boss Remains Billionaire.

In December, 2009, we updated the story of Swiss-based medical device company Synthes and the marketing by its Norian division of a bone cement.  At that time, US authorities charged the company with use of an unapproved product in about 200 patients, three of whom suffered untimely deaths.  At that point, four US based Synthes executives had pleaded guilty to charges related to this affair. 

Last week, another shoe dropped.  As reported by the Associated Press,

A medical devices company will admit criminality and pay the maximum $23 million fine for illegally testing bone cement on about 200 spinal patients, three of whom died in surgery, U.S. prosecutors said Monday.

Norian Corp. trained surgeons to conduct unapproved clinical tests of its bone cement from 2002 to 2004, subverting U.S. Food and Drug Administration safeguards, prosecutors said. The trials were stopped after the third patient death, they said.

The cement, which is used to fill in bone defects, is approved for use in the arm but not the load-bearing spine, authorities said. The surgeries often involved older patients with compression fractures, they said.

The results are:

Norian will plead guilty to conspiracy to impede FDA functions, a felony, and 110 misdemeanor counts of interstate shipping of misbranded Norian XR. Synthes will plead guilty to the same misdemeanor shipping count.

As part of the agreement, Norian will be sold to an outside buyer, the parent company said.

Imposing divestiture of the offending subsidiary was unusual, according to the Philadelphia Inquirer:

Forcing a divestiture of a business unit in a plea agreement was precedent-setting for the U.S. Attorney General's Office in the Philadelphia area, spokeswoman Patricia Hartman said Monday.

Officials with the Office of the Inspector General in DHHS said the divestiture should send a message to other health-care companies that Synthes' behavior had grave consequences.

'Criminal conduct can result in a company getting rid of part of their business,' Greg Demske, a top official with the Inspector General, said Monday. 'This is an egregious case, and it made us firm in our belief that we should draw a line here,' he said.

If it remained a subsidiary of Synthes, Norian would be excluded from participating in Medicare and other government-funded health care programs, which would be potentially devastating to its business. According to a divestiture agreement released Monday by the U.S. Attorney in Philadelphia, Synthes has to sell Norian by May 24.

The assets of Norian would not be allowed to be transferred to another part of the Synthes 'corporate family' as part of the divestiture, Demske said.

Synthes will update the government monthly on its plans to divest Norian, and if it fails to sell the company by the May deadline, it can be fined $10,000 a day.

So does this case signal a new toughness by US authorities in cases of bad behavior by health care corporations?

According to the Wall Street Journal, Synthes officials were not exactly quaking in their boots because of these penalties, as their spokesperson said Synthes "does not expect this settlement to have any significant financial impact." Synthes would only be liable for fines of "about $24.3 million in total." That pales in comparison to the "company['s] posted total sales of $3.4 billion last year." As for the divestiture of Norian, the WSJ reported, "a spokesman said Monday that the Norian unit is mostly active in product development and isn't actively selling products. That business has fewer than 100 employees,...."

In fact, company leadership did not seem to realize that they did anything wrong, despite the company and four executives pleading guilty to crimes, actions involving the death of three patients,

'Synthes remains committed to operating in accordance with the highest legal and ethical standards, and bringing closure to this matter will permit the company to focus on its mission to improve patient care,' the company said.

Furthermore, while this is one of the few cases in which some company executives actually may have to pay penalties (after pleading guilty to at least misdemeanors), the big fish appeared to get away. As we discussed last year, an unindicted "person no. 7" was alleged to have set up the scheme to "test" the bone cement in a clinical series. Person No. 7 was at that time identified as the company CEO. That CEO, according to the Philadelphia Inquirer last year, was one Mr Hansjorg Wyss, noted to have a fortune estimated at $5.7 billion, making him the richest man in Philadelphia, and the 83rd richest man in the world, according to Forbes magazine.  (See this post.)   The settlement of this case would apparently have no impact on his immense wealth.

So although this case has some unusual wrinkles, and may yet yield some negative consequences for some of the people involved in the direction and implementation of the wrong-doing, it would appear to leave unscathed the person who has personally profited the most from the company, and its actions, including its less savory actions.  There is progress here, but only a little.

Once again, it appears that in the eyes of the law, top corporate leaders are different from you and me.  They appear immune from the penalties that lesser individuals may suffer.  They have impunity to continue to amass wealth even wealth that results from actions that were deemed illegal.   Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

"Person No. 7," Also Known as the 83rd Richest Man in the World

This one nearly snuck by. 

A Settlement and Some Indictments

In May, 2009, we posted that international Swiss-based medical device manufacturer Synthes settled charges that it was paying surgeons who conducted clinical trials for the company with company stock, and in June, 2009, we posted that Synthes was indicted based on allegations that it had subjected patients to an experimental use of its Norian XR bone cement product on the spinal cord, a use not approved by the US Food and Drug Administration, and that its executives had lied to the FDA about these actions.  It was noteworthy that the indictment named but did not charge the then CEO of the company as "Person No. 7" who allegedly decided not to conduct clinical trials of Norian XR, but rather to have surgeons use it in a case series that was not identified as clinical research.  The company CEO at that time was a Mr Hansjorg Wyss, who is still chairman of the Synthes board, owner of 40% of Synthes stock, and the richest man in the Philadelphia area, worth $5.7 billion according to Forbes magazine, making him the 83rd richest man in the world in 2009, according to Forbes magazine.

Four Guilty Pleas

Here is what first escaped my attention.  In July, 2009, the Philadelphia Inquirer reported:

Two senior executives of a West Chester-based manufacturer of medical devices pleaded guilty yesterday in connection with illegal clinical trials of a bone cement on about 200 patients, three of whom died.

The company, Synthes USA Inc., did not tell the patients that they were participating in what amounted to human experimentation, according to a 97-count indictment filed June 16 by the U.S. Attorney's Office in Philadelphia.

Michael D. Huggins, 51, of West Chester, was president and chief operating officer of Synthes' spine division from late 1994 to January 2008.

John J. Walsh, 46, of Coatesville, has served as director of regulatory and clinical affairs in the same division since August 2003.

Before U.S. District Judge Laurence F. Stengel, each pleaded guilty to a single misdemeanor count of introducing adulterated medical devices into interstate commerce. They face $100,000 fines and a year in prison when they are sentenced Oct. 22.

Then, in August, 2009, Bloomberg reported:

Synthes Inc. official Richard Bohner pleaded guilty in Philadelphia to charges tied to illegal clinical trials of a bone cement that led to three deaths.

Bohner, Synthes’ vice president of operations, is the last of four executives to plead guilty to shipping misbranded Norian XR across state lines. He faces as long as one year in prison plus a $100,000 fine, according to documents made public today in federal court in Philadelphia.

Bohner and the other executives, Michael Huggins, John Walsh and Thomas Higgins, promoted the drug through the use of test markets aimed at persuading surgeons to publish the results of their surgeries, according to court documents.

Huggins and Walsh, who pleaded guilty July 20, will be sentenced on Oct. 22.

So that is four individual guilty pleas so far in this case. The pleas received only scant attention in the local media, and hence slipped by the technology I was using to scan the media at the time.

The Richest Man in Philadelphia

I got caught up when on 6 December, 2009, the Philadelphia Inquirer published a summary article focused on the "Person No. 7":

Wyss also is chairman of Synthes in West Chester, which faces 52 felony counts stemming from allegations that it illegally experimented on patients, three of whom died.

Synthes is fighting the charges, and a trial could be held next year. Four of its executives already have pleaded guilty to misdemeanor counts in the case and face sentencing hearings in January.

Federal prosecutors in Philadelphia did not name or charge Wyss, but their June indictment describes a "Person No. 7," who was a major shareholder and chief executive officer of the company when the alleged illegal conduct occurred, from 2001 through 2004. A Synthes representative confirmed that Wyss was CEO then.

In 2001, the U.S. attorney's indictment says, Person No. 7 decided the company should not pursue the costly and time-consuming clinical trials that the U.S. Food and Drug Administration demanded for the company's bone-cement product, Norian.

Instead, according to the indictment, Person No. 7 directed the company to 'get a few sites to perform 60 to 80 procedures and help them publish their clinical results' to help popularize Norian for a use not approved by the FDA.

The procedures involved injecting Norian into the spines of patients who had vertebral compression fractures, which are typically caused by osteoporosis. FDA officials had previously approved Norian for other uses, but they demanded trials for that type of surgery, fearing that the cement could perform differently in the spine.

Even after tests in pigs showed that Norian could leak from the spine and cause life-threatening blood clots, Synthes continued with surgeries on human patients, who were never told that the procedure was experimental.

Three of those patients died, but prosecutors do not know whether Norian played any role in their deaths, because the company and doctors did not immediately report all the fatalities to the FDA. The patients have not been identified.

Through a Synthes representative, Wyss initially agreed to be interviewed for this article, but later declined.

The Inquirer article seemed to try to balance the allegations about Wyss with his wealth and philanthropy:

Wyss grew up in Bern, Switzerland. His father sold mechanical calculators and liked to discuss world events, according to Harvard's Web site. Wyss trained as an engineer in Switzerland and soon began setting up Chrysler manufacturing plants worldwide. In 1965, he earned a master's degree at Harvard's business school.

'I didn't speak in class for the first five weeks,' he told a Harvard Web publication at the time of his gift. 'My classmates were all the crème de la crème, with button-down shirts I had never seen before.'

He worked for several large companies, but sold airplanes on the side. One of his buyers was a Swiss surgeon who founded Synthes. That connection eventually led Wyss to become president of the company's U.S. business in 1977.

Over time, he became a large shareholder and chief executive. He retired from that post in 2007, but he remains chairman.

Forbes Magazine in March estimated Wyss was worth $5.7 billion. His fortune has helped him pursue whatever he wants, including the rehabilitation of the Crooked Tree Golf Course in Tucson, Ariz., and the purchase of the 900-acre Halter Ranch & Vineyard in Paso Robles, Calif. The winery emphasizes organic growing methods and sells many wines, including one named Synthesis.

Wyss has given away large chunks of his fortune, mostly to organizations dedicated to his primary passions: science and the environment.

His $125 million donation to Harvard funded the Wyss Institute for Biologically Inspired Engineering....

Wyss also established two private foundations. The Wyss Foundation is dedicated to preserving land in the American West. Wyss went hiking there as a student and fell in love, according to Forbes.

The Wyss Foundation gave away about $13 million and had about $250 million in assets in 2007, according to tax filings.

Wyss also donates heavily from his personal funds. BusinessWeek estimated his total giving from all sources at $277 million from 2004 through 2008.

However, some of Wyss' philanthropy seems more designed to benefit his company:

Wyss' other foundation, the Hansjörg Wyss Foundation, had about $172 million in assets and gave away $4.9 million in 2007. It focuses mostly on education and training of surgeons, according to the AO Foundation, a Swiss research group with ties to Synthes and Wyss.

By funding research and training, Synthes has forged tight relationships with surgeons. The U.S. Attorney's Office alleges that the company paid for trips to educational seminars in San Diego and Charlotte, N.C., where surgeons learned to use Norian in the spine.

Marketing Over Research

This emphasis on education that actually seems to partake of company marketing is also displayed by Synthes itself.  Per the company's 2008 Annual Report, the company runs a "residency program,"

The Synthes Resident Program was originally released in the United States in 2007 by Synthes Trauma. It was first developed to train orthopaedic trauma surgical residents and consists of both online training modules and locally offered workshops.

In 2008, the Synthes Resident Program was expanded to a selection of European countries with modifications for the needs of specific areas and markets. Furthermore it is now also being offered by Synthes Spine and Synthes CM.

This program has achieved remarkable popularity, or should we say "market penetrance?"

The Synthes Resident Program has been well accepted in the U.S., with more than 90% of all U.S. orthopedic residents having utilized the program.

The company also offers an "Enhanced Surgeon Education Program," and support's the AO Foundation's educational activities.

On the other hand, the financial summary provided in the report suggests that research is not what the company emphasizes.  Its 2008 operating expenses included $943.3 million in sales and promotion, $349.4 million in general and administrative, and only $169.9 million in research and development, only 11.6% of total operating expenses.

And if you like the report's verbiage about education, you will also appreciate its full page section on "Integrity," which includes the header:

Corporate Citizenship. Acting with Integrity. Acting ethically and respectfully is a cornerstone of our business. At Synthes we are committed to responding to the challenges in our business by operating in accordance with the highest levels of professional and ethical standards in our industry. Simply put, we must always act with integrity.

It also boasts:

Our commitment to abide by the rules and regulations applies throughout Synthes, to all countries and to all employees, and to all our business partners.

Acting ethically is highly important for Synthes. Our actions create our
reputation. Our good reputation is an integral part of our Synthes brand,
and an essential element of our continued success.

And finally asserts:

Our effort to operate with the utmost integrity begins with the commitment of our Board of Directors and senior managers. [italics added for emphasis]  Our managers are role models for our employees, and lead our efforts to build and to promote a culture that encourages positive ethical conduct and that demonstrates commitment to compliance with the law.

Those four now admitted guilty top executives certainly were excellent role models. Even better was "Person No. 7," the current board chairman and former CEO.

Summary

So here we have all the elements: guilty pleas by top executives in connection with a human experiment whose nature was concealed from patients; allegations about but no charges against a fabulously wealthy company leader; a company that promotes what appears to be marketing in the guise of education; a tremendously profitable company which spends most of its money on marketing, not research; a company that boasts of its integrity and how its leaders are "role models," even as some have pleaded guilty to crimes; and despite the worldwide reach of the company and its products, no national coverage of any of this, the anechoic effect redux.

We have, not only in the US, but in other developed countries (for example, Switzerland, in which Synthes is based), and globally, health care based on marketing and hype, on deception and conflicts of interest, and on making a few privileged insiders fabulously wealthy.  Here is the essence of our health care dysfunction, and the inflating health care bubble.  When would be health care reformer stop arguing about insurance coverage, perhapds they can then pay some attention to these major reasons why health care is so expensive, inaccessible, and often does so little good for patients. 

PS - Earlier this year, we commented on the make-up of the Board of Trustees of the prestigious Hospital for Special Surgery in New York, which seemed split mainly among leaders of finance, including such troubled corporations that contributed to the global financial meltdown as Bank of America, AIG, Citigroup, and Wachovia, and orthopedic surgeons with ties to device makers.  One of the latter was Dr David Helfet, who listed his memberships on advisory boards for OHK Medical Devices Inc, Healthpoint Capital, and Orthobond Corp.  Just to add to the whiffs of lack of full disclosure surrounding this case, Dr Helfet still does not disclose on the hospital web-site that he is on the Board of Directors of Synthes.

Note (added 14 December, 2009) - Per comment below, the Vice President of Corporate Compliance and Internal Audit at the Hospital for Special Surgery claimed that an administrative error, not failure of disclosure by Dr Helfet, lead to the omission of the information about his membership on the Synthes board from the Hospital's web-site.

"Person No. 7," Also Known as the 83rd Richest Man in the World

This one nearly snuck by. 

A Settlement and Some Indictments

In May, 2009, we posted that international Swiss-based medical device manufacturer Synthes settled charges that it was paying surgeons who conducted clinical trials for the company with company stock, and in June, 2009, we posted that Synthes was indicted based on allegations that it had subjected patients to an experimental use of its Norian XR bone cement product on the spinal cord, a use not approved by the US Food and Drug Administration, and that its executives had lied to the FDA about these actions.  It was noteworthy that the indictment named but did not charge the then CEO of the company as "Person No. 7" who allegedly decided not to conduct clinical trials of Norian XR, but rather to have surgeons use it in a case series that was not identified as clinical research.  The company CEO at that time was a Mr Hansjorg Wyss, who is still chairman of the Synthes board, owner of 40% of Synthes stock, and the richest man in the Philadelphia area, worth $5.7 billion according to Forbes magazine, making him the 83rd richest man in the world in 2009, according to Forbes magazine.

Four Guilty Pleas

Here is what first escaped my attention.  In July, 2009, the Philadelphia Inquirer reported:

Two senior executives of a West Chester-based manufacturer of medical devices pleaded guilty yesterday in connection with illegal clinical trials of a bone cement on about 200 patients, three of whom died.

The company, Synthes USA Inc., did not tell the patients that they were participating in what amounted to human experimentation, according to a 97-count indictment filed June 16 by the U.S. Attorney's Office in Philadelphia.

Michael D. Huggins, 51, of West Chester, was president and chief operating officer of Synthes' spine division from late 1994 to January 2008.

John J. Walsh, 46, of Coatesville, has served as director of regulatory and clinical affairs in the same division since August 2003.

Before U.S. District Judge Laurence F. Stengel, each pleaded guilty to a single misdemeanor count of introducing adulterated medical devices into interstate commerce. They face $100,000 fines and a year in prison when they are sentenced Oct. 22.

Then, in August, 2009, Bloomberg reported:

Synthes Inc. official Richard Bohner pleaded guilty in Philadelphia to charges tied to illegal clinical trials of a bone cement that led to three deaths.

Bohner, Synthes’ vice president of operations, is the last of four executives to plead guilty to shipping misbranded Norian XR across state lines. He faces as long as one year in prison plus a $100,000 fine, according to documents made public today in federal court in Philadelphia.

Bohner and the other executives, Michael Huggins, John Walsh and Thomas Higgins, promoted the drug through the use of test markets aimed at persuading surgeons to publish the results of their surgeries, according to court documents.

Huggins and Walsh, who pleaded guilty July 20, will be sentenced on Oct. 22.

So that is four individual guilty pleas so far in this case. The pleas received only scant attention in the local media, and hence slipped by the technology I was using to scan the media at the time.

The Richest Man in Philadelphia

I got caught up when on 6 December, 2009, the Philadelphia Inquirer published a summary article focused on the "Person No. 7":

Wyss also is chairman of Synthes in West Chester, which faces 52 felony counts stemming from allegations that it illegally experimented on patients, three of whom died.

Synthes is fighting the charges, and a trial could be held next year. Four of its executives already have pleaded guilty to misdemeanor counts in the case and face sentencing hearings in January.

Federal prosecutors in Philadelphia did not name or charge Wyss, but their June indictment describes a "Person No. 7," who was a major shareholder and chief executive officer of the company when the alleged illegal conduct occurred, from 2001 through 2004. A Synthes representative confirmed that Wyss was CEO then.

In 2001, the U.S. attorney's indictment says, Person No. 7 decided the company should not pursue the costly and time-consuming clinical trials that the U.S. Food and Drug Administration demanded for the company's bone-cement product, Norian.

Instead, according to the indictment, Person No. 7 directed the company to 'get a few sites to perform 60 to 80 procedures and help them publish their clinical results' to help popularize Norian for a use not approved by the FDA.

The procedures involved injecting Norian into the spines of patients who had vertebral compression fractures, which are typically caused by osteoporosis. FDA officials had previously approved Norian for other uses, but they demanded trials for that type of surgery, fearing that the cement could perform differently in the spine.

Even after tests in pigs showed that Norian could leak from the spine and cause life-threatening blood clots, Synthes continued with surgeries on human patients, who were never told that the procedure was experimental.

Three of those patients died, but prosecutors do not know whether Norian played any role in their deaths, because the company and doctors did not immediately report all the fatalities to the FDA. The patients have not been identified.

Through a Synthes representative, Wyss initially agreed to be interviewed for this article, but later declined.

The Inquirer article seemed to try to balance the allegations about Wyss with his wealth and philanthropy:

Wyss grew up in Bern, Switzerland. His father sold mechanical calculators and liked to discuss world events, according to Harvard's Web site. Wyss trained as an engineer in Switzerland and soon began setting up Chrysler manufacturing plants worldwide. In 1965, he earned a master's degree at Harvard's business school.

'I didn't speak in class for the first five weeks,' he told a Harvard Web publication at the time of his gift. 'My classmates were all the crème de la crème, with button-down shirts I had never seen before.'

He worked for several large companies, but sold airplanes on the side. One of his buyers was a Swiss surgeon who founded Synthes. That connection eventually led Wyss to become president of the company's U.S. business in 1977.

Over time, he became a large shareholder and chief executive. He retired from that post in 2007, but he remains chairman.

Forbes Magazine in March estimated Wyss was worth $5.7 billion. His fortune has helped him pursue whatever he wants, including the rehabilitation of the Crooked Tree Golf Course in Tucson, Ariz., and the purchase of the 900-acre Halter Ranch & Vineyard in Paso Robles, Calif. The winery emphasizes organic growing methods and sells many wines, including one named Synthesis.

Wyss has given away large chunks of his fortune, mostly to organizations dedicated to his primary passions: science and the environment.

His $125 million donation to Harvard funded the Wyss Institute for Biologically Inspired Engineering....

Wyss also established two private foundations. The Wyss Foundation is dedicated to preserving land in the American West. Wyss went hiking there as a student and fell in love, according to Forbes.

The Wyss Foundation gave away about $13 million and had about $250 million in assets in 2007, according to tax filings.

Wyss also donates heavily from his personal funds. BusinessWeek estimated his total giving from all sources at $277 million from 2004 through 2008.

However, some of Wyss' philanthropy seems more designed to benefit his company:

Wyss' other foundation, the Hansjörg Wyss Foundation, had about $172 million in assets and gave away $4.9 million in 2007. It focuses mostly on education and training of surgeons, according to the AO Foundation, a Swiss research group with ties to Synthes and Wyss.

By funding research and training, Synthes has forged tight relationships with surgeons. The U.S. Attorney's Office alleges that the company paid for trips to educational seminars in San Diego and Charlotte, N.C., where surgeons learned to use Norian in the spine.

Marketing Over Research

This emphasis on education that actually seems to partake of company marketing is also displayed by Synthes itself.  Per the company's 2008 Annual Report, the company runs a "residency program,"

The Synthes Resident Program was originally released in the United States in 2007 by Synthes Trauma. It was first developed to train orthopaedic trauma surgical residents and consists of both online training modules and locally offered workshops.

In 2008, the Synthes Resident Program was expanded to a selection of European countries with modifications for the needs of specific areas and markets. Furthermore it is now also being offered by Synthes Spine and Synthes CM.

This program has achieved remarkable popularity, or should we say "market penetrance?"

The Synthes Resident Program has been well accepted in the U.S., with more than 90% of all U.S. orthopedic residents having utilized the program.

The company also offers an "Enhanced Surgeon Education Program," and support's the AO Foundation's educational activities.

On the other hand, the financial summary provided in the report suggests that research is not what the company emphasizes.  Its 2008 operating expenses included $943.3 million in sales and promotion, $349.4 million in general and administrative, and only $169.9 million in research and development, only 11.6% of total operating expenses.

And if you like the report's verbiage about education, you will also appreciate its full page section on "Integrity," which includes the header:

Corporate Citizenship. Acting with Integrity. Acting ethically and respectfully is a cornerstone of our business. At Synthes we are committed to responding to the challenges in our business by operating in accordance with the highest levels of professional and ethical standards in our industry. Simply put, we must always act with integrity.

It also boasts:

Our commitment to abide by the rules and regulations applies throughout Synthes, to all countries and to all employees, and to all our business partners.

Acting ethically is highly important for Synthes. Our actions create our
reputation. Our good reputation is an integral part of our Synthes brand,
and an essential element of our continued success.

And finally asserts:

Our effort to operate with the utmost integrity begins with the commitment of our Board of Directors and senior managers. [italics added for emphasis]  Our managers are role models for our employees, and lead our efforts to build and to promote a culture that encourages positive ethical conduct and that demonstrates commitment to compliance with the law.

Those four now admitted guilty top executives certainly were excellent role models. Even better was "Person No. 7," the current board chairman and former CEO.

Summary

So here we have all the elements: guilty pleas by top executives in connection with a human experiment whose nature was concealed from patients; allegations about but no charges against a fabulously wealthy company leader; a company that promotes what appears to be marketing in the guise of education; a tremendously profitable company which spends most of its money on marketing, not research; a company that boasts of its integrity and how its leaders are "role models," even as some have pleaded guilty to crimes; and despite the worldwide reach of the company and its products, no national coverage of any of this, the anechoic effect redux.

We have, not only in the US, but in other developed countries (for example, Switzerland, in which Synthes is based), and globally, health care based on marketing and hype, on deception and conflicts of interest, and on making a few privileged insiders fabulously wealthy.  Here is the essence of our health care dysfunction, and the inflating health care bubble.  When would be health care reformer stop arguing about insurance coverage, perhapds they can then pay some attention to these major reasons why health care is so expensive, inaccessible, and often does so little good for patients. 

PS - Earlier this year, we commented on the make-up of the Board of Trustees of the prestigious Hospital for Special Surgery in New York, which seemed split mainly among leaders of finance, including such troubled corporations that contributed to the global financial meltdown as Bank of America, AIG, Citigroup, and Wachovia, and orthopedic surgeons with ties to device makers.  One of the latter was Dr David Helfet, who listed his memberships on advisory boards for OHK Medical Devices Inc, Healthpoint Capital, and Orthobond Corp.  Just to add to the whiffs of lack of full disclosure surrounding this case, Dr Helfet still does not disclose on the hospital web-site that he is on the Board of Directors of Synthes.

Note (added 14 December, 2009) - Per comment below, the Vice President of Corporate Compliance and Internal Audit at the Hospital for Special Surgery claimed that an administrative error, not failure of disclosure by Dr Helfet, lead to the omission of the information about his membership on the Synthes board from the Hospital's web-site.

Synthes Indicted

Last month, we posted about a legal settlement in which device manufacturer Synthes agreed to stop creating conflicts of interests by paying physicians who performed its trials with company stock. Synthes is back in the news, and not in favorable terms. As reported by the Philadelphia Inquirer,

A Swiss company with major operations in West Chester illegally tested its bone cement on about 200 people, three of whom died, according to a 52-count indictment issued yesterday by the U.S. attorney in Philadelphia.

Synthes Inc., a producer of orthopedic products that employs about 1,400 in Chester County, did not tell any of the patients that they were participating in experimental surgeries, the indictment said.

Federal prosecutors also accused Synthes executives of lying to the U.S. Food and Drug Administration about whether they had tested the product for uses that the agency had not approved.

Particularly striking were allegations that the company's CEO was directly involved in the decisions.

The FDA had approved Norian XR to fill bony voids or defects in some parts of the body, but not in the spine. The agency insisted that Synthes conduct clinical trials, which are lengthy and expensive and require FDA oversight, if it wanted to expand the uses of Norian XR to treat spinal fractures.

But, a company executive identified in the indictment as 'Person No. 7' decided not to conduct clinical trials. Instead, the person said the company should 'get a few sites to perform 60-80 procedures and help them publish their clinical results,' according to the indictment.

The report never explicitly identifies 'Person No. 7,' but says he was the chief executive officer and a large shareholder. A company spokesman identified Hansjörg Wyss as the CEO while the tests occurred.

Forbes Magazine lists Wyss, a Swiss citizen, as a West Chester resident and the Philadelphia area's wealthiest person, with a net worth of $5.7 billion. Last year, Wyss gave the largest amount from a single source in Harvard University's history when he donated $125 million to create a bio-engineering institute.

Wyss owns about 40 percent of outstanding Synthes stock. The company, which had about $805 million in first-quarter sales this year, specializes in orthopedic devices, including plates and screws.

The Inquirer article included more detail about how the company allegedly disregarded risks to patients as it pushed the surgeons to try Norian XR on them, without disclosing that its use was experimental,

Instead of conducting trials with FDA oversight, Synthes executives convinced about 50 surgeons to test Norian XR in people with spinal fractures. Synthes sales representatives often were in the operating room during the surgeries, including those where patients died, prosecutors said.

When company executives began these surgical tests in 2002, they knew that Norian XR caused blood clots in test tubes and that clots became lodged in the lungs in tests with pigs, the indictment said.

Synthes continued the experimental surgeries even after two patients died on the operating table, prosecutors said. The company stopped the tests after a third patient died in January 2004.

Again, it seems that the current leaders of health care all too often put more priority on personal profits than on protecting patients' health and safety. So instead of all the talk about reforming how health care is financed, maybe the conversation should be about reforming how health care is lead, and finding ethical, honest leaders who put patients' welfare ahead of their own wealth.

Synthes Settles, Agrees to Stop Giving Stock to Physicians Conducting Clinical Trials

Again, 'tis the season for legal settlements. From the Newark Star-Ledger,

New Jersey and Pennsylvania-based medical company Synthes reached a settlement today over the company's alleged financial conflicts of interest, which officials are calling a landmark deal, state officials announced today.

The attorney general's office launched an investigation early 2008 into Synthes, which produces devices for treating spinal trauma, to determine whether physicians were financially benefiting from conducting clinical trials on the company's products. Under the agreement, Synthes will no longer pay trial physicians with company stock and must disclose all payments to the physicians and whether the physicians have a financial stake in the outcome of the trial.

Attorney General Anne Milgram, who said such provisions were the first of their kind, said conflicts of interest are common within the medical community.

'It is outrageous that doctors who are testing and, in many cases, recommending the use of certain high-risk medical devices are being compensated with stock in the very companies that make the devices,' said Milgram. 'All patients -- but especially those considering high-risk devices such as spinal disc replacements -- deserve honest, objective clinical trial information about the products available.'

She also criticized the Food and Drug Administration, saying the federal agency was not vigilant enough in regulating Synthes, a $3.2 billion global company.

'Medical device makers have a duty to make certain that clinical trial results are accurate and unbiased,' Milgram said. 'In creating these financial incentives for doctors, Synthes and the rest of the industry have done the exact opposite. Going forward, if the industry will not address this problem voluntarily, we most certainly will.'

What will they think of next? We have seen plenty of cases in which physicians have been given payments that could influence their clinical decision making by companies with products or services to sell. Often, such payments are not disclosed. This is one of the few times I have seen physicians other than those on corporate boards, however, receiving payments in company stock. This would seem to be a new low. It surely would provide a more powerful incentive to make the studies' results favor the company's products than would mere cash payments. At least the settlement will stop this practice, and force disclosure of company payments.

The statements by the state Attorney General were particularly and admirably direct.

However, once again we see some familiar patterns. While human beings authorized or committed the acts that got the organization in trouble, rarely do these people seem to suffer any negative consequences. At most, the organization may pay a fine. In this case, the fine was, in corporate terms, tiny. However, even a large fine, however, may come out of dividends or the stock price, dispersing the cost to stock-holders, or out of salaries across the board. Thus, those who got the organization into trouble are unlikely to feel pain from it. Perhaps because of reverence for all organizations related to health care, and fear that the bankruptcy of any health care organization, even a health care insurance company, will leave patients in the lurch, prosecutors do not seem inclined to actually prosecute such organizations. The net effect, though, seems to be that dishonest executives of health care organizations can continue to act with impunity.Until bad leadership of health care organizations leads to negative consequences for those practicing it, health care leadership can be expected to continuously degrade.

ADDENDUM (6 May, 2009) - See also comments by Merrill Goozner on GoozNews blog.