Cochlear kickbacks?

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Tuesday, June 15, 2010
Cochlear Americas to pay $880,000 to resolve suit
WASHINGTON, DC–The U.S. Justice Department has announced that Cochlear Americas has agreed to pay $880,000 to resolve allegations that it paid illegal remuneration to healthcare providers to induce purchases of cochlear implant systems. Cochlear Americas is a subsidiary of the Australian Cochlear Limited, the world’s largest manufacturer of cochlear implants. The settlement resolves a lawsuit brought by a whistleblower, Brenda March, in 2004.

The suit, filed in the District of Colorado, alleged that Cochlear Americas violated the Anti-kickback Act and the False Claims Act by paying various forms of illegal remuneration to physicians who prescribed the use of the Cochlear-manufactured devices for Medicare and Medicaid patients. Cochlear Ltd. issued a statement saying that it “specifically disputes and denies the factual and legal allegations in relation to sales [programs] and other conduct alleged to have occurred from 1998 to 2003 in the USA. However,” it added, “to avoid ongoing legal fees and the uncertainty and expense of litigation, the parties have … agreed to resolve the matter.”

The United States intervened in the lawsuit in January 2007 and shortly thereafter moved to stay the suit, while it pursued an administrative civil monetary penalties investigation against Cochlear. The settlement announced on June 9 resolves that administrative matter as well as the suit initiated by the whistleblower.

“Today’s actions demonstrate that the United States will not tolerate the payment of kickbacks by any entity involved in providing medical goods and services to beneficiaries of federal health care programs,” said Assistant Attorney General Tony West, head of the Justice Department’s Civil Division. March, a former vice-president and director at Cochlear Americas, brought her suit under the qui tam provisions of the False Claims Act, which permit private citizens with knowledge of fraud against the government to bring a lawsuit on behalf of the United States and to share in any recovery. Under the civil settlement, she will receive $176,000.

Cochlear Limited’s 2007 annual report acknowledged that a US Federal investigation continued into its payments to physicians and providers. In February 2007, part of the whistleblower complaint against Cochlear filed by former Chief Financial Officer Brenda March was unsealed by the U.S. District Court for the District of Colorado. The complaint alleges that Cochlear violated the Federal anti-kickback statute through its Partners Program, which offered credits towards free or discounted products for physicians who implanted Cochlear devices, as well as gifts, trips, and other gratuities paid to physicians and providers. The government intervened in the case and transferred it from the U.S. Department of Justice to the Health and Human Services Inspector General for the imposition of civil penalties. In June 2010, Cochlear America agreed to pay a fine of $880,000 as part of a settlement with the US Department of Justice.[2]

wikipedia…

Cochlear’s dirty marketing tricks

We’ve been told that a complaint was filed in USA earlier this year against Cochlear. Upon investigation, we found out that the case focused on Medicare and exaggerated claims made by providers and possible competition practices.

Background

So what’s this about? Someone called Brenda March worked as the Chief Financial Officer and Vice President of Cochlear from 1998-2004. She became a whistleblower, and filed a complaint (with the US government) [PDF], via her lawyers. This case has now been referred to the US HHS Office of the Inspector General, by the US Department of Justice.

Whilst this complaint focuses on specific American laws around Medicare, and the fairness of payments, it also contains useful facts about how cochlear implants are sold and marketed.

Incentives to use Cochlear’s products (implant CIs)

In 1997 Cochlear established a ‘Partners Program’ (and subsequent schemes), which gave surgeons ‘points’ each time they implanted a CI.

A points programme worked in the same way as rewards programmes you would get at your local supermarket. E.g. when you go shopping in Sainsburys you can get Nectar points. Get enough points and you can get some freebies or rewards. Shop elsewhere, and perhaps you can collect Air Miles, AAdvantage etc. The company buys in your loyalty, thus you feel obliged to buy from them. Its a clever marketing technique, and most of us will participate.

The okay thing about all the above marketing, is you are making decisions which affect your life, and your finances, and that is where it ends. You are fully aware this is happening, thus able to make an informed decision. Secondly, it usually has no direct implications on anyone’s health.

The case of Cochlear points, works in a similar way. Surgeons, audiologists and other front line staff would get points each time their service brought a CI from Cochlear. In other words, the more Cochlear implants a surgeon implanted, the more ‘points’ they would get, and thus bigger and more freebies from Cochlear.

Purchasing these devices for medical staff, was not for personal use, but they would then need to sell the benefits of a CI to a deaf person or parents of deaf children to get rid of the device, so in turn they could buy more CIs from the manufacturer, and get more points or bigger freebies.

Freebies

Freebies included (to woo medics and encourage cochlear implantation):

  • golf tournaments
  • first class airfares and also for spouses or guests
  • exotic holidays
  • all expenses flights/trip to Australia twice a year, with significant free time & recreational activity
  • payment of salaries of employees, and general operating expenses of clinics (which means more profit for physicians or practices)
  • free products (which they could then sell on - device costs £16,500, so that much free money)
  • direct cash payments

On a points system, these freebies would increase the more CIs implanted. Implant more, and you get a bigger personal prize.

To quote from the complaint brought by the US government and a former Vice President of Cochlear:

“The express purpose of such payments are and were to encourage Physicians to direct hospitals … to purchase Cochlear Implant Systems”.
Other dubious practices

Other marketing techniques included such people involved must agree to purchase between 5-10 implants to attend an event. You would obviously then need to pass on this purchase decision to a deaf person, by marketing or selling the idea of a CI to them.

In addition, Cochlear required provide certain outcome evaluations i.e. make sure the results were favourable to Cochlear. Perhaps modify statistics or influence these, and lack impartiality.

Unethical?

See the mentality here? Lets sell the benefits of a CI to deaf people, perhaps tap into their vulnerability, so I can have some more freebies. Perhaps tell them they won’t get through education (I’ve been told this) if they don’t have a CI. Abuse and play on fear. Perhaps tell parents that alternatives such as sign language is a bad, and their child will never be normal (again I’ve seen it happen in clinical situations).

The problem with this, is two things:

  • there is a conflict of interest between a surgeon getting a reward, and what is in the best interest of the patient. A surgeon might want some freebies, thus could go for a hardcore marketing technique (implant will really change your life etc), whether it is good for the patient or not. This brings the medical profession into disrepute.
  • who is in control? When you go shopping at Sainsburys, you make an active decision to do this, and making an informed decision. The process is more transparent. How many end users are aware of the above?

Cochlear has publically stated that it wanted a 20% target growth internationally, and has beaten these targets, thus one can only assume that such aggressive marketing techniques (and what I would call unscrupulous), are happening elsewhere including the UK. For an international company, it would not single out one country in terms of incentives.

Who is protecting deaf people?

Okay, exactly what are deaf organisations doing about this? Pussyfooting around in case they offend someone, as they have done so for years? Too scared to jeopordise their positions, and put their neck on the line?

Do they receive money too or some other incentive to shut the hell up? Balanced information cannot exist just by taking CI information vs cultural information, money and power structures get in the way.

Hmm …

A good example of money being the root of all evil?

For the record, if an adult wants an implant then they can have 100 for all I care. However, the over marketing strategies has always scared the hell out of me. It plays on fear of being in a minority and seeks to makes millions from this.

As for Cochlear shareholders, you should all be ashamed of yourselves. The sad thing is, due to how society is constructed, these people will probably think its an ethical investment.

Sources:
Complaint: US Court District of Colorado [PDF]
Former CFO Turns In Cochlear Americas
Deafness Research UK: Cochlear Implants

See also:
Cochlear set to grow 20% in 5 years
Cochlear takeover bid by Medtronic possible
Cochlear’s aggressive marketing working

Tags:

cochlear
cochlear implants
marketing

if this is true… shame on you cochlear… shame on you

That is interesting. I’m willing to bet there are very similar practices with selling hearing aids as well. Sell so many hearing aids, and get some benefit or gift? Bet that never happens…(please sense the sarcasm!) Makes you question if audiologists should be in the business of benefiting from selling hearing aids? Same types of questions could be raised here.

The only difference is that in the cochlear case WE KNOW for sure this has happened.
In the case of of Hearing aids, it is all especulation.

Some hearing aid manufacturers have points based schemes where the dispenser gets a reward.

I don’t sign up for these - but I suppose if I’m automatically signed up and then I win a a car for being the 20th sale that month or something then I doubt that I would send the car back!

I would however rather have cheaper trade prices than prizes etc.

This practice is illegal in the US. And no hearing aid manufacturers i know of use this tactic ANYMORE.

dr. amy

Shame on coclear
shame on them…

Dr Amy: I don’t believe there is any USA law that prohibits a mfg from offering incentatives or lower wholesale prices for volume sales, Ed

I worked in the maritime industry for 25+ years. Kickbacks and incentives were a way of life (business). If you didn’t play the game, you weren’t in business. Sometimes people got caught. It was usually the little guy that ended up paying the price.

I’m sure many other industries in the US play the same game. When I supplied my services to foreign businesses, kickbacks were much more common than they were in the US. If you didn’t take the agent out to dinner and buy him gifts, someone else got the job.

Still unacceptable… A Dr is using this or that kind or brand of implant just because
the rep gave him a plasma or a golf trip… We as a consumer should send a message to
them…

Cochlear is a big company and it should not resort to those tactics, they have good products.
Lets hope they have corrected their sales policies…