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Ethics & Employees

Whistleblowing and Hotlines

Repeatedly, major scandals result from effective whistleblowing by employees. Their actions, often taken at considerable personal risk, have opened the door for investigations that time and again have found serious abuses. Many corporate ethics officers believe that systems need to be in place to encourage whistleblowers. Developing such systems, however, is difficult.

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Whistleblower Reveals Ethical Dilemmas at Medical Supply Company, Guidant Corporation

UPDATE, June 7, 2006: The New York Times reported that newly released company records show that Guidant Corporation drafted a detailed letter in January 2005 to physicians disclosing the electrical flaws in its defibrillators and its intention to pull back devices not yet implanted into patients. The letters, however, were not sent and the defibrillators continued to be implanted. These records challenge Guidant executives defense last year of their decision not to tell doctors about significant device defects, citing concerns that doing so could have exposed patients to risks from unnecessary device replacement.

UPDATE, April 27, 2006: The New York Times reported that the Heart Rythm Society, which represents implant device specialists, called for sweeping changes in how the medical device industry and government oversee implanted heart devices. It stongly urged companies to use outside experts to help them decide when to issue alerts about potential product safety problems, recommended ways of collecting product performance data, and proposed methods for standardizing how doctors and patients are made aware of problems.

Newly released court documents are shedding light on a case that raises questions about the ethical obligations that medical supply companies have to their customers – doctors, and, by extension, their patients. The company has now responded publicly, but behind today’s headlines is a story that raises critical ethical business issues.

Guidant Corporation, a leading manufacturer of heart defibrillators, has cautioned doctors to check the voltage on certain implantable defibrillators after the company received reports of defective devices. This is the latest development in a case that was featured in a March 10, 2006, U.S. Senate Judiciary Committee hearing on potential new legislation that would prohibit corporate executives from intentionally distributing defective products.

In a press release on March 13, 2006, Guidant announced that it is voluntarily advising physicians about important product information regarding CONTAK RENEWAL 3 RF and RENEWAL 4 RF devices.  Guidant said it has apprised the United States Food and Drug Administration (FDA) of this action and the FDA may classify this communication action as a recall. Guidant said physicians should use this information to decide how best to treat their patients. This is a key issue highlighted by earlier Guidant events:

On March 8, 2006, the New York Times reported that a Guidant consultant, Dr. Richard N. Fogoros, had told the company that he believed it had an ethical responsibility to inform doctors of the defects found in one of the life-saving heart defibrillators the company manufactures. His concerns related to a different problem with the defibrillators than the the one addressed on March 13 by Guidant, but his warnings, just like today’s announcement, go to the heart of the question of how early a medical supply company should warn doctors when there is evidence of a product defect.

Memos from Dr. Fogoros challenge Guidant’s decision not to publicize flaws on the basis that it believed patients would face a greater risk from replacement surgery than they did from the units themselves. It appeared that Guidant did not go public because it did not believe it had a sufficient number of cases of defects.

Dr. Fogoros argued in memos back on May 18, 2005, that while Guidant’s decision was statistically defensible, the company had violated a “sacred obligation” that it had to doctors by interjecting its medical judgment for theirs. “Neither the doctor nor the patient consider themselves to have signed up to have Guidant dictate any treatment plans,” he reasoned. Furthermore, he wrote, the situation presented Guidant with a clear conflict of interest, which would predispose it to divulge product malfunctions only when “absolutely necessary.”

Dr. Fogoros, according to the report in The New York Times, added that “[The conflict] is obvious for all to see….This means that when a tragedy occurs our decisions will be viewed in the harshest light possible, without any objective consideration of the statistical niceties supporting our actions.”

Dr. Fogoros stressed in his memo that while he believes Guidant’s products to be extremely dependable, he worried that the company’s use of numbers to defend its choices under circumstances which involve people’s lives would generate “bitter derision towards our protests that we were only acting with the patients best interests at heart.”

Complicating the situation was the fact that the company was at the time negotiating a merger with the Johnson and Johnson Company.  Dr. Fogoros suggested in his memo that the company could profit from revealing the defects by simultaneously announcing a marketing program for a new product that would enable doctors to monitor the progress and effectiveness of Guidant devices. However, despite Dr. Fogoros’s urgings, it was not until November, six months later, that Guidant began to disclose some of the risks related to the defibrillators.

The memos were written just after Guidant informed a Minneapolis physician, Dr. Barry J. Maron, of a defect in its defibrillators, which could cause it to short circuit and malfunction (defibrillators use electricity to interrupt potentially lethal heart rhythms, and are usually replaced every five years). The company informed Dr. Maron of the problem after one of his patients died as a result of a dysfunctional Guidant defibrillator, one of seven patient deaths tied to the devices. Dr. Maron urged the company to warn doctors of the product’s potential risks, which it had known about for three years. When the company failed to do so, Dr. Maron and a colleague, Dr. Robert G. Hauser, notified other physicians and contacted the New York Times, which ran an article in late May 2005 about the defibrillators.

Since the article, Guidant has recalled over 10,000 implantable heart devices and is under inspection by the Justice Department and the Food and Drug Administration. Guidant has responded to criticism by insisting that its decisions are motivated solely by the concern for patients well-being (October 20, 2005 Guidant Press Release) and by creating an independent panel of experts to propose guidelines for physician communications (August 29, 2005 Guidant Press Release).

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Health and Governance

Many cases of alleged malfeasance in the health sector come to light as a result of the courage of whistleblowers. The Global Corruption Report 2006, to be published by Transparency International on February 1, 2006, highlights numerous instances of massive corruption and unethical activities in the health area across the globe – time and again these cases would not have been discovered had it not been for whistleblowers. The latest example was reported on January 24, 2006:

Suit Accuses Medtronic of Bribing Doctors

UPI reported from Memphis in the United States that a whistleblower lawsuit accuses Medtronic (a leading U.S. manufacturer of healthcare products) of paying doctors thousands of dollars in consulting fees to get them to use its spinal implants. In court papers, lawyers say that one Wisconsin surgeon received $400,000 for a consulting contract that required eight days of work, while another, in Virginia, was paid almost $700,000 in the first nine months of 2005. UPI noted a story in the New York Times that reported that Jacqueline Kay Poteet, a former manager of travel services for Medtronic, filed the lawsuit in Memphis. Her job included making travel arrangements for doctors who traveled to conferences on Medtronic's dime.

UPI reported that if the Minneapolis-based company settles with the Justice Department, Poteet, who left her job because of disability in 2003, will get a percentage of the settlement. The Justice Department has not yet formally intervened in the lawsuit, although the Times said it has offered Medtronic a $40 million settlement. A company spokesman said that consulting arrangements with doctors are critical to improving its product.

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The NBES on Whistleblowing


2005 National Business
Ethics Survey: How Employees Perceive Ethics at Work in the United States (NBES)
Ethics Resource Center (www.ethics.org)

A section of the 2005 National Business Ethics Survey highlights the serious problems that now exist with regard to whistleblowing.

Outcomes for Whistleblowers

The NBES asked employees who reported misconduct what personal consequences they faced after they reported what they had seen.

Findings:

  • Of employees who reported misconduct, 48% received positive feedback, while 52% did not.
  • Of employees who reported misconduct, 22% experienced retaliation, while 78% did not.

 

The analysis by the NBES found that most striking is the fact that misconduct is widespread. More than half of all employees witness an act of misconduct each year (52% of respondents), and more than 36% of those who see it also witnesses at least two or more incidents.

One possibility that this finding suggests is that an act of misconduct does not always take place in isolation. If misconduct happens within employees' circle of associations, at least one-third of the time some form of misconduct is likely to happen again in the course of their work. Fifteen percent of employees who feel pressure to compromise the standards of their organization say this pressure is inflicted by their coworkers, and 94% of employees who feel pressure say that they have observed at least one type of misconduct.

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