Introducing Covid Stimulus Watch

The furor over some of the companies receiving federal financial assistance through the Paycheck Protection Program represents one of the most remarkable outbursts of anti-corporate sentiment seen for quite some time. A corporation such as Shake Shack, which used to have a cult following, found itself vilified for getting a $10 million loan from a program the public assumed would be used to help mom-and-pop businesses rather than a fast casual chain that last year had revenues of more than half a billion dollars.

I’s not just a matter of big versus small. Journalists have pounced on the disclosures of the PPP loans—which have come from SEC filings rather than the federal government—to look for examples of problem companies on the list. One of the best examples, by the New York Times, found all kinds of corporate bad actors getting the loans.

A new website my colleagues and I at Good Jobs First have just launched will make it even easier to pursue this kind of research. Covid Stimulus Watch combines available recipient data for the PPP  — as well as the Payroll Support Program, which has doled out billions to the airlines – with accountability data about the companies.

The accountability data comes in six categories. Four of those are derived from data in Violation Tracker: employment-related penalties (such as wage theft and workplace discrimination); government-contracting related penalties (mainly False Claims Act cases); environmental, healthcare and safety penalties; and consumer protection, financial misconduct and unfair competition penalties.

The fifth category, relating to taxes and subsidies, shows which large companies have paid very low federal income tax rates and which have received large amounts of pre-pandemic financial assistance from federal, state and local programs, such as those shown in Subsidy Tracker. The final category shows which recipient companies have high levels of executive compensation, especially in comparison to what they pay a typical worker.

The limited set of recipients currently listed in Covid Stimulus Watch already illustrate the accountability issues at stake. For example, the major airlines that are receiving billions of dollars in aid raise concerns in multiple categories. United has paid out over $40 million to settle employment discrimination lawsuits. American Airlines has paid over $70 million in safety violations. JetBlue and Delta had negative federal income tax rates in 2018.  The ratio of the pay of American’s CEO to that of its median employee was 195 to 1.

Concerning data can also be seen about some of the smaller recipients. One PPP recipient, Veritone Inc., paid its CEO $18 million in compensation. Another PPP company, FuelCell Energy, received more than $170 million in federal grants prior to the pandemic.

The data in Covid Stimulus Watch will hopefully fuel even more debate over which corporations deserve to be rescued by taxpayers.

Corporate-Owned Nursing Homes and Covid-19

It was only a few days ago that the Centers for Medicare and Medicaid Services announced that nursing homes will be required to notify residents and their families when coronavirus cases have been discovered in a facility. This comes many weeks after the Life Care Center in Kirkland, Washington became an early Covid-19 hotspot and deaths started mounting at other nursing homes across the country.

Even before the pandemic began, conditions in the nation’s roughly 15,000 nursing homes, which house some 1.5 million residents, were far from ideal. As a Washington Post investigation recently found, about 40 percent of nursing homes with publicly reported cases of coronavirus — the list of which is far from complete, given varying transparency practices among the states — had been previously cited by government inspectors for violating regulations meant to control the spread of infections. This made them all the more susceptible to coronavirus.

The blame for that poor track record rests to a significant degree with the large corporations, including private equity firms, that control a substantial portion of the country’s nursing homes. While the Washington Post story did not identify the parent companies of the facilities with reported Covid-19 cases, the data in Violation Tracker shows the compliance problems at those corporations.

The nursing home chain with the largest amount of total penalties is Kindred Healthcare, which has had to pay out more than $350 million in fines and settlements.  The bulk of that amount has come from cases in which Kindred and its subsidiaries were accused of violating the False Claims Act by submitting inaccurate or improper bills to Medicare and Medicaid. Another $40 million has come from wage and hour fines and settlements.

Kindred has also been fined more than $4 million for deficiencies in its operations. This includes more than $3 million it paid to settle a case brought by the Kentucky Attorney General over issues such as “untreated or delayed treatment of infections leading to sepsis.”

Golden Living Centers, a large chain owned by the private equity firm Fillmore Capital Partners, accounts for more than $200 million in fines and settlements. Golden Living is the current incarnation of Beverly Enterprises, which in the 1990s was the poster child of nursing home misconduct. In 2000 it paid $170 million to settle allegations that it defrauded Medicare by fabricating records to make it appear that staff members were devoting much more time to residents than they actually were.

Golden Living and Beverly have also paid more than $6 million in fines arising out of inspections of their facilities, including $1.5 million paid to the Arkansas Attorney General to resolve allegations of patient neglect.

Another chain with a problematic track record is Life Care Centers of America, operator of the ill-fated facility in Kirkland. The company has paid more than $147 million in fines and settlements, most of which came from a False Claims Act case in which it was accused of improperly billing Medicare for rehabilitation services.

The company has also paid more than $2 million in fines stemming from inspections, including $467,985 for nursing homes in Washington State. Life Care facilities appear numerous times on the Washington Post list of facilities with reported coronavirus cases.

Other chains with substantial penalty totals include Genesis HealthCare ($57 million), Ensign Group ($48 million) and National Healthcare Corp. ($28 million).

Among the many problems that have been brought into sharp relief by Covid-19 — and that will have to be addressed once we have gotten through the pandemic – is the sorry state of our nursing homes, too many of which seem to put profit ahead of safety for one of the most vulnerable parts of our population.

Relying on Drug Companies With Flawed Safety Records to Save Us from Covid-19

Among the many things that have changed drastically in the past few months is the public perception of the pharmaceutical industry. At the beginning of the year, the main news about Big Pharma was the possibility of a multi-billion-dollar opioid settlement with the states.

Now, rather than being held accountable for tens of thousands of overdose deaths, the industry is being hailed as our savior from Covid-19. The news is filled with laudatory stories about the efforts of the drug companies to come up with a treatment for those currently suffering from the virus and a vaccine that may be the only way for society to return to something approximating normal.

Of course, everyone wants these efforts to succeed, but we shouldn’t ignore the very checkered track record of the industry. The safety portion of that record suggests that pushing for extremely rapid results may be risky.

The pharmaceutical industry’s safety problems date back at least to the 1930s, when a company called S.E. Massengill introduced a liquid antibiotic without testing and the drug turned out to cause fatal kidney damage. In the 1950s Parke-Davis heavily promoted a typhoid drug for less serious ailments until it emerged that users were developing severe and irreversible anemia. During the same period, thousands of children around the world were born with birth defects after their mothers took the morning-sickness drug thalidomide during pregnancy.

Sometimes these scandals involved vaccines. In the mid-1950s a California company called Cutter Laboratories produced large stocks of the new polio vaccine that mistakenly contained the live virus. Scores of children who received the vaccine developed polio.

Defenders of the pharmaceutical industry will claim that safety practices are much more stringent these days. But consider the recent history of Johnson & Johnson, which is one of the companies actively pursuing a coronavirus vaccine.

J&J, whose baby products long enjoyed a reputation for purity, has in the past two decades been implicated in a seemingly endless series of controversies about product safety and the illegal marketing of drugs for uses not approved as safe by the Food and Drug Administration.

Some of the company’s problems stemmed from faulty production practices. During 2009 and 2010 J&J had to announce around a dozen recalls of medications, contact lenses and hip implants. The most serious of these was the massive recall of liquid Tylenol and Motrin for infants and children after batches of the medications were found to be contaminated with metal particles.

in 2013 Advanced Sterilization Products, a division of J&J subsidiary Ethicon Inc., had to pay $1.2 million to settle FDA allegations that it had produced and distributed adulterated and misbranded sterilization monitoring products.

Other major companies in the coronavirus vaccine race have been involved in their own controversies. In 2012 GlaxoSmithKline, which is partnering with Sanofi in its vaccine effort, had to pay $3 billion to settle various criminal and civil charges, among which were allegations that the company withheld data on safety problems with its diabetes drug Avandia from the FDA.

Pfizer, which is working with a smaller company called BioNTech, has had safety problems dating back to the 1980s, when defective heart valves made by its Shiley division caused the death of more than 100 people. An FDA task force concluded that the company had withheld crucial safety information.

We are all desperate for drugs to treat and prevent coronavirus, but we should make sure that the urgency of the situation does not lead to safety shortcuts that can have disastrous consequences.

Trump’s Risky Covid-19 Infomercials

Donald Trump has declared himself a wartime president, but in many of his briefings these days he comes across more as one of those hucksters of late-night television touting miracle cures. He relentlessly promotes the anti-malaria drug hydroxychloroquine as a treatment for Covid-19, even though it has not been proven safe or effective for that purpose. “What do you have to lose?” Trump keeps saying, ignoring evidence that the drug can have serious cardiac side effects.

It is understandable that those suffering from coronavirus disease may be willing to try anything to survive, and some doctors are treating seriously ill patients with hydroxychloroquine as a last-ditch measure. There are also clinical trials under way to see if the drug really does work against Covid-19. But all that is entirely different from the president’s using the White House podium to suggest that everyone should try the medication as if it were a new brand of mouthwash.

Not only is that dangerous – Trump’s comments have caused a run on the drug that has affected those who need it to treat diseases such as lupus and rheumatoid arthritis – but it also stands in contradiction to several decades of efforts to discourage widespread promotion of prescription drugs for uses not approved by the Food and Drug Administration.

Data in Violation Tracker show that over the past two decades pharmaceutical companies have paid out more than $20 billion in fines and settlements to resolve Justice Department, FDA and state attorneys general cases involving the improper marketing of drugs. These include three dozen cases in which the penalty amount exceeded $100 million and five in which the amount was more than $1 billion.

The largest single penalty of this kind was the $3 billion paid by GlaxoSmithKline in 2012 for off-label promotion of drugs such as the anti-depressant Paxil as well as its failure to report certain safety data. In 2009 Pfizer and its subsidiary Pharmacia & Upjohn agreed to pay $2.3 billion to resolve allegations that they illegally promoted drugs such as the anti-inflammatory Bextra.

In 2013 Johnson & Johnson and several subsidiaries paid $2.2 billion in criminal fines and civil settlements to resolve allegations they had marketed the anti-psychotic medication Risperdal and other drugs for unapproved uses as well as allegations that they had paid kickbacks to physicians and pharmacists to encourage off-label usage. At a press conference announcing the resolution of the case, U.S. Attorney General Eric Holder said the company’s practices ”recklessly put at risk the health of some of the most vulnerable members of our society — including young children, the elderly and the disabled.”

In the current situation, it is an elected leader rather than a drug maker doing the improper promotion, but a corporation — the French firm Sanofi, which produces hydroxychloroquine under the brand name Plaquenil – stands to benefit. As a result of Trump’s hype, a sleepy product dating back to the 1950s, is now the most sought-after pharmaceutical on the planet.

Sanofi is being cautious, stating on its website that Plaquenil “can cause serious adverse reactions and should not be taken without medical prescription or advice,” adding that it has not been approved for use in Covid-19 patients. Yet the site goes right on to state: “According to some preliminary results from independent pilot studies, hydroxychloroquine was reported as having a potential anti-viral effect on the virus that causes COVID-19.”

Other companies such as Amneal Pharmaceuticals, which produces a generic version of hydroxychloroquine, may have their own pot of gold. The company has ramped up production of the drug and has generated good p.r. by donating a quantity of the medication to the state of Texas.

The risk here is that Trump’s unbridled advocacy for the drug will steamroll the FDA into opening the floodgates and making it available not just to the desperately ill, but also to millions of others who have a mild form of the disease or are not infected at all. And we may never know for sure if those millions benefited from the medication or were needlessly exposed to cardiac and other risks.

The Rap Sheets of the Big Ventilator Producers

Earlier this year, the U.S. Attorney’s Office in South Carolina announced that a company called ResMed had agreed to pay more than $37 million to settle allegations under the False Claims Act that it illegally paid kickbacks to promote sales of equipment used to treat sleep apnea.

The case did not receive much attention at the time, but ResMed, which also produces ventilators, is now one of the companies involved in the controversy over the distribution of equipment that hospitals desperately need to save lives during the coronavirus pandemic.

New York Gov. Andrew Cuomo and other state chief executives have been complaining about price-gouging and shipments that fail to materialize, as health systems across the country compete for a woefully inadequate supply of ventilators, some of which have reportedly been exported.

This apparent profiteering should come as no surprise, given the track record of the ventilator industry, in which ResMed is not the only producer with a history of alleged misconduct. In fact, all the big publicly traded companies in the industry have paid millions of dollars in penalties in False Claims Act, kickback and bribery cases.  Along with ResMed, they are Philips, General Electric, Hill-Rom, and Medtronic.

In 2016 a Philips subsidiary called Respironics agreed to pay $34.8 million to settle allegations similar to those faced by ResMed involving the payment of kickbacks to suppliers for the purchase of sleep apnea equipment. In 2013 the Securities and Exchange Commission ordered Philips to pay $4.5 million for violations of the Foreign Corrupt Practices Act stemming from improper payments to healthcare officials in Poland.  

In 2011 GE Healthcare agreed to pay $30 million to settle False Claims Act allegations that a subsidiary caused Medicare to overpay for a radiopharmaceutical used in certain cardiac diagnostic imaging procedures by giving the federal government false or misleading information about doses.

Also in 2011 Hill-Rom agreed to pay $41.8 million to settle allegations that for years it knowingly submitted numerous and repeated false claims to the Medicare program for certain specialized medical equipment – bed support surfaces for treatment of pressure ulcers or bed sores – for patients for whom the equipment was not medically necessary.

Since 2006 Medtronic and its subsidiaries have paid more than $160 million in penalties in eight False Claims Act cases. The largest of these was a $75 million settlement agreed to by Medtronic Spine to resolve allegations that its marketing activities caused hospitals to submit false claims for kyphoplasty procedures, minimally-invasive surgeries used to treat compression fractures of the spine caused by osteoporosis, cancer or benign lesions.

Along with the False Claims Act cases, which are civil matters, a Medtronic subsidiary agreed to plead guilty and pay more than $17 million in 2018 to resolve a criminal charge that it promoted a neurovascular device for uses that were not approved by the FDA and were potentially dangerous.

It is true that none of these cases involved mechanical ventilators, but they do suggest something about ethical practices at the five companies. These are corporations accused of putting their own financial interests ahead of those of the federal government and thus the taxpayers. One of them has a subsidiary that is literally a corporate criminal.  

The coronavirus crisis is exposing many vulnerabilities of U.S. society. Among them is that the survival of many thousands of people now depends in large part on the behavior of a group of companies that have been something less than model corporate citizens.

This makes it all the more scandalous that the Trump Administration refuses to make full use of the Defense Production Act to end profiteering in the ventilator industry and force it to serve the needs of the country during this national emergency.