Putting the Bite on Hospitals
Sethi: “The biggest companies
Mark Leahey, second from left,
A D V E R T I S E M E N T
A D V E R T I S E M E N T
An ex-employee’s lawsuit describes payola and pressure by a North Texas medical-supply giant.
By PABLO LASTRA
Cynthia Fitzgerald’s career seemed to be heading down a promising path at last. She’d moved to North Texas from her native Nebraska in 1997, living with relatives while she looked for work. After months of searching, she’d found what she thought would be a great job, with a growing firm in the healthcare field. “I thought it was an excellent company,” she said, “a perfect fit.” She liked the idea that her assignment would be to help hospital patients across the country save money.
That was almost 10 years ago. Her dream job lasted only seven months, but its aftermath is still unfolding. While the experience didn’t turn out to be what she’d hoped for, it has indeed changed her life. And depending on the outcome of a major lawsuit whose records have just been unsealed, Fitzgerald’s performance, at her job and afterward, could, finally, save money for taxpayers and patients.
The company was Novation, a giant of the healthcare world. Serving as a middleman between suppliers and users of medical goods, Novation is entrusted by thousands of hospitals with the responsibility of lowering prices through bulk purchasing. But instead, Novation now stands accused, by Fitzgerald and others, of abusing its position of power, bilking the public of millions of dollars.
As senior product manager, Fitzgerald negotiated with manufacturers of medical supplies from syringes to trash bags, extracting the lowest price for the highest-quality goods for healthcare consumers. Over the months, however, she found this job deDELETEion turned on its head, as Novation executives asked her to look the other way as deals were cut with vendors that led to high prices for questionable items.
Novation has been under the magnifying glass for several years now. Allegations of corruption have resulted in massive ongoing federal and state investigations of fraud. Four times, the company and others like it, known as group purchasing organizations, have been called before the U.S. Senate to answer questions. The company says that it does an adequate job of policing itself. Critics say Novation and other group-purchasers act as gatekeepers for multimillion-dollar monopolistic contracts, extracting kickbacks and payoffs from the other complicit giants of the healthcare industry that are all too willing to pay whatever it takes if it guarantees that their competitors will be shut out.
Fitzgerald said she was in the middle of much of this during her seven months at Novation in 1998 and 1999. A representative of a catheter company bluntly asked her how much money it would need to pay Novation in order to obtain a contract. When a contract for garbage bags came up for bid, she said, she was pressured to grant it not to the low bidder, but to a company with higher prices — and a high-level connection to Novation.
Fitzgerald was fired in 1999. In 2002 she began assembling a whistleblower case against her former employer in federal court. That suit, filed in 2003, was sealed at the request of federal investigators. It argues, in part, that the corporate culture at Novation pushed product managers like Fitzgerald to seek kickbacks from suppliers in exchange for contracts worth billions, in the process engaging in massive fraud against the government, which pays a major share of healthcare costs. Two weeks ago, it was unsealed, and court papers were served on Novation and 16 other healthcare mega-corporations such as Merck and Johnson & Johnson.
Novation has said the accusations are “without merit,” brought by “a former employee who worked for the company for about six months” and who was fired for work performance issues. Company officials declined to answer questions for this story.
Fitzgerald said she was illegally fired for reporting corruption. The Texas Attorney General’s office is “interested” in the case and “monitoring developments,” as is the Department of Justice.
If Fitzgerald wins, she could be awarded back wages, damages, and a reward — and taxpayers, conceivably, could recoup billions of dollars.
Novation, based in Las Colinas, is the biggest company you’ve never heard of. It’s the largest GPO, or group purchasing organization, in the country, brokering $33 billion worth of healthcare supplies annually for 2,500 hospitals and more than 10,000 clinics.
GPOs originated in New York in the early 1900s, when hospitals partnered to buy supplies in bulk. In the 1980s, as healthcare costs soared, more GPOs were formed and consolidated to negotiate for better prices from suppliers. Novation was started in 1998 to buy for two hospital groups: VHA, an Irving-based network representing 28 percent of America’s community hospitals, including Baylor; and University HealthSystem Consortium of Illinois, an alliance that includes 90 percent of the leading academic medical hospitals, including Parkland in Dallas and John Peter Smith hospital system in Fort Worth.
Although they provide a service to hospitals, most GPOs are private, for-profit companies. Because they are funded by administrative fees calculated as a percentage of the contracts they negotiate, higher prices for supplies mean higher profits for GPOs — a major flaw in the scheme, since it effectively puts the interests of GPOs at odds with the interests of the hospitals they’re supposed to be helping. Money left over after GPOs pay operating expenses is supposed to go back to member hospitals. This arrangement was sanctioned by a 1986 bill passed by Congress, giving the GPOs “safe harbor” from kickback laws. The theory was that passing the GPOs’ operating costs to suppliers would help hospitals’ financial bottom lines. Administrative fees were capped at 3 percent of a contract’s value — anything above that is supposed to be scrutinized for fraud by the Centers for Medicare and Medicaid Services.
However, during Fitzgerald’s short tenure, she found that Novation ignored that fee cap. In fact, the bid documents Novation sent out to suppliers, which are part of the exhibits of the case, asked those companies to propose whatever level of fees they wanted. Winning bidders tended to offer Novation high fees. That didn’t follow any guidelines Fitzgerald had ever heard of.
One of the first contracts assigned to her was a three-year deal for catheters to be sold under Novation’s private Novaplus label. After bids were submitted, ethics guidelines called for a “quiet” period, during which vendors and contracting managers were to have only written contact. “I got a lot of questioning from my managers on who I was going to award it to,” said Fitzgerald. “I told them I was doing my evaluations.”
Johnson & Johnson representatives ignored the no-contact rule. They called Fitzgerald and demanded a meeting. “I went down to meet them at the lobby, and I told them we’re in a quiet period and we’re not supposed to talk,” she said. But the supplier reps were insistent, asking what their prospects were of winning the contract. Fitzgerald ended the meeting.
Undaunted, Johnson & Johnson arranged to get together with her supervisor, Sherry Woodcock. Fitzgerald crashed that meeting.
The Johnson & Johnson representatives had a simple question: “How much will it take to get the contract?” When they got no answer from the startled Fitzgerald, they told her that “others before [her had] done it,” suggesting that the contract could be bought and that the price was hers to name.
“Oh, no, this is illegal, and I don’t look good in [jail-issue] orange and I don’t look good in stripes,” Fitzgerald recalled saying to Woodcock. After the meeting, the two talked about what had happened. Fitzgerald, horrified, told Woodcock that a Fortune 100 company had just tried to bribe them. “I am very concerned here,” she said.
Woodcock reassured her she’d inform the head of the department, John Burks. After days passed without Burks’ hearing about the incident, Fitzgerald went directly to him. He told her that what had transpired was unethical but not illegal and that disqualifying Johnson & Johnson from the bid was too harsh a punishment.
In the end, Fitzgerald awarded the catheter contract to Becton Dickinson, another healthcare giant and the largest syringe manufacturer in the world, which offered lower prices. She would later have reason to question that company’s practices as well.
Novation pressured its contract managers to consider other issues in awarding contracts beyond the savings for hospitals and quality of products. In addition to the “marketing fees” paid to Novation, winning bidders usually forked over money for another Novation venture. “VHAseCURE.net” was a web site through which hospitals could order supplies.
Shortly after the catheter contract was awarded in December 1998, a $100,000 check arrived from Becton Dickinson as sponsorship for VHAseCURE.net. Novation officials were so pleased that they put a picture of themselves and Becton higher-ups, with the check, in their corporate newsletter. The $100,000 hadn’t been part of Becton Dickinson’s official bid, but the check, a copy of which is an exhibit in the case, reads differently. The money, it says, was for “Marketing Fee/Sole Award.” A “sole” source means that Becton Dickinson had exclusive rights to sell catheters to Novation member hospitals. Fitzgerald was commended for her service to Novation. “Cynthia was instrumental in working with [Becton Dickinson] to help them understand how sponsorship would bring value to our VHA members ... Thanks again, Cynthia!” read the e-mail from a manager who oversaw the VHAseCURE.net.
She got another attagirl when Novation executives read a summary of the catheter contract outcome, showing how Novation would earn higher fees from Becton Dickinson products than Johnson & Johnson’s. And there was more: Becton Dickinson’s fee was 9 percent for catheters sold under Novation’s private-label brand, Novaplus — adding to both companies’ profit on the deal at a rate three times the maximum recommended by law. “Great work here,” Novation’s then-president wrote in an e-mail that is part of the case.
While she was working on the catheter contract, Fitzgerald met a Becton Dickinson sales manager for lunch. He told her his company was spending large amounts of money to get “a huge Novation contract” — the safety hypodermic needle and syringe contract — that was coming up for bid. He characterized it as “buying the business.” Becton Dickinson had given $1 million as a “special marketing fee” in addition to the normal administrative fee, he said.
A Becton Dickinson spokesperson told Fort Worth Weekly that the company believes the lawsuit is “without merit” and that it “acted lawfully in [its] business dealings.”
When Fitzgerald first joined Novation, she and her bosses sat down to go over the contracts assigned to her. One was for can liners — garbage bags. Fitzgerald says Woodcock laughed and told her that the contract would always belong to Heritage Bag, a Carrollton manufacturer.
Woodcock explained that the company was represented by John M. Doyle, the former president of Novation’s predecessor, VHA Supply. Forced to resign from VHA in 1986 because of accusations that he’d sexually harassed female employees, he soon went to work for Heritage — and got them the can liner contract. Twelve years later, Heritage still had it.
In so many words, Woodcock told Fitzgerald not to worry about Heritage and that as a black woman at Novation, she could have a good future, maybe even become vice-president.
Fitzgerald nonetheless put the contract out for bid and conducted preliminary research. She found three vendors with lower prices than Heritage, all of whom told her they knew they had no hope of winning the contract. Novation management seemed to agree — supervisors continued to tell Fitzgerald she should award the contract to Heritage. When she talked to the contracting officer who had previously handled the can-liner contract, he urged her not to “rock the boat” — he’d almost been fired for it. “You can’t win,” he told her.
Doyle and his son and other Heritage reps took Fitzgerald to dinner at Newport’s in Dallas’ West End district. It was December 1998 and the beginning of the end for Fitzgerald’s job at Novation.
The meal began with casual conversation but abruptly turned to business, when Doyle asked her if Heritage Bag would win the award again. Fitzgerald refused to answer.
The younger Doyle became irate and walked away, Fitzgerald remembered. Doyle motioned to his son to come back and told him they would “take care of her,” and that Heritage Bag “had been around for a long time.” The comment frightened Fitzgerald. An awkward silence that followed lasted for the rest of the dinner.
When contacted by the Weekly, Doyle acknowledged that he had represented Heritage Bag for 20 years but said he didn’t remember anything about the dinner. In 2002, he told The New York Times that he received a commission for every trash bag sold to a Novation hospital but did not say how much.
A few nights after the dinner, at a Christmas party, Fitzgerald told Woodcock, in front of the entire contracting staff of the Novation’s medical and surgical division, that she wanted nothing to do with the can-liner contract. Woodcock agreed to take it over and awarded it to Heritage Bag shortly afterward.
An e-mail to Novation CEO Mark McKenna gives the executive summary for the can-liner award: Novation’s “marketing fee” for Heritage Bag products was 8.19 percent, versus the 2 percent another manufacturer offered.
Within days of asking to be taken off the can-liner contract, Fitzgerald’s performance review came in. The verdict: “unacceptable performance.” She was “abrasive, abrupt, rude, terse,” leading to “staff avoidance” of her. A male staffer was “very uncomfortable and appalled” by “racial” and “suggestive” comments made to male coworkers, who “were shocked ... and wanted to remove themselves from the vicinity immediately.” Fitzgerald was told to read The Successful Manager’s Handbook and submit a written course of action to improve her job performance.
“They tried to make me sign this thing saying I was incompetent, propositioning sexually to white men,” she said. “I refused to sign it. The next thing I knew I was fired and escorted off the property.”
Critics have compared GPOs to secret clubs that major suppliers can access through fees and other payments that smaller companies can’t match. Small manufacturers of medical devices have accused Novation and other GPOs of acting as a collective monopoly that the big manufacturers can bribe in order to shut out competition and prevent consumers from having access to the best possible products at the best possible price. Richard Blumenthal, attorney general of Connecticut, who has been investigating GPOs, including Novation, said in a statement that they “create a myriad of conflicts and anticompetitive behavior that must be regulated, if not prohibited.”
Novation has disputed this. In a 2002 letter to the Federal Trade Commission, Jody Hatcher, a Novation vice president, argued that “the notion that Novation would condition a supplier’s participation in a Novation contract on offering a higher price makes no sense at all.” Novation, he added, “competes with other GPOs for hospital members, and it would lose those members if it required contract suppliers to raise their prices.”
Novation has estimated that the average hospital would have to spend $353,000 a year to negotiate on its own for supplies. Novation’s annual operating revenue has been estimated at $671 million.
GPO defenders say that the companies provide a valuable service in helping control healthcare costs, which have been rising at double the rate of inflation. Hospitals, they argue, can’t afford to deal with all the vendors to get the best prices. “So many hospitals, little rural ones and huge urban ones, are drowning in red ink and don’t have the money to negotiate for supplies,” said Donna Ralli, who worked in Novation’s legal department until 2004. “They say GPOs save them money. And small companies are happy to talk to GPOs because GPOs give them access to thousands of [healthcare providers] without [the small suppliers] needing thousands of salespeople.”
At least a few manufacturers paint a far different picture of GPOs, describing them more as bullying middlemen than benign facilitators. Masimo of California has argued that its technologically superior pulse oximeter, a device used to measure newborns’ blood-oxygen levels, was rejected by Novation because the GPO wanted to give an exclusive contract to Nellcor, a subsidiary of Tyco International, which offered incentives to hospitals that agreed to buy full bundles of Nellcor products. While Novation claimed that hospitals were free to purchase Masimo’s oximeter outside their contract with the GPO, Masimo said that promoting rebates on bundles of Tyco products amounted to influencing this decision. Masimo sued Tyco, but not Novation, in 2002 and settled out of court a year later for an undisclosed sum.
Another lawsuit along those lines cost Becton Dickinson a cool $100 million and cost Novation, Premier, and Tyco a combined $58 million. Retractable Technologies, a small company started by engineer Tom Shaw in Little Elm in Denton County, developed a safety syringe that made accidental needle sticks impossible, yet found that hospitals wouldn’t buy his product because they had contracts with Novation. Retractable sued Novation and Becton Dickinson in federal court, claiming that it was shut out of hospitals after Becton Dickinson paid Novation $1 million in “special marketing” fees for syringes. At the time, Fitzgerald testified that Novation looked at Retractable’s products only in order to avoid being sued but that superiors told her there was no chance of a contract for the small company.
Novation settled with Retractable out of court in 2003, and Retractable at last got a contract with the GPO. But Retractable is still having problems selling its products. Earlier this year, it sued Becton Dickinson again for patent infringement, alleging that it continues to use “exclusionary” and “anticompetitive” contracts to keep Retractable off the market.
“The current GPO business model suffers from serious structural flaws, which the companies have exploited for their self-enrichment and at substantial cost to the healthcare industry,” said Dr. Prakash Sethi, president of the International Center for Corporate Accountability at City University of New York. He has studied GPOs extensively. “The biggest companies in the industry,” he added, “also top the list for alleged misdeeds and unethical practices.”
Dr. Sethi has estimated that GPOs extract extra profits of as much as $6 billion annually that should go to hospitals. He’s not alone in his conclusions. Other studies testifying to the inefficiency of GPOs and their potential for corruption have come from professors at the University of North Texas, Harvard, and even the Office of the Inspector General of the Health and Human Services Department and the Government Accountability Office. The studies that have produced opposite findings have, for the most part, been funded by a trade group representing the GPOs.
The federal government has also taken notice. The U.S. Senate antitrust subcommittee has held four hearings on GPOs since 2002.
The newly Democratic-controlled Congress has busied itself with other matters than regulating GPOs, but the government is still looking into Novation. The Department of Justice opened a broad investigation, now three years old, delivering subpoenas to Novation and various major manufacturers of medical supplies, seeking the details of improper financial transactions and other possible inducements to influence contracting decisions.
Federal prosecutors have refused to comment, but sources familiar with the investigation said that if the government finds evidence of fraud, every illegally negotiated hospital item paid for with federal dollars could be treated as a separate count of fraud — and the company could be required to repay the difference between the correct price and the overblown price on each item. The result could be a case so massive, a former investigator told the Weekly, that the government would have to forget the idea of accounting for every instance of fraud, and instead estimate damages through sampling of Medicare and Medicaid spending going back years.
Ralli, the former Novation in-house counsel, argued that Congress and the news media have distorted the Novation story. “It’s not mandatory for hospitals to buy their supplies from Novation,” she said. “If they don’t like the prices on a contract, they have freedom to go [join another GPO]. If you don’t like a pair of pants at Neiman Marcus you can go to Saks. Consumers are free to make these choices.” GPOs, she added, provide a valid and valuable service. For its part, Novation claims that it discloses its financial information and fees associated with its contracts as well as savings reports to member hospitals.
The GPOs responded to threats of government regulation by forming the Healthcare Group Purchasing Industry Initiative, covering the nine largest GPOs, including Novation. The group instituted a non-binding code of ethics for its members, and GPOs that violate the code are supposed to be expelled from the group. At a Senate hearing last year, the GPOs’ former representative, Richard Bednar, told the Weekly that government regulation would be tantamount to “outsourcing the moral compass” of GPOs.
Sethi, who has studied the voluntary industry code, says it is encumbered by “a self-serving governance structure” and lacks independent monitoring. “How can self-regulation work, when the GPOs whose conduct is to be monitored are also in charge of doing the monitoring?” he said. “The CEOs of the major GPOs are also the governance committee of the Initiative. The system is totally controlled by the industry and has no meaningful transparency.”
Images of industry executives meeting behind closed doors with no oversight are not products of paranoid imaginations. Earlier this year, Blumenthal’s office, as part of a settlement, disbanded the Healthcare Research and Development Institute of Florida, an organization owned by executives of major hospitals, including several that buy their supplies through Novation. Baylor Health Care System CEO Joel T. Allison was a member. The institute charged healthcare suppliers tens of thousands of dollars in consultation and membership fees. Blumenthal called HRDI a “secret society, an elite and exclusive club of premier hospital executives and select hospital supply businesses that restrained competition to the detriment of patients and providers.”
For healthcare suppliers, a contract with Novation can make the difference between bankruptcy and huge profits. Companies that can afford to pay the GPO’s administrative fees and other promotional considerations have found themselves with sunny financial futures, their share of the market multiplied and competitors shut out.
Nycomed, a Swiss pharmaceutical company, told shareholders in 1998 that it expected its market share to increase, “particularly following the winning of the Novation contract.” The prophecy was spot on — a 1999 Nycomed statement gloated that “growth in the USA was particularly strong,” with market-share increases in various categories of products Novation had agreed to buy. Internal documents from Novation show that a Nycomed-brand product earned a 3 percent administrative fee for Novation. The same item, also manufactured by Nycomed, but distributed under the name of Novaplus, Novation’s private-label brand, earned the GPO a 30 percent administrative fee, 10 times the “safe harbor” limit. Nycomed is now owned by GE Healthcare.
Tom Shaw has recounted the story of how Retractable was given the Novaplus pitch when it first approached Novation. Novation officials, he told the Weekly in an interview in 2005, offered to sell his company’s blood collection tube holder under the Novaplus brand for a 270 percent markup over Retractable’s bid — with the two companies splitting the profits. Shaw rejected the deal.
Since Retractable won its antitrust lawsuit, other small manufacturers have gone after Novation in court as well. Daniels Sharpsmart of Illinois, a manufacturer of sharps containers, has a pending lawsuit against Novation on almost identical grounds to Retractable’s case. Another company, Genicon, a Florida manufacturer of endosurgical products, argued that sweetheart contracts between Novation and other GPOs and Johnson & Johnson and Tyco kept its superior and cheaper products out of hospitals. The company settled with the defendants last year; terms were not disclosed.
Dr. Sethi said GPOs have “strong incentives to maximize their income and equally strong disincentives against distributing this income to their beneficial customers, which are hospitals and nursing homes.”
Novation’s net profits are supposed to go back to member hospitals, but in at least one case the company invested massive amounts of cash on a struggling internet startup company. In 2000, Novation spent hospitals’ money on buying half of Neoforma, a company that was supposed to facilitate online ordering of supplies for hospitals, entering into a 10-year e-commerce contract that supplanted VHAseCURE.net. Suppliers were forced to sign up for Neoforma, which meant yet more fees. Several executives affiliated with Novation owned hundreds of thousands of dollars of stock in Neoforma — at least until the conflict of interest was pointed out by hospital executives and members of Congress, and they were forced to either sell the stock or quit their positions. But Neoforma was a financial black hole for Novation, losing $700 million over five years and unable to exist without Novation’s underwriting. In 2006, Neoforma was merged with Global Healthcare Exchange, or GHX, a similar e-commerce company owned jointly by Premier, the second-largest GPO, and several major manufacturers, including Johnson & Johnson, Becton Dickinson, and Tyco. Today, GHX is the only significant e-commerce company in healthcare.
Mark Leahey, executive director of the Medical Devices Manufacturers Association, a trade group for small manufacturers of healthcare products, said members of his group still face difficulties getting contracts with Novation. “They remain concerned that the level playing field is still not there,” he said. “They’re still at a disadvantage because of the supplier-funded model.”
Despite public pronouncements of transparency, Novation has a reputation for secrecy and a loathing of regulation. A deposition filed in a discrimination lawsuit included the testimony that the legal department at Novation made an employee destroy 10 boxes of documents in January 2004, in between rounds of Senate hearings. “There were so many documents to shred,” the complaint reads, “that even with the new, large shredder it took Plaintiff several hours to shred all the documents.” Other Novation employees denied under oath any knowledge of the shredding or that a shredder even existed.
Allegations of Novation’s abuses have diminished in recent years since the company took public action to address concerns. For example, administrative fees were capped at 3 percent, the highest percentage that can be charged without scrutiny from the Centers for Medicare and Medicaid Services. The average contract, according to Novation, now carries a 1.89 percent fee. But despite these efforts, the company continues to be at the center of controversy.
In September 2006, Novation’s influence on healthcare took an international turn when the National Health Service, the publicly funded universal healthcare system of the United Kingdom, contracted with the company to manage the supply chain for public hospitals there for 10 years. Novation promised British authorities £1.4 billion in savings over the life of the contract, and cited the “$1 billion a year” that Novation claims it saves American hospitals. Further, Novation’s press release stated, English medical supply companies would “benefit from Novation’s long history of offering the most transparent bidding process as well as superior contracting and marketing services.”
Although investigators for the British health service asked about the probe into Novation’s practices, the deal went ahead. Critics screamed at the Labour government of then-Prime Minister Tony Blair. Health worker unions savaged the arrangement over concerns that Novation would provide hospitals with unsafe supplies. Political opponents accused Blair of subjecting NHS to “creeping privatization” and irresponsibility in handing the immense task of buying supplies for all of the public hospitals of the United Kingdom to a company facing a major federal fraud investigation in the United States. Novation’s English venture is headed by Sherry Woodcock, Cynthia Fitzgerald’s former boss.
Novation’s business is growing: The company projects a volume increase of almost 5 percent this year. Its newest venture is a regional purchasing cooperative, the latest trend in GPOs. VHA started the Texas Purchasing Coalition last month, which includes 13 Texas hospitals with a collective purchasing power of $500 million a year. Meanwhile, other Novation member hospitals are defecting to other GPOs. Earlier this year, a number of Illinois hospitals formed their own purchasing cooperative, contracting with Premier. Critics say that regional groups add another layer of GPO contracts for smaller suppliers to deal with.
And this summer, as the furor over toxic Chinese products boiled, Novation hospitals learned they had unwittingly handed their patients Chinese-made toothpaste sweetened with potentially deadly diethylene glycol. The Department of Consumer Protection of Connecticut noted that 3,661 of the 4,852 tubes of tainted toothpaste recalled in the state came from Danbury Hospital. Danbury had received supplies from a Novation-contracted distributor, Medline of Illinois.
Novation’s problems have a direct impact in North Texas, since the company supplies so many hospitals here — including the John Peter Smith hospital system in Tarrant County. Despite that fact that JPS is a public hospital supported by tax dollars, JPS officials declined to be interviewed about their dealings with Novation and whether patients and taxpayers here are being affected by the GPO’s practices.
After three weeks of attempting to arrange an interview with JPS officials, the Weekly received a brief written statement from Gale S. Pileggi, the hospital’s senior vice president. None of its four sentences addressed the controversies raging over Novation.
It said: “We are a member of University HealthSystem Consortium (UHC). As a member of this organization, we authorize them to act as a group purchasing organization on our behalf. We purchase a vast number of our supplies through UHC contracts. We also purchase directly from vendors and manufacturers through agreements that we have directly negotiated.”
Tarrant County officials also did not respond to calls for comment from the Weekly.
Today, Cynthia Fitzgerald runs Dimension Medical Supply Group in Plano, a small company that brokers sales of medical materials to the government. Overlooking her desk is a poster that says, “I do not choose to be common.” There are pictures of black jazz musicians. She talks about the process of revealing what she saw at Novation, a memory that hasn’t faded after eight years.
After she left Novation, Fitzgerald struggled to find work. Other companies in the healthcare industry wouldn’t consider her. Finally, she decided to start her own company. Its mission, she says, is something closer to what GPOs should be doing. “The only way I could make sure that I wouldn’t have to do something dirty was to go into business for myself,” she said.
Fitzgerald contacted federal investigators in 1999 about Novation’s practices. They didn’t believe her claims. Then, when Retractable Technologies sued Novation, she was subpoenaed. The day before her deposition in 2002, she said, Novation attorneys contacted her, wanting to know what she would say. She told them they’d have to wait to find out. At that time, she testified that she was fired by Novation because of “philosophical differences.” Worried about possible repercussions to her business as a result of testifying in a case against Novation, she testified, “A very large corporation can do just about anything to a small company.”
After four years of preparation, her whistleblower lawsuit will now play out in Dallas’ federal courthouse. If the case is strong, the federal government and the Texas attorney general may intervene in the lawsuit, merging it with the three-year-old Justice Department investigation. The suit covers Novation’s actions between 1993 and 2003.
When the lawsuit is over, Fitzgerald could find herself redeemed and substantially richer for having spoken up — whistleblower rewards can be as high as 30 percent of the money recouped by the government. Or she could find herself back where she started, with a life unsettled at the age of 50.
“It’s had an impact in my life, but I know it’s the right thing to do,” she said. “This is more than what I would have wanted to find myself engaged in at this point in my life.
“This has been an uphill battle,” she said. “This is not something that I was interested in. If I could go back and do everything over, I’m not sure I would take this on again.”
You can reach Pablo Lastra at
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