Last Week's Scandals

The march of settlements and other unfavorable legal results for health care organizations continued last week, in alphabetical order

CVS Settles for $77.6 Million for Violating the Controlled Substances Act

As reported by Bloomberg,

CVS Caremark Corp. agreed to pay $77.6 million to settle claims that some of its stores in California and Nevada allowed criminals to buy cold medications that were used to make methamphetamine.

The pharmacy chain will pay a $75 million fine, the largest civil penalty ever paid under the Controlled Substances Act, and forfeit $2.6 million in profits from the illegal sales, the U.S. Attorney’s Office in Los Angeles said today in a statement.

Between September 2007 and November 2008, CVS failed to ensure that stores in Southern California complied with laws limiting sales of over-the-counter drugs made with pseudoephedrine, which allowed methamphetamine traffickers to buy large amounts of the drugs, according to the statement. CVS changed its sales practices only after it became aware of the investigation, prosecutors said.

What was unusual about this case is that the company's CEO actually seemed to acknowledge that it did something wrong, and vowed change:

'While this lapse occurred in 2007 and 2008 and has been addressed, it was an unacceptable breach of the company’s policies and was totally inconsistent with our values,' CVS Chief Executive Officer Thomas Ryan said in a statement. 'We have strengthened our internal controls and compliance measures and made substantial investments to improve our handling and monitoring of PSE.'

Amazing, a CEO acknowledging that his corporation's values include complying with the law... [sarcasm off]
Note that we most recently posted about a settlement by CVS, one by CVS Caremark for improperly charging a public entity, in September, 2010, here.

Johnson & Johnson Found Liable for $257.7 Million for Fraud

As reported by Bloomberg,

Johnson & Johnson lost a $257.7 million jury verdict in Louisiana for making misleading claims about the safety of the company’s Risperdal antipsychotic drug.

J&J officials defrauded the state’s Medicaid system by wrongfully touting Risperdal as superior to competing antipsychotic drugs and minimizing its links to diabetes, said jurors in state court in Opelousas, Louisiana.

Specifically,

The jury found 35,542 violations of the state’s Medical Assistance Programs Integrity Law and imposed a penalty of $7,250 for each. The total $257.7 million verdict is the fifth- largest in the U.S. so far in 2010, according to data compiled by Bloomberg.

'You can’t come into Louisiana and disseminate false and misleading information,' Patrick Morrow, who represented the state, said after the verdict in a phone interview. 'I’m sure this matter will be in the appellate courts for years to come. This is the first step.'

The state’s case centered on drug safety claims that J&J and Ortho-McNeil Janssen made in November 2003 correspondence to 700,000 doctors. In those letters, J&J touted Risperdal as safer than competing antipsychotics such as Indianapolis-based Eli Lilly & Co.’s Zyprexa and London-based AstraZeneca Plc’s Seroquel. Risperdal global sales peaked at $4.5 billion in 2007, declining after the company lost patent protection.

The U.S. Food and Drug Administration responded with a warning letter saying J&J made false and misleading claims that minimized the potentially fatal risks of diabetes and overstated the drug’s superiority to rival medicines.

Lawyers for the state asked jurors to hold J&J liable for the 7,604 letters it sent to Louisiana doctors and regulators making those claims along with more than 27,542 sales calls in the state made by the drugmaker’s representatives in 2003 and 2004.

Note that we last discussed problems at Johnson and Johnson, those being manufacturing issues leading to contaminated drugs, in September, 2010, here.

Medtronic Settles for $268 Million for Personal Injuries

As reported by the Minneapolis Star Tribune,

Medtronic Inc. has agreed to pay $268 million to settle thousands of lawsuits that patients filed after a 2007 recall of a faulty heart defibrillator wire that caused at least 13 deaths.

The settlement announced Thursday covers some 8,100 personal injury lawsuits in both federal and state courts over Medtronic's popular Sprint Fidelis lead, which was implanted in some 235,000 people when the company recalled the device after a small number fractured. The malfunction could cause the defibrillator to stop working or to inappropriately shock patients -- a frightening and uncomfortable experience, but usually not life-threatening.

The cases had been lingering in a kind of legal limbo that began with a 2008 U.S. Supreme Court decision involving another Medtronic case that prevented many patients with faulty medical devices from filing suit against the makers of those products.

Rather than wait for a definitive resolution to various legal appeals, the Fridley-based medical technology giant agreed to end the three-year legal battle with a settlement.

Note that we last discussed Medtronic's payments to physicians, in June, 2010, here.

Summary

Ho-hum, another week, another set of settlements, convictions, and/or verdicts unfavorable to large, important health care organizations. Although all the actions above would result in seemingly large payments by the companies involved, all of the payments were trivial in size compared to the companies' revenues. Note that in none of the cases above did any individual pay any penalty. In only one of the cases did a corporate leader acknowledge that bad things were done, but should be done no more.

As we have noted infinitum, penalties that only appear to be (relatively small) costs of doing business are unlikely to deter future bad behavior. Until the people who actually authorized, directed and implemented the bad behavior have to suffer some negative consequences, expect the bad behavior to continue.  Note that each of the companies discussed above have had their previous ethical lapses discussed in previous Health Care Renewal posts.

The continuing march of settlements, and sometimes criminal convictions involving major health care organizations should be regarded merely as providing a floor to estimates of the extent of bad behavior by large health care organizations. Bad behavior may not be reported, or lead to legal action, and legal action may not lead to settlements or convictions. However, it is amazing how many organizations that were once regarded as exemplary have had to settle, or plead guilty, or been convicted.

When it comes to health care's leadership, society seems to have acceded to defining deviancy down. Until we start holding health care leaders to high standards, expect their organizations not to uphold high standards.

Should the President of the University of Michigan be Held Accountable for Johnson and Johnson's Adulterated Drugs and Defective Devices?

We first started to discuss the intense conflicts of interest generated when leaders of academic medicine are also members of boards of directors of for-profit health care corporations in 2006.

The issue really made the big time in 2010 when the New York Times published a front page article in its Sunday Business section about whether university presidents who also were corporate directors were part of an "academic-industrial complex."

University of Michigan President Mary Sue Coleman as a Director of Johnson and Johnson

One such director we discussed this year is Mary Sue Coleman, President of the University of Michigan, and hence leader of a prestigious medical school and academic medical center, who is also Director of the large health care conglomerate, Johnson and Johnson. This relationship became locally controversial when President Coleman supported a smoking ban on campus, and critics pointed out that Johnson and Johnson is a prominent maker of smoking cessation products.

Now President Coleman's role on the Johnson and Johnson board made it into the national media, as the topic of an editorial in the Detroit News:

Should public officials moonlight as corporate operatives? This is a question being raised at the University of Michigan in the wake of the administration's decision to ban smoking on campus.

While some students have criticized the ban, many take issue with the priorities of the administrators who backed it: Specifically, U-M President Mary Sue Coleman, whose decision-making may have been influenced by her membership on the board of Johnson & Johnson, a private company. The right thing for Coleman to do would be to resign from her corporate position, or, at the very least, refuse to accept payment.

(Not to toot my own horn, but I thank the editorial writer for quoting me as a "high-profile" ethicist.)
The issue in this editorial, and in the earlier discussion of President Coleman's responsibilities for Johnson and Johnson, was whether the latter could influence specific decisions made in the former role.

However, events since our original posts on this case should create a new set of concerns.

Johnson and Johnson's Recall of Over-the-Counter Childrens' Medications

Johnson and Johnson has been dealing with a series of crises generated by revelations of problems in how it manufactures many of its marquee drugs and devices.

We posted here about problems in the manufacture of well known over-the-counter childrens' medications, such as childrens' Tylenol (acetaminophen) and Motrin (ibuprofen), by Johnson and Johnson's McNeil Consumer Healthcare subsidiary. Medications were found to be contaminated, and the plant making them was shut down.

Stringent Cost Cutting, Merger Mania, and Executives Who Don't Understand their Company's Business

Since then, investigative reporting by Fortune suggested that quality control problems were the result of that tactic popular among corporate executives to boost profits and hence their own over-stuffed pay checks, stringent cost cutting:

McNeil's quality-control department thrived for a few years. Then, not long after Larsen retired in 2002, it began to slowly weaken. The culprit was a familiar one -- cost cutting -- but in a subtler form. There were no wholesale layoffs in quality control. Instead experienced staffers were repeatedly laid off and replaced with newbies who mostly lacked technical pharmaceutical experience. By 2008 the analytical laboratory, formerly staffed almost entirely by full-time scientists, was half-full of contract workers, according to a former manager there.

Once stricter than a schoolmarm, the department grew lax. The team that tested the production lines was dubbed the 'EZ Pass system,' according to a former quality-control employee.

Quality problems also appeared to be products of another familiar tactic that "brilliant" CEOs use to quickly boost the bottom line, mergers and acquisitions:

At the end of 2006, J&J, on the hunt for growth amid slowing sales and profits, completed the $16.6 billion acquisition of Pfizer's (PFE, Fortune 500) consumer health care division....

The merger dramatically altered McNeil's position. It had previously been part of the pharma unit, but after the deal it was folded, along with the Pfizer group, into J&J's consumer sector, headed by Colleen Goggins. According to former executives, the difference between divisions was both cultural and financial. 'The people who ran pharma understood the requirements associated with [regulatory] compliance and the investments required to keep that up,' says a former executive. Consumer relied more on marketing, or 'smoke and mirrors,' as an ex-McNeil director scoffs. Perhaps the most striking difference was in profit margins. Companies in the consumer group typically had margins around 10%; McNeil generated more than twice that.

So,

Their new consumer bosses were now in charge of reducing McNeil's spending so that the company could meet the merger targets. Goggins looked to squeeze every cost, former employees say, and her team leaned heavily on McNeil, with its juicy margins, to absorb the cutbacks. 'I was given savings goals that were mind-boggling, unheard-of,' says one former executive.

And the merger brought out another common feature of contemporary management, executives with plenty of power, but almost no knowledge about or experience in the sort of work done by their subordinates:

Because the consumer executives lacked pharmaceutical experience, former McNeil employees say, they demanded ill-advised operational reductions. One VP remembers arguing with one of Goggins's

A Growing List of Recalls and Mistakes

While we learned about how Johnson and Johnson executives pursued all the currently fashionable management techniques to make more money, but likely to the detriment of the quality and safety of their products, we also learned that the problems at the company were not limited to a single factory, the specific products listed above, or a single unit of the company.

The company also recalled some contact lenses made by Johnson and Johnson Vision Care, as reported by the Associated Press,

Health giant Johnson & Johnson has issued its ninth recall of a consumer health product in a year, this time covering millions of 1 Day Acuvue contact lenses sold in Japan and two dozen other countries in Asia and Europe.

The affected contact lenses were mostly sold in Japan and none were sold in the U.S. or Canada, the company said.

Johnson & Johnson said Monday it had received a limited number of complaints from customers in Japan that they experienced an unusual stinging or pain when inserting the Acuvue TruEye Brand contact lenses.

Then it recalled prosthetic hips made by its DePuy orthopedic unit, as reported by Medscape,

An orthopaedic unit of Johnson & Johnson (J&J) is voluntarily withdrawing 2 implant systems for hip replacement after learning that roughly 1 of 8 patients in England and Wales who received the implants needed a second hip replacement operation.

The 2 devices under recall are the ASR XL Acetabular System, a metal cup fitted into the pelvis and the corresponding metal ball that replaces the femoral head, and the ASR Hip Resurfacing System, which is similar except that a metal cap is fastened to the femoral head. Both devices are manufactured by DePuy Orthopaedics of J&J.

Then the US Food and Drug Administration (FDA) warned Johson and Johnson's DePuy unit about its marketing of some different joint replacement products, as reported by the Wall Street Journal,

A Johnson & Johnson (JNJ) unit is marketing joint-replacement products without the required approval from federal regulators, the U.S. Food and Drug Administration said in a warning letter recently made public.

In the letter, the FDA said J&J unit DePuy Orthopaedics Inc. is illegally marketing its TruMatch Personalized Solutions system because it hasn't received appropriate clearance to sell the product. Additionally, the FDA found that DePuy is promoting another system--its Corail Hip System--for uses that haven't yet been approved.

'A review of our records reveals that you have not obtained marketing approval or clearance before you began offering the TruMatch Personalized Solutions System for sale, which is a violation of the law,' the FDA said in the letter.

The FDA added that the Corail Hip System has been misbranded and asked DePuy to immediately stop marketing the Corail system for unapproved uses.

And a few days ago, the now embattled head of the Johnson and Johnson consumer products unit, which was central to some of the earlier recalls, but not to some of the later problems, announced her resignation, as reported by Natasha Singer and Reed Abelson writing for the New York Times,

A longtime senior executive at Johnson & Johnson in charge of the consumer products division is leaving the company early next year, signaling a shake-up after a troubling series of recalls, including of children’s Tylenol, tarnished the company’s reputation in the last year.

The company said Thursday that the executive, Colleen A. Goggins, who testified this spring before a Congressional committee investigating the recalls, would retire in March. Ms. Goggins, 56, has worked at Johnson & Johnson since 1981 and was a member of the company’s senior leadership.

Who Will Be Accountable for a Company in Disarray?

Johnson and Johnson was one of the most trusted names in health care for a long time, perhaps partially because of its forthright response to the apparently external contamination of its Tylenol products in the 1980s. Now it appears to be a company in disarray, battered by numerous recalls of apparently contaminated, adulterated, or defective products, both drugs and devices, allegations that its conventional management wisdom lead to these quality and safety problems, and now with at least one key senior manager leaving.

All that went wrong is not exactly clear yet. Clearly, however, top managers, and the board of directors to whom they report ought to be accountable.

Here is where we return to the case of University of Michigan President Mary Sue Coleman. She is, after all, well-paid to be a director of Johnson and Johnson. Therefore, she ought to be accountable for the type of people hired as top managers, and the general direction of their management. She ought to be accountable for letting Johnson and Johnson CEO William Weldon and consumer products head Colleen Goggins continue in office, and receive outsized compensation, ($19,847,026 and $5,345,737  total compensation respectively last year, see here). She also ought to be accountable for the general thrust of their management, including excess cost-cutting, seeking mergers without clear plans for assimilating them, and putting people who did not understand pharmaceuticals in charge of pharmaceutical production.

The original controversy about President Coleman's role on the Johnson and Johnson board focused on whether her decision to promote a smoke free campus resulted from her conflict of interest.  Then, one defense mounted by President Coleman's spokesperson was:

'It's essential that U-M have a voice and interact with the business world,' said Rick Fitzgerald, a U-M spokesman. 'She thinks it's her duty to understand what the commercial world is doing.'

Now President Coleman has had a chance to have a voice and interact with Johnson and Johnson, and understand what it is doing by assuming a position that gives her ultimate responsibility for the company's top leadership and the direction they took. Now it appears the leadership may have been faulty, and their direction ill-advised.

Will President Coleman take responsibility for that? Maybe some enterprising student journalists at the university should ask her.

Meanwhile, this case now illustrates another important facet of the problems created when leaders of academic medicine serve on boards of directors of health care corporations. The mission of the University of Michigan's medical school and academic medical center includes taking the best possible care of individual patients. Taking the best possible care of individual patients cannot be done when the drugs physicians recommend or prescribe in good faith turn out to be adulterated, or when the devices they employ in good faith turn out to be faulty.

President Coleman's primary interests and entrusted responsibilities include upholding the best possible care for individual patients. Presiding over a company whose sloppy and ill-informed leadership, and misplaced priorities lead to the production of adulterated medicines and defective devices seems to conflict with this primary interest and entrusted responsibility.

Maybe all those academic leaders who accepted apparently cushy jobs on corporate boards will reconsider their decisions when they start being held responsible for their companies' poor leadership and poor decisions leading to poor health care outcomes of the use of their companies' products. They may really start to reconsider when journalists learn that academic leaders are more accessible than the current and ex-CEOs who also populate corporate boards.

Meanwhile, academic medicine ought to really rethink whether continuing to defend the "new species of conflicts of interest" will soon become counter-productive.

Are Ill-Informed Leaders the Cause of Drug Manufacturing Mishaps?

Fundamental Corporate Failures

In the last few years, there seems to have been an epidemic of once revered companies suddenly unable to perform the most basic functions necessary for their businesses.  Finance firms ran out of money and ended up bailed out or bankrupt.  An automobile firm produced cars that seemed to accelerate out of control.  Another automobile company, once the world's biggest, went bankrupt and had to be bailed out by the government. An oil company took months to cap a blown out well. 

In the health care world, drug companies which could no longer manufacture pure and unadulterated drugs.  Baxter International sold deadly contaminated heparin (post here). Johnson and Johnson sold contaminated or wrongly dosed over-the counter childrens' medicines (post here).

Another Troubled Johnson and Johnson Factory

Now yet more problems have surfaced at a Johnson and Johnson factory.  As reported by the AP:

A dozen recent federal inspections of a Johnson & Johnson factory for heartburn and other nonprescription medicines show a host of violations that could affect the quality and makeup of the drugs.

A new report on inspections at the Lancaster, Pa., factory in the past month indicates a pattern of ignoring rules for manufacturing and quality, failure to investigate problems that could affect the composition of products, carelessness in cleaning and maintaining equipment, and shoddy record-keeping.

In some cases, medicine batches made during equipment failures were not checked for quality.

Food and Drug Administration investigators had to ask for information many times in some cases, and then wait days to get it.

The scope of the problems was large:

The inspection report, released Wednesday, lists 12 different types of violations, from not determining the impact of equipment failures 'on the manufacturing process and products' to incomplete records of investigations into 'unexplained discrepancies' in manufacturing. The latter problem occurs 'whether or not the batch has already been distributed,' the report states.

Some examples were:

_'Laboratory controls do not include the establishment of scientifically sound and appropriate test procedures to assure that drug products conform to appropriate standards of identity, strength, quality and purity.'

_Procedures to prevent 'objectionable microorganisms' from getting into medicines appear not to have been followed.

_'Deviations from written test procedures are not justified.'

_Staff were not following up 'to determine the causes for repeated mix-up of tablets.'

_Written procedures for cleaning and maintenance did not have enough detail about the methods, equipment and materials to be used.

_The plant did not have recent drug production and quality control records readily available to the inspectors, as is required.

_Samples of drug products taken to determine if they met written specifications were not properly identified.

_There was no preventive maintenance program for at least five types of complex manufacturing or testing equipment.

Previous Problems at Johnson and Johnson Factories
Note that just a few days before this hit the news, the Philadelphia Inquirer reported this follow-up from the problems at the plant in Fort Washington, PA run by Johnson and Johnson's subsidiary McNeil Consumer Healthcare

A federal grand jury is investigating problems at the now-shuttered McNeil Consumer Healthcare plant in Fort Washington that triggered the recall of children's Tylenol and other popular pediatric medicines, according to the company.

The existence of the investigation was made public Tuesday by Louise Mehrotra, vice president for investor relations for Johnson & Johnson, McNeil's parent company.

That report reminded us that there have been problems at a third Johnson and Johnson plant:

[Johnson and Johnson subsidiary] McNeil is now dealing with FDA issues at three drug-making facilities, including one in Las Piedras, Puerto Rico.

Problems at the Las Piedras plant last year set in motion the investigation at Fort Washington.

At Las Piedras, FDA inspectors were chiefly concerned about why it took McNeil more than a year to respond to consumer complaints of a musty smell associated with Tylenol caplets produced at the plant. The smell was traced to a chemical used to treat wooden pallets at the plant.

So three Johnson and Johnson manufacturing plants have recently allegedly failed to uphold basic quality standards, and thus have made medicines that ranged from musty smelling to contaminated. Clearly, the most basic responsibility of a drug manufacturer is to supply fresh, pure, unadulterated drugs, and now Johnson and Johnson, a once iconic American drug and device company, seems to be having trouble fulfilling this responsibility.

Caused by Leadership Shortcomings?
It seems that health care firms, like so many others, have been distracted by financing fantasies and marketing marvels from the most fundamental parts of their business. One wonders how responsible are leaders with little understanding of the fundamentals of the fields in which their firms operate, and who seem to just get richer no badly how their firms perform.

Note that the current Johnson and Johnson CEO William C Weldon's background is in "sales,marketing and international management," not manufacturing, engineering, chemistry, or the biological sciences, per the company's 2010 proxy statement.  In 2009, with one factory already under investigation, his total compensation was over $30,000,000.

The Johnson and Johnson board of directors all get more than $200,000 per year in compensation.  The board does include two biologists and two physicians  (Prof Mary Sue Coleman, is "professor of biological chemistry" at the University of Michigan; Michael M E Johns, MD, a physician; Susan L Lindquist, Professor of Biology at Massachusetts Institute of Technology; and David Satcher, MD a physician.)  However, while it also contains the retired CEOs of a telecommunications company, an electronics company, an airline, a food company, and an bank/ finance company,  it does not seem to contain anyone with experience in manufacturing, much less pharmaceutical manufacturing.  

On the other hand, it includes several people with leadership positions in non-profit health care institutions  with whose primary responsibilities their Johnson and Johnson board membership may conflict.  (Mary Sue Coleman is President of the University of Michigan; Michael M E Johns, Chancellor of Emory University, member of the Institute of Medicine, member of the editorial board of JAMA, and chair of the publications committee of Academic Medicine; Susan L Lindquist, member of the Institute of Medicine; Leo F Mullin, Chairman of the Board of the Juvenile Diabetes Research Foundation; William D Perez, Trustee of Cornell University, and Trustee of Northwestern Memorial Hospital;  and David Satcher, board member for the Kaiser Family Foundation.)   

Note that leaders of non-profit academic health care institutions who also serve on boards of for-profit health care corporations often justify the apparent conflict by the need to "have a voice and interact with the business world," as explained (see post here) by a spokesperson for Mary Sue Coleman.  A university president who sits on a corporate board to "understand what the commercial world is doing," may have not learned enough about that world to make sure it is doing it well.

Finally, several Johnson and Johnson board members are former or current leaders of some of the financial firms whose problems lead to the global financial meltdown, or "great recession," (Anne M Mulcahy has been a member of the Citigroup board since 2004, and was on the FNMA board from 2000 to 2004, both nearly failed, and required government bailouts to survive; Leo F Mullin, currently Senior Advisor to Goldman Sachs Capital Partners, a subsidiary of Goldman Sachs, which just settled charges by the SEC that it misled investors; and Charles Prince, CEO of Citigroup from 2003 to 2007.)   Are these the sort of people we should trust to uphold the fundamental quality of drug manufacturing? 

Health care organizations are increasingly saddled with leaders who do not understand the fundamentals of the health care environment, are not pledged to support their missions, and may be distracted by conflicts of interest.  Such leaders may be increasingly responsible for the dysfunction of modern health care.  True health care reform requires leadership that understands the context, and supports the mission without conflict.

The New York Times Reports A University President's Conflict of Interest

Three months ago, we discussed the controversy at the University of Michigan about  the university president's position on the board of directors of the big pharmaceutical, medical device and medical supply company Johnson and Johnson as a potential conflict of interest that could have influenced her decision to make the campus smoke-free.  (Johnson and Johnson makes drugs to aid in smoking cessation.)  I argued that by the Institute of Medicine definition, President Coleman did have a conflict of interest, and while it was not possible to tell whether it influenced the smoke-free decision, the issue with conflicts is that they constantly raise the possibility of undue influence on decisions.

Now this issue has made it to the big time.  New York Times reporter Duff Wilson, wrote in the Times' Prescriptions Blog

The University of Michigan medical school became the first in the nation last month to say it would refuse any funding from drug companies for its continuing medical education classes. The decision could cost it as much as $1 million a year, but it was worth it, the medical school dean said, for education to be free from potential bias.

At the same time, Mary Sue Coleman, president of the entire University of Michigan, sits on the board of directors for the pharmaceutical giant Johnson & Johnson. Last year, the company paid her $229,978 — roughly half in stock and half in cash — for attending a limited number of meetings, corporate filings show.

Conflict of interest? Conflict of policies? If the med school and mere professors could be tainted by drug money, what about the university president?

She says no. Responding to questions on Ms. Coleman’s behalf Monday, Kelly E. Cunningham, a spokeswoman for the university, said the president satisfied the policy by disclosing her outside work. Ms. Coleman has never had to recuse herself from any discussion or action at the university because medical purchasing and investment decisions are so remote from her, Ms. Cunningham said.

'The same is true at J&J,' she added. 'There has never been a discussion or decision at the board level that involved something related to the UM. But, of course, if there were, she would recuse herself.'

The story was picked up by the Detroit Free Press, which reiterated the official line that President Coleman's role on the Johnson and Johnson board did not pose a conflict:

A student group at the University of Michigan is calling on President Mary Sue Coleman to resign from her seat on the Johnson & Johnson board of directors, saying it's a conflict of interest.

But Coleman has no plans to resign, and university officials say her role on the board is not in conflict with university operations. Last year, she earned nearly $230,000 for her board duties. Coleman's U-M salary is about $550,000.

'It's essential that U-M have a voice and interact with the business world,' said Rick Fitzgerald, a U-M spokesman. 'She thinks it's her duty to understand what the commercial world is doing.'

So, as I did last time, let us turn to the Institute of Medicine's definition of conflict of interest (in a health care context) found in its report, Conflict of Interest in Medical Research, Education, and Practice.

Conflicts of interest are defined as circumstances that create a risk that professional judgments or actions regarding a primary interest will be unduly influenced by a secondary interest. Primary interests include promoting and protecting the integrity of research, the quality of medical education, and the welfare of patients. Secondary interests include not only financial interests....

I asserted then that President Coleman has a conflict of interest. Her primary interests as President of a university are to uphold the university's academic mission, and as President of a university that includes a medical school, a school of public health, and an academic medical center, also to uphold the integrity of patient care and public health practice. Her secondary interest as a member of the board of directors of a public, for-profit corporation is her fiduciary duty to that corporation and its stockholders, which means she must "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.] Such unyielding loyalty to the shareholders of a pharmaceutical and medical device company clearly creates a risk of influencing judgments or actions that could affect the corporations' sales or operations, economic or health policy, or the general environment in which it operates. Many of the judgments of or actions performed by the leader of a medical school, public health school, and academic medical center could so so, and are thus at risk of being so unduly influenced.

As the IOM report said, though,

a judgment that someone has a conflict of interest does not imply that the person is unethical. Such judgments assume only that some situations are generally recognized to pose an unacceptable risk that decisions may be unduly influenced by considerations that should be irrelevant.

However, note that the sorts of decisions that may be influenced by a conflict of interest go beyond just those that involve the specific secondary interest causing the conflict. So the University spokesperson's statement that the president would recuse herself from any decision at the university that directly involved Johnson and Johnson, but that no such decision has ever been necessary, missed the point.

Meanwhile, the university's insistence that the president's part-time position at Johnson and Johnson is justified by the need to "have a voice and interact with the business world" rings hollow. There are many ways a president could do that which do not involve getting corporate pay (and for "unyielding loyalty"). It rings especially hollow at a university that has identified corporate funding for continuing medical education as an unacceptably bad conflict of interest.

But then again, conflicts of interest are known to create confused thinking, and such confused thinking is likely to be prevalent at an institution that has one set of rules for the little people, and another for the top leaders.

Maybe this story in the New York Times will lead to some discussion about whether it is good for academic medical institutions to tolerate this previously "new species of conflict of interest" (as we termed it in 2006).

Corporate Proxies Suggest CEOs Rewarded for Influencing Health Care Reform

We have frequently discussed the often outsized, if not outrageous compensation awarded to top leaders of health care organizations.  Such compensation may seem disproportionate to the leaders' real-world achievements, and may contrast with organizational actions that seem inept, mission-hostile, or unethical.

In perusing this year's crop of proxy statements from some of the biggest US health care corporations, I noted that some provide some narrative, qualitative justification for their top leaders pay.  I was struck by three similar statements:

Johnson and Johnson

We recently discussed the contrast between Johnson and Johnson CEO William Weldon's gargantuan compensation and his detached response to the findings of an inspection of one of his company's factories that lead to its shutdown and the recall of its products.   According to the company's 2010 proxy statement, Mr Weldon's total compensation approved  in 2010 was $19,847,026.   The proxy statement included this overview of his performance:

The Board believes that Mr. Weldon generally exceeded expectations despite substantial economic, political, regulatory and competitive challenges as well as significant patent expirations. As referenced in the table above, the Company delivered solid financial results and positioned itself for future growth.

Under "strategic results" was this statement:

Mr. Weldon played an effective role in helping shape health care policy around the world and has been very involved with efforts on U.S. Health Care Reform. Mr. Weldon’s personal involvement with key leaders and organizations has ensured the interests of the Company are well represented.

Pfizer

We recently discussed the contrast between Pfizer Inc CEO Jeffrey Kindler's sizable compensation and the number and size of lawsuits alleging unethical conduct that the organization has settled, and its criminal conviction as a "racketeering influenced and corrupt organization" (RICO). According to the company's 2010 proxy statement, Mr Kindler's total compensation in 2009 was $14,898,038. The proxy statement included an Executive Compensation Discussion and Analysis. Its summary of Mr Kindler's performance was:

The committee believes that Mr Kindler's leadership was a significant factor in the continued progress made by Pfizer in 2009 in strengthening the foundation for future growth and long-term success.

It also specifically addressed Mr Kindler's "industry leadership":

During 2009, Mr Kindler was actively involved, through both Pfizer and external organizations, in developing and advancing US and global public policies that serve the overall interest of our Company and our shareholders, as well as doctors and patients. These efforts included constructive participation in the US legislative process to advance Pfizer's goals of achieving a more rational operating environment....

UnitedHealth Group

We recently discussed the contrast between UnitedHealth Group CEO Stephen J Helmsley's large total compensation and the profit he recently made from the sale of stock options and various questions raised about his company's ethical performance.  According to the company's 2010 proxy statement, his 2009 total compensation was $8,901,916. The company's 2010 proxy statement stated his compensation was based upon a variety of factors, including:

Positive participation and leadership of the Company in the health care reform and modernization debate

Summary

We have noted how health care organization may be gripped by "compensation madness," caused by "insiders hijacking established organizations for their personal benefit."  One could view the statements above as just one form of post-hoc justification for compensation madness.  It is possible that timid, if not crony boards are simply getting more inventive in their rationalizing CEOs' imperial pay scales.  On the other hand, those justifying the compensation of three extremely well-compensated health care corporate CEOs may really believe what they wrote about their CEOs roles in health care reform. 

We have posted little about the US health care reform effort because so much of it seemed irrelevant to the concerns mentioned on Health Care Renewal.  Health care reform legislation did little to address problems with health care leadership, governance and ethics, and how they challenge health care professionals' values and lead to higher costs, declining access, poor health care quality and disgruntled health care professionals (see this summary).  Maybe one reason this was so was that the top leaders of health care organizations did a good job pushing their personal and organizational priorities into the reform legislation, meanwhile discouraging any provisions that might threaten the way they were leading their organizations, and how much they were making while doing so. 

There a many reasons for the popular dissatisfaction with the recently enacted US health care reform legislation.  The influence of the leadership of top health care corporations in promoting their, rather than the populace's goals, ought to be a topic of further inquiry.  Meanwhile, it may be that the "superclass" has struck again. 

$19 Million Means Never Having to Say You Are Sorry?

Johnson and Johnson, the giant diversified health care company, recently shut down a factory that manufactured non-prescription childrens' medication, and recalled its products.  The findings from a US Food and Drug Administration (FDA) inspection of the plant were striking.  As described by Reuters,

The company recalled 40 widely used children's pain and allergy medications, saying some may have a higher concentration of their active ingredients, while others may be contaminated. J&J has had four recalls in the past year of over-the-counter medicines.

In an FDA report issued on Tuesday, inspectors said they found thick dust, grime and contaminated ingredients at the J&J plant that produces Children's Tylenol and dozens of other products recalled last week.

This infuriated the member of Congress who chairs a sub-committee which oversees the FDA:

Democratic Representative Rosa DeLauro sent a letter to the Food and Drug Administration asking questions about how the agency can respond to recalls and quality control lapses.

'I am concerned that the agency does not possess the authority to take appropriate action to address potentially criminal behavior by a corporation,' DeLauro wrote in the letter to FDA Commissioner Margaret Hamburg.

Furthermore,

DeLauro, in her letter, said the company's 'disregard' for manufacturing standards was 'both unnerving and unethical.'

'The corporate oversight observed at this facility appears to be symptomatic of reckless behavior that is clearly unacceptable,' she wrote.

The Reuters report then noted:

J&J has called the manufacturing problems unacceptable and vowed to fix them. The company has suspended production at the Pennsylvania plant where the recalled children's products are made.

Moreover, the company CEO took to the blogsphere (via the company's JNJ BTW blog) to give his response (below in its entirety).

To All Who Use Our Products,

We have a responsibility at Johnson & Johnson to provide you with the highest-quality products possible, and we have worked hard to fulfill that responsibility day-by-day for over a century.

The recent recalls of some over-the-counter medicines from our McNeil Consumer Healthcare operating company are a matter of great concern. They are a disappointment to me, and to the employees of the Johnson & Johnson Family of Companies. You can be confident that we will make whatever changes are needed at McNeil to fully restore the quality of its manufacturing.

As reported, McNeil has suspended all manufacturing operations at its facility in Fort Washington, Pa., until we can be sure that they are operating under the standards we demand of ourselves, and which our customers expect of us. McNeil has also retained independent quality experts to assist in this regard and is re-evaluating quality systems and manufacturing processes across the organization.

I have been assured that the chance of a serious medical event from the recalled products is remote. Even so, this does not give us comfort; one of our companies has let you down.

For now, please check your infants’ or children’s forms of TYLENOL®, MOTRIN®, ZYRTEC® or BENADRYL® and discard any medicines that are being recalled. You can check the list of recalled lots, apply for refunds, and get more information about the recall at McNeil’s dedicated website (http://mcneilproductrecall.com), or by calling 888-222-6036.

We will work hard to earn back your confidence.

Sincerely,

Bill Weldon

This seems like a very important case, because it involves a pharmaceutical company apparently violating its most fundamental responsibility, to provide pure, unadulterated medicine to the public.  While the current case did not apparently lead to major health consequences to patients (as did the case of the contaminated heparin), it still suggests very basic flaws with Johnson & Johnson's operations.

Thus, what is striking about the CEO's message is its remote tone.  He characterizes the problems at the factory as a reason for "great concern" and "a disappointment."  Such language seems designed to reduce the CEO's own connection to the problems at the factory.  This is the language one might use to describe someone else's conduct.  (For example, Politician X's vote on the bill "caused me great concern," and "was a disappointment.")

On the other hand, although the CEO wrote about collective responsibility, ("we have a responsibility at Johnson and Johnson,"), he never suggested he had any responsibility or was accountable for what happened. 

Of course, we have frequently seen language like this when health care organizations are accused of practices that violate their fundamental responsibilities, or could threaten health and safety.  Rather than embracing responsibility, often leaders use language that suggests a fear of admitting anything that could create legal liability.

However,  supposedly the rationale for entrusting so much power, and providing so much compensation to CEOs and other top executives, including those of health care organizations, is the tremendous responsibility they undertake.  In fact, the Johnson & Johnson 2010 proxy statement provides this justification for the executives' stratospheric pay:

Pay for Performance —All components of compensation should be tied to the performance of the individual executive officer and his or her specific business unit or function and/or the Company overall.
• Credo Values— The manner in which financial and strategic objectives are achieved is important. While not always quantifiable, the manner in which employees achieve results should also be a key element of the individual performance review process. During the performance review process, the Company’s set of core values—trustworthiness, respect, responsibility, fairness, caring and citizenship—as set forth in Our Credo should be used to assess how objectives are achieved.
• Accountability for Short- and Long-Term Performance — Annual performance bonuses and long term incentives should reward an appropriate balance of short- and long-term financial and strategic business results, with an emphasis on managing the business for the long-term.

It then goes on the emphasize the company's Credo:

Importance of Credo Values

For more than 65 years, the Johnson & Johnson Credo has guided the actions of the Company and its executive officers in fulfilling their responsibilities to the Company’s customers, employees, community and shareholders. In assessing the executive officers’ contributions to the Company’s performance, the Committee not only looks to results-oriented measures of performance, but also considers how those results were achieved— whether the decisions and actions leading to the results were consistent with the values embodied in the Credo— and the long-term impact of an executive officer’s decisions. Credo based behavior is not something that can be precisely measured and, thus, there is no formula for how
Credo-based behavior can, or will, impact an executive’s compensation. The Committee and the Chairman/CEO use their judgment and experience to evaluate whether an executive’s actions were aligned with the Company’s Credo values.

Thus, last year Mr Weldon's total compensation was $19,847,026. Such an amount ought to pay for a vast amount of responsibility and accountability. (Also, the total compensation of Ms C A Goggins, the Worldwide Chairman of the Consumer Group, who I presume to the the executive just below the CEO who is responsible for products made by the factory which had to be closed, was $5,345,737.)

So again the rules for the executives of big health care organizations seem to be heads they win, tails we lose.  They are paid enough to turn them into a new aristocracy supposedly because of the tremendous responsibility and accountability they assume.  However, when things go wrong, responsibility and accountability vanish in a haze of concern and disappointment (with other peoples' actions.)

On Health Care Renewal we continue to be concerned with and disappointed about our dysfunctional health care system, and its worsening problems with costs, quality and access as long as it is lead by people who can become rich without any responsibility or accountability for their actions.  The robber barons that arose in the late 19th century lead our country and the world into the great depression.  The new health care robber barons will soon lead us into the great health care depression. 

Sunday Settlement and Guilty Plea Roundup

Here we go again. 

AstraZeneca / Seroquel

We have posted frequently about allegations of devious marketing techniques used by AstraZeneca to promote its blockbuster atypical anti-psychotic drug Seroquel (quetiapine.)  See our posts here, here, here, here, and here.  Now, as reported by the New York Times, it is time for AZ to settle with the US government.

AstraZeneca has completed a deal to pay $520 million to settle federal investigations into marketing practices for its blockbuster schizophrenia drug, Seroquel, the Attorney General, Eric Holder, said at a news conference Tuesday afternoon.

'AstraZeneca paid kickbacks to doctors as part of an illegal scheme to market drugs for unapproved uses,' Kathleen Sebelius, secretary of health and human services, said at the event in Washington. She said the company promoted drugs for unapproved uses by children, the elderly, veterans and prisoners.

AstraZeneca agreed to sign a corporate integrity agreement with the federal government over its marketing of Seroquel for unapproved uses, but will not face criminal charges, company and federal officials said.

The company, based in London, has been accused of misleading doctors and patients by playing up favorable research and not adequately disclosing studies that show Seroquel increases the risk of diabetes.

Of course, an AZ spokesperson had a different take on it.

Glenn Engelmann, AstraZeneca’s U.S. general counsel, released a statement saying the company denies the allegations but settled the investigation with the payment.

'It is in the best interest of AstraZeneca to resolve these matters and to move forward with our business of discovering and developing important, life-changing medicines — while avoiding the delay, uncertainty, and expense of protracted litigation,' Mr. Engelmann said.

Johnson and Johnson / Topamax

On the other hand, the issue of how Johnson and Johnson marketed Topamax (topiramate), a drug approved for treating seizures, is a new one for Health Care Renewal.  Here is the story, via Bloomberg.

Two units of Johnson & Johnson will pay more than $81 million to resolve criminal and civil claims over illegal promotion of the epilepsy drug Topamax, the U.S. Justice Department said.

Ortho-McNeil Pharmaceutical LLC agreed to plead guilty to a misdemeanor and pay a $6.14 million criminal fine for misbranding the drug, the government said. Ortho-McNeil-Janssen Pharmaceuticals also will pay $75.37 million to resolve civil allegations that it illegally marketed Topamax and caused false claims to be submitted to government health programs.

While the Food and Drug Administration approved Topamax for the treatment of partial onset seizures, Ortho-McNeil Pharmaceutical promoted the drug for unapproved psychiatric uses, the government said. The company hired physicians through its 'Doctor-for-a-Day' program to join sales representatives in visiting doctors and to speak to colleagues about unapproved uses and doses, according to the government.

In this case, the company admitted wrong-doing as part of the specific plea agreement.

Under the plea agreement, Ortho-McNeil Pharmaceutical will admit that from 2001 to 2003 it promoted Topamax 'for certain uses not approved' by the FDA, according to a statement by Ortho-McNeil-Janssen.

The company 'voluntarily discontinued the program at issue before receiving the government’s first subpoena in the investigation,' according to the statement.

Ortho-McNeil-Janssen also will sign a five-year corporate integrity agreement with the U.S. Health and Human Services Department.

Summary

Once more, with feeling ....  We have discussed a series of legal settlements and criminal convictions and guilty pleas resolving cases of alleged wrong-doing by health care organizations. Almost none included any penalties for people who authorized, directed or implemented the bad behavior. None of the financial penalties were so big as to be more than another cost of doing business for the organizations involved. Corporate entities, but very rarely people have pleaded guilty or been convicted (almost always of misdemeanors), Some of the cases included gimmicks, like a subsidiary constructed only to plead guilty, that otherwise seemed to lessen accountability.

If we truly want health care that is accessible, of high quality, at a fair price, and more importantly, if we want health care that is honest and focused on patients, we need to provide health care leaders with clear, rational incentives in these directions, and make them fully accountable for their actions, and the courses of their organizations under their leadership.

ADDENDUM (2 May,2010) - See also comments on the Hooked: Ethics, Medicine, and Pharma blog by Dr Howard Brody on the AZ settlement.

Smoke Screen - How a Conflict of Interest Muddled the Debate on the Smoke-Free Initiative at the University of Michigan

As a physician, not being a big fan of cigarette smoking, I would have found little to criticize had anyone showed me the Smoke-Free Initiative at the University of Michigan, as promoted by the University President, Mary Sue Coleman. 

A Conflict of Interest: University President and Johnson & Johnson Board Member

It turns out, though, that this initative has provoked debate on that campus, not so much about its possible benefits and harms, but about whether the Ms Coleman's promotion of it had to do with a conflict of interest.  The debate broke out with an op-ed in the Michigan Daily:

It’s clear, then, that University President Mary Sue Coleman is the architect of the Smoke-Free Initiative, which will take effect in July of 2011. The initiative will prohibit smoking on all outdoor University property. Coleman and University administrators have been embarrassingly vague about why such a ban is necessary. Instead, they keep insisting that the smoking ban will improve public health.

Interestingly enough, the smoking ban may also improve Coleman’s salary.

That’s because Coleman isn’t just a college president. In her spare time, she moonlights as a businesswoman, sitting on the board of directors for major pharmaceutical company Johnson &  Johnson, as well as the Meredith Corporation, a magazine publisher. According to Forbes.com, her position at Johnson & Johnson netted her an income of $229,000 last year.

Among Johnson & Johnson’s many marketed brands are smoking cessation products like Nicorette and Nicoderm — products that University smokers will feel encouraged to use once smoking becomes unwelcome on campus in July 2011. Indeed, administrators have already announced that smoking cessation products may be offered at discounted prices to students who are trying to quit.

Obviously, this is a sizeable conflict of interest for Coleman. Even if her Johnson & Johnson salary didn’t actively influence her decision to ban smoking, it makes it substantially harder to take her at her word that the University needs this ban — especially when representatives of her administration can’t come up with a specific reason for it.

But Coleman’s corporate troubles run deeper than this. As the University’s College Libertarians pointed out in a press release this weekend, Johnson & Johnson has an affiliated non-profit group, the Robert Wood Johnson Foundation, which lobbies for the adoption of certain health-related policies through research and grant money. RWJF is notoriously anti-smoking, as its website explains: 'At the state and community level, we support advocacy for proven tobacco control measures, such as smoke-free air laws, funding of prevention and cessation programs and increases in tobacco taxes.'

While it’s no surprise that RWJF would fight for laws that restrict smoking and lead to increased use of Johnson & Johnson products, such an aggressive lobbying force should not hold financial sway over the president of a public university. Students, faculty and staff must be able to trust that their president is working in the best interests of the University community, not a profit-motivated corporation. Even the perception of a conflict of interest is embarrassing for this institution.

And then, in another op-ed in that paper:

Granted, some of Coleman’s reasons for the Smoke-Free Initiative are likely motivated by good intentions like lowering the University’s health care costs. But these justifications are severely compromised by her compensation from a corporation that will likely benefit from the smoking ban. Coleman sits on the board of directors for Johnson & Johnson, from which she earned nearly a quarter of a million dollars in 2009, and holds 11,159 shares of common stock, 10,777 shares of common stock equivalent units and 7,600 exercisable stock options in the company. Johnson & Johnson is the producer of a host of nicotine replacement products, including Nicoderm and Nicorette. Coleman explains, 'the University will offer free behavioral sessions and selected over-the-counter smoking cessation products to faculty and staff, along with co-pay reductions for prescription tobacco cessation medicines (and) discounts on tobacco cessation aids.'

In other words, under the proposed Smoke-Free Initiative, the University would subsidize products made by Johnson & Johnson. The University would purchase more nicotine replacement products, likely resulting in financial gains for Johnson & Johnson and, consequently, Coleman.

In reply, a letter by Dr Robert W Winfield, University of Michigan Chief Health Officer, asserted:

Some have raised concern about the appearance of a conflict of interest between President Coleman’s service on the board of directors of Johnson & Johnson, a company that produces some smoking-cessation products.

Simply put, there is no conflict. Prescription-only drugs for smoking cessation are generally considered the most effective and most widely used. Johnson & Johnson does not make any prescription-only smoking-cessation products.

A report of a meeting of the Michigan Student Association noted:

In a press release and columns in The Michigan Daily, members of the College Libertarians have identified Coleman as having an apparent conflict of interest due to her position on the board of Johnson & Johnson — a company that manufactures and markets smoking cessation products.

Kozack said if the allegations prove to be true, they could have large implications as Coleman is compensated for sitting on the company’s board.

He said the main reason for the resolution and the accusation of Coleman’s conflict of interest is that there is not enough information provided to the whole campus about the origin of the Smoke Free Initiative.

But in defense of President Coleman, the following appeared in the Michigan Capitol Confidential:

The University of Michigan's student newspaper - The Michigan Daily - wrote an opinion piece last week suggesting a conflict of interest involving University of Michigan President Mary Sue Coleman.

Coleman also earned a $230,000 salary in 2009 for sitting on the board of Johnson & Johnson. Alza Corporation, a subsidiary of Johnson & Johnson, markets Nicorette and Nicoderm, smoking cessation products.

Three ethics experts say Coleman is not in conflict.

'She is doing a public health service,' Peter Rost, a former vice president of Pfizer who has testified before Congress on the business practices of drug companies, wrote in an e-mail. 'The possible income by J& J from this campus is completely and utterly negligible and will have no impact on J&J income statement. Same thing if she opened public health clinic for depressed students and happened to sit on board of (a company) selling antidepressants. Conflict of interest should normally have some undue influence on either party. Since that is not the case I'm not troubled.'

Aine Donovan, the executive director of the Ethics Institute at Dartmouth College who teaches business ethics, said she didn't see a conflict.

'This is very reasonable,' Donovan said. 'Johnson & Johnson has a large range of products. This is a very reasonable position she is taking and it is a very laudable one.'

Timothy Keane, director of the Emerson Ethics Center in St. Louis, said it was 'a bit of a stretch' to say Coleman had a conflict of interest.

'Johnson & Johnson is not trying to set up shop and sell something to the University,' Keane said. 'They are not being a supplier to the University. It doesn't matter if you are a smoker or not, research indicates it is bad for you.'

A Hazy Debate

Smoke gets in your eyes. Maybe it should not be a surprise that once President Coleman's relationship with Johnson and Johnson was noted, opponents and proponents of the Smoke-Free Initative used arguments about that relationship to bolster their positions, rather than debating the smoking ban on its merits. The result, however, shows how conflicts of interest seem to always produce confusion, if not smoke and mirrors.

Most of the debate seemed to be about whether Ms Coleman would personally profit from the smoking ban, and if so, how much. For example, the second op-ed above argued, "the University would purchase more nicotine replacement products, likely resulting in financial gains for Johnson & Johnson, and consequently, Coleman." On the other hand, one expert quoted in the Michigan Capital Confidential argued that the income to J&J from the Michigan campus would be "utterly negligible," and another argued that "Johnson & Johnson is not trying to set up shop and sell something to the University."

On one hand, however much use of J&J nicotine replacement products there is at the University of Michigan, the amount is unlikely to change the profits of J&J, or the salaries or values of stock owned by its directors. On the other hand, J&J may not run a retail store at the University, but it is in the company's interest to sell more of all its products on university campuses, and everywhere else.

But in my humble opinion, the issue is not about the degree President Coleman's salary and assets derived from her position with Johnson and Johnson would be affected by a specific policy she may advocate. The issue is whether her judgments and decisions as President could be unduly influenced by her relationship with the company.

Definition of Conflicts of Interest


This provides a good opportunity to review a good working definition of conflict of interest as it applies to medicine, health care and health policy. Last year the Institute of Medicine published a thorough and well-balanced report, Conflict of Interest in Medical Research, Education, and Practice. It defined conflict of interest (p. 6):

Conflicts of interest are defined as circumstances that create a risk that professional judgments or actions regarding a primary interest will be unduly influenced by a secondary interest. Primary interests include promoting and protecting the integrity of research, the quality of medical education, and the welfare of patients. Secondary interests include not only financial interests....

Furthermore,

The severity of a conflict of interest depends on (1) the likelihood that professional decisions made under the relevant circumstances would be unduly influenced by a secondary interest, and (2) the seriousness of the harm or wrong that could result from such an influence.

But,

a judgment that someone has a conflict of interest does not imply that the person is unethical. Such judgments assume only that some situations are generally recognized to pose an unacceptable risk that decisions may be unduly infuenced by considerations that should be irrelevant.

Thus, a conflict of interest should be seen as a situation which increases the risk of bad judgments or decisions, but does not necessarily cause them, much less cause a particular bad judgment or decision.  (Thus, it makes no sense to try to argue, as the experts did above, that because a person made a good decision, he or she does not have a conflict of interest.)

I assert that President Coleman has a conflict of interest. Her primary interests as President of a university are to uphold the university's academic mission, and as President of a university that includes a medical school, a school of public health, and an academic medical center, also to uphold the integrity of patient care and public health practice. Her secondary interest as a member of the board of directors of a public, for-profit corporation is her fiduciary duty to that corporation and its stockholders, which means she must "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.] Such unyielding loyalty to the shareholders of a pharmaceutical and medical device company clearly creates a risk of influencing judgments or actions that could affect the corporations' sales or operations, economic or health policy, or the general environment in which it operates.  Many of the judgments of or actions performed by  the leader of a medical school, public health school, and academic medical center could so so, and are thus at risk of being so unduly influenced.

However, that she has such a conflict does not prove that any particular judgments or decisions were made badly because of it. Conversely, that particular judgments or decisions were made well does not disprove the existence of the conflict. 

So I beg to differ with all the experts cited in the Michigan Capital Confidential article.  On the other hand, while the President may have a conflict of interest, it is impossible to tell how or whether this influenced her particular decision to support the Smoke-Free Initiative.  Neither does it speak to the benefits or harms of such a policy.  The main effect of the President's conflict of interest seems to have been to muddle the debate about the policy.

Conflicts of interests' general tendency to muddle and confuse provide one argument for their elimination.  Another is that they may affect judgments and actions that are not so readily debated as, and more likely to produce bad results than smoke-free initiatives.  Maybe the hazy debate about the University of Michigan Smoke-Free Initiative will lead to a clearer discussion of whether academic and academic medical leaders should also be corporate leaders.

Omnicare, IVAX Settle

Settlements and kickbacks and corporate integrity agreements, oh my (to the tune of "lions and tigers and bears, oh my")

To quote the BusinessWeek version of the story:

A $112 million settlement involving alleged drug kickbacks that the Justice Dept. announced with the nation's largest nursing home pharmacy and a generic drug manufacturer on Nov. 3 is part of a wide-ranging investigation of suspected Medicaid fraud by the pharmaceutical industry.

Under Tuesday's settlement, Omnicare will pay $98 million plus interest to the federal government and a number of state Medicaid programs to settle allegations that it participated in kickback schemes with IVAX, J&J [Johnson & Johnson], and two nursing home chains. IVAX, a subsidiary of Israel's Teva Pharmaceutical Industries (TEVA), agreed to pay $14 million plus interest.

Omnicare and IVAX entered 'corporate integrity agreements' to establish new training and policies to prevent future problems. Neither company admitted any wrongdoing.

Here are some details of the alleged wrong-doing:

Omnicare is a publicly traded pharmacy benefit manager for long-term care facilities that operates in 47 states, the District of Columbia, and Canada. It had revenues of $6.3 billion in 2008.

According to the settlement, Omnicare allegedly received $8 million in payments from IVAX in 2000-04 to buy $50 million in generic drugs and recommend that physicians prescribe them to their nursing home patients. Omnicare entered the contract even though its outside counsel repeatedly warned it might violate the federal anti-kickback law, the government alleged in its complaint, filed in March. Omnicare also took payments from New Brunswick (N.J.)-based J&J from 1999 to 2004 to aggressively persuade doctors to prescribe Risperdal, an anti-psychotic drug, and discourage use of alternative medications, according to the settlement.

In addition, Omnicare allegedly paid $50 million to nursing home chains Mariner Health Care and SavaSeniorCare in 2004 to keep referring their Medicaid and Medicare patients to Omnicare for pharmacy services.

It is noteworthy that these activities went on despite repeated advice of at least one attorney:

According to the government's complaint, Omnicare again ignored its outside counsel's advice that the payment was illegal.

The activities also went on despite Omnicare's participation in a previous corporate integrity agreement.

This isn't the first time Omnicare has had to settle civil fraud complaints filed by the government. In 2006, Omnicare agreed to pay $102 million to settle Medicaid fraud cases in 43 states, without admitting wrongdoing, including a $52.5 million settlement with Michigan. One complaint accused Omnicare of switching two drugs from tablet to capsule form to boost Medicaid payments. Omnicare had to enter a five-year corporate integrity agreement.

As I have written again and again regarding many other cases that resulted in legal settlements or guilty pleas, the companies involved only need to pay fines, and no individual who performed, directed or approved unethical or illegal acts will suffer any negative consequences. I submit once again that such fines are viewed merely as costs of doing business by the affected companies, and do not deter future bad behavior.

For once, the coverage of this case included some opinions similar to mine:

The Office of Inspector General of the Health & Human Services Dept. has the authority to bar health-care companies from participating in the Medicaid, Medicare, and other federal health programs as a penalty for violating anti-fraud laws. That's a severe sanction given the huge size of those programs. The settlements with Omnicare and IVAX left open the possibility of exclusion.

Some experts say Omnicare should be barred as a repeat offender, to send a strong message to other pharmaceutical industry players that fraud will no longer be tolerated. 'If the government were really serious, they'd give Omnicare the death sentence,' said Erik Gordon, a business professor at the University of Michigan who follows the pharmaceutical industry. 'Then all the other players would say this isn't just the cost of doing business, this is a bet-the-company thing.'

West declined to comment on whether the Justice Dept. will recommended the exclusion of the two companies, saying only that his office works closely with the OIG's office on appropriate penalties.

[Patrick] Burns, with Taxpayers Against Fraud, said the government has been hesitant to exclude health-care companies for fraud, fearing it will be seen as overzealous. But he believes that's the wrong attitude. 'Doing business with the U.S. government is a privilege, not a right,' he said. 'I think Omnicare has abused the privilege.'

Finally, note that the description of this case suggested that the kickbacks had effects on physicians' prescribing and hence the use of specific drugs. The Justice Department's filing alleged that in return for the payment from IVAX, Omnicare tried to get physicians to prescribe that company's products, and that in return for the payment from J&J, Omnicare pushed them to prescribe the atypical anti-psychotic Risperdal. Thus the activities that went on this case could have lead to the use of inappropriate, useless or even harmful drugs by certain patients.

I submit that would-be health care reformers who want to improve care, reduce costs and improve access should advocate for real negative consequences for people who implement, direct or approve the various versions of fraud, kickbacks, and miscellaneous corruption and malfeasance we have discussed on Health Care Renewal.

By the way, it appears one of the members of Omnicare's Board of Directors is also a leader in academic health care.  She is Andrea R. Lindell, DNSc, RN, who is also Dean of the College of Nursing at the University of Cincinnati.  One would think that someone who thus boasts "the success of our students, faculty, staff and alumni who work together to promote excellence in education, research, service and practice" needs to keep a closer eye on the ethical aspects of her company's management.

Practicing (Clinical Trials) Medicine Without a License

Another story of dubious clinical research, this time reported by the St Petersburg (Florida, US) Times:

Vladimir Martin called himself 'doctor' and ran 17 clinical trials of new drugs for major pharmaceutical companies before one patient noticed he didn't have a medical license.

The patient alerted the St. Petersburg Times, whose resulting story led to a state investigation. On Saturday, Martin, 43, was arrested on charges of practicing medicine without a license. He was later released from the Pinellas County Jail on $10,000 bail. The felony charge carries a maximum sentence of five years in prison and maximum fine of $5,000.

The Clearwater man, who changed his last name from Kossatchev after moving to Florida in 2003, went to medical school in the former Soviet Union and practiced in a hospital in his native Ukraine.

Ruth Weber, a 74-year-old Clearwater resident, told the Times in April 2008 that the man who called himself Dr. Martin enrolled her in a study for lower-back pain and adjusted the dosage of her medicine. Only licensed physicians are supposed to conduct such activities. Patients in the study were randomly selected to receive a new Johnson & Johnson painkiller called tapentadol, a placebo or the potent narcotic oxycodone.

Though Dr. Robert Lee Jackson, a Clearwater osteopath, was listed by the FDA as the physician conducting the study, Weber said she never saw Jackson. In weekly visits to Alliance Medical Research Group on Belcher Road, Weber said it was Martin who drew blood, doled out medication and, at one point, doubled her dosage.

Martin also conducted electrocardiograms on Weber, although his techniques were so rusty the electrodes kept slipping off, she said. Weber eventually dropped out of the study when she saw no improvement for her back pain.

A second woman, Ann Reed, told investigators she also responded to an ad for a drug study trial at Alliance Medical Research. Martin took her blood, listened to her heart and gave her medications, Reed said. Martin sometimes had to stick her four times to draw blood, she said.

Like Weber, Reed said she never saw Jackson during her trial, which involved 13 visits between May 2007 and March 2008.

Greg Panico, a spokesman for Johnson & Johnson, said the company audited Alliance Medical after the Times' story and submitted its findings to the FDA. He declined to discuss the nature of the report, but said the drug company is no longer working with Alliance Medical.

Panico also said data collected in the tapentadol study at that site was not submitted to the FDA.

The drugmaker said it reported its findings to the Sterling Institutional Review Board in Atlanta, which had been hired by Johnson & Johnson to oversee patient safety during the trial.

Despite losing the Johnson & Johnson trial, Martin told investigators in July that he was conducting four other drug studies.

A little Google searching turned up another example on ClinicalTrials.gov of a commercially funded clinical study for which the Alliance Medical Research Group enrolled patients. This was a Phase III study sponsored by Cephalon, an "Open-Label Study to Evaluate the Effect of Treatment With Fentanyl Buccal Tablets on Pain Anxiety Symptoms When Used for the Management of Breakthrough Pain." Note also that Sterling Institutional Review Board appears to be another example of a for-profit, commercial institutional review board.

Here we have another example of remarkably bad implementation of commercially sponsored and commercially supervised clinical trials.

We have posted a number of times about sloppy and mismanagement of commercially sponsored clinical research, often under the auspices of for-profit contract research organizations (CROs) and for-profit institutional review boards (IRBs). See this 2006 vintage post on the infamous study 3014 on Ketek, sponsored by Sanofi Aventis.

In my humble opinion, in the contemporary business world, many managers are driven mainly by quarterly profits. However, what works best to boost profits in the short run may not be what works to produce valid clinical research that maximizes the safety of and respect afforded human research subjects. When all the organizations involved in the research, the sponsor, the organization implementing the research, and the organization supervising research ethics are for-profit, the incentives to cut corners are multiplied. Cutting corners can jeopardize the validity of the studies, and the safety and respectful treatment of study subjects.

I again submit that making human experimental research into a commercial enterprise, mainly serving the marketing of drugs and devices, may not produce good science, and may not be good for patients. It might be a better idea to leave human research to not-for-profit organizations and health care professionals.


Hat tip to PharmaGossip.

Does Pharma Want its Researchers to Believe They Are Next to God?

In "Drug Maker Told Studies Would Aid It, Papers Say" (New York Times, Mar. 19, 2009), the Times discusses the case of psychiatrist Dr. Joseph Biederman. Dr. Biederman outlined plans to test Johnson & Johnson’s drugs including risperidone/Risperidal in presentations to company executives and seemed to guarantee positive outcomes for his studies of the drug, raising questions about his research.

Biederman has become a key witness in a series of lawsuits filed by state attorneys general claiming that makers of antipsychotic drugs defrauded state Medicaid programs by improperly marketing their medicines. His work helped fuel a rapid rise in the use of these medicines in children. Biederman earned at least $1.6 million in consulting fees from drug makers from 2000 to 2007 but failed to report all but about $200,000 of this income to university officials.

However, if a passage about Dr. Biederman's testimony in court is correct, I believe pharma should consider whether it wants to use someone who believes they are next to God in any capacity whatsoever.

There are certain damning statements that, once made by a person, cast a deep shadow over a person's character. I believe this one, if true, may rise to that level:

In a contentious Feb. 26 deposition between Dr. Biederman and lawyers for the states, he was asked what rank he held at Harvard. “Full professor,” he answered.

“What’s after that?” asked a lawyer, Fletch Trammell.

“God,” Dr. Biederman responded.

“Did you say God?” Mr. Trammell asked.

“Yeah,” Dr. Biederman said.

One does not usually joke in deposition.

I've been Yale faculty, and would never, ever have made anything even approaching such a comment, least of all in a deposition about drug issues affecting kids.

Let alone the the palm-greasing he was afforded, could Dr. Biederman's apparently hyperinflated ego have clouded his judgment and scientific objectivity?

In drug R&D, that is inherently an extremely dangerous proposition.

Where children are concerned, catastrophic might be a more apt term.

-- SS

What Me Worry? - Academic Leaders Blissfully Unaware of the Commercial Purposes of their Research Center

A few weeks ago, the Boston Globe published an investigative report on differences in reimbursements insurers and managed care organizations provide to different hospitals and hospital systems. One major bullet point was that the Partners HealthCare system, whose flagship hospitals include the Massachusetts General Hospital and the Brigham and Womens Hospital, received higher reimbursement rates than other well-known hospital and health care systems. A second was by some measures of quality, the major Partners teaching hospitals did not do better than other Boston hospitals.

In the resulting debate in the blogsphere (for example, see these posts and accompanying comments, on the Running a Hospital blog, and on the Movin' Meat blog,) some argued perhaps Partners really did deserve the extra payment. After all, the Massachusetts General Hospital and the Brigham and Womens Hospital are two of the most prestigious hospitals in the US, and indeed, the world. It is not implausible that this prestige arose from some real quality advantages. Furthermore, as we and others have argued, the available measures of quality, including those proposed to govern so-called "pay for performance" (P4P) in health care, are deeply flawed. For example, because of the Massachusetts General Hospital's reputation, it may attract the most difficult and complex patients, and these patients' severity and complexity of illness may have caused the hospital to have high mortality rates, despite the best of care.

Thus, at the time, the extra reimbursement going to Partners hospitals did not seem an issue for Health Care Renewal. But this week another series of stories came out about "Man's Best Hospital," (as it was called in "Samuel Shem's" House of God).... And they suggested that the Partners system may have quality problems of another kind.

Revelations about a research center at the Massachusetts General Hospital, and the renowned psychiatrist who ran it resulted from discovery legal proceedings. Lawsuits against several drug companies claimed that children were injured by atypical anti-psychotic drugs produced by several companies. The plaintiffs asserted that Dr Joseph Biederman's research was "crucial to the widespread acceptance of pediatric uses of antipsychotic medicines," (per Gardiner Harris reporting in the New York Times). The Massachusetts General Hospital's web-site notes that Dr Biederman is "Chief of the Clinical and Research Programs in Pediatric Psychopharmacology and Adult ADHD at the Massachusetts General Hospital, and Professor of Psychiatry at the Harvard Medical School."

According to the NY Times article, Dr Biederman pressured Johnson & Johnson, the manufacturer of Risperdal (risperidone), an atypical antipsychotic drug, to finance a research center at Massachusetts General Hospital,

E-mail messages and internal documents from Johnson & Johnson made public in a court filing reveal that Dr. Biederman pushed the company to finance a research center at Massachusetts General Hospital, in Boston, with a goal to 'move forward the commercial goals of J.& J.'

Furthermore,

A series of documents described the goals behind establishing the Johnson & Johnson Center for the study of pediatric psychopathology, where Dr. Biederman serves as chief.

A 2002 annual report for the center said its research must satisfy three criteria: improve psychiatric care for children, have high standards and 'move forward the commercial goals of J.& J.,' court documents said.

A February 2002 e-mail message from Georges Gharabawi, a Johnson & Johnson executive, said Dr. Biederman approached the company 'multiple times to propose the creation' of the center. 'The rationale of this center,” the message stated, “is to generate and disseminate data supporting the use of risperidone in' children and adolescents.

Furthermore, David Armstrong, writing for the Wall Street Journal, noted

Internal J&J records that are part of the plaintiffs' filing indicate that Janssen (Johnson & Johnson subsidiary) paid, or was requested to make payments, of $500,000 to help start up the center in 2002, another $200,000 for operating funds in 2003 and an additional $250,000 for 2004 activities. Janssen declined to comment on those figures.

Dr. Biederman was receiving direct compensation from J&J during those years, according to records obtained by Sen. Charles Grassley, who has been investigating drug-company payments to the Harvard researcher at others at academic medical centers. In 2001, Dr. Biederman was paid $58,169 by J&J although he reported to Harvard that he was only paid $3,5000, according to Sen. Grassley. In all, Dr. Biederman received more than $1.6 million between 2000 and 2007 from drug companies while reporting to Harvard receiving only several hundred thousand, Sen. Grassley's documents show.

Also, per the WSJ,

The emails also suggest that the company's marketing staff were involved in creating the institute and that company officials helped to write and vet research work done by Dr. Biederman and his associates.

Officials from Massachusetts General Hospital denied that they knew what was really going on at the Center. Per an article in the Boston Globe,

Massachusetts General Hospital issued a statement yesterday saying that the center, the MGH-Johnson & Johnson Center for the Study of Pediatric Psychopathology, existed from 2002 to 2006 and gave many researchers 'the infrastructure necessary to complete projects related to the psychiatric care of children in an efficient, expeditious, and integrated manner.'

The hospital controlled the center's programs, it said, and, 'The grant agreements stated that the center was for scientific and educational purposes only and not for purposes of promoting, directly or indirectly, the products of Johnson & Johnson and its affiliates.'

The allegations in the Risperdal case 'have raised significant questions and concerns about the implementation of those agreements,' the statement said. 'The MGH takes these allegations very seriously and intends to investigate these issues thoroughly.'

Meanwhile, Harvard University denied any direct involvement. Per an article in Bloomberg News,

David Cameron, a spokesman for Boston-based Harvard Medical School, said Harvard isn’t involved with the J&J Center at Massachusetts General, a Harvard teaching hospital.

'Harvard Medical School does not ‘own’ any of its teaching hospitals,' Cameron said in an e-mail. 'While we are affiliated with them through academic appointments, all teaching hospitals are individually governed.'

A major theme of this blog has been how the leadership of ever larger and more dominant health care organization have forsaken their missions, and instead acted to threaten physicians' and other health professionals' core values. For example, a leader of academic medicine asserted that faculty were judged more for their ability to bring in money, to be "taxpayers," in his words, but not to teach, do research, or take care of patients. This occurred while health care organizations were increasingly run by people from the business world who had little experience in or knowledge of the care of patients, or of biomedical or clinical science.

The sorry tale of Dr Joseph Biederman now adds to the evidence that at even the most elite academic medical institutions commercial purposes may outweigh the academic or clinical mission. The remarkable feature of this story is that the leaders of the particular institutions involved seemed blissfully unaware of what was going on.

At best, the leaders of Massachusetts General Hospital did not seem to know what the purposes of their own so-called research units were. Although Harvard Medical School has long been identified with its prestigious teaching hospitals, and vica versa, now the Medical School says it was "not involved" in the hospitals' and its own faculty's research activities. It all has the smell of "plausible deniability." Maybe the leadership of ostensibly academic institutions no longer want to know too much about their institutions' academic activities, presumably as long as those activities brought in enough money to be good "taxpayers."

But if academic leaders claim to know nothing about and have no involvement in their organizations' academic activities, what sort of leaders are they, and what really are their missions?

Meanwhile, all too many medical academics cloak themselves in the mantles of their academic respectability while helping to hawk drugs and devices, while claiming to be perfectly uninfluenced by the tens or hundreds of thousands or more dollars they are making on the side, and uninfluenced by how the huge grants their sponsors hand to their institutions promote their careers, making their academic cloaks all the more showy.

For additional comment on this case, see this post in the Clinical Psychology and Psychiatry Blog, this one on the Alison Bass blog, and this one on the University Diaries blog.

ADDENDUM (1 December, 2008) - Also see this post on the Carlat Psychiatry Blog.