Who Benefits? - Rising Generic Drug Prices and the Case of Mylan's Conflicted Property Purchases

boards of directors conflicts of interest executive compensation mission-hostile management Mylan perverse incentives

Who Benefits? - Rising Generic Drug Prices and the Case of Mylan's Conflicted Property Purchases

Unknown 7/09/2015 Komentar

Rising Generic Drug Prices

Health care costs in the US continue their seemingly inexorable rise.  Even the parts of health care that used to seem reasonably priced now are affected.  As Ed Silverman discussed on PharmaLot

prices for many generic drugs have been climbing, prompting concerns that a low-cost staple of the U.S. health care system might soon strain budgets.

Generic drugs, like practically every other part of US health care, have become big business.  As a Forbes article pointed out, the industry is becoming more consolidated, and more likely to suffer from manufacturing and regulatory issues.  However, there may be other reasons for increasing generic drug costs.

Case: Mylan Purchased Properties Developed by its Own Board Vice Chair

A recent Wall Street Journal scoop on the big generic pharmaceutical company Mylan suggested that maybe such companies are now suffering from the same leadership and governance ills we have been finding throughout US - and indeed global - health care.  Furthermore, to understand the impacts of such health care dysfunction, one must consider the incentives that underlie them, that is, who benefits?

The story concentrated on some dodgy deals involving the company and firms linked to the Vice Chairman of its board of directors.  The first part of the story was:

Generic-drug maker Mylan NV moved into new headquarters in December 2013 after buying vacant land in an office park near Pittsburgh and erecting a five-story building for about 700 employees.

The company hasn’t publicly disclosed that the office park’s main developer is Rodney Piatt, Mylan’s vice chairman, lead independent director and compensation-committee chief. The new headquarters was a big boost for the mixed-use real-estate development, called Southpointe II, where all the land has been sold and some of the last buildings are now rising.

Securities regulators require public companies to tell shareholders about any significant transactions with directors, executives or other 'related persons.' Members of boardroom compensation committees have special duties under securities and tax laws to avoid dealings that compromise their independence.

Mylan, now fighting a three-way takeover battle in the pharmaceutical industry, says there was no need to disclose Mr. Piatt’s connection to the $60 million real-estate project because he and the company avoided any direct dealings with each other.

The day before Mylan announced plans to build the new headquarters, a company managed and partly owned by Mr. Piatt sold a 7-acre site for $1 to an entity owned by a business partner in Southpointe II, according to property records reviewed by The Wall Street Journal. The partner’s firm sold the same land to Mylan for $2.9 million later the same day.

Also,

Real-estate records show a similar transaction in May. Mylan paid $9.2 million to buy an adjacent 11 acres from Mr. Miller, whose firm previously bought the land for $10 from a company partly owned by Mr. Piatt.

'Mr. Piatt was not a party to either transaction' involving Mylan and 'had no direct or indirect material interest in the transactions,' says a Mylan spokeswoman.

She adds that Mr. Piatt didn’t make a profit on either sale to Mylan because Mr. Miller separately arranged to buy out Mr. Piatt at cost and then sold the land directly to Mylan. Mr. Piatt didn’t return calls seeking comment.

Note however that

Securities rules require disclosure of any transaction of more than $120,000 where a related person will have a direct or indirect material interest, regardless of whether the person makes a profit.

In the case of compensation-committee members, related-party transactions can jeopardize the independence required of them under tax and securities rules. That can threaten the tax-favored status of some executive-pay programs and require executives to disgorge some of their gains on stock sales.

Some securities-law and corporate-governance experts say Mylan should have been more transparent about the real-estate transactions or handled them differently.

'The optics are terrible,' says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware and a director at HealthSouth Corp. and Bob Evans Farms Inc. 'Pittsburgh is a big town with no shortage of real estate. Either they could have gone somewhere else, or [Mr. Piatt] could have relinquished the directorship and eliminated the conflict.'

Just to emphasize the questions about Mr Piatt's independence,

The new headquarters is named the Robert J. Coury Global Center, after Mylan’s executive chairman. Mr. Coury, 54, was chief executive from 2002 to 2012.

A few months after the project’s approval by local officials, Mr. Piatt signed a pension amendment that increased the value of Mr. Coury’s promised benefits by 40%. His overall pension of $48.8 million is 11th-largest among executives at U.S. publicly traded companies, according to Standard & Poor’s ExecuComp.

Further muddying the waters,

During construction, Mylan hired project-management firm RIZ Consulting & Management Inc. to oversee the general contractor and architect. RIZ has the same business address and phone number as Mr. Piatt’s real-estate company, and he is listed as the contact person for RIZ in the local chamber of commerce’s membership directory.

RIZ’s president also is a top executive at Mr. Piatt’s company, and some employees of Mr. Piatt’s company worked for RIZ on the project, according to state records, construction documents and the minutes of permit meetings. RIZ’s president didn’t return calls seeking comment.

'They set it up that way because [Mr. Piatt] sits on the board of Mylan,' says Jeff Yates, a project manager with PJ Dick Inc., the general contractor for the Mylan headquarters project. 'It was kind of a conflict of interest, [so] RIZ was a separate company set up to be the owner’s rep.'

We often discuss how health care is tangled in a vast web of conflicts of interest.  The kinds of apparent conflicts of interest in play in this case are somewhat different from those we frequently discuss, but still seem part of this web.

In the last few days, other Pittsburgh newspapers have jumped into the fray, and found their own experts to question these deals.  Per the Post-Gazette,

'It doesn’t pass the smell test'” said Mel Fugate, a management professor at Southern Methodist University.  Mr. Fugate said that while the SEC places legal requirements on which transactions must be disclosed, the legal obligations are 'the lowest hurdle of them all.'

'This smells bad … even if they can prove legally there are no conflicts' he said.

Again, as noted above the law in certain instances may define conflicts of interest more narrowly than ethical definitions.  For example, the Institute of Medicine defined conflicts of interest in medicine: occurring "when an individual or institution has a secondary interest that creates a risk of undue influence on decisions or actions affecting a primary interest."

The Tribune weighed in,

'The whole thing stinks,' said Douglas Branson, a University of Pittsburgh law professor and an expert in corporate governance. 

Board members'have to serve the best interest of the corporation,' he said. 'You can't be both a seller and buyer — that's the classic definition of conflict of interest.

So here we see serious allegations of conflicts of interest affecting the Vice Chair of the Mylan board, and perhaps affecting another board member and former CEO.  These conflicts suggest that company operations could have been manipulated for these individuals' benefits.

Other Questions about Mylan's Leadership and Governance

Yet these are not the only examples of questions about Mylans' leadership and governance, questions which suggest that managers and board members may have been putting personal gain ahead of the larger interests of the corporation, its shareholders, and the patients who take its drugs


A Pittsburgh Business Journal article noted the "allegations of impropriety" raised by the current case, but also hinted at larger problems with the leadership and governance of Mylan.


Current CEO's Invalid MBA

Per the Pittsburgh Business Journal

Mylan (Nasdaq: MYL) has had ethics questions in the past. An MBA awarded to CEO Heather Bresch was withdrawn in 2008 following an investigation that found she didn’t complete the necessary course credits.

However, that finding did not apparently affect her ongoing career trajectory at Mylan

Former CEO's Use of Company Jet to Help Son's Rock Music Career

The Pittsburgh Business Journal also stated,

And in 2012, the Wall Street Journal found that [former CEO] Coury transported his son to rock concerts on the corporate jet, which was allowed as part of his employee benefits package.

That WSJ article emphasized,

 Nina Devlin, a spokeswoman for Pittsburgh-based Mylan, said Mr. Coury's employment contracts have allowed outside personal activities, 'including those related to his son Tino's career.' She said Mr. Coury isn't required to use the corporate jets but his employment contracts for the past decade have allowed personal use by him and his family.

Thus these contracts apparently allowed valuable Mylan resources to be expended in support of the former CEO's son's career, even though Tino did not apparently have any direct role in the company. Note that these revelations also apparently did not affect Mr Coury's career trajectory with the company, nor did those below.

Transactions Between Former CEO's Brothers and Mylan

That same WSJ article also found,

 This wasn't the only business relationship between the elder Mr. Coury and his brothers. Coury Investment Advisors, a company in which two of his brothers, Gregg and Paul, are principals, has served as a broker for Mylan's employee-benefit plans. Various insurers paid them $597,000 in the past three years for Mylan-related business, according to U.S. Labor Department filings.

That appeared to be another conflict of interest, benefiting different members of the former CEO's family.

However, that is still not the whole story.  A quick look through our magic files, and Google, revealed some other pieces.

Mylan Settled Allegations of Inflated Pricing

In 2010, we briefly posted about a settlement by Mylan of charges it falsely inflated prices for several drugs.
As is usual in such settlements, none of the people who authorized, directed or implemented the actions leading to this settlement apparently suffered any negative consequences, including the top managers on whose watch they occurred. 

Mylan Fired Executive Allegedly for Filing Whistleblower Lawsuit Against Another Company

In June, 2014, the Pittsburgh Tribune reported,

 When Mylan Inc. learned that its vice president of marketing had filed a whistleblower lawsuit against his previous employer, it fired him, the man alleged in a federal lawsuit filed Tuesday.

Note that the lawsuit was against Cephalon, not Mylan.  Rocking the boat, or blowing the whistle apparently are not rewarded at Mylan.

Current CEO Named US Patriot of the Year, then Moved Mylan to Netherlands

In 2014, some wondered how Heather Bresch, still the Mylan CEO, could have claimed to be ultra-patriotic while she was planning to move her company out of the US.  In 2011, Esquire listed Ms Bresch in an article on "Americans of the Year: Patriots." They were apparently particularly impressed that she had called for more inspections on foreign drug companies whose products are imported into the US. However, in 2014, per Ron Fournier in the National Journal.

This story is about a gilded class of people and corporations enriched by the new American economy while the rest of its citizens pay the tab. The protagonists could be any number of institutional elites, but this column happens to be about a Democratic senator from West Virginia, Joe Manchin, and his daughter, Heather Bresch, the chief executive of Mylan, a giant maker of generic drugs based outside Pittsburgh.

Her company's profits come largely from Medicaid and Medicare, which means her nest is feathered by U.S. taxpayers. On Monday, Bresch announced that Mylan will renounce its United States citizenship and instead become incorporated in the Netherlands – leaving this country, in part, to pay less in taxes.

This is the sort of story that makes blood boil in populists – voters from the Elizabeth Warren wing of the Democratic Party to libertarians who follow Rand Paul and including tea party conservatives. These disillusioned souls, growing in numbers, hate hypocrites who condemn the U.S. political system while gaming it.

Later, Ms Bresch's father, Senator Manchin, said what his daughter did should be illegal, again per another Ron Fournier article in the National Journal, whose title says it all:

Senator Manchin: What My Daugher Did Should be Illegal

Nonetheless, late in 2014, Bloomberg reported that not only would Mylan go ahead with the inversion, but it would pay the excess taxes personally incurred by its own executives due the transaction.  Such taxes were meant as a negative incentive to discourage such maneuvers.  Even so, top managers seemed to be able to pay themselves to avoid the effect of these incentives, and of course any resulting personal financial losses.


Summary

 The latest story about Mylan seemed to show a leading board member financially benefiting from transactions between the company over which he was supposed to exercise stewardship and his own company.  Other stories showed Mylan executives seeming to gain outsized benefits for themselves or their family members from Mylan beyond conventional salaries and corporate benefits packages. Of course, since Mylan is not just any company, but a very large generic drug company, putting top hired managers and boards of directors first may mean putting patients second.  The cost of these managers' and boards' interests may be at the expense of patients, and the public at large.

Thus perverse incentives enable mission-hostile management and ultimately health care dysfunction.

So once again, when considering how US, and global health care has become so dysfunctional, it makes sense to think about who is benefiting from the current dysfunction.  It very often is organizational insiders, particularly top hired managers, and sometimes those who are supposed to keep an eye on them. 

 Thus, like hired managers in the larger economy, health care managers have become "value extractors."  The opportunity to extract value has become a major driver of managerial decision making.  And this decision making is probably the major reason our health care system is so expensive and inaccessible, and why it provides such mediocre care for so much money. 

One wonders how long the people who actually do the work in health care will suffer the value extraction to continue?
As we have said far too many times - without much impact so far, unfortunately - true health care reform would put in place leadership that understands the health care context, upholds health care professionals' values, and puts patients' and the public's health ahead of extraneous, particularly short-term financial concerns. We need health care governance that holds health care leaders accountable, and ensures their transparency, integrity and honesty.

But this sort of reform would challenge the interests of managers who are getting very rich off the current system.

As Robert Monks said in a 2014 interview,

People with power are very reluctant to give it up. While all of us recognize the problem, those with the power to change it like things the way they are.

So I am afraid the US may end up going far down this final common pathway before enough people manifest enough strength to make real changes.

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Bill Clinton, Paid to Speak to Biotech Conference, Extolled $1000 Pill to Prevent "Liver Rot," Despite Lack of Evidence that It Does

Clinton Foundation evidence-based medicine Gilead hepatitis C Sovaldi

Bill Clinton, Paid to Speak to Biotech Conference, Extolled $1000 Pill to Prevent "Liver Rot," Despite Lack of Evidence that It Does

Unknown 7/02/2015 Komentar

What were they thinking?

Former President Clinton Talkes to Pharma and Biotech Executives

In mid June, 2015, the Philadelphia Inquirer reported that former US President

Clinton was the keynote speaker at Klick Ideas Exchange, sponsored by Klick Health, a Toronto-based digital marketing agency, along with Veeva Systems and the Biotechnology Industry Organization. BIO, the Washington-based trade association, is holding its annual convention at the Pennsylvania Convention Center this week, attracting 15,000 people.

For his troubles he was apparently paid, however

his foundation did not respond to a request for information about Monday's speaking fee. Hillary Clinton's campaign also did not respond to a similar request. A spokeswoman for Klick Health declined to provide Clinton's fee.

It is likely he was well paid, since his going rate is very high:

disclosure forms indicated Bill Clinton received between $225,000 and $275,000 for each of eight speaches delivered between March 31 and May 14 of this year.

Clinton Endorses the Miraculous $1000 Pill

So what would a former president say to a bunch of pharmaceutical and biotechnology executives and their friends?  He chose to talk about the prices of new drugs:

Former president Bill Clinton said Monday in Philadelphia that high prices for some medicines are hard to justify, and the biotech and pharmaceutical industries should try full explanation and disclosure to make their case.

'Explain, explain, explain and disclose, disclose, disclose,' Clinton said in a speech and question-and-answer session before about 200 biotech and health-care executives at the National Museum of American Jewish History. 'Don't expect everybody to love you, but at least they will hear your side of the story.'

Who could quarrel with more explanations and disclosures?  President Clinton did not stop there, and went on to opine about prices versus drugs' purported value to patients, with a focus on new drugs for hepatitis C.

Clinton pointed to new hepatitis C drugs, Sovaldi and Harvoni, which are sold by Gilead Sciences for more than $80,000 for a 12-week program of treatment. Those medications often cure a disease that can cause liver disease and eventually lead to transplants or death, which are expensive, too. But the sticker price on the drug has caused a backlash by payers and patients.

'Who wants to let somebody's liver rot? Nobody,' Clinton said. 'Who's got $80,000 to spend? Not many. And if you're a small businessperson and you're in a small pool [of employer-based insurers], are you going to fire somebody who needs that treatment? These are all practical problems, and we can solve them.'

So the implications are clearly
-  President Clinton thinks it is reasonable to charge $80,000 for a course of treatment with Sovaldi, but society needs to figure out who will pay
-  Apparently he thinks it is reasonable because without treatment, patients with hepatitis C will get "liver rot," but the drugs will prevent that.

The Evidence Fails to Support the President

President Clinton's preparation for this talk apparently did not include speaking with someone who had critically reviewed the best evidence from clinical studies about hepatitis C, and the effects of new drugs on it, particularly, the effects of sofosbuvir (Sovaldi.)  Neither did President Clinton read Health Care Renewal.

If he did, he would have found out starting in March, 2014, we have posted about the lack of good evidence from clinical research suggesting these drugs are in fact so wondrous.  The drugs are now touted as "cures," at least by the drug companies, (look here), and physicians are urged to do widespread screening to find patients with asymptomatic hepatitis C so they can benefit from early, albeit expensive treatment.

However, as we pointed out (e.g., here and here)
-  The best evidence available suggests that most patients with hepatitis C will not go on to have severe complications of the disease (cirrhosis, liver failure, liver cancer), and hence could not benefit much from treatment.
-  There is no evidence from randomized controlled trials that treatment prevents most of these severe complications
-  There is no clear evidence that "sustained virologic response," (SVR), the surrogate outcome measure promoted by the pharmaceutical industry, means cure. 
-  While the new drugs are advertised as having fewer adverse effects than older drugs, it is not clear that their benefits, whatever they may be, outweigh their harms.

Furthermore, health care professionals and researchers with heftier credentials in clinical epidemiology and evidence based medicine than mine have since published similar concerns.  These included
- a report from the German Institute for Quality and Efficiency in Health Care (the English summary is here)
- an article in JAMA from the Institute for Clinical and Economic Review (1)
- a report from the Center for Evidence-Based Policy (link here)
- an article in Prescrire International (2)

These publications and your humble scribe noted that the clinical trials or other types of clinical research about new hepatitis C treatment published in the most prominent journals had numerous methodologic problems that all seemed likely to make the new drugs look better, perhaps intentionally.  (See posts here,  here, and here.)

But because, as we noted here, concerns about the lack of evidence in support of Sovaldi and its new competitors have been anechoic, it might not have been so easy for President Clinton to quickly determine if hepatits C usually causes "liver rot," and whether Sovaldi almost always prevents "liver rot," and hence might just be worth $1000 a pill.

Hype Wins, Logic and Reason Lose

Unfortunately, the problem is not merely that the BIO folks hired a celebrity to tell them what they wanted to hear.  President Clinton has a lot more gravitas than a Hollywood star, even given his famous equivocation about the meaning of the word "is."

More unfortunately in this context, President Clinton is also the husband of the current front running Democratic candidate for President.  Should former Senator and Secretary of State Hilary Clinton win the election, would her health policy choices be influenced by the (probably erroneous) belief that the current extremely high prices of medical treatments, particularly new drugs, are reasonable because of their magical curative properties?  Furthermore, President Clinton is also the Founder and presumed current leader of the the Bill, Hilary and Chelsea Clinton Foundation whose goals include working "to improve global health and wellness,..."  Is this work based also based on the assumption that the astronomical prices of new drugs are justified by their miraculous powers?

Thus President Clinton's apparent endorsement of the wonderful powers of Sovaldi, despite the lack of good evidence underlying them, may carry a lot of weight.  

Conclusion

How distorted is health care these days.  Misinformation, even disinformation seems to dominate evidence and logic.  Concerns about health care dysfunction are suppressed by the anechoic effect.  Perhaps inspired by the generic managers who now run health care organizations, everyone seems to have become a health care expert, and so the reach of viewpoints on health care seems to be more about the celebrity of their proponents rather than their knowledge, or the logic and evidence underlying their views.

As a start, true health care reform has to somehow liberate good clinical evidence from where it has been hidden, and encourage logical discourse over marketing, public relations, hype, propaganda, and disinformation.

If only someone who knows something about health care, logic and evidence could get their views heard by ex Presidents and others who dominate our 24/7 conversation. 

ADDENDUM (2 July, 2015) - This post was republished on the Naked Capitalism blog

See also comments by Micky on the 1BoringOldMan blog.

References
1. Ollendorf DA, Tice JA et al. The comparative clinical effectiveness and value of simeprevir and sofosbuvir in chronic hepatitis C viral infection. JAMA Intern Med 2014. Link here.
2. Sofosbuvir (Sovaldi), active against hepatitis C virus, but evaluation is incomplete. Prescrire Int 2015; 24: 5- 10. Link here.

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How Institutional Conflicts of Interest Exacerbate the Anechoic Effect - the Example of ASCO Fearing "Biting the Hand that Feeds You"

American Society of Clinical Oncology anechoic effect conflicts of interest health care prices institutional conflicts of interest medical societies You heard it here first

How Institutional Conflicts of Interest Exacerbate the Anechoic Effect - the Example of ASCO Fearing "Biting the Hand that Feeds You"

Unknown 6/27/2015 Komentar

As we recently discussed (here, here, here and here), in May, 2015, the New England Journal of Medicine, arguably the world's foremost medical journal, published an editorial and a three-part commentary arguing that current concerns about the effects of financial conflicts of interest (COI) on health care are overblown(1-4).  On June 1, the Wall Street Journal published a report on the 2015 meeting of the American Society of Clinical Oncology (ASCO) that provided a vivid example of why these concerns should not be dismissed.

Questioning Drug Prices at the ASCO Meeting

The main issue in the article was:

In a sign of growing frustration with rising drug prices, a prominent cancer specialist on Sunday sharply criticized the costs of new cancer treatments in a high-profile speech at one of the largest annual medical meetings in the U.S.

'These drugs cost too much,' Leonard Saltz, chief of gastrointestinal oncology at Memorial Sloan Kettering Cancer Center, said in a speech heard by thousands of doctors here for the annual meeting of the American Society of Clinical Oncology.

The notion that health care prices are high and are rising continuously in the US should hardly be novel for regular Health Care Renewal readers.  We have been writing about it for a while, starting in 2005.

We first posted about high drug prices in July, 2005, with the example of BilDil.  This was a brand-name combination drug that included two compounds that were already cheaply available in generic form, advertised as a uniquely convenient therapy for congestive heart failure.  We were aghast that the price of the combination drug might be $5.40 - $10.80 a day (in 2005 dollars), over three times the cost of the two drugs in generic form.

But only a few days later we noted that three cancer costs had yearly costs in the five figures, and one, Erbitux, cost as much as $100,000.  Most amazingly we noted that Thalidomid was priced at $25,000  a year.  Yet it was just the infamous thalidomide, the drug initially marketed as a tranquilizer that caused severe birth defects after it was initially sold in Europe.  The drug was still available in generic form in South America for about seven cents a pill.

Since then, the ridiculously high prices of many tests and treatments, but most notably new drugs and devices, has been so widely covered our discussion has been limited to special cases.   For example, consider just a few headlines from April to May, 2015.

How Much Would You Pay for an Old Drug? If You Have MS, a Fortune (Bloomberg)

Pharmaceutical Companies Buy Rivals' Drugs, Then Jack Up the Prices (WSJ)

How Marketing Exclusivity Led to Higher Drug Costs and Questionable Benefits (WSJ)

Runaway Drug Prices (NY Times)


Drug Prices as a Taboo Topic

However, despite this wide attention to the problem, the speech at ASCO was notable.  Back to the WSJ...

Dr. Saltz’s speech was unusual because it was made at the meeting’s plenary session, where the field’s most significant scientific research is presented and which all meeting participants are expected to attend. An estimated 25,000 doctors and scientists attended this year’s meeting.

One would think that the high price of drugs, especially cancer drugs, would be a fit subject for discussion at a plenary session of ASCO, however,

It is unprecedented for plenary speeches, which typically address scientific and medical issues, to substantially take on the topic of drug costs, said Alan Venook, a professor of medicine at the University of California San Francisco who planned the meeting’s scientific session and invited Dr. Saltz to speak.

The prominent venue for the speech was also unusual because, like many medical meetings, ASCO is sponsored by pharmaceutical companies and often focuses on highlighting advancements in drug development, said Dr. Venook. He said discussing drug prices there is 'uncomfortable' because it could be seen as 'biting the hand that feeds you.'

Doctors are also reluctant to antagonize the drug industry because they need pharmaceutical firms to invest in developing new medicines for patients, he said.

'It’s a tough balancing act for ASCO where the meeting is largely funded by pharma,' Dr. Venook said in an interview. 'You can’t have a [plenary] talk trashing pharma, but you can have a talk by a respected person questioning it.'

So because pharma gives ASCO a lot of money, at best, only the most distinguished ASCO members can gently question pharma, but cannot criticize, much less "trash" the source of their mammon.


This is thus a succinct example of why financial conflicts of interest in medicine and health care can be bad.  The incredibly high prices of cancer drugs should be a fit topic for discussion at a meeting run by a society of medical oncologists.  But those in charge of the meeting and the society are afraid to initiate such a discussion, and even more afraid of appearing to criticize the companies that charge these prices, because the society has become dependent on money from these very same companies.  So this is further an example of how conflicts of interest can create the anechoic effect - the notion that certain topics in medicine and health care are taboo, because discussing them might trouble the powers that be, and particularly the moneyed interests that now dominate medicine and health care. 

In a succinct response to the NEJM series (1-4) soft pedaling concerns about conflicts of interest, the British Medical Journal ran a commentary by a former NEJM national correspondent, and two former NEJM editors.(5)  It stated,

The NEJM has now sought to reinterpret and downplay the importance of conflicts of interest in medicine by publishing articles that show little understanding of the meaning of the term. The concern is not whether physicians and researchers who receive industry money have been bought by the drug companies, as Drazen writes, or whether members of guideline panels or advisory committees to the US Food and Drug Administration with ties to industry make recommendations that are motivated by a desire for financial gain, as Rosenbaum writes. The essential issue is that it is impossible for editors and readers to know one way or the other.

In this case, we seem not to be talking about the possibility that health care professionals "have been bought by the drug companies,"  but how drug companies essentially "buying" a professional organization has apparently heretofore prevented medical professionals from discussing a vital issue that could have major effects on patients.

Following the Money

In case there is any question about the money involved and its sources, one only needs to go to some publicly available in formation supplied by ASCO (mostly because of reporting requirements imposed on all US non-profit organizations of a certain size).  

The latest (2014) annual report from ASCO reveals that the organization only gets 16.1% of its revenue from member dues.  Thus a ostensible membership organization gets only about a sixth of its funding from members' dues.

Yet the organization has become quite wealthy.  Its most recent (2013) US Internal Revenue Service 990 Form reveals that it owns over $55 million in real estate, and has over $104 million in investments (presumably as an endowment.)  The organizations' leaders are also doing very well. Its CEO, Allen Lichter MD, got $804,775 in total compensation in 2012.  Eleven other managers, of which three are health care professionals (one MD, one RN, one PharmD), got at least $220,000 in total compensation.  Five of them got more than $300,000. 

The source of all that money seems mainly to be pharmaceutical and other health care corporations that sell goods and services for cancer care.  US non-profit organizations are not forced by law to reveal the details of their financial support.  However, the ASCO annual report does list 23 pharmaceutical and biotechnology companies, and one for-profit cancer hospital chain as contributing at least $1 million each in total to the non-profit over time.  The report lists 37 pharmaceutical, biotechnology, and medical device companies as current corporate donors, and also 10 other for-profit health care related corporations as current corporate donors.

In addition to these apparently marked institutional conflicts of interest, ASCO leaders may have their own individual conflicts of interest.  I do not have the resources to search all relationships affecting meeting organizers and ASCO officers and trustees, and the organization does not post conflicts of interest affecting its leadership and governance in a prominent place. However, Dr Alan Venook, who confessed to his discomfort about inviting a talk that might be perceived as biting the hand that feeds the finances of ASCO, is or has been on advisory boards for Thershold Pharmaceuticals,  Mirna Therapeutics, and GlobeImmune.  For a 2014 presentation, he gave the following disclosures: "Research support from Genentech/Roche, BMS, Lilly, Novartis; H. Lenz: Consulting, advisory boards and research support from Genentech/Roche, BMS and Merck."  Furthermore, the current chair of the ASCO Board of Directors, Julie M Vose, MD, is also on the Medical Advisory Board of EmergingMed Inc, and the Clinical Advisory Board of Bullet Biotechnology.

Summary

The New England Journal of Medicine recently launched a counter-attack against the "pharmascolds" who are allegedly slowing the pace of medical progress by their excessive and puritanical concerns about financial conflicts of interest.  Yet the arguments that COIs could be bad for health care are logical, and based on at least some reasonably good evidence.  (See the article by Steinbrook et al in the BMJ mentioned above[4], the accompanying BMJ editorial[5] just to start and then the 2009 Institute of Medicine report.)

Moreover, we have encountered a lot of vivid cases suggesting that conflicts of interest can have adverse influences on health care.  In this most recent one, we see at least one prominent if conflicted organizational insider admitting that institutional, and perhaps individual conflicts of interest have made discussion of at least one big health care and health care policy topic taboo.  This seems to corroborate our previous discussion that the anechoic effect - that certain topics in health care are taboo - may be generated by conflicts of interest of the people who ought to discuss them, or of those to whom those people may have to answer.

True health care reform requires full disclosure of conflicts of interest for honesty's sake, and marked reduction of conflicts affecting those who make health care decisions on behalf of individual patients, and health care policy decisions that affect patients' and the public's health.  If we allow conflicts of interest to continue, we will have difficulty even discussing the most severe problems affecting health care, because those generating the topics are benefiting from the circumstances that enable such problems.

ADDENDUM (1 July, 2015) - This post was republished on 28 June, 2015, on the Naked Capitalism blog. 

ADDENDUM (20 July, 2015 ) - This post was republished on July 12, 2015 in OpenHealth News.

References

  1.Drazen JM.  Revisiting the commercial-academic interface.  N Eng J Med 2015; ; 372:1853-1854. Link here.
2. Rosenbaum L.  Reconnecting the dots - reinterpreting industry-physician relations.  N Eng J Med 2015; 372:1860-1864.  Link here.
3. Rosenbaum L. Understanding bias - the case for careful study.  N Engl J Med 2015;  372:1959-1963.  Link here.
4.  Rosenbaum L.  Beyond moral outrage - weighing the trade-offs of COI regulation. N Engl J Med 2015; 372: 2064-2068.  Link here.
5. Steinbrook R, Kassirer JP, Angell M.  Justifying conflicts of interest in medical journals: a very bad idea.  Brit Med J 2015; 350: h2942.  Link here. 
6. Loder E. Revisiting the commercial-academic interface in medical journals.  Brit Med J 2015; 350: h2957.  Link here.

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Childish, petty and vindictive: UPMC hospitals ban sale of Post-Gazette from their gift shops

anechoic effect free speech Pittsburgh Post-Gazette University of Pittsburgh Medical Center UPMC

Childish, petty and vindictive: UPMC hospitals ban sale of Post-Gazette from their gift shops

Unknown 6/25/2015 Komentar

Here's a new angle on how a healthcare organization might react to unfavorable press:

Ban the sale of the newspaper in question from their territory:

UPMC hospitals ban sale of Post-Gazette from their gift shops
June 24, 2015 12:00 AM

http://www.post-gazette.com/business/pittsburgh-company-news/2015/06/24/UPMC-hospitals-ban-sale-of-Post-Gazette-from-their-gift-shops/stories/201506240066

By Steve Twedt / Pittsburgh Post-Gazette

Some UPMC hospitals are banning the Post-Gazette from sale in their gift shops, a move UPMC spokesman Paul Wood said was precipitated by “fairness issues” in the newspaper’s coverage of the health system.

At least three UPMC hospitals -- UPMC Shadyside, UPMC Mercy and Children’s Hospital of Pittsburgh of UPMC -- say they will no longer sell the newspaper.

This seems simply retaliatory and in fact silly, as (at least hopefully) the newspaper will remain on sale in the rest of the city, as well as available online.  That is, assuming UPMC does not go on a vendetta against the newspaper, in its own in-house PR campaigns and mailings, in other media, or in the courts.

Twice in recent years, UPMC executives have canceled the health giant’s advertising in the PG, citing dissatisfaction with the way UPMC was covered in the news pages and how it was portrayed in editorials and editorial cartoons.

One wonders if UPMC has specifically identified false and inaccurate reporting.  Editorial cartoons are also standard fare for newspapers, and if they are not liked, the answer is written response, not banning IMO.

''The Post-Gazette is edited without regard to any special interest, and our news columns are not for sale, at any price,'' said John Robinson Block, publisher of the newspaper. ''We have been here since 1786, and have as our purpose the same goal that UPMC was established for -- to serve the public's interest, not a narrow purpose.''

As pointed out many times at Healthcare Renewal, the purpose of healthcare systems may not entirely be for serving the public's interests anymore.  Rather, they are serving the private interests of a small executive group who reward themselves handsomely for all being such uniformly superb, excellent and deserving managers.

As Roy Poses wrote at http://hcrenewal.blogspot.com/2015/02/outsize-compensation-for-teflon-coated.html, and elsewhere:

... As we have said before, in US health care, the top managers/ administrators/ bureaucrats/ executives - whatever they should be called - continue to prosper ever more mightily as the people who actually take care of patients seem to work harder and harder for less and less. This is the health care version of the rising income inequality that the US public is starting to notice.

Thus, like hired managers in the larger economy, non-profit hospital managers have become "value extractors."  The opportunity to extract value has become a major driver of managerial decision making.  And this decision making is probably the major reason our health care system is so expensive and inaccessible, and why it provides such mediocre care for so much money. 

Back to the newspaper:

... UPMC officials did not respond Tuesday to questions asking which specific stories they found objectionable.

Perhaps anything that does not read like PR from a large advertising firm painting the organization in the finest light, and editorial cartoons showing executive halos....

''We believe that our coverage of UPMC has been fair-minded in every respect,'' said David M. Shribman, the newspaper's executive editor. ''Every entity in every town feels aggrieved at some point by what a good newspaper writes. It's part of living in a free society where the exchange of news and information is prized, not punished.''

It's sad when newspapers have to state the obvious.

But health system officials have often criticized stories, editorials, and editorial cartoons published in the Post-Gazette in recent years, most frequently in its coverage of the ongoing contract battle with insurer Highmark and, in years past, about the health giant's real-estate holdings and its business practices.

The answer to free speech is more free speech.  Colleges and universities are painfully learning this lesson (e.g., see the website of the Foundation for Individual Rights in Eduction, FIRE, at https://www.thefire.org/).

I actually think a ban on selling the newspaper at UPMC facilities is childish.  UPMC executives seem a bunch of petty, vindictive crybabies for banning sale of the paper from their shops.

-- SS

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The US' Multinational Trade Negotiations - Trading Away Its Own and Other Countries' Current and Future Restraints on Drug Prices?

CMS health care prices Medicare pharmaceuticals regulatory capture revolving doors trade policy US Trade Representative

The US' Multinational Trade Negotiations - Trading Away Its Own and Other Countries' Current and Future Restraints on Drug Prices?

Unknown 6/18/2015 Komentar

Trade Agreements More about Deregulation than Trade

International trade negotiations, especially their more technical aspects, seem far removed from health care and health policy, and unrelated to health care dysfunction.  However, it seems that such trade negotiations have become a back door route to affect health policy, especially national efforts to regulate health care intended to improve patients' and the public's health.  

We recently discussed how current multinational trade negotiations seem to be more about changing regulation in favor of big corporations than broadly advancing trade.  Some of the effects of the proposed trade pacts could have bad effects on patients' and the public's health, particularly by allowing corporations to challenge particular countries' public health policies outside of these countries' judicial systems, in kangarooish courts seemingly designed to favor corporate interests.  Also, the trade pacts' focus on intellectual property could lead to longer patent protection on drugs, biologics, and devices, raising health care costs.  However, attempts to figure out how proposed trade agreements could affect health care and public health were hindered by the secrecy surrounding the negotiations.

"Procedural Fairness" for Pharmaceutical Companies, not You and Me

Earlier in June, 2015, a part of the current draft of the Trans-Pacific Partnership (TPP) appeared on  Wikileaks, revealing yet another set of concerns about how the agreement could affect health care.  It was entitled "Annex on Transparency and Procedural Fairness for Pharmaceutical Products and Medical Devices," and hence was specifically about health care.

The bulk of the annex seemed to be about improving the treatment of drug, device and biotechnology companies by national agencies that make decisions about payments for their products. The annex apparently proposed establishing the companies' rights to rapid reviews, access to applicable procedures and guidelines, access to written decisions, company appeals of the agencies' decisions, and protection of corporate confidential information. On the other hand, there was nothing I could see in the annex about the rights of, say, patients or health care professionals.

We have noted the concern that international trade agreements may make government regulation subject to corporate appeal in "investor-state dispute settlement" (ISDS) processes, essentially international quasi-courts that are not subject to national judicial systems, may not provide for any input by parties other than governments and corporations (that is, by, for example citizens, patients or health professionals), and may not allow appeal.  Thus, by specifically incorporating new protections for corporations seeking favorable payments for their new products from national agencies, the annex could make it possible for the corporations to appeal to ISDS, going around national court systems.  As reported in the Huffington Post,

According to an analysis of the leaked document by Jane Kelsey, a law professor at the University of Auckland in New Zealand, these rules are enough to expose national health authorities to legal challenges under TPP’s investor-state dispute settlement process, or ISDS. ISDS empowers companies to challenge countries’ domestic laws before a tribunal of international judges if they believe the laws unfairly limit investment. The tribunals have the power to impose significant fines on countries if their laws are found responsible for the investment hardship in question. While pharmaceutical companies could not challenge national health programs’ policies through ISDS, their grievances would be eligible for ISDS if the companies claimed the policies hindered investment.

In fact, the Huffington Post article noted suspicions that the US Trade Representative (USTR) has been negotiating on behalf of big US drug, device and biotechnology companies to target price regulations in Australia and New Zealand,

Among the United States’ TPP negotiating partners, pharmaceutical provisions have faced the greatest opposition from Australia and New Zealand, which have national health authorities that provide prescription drugs to their citizens at heavily discounted rates. The U.S. Trade Representative and U.S. pharmaceutical companies have targeted the cost containment measures in those countries’ prescription drug programs for years. Pharmaceutical companies also claim that New Zealand’s drug approval process is opaque and difficult to navigate.

Why Explicitly Include the US Center for Medicare and Medicaid Services (CMS)?

However, anyone in the US who thinks that all the burden from the trade pact is only on other countries, particularly those down under, should think again. The draft trade pact annex also seemed designed to prevent any future attempts by the US government to control drug and device costs, especially for the US Medicare program, even though the current US President has proposed such attempts. 

Note that when the US program was extended to cover drugs, the legislation specifically forbade the government from negotiating prices, a provision that seemed more about protecting corporate revenues than the federal budget.  So, as reported by the New York Times,

The newly leaked annex, dated Dec. 17, 2014, lists Medicare and the Centers for Medicare and Medicaid Services as falling under its strictures.

The USTR pooh poohed any concerns about that,

Officials at the United States trade representative’s office, while declining to comment on a leak they would not acknowledge, said rules in the Pacific accord would have no impact on the United States because Medicare already adhered to them. The trade representative’s office helped develop the proposals.

'Already, transparency and procedural fairness are integral parts of the U.S. legal system and as such are principles reflected in U.S. trade agreements,' the representative’s office said in a statement.

Maybe preventing any government negotiation about, much less control of drug and device prices may be part of what the USTR called "procedural fairness."  In any case, if the US, and specifically CMS are doing so well, why bother giving this trade pact jurisdiction over them, unless to prevent any uppity future US government from daring to negotiate with the pharmaceutical industry?

The Huffington Post noted that

In an earlier statement, [Director of Public Citizen's Global Access to Medicine Project Peter]  Maybarduk expressed concern that the rules would 'limit Congress’ ability to enact policy reforms that would reduce prescription drug costs for Americans –- and might even open to challenge aspects of our health care system today.'

He expanded on that in a commentary for The Hill,

Earlier this week, WikiLeaks published the draft TPP 'Annex' on healthcare technologies. In the five-page document, the U.S. government commits Medicare to rules and procedures that would make it difficult — if not impossible — to implement a national formulary that would provide leverage for proposed negotiations with drugmakers under Medicare Part D.

Medicare costs are expected to more than double from $77 billion in 2015 to about $174 billion in the next decade. In February, the president called for giving Medicare the power to negotiate prices with drug manufacturers to ameliorate this cost burden. Americans support giving Medicare negotiating power by wide margins and across party lines.

Negotiations are most effective if the U.S. government has leverage. Experts suggest that key leverage in Medicare negotiations should come from developing a national drug formulary — a list of drugs that Medicare would cover. A formulary would stimulate competition, reduce prices and lead to healthier outcomes for patients and the healthcare system.

But the leaked TPP 'Annex' shows that the pact would impose procedural requirements on formulary decisions, exact significant administrative costs and open up the drug review process to increased corporate influence. Medicare would have to live by these rules. The result could be a toothless negotiator, and a formulary filled with expensive drugs that have questionable public health benefits, if any.

Summary

So why did the US Trade Representative acquiesce to, if not actively promote, a trade pact that would limit the ability of the US government, specifically, CMS to try to put a damper on the ever rising health care prices that threaten to bankrupt individuals and maybe eventually the Medicare program itself? And why, incidentally did it do so when this appeared to contradict the current US President's own stated goal to have Medicare negotiate the prices it pays for drugs?  (And why, incidentally, did it promote a pact that would give international tribunals jurisdiction over US government actions when that may be unconstitutional according to an increasing number of experts?) 

The best speculation we offered before was that the USTR has been "captured" by industry, in part through the conflicts of interest generated by multiple passages through the revolving door by current and former USTR personnel. 

At the moment, the TPP has stalled again in the US Congress.  However, do not underestimate the ability of its proponents to get it moving again.  The now intermittent drip of secrets from the ongoing trade negotiations showing how little they have to do with trade, and how much they have to do with advancing corporate interests suggest the need for much more vigilance in defense of patients' and the public's health.

Meanwhile, I repeat again that we need to do a lot more to undo regulatory capture that affects health care, and stop the incessantly spinning revolving door.    Attempts to turn government toward private gain and away from being of the people, by the people, and for the people have no doubt been going on since the beginning of government (and since the Constitution was signed, in the case of the US).  However, true health care reform  would require curtailing the severe sorts of conflicts of interest created by the revolving door.

Real heath care reform would require  multiyear cooling off periods before someone who worked in the commercial world can get a job in a government whose work has direct effect on his or her previous employer or industry sector, and before someone who worked in government whose work had direct effect on a particular economic sector can accept a job for a company in that sector.

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