Academic Medical Leaders as Directors of For-Profit Health Care Corporations: the Prevalence of This "New Species" of Conflict of Interest Documented in the BMJ

The important conflicts of interest generated when academic health care leaders also serve on the boards of directors of for-profit health care corporations is suddenly less anechoic, thanks to some intrepid researchers and the British Journal of Medicine.

Background: Academic Health Care Leaders Also Serving as Directors of For-Profit Health Care Corporations

First Discovered Cases

In 2006, we first noticed that leaders of academic medicine also were serving as board members of large for-profit health care corporations.  The first example we discussed was that of Marye Anne Fox, Chancellor (equivalent to president) of the University of California - San Diego, and hence the person to whom the University of California, San Diego School of Medicine and its academic medical center report. The conflict was between this position, and her service as a member of the board of directors of Boston Scientific, a medical device manufacture, and the board of directors of Pharmaceutical Product Development Inc., a contract research organization.

Later that year, we discussed a "new species of conflict of interest."  At that time we wrote:

Medical schools and their academic medical centers and teaching hospitals must deal with all sorts of health care companies, drug and device manufacturers, information technology venders, managed care organizations and health insurers, etc, in the course of fulfilling their patient care, teaching, and research missions. Thus, it seems that service on the board of directors of a such public for-profit health care company would generate a severe conflict for an academic health care leader, because such service entails a fiduciary duty to uphold the interests of the company and its stockholders. Such a duty ought on its face to have a much more important effect on thinking and decision making than receiving a gift, or even being paid for research or consulting services. Furthermore, the financial rewards for service on a company board, which usually include directors' fees and stock options, are comparable to the most highly paid consulting positions. What supports the interests of the company, however, may not always be good for the medical school, academic medical center or teaching hospital.

Since 2006, we continued to find colorful examples of such conflicts of interest, e.g.,

- In 2006, the UnitedHealth board included multiple academic leaders, at least one of whom seemed partly responsible as a member of the board compensation committee for allowing the then UnitedHealth CEO to collect many backdated stock options (look here)
- In 2009, some attributed the problems at George Washington University's medical school that caused it to be put on probation to the conflict of interest of its provost and vice president for health affairs,  who also sat on the board of Universal Health Services, which owned the university hospital (look here)...

Through more recent years,

- In 2014, members of the AMA committee that has an outsize role in how the government fixes the pay of US doctors wer also found to be members of boards of directors of such companies as Kindred Healthcare, Hanger Inc, and Sante. (Look here.)
- In 2015, the academic physician and research unit leader nominated to be the new head of the US Food and Drug was a director of Portola Pharmaceuticals (look here)...

Look here for even more

Our Early Cross-Sectional Study

In 2007, we did a somewhat rough and ready research project based on 2005 data to determine the prevalence of such conflicts.  The results were presented in abstract form,(1) but not published as an article:

In 2005, there were 164 US health care companies in the 2005 S&P 1500, and 125 US medical schools. We identified 198 people who served on the companies' boards of directors who had faculty or leadership positions at these medical schools. Of the 125 medical schools, 65 schools had at least one faculty member and/or leader who also served on a health care corporation's board of directors. 15 schools had more than five, and 4 had more than 10 such individuals. Of the 125 schools, 7 reported to university presidents who were also directors of health care corporations, and 11 schools reported to vice-presidents for health affairs who were also such corporate directors. Four schools were lead by deans who were also health care corporate directors, and 10 schools had academic medical center CEOs who were such directors. 22 schools had at least one top leader who was also a director of a health care corporation. 36 schools reported to university boards of trustees which each included at least one director of a health care corporation, and 12 schools' own boards of trustees included at least one such director.

We concluded:

more than one-half of US medical schools had a leader or faculty member who also was a director of a major US for-profit publicly traded Bpure^ health care corporation, more than one-sixth of schools had a top leader who was also such a director, and more than one-fifth reported to boards of trustees which included such directors.

More Modern and Complete Data

Unfortunately, we never wrote a full paper about this work, although the likelihood we could have gotten it published around 2007 was very small.  It is fortunate that Anderson and colleagues did a more complete and current version of this project, which was published online this week by the British Medical Journal.(2)

Methods

Their methodology was similar to our earlier work, but more sophisticated.  They obtained data on the 2013 board members of 446 public for-profit US companies listed on New York Stock Exchange or NASDAQ and classified as in the healthcare sector, including pharmaceutical, biotechnology, medical equipment and supply companies and health care providers from the companies' 2014 proxy statements.

Results

Their results were striking, suggesting even a greater prevalence of conflicted academic leaders than our preliminary results suggested

Directors were affiliated with 85 geographically diverse non-profit academic institutions, including 19 of the top 20 National Institute of Health funded medical schools and all of the 17 US News honor roll hospitals. Overall, these 279 academically affiliated directors included 73 leaders, 121 professors, and 85 trustees. Leaders included 17 chief executive officers and 11 vice presidents or executive officers of health systems and hospitals; 15 university presidents, provosts, and chancellors; and eight medical school deans or presidents.

The new study also described the direct financial relationships among the academic leaders, professors and trustees and the corporations on whose boards they served.

The total annual compensation to academically affiliated directors for their services to companies was $54 995 786 (£35 836 000; €49 185 900) (median individual compensation $193 000) and directors beneficially owned 59 831 477 shares of company stock (median 50 699 shares).

Discussion

As we have suggested, Anderson et al stated that being on the board of directors of a for-profit health care corporation creates conflicts of interest beyond those created by simply having a financial relationship with a health care company, e.g., by participating in a commercially sponsored research project or acting as a consultant to a company.

Similar to individuals engaging in consulting relationships, directors on industry boards enter a formal contract with the company and receive financial payment for services; however, they are subject to two important differences. Firstly, unlike consultants who are compensated to provide expertise on a specific issue, directors are subject to a fiduciary responsibility to company shareholders to advance the general interests of the company and increase profits. Secondly, directors are reimbursed both through larger cash fees than typical consulting contracts and through stock options, the value of which is directly tied to the financial success of the company.

They also added the reminder that,

Though the missions of academia and for profit companies can overlap, they may also diverge, specifically when the for profit mission of industry competes with the non-profit taxpayer funded clinical and research missions of academic medical and research institutions.

So,

previous guidelines have emphasized the relationships of clinicians and researchers with industry, but institutional conflicts of interest, which arise when administrators, including executive officers, trustees, and clinical leaders have a financial relationship with industry, are increasingly recognized and pose a unique set of risks to academic missions. 

Our Summary

We have written again and again on the problem of conflicts of interest affecting health care professionals, academics, and policy makers.  The worst such conflicts may occur when individuals are simultaneously leaders of large mission-oriented health care non-profit organizations, such as teaching hospitals, medical schools, or research institutes, and board members of for-profit health care corporations.  Despite our attempts to raise such issues as important, and probably important causes of health care dysfunction, they have remained anechoic.

Now a broadly based study of this no longer so "new species" of conflict of interest has appeared in one of the biggest and most prestigious medical journals.  Let us hope it will bring this issue to the forefront, and also partially counter those who have been preaching that concerns about conflicts of interest in health care are overblown.

As we have said again and again, the web of conflicts of interest that is pervasive in medicine and health care is now threatening to strangle medicine and health care.  Furthermore, this web is now strong enough to have effectively transformed US health care into an oligarchy or plutocracy.  Health care is effectively run by a relatively small group of people, mainly professional managers plus a few (lapsed?) health care professionals, who simultaneously run or influence multiple corporations and organizations.

For patients and the public to trust health care professionals and health care organizations, they need to know that these individuals and organizations are putting patients' and the public's health ahead of private gain. Health care professionals who care for patients, those who teach about medicine and health care, clinical researchers, and those who make medical and health care policy should do so free from conflicts of interest that might inhibit their abilities to put patients and the public's health first.

Health care professionals ought to make it their highest priority to ensure that the organizations for which they work, or with which they interact also put patients' and the public's health ahead of private gain, especially the private gain of the organizations' leaders and their cronies.

ADDENDUM (16 November, 2015) - Note that an abbreviated version of this post has appeared as an electronic "rapid response" to the article by Anderson et al (link here), although the published form has on it our original submission date.   

References

1. Poses RM, Smith WR, Crausman R, Maulitz R. Selling them the rope: prevalence of for-profit health care corporate dirctors among academic medical leaders. J Gen Intern Med 2007; 22 (Suppl 1): 98.
2.  Anderson TS, Good CB, Gellad WF.  Prevalence and compensation of academic leaders, professors and trustees on publicly trade US healthcare company boards of directors: cross sectional study.  Brit Med J 2015; 351:h4826.  Link here. 

12:39 PM

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

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.

12:42 PM

More Barbarians at the Gates: Private Equity Puts Primary Care in Play

There are still some idealistic physicians who enter primary care practice as a calling.

The usual informal definition of primary care is care which is continuous, coordinated, comprehensive and compassionate.  The official definition used by the American Academy of Family Physicians (AAFP) is:

Primary care is that care provided by physicians specifically trained for and skilled in comprehensive first contact and continuing care for persons with any undiagnosed sign, symptom, or health concern (the 'undifferentiated' patient) not limited by problem origin (biological, behavioral, or social), organ system, or diagnosis.

Primary care includes health promotion, disease prevention, health maintenance, counseling, patient education, diagnosis and treatment of acute and chronic illnesses in a variety of health care settings (e.g., office, inpatient, critical care, long-term care, home care, day care, etc.). Primary care is performed and managed by a personal physician often collaborating with other health professionals, and utilizing consultation or referral as appropriate.Primary care provides patient advocacy in the health care system to accomplish cost-effective care by coordination of health care services. Primary care promotes effective communication with patients and encourages the role of the patient as a partner in health care.

Private Equity Firms are Buying Out Primary Care Practices

However, an article this week in Modern Healthcare described how primary care in the US is getting a rude surprise.  Apparently, primary care practices are now "in play," (using the terminology for the classic 1987 movie Wall Street, in which Gordon Gekko declared that greed is good).



The argument was that there is

a small but growing number of investments that private-equity firms are making in primary-care physician practices that are ahead of the curve in offering new care delivery and payment models. Investors see an opportunity in being early participants in value-based care, even as the business case is still unclear given mixed results in Medicare's payment and delivery reform demonstrations so far.

But the niche is well-suited for private-equity firms, which feed on uncertainty, said Todd Spaanstra, a partner at Crowe Horwath, an accounting and consulting firm. 

This is not about quality of care, it is about the idea that business people think that "value-based care" and "risk-based contracting" are the current rages, and so there is money to be made investing in entities that seem to fit in with these fashions.

said Slava Girzhel, managing director at KeyBanc Capital Markets. 'There's a lot of discussion about private-equity investing in risk-based models, and I do think we'll see more of that.'

Continuous, coordinated, comprehensive and compassionate care may suffer when the time horizons are not that long, and the owners of the practice are ultimately looking to sell it. 

The long-term opportunity for private-equity firms is the ability to sell these managed-care-savvy medical groups to insurers or health systems, which may pay a premium for the care-coordination expertise and data analytics these practices offer.

Also,

The typical private-equity investment timetable is short—about five years. At that point, the firm would probably look to sell the practice, ideally to an insurance company or a health system, said Dan Hosler, a principal at private-equity firm Sterling Partners.

Furthermore, why private equity may be interested in primary care now, continuing interest will depend on the numbers, not on the benefits to patients

'This is an area where there are winners and losers,' said Dr. Andrei Gonzales, director for value-based reimbursement initiatives at McKesson Health Solutions. 'It's everyone trying to get a slice of the pie that's getting smaller.'

What Happens When the Barbarians are at the Gate

Conspicuously absent from this article was discussion of aspects of the private equity modus operandi which are even more at odds with primary care values than the short time horizon noted above.  We previously warned about the perils of private equity employing physicians (look here.)  The main points were:

-  Private equity is just the new name for leveraged buyout firms (the type of firm described the book, Barbarians at the Gate.)

-  Therefore, when they buy out firms (e.g., the primary care practices discussed above), they use borrowed money.

-  But they leverage in two senses.  Once firms are bought, the private equity owners makes the firms take out further loans, and the money from them may go back to the owners, usually in the form of a special dividend, to pay down the debt originally incurred by the private equity owners.  This leaves the bought out firms heavily in debt, but frees the private equity firm from its original debt.  If the firm is eventually sold, the new buyers take over the debt.  In a worst case scenario, however, the bought out firm goes bankrupt, the private equity's firm stock in it becomes worthless, but the private equity firm need not be responsible for its financial obligations.

-  If the private equity firm desires more money while it still owns the acquired firm, it may sell parts of it off.

-  To make the finances of the acquired firm look more attractive to the next buyer, the private equity firms often undertakes short term cost cutting measures that may involve layoffs, increased workload on remaining workers, etc.

Other dark aspects of private equity are discussed on the Naked Capitalism blog here.

Summary

Primary care physicians thinking about selling their practices to private equity ought to think at least twice before doing so, assuming the physicians are serious about upholding the values of primary care.  Private equity firms are in it for the money, and in the relatively short term.  Private equity firms are unlikely to care about the mission of primary distinct from the ability of primary care practices to make the firms richer.  Therefore, practices owned by private equity may well not provide the best possible care for their patients.  In any case, the physicians working for such practices may be answering to owners who are very explicitly only in it for the money.  They will have become corporate physicians, possibly in the most pessimistic sense of the term.

In general, Dr Arnold Relman reminded us that physicians used to shun the commercial practice of medicine (look here).  Physicians and other health professionals who sign on as full-time employees of large corporate entities have to realize that they are now beholden to managers and executives who may be hostile to their professional values, and who are subject to perverse incentives that support such hostility, including the potential for huge executive compensation.  It is not clear why physicians seem to be willing to sign contracts that underline their new subservience to their corporate overlords, and likely trap them within confidentiality clauses that make blowing the whistle likely to lead to extreme unpleasantness.

Things are likely to be even worse for corporate physicians who are employed by firms owned by private equity. Because of the way private equity operates, primary care practices owned by such firms are liable to be very unstable.  At best, they are liable to be sold to totally new owners in a relatively short time frame, and those owners are likely to be those who will pay the highest price, not necessarily those who will provide the best stewardship for the practices.

Furthermore, primary care practices owned by private equity are likely to end up heavily indebted and subject to strict cost cutting measures that may decrease care quality, decrease access, increase patients' out of pocket costs, and demoralize providers.  Practices acquired by private equity may be broken up and sold as separate pieces.  Should the debt be too high, and the cost cutting not be sufficient, such practices could end up bankrupt and possible completely defunct. 

Do not say I did not warn you.

Physicians need to realize that to fulfill their oaths to put patients first, they have to reduce the influence of rich and powerful organizations with other agendas, like health care corporations, and especially corporations owned by private equity.  The metastasis of private equity into primary care should make us all rethink the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

ADDENDUM (28 April, 2015) - This post was re-published on the Naked Capitalism blog.  

7:24 AM

"God Damn the Pusher Man" - Especially when Enabled by the FDA Revolving Door

Who is watching the watchers?  A story this week involving "speed" like drugs added to "dietary supplements" suggests how far the once respected US Food and Drug Administration has fallen.

An Amphetamine-Like Drug Spiking "Nutritional Supplements"

The story began with a paper by Cohen and colleagues published a relatively obscure medical journal, and then picked up by the news media.(1)  The main points of the article were:

BMPEA (beta-methylphenylethylamine) is a compound first synthesized in the 1930s as a "potential replacement" for amphetamines.  Animal tests revealed amphetamine-like properties.  The compound was never tested on humans, and never marketed.

But,

BMPEA remained known only as a research chemical until early 2013 when the FDA identified BMPEA in multiple supplements labelled as containing ‘Acacia rigidula’, even though the stimulant has never been identified or extracted from Acacia rigidula, a shrub native to Texas.

However,

More than two years after the FDA's discovery, the FDA has yet to warn consumers about the presence of the amphetamine isomer in supplements.

So Cohen et al undertook to identify "nutritional supplements" said to contain acacia rigidula and test them for BMPEA.  They found 21 such supplements, all of which tested positive. The authors then recommended,

that supplement manufacturers immediately recall all supplements containing BMPEA, and that the FDA use all its enforcement powers to eliminate BMPEA as an ingredient in dietary supplements. Consumers should be advised to avoid all supplements labelled as containing Acacia rigidula. Physicians should remain alert to the possibility that patients may be inadvertently exposed to synthetic stimulants when consuming weight loss and sports supplements.

Note that while the power of the FDA to regulate "nutritional supplements" is limited by a 1994 law, Cohen and colleagues wrote that it

is tasked with identifying and removing mislabelled, adulterated, and dangerous dietary supplements from the marketplace.

Since BMPEA is apparently not found in nature, and was not sold prior to 1994, putting BMPEA in a "dietary supplement" appears to be adulteration. 


The Risks of BMPEA in Nutritional Supplements

The study was then picked up by the media.  In the Los Angeles Times, Pieter Cohen, the lead author of the journal article,

said that while the effects of BMPEA are unknown, the compound is potentially dangerous. He said the FDA's failure to act is 'completely inexcusable.'

Furthermore, in a CBS report,

BMPEA has not been tested in humans, but led to increased blood pressure in cats and dogs.

'These are things that are signals that in humans will later turn into heart attacks, strokes and maybe even sudden death,' Cohen said.

The point is that while it has never been tested fully on humans, there is every reason to suspect that BMPEA acts very similarly to amphetamine, colloquially called "speed."  Amphetamines, as we discussed here, have dangerous side effects, including severe blood pressure elevations, and increased risks of stroke, myocardial infarction (heart attack), and other cardiac events.  The drugs also have a high potential for abuse. 


Why Did the FDA Do Nothing? 

Despite the likely riskiness of BMPEA, the FDA did nothing when it found it in numerous dietary supplements in 2013, and has not indicated that it will do anything now.  According to the LA Times,

FDA spokeswoman Juli Putnam acknowledged that the agency published research on the occurrence of BMPEA in Acacia rigidula supplements in 2013.

'While our review of the available information on products containing BMPEA does not identify a specific safety concern at this time, the FDA will consider taking regulatory action, as appropriate, to protect consumers,' she said.

In a Consumers Report item, Dr Cohen responded to that,

'It’s mind boggling,' said Pieter Cohen, M.D., the Harvard physician who is the lead author of the new study, published online in the journal Drug Testing and Analysis. 'The companies think they have complete impunity. They assume the FDA will do nothing about it. And they’re right.'

A post in the NY Times Well blog reiterated, 

Under federal law, dietary supplements — with some exceptions — can contain only ingredients that are part of the food supply or that were already on the market before 1994. Dr. Cohen said that BMPEA has never been sold as a food or supplement, and as a result any product that contains it is considered adulterated, which would give the F.D.A. the authority to send warning letters to companies that add it to their supplements.

Yet while the FDA had authority to do something, it did nothing.

Was the Revolving Door the Reason?

Back in 2014, we posted about two transitions through the revolving door by the FDA official in charge of the regulation of nutritional supplements.  We reproduce the relevant section of the post below:

This round trip through the door was noted rather obliquely in a New York Times article in late April, 2014, focused on how slowly the FDA has reacted to apparently dangerous "dietary supplements,"

Before joining the F.D.A. in 2011, Dr. [Daniel] Fabricant was a top executive at an industry trade group, the Natural Products Association.

The article had previously identified Dr Fabricant as

the director of the division of dietary supplement programs in the agency’s Center for Food Safety and Applied Nutrition.

But,

The F.D.A. recently announced that Dr. Fabricant is leaving the agency this month to return to the trade group as its chief executive.

While the NY Times article thus mentioned as an aside that a government official with major responsibility for regulating dietary supplements had these relationships with the dietary supplement industry, it did not then question whether that relationship had anything to do with slow responses by the FDA to reports of toxic dietary supplements. 

In 2014, the Times drew no conclusions about Mr Fabricant's career trajectory.  However, this time

But public health experts contend that the F.D.A.’s reluctance to act in this case is symptomatic of a broader problem. The agency is not effectively policing the $33 billion-a-year supplements industry in part because top agency regulators themselves come from the industry and have conflicts of interest, they say. In recent years, two of the agency’s top officials overseeing supplements — including one currently on the job — were former leaders of the largest supplement industry trade and lobbying group.

Daniel Fabricant, who ran the agency’s division of dietary supplement programs from 2011 to 2014, had been a senior executive at that trade group, the Natural Products Association, which has spent millions of dollars lobbying to block new laws that would hold supplement makers to stricter standards. He left the F.D.A. last year and returned to the association as its chief executive. His current replacement at the F.D.A.’s supplement division also comes from the trade group.

'To have former officials in the supplement industry become the chief regulators of that industry at the F.D.A. is like the fox guarding the hen house,' said Michael F. Jacobson, the executive director of the Center for Science in the Public Interest, a consumer advocacy group.

Also, the new Well blog post noted 

Shortly before Dr. Fabricant left the F.D.A. in 2014 to return to the association, the F.D.A. hired another official from the group, Cara Welch. She is now the acting director of the agency’s supplement division. Dr. Cohen, who is also an internist at the Cambridge Health Alliance, said he repeatedly wrote to Dr. Welch asking what the agency was going to do about BMPEA, and that she did not respond.

Dr. Welch declined repeated requests for interviews. In a statement, Juli Putnam, an F.D.A. spokeswoman, said that the agency 'has found that hiring experienced leaders with diverse backgrounds in public health, industry, academia, and science enriches the professional environment and leads to the best health policy outcomes for the American public.'

Before joining the F.D.A., Dr. Welch was the vice president of scientific and regulatory affairs at the Natural Products Association, where she was a staunch defender of the supplement industry. When JAMA, a leading medical journal, raised concerns in a 2011 editorial that the federal law allowed the supplements industry to police itself, Dr. Welch responded that the industry had 'an excellent safety record.'

'The industry itself supports and has implemented strong self-regulatory mechanisms,' she said in an industry news release at the time.

Summary

To summarize, from 2011 to now, the leadership of the part of the FDA that is supposed to regulate dietary supplements was dominated by former top executives of the Natural Products Association, the trade organization for dietary supplement manufacturers.  In 2013, FDA scientists found that multiple dietary supplements contained BMPEA, a compound closely related to amphetamines, and hence potentially dangerous and addictive, although it had never been tested on or previously used by humans.  Although the FDA had authority to do something about this apparent adulteration of these products, it so far had done nothing.  Thus it appears that the currently legal revolving door that allows government regulation to be run by people who come directly from the industries that government is supposed to regulate could be responsible for exposing people to dangerous, addictive drugs.

Remember, BMPEA is a first cousin of amphetamine, amphetamine is "speed," and as the drug epidemics of the 1960s and 1970s showed us, "speed kills."  So a plausible argument is that the revolving door, as relevant to FDA, has enabled manufacturers of nutritional supplements to become the "pusher man," a la the Steppenwolf sound track of Easy Rider,


As we noted here, some experts consider the revolving door per se to be corruption, not merely conflict of interest.  The current case plausibly suggests not only that the revolving door is corrupt, but that when applied to health care can pose dangers to patients, not merely danger to government finances, government ethics, and the integrity of representative democracy.  Nonetheless, up to now, a few people have decried the revolving door (and very occasionally in health care), but nothing has been done about it.   

So it is surprising that today (13 April, 2015), the New York Times published an editorial inspired by the BMPEA case, which concluded

consumer advocates are surely right that putting the industry in charge of supplement regulation is like appointing the fox to guard the henhouse. Clearly, the F.D.A. should not allow industry insiders to fill key positions. A permanent solution is for Congress to enact conflict-of-interest laws forcing employees above a certain grade level at any agency to recuse themselves from official actions that affect a former employer or client, including trade associations and their members.

As a minimum, that would be a good start.  Unfortunately, even a NY Times editorial hardly guarantees action.  At least, however, the problem of the revolving door as a danger to patients has gotten a little less anechoic.

As we last wrote, the continuing egregiousness of the revolving door in health care shows how health care leadership can play mutually beneficial games, regardless of the their effects on patients' and the public's health.  Once again, true health care reform would cut the ties between government and corporate leaders that have lead to government of, for and by corporate executives rather than the people at large.

ADDENDUM (20 April, 2015) - This post was republished on Naked Capitalism. 


Reference

1.  Cohen PA, Bloszies C, Yee C, Gerona R. An amphetamins isomer whose efficacy and safety in humans has never been studied, beta-methylphenylethylamine (BMPEA), is found in multiple dietary supplements.  Drug Testing Analysis 2015; DOI: 10.1002/dta.1793  Link here.

8:58 AM

The Medical School as Hereditary Plutocracy - Retiring Board Chair Sanford Weill of Cornell Weill Medical School Names His Own Daughter as New Chair

As I have written before, sometimes you just could not have made this stuff up.

The Retiring Board Chairman Appoints His Own Daughter to Succeed Him

The most even handed reporting on this story was in Inside Higher Ed,

Leadership of the board that oversees Cornell University’s medical college is passing from father to daughter, an unusual transition of power for a higher education board.

Weill Cornell Medical College’s Board of Overseers has been chaired for the past two decades by its namesake and major donor, Sandy Weill, the former CEO of Citigroup.

His daughter, Jessica Bibliowicz, is now set to take over Weill's role. She is the founder and former CEO of a major insurance brokerage, and has also been on the board for a decade.

Let me just dissect this a bit.  Weill Cornell Medical College is a large, prestigious medical school located in New York City, and part of Cornell University.  The chair of its Board of Overseers for the last two decades as been one Sanford I Weill.  Mr Weill is a famous finance executive, formerly CEO of Citigroup from 1998 - 2003, remained chairman of the board of Citigroup through 2006, and is now chairman emeritus (look here). 

According to a Cornell press release, the new chairperson, ms Jessica Bibliowicz, is a

Cornell University graduate in 1981 and after working 18 years in financial services, Ms. Bibliowicz became CEO of National Financial Partners in 1999, a financial services firm that specializes in benefits and wealth management. The company went public in 2003 and was sold to Madison Dearborn in 2013.

 Currently,

Ms. Bibliowicz is a senior advisor at Bridge Growth Partners and serves on the board of directors of Sotheby's(NYSE: BID); Realogy (NYSE: RLGY); and the Asia Pacific Fund (NYSE: APB). She is a board director/trustee of Prudential Insurance Funds....

The Inside Higher Ed article noted that

In a statement, Cornell said, Weill Cornell Medical College engaged in a comprehensive process to select its chair of the Board of Overseers by canvassing multiple members of the board in full consultation with senior leadership. The search was headed by a group of senior trustee overseers with extensive knowledge of the institution and Weill Cornell firmly believes it has selected the best choice as chair.'

The New York Times reporting of the succession, oddly in the Dealbook blog, which is focused on finance and Wall Street, not medicine, made it seem, however, that Mr Weill handpicked his daughter to succeed him,

he increasingly felt that the time was nearing to appoint a successor.

'I felt like it was a good time for younger blood,' he said.

Ultimately, he decided upon his daughter,

The Cornell press release lauded Mr Weill, the retiring chair as providing "bold and visionary leadership," having "enduring dedication," exemplifying "benevolence and unwavering resolve to ensure a healthier future," etc, etc.  It called him a "self-made man who exemplifies the philosophy of leading by example."  It quoted the current dean of the medical school, Dr Laurie Glimcher, (whose apparent conflict of interest as a board member of Bristol-Myers-Squibb we discussed here and here) calling his accomplishments "breathtaking."  It quoted the university president, David Skorton, calling him again a "visionary."

In the Dealbook article, Dr Glimcher further praised the chairperson designate, Ms Bibliowicz, as "a person of enormous energy and passion," who will "bring her energy, her connections and her passion for medicine and medical research and education to the role."


The Inside Higher Ed article noted some vague questions about the position of chair of the board of trustees of an important medical school being passed from father to daughter,

'On the other side of the coin, within-family succession planning adds complexity to the issue -- it just raises certain questions,' [former vice president for programs and research at the Association of Governing Boards of Universities and Colleges Peter] Eckel said.

However, Mr Eckel did not really list these questions.

Later, the article referred to "nepotistic arrangements," presumably in part referring to this father - daughter transition, but then found someone to defend them. 

The Real Questions

Weill Cornell Medical College is part of a non-profit organization.  Nonprofit organizations have no owners. Non-profit organizations are formed to support particular missions, under the stewardship of boards of trustees (or directors or overseers).  These boards have three basic duties [italics added]

 Duty of care: Board members are expected to actively participate in organizational planning and decision-making and to make sound and informed judgments.
Duty of loyalty: When acting on behalf of the organization, board members must put the interests of the nonprofit before any personal or professional concerns and avoid potential conflicts of interest.
Duty of obedience: Board members must ensure that the organization complies with all applicable federal, state, and local laws and regulations, and that it remains committed to its established mission.

Thus, the transfer of the position of chair of the board from parent to offspring, apparently directly under the control of the parent, is questionable on its face, suggesting that family interests came before the "interests of the nonprofit."  Such transfers may commonly occur on the boards of privately family held for-profit companies, but are basically unheard of for medical schools or other large academic medical nonprofit organizations, where they certainly could appear nepotistic.

That concern is amplified when neither parent or child have any appreciable background or training in the work of the nonprofit.  Neither Mr Weill nor Ms Bibliowicz seem to have any training or background in health care, biomedical research, or specifically medicine.  Yet Weill Cornell Medical School's basic mission is to train students to be physicians.  So how well either or their personal judgments about the policy and operations of a medical school are "informed" is not exactly clear.  

Further concerns are raised by the background of the father in this father daughter transaction, the part of the background that was entirely ignored by the rather fawning public discussion of the transaction in the Cornell press release, and also the NY Times Dealbook article.

In fact, Mr Weill's leadership in the past was of Citigroup during the lead up to the global financial collapse of 2008.  Citigroup, the poster child for the too big to fail bank, nearly went bankrupt, and required a huge government bailout.  Its near collapse, again apparently only prevented by government action, is widely considered to have been a major cause of the finance disaster starting in 2008.  As we noted in a 2009 blog post about Weill Cornell,   The Sellout, by Charles Gasparino, featured vivid portraits of the bad leadership that lead to the collapse, including specifically Mr Weill,

But in reality, Will never really ran anything. He was a visionary, to be sure, but one whose vision was so myopically focused on building the empire had lusted for for so long and on its share price that he ignored just about everything else. (p. 144)

Furthermore, this was Mr Weill's listing in the "key people" section of the book,

Former CEO and chairman of Citigroup, Weill created the idea of the one-stop-shopping mega-financial conglomerate, engineering a series of mergers ... and in the process created the world's largest financial company.  Famously obsessed with his firm's stock price, Weill announced his resignation in 2003 after investigators discovered he'd pressured a stock analyst, Jack Grubman, to raise his rating on AT&T, where Weill was on the board, in return for ensuring that Grubman's children got into an exclusive preschool.

Furthermore, in the Time magazine series on the "25 People to Blame for the Financial Crisis," Mr Weill is listed as  "blameworthy" because,

Who decided banks had to be all things to all customers? Weill did. Starting with a low-end lender in Baltimore, he cobbled together the first great financial supermarket, Citigroup. Along the way, Weill's acquisitions (Smith Barney, Travelers, etc.) and persistent lobbying shattered Glass-Steagall, the law that limited the investing risks banks could take. Rivals followed Citi. The swollen banks are now one of the country's major economic problems. Every major financial firm seems too big to fail, leading the government to spend hundreds of billions of dollars to keep them afloat. The biggest problem bank is Weill's Citigroup. The government has already spent $45 billion trying to fix it. 

In a post on the Baseline Scenario blog, Simon Johnson, author of another authoritative book on the financial crisis, 13 Bankers, wrote this about Citigroup leadership,

Citigroup is a very large bank that has amassed a huge amount of political power. Its current and former executives consistently push laws and regulations in the direction of allowing Citi and other megabanks to take on more risk, particularly in the form of complex highly leveraged bets. Taking these risks allows the executives and traders to get a lot of upside compensation in the form of bonuses when things go well – while the downside losses, when they materialize, become the taxpayer’s problem.

Citigroup is also, collectively, stupid on a grand scale. The supposedly smart people at the helm of Citi in the mid-2000s ran them hard around – and to the edge of bankruptcy. A series of unprecedented massive government bailouts was required in 2000-09 – and still the collateral damage to the economy has proved enormous. Give enough clever people the wrong incentives and they will destroy anything.

Physicians are supposedly rigorously trained, and tasked with upholding important ethical principles.   So did it make sense to entrust the stewardship of a premier American medical school to the man who engineered the expansion of Citigroup that turned out to be "stupid on a grand scale," in order to "get a lot of upside compensation," while leaving the "downside losses" to become "the taxpayer's problem," so that the "collateral damage to the economy has proved enormous?"   Does it make sense to allow him to choose his own daughter, who has no more medical experience than he did (which was zero), to steward the school in the future?

I wonder what Cornell medical students, or physician alumni would say, if they felt safe enough to answer the question?

As we wrote in 2009,  boards of trustees of not-for-profit health care institutions have a primary duty to uphold the institutions' missions.  Thus, one would think such boards would be selected according to their dedication to their missions.  But perhaps, in the grubby real world, there may be more important criteria, possibly such as the size of their donations to the institution.  Furthermore, those likely to donate the most  may be more likely to be richest (and perhaps most in need to making themselves appear philanthropic and public-spirited) than the most fervent upholders of patient care, teaching and research.

Maybe giving stewardship of our once proud health care institutuions to people most likely to defend their missions, rather than most likely to donate a lot of money, would result in somewhat poorer institutions which do a better job of patient care, teaching and research.

You heard it here first.  
 

1:08 PM

Price Fixing, Regulatory Capture, Crony Capitalism - Will the New Public Citizen Report Succeed in Outing the RUC?

Just last month the RUC made it back into the headlines.  Then we posted  Politico made another attempt to shed some light on this obscure committee and its outsize effect on health care. Now the watchdog organization Public Citizen has stepped into the breach, publishing a report on the RUC (Research Based Relative Value Scale Update Committee), with an accompanying press release and op-ed. 

Introduction - Why the RUC is Important

To explain why this issue is important, I can simply repeat what I wrote before. 

In 2007, readers of the Annals of Internal Medicine could read part of the solution to a great medical mystery.(1)  For years, health care costs in the US had been levitating faster than inflation, without producing any noticeable positive effect on patients.  Many possible reasons were proposed, but as the problem continued to worsen, none were proven.

The article in the Annals, however, proposed one conceptually simple answer.  The prices of most physicians' services, at least most of those that involved procedures or operations for Medicare patients, were high because the US government set them that way. Although the notion that prices were high because they were fixed to be so high was simple, how the fixing was done, and how the fixing affected the rest of the health system was complex, mind numbingly complex.

Perhaps because of the complexity of its implementation, the simplicity of the concept has not seemingly reached the consciousness of most American health care professionals or policy makers, despite the publication of several scholarly articles on the subject, efforts by humble bloggers such as yours truly, a major journalistic expose in the Wall Street Journal in 2010,  another major expose in Washington Monthly in 2013, congressional hearings in 2013, and yet another major expose in Politico in 2014.  The lack of much public discussion of this issue despite its importance and the above attempts to start discussion seemed to be a prime example of what we have called the anechoic effect, that important causes of health care dysfunction whose discussion would discomfit those who are currently personally profiting from the current system rarely produce many public echoes.  (For a review of what is known to date about how the offputtingly named Resource Based Relative Value Scale Update Committee (RUC) works, and previous attempts to makes it central role in fixing what US physicians are paid public, see the Appendix.)

Once Again...  the Public Citizen Report

The latest report draws on the earlier exposes and journal articles, and repeats again all but one of the major points in the Washington Monthly 2013 article.  Here are the points with quotes from the new report.

The RUC is Well Hidden

After describing the RUC as "secretive" in its introduction, the report reviewed the specifics:

most of its proceedings occur behind closed doors and without public scrutiny. Minutes from each of the RUC’s three annual meetings are not made publicly available. Additionally, when the RUC votes each spring to assign work RVU values to CPT codes, the voting results are not released to the public.

Also,

One critical piece of information that is not disclosed to anybody (including RUC members) is any indication of how each member of the RUC voted.

The RUC Fixes Prices

The RUC has enormous power in setting health care prices,...

The Government Enables the RUC to Fix Prices

The key data point in the formula that is used to set Medicare payment rates is largely determined by a secretive committee that is managed and funded by the American Medical Association....

Also,

CMS is not required to accept the RUC’s recommendations. In fact, the RUC is insistent that its role in the process is only to exercise its right to petition the government. However, studies have demonstrated that CMS accepts RUC recommendations at overwhelmingly high rates.

The Government Fixed Prices are Endorsed by the Private Sector

The RUC’s influence over physician payments extends well beyond Medicare payments because private insurers also use the Medicare payment framework as a baseline for determining their payments. Private insurance companies often set their payments based on the underlying Medicare fee schedule.

The Price Fixing Drives Up Costs and the Use of Services

The RUC has been accused of overstating many of the factors used to determine a physician payment.

Also,

When the RUC has recommended adjusting the values that determine physician payments, it has been more than five times as likely to increase pay for a procedure as decrease it.

These Incentives Cripple Primary Care

To the extent that the RUC’s members are biased towards their own specialties, this results in the overvaluing of specialty procedures at the expense of primary care. Because there are significantly more specialty procedures than primary care procedures, the overvaluation of specialty and procedural services has caused U.S. specialists’ pay to rise much more rapidly than primary care physicians since the formation of the RUC.

Higher pay to specialists creates greater incentives for medical students to practice specialty or procedural medicine, resulting in a shortage of primary care physicians.

These Incentives Benefit Big Corporations, not just Medical Specialists

This was the only issue not directly addressed in the 2014 Politico article or in the new Public Citizen report.  (But see our 2013 post.)

Anechoic So Far

So in some sense the Public Citizen report on the RUC sang the same old song.  However, as the report itself noted, previous attempts to inspire action about the RUC have generated no echoes.  Thus, maybe it should be no surprise that so far there has been no press coverage of the Public Citizen report (at least as far as I could tell by using my usual search techniques as of this morning). 

Of course, as we have discussed ad infinitum, that which discomfits those who are making so much money from our current health care system often manages to create few echoes, that is, what we have dubbed the anechoic effect.

This is all the more interesting because there are aspects of the RUC that could outrage both left- and right-wingers.  First of all, the RUC is a major component in a system of government price fixing.  Enabled by the RUC, CMS fixes the prices of medical care.  Many on the right, but particularly those of the more libertarian or free market fundamentalist persuasion say they hate government price fixing.

Second of all, the RUC exemplifies regulatory capture.  The report quoted

 Thomas Scully, an administrator of the Centers for Medicare and Medicaid Services under President George W. Bush, also has been highly critical of the RUC, and particularly the power the AMA has over the process. 'The idea that $100 billion in federal spending is based on fixed prices that go through an industry trade association in a process that is not open to the public is pretty wild,' Scully said in 2013.

Again, many on the right, and also, probably many on the left worry about regulatory capture.

Third, the RUC represents a particular species of regulatory capture, crony capitalism.  This was not emphasized in the report, but we have written before about how many RUC members have personal financial ties to health care corporations, and how these constitute conflicts of interest (look here).  The Washington Monthly noted that RUC members are sponsored by medical societies that in turn have institutional conflicts of interest involving big health care corporations, and that the way the RUC sets prices could benefit such health care corporations (look here.)  Both left- and right-wingers say they loathe crony capitalism, although the left emphasizes the undue influence of big business, and the right emphasizes the bad actions of government resulting from it.

Yet very few on the right or left seem to have noticed, much less have become outraged by the RUC

The new Public Citizen report suggested

The most important policy change is for CMS to stop relying on the AMA to maintain the existing system for determining the value of Medicare payments to physicians.

Maybe this time someone will listen.  As I have written too often, I hope the latest attempt by Public Citizen to make the RUC less anechoic will succeed in increasing awareness of the RUC and its essential role in making the US health care system increasingly unworkable.  Of course, such awareness may disturb the many people who are making so much money within the current system.  But if we do nothing about the RUC, and about the ever expanding bubble of health care costs, that bubble will surely burst, and the results for patients' and the public's health will be devastating.



APPENDIX - Background on the RUC

 We have frequently posted, first here in 2007, and more recently here,  here, here, and here, about the little-known group that controls how the US Medicare system pays physicians, the RBRVS Update Committee, or RUC.

Since 1991, Medicare has set physicians' payments using the Resource Based Relative Value System (RBRVS), ostensibly based on a rational formula to tie physicians' pay to the time and effort they expend, and the resources they consume on particular patient care activities. Although the RBRVS was meant to level the payment playing field for cognitive services, including primary care vs procedures, over time it has had the opposite effect, as explained by Bodenheimer et al in a 1997 article in the Annals of Internal Medicine.(1) A system that pays a lot for procedures, but much less for diagnosing illnesses, forecasting prognoses, deciding on treatment, and understanding patients' values and preferences when procedures and devices are not involved, is likely to be very expensive, but not necessarily very good for patients.
 
As we wrote before, to update the system, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the RBRVS Update Committee. The RUC is a private committee of the AMA, touted as an "expert panel" that takes advantage of the organization's First Amendment rights to petition the government. Membership on the RUC is allotted to represent specialty societies, so that the vast majority of the members represent specialties that do procedures and focus on expensive, high-technology tests and treatments.
 
However, the identities of RUC members were opaque for a long time, and the proceedings of the group are secret.  As Goodson(2) noted, RUC "meetings are closed to outside observers except by invitation of the chair." Furthermore, he stated, "proceedings are proprietary and therefore not publicly available for review."
 
In fact, the fog surrounding the operations of the RUC seems to have affected many who write about it. We have posted (here, here, here, and here) about how previous publications about problems with incentives provided to physicians seemed to have avoided even mentioning the RUC. Up until 2010, after the US recent attempt at health care reform, the RUC seemed to remain the great unmentionable. Even the leading US medical journal seemed reluctant to even print its name.
 
That changed in October, 2010.  A combined effort by the Wall Street Journal, the Center for Public Integrity, and Kaiser Health News yielded two major articles about the RUC, here in the WSJ (also with two more spin-off articles), and here from the Center for Public Integrity (also reprinted by Kaiser Health News.) The articles covered the main points about the RUC: its de facto control over how physicians are paid, its "secretive" nature (quoting the WSJ article), how it appears to favor procedures over cognitive physician services, etc.
 
In 2011, after the "Replace the RUC" movement generated some more interest about this secretive group, and its complicated but obscure role in the health care system, the current RUC membership was finally revealed.  It was relatively easy for me to determine that many of the members had conflicts of interest (beyond their specialty or sub-specialty identity and their role in medical societies that might have institutional conflicts of interest, and leaders with conflicts of interest).  
 
Then that year a lawsuit was filed by a number of primary care physicians that contended that the RUC was functioning illegally as a de facto US government advisory panel.  It appeared that things might change.  However, it was not to be.  A judge dismissed the lawsuit in 2012, based on his contention that the law that set up the RBRVS system prevented any challenges through the legal system to the mechanism used to set payment rates.  The ruling did not address the legality of the relationship between the RUC and the federal government.  The eery quiet then resumed, only punctuated briefly in early 2013, when a Senate committee held hearings with no obvious effect.      

References
1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. (Link here.)
2. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. (Link here.)

12:02 PM

Merging Finance and Health Care Leadership - Robert Rubin Proteges Running DHHS, Spouse of Hedge Fund Magnate Running the FDA

Hidden between the lines of some not very prominent news stories were reminders of how close health care and financial leadership have become in these times of continuing economic unrest after the global financial collapse/ great recession.

After the events of 2008, it became more apparent that the dysfunction in academics and health care  paralleled that seen in finance.  One reason may have been the overlapping leadership of finance and health care.  For example, in 2008 we first posted about how Robert Rubin, who was then a Fellow of the Harvard Corporation, the top group responsible for the governance of that great academic and medical institution, bore responsibility for the global financial collapse/ great recession.  Mr Rubin as Treasury Secretary was a proponent of financial deregulation in the Clinton administration.  Later, he became a top leader of Citigroup, whose near collapse helped usher in the crisis of 2008 (look at our 2008 post here and our 2010 post here.  Rubin just stepped down from his Harvard position this year,)  Since 2008 we found many other links among the leadership of Wall Street and of academic medicine and of big health care corporations.  These links, if anything, seem to be getting stronger. 

From the Department of Health and Human Services to Citigroup and then back to the Department of HHS

A tiny, four sentence Reuters story noted an apparently routine appointment to upper management at the US Department of Health and Human Services.  The first three sentences were:

U.S. Health Secretary Sylvia Burwell named Citigroup Inc executive Kevin Thurm as senior counselor of the U.S. Department of Health and Human Services (HHS), which is implementing the controversial U.S. Affordable Care Act.

Thurm has served in a number of roles at Citi since joining the bank in 2001, including senior adviser for compliance and regulatory affairs and deputy general counsel.

Before joining Citi, Thurm, a former Rhodes scholar, was the deputy secretary of the U.S. Department of Health and Human Services.

Why is that significant?  First, the near bankruptcy of the huge, badly led Citigroup was widely acknowledged to be a cause of the global financial collapse.  A 2011 New Yorker article on the role of the revolving door between Washington and Wall Street ("Revolver," by Gabriel Sherman) summarized the plight of Citigroup and the role of Robert Rubin in it,

Citigroup was the most high-profile of Wall Street’s basket cases, the definitionally too-big-to-fail institution. With massive exposure to the housing crash and abysmal risk management, the firm cratered, surviving as a virtual ward of the state after the government injected billions and took a 36 percent ownership position. Along with AIG and Fannie and Freddie, Citi came to be seen as a pariah institution, felled by management dysfunction and heedless greed in pursuit of profits. Complicating matters for Citi, the wounded bank found itself tangled in the populist vortex that swirled in the crash’s wake. On the left, there were calls that Citi should be outright nationalized, stripped down, and sold off for parts. Pandit was called before irate congressional-committee members to answer for Citi’s sins, an ignominious inquisition captured on live television. In January 2009, under pressure, Citi canceled an order for a new $50 million corporate jet.

There was plenty of blame to go around at Citi. Chuck Prince, a lawyer by training who succeeded Citi’s outsize former CEO Sandy Weill, had little grasp of the complex mortgage securities Citi’s traders were gambling on. As late as the summer of 2007, when the housing market was in free fall, Prince infamously told the Financial Times that 'as long as the music is playing, you’ve got to get up and dance.'

Bob Rubin himself pushed the bank to take on more risk in order to increase its profitability, a move that Citi’s dismal risk management was ill-equipped to handle. Pandit, whom Rubin had helped to recruit in 2007 just as the economy began to unravel, was tasked with cleaning up the mess when he became CEO in December of that year, and his early tenure had a deer-in-headlights character. Eventually, he realized that the asset class Citi lacked most was human capital, of the blue-chip variety.  

The article also summarized Rubin's role in the fervor of deregulation in service of market triumphalism that lead to the financial collapse,

In tapping Rubin to run Treasury, Clinton was sanctioning a revolution in the Democratic Party, one that fundamentally redefined the party’s relationship with Wall Street. Rubin, along with Alan Greenspan and Larry Summers, believed in an enlightened capitalism, which would spread prosperity widely. This enchantment with the beneficence of markets became the dominant view in Democratic Washington, hard to argue with when the economy was booming, as it was in the second half of the nineties. Rubin recognized that derivatives posed a risk but effectively blocked efforts to regulate them and pushed for the repeal of the Glass-Steagall Act, the Depression-era legislation that prevented commercial banks from merging with investment and insurance firms (the new law essentially legalized the $70 billion merger in 1998 of Citicorp and Travelers Group that created Citigroup).

Circling back to recent events, Once he got to Citigroup, Rubin assembled a team, partially from his old associates in the Clinton administration,

He also recruited several former Clinton aides to Citi, including former Health and Human Services deputy secretary Kevin Thurm....

So Kevin Thurm became something of a Robert Rubin protege at Citigroup. In fact, he rose to an important leadership position at the same time Citigroup was getting ready to become a "basket case," in part apparently because of the advice of Robert Rubin.  According to a 2013 version of Mr Thurm's official Citigroup bio,

Kevin L. Thurm is Senior Advisor for Compliance and Regulatory Affairs at Citigroup.

Previously, Thurm served as the Chief Compliance Officer of Citi. In that role, Thurm led Global Compliance which protects Citi by helping the Firm comply with applicable laws, regulations, and other standards of conduct, and is responsible for identifying, evaluating, mitigating and reporting on compliance and reputational risks and driving a strong culture of compliance and control. Since joining Citi in 2001, Thurm has also served as Deputy General Counsel of Citi, where he led the Corporate Legal group, overseeing a number of Company-wide Legal functions and providing support on day to day matters, including issues involving the Board, senior executives, and regulators; Chief  Administrative Officer of Consumer Banking North America, where he helped lead the business group and was responsible for a variety of functions including Community Relations, Compliance, Legal and Public Affairs; Director for Administration in the Corporate Center; Chief of Staff to the President and Chief Operating Officer of Citigroup; and as the Director of Consumer Planning in the Global  Consumer Group.

To recap, Mr Kevin Thurm was a top compliance executive of Citigroup while the company was imploding, and being a protege of Robert Rubin, an architect of the financial deregulation that led to the global financial collapse, and a leader of Citigroup responsible for the risky behavior of that company that led to its near collapse, which was another precipitant of the global financial collapse or great recession.  It is not obvious that these are great qualifications to be Senior Counselor at DHHS.

Moreover, Mr Thurm's responsibilities at DHHS would not be limited to compliance or financial leadership.  According to the official DHHS press release announcing his appointment,

As a Senior Counselor, Thurm will work closely with the Department’s senior staff on a wide range of cross-cutting strategic initiatives, key policy challenges, and engagement with external partners.

Yet, there is nothing in Mr Thurm's public record to indicate that he has any actual experience in health care, medicine, public health, or biologic science.  So it is not obvious why he should be entrusted with leading "cross-cutting strategic initiatives, [and] key policy challenges."

On the other hand, Mr Thurm might be simpatico with the new Secretary of DHHS, Ms Sylvia Burwell.  According to a Washington Post article at the time of the hearings about her nomination,

despite her Washington experience, ... is not well known in health-policy circles, and, during her confirmation hearings, she gave little concrete sense of the direction in which she will take the complex department she will inherit.

This seems to be a polite way to see she also has no actual experience in health care, medicine, public health, or biologic science.   Her official biography lists no such experience.  However, she was also a Robert Rubin associate, and perhaps protege, during the Clinton administration,

During the Clinton administration, Burwell held several economic roles — as staff director of the White House National Economic Council, as chief of staff under then-Treasury Secretary Robert Rubin,...

To summarize so far, the new Secretary of the Department of Health and Human Services, and now her new Senior Counselor, were both closely associated with Robert Rubin, who seems to bear major responsibility for the global financial collapse, and the new Senior Counselor worked with Rubin at Citigroup, whose near bankruptcy helped accelerate that collapse.  On the other hand, neither of these leaders has any experience in health care, public health, medicine, or biological science. 

Hedge Funds, Tax Avoidance, and the US Food and Drug Administration

This story is even less obvious.  A July, 2014, report in Bloomberg recounted plans for a Senate hearing on tax avoidance by huge, lucrative hedge funds.  The basics were,

A Renaissance Technologies LLC hedge fund’s investors probably avoided more than $6 billion in U.S. income taxes over 14 years through transactions with Barclays Plc and Deutsche Bank AG, a Senate committee said.

The hedge fund used contracts with the banks to establish the 'fiction' that it wasn’t the owner of thousands of stocks traded each day, said Senator Carl Levin, a Michigan Democrat and chairman of the Permanent Subcommittee on Investigations. The maneuver sought to transform profits from rapid trading into long-term capital gains taxed at a lower rate, he said.

An accompanying Bloomberg/ Businessweek story described testimony at a Senate hearing by the Renaissance co-Chief Executive Officer Peter F Brown,

Renaissance was founded by the mathematician James H. Simons, whose fortune is now estimated by Bloomberg Billionaires Index at about $15.5 billion.

Brown became co-CEO with Robert L. Mercer in 2010 after Simons retired and became non-executive chairman. Before joining the firm in 1993, he was a language-recognition specialist at International Business Machines Corp.

Mr Brown testified that the company was not so much trying to avoid taxes by the complex strategy but simply to make even more money.    But, per the New York Times, Senator Levin

focused on the lucrative nature of the transactions, most of which took place using Renaissance employees’ money. Between 1999 and 2010, the fund used basket options to produce profits of more than $30 billion, Mr. Levin said. Barclays and Deutsche Bank together made more than $1 billion in revenue.

Mr Brown's firm seems, unlike Citigroup, to have a record of financial success, and no one is accusing Mr Brown or his firm of being responsible for the global financial collapse.  However, Mr Brown is certainly a very rich Wall Street insider.  Also, as we noted in 2009, his firm clearly has had major involvement in health care investments.   And the current hearings emphasize concerns that his firm has been executing questionable tax avoidance strategies.

Mr Brown has one other very major tie to health care.  As  noted in 2009 on Health Care Renewal, but apparently only parenthetically by one recent news article, (again from Bloomberg, written before the Senate hearing),

Brown lives in Washington with his wife, Margaret Hamburg, the commissioner of the U.S. Food and Drug Administration. She was appointed by President Barack Obama in 2009.

In 2009, we noted that as a condition of Dr Hamburg's leadership of the US FDA, her husband, Mr Brown, would have to divest his shares of four Renaissance funds.  However, it is obvious that he remained at and became the co-CEO of Renaissance since. 

While the current leader of the FDA clearly has medical and health care experience, she is also steeped in the culture of finance and Wall Street.

Summary

Thus we have two recent stories of how top health care leadership positions in the US government are held by people with strong ties to the world of finance, but not always with any direct health care or public health experience.  Why was the wife of a hedge fund magnate the best person to run the FDA?  Why was a person not known in "health policy [or health care] circles" the best person to run the Department of Health and Human Services?  Why was a Robert Rubin protege from Citigroup the best person to be a Senior Counselor at DHHS?  Presumably there were many plausible candidates for these government positions.  Why was it not possible to find people to fill them who were not tied to Wall Street?  Why was it not possible to find people with profound understanding of and sympathy for the values of health care and public health to fill all of them?   

The leadership of health care and finance continue to merge.  This seems to be one broad explanation for why both fields continue to be notably dysfunctional.  While Wall Street has spread around plenty of money to influence public opinion and political leaders, many still remember how its foolish and greedy leadership nearly caused another great depression.  It is likely that the influence of Wall Street culture on the leadership of health care organizations, be they governmental, academic, other non-profit, or commercial, has fostered the continuing financialization of health care, with its focus on "shareholder value," that is, putting short-term revenue ahead of patients' and the public's health.

I strongly believe health care would be better served by leadership that puts patients' and the public's health first.  Occasionally people with such values may come from a finance or economics background.  However, in an era where many people continue to believe "greed is good," we at least ought to confirm that health care leaders really are about health care first, and money a distant second.

ADDENDUM (20 August, 2014) - This was re-posted on the Naked Capitalism blog.

8:27 AM