How Many Straws? - After $60 Million Settlement for Poor Manufacturing Quality, Hospira Warned by FDA, Then Assessed Punitive Damages for Firing Whistle-Blower

How many legal cases suggesting failures of leadership of large health care corporations will it take to break the back of health care? 

$60 Million Settlement of Class Action Alleging Cost Cutting Led to Poor Manufacturing of Drugs and Devices

Earlier this year, we posted about the $60 million settlement of a class action lawsuit brought by investors in Hospira Inc,  a drug and device manufacturer.  The plaintiffs had contended that "cost cutting aimed at boosting short-term profitability," and ostensibly "shareholder value" lead to "gutting quality control efforts," and ultimately to quality problems discovered by inspections by the US Food and Drug Administration (FDA).

This case was brought not by law enforcement officials or regulators, but by stock holders who believed that their investments were degraded by management misbehavior. Nonetheless, as is usual in most settlements of civil cases involving big health care organizations, according to Law360, Hospira managers were able to assert,

Defendants deny that they have violated the federal securities laws or any laws and maintain that their conduct was at all times proper and in compliance with all applicable provisions of law.

Note also that company executives, including CEO Michael Ball, were named as defendants, but I could find no record that they had to pay anything themselves.

So this, like many other legal settlements we have discussed, only seemed to serve as a marker of probable, but not definite misbehavior by the leadership of a big health organization that led to problems with the manufacture of drugs or devices. This is concerning since the public and health care professionals trust drug and device manufacturers to proffer products of good quality.  Yet the resolution of the case left lingering uncertainty because the defendants could settle without admitting any wrongdoing.

FDA Warnings, and Punitive Damages for Firing a Whistleblower

Some more evidence that there really were quality problems in Hospira's manufacturing operation appeared in October, 2014, when the FDA warned the company about particles found in drugs manufactured in its Australian factory (per the Chicago Tribune).  

Furthermore, in November, 2014, a story appeared that not only corroborated the existence of important issues with manufacturing quality at Hospira, but suggested that the company had tried to cover up these problems.  As reported by Crain's Chicago Business,

A Lake County jury awarded almost $10 million to a former Hospira employee, finding that the company fired him because he raised concerns that it covered up quality and safety issues with a product. 

In particular, 

The former employee, Angel Estrada, was a vice president of quality systems and compliance for the Lake Forest-based pharmaceutical company from September 2010 to September 2011, when the company fired him, according to a lawsuit filed in Lake County Circuit Court.

Estrada raised concerns to supervisors that Hospira was not addressing issues in one of its medical pumps that a hospital in Spain reported to the company. The hospital reported that air bubbles had occurred in the device when used on children, which can cause fatalities, according to the complaint.

The lawsuit alleges that Estrada reached out to his superiors, including Hospira CEO Michael Ball, to address the reported issues and notify the FDA and European regulators of the pump's alleged defects.

The lawsuit alleges that on the same day Estrada sent Ball a report, two employees under Estrada were fired 'purportedly for altering a record during the course of an audit.' Hospira fired Estrada 'under the pretext of not properly investigating' one of the employee's conduct during the audit, the lawsuit says.

The real reason he was fired 'was to quash his reporting of the dangers associated' with the pump, the suit alleges.

The jury issued its verdict earlier this month. Of the almost $10 million Estrada was awarded, $7 million was punitive damages.

So in this case, a high ranking corporate executive tried to blow the whistle because of quality problems affecting the manufacture of a medical device.  These problems put patients at risk, and pediatric patients at that. His whistleblowing was vigorous, going as high as the company CEO.  Yet, the jury found that the company responded by firing the whistleblower.  

Still, not surprisingly,

Hospira said it will appeal and that it maintains that the allegations are 'fully without merit.'

That remains management's contention, but the jury found otherwise, and emphasized this finding with punitive damages.

Summary

These cases, added to all our other discussions of legal settlements, crime, and corruption in health care, suggests that bad behavior by leaders of large health care organizations is rampant.  Yet these cases also suggest how hard it is to understand the scope of the problem.  Each of the cases above involving Hospira seemed to proceed in a vacuum, uninformed by previous cases.  None got much media attention.  (For example, the latest jury findings only appeared in two media outlets, as far as I can tell, and both were in Chicago.)  There have been few efforts, beyond those of your humble servant, to try to link various civil, criminal, and regulatory cases involving large health care organizations together in any sense.  Continued lack of awareness of the scope of the problem of management misbehavior in health care mitigates against finding any effective solutions.

Furthermore, the cases above, like most others we have discussed, did not lead to any negative consequences to any individuals for authorizing, directing, or implementing the bad behavior, even though the behavior may have lead to their individual enrichment.  Managers in this era of "shareholder value" are often lavishly awarded for cost cutting that increases short term revenue.  Note that the top executives of Hospira have been lavishly rewarded.  According to the company's 2014 proxy statement, its five top executives each had total compensation exceeding $2,750,000 in 2013.  CEO Michael Ball, who was named as a defendant in the case settled earlier this year, and allegedly ignored the whistleblower's warnings in the most recent case, received $9,892,283.  It is quite possible that all these executives at least indirectly benefited financially from the cost cutting that lead to the quality problems implied by the cases above. Yet as long as there is no accountability for any person who was directly involved in authorizing, directing, or implementing the bad behavior, or who might have benefited from being furnished plausible deniablity about it, future bad behavior will not be deterred.

So how many more cases will it take before we start holding the leaders of large health care organizations accountable?  Will we do so before the back of our health care system is broken?

12:27 PM

Are Million Dollar Plus Business Trained Managers the Right People to Lead Health Care in the Time of Ebola?

You can guess my opinion on the answer.

Introduction

News and opinions about Ebola virus are swirling around the US, fueled by a tragic epidemic in West Africa, and fears that more infections could appear here.  On October 6, 2014, I posted my concerns that despite a tremendous amount of confidence expressed by government officials and health care leaders, our dysfunctional health care system might have trouble containing Ebola virus.  Less than two weeks later, my concerns do not seem so extreme.  The first patient to be diagnosed with Ebola virus in the US has died.  Two nurses who cared for him now have the virus.

There seem to be millions of words on paper and on the internet about Ebola appearing every day.  So I certainly do not want to try to deal with the problem in all its aspects.  I do want to revisit a particular set of issues from my October 6 post: the hazards posed by generic management deluded by business school dogma running health care institutions in the time of Ebola.  In particular, my focus is the management of the US hospital at which one patient died, and two nurses were infected, based on what has come out since October 6.

The Incoherence of Hospital Leaders

On October 6, we noted that the hospital, Texas Health Presbyterian, part of the Texas Health Resources hospital system, had issued conflicting and confusing statements about why the first Ebola patient, Mr Thomas Eric Duncan, was sent home from the hospital when he first presented.  The first specific statement by hospital managers was that there had been a problem with the hospital's electronic health record (EHR), as had been suspected by my fellow Health Care Renewal blogger, InformaticsMD.  Then the hospital retracted that statement, but provided no explanation with which to replace it.

Since then, there have been more inconsistencies in statements made by hospital managers.

Fever or No Fever?

First hospital managers said Mr Duncan arrived without a fever, but then review of his medical records indicated his temperature was as high as 103 degrees F while he was in the hospital, a fever high enough that it might reasonably have prompted admission given his other symptoms, even if Ebola was not a concern.  (See this Dallas Morning News story.)

Readiness for Ebola Patients?

Hospital managers assured the public they were ready for Ebola virus patients, e.g., in the Dallas Morning News story of September 30, 2014, 

When Ebola arrived, they were ready.

The staff at Texas Health Presbyterian Hospital of Dallas did a run-through just last week of procedures to follow if the deadly virus landed in Dallas.

'We were prepared,' Dr. Edward Goodman, an epidemiologist at Texas Health Presbyterian, said Tuesday in a news conference. 'We have had a plan in place for some time now in the event of a patient presenting with possible Ebola. We are well-prepared to deal with this crisis.'

Presbyterian said it is following recommendations from the U.S. Centers for Disease Control and Prevention and the Texas Department of Health in responding to the patient, described as being 'critically ill' at the hospital in northeast Dallas.

All precautions are being taken to protect doctors, nurses and others in the hospital, officials said.

Sadly, this statement soon seemed, as one politician once said, inoperative. an October 14 Washington Post article described how hospital health professionals had to essentially make up their procedures as they went along.

The hospital that treated Ebola victim Thomas Eric Duncan had to learn on the fly how to control the deadly virus, adding new layers of protective gear for workers in what became a losing battle to keep the contagion from spreading, a top official with the Centers for Disease Control and Prevention said Tuesday.

'They kept adding more protective equipment as the patient [Duncan] deteriorated. They had masks first, then face shields, then the positive-pressure respirator. They added a second pair of gloves,' said Pierre Rollin, a CDC epidemiologist.

Also,

He said the hospital originally had no full-body biohazard suits equipped with respirators but now has about a dozen. Protocols evolved at the hospital while Duncan was being treated, he said: 'Collecting samples, with needles, then you have to have two people, one to watch. I think when the patient arrived they didn’t have someone to watch.'

Worse, in the last 24 hours, there have been reports by anonymous people said to be nurses at Texas Health Presbyterian that the hospital was clearly not ready, per the Los Angeles Times,

The nurses' statement alleged that when Duncan was brought to Texas Health Presbyterian by ambulance with Ebola-like symptoms, he was 'left for several hours, not in isolation, in an area' where up to seven other patients were.  'Subsequently, a nurse supervisor arrived and demanded that he be moved to an isolation unit, yet faced stiff resistance from other hospital authorities,' they alleged.

Duncan's lab samples were sent through the usual hospital tube system 'without being specifically sealed and hand-delivered. The result is that the entire tube system … was potentially contaminated,' they said.

The statement described a hospital with no clear rules on how to handle Ebola patients, despite months of alerts from the U.S. Centers for Disease Control and Prevention in Atlanta about the possibility of Ebola coming to the United States.

'There was no advanced preparedness on what to do with the patient. There was no protocol. There was no system. The nurses were asked to call the infectious disease department' if they had questions, but that department didn't have answers either, the statement said. So nurses were essentially left to figure things out on their own as they dealt with 'copious amounts' of highly contagious bodily fluids from the dying Duncan while they wore gloves with no wrist tape, flimsy gowns that did not cover their necks, and no surgical booties, the statement alleged.

'Hospital officials allowed nurses who interacted with Mr. Duncan to then continue normal patient-care duties,' potentially exposing others, it said.

In response, the official hospital statement (authored by one Wendell Watson, "a Presbyterian spokesman," according to the AP) contained vague assurances, but no specific responses to the allegations,

'Patient and employee safety is our greatest priority, and we take compliance very seriously,' the hospital said in a statement. 'We have numerous measures in place to provide a safe working environment, including mandatory annual training and a 24-7 hotline and other mechanisms that allow for anonymous reporting. Our nursing staff is committed to providing quality, compassionate care, as we have always known, and as the world has seen firsthand in recent days. We will continue to review and respond to any concerns raised by our nurses and all employees.'

So while hospital officials (and local and national politicians and government leaders) kept up reassuring statements that our sophisticated, high-technology hospitals were totally ready to deal with a disease like Ebola, the reality appeared far different. 

Other Inconsistencies

According to a USA Today story, other inconsistencies included hospital statements about the date Mr Duncan's diagnosis was confirmed, and whether or not the hospital was diverting ambulances.

Were Health Professionals Silenced?

Of course, given the suddenness of the arrival of Ebola in the US, the acuity of the first patient, and the general atmosphere of panic, initial confusion in public statements however critical the information they were meant to contain may be, is understandable.

However, there are now allegations that hospital management was not merely confused, but trying to keep critical information secret, and the allegations do not seem incredible.

In a Washington Post story on October 12, about how many US hospitals seem not well prepared for Ebola infected patients, appeared this from Bonnie Castillo, director of Registered Nurse Response Network, part of the union, National Nurses United,

Castillo said the union has been trying to contact nurses at Texas Health Presbyterian Hospital, where Thomas Eric Duncan, the Liberian man diagnosed with Ebola, died Wednesday.

'That hospital has issued a directive to all hospital staff not to speak to press,' Castillo said. 'That is a grave concern because we need to hear from those front-line workers. We need to hear what happened there. … They have them on real lockdown. There is great fear. This hospital is not represented by a union. Our sense is they are afraid to speak out.'

The Los Angeles Times story included,

The Dallas nurses asked the union to read their statement so they could air complaints anonymously and without fear of losing their jobs, National Nurses United Executive Director RoseAnn DeMoro said from Oakland.

The October 14 Washington Post story noted

the labor organization National Nurses United read a statement that it said came from nurses at the hospital who 'strongly feel unsupported, unprepared, lied to and deserted to handle their own situation.'

The AP story of October 15 stated,

The Presbyterian nurses are not represented by Nurses United or any other union. DeMoro and Burger said the nurses claimed they had been warned by the hospital not to speak to reporters or they would be fired.

The AP has attempted since last week to contact dozens of individuals involved in Duncan's care. Those who responded to reporters' inquiries have so far been unwilling to speak.

 Covering up information vitally needed by health care professionals, other institutions, the government, etc to better manage a potentially fatal disease that is already epidemic in other countries appears completely unethical.  Doing so to preserve the reputation of managers seems reprehensible.  But the implication of the recent stories is that is what happened. 

Why Hospital Managers May Not Deserve Our Trust

The US has had no recent experience with any disease like Ebola.  So that mistakes, sometimes very serious ones, were made in the management of the first Ebola patients is not a big surprise.
 
What may be a big surprise to many Americans is how untrustworthy health care leaders, and in particular the managers of Health Texas Presbyterian hospital and its parent system, Health Texas Resources now appear.  After all, USA Today published on October 14, "Texas Health Presbyterian was a respected, renowned hospital."  While even people at respected, renowned institutions make mistakes when confronted with sudden, unfamiliar problems, should not the institution's leaders at least be trusted to in their public pronouncements?

Instead, it appears that the leaders appeared tremendously overconfident, and worse, may have silenced employees from raising concerns that could have reflected badly on leadership.  This occurred in a context in which transparency was imperative so that other people who might have to deal with Ebola patients might be better prepared.


On the other hand, based on what we have been posting on Health Care Renewal for nearly 10 years, the conduct of the Texas Health Resources leaders should have come as no surprise.  On Health Care Renewal we have been connecting the dots among severe problems with cost, quality and access on one hand, and huge problems with concentration and abuse of power, enabled by leadership of health care organizations that is ill-informed, incompetent, unsympathetic or hostile to health care professionals' values, self-interested, conflicted, dishonest, or even corrupt and governance that fails to foster transparency, accountability, ethics and honesty. 

We have seen many examples of hospital executives who seemed vastly impressed by their own brilliance, egged on by board members who were themselves executives of other organizations, and by marketing and public relations functionaries dependent on these executives for their own career advancement.  In particular, we have posted examples of hospital CEOs and other top executives making millions of dollars a year based on their supposed "brilliance," or "visionary" capacity, at least according to the board members who supposed to be exercising stewardship over their institutions, and the public relations people they hired.  Such brilliance has often been asserted, but rarely been explained or justified  (The latest example was here, and much more discussion is here.)

Most such ostensibly "brilliant" hospital executives had no direct experience in clinical care, public health, or biomedical science.

Making hospital leaders feel entitled to make more and more money regardless of their or their institutions' performance seems to be a recipe for "CEO Disease," leading to disconnected, unaccountable, self-interested leaders.  Hospital leaders suffering from the CEO disease may be particularly willing to countenance suppression of any facts or ideas that might raise doubts about their brilliance.  

So the leadership of Texas Health Resources may in fact be very typical of that of large non-profit hospital systems.  THR is such a system.  A Dallas Morning News article about Mr Doug Hawthorne, the Texas Health Resources CEO who just retired in September, 2014, stated

In 1997, Doug Hawthorne helped reshape the health care industry in North Texas by leading the creation of Texas Health Resources, an alliance of Presbyterian Healthcare Resources, Harris Methodist Health System and Arlington Memorial Hospital.

By 2014,

 With more than 22,000 employees in fully owned and joint venture operations, Texas Health is one of the largest care providers in North Texas. For its 2012 fiscal year, it had $3.7 billion in total operating revenue and $5.3 billion in total assets.

For leading this system, Mr Hawthorne made a lot of money, although apparently no recent data is available on his compensation,

He was among the most highly compensated not-for-profit CEOs in the region. For 2012, the most recent information available, his base salary was about $1 million and his bonus was about $1.1 million.

It should be no surprise that to justify this compensation, Mr Hawthorne was proclaimed a visionary.  According to the Dallas/ Fort Worth Healthcare Daily, Mr Hawthorne was inducted in 2014 into the Texas Business Hall of Fame.  At that time, 

'A healthcare visionary, Mr. Hawthorne is at the helm of one of the largest faith-based, nonprofit health care delivery systems in the United States, Texas Health Resources,' the Hall said in a release announcing the induction.

Yet Mr Hawthorne had no direct patient care experience, public health experience, or biomedical or clinical science experience.  Mr Hawthorne is on the board of directors of the LHP Hospital Group Inc, a for-profit that provides capital and services to non-profit hospitals.  The official bio, posted by LHP stated his educational background only included

B.S. and M.S. degrees in healthcare administration from Trinity University in San Antonio.

Furthermore, as we mentioned earlier, the current CEO of Texas Health Resources, Mr Barclay E Berden, who has only been on the job since September 1, 2014, also was hailed by system board of trustees for his "unique leadership strengths."  His current compensation is unknown, but I would guess is likely over $1 million/year.  He highest degree is a MBA, and like his predecessor, had much experience in hospital management, but apparently none in clinical care, public health, or biomedical science. 

Summary

Texas Health Resources' recent CEOs have been paid millions, and hailed for their brilliance, despite a lack of any direct experience in health care, public health, or biomedical science.  Leaders convinced of their own brilliance may live in bubbles that prevent penetration of any ideas or facts that may challenge that brilliance, making them thus susceptible to hubris.

So should we have been surprised that the leadership of the first US hospital system to directly confront Ebola de novo seemed more concerned with polishing their supposed brilliance than with transparently providing the information that other people who have to confront Ebola in the future so greatly need?

No, but one tiny silver lining to the time of Ebola is that it may make it glaringly obvious that we need true health care reform that focuses on reforming the leadership of big health care organizations. In particular, we need leadership that is well-informed about health care and public health; that upholds the values of health care professionals, specifically by putting patients' and the public's health ahead of their own remuneration; is willing to be held accountable; and is honest and unconflicted.

Allowing the current dysfunction to continue, while it will be very profitable to the insiders who run the system, will continue to enable tragic outcomes for patients and the public.  

1:02 PM

Retrospective on the Blumsohn - Procter and Gamble -Sheffield University Affair: the Unhappy Lives of Whistleblowers and the Anechoic Effect

Introduction - the Unhappy Lives of Whistleblowers

The UK Times Higher Education Supplement just published a feature on the unhappy fate of academic, including academic medical whistleblowers.

Whistleblowers in universities can hit the national headlines for shining light on issues of public interest, only for their careers to end up in very dark places.

Some of higher education’s most prominent whistleblowers paint a bleak picture about the impact on their subsequent careers. They talk about being persecuted by colleagues after coming forward. But even after leaving their jobs, some believe they still suffer a legacy. One talks about being 'effectively blackballed' from ever working again in higher education.

For other whistleblowers, exile is self-enforced.

It is noteworthy that the graphic for the article showed a whistleblower with a ball and chain, but the ball is in the shape of a whistle.

Summary - The Blumsohn - Actonel - Procter and Gamble - Sheffield University Case

The article focused on the case of Dr Aubrey Blumsohn, which we discussed recently, and have posted about since 2005 (here).  For all relevant posts, look here.

The Times provided a good summary.  It is worth quoting it here, as a reminder of a very important case which has had far too few echoes.

[The] case began in 2002, when he was working in the research unit led by Richard Eastell, professor of bone metabolism at Sheffield. The unit was researching the effects on patients of Procter & Gamble’s anti-osteoporosis drug Actonel.

Blumsohn raised concerns about abstracts for conference papers submitted by P&G, under his primary authorship, but without the firm having granted him full access to the drug trial data.

His concerns were first raised with senior colleagues and then reported in Times Higher Education in 2005.

The data analysis for the research was carried out by P&G, which paid for the research and which did not release key data to Eastell and Blumsohn. According to Blumsohn, this prevented honest publication of research.

After coming forward, Blumsohn has previously said, his other research work was used as the basis for a series of research grant applications that Eastell sponsored and signed off for a PhD student, without acknowledging Blumsohn’s input and despite his objections.

In 2005, he told the university that he was speaking to the media after losing faith in its internal systems for dealing with such allegations. He was subsequently suspended and told by Sheffield that he could lose his job over alleged 'conduct incompatible with the duties of office', including 'briefing journalists' and 'distributing information, including a Times Higher article, to third parties with apparent intent to cause embarrassment'.

He later reached a settlement with the university and it dropped all disciplinary charges. However, he left the university in 2006.

Blumsohn says of what happened afterwards: 'I withdrew from medicine completely, I withdrew from academia and ultimately withdrew my medical registration as well.'

Given the impact on his career, does Blumsohn regret coming forward with his concerns? 'I had to do that,' he says. 'As a scientist, I couldn’t just go along with having my name attached to manipulated publications, based on secret data ghost-analysed by pharmaceutical companies.'

Could Sheffield have dealt with his concerns more effectively? 'I don’t know how Sheffield could have done better, or indeed how any medical school could have done,' Blumsohn replies.

He clarifies: 'The problem these days is that some parts of universities – most notably medical schools but some other parts as well – have so many conflicts of interest and financial imperatives guiding what they do, I’m not sure other universities would necessarily have behaved differently from Sheffield. When millions of pounds are at stake both in private fees for academics and university funding, and a pharmaceutical company is wanting you to dance, the pressure to go along and to get staff to remain quiet is overwhelming.'

A few comments are in order.  While universities appear to be places of free speech and open discussion, note that Sheffield apparently could punish Dr Blumsohn simply for talking to journalists, but particularly for simply saying things that might embarrass university leaders.  So university leaders wish not to be embarrassed seems to trump free speech and academic freedom.

Second, Dr Blumsohn rightly pointed out that the issue was really scientific integrity, not embarrassment.  He tried to stop what he perceived as manipulation of clinical research by a pharmaceutical company to support its vested interests in selling a particular drug.  Such manipulation threatened scientific integrity, and ultimately threatened patients' health.

Third, Dr Blumsohn also rightly pointed out in retrospect that what university managers really seemed to fear was not just personal embarrassment, but curtailment of money flows from industry to their institution that made them look good, and presumably become more wealthy.

Few Echoes in the Discussion of Whether the Former Procter and Gamble Executive on Whose Watch the Affair Occurred Should be US Veterans Affairs Secretary

As we discussed here, a top executive at Procter and Gamble whose remit at the time the affair occurred seemed to include Actonel and research related to it was nominated to run the US Department of Veterans Affairs, and hence the whole VA health system.  Only two blogs, including this one, raised the issue of the Blumsohn - Actonel - Procter and Gamble - Sheffield University affair as relevant.  There was no other public discussion of this connection.  The former Procter and Gamble executive was confirmed, and now runs the Department of Veterans Affairs.

Summary

This is another example of how leaders of big health care organizations remain unaccountable for their organizations' misdeeds.  The lack of any mainstream discussion of the Blumsohn - Actonel - Procter and Gamble - Sheffield University affair in connection to the VA nomination demonstrate the anechoic effect.  Even the most determined whistleblowers often do not get the public notice they deserve, and their revelations do not have the effects they ought to have, even after the whistleblowers have paid a very high price to try to spark public discussion.

So anyone thinking about trying to get public notice for some fact or issue that threatens the powers that be will think twice, both about the potential downsides to the whistleblower, and the potential ineffectiveness of these attempts.    

In the past two weeks, I have heard in confidence about three stories in which discussion of issues that might offend the powers that be, specifically, the leaders of big health care organizations, has been suppressed.  I am convinced that for every Dr Aubrey Blumsohn, there are dozens who are aware of deception, other unethical conduct, even crime and corruption that could harm patients and patient care, but are afraid to speak out.

Of course, as long as these issues remain hidden, the damage to patients and the public's health continues to be done.

We clearly need changes in public policy to protect whistleblowers and foster free speech about important issues in academics and health care.  We need health care professionals, health care researchers, health care policy makers, and those among the public who care about health care and health care need to organize to support free speech and academic freedom.  Otherwise, the anechoic effect will continue to befog all of health care.

Hat tip to Dr Carl Elliott writing for the Fear and Loathing in Bioethics blog.

11:31 AM

"Phony Consulting and Royalty Agreements," "Chocolate" Bribes, a Sales Representative Doubling as a Stripper, Oh My - Three Settlements for Othrofix

On this US election day, we seem to be in a mini-squall of cases involving unethical, deceptive, and now very colorful marketing practices used to push drugs and devices. 

We recently discussed a settlement of allegations of deceptive marketing practices and kickbacks by pharmaceutical company Boehringer-Ingelheim (here), a US congressional report alleging deceptive influence by Medtronic marketers over ostensibly scholarly publications (here), a study of documents released after litigation that appear to show how Pfizer had a systemic marketing campaign that used controlled trials as deceptive marketing vehicles (here),

Now three separate settlements by device/ biotechnology company Orthofix have come to light.

Settlement 1 - "Phony Consulting and Royalty Agreements," and Prostitution as Kickbacks, and a Sales Representative as Stripper

A Bloomberg article outlined Orthofix's two latest settlements.  The newest seems the most audacious, or bodacious,

Orthofix International NV, (OFIX) a maker of spinal implants, agreed to pay the U.S. $30 million to settle claims that a subsidiary paid illegal kickbacks and provided prostitutes to doctors in return for orders.

The subsidiary, Blackstone Medical Inc., paid kickbacks to spinal surgeons in the form of phony consulting and royalty agreements, and travel and entertainment to entice them to use its products, the U.S. Justice Department said in a statement today.

This case adds to the mounting pile of evidence that many of the financial relationships among physicians and health care academics and drug, device, biotechnology and other health care corporations are not merely conflicts of interest incidental to innovation.  In particular, Bloomberg reported,

[Whistle blower Susan] Hutcheson alleged that officials of Blackstone, purchased by Orthofix in 2006, violated kickback and false-claim laws by setting up a system to compensate doctors under sham consulting agreements and phony research grants, according to court filings. The sales executive said the company also offered lavish travel opportunities to doctors who implanted its products, the filing said.

Some doctors were paid as much as $8,000 a month under the fictitious consulting agreements, Hutcheson said in her suit, filed in federal court in Massachusetts. Orthofix’s U.S. unit is based in Lewisville, Texas. Some also received phony research grants for as much as $18,000, the suit added.

Then there was this colorful detail,

Blackstone salespeople also were urged to take surgeons out for expensive dinners, escort them to strip clubs and pay for liaisons with prostitutes to get their business, Hutcheson said in the suit.

One female sales manager in Dallas agreed to disrobe and join strippers on stage at the request of two surgeons to whom she was pitching the company’s products, Hutcheson said in her suit. The sales manager was demoted, not fired, over the incident, Hutcheson said in the suit.

We often hear from drug, device, and biotechnology companies that their sales efforts are all about providing needed information to physicians, information they could not otherwise obtain.  In this case, the information appeared to be rather anatomical, but also rather personal.

The AP coverage of this store (here, via Businessweek) also noted that the settlement involved a corporate integrity agreement.  Neither story mentioned any admissions made by the company.  As far as I could tell, no corporate executives suffered any consequences as part of this settlement.

Settlement 2 - Fraud, Obstructing the US Government, and Less Colorful Kickbacks to Promote Bone Growth Stimulators

The article did nor provide any helpful photographs, but it did note that Orthofix recently made a second settlement.

The settlement’s approval comes after Orthofix officials agreed to pay $42 million to resolve a separate whistle-blower suit and a criminal probe of allegations it paid kickbacks to doctors who used its bone-growth stimulators.


One of its units will plead guilty in federal court in Boston federal court to a single felony count of obstructing a U.S. government audit and pay a $7.8 million fine, according to a June 7 regulatory filing. Orthofix also will pay $34.2 million to resolve whistle-blower claims that the company defrauded the federal Medicare program over bone-growth stimulators, which patients wear after surgery to speed healing.

Amazingly, unlike the first settlement, and unlike most settlements we have discussed,

Five Orthofix employees have pleaded guilty to criminal charges in connection with probes of the kickback allegations. Thomas Guerrieri, an Orthofix vice president, pleaded guilty in April to violating the federal anti-kickback statute by setting up fake consulting agreements for doctors who used the company’s products.

Note that we discussed a surgeon who pleaded guilty to accepting kickbacks from multiple device companies, including the Blackstone subsidiary of Orthofix, here in 2008.

Settlement 3 - "Chocolate" Bribes to Mexican Government Officials

Finally, the AP story noted in passing "the recent resolution of a federal Foreign Corrupt Practices action" against the company.  I could not find any news coverage of that, but in July there did appear a SEC press release.

The Securities and Exchange Commission today charged Texas-based medical device company Orthofix International N.V. with violating the Foreign Corrupt Practices Act (FCPA) when a subsidiary paid routine bribes referred to as 'chocolates' to Mexican officials in order to obtain lucrative sales contracts with government hospitals.

The SEC alleges that Orthofix’s Mexican subsidiary Promeca S.A. de C.V. bribed officials at Mexico’s government-owned health care and social services institution Instituto Mexicano del Seguro Social (IMSS). The 'chocolates' came in the form of cash, laptop computers, televisions, and appliances that were provided directly to Mexican government officials or indirectly through front companies that the officials owned. The bribery scheme lasted for several years and yielded nearly $5 million in illegal profits for the Orthofix subsidiary.


Orthofix agreed to pay $5.2 million to settle the SEC's charges.

Also,

Orthofix also disclosed today in an 8-K filing that it has reached an agreement with the U.S. Department of Justice to pay a $2.22 million penalty in a related action.

Summary  

So the box score here includes settlements of legal actions alleging bribery and kickbacks, a corporate integrity agreement, a guilty plea by a company subsidiary to obstructing the US government, and multiple guilty pleas by company executives.  The bribes and kickbacks were provided in various colorful forms.  

The variety of unethical behaviors unearthed suggests a company with a seriously deranged corporate culture.  Whether the various actions taken against it, including the very unusual punishments meted out to some of its apparently mid-level executives will change its behavior, or serve as a lesson to other companies and their leaders is not clear.  Whether they are sufficient to suggest anyone should trust this company, its leaders, or its products seems questionable.   

This story adds to our various compilations of legal settlements and tales of crime, including bribery, kickbacks and fraud involving major health care organizations which suggest serious, deep afflictions within the culture of our commercialized health care system.  Yet almost nowhere, except here on Health Care Renewal are there calls for serious reforms to restore trust in our health care organizations and their leaders.

As we have said endlessly, up to now, such legal settlements seemingly have had no effect on the bad behavior of big health care organizations, while they continually erode trust in these organizations and their leadership, and trust in physicians to put patients ahead of personal gain.

Furthermore, these cases seem to be part of a larger social problem. It seems that nowadays the leadership of large, powerful organizations feels free to promote their own interests using psychologically sophisticated but deceptive marketing and public relations strategies no matter what their effect on the public welfare.

Again as we have said all too many times before, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences. Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Maybe after all the election hoopla dies down here in the US, we can finally have a serious conversation about health care reform that will make our health care system more trustworthy. 

2:28 PM

Health Care Academics' Unrest and Bad Health Care Leadership?

Last month we discussed a recent, large scale study of physician burnout, and wondered whether it would finally inspire some discourse about why physicians are really so upset.  In particular, we hypothesized,  based on some real, if limited data, that physician angst, dissatisfaction, burnout, etc may mainly be a response to the problems with leadership and governance of health care organization we post about on Health Care Renewal.

After that post, one of our scouts found a very interesting and relevant article from earlier this year which got little attention at the time, but deserves more.  [Pololi LH, Krupat E, Civian JT, Ash AS, Brennan RT. Why are a quarter of faculty considering leaving academic medicine? A study of their perceptions of institutional culture and intentions to leave at 26 representative U.S. medical schools. Acad Med. 2012; 87: 859-69. Link here.]

Study Design

This was a cross-sectional survey of faculty at 26 medical schools in the US, selected to be similar to the general population of medical schools in the country.  At each school, 150 faculty were randomly chosen stratified by sex and age, and then the sample was enriched to include additional minority faculty and women surgeons, for a total of 4578.

The faculty were sent a multi item survey to assess their perception of the organizational culture of their institutions, and asked about their intentions to continue in or leave their current positions and academic medicine.  Responses to each survey item were allowed to be from 1 = strongly disagree, to 5 = strongly agree.  The items on the survey were combined into various scales.  A number of items on the survey seemed to be related to issues we frequently discuss on Health Care Renewal.  These items ended up in three different scales, entitled Relatedness/Inclusion, Values Alignment, and Ethical/Moral Distress.  The survey items are listed below, grouped by issue, with the scales into which they were combined noted.

Issue: Mission-Hostile Leadership

Administration only interested in me for revenue   (Reverse coded) (Values Alignment)
Institution committed to serving the public (VA)
Institution's actions well-aligned with stated values and mission (VA)
Institution puts own needs ahead of educational/clinical missions (RC) (VA)
My values well-aligned with school's (VA)
Institution awards excellence in clinical care (VA)
Institution does not value teaching (RC) (VA)
Have to compromise values to work here (Ethical/Moral Distress)

Issue: Deceptive, Unethical Leadership

Felt pressure to behave unethically (Ethical/Moral Distress)
Need to be deceitful in order to succeed (EMD)
Others have taken credit for my work (EMD)

Issue: Generation of the Anechoic Effect by  Suppression of Free Speech, Academic Freedom, Dissent, Whistle-Blowing,

Feel ignored/ invisible (RC) (Relatedness/Inclusion)
Hide what I think and feel (RC) (R/I)
Reluctant to express opinion/ fear negative consequences (RC) (R/I)

So in summary, the survey contained quite a few questions about mission-hostile management, comprising nearly all of the Values Alignment scale, some questions about deceptive or unethical leadership, all in the Ethical/Moral Distress scale, and some about generation of the anechoic effect by suppression of free speech, academic freedom, dissent, and whistle-blowing, all in the Relatedness/Inclusion scale.

Results

The response rate was 52% (N=2381.)

Unfortunately, the article did not include the distributions of the responses to individual survey items, and only included the mean and standard error of the scale scores.  The values for the scales of most interest were:
Relatedness/Inclusion  3.56 SE= 0.022
Values Alignment  3.25 SE=0.028
Ethical/Moral Distress 2.36 SE=0.022

Note that the article did not address the degree individual items, especially those listed above, contributed to variation in the scale scores.


A small majority of faculty indicated their intentions to stay at their institutions (57%).  Of the remainder, 14% were considering leaving their school due to dissatisfaction, and another 21% were considering leaving academic medicine due to dissatisfaction.  The remainder were considering leaving due to personal/ family reasons or to retire.

The authors did complex multinomial logit modeling to assess the relationships among the various scales, demographic factors, and intention to leave.  Most relevant to us, Relatedness/Inclusion was significantly related to intention to leave the institution due to dissatisfaction (Coefficient -0.69, p lt 0.001, OR =0.50), as was Values Alignment (-0.39, p=0.04, OR=0.68), but not Ethical/ Moral Distress.  Furthermore, Relatedness/Inclusion was related to intention to leave academic medicine due to dissatisfaction (-0.48, p lt 0.001, 0.62), as was Ethical/Moral Distress (0.60, p lt 0.001, OR =1.82). The article did not address whether individual survey items, including those of most interest listed above, were related to intention to leave.  The article also did not address whether responses to the survey or intention to leave varied across faculty characteristics, medical school characteristics, or individual medical schools. 

Summary and Comments

This very large survey of faculty from multiple US medical schools showed that more than one-third were considering leaving their institutions or academic medicine due to dissatisfaction, indicating a striking prevalence of faculty distress.  Their responses to questions about perceived organizational cultural and leadership problems, including those possibly related to leadership's perceived hostility to the mission, leadership's perceived dishonesty or unethical behavior, and leadership's suppression of dissent, free speech, academic freedom, and whistle-blowing were related to their intentions to leave due to dissatisfaction.

These results suggest the hypothesis that much of faculty angst may be due to the sorts of problems with leadership and hence organizational culture that we discuss on Health Care Renewal.  Since this was a cross-sectional survey, it certainly does not offer scientific proof of this hypothesis.  Note that there is other evidence from numerous cases discussed in Health Care Renewal, qualitative studies and our much smaller study published only in abstract form that also supports this hypothesis (look here). 

One part of the author's discussion of their findings was particularly relevant:

Our findings are congruent with metaanalyses of 25 years of organizational justice research outside medicine. These studies suggest that employee perceptions of organizational justice and an ethical climate are related to increased job satisfaction, trust in leadership, enhanced performance, commitment to one’s employer, and reduced turnover.

 The scale of ethical/moral distress (see Table 1) reflects reactions to the prevailing norms and possible erosion of professionalism and increased organizational self-interest. There is a growing belief that organizations influence and are responsible for the ethical or unethical behaviors of their employees.To our knowledge, faculty perceptions of 'moral atmosphere' and 'just community' embedded in our survey have not been previously investigated in academic medicine, even though the ethical concepts of professionalism and justice can be used to guide the pursuit of excellence in the missions of medical schools. Several scholars have called for academic medicine to attend to its social justice and moral mission. Faculty perceptions
of organizational justice are pivotal to the critical issue of professionalism in medicine. The ethical/moral distress scale in the survey reported here included items such as 'the culture of my institution discourages altruism' and 'I find working here to be dehumanizing.' (See Table 1 for other items in this scale.) In that ethical/moral distress was more strongly related to intent to leave academic medicine entirely than intent to leave one’s own institution, these negative feelings among faculty must be particularly disheartening to them and may color major career decisions.

I believe that the study by Pololi et al adds to the evidence that physician distress is a symptom of a dysfunctional system in which major health care organizations have been taken over by leaders more devoted to self-interest and short-term revenue than the values prized by health care professionals and academics.  This applies obviously to academic medical institutions, but also to other organizations that might have been expected to defend such professional and academic values, such as professional associations, accrediting organizations, and health care foundations.  As we said before, if physicians really want to address what is making them burned out and dissatisfied, they will have to regain control of their own societies, organizations, and academic institutions, and ensure that these organizations put core values, not revenue generation and providing  cushy compensation to their executives, first.  

12:34 PM

Old Mystery Solved? Former FDA Reviewer Speaks Out About Intimidation, Retaliation and Marginalizing of Safety

At my Dec. 2005 post "Report: Life Science Manufacturers Adapt to Industry Transition" I wrote:

... The recognition of a gap in formally-trained medical informatics-trained personnel in the pharmaceutical industry [by Gartner Group] is welcome. For example, from my own experience:

I recall an interview I had last year with the head of the Drug Surveillance & Adverse Events department at Merck Research Labs in a rehire situation [after a 2003 layoff]. I came highly recommended by an Executive Director in the department, to whom I had shown my prior work. This included well-accepted, novel human-computer interaction designs I'd developed for use by busy biomedical researchers for a large clinical study in the Middle East, as well as my work modeling invasive cardiology and leading the development and implementation of a comprehensive information system to detect new device and treatment modality risks in a regional center performing more than 6,000 procedures/year. In addition, I'd worked with the wife of the Executive Director in years prior, when she ran the E.R. of the hospital where I was director of occupational medicine.

Despite all this in my favor, the Executive Director's boss, himself a former FDA adverse events official [a former deputy director of CDER’s office of drug safety, who'd recently moved to the pharma industry he once regulated - ed.], dismissed me in five minutes as I was showing him the cardiology project, saying flatly "we don't need a medical informatics person here." I had driven 80 miles to Rahway for this interview to save the executive a trip to Pennsylvania, where I was originally scheduled to come for the interview, since the executive's father was ill in the hospital. In an instance of profound social ineptness, my effort was not even acknowledged. Perhaps he was in a bad frame of mind, but the dismissal under the circumstances was all the more disappointing.

I recall this was one of the most puzzling hiring debacles I'd ever experienced, as all the senior people in his dept. had recommended he hire me - I was really only there for his approval and signoff - and the work I'd shown him had improved care, saved lives, and saved money.

I may not need to be puzzled any longer.  This story just appeared:

Former FDA Reviewer Speaks Out About Intimidation, Retaliation and Marginalizing of Safety
By Martha Rosenberg, Truthout
July 29, 2012

The Food and Drug Administration (FDA) is often accused of serving industry at the expense of consumers. But even FDA defenders are shocked by reports this week of an institutionalized FDA spying program on its own scientists, lawmakers, reporters and academics that included an enemies list of "actors" and collaborators

... Ronald Kavanagh [FDA drug reviewer from 1998 to 2008]:  ... In the Center for Drugs [Center for Drug Evaluation and Research or CDER], as in the Center for Devices, the honest employee fears the dishonest employee. There is also irrefutable evidence that managers at CDER have placed the nation at risk by corrupting the evaluation of drugs and by interfering with our ability to ensure the safety and efficacy of drug ... While I was at FDA, drug reviewers were clearly told not to question drug companies and that our job was to approve drugs.

Read the entire story at the link.  I won't cover it more here, except to say it's certainly possible to believe certain FDA officials don't want serious people around -- who in addition to being MD's can write serious software to detect drug and device problems -- whose work can get in the way of drug approvals.

-- SS

4:16 PM

Hedge Fund U, Version 2

We have posted frequently on the governance and leadership of academic medical organizations. While one would think that health care organizations, and especially academic health care organizations ought to be held to a particularly high standard of governance, we have noted how their governance is often unrepresentative of key constituencies, opaque, unaccountable, unsupportive of the academic and health care mission, and not subject to codes of ethics. How the governance of organizations with such exemplary missions and sterling repuations got this way has been unclear.

In 2007, we reported on one famous institution which had a more representative, transparent, and accountable form of governance. Let me provide a summary of the background from FIRE, the Foundation for Individual Rights in Education,

For over a century, Dartmouth College provided alumni with an avenue for direct participation in selecting leadership, with eight of the 18 members of Dartmouth's Board of Trustees coming from popular vote (the other ten were appointed by the Board). Starting in 2004, petition candidates—those who had to gather alumni signatures to be nominated—challenged those selected by the Association of Alumni in the annual trustee elections. Alumni responded in kind: over the next four years, four petition candidates were elected to the Board of Trustees.

These trustees spoke out when they perceived their alma mater as not living up to its mission, and Dartmouth students benefited. In May 2005, the college repealed its speech code, and it immediately moved from FIRE's "red-light" rating and became a 'green-light' institution.

These developments did not please everyone, however. Some campus officials viewed the propensity of petition candidates to voice their opinions on illiberal policies as detrimental to the school's image. The Wall Street Journal profiled T.J. Rodgers, a petition-nominated trustee, who explained the criticisms leveled at the 'divisive dissidents.'

>> If 'divisive' means there are issues and we debate the issues and move forward according to a consensus, then divisive equals democracy, and democracy is good. The alternative, which I fear is what the administration and [Board of Trustees Chairman] Ed Haldeman are after right now, is a politburo-one-party rule. <<

As the petition candidates grew in numbers (including George Mason Law Professor Todd Zywicki), so too did the official criticism. After Zywicki expressed disagreement with Dartmouth's leadership, the Board's chairman responded.

Haldeman and his cohorts wrote in a statement on the board's Web site that Zywicki 'violated his responsibilities as a trustee of Dartmouth College, which includes acting in the best overall interests of Dartmouth and representing Dartmouth positively in words and deeds.'

It was clear that a frank discussion of the issues at Dartmouth was not welcome on the governing board. The Trustees thus moved to alter the playing field. In September 2008, the Board declared that it would add five new positions—all hand-picked by current Trustees. The century-long tradition of parity between alumni-elected Trustees and the self-perpetuating Board members was erased. It came as no surprise when the Association of Alumni announced in January that the 2009 election would feature no petition candidates.

In 2007, what really got our attention was the stated rationale for this push towards less representative and accountable governance. Mr Haldeman, the chairman of the board of trustees, announced a smaller proportion of elected trustees would ensure that the board "has the broad range of backgrounds, skills, expertise, and fundraising capabilities needed," and that the board members would possess "even more diverse backgrounds." Yet when we examined the backgrounds of the current charter trustees, we found that they exhibited little diversity. Remarkably, three-quarters (6/8) were in leaders of the finance sector. In 2007, they seemed not very diverse, but why the majority should be in the financial sector, and what implications that had, was then obscure.

Things have changed. In the fall of 2008, the world economy descended into an unprecedented financial collapse. Many concluded that the global economic collapse was caused by arrogance, greed, and corruption within the financial sector.

This suggested that leadership of academia, and academic medicine in particular, by leaders of the finance sector might not, in retrospect, have been a such a good idea. Furthermore, when we had other occasions to look, we found that Dartmouth College was not an isolated case.

We noted that half of the Fellows of Harvard, the university's equivalent of a board of trustees, were from finance, and two were affiliated with corporations at the center of the global financial collapse. We recently found that almost 40% of the board of Yeshiva University were from finance as of the end of 2008. One former board member was Bernie Madoff, now in jail for running a giant Ponzi scheme disguised as an unregistered hedge fund. Yeshiva lost $110 million of its investments with Madoff. Another former member was indicted, accused of fraudulently abetting Madoff's operations. One current member runs a hedge fund that had to pay $180 million to settle other fraud allegations.

So we raised the hypothesis that some of the problems of academia, and particularly the problems of medical academia, may have been at least enabled by leadership more used to working in an increasingly amoral marketplace than to upholding the academic mission. Simultaneously, a commentary in the Chronicle of Higher Education put it this way,

Most college and university boards are composed largely of wealthy people, usually from the worlds of finance, law, and private enterprise. They are sometimes alumni but are often selected for their personal capacity to give, their links to other people who might give, or their historical record of having given.

Many trustees today have in fact been part of the elite sectors of finance, law, and enterprise that have proven improvident, shortsighted, and badly governed. Can they be seen as the wisest of our wise who will bring both generosity and wisdom to the academy?

News items from last week, some generated by release of financial disclosure forms from new members of the current US administration, add insight into what now appears to be a pervasive web of entanglements among academia and the finance sector.

One set of stories was about Lawrence Summers, now chief economic advisor to the US President, but president of Harvard University from 2001-2006. Just after resigning as president, and while still a professor at the university's Kennedy School of Government, Mr Summers suddenly began lucrative relationships with multiple players in the financial sector. Per the New York Times, Mr Summers assumed an amazingly well-paid part-time position at a hedge fund,

Mr. Summers, the former Treasury secretary and Harvard president who is now the chief economic adviser to President Obama, earned nearly $5.2 million in just the last of his two years at one of the world’s largest funds, according to financial records released Friday by the White House.

Impressive as that might sound, it is all the more considering that Mr. Summers worked there just one day a week.

Much is known about Mr. Summers’s days in Washington and Cambridge, but little attention has been paid to his two years in New York, from late 2006 to late 2008, advising an elite corps of math wizards and scientists devising investment strategies for D. E. Shaw & Company.

Mr Summers also collected prodigious speaking fees from many financial corporations, some of which subsequently failed or had to be bailed, out, as per the Washington Post, he

was paid more than $2.7 million in speaking fees by several troubled Wall Street firms and other organizations.

Financial institutions including JP Morgan Chase, Citigroup, Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for an April 16 visit to Goldman Sachs, according to his disclosure form. Summers reported donating two fees totaling $70,000, including the payment from Merrill Lynch, to charity.

Summers received all this money why he was still a faculty member at Harvard. As noted by the Washington Post, he did not leave his faculty position there until 2009.

Although there is no evidence that Summers had financial relationships with corporations in the finance sector while president of Harvard, his sudden and very lucrative jump into that sector after leaving the presidency, and while nominally a full-time faculty member, suggests at least a major alignment of interests. Some commentators have made this point more forcefully, for example, Robert Scheer in the Nation,

Not surprisingly, Lawrence Summers is convinced that he deserved every penny of the $8 million that Wall Street firms paid him last year. And why shouldn't he be cut in on the loot from the loopholes in the toxic derivatives market that he pushed into law when he was Bill Clinton's treasury secretary? No one has been more persistently effective in paving the way for the financial swindles that enriched the titans of finance while impoverishing the rest of the world than the man who is now the top economic adviser to President Obama.

Perhaps this alignment was related to charges that while president of Harvard, Summers helped stifle someone who tried to blow the whistle on excessively risky investment practices involving financial derivatives at the Harvard Management Company. Per the Harvard Crimson,

After a year-long stint at a European investment bank and another at Enron, Iris M. Mack signed on to be a quantitative analyst for Harvard Management Company in early 2002, hoping, she says, to find job security and distance from the risky trading and accounting practices that forced her last employer into bankruptcy in the company charged with managing Harvard’s endowment.

But only a few months later, Mack says she was fired after she raised concerns to University officials about managers’ qualifications and possibly irresponsible usage of financial instruments that could have contributed to the recent and sudden decline in Harvard’s endowment.

In an e-mail sent May 30, 2002 to Marne Levine, chief of staff for then-Harvard President Lawrence H. Summers, Mack detailed her concerns regarding what she deemed HMC’s 'frightening' usage of derivatives and statistical modeling techniques, as well as the Company’s lack of a timely and portfolio-wide risk management system, high employee turnover rate, and low level of productivity in the workplace, specifically among managers.

According to documents and e-mail records, all provided by Mack, Levine had initially assured Mack that their correspondence would remain confidential. But on July 1, HMC chief Jack R. Meyer called Mack into a meeting, in which she was presented with copies of her e-mails, according to a letter sent to Levine and Summers by Mack’s attorney.

The next day, Meyer dismissed Mack, pointing to 'these baseless allegations against HMC [that you sent] to individuals outside of HMC,' the letter says.

Ultimately, Mack says she reached an out-of-court settlement with Harvard over her firing because her lawyers felt that the University did not want to attract media attention from the dismissal....

Now, with the economy in an unprecedented slump in part due to the widespread and unregulated use of derivative contracts, Mack says she feels 'vindicated' but also sad.

'I’m not trying to pretend I’m omniscient or anything, but a lot of people who were quantitative traders, in the back of our minds, we knew a lot of these models were just that: guestimates,' Mack says. 'I have mixed feelings, on the one hand, I wasn’t crazy, I knew what I was talking about. But maybe if more and more people had spoken up, the economy wouldn’t be the way it is now.'

So now we wonder whether the poor governance practices, and resultant poor leadership of many academic health care institutions may have resulted from the increasing dominance of the governance of these organizations by people from the "improvident, shortsighted, and badly governed" finance sector?

11:18 AM

US President Advocates for Research Integrity

US President Barack Obama announced a new emphasis on the integrity of science used to help make public policy decisions. As summarized by the NY Times,

President Obama’s directive on Monday to 'guarantee scientific integrity' in federal policy making could have a far-reaching impact....

The document orders Mr. Obama’s top science adviser to help draft guidelines that will apply to every federal agency. Agencies will be expected to pick science advisers based on expertise, not political ideology, the memorandum said, and will offer whistle-blower protections to employees who expose the misuse or suppression of scientific information.

The idea, the president said in remarks before an audience of lawmakers, scientists, patients advocates and patients in the East Room, is to ensure that 'we make scientific decisions based on facts, not ideology'....

Here are some key parts of the memorandum written by the President:

Science and the scientific process must inform and guide decisions of my Administration on a wide range of issues, including improvement of public health, protection of the environment, increased efficiency in the use of energy and other resources, mitigation of the threat of climate change, and protection of national security.

The public must be able to trust the science and scientific process informing public policy decisions. Political officials should not suppress or alter scientific or technological findings and conclusions. If scientific and technological information is developed and used by the Federal Government, it should ordinarily be made available to the public. To the extent permitted by law, there should be transparency in the preparation, identification, and use of scientific and technological information in policymaking. The selection of scientists and technology professionals for positions in the executive branch should be based on their scientific and technological knowledge, credentials, experience, and integrity.

By this memorandum, I assign to the Director of the Office of Science and Technology Policy (Director) the responsibility for ensuring the highest level of integrity in all aspects of the executive branch's involvement with scientific and technological processes.

Specifically, I direct the following:

1. Within 120 days from the date of this memorandum, the Director shall develop recommendations for Presidential action designed to guarantee scientific integrity throughout the executive branch, based on the following principles:

(a) The selection and retention of candidates for science and technology positions in the executive branch should be based on the candidate's knowledge, credentials, experience, and integrity;

(b) Each agency should have appropriate rules and procedures to ensure the integrity of the scientific process within the agency;

(c) When scientific or technological information is considered in policy decisions, the information should be subject to well-established scientific processes, including peer review where appropriate, and each agency should appropriately and accurately reflect that information in complying with and applying relevant statutory standards;

(d) Except for information that is properly restricted from disclosure under procedures established in accordance with statute, regulation, Executive Order, or Presidential Memorandum, each agency should make available to the public the scientific or technological findings or conclusions considered or relied on in policy decisions;

(e) Each agency should have in place procedures to identify and address instances in which the scientific process or the integrity of scientific and technological information may be compromised; and

(f) Each agency should adopt such additional procedures, including any appropriate whistleblower protections, as are necessary to ensure the integrity of scientific and technological information and processes on which the agency relies in its decisionmaking or otherwise uses or prepares.

Unfortunately, we rarely post about what could be called good news on Health Care Renewal. But I really think it is really good news when the President of the United States makes scientific integrity a headline issue; speaks for scientific integrity and specifically against suppression and manipulation of science; advocates specific standards for scientific integrity for every government branch and agency; advocates for the transparency of science and the scientific process used in policy decisions; and argues for the protection of whistle-blowers.

We have again and again documented instances of threats to scientific integrity (specializing, of course, in the integrity of clinical and health services and policy research) including suppression of research, manipulation of research, and protection of whistle-blowers. It's nice to see these causes gain moral, and in this case legal support, especially from one of the most powerful political leaders in the world. Nice work, Mr President!

10:23 AM