Why Would Directors of Health Care Corporations Push for Bigger Pensions for Academic Administrators?

We recently posted about 36 well-paid top executives in the University of California system, including leaders of medical schools, academic medical centers, and public health, who threatened a lawsuit if their pensions were not increased according to what they claim was a promise made to them in 1999.

Riddle me this: why would a group of directors of for-profit corporations that provide health care goods and services. plus a director of a leading biotechnology trade group, and the director of a leading mutual fund family band together to support this demand, thus to push for bigger pensions for these top managers of the University of California system?

Here is a list of the directors, and their corporations:

-  Mark R Laret, director of Varian Medical Systems and Nuance Communications Inc, which provides numerous health care products 
- Dr David Feinberg, director of OSI Systems, whose Spacelabs Healthcare subsidiary manufactures medical devices
- Steven C Currall, director of Leadership in Medicine Inc, which claims to be a leading provider of intelligence about key opinion leaders (KOLs) in medicine and health care.  Its web-site asserts, "IF YOU NEED TO KNOW who are the most prominent, admired, and influential actors in healthcare, how they are interconnected, and why, you need our expertise.  Given how vastly complex are the relationships among providers, researchers, and other significant actors in healthcare, it is vital to focus on key opinion leaders (KOLs) at local, regional, and global levels, and to understand the ties among them."  (Note that we have often discussed how KOLs function as stealth marketers for pharmaceuticals and devices.)

They joined:
-  Robert S Sullivan, PhD - director of BIOCOM, whose web-site asserts it is the" largest regional life science association in the world, representing more than 550 member companies in Southern California."
-  Richard K Lyons, director of iShares, a leading provider of mutual funds.

The answer is simple.  All the corporate directors listed above are also members of the group of 36 litigious executives.  See their name on the list of 36 here in the San Francisco Chronicle.

- Mark R Laret, director of Varian Medical Systems and Nuance Communications Inc, which provides numerous health care products, is also CEO of UCSF Medical Center.
- Dr David Feinberg, director of OSI Systems, whose Spacelabs Healthcare subsidiary manufactures medical devices, is also CEO of the UCLA Hospital System
- Steven C Currall, director of Leadership in Medicine Inc, which claims to be a leading provider of intelligence about key opinion leaders (KOLs) in medicine and health care, is also Dean, and Professor of Management of the University of California - Davis Graduate School of Management.
Robert S Sullivan, PhD - director of BIOCOM, whose web-site asserts it is the" largest regional life science association in the world, representing more than 550 member companies in Southern California, is also Dean of the University of California - San Diego Rady School of Management.

- Richard K Lyons, director of iShares, a leading provider of mutual funds, is also Bank of America Dean and Professor of Business, University of California - Berkeley Haas School of Business.

Their inclusion within the larger group seems ironic, at best.  As corporate directors, they have outside income and have accumulated assets that will likely keep them out of poverty in their old age.  For example, Mr Laret had accumulated the equivalent of 37,168 shares of Varian, and was paid $267,300 a year for his services according to the company's 2010 proxy statement.

Furthermore, for those who directly lead health care institutions, Mr Laret and Dr Feinberg, their memberships on the boards of health care corporations, which imply fiduciary responsibilities to the companies and their stock-holders, conflict with their duties as leaders of academic health care to uphold teaching, research and patient care.  Dean Currall's responsibilities to an organization which seems entirely dedicated to helping drug, device, and biotechnology companies turn health care professionals and academics into stealth marketers at least seems unseemly given that his school is part of a university which also includes a medical school and academic medical center. 

Since our earlier post, it appears that the University of California president will not accede to the demands of the 36, as noted in the San Francisco Chronicle.  Their demands have continued to provoke outrage.  A recent discussion in Inside Higher Ed interviewed Emeritus Professor Helen Henry, a member of the University's Academic Senate, who posited:

the debate as part of a fundamental philosophical disagreement within the university. The signatories to the letter, many of whom are based in medicine or management, have a different view of the university than faculty from other disciplines, she said.

'I don’t think there’s any question but that there are these two different mindsets that are fighting for what the university should be. It’s transparent in this letter,' said Henry, a professor emeritus of biochemistry at the Riverside campus. 'They are running businesses. But there are those of us that don’t feel this is what the university should be.'

'This is absolutely a manifestation of that clash between the people who see UC as their business … and the people who see UC’s mission as teaching, and research and service to the state. That’s a dual personality that the university always has to live with.'

Five of the university leaders demanding higher pensions for themselves have responsibilities as directors of corporations that may conflict with their academic institutions' missions, while these corporate positions ought to insulate them from financial concerns about their retirement. This corroborates Prof Henry's notion that they see themselves as businesspeople whose role is separate from, and not necessarily supportive of the university mission.

I disagree, however, with Prof Henry's implication that the University has to live with such a split among its leadership. People who lead academic institutions have a primary responsibility to support the academic mission. Their goals should not be to maximize profits, much less to enrich themselves. Letting academia, and academic medicine be lead by leaders out to make money and line their own pockets will lead to just that, but hardly better teaching, research, and patient care.

Why Would Directors of Health Care Corporations Push for Bigger Pensions for Academic Administrators?

We recently posted about 36 well-paid top executives in the University of California system, including leaders of medical schools, academic medical centers, and public health, who threatened a lawsuit if their pensions were not increased according to what they claim was a promise made to them in 1999.

Riddle me this: why would a group of directors of for-profit corporations that provide health care goods and services. plus a director of a leading biotechnology trade group, and the director of a leading mutual fund family band together to support this demand, thus to push for bigger pensions for these top managers of the University of California system?

Here is a list of the directors, and their corporations:

-  Mark R Laret, director of Varian Medical Systems and Nuance Communications Inc, which provides numerous health care products 
- Dr David Feinberg, director of OSI Systems, whose Spacelabs Healthcare subsidiary manufactures medical devices
- Steven C Currall, director of Leadership in Medicine Inc, which claims to be a leading provider of intelligence about key opinion leaders (KOLs) in medicine and health care.  Its web-site asserts, "IF YOU NEED TO KNOW who are the most prominent, admired, and influential actors in healthcare, how they are interconnected, and why, you need our expertise.  Given how vastly complex are the relationships among providers, researchers, and other significant actors in healthcare, it is vital to focus on key opinion leaders (KOLs) at local, regional, and global levels, and to understand the ties among them."  (Note that we have often discussed how KOLs function as stealth marketers for pharmaceuticals and devices.)

They joined:
-  Robert S Sullivan, PhD - director of BIOCOM, whose web-site asserts it is the" largest regional life science association in the world, representing more than 550 member companies in Southern California."
-  Richard K Lyons, director of iShares, a leading provider of mutual funds.

The answer is simple.  All the corporate directors listed above are also members of the group of 36 litigious executives.  See their name on the list of 36 here in the San Francisco Chronicle.

- Mark R Laret, director of Varian Medical Systems and Nuance Communications Inc, which provides numerous health care products, is also CEO of UCSF Medical Center.
- Dr David Feinberg, director of OSI Systems, whose Spacelabs Healthcare subsidiary manufactures medical devices, is also CEO of the UCLA Hospital System
- Steven C Currall, director of Leadership in Medicine Inc, which claims to be a leading provider of intelligence about key opinion leaders (KOLs) in medicine and health care, is also Dean, and Professor of Management of the University of California - Davis Graduate School of Management.
Robert S Sullivan, PhD - director of BIOCOM, whose web-site asserts it is the" largest regional life science association in the world, representing more than 550 member companies in Southern California, is also Dean of the University of California - San Diego Rady School of Management.

- Richard K Lyons, director of iShares, a leading provider of mutual funds, is also Bank of America Dean and Professor of Business, University of California - Berkeley Haas School of Business.

Their inclusion within the larger group seems ironic, at best.  As corporate directors, they have outside income and have accumulated assets that will likely keep them out of poverty in their old age.  For example, Mr Laret had accumulated the equivalent of 37,168 shares of Varian, and was paid $267,300 a year for his services according to the company's 2010 proxy statement.

Furthermore, for those who directly lead health care institutions, Mr Laret and Dr Feinberg, their memberships on the boards of health care corporations, which imply fiduciary responsibilities to the companies and their stock-holders, conflict with their duties as leaders of academic health care to uphold teaching, research and patient care.  Dean Currall's responsibilities to an organization which seems entirely dedicated to helping drug, device, and biotechnology companies turn health care professionals and academics into stealth marketers at least seems unseemly given that his school is part of a university which also includes a medical school and academic medical center. 

Since our earlier post, it appears that the University of California president will not accede to the demands of the 36, as noted in the San Francisco Chronicle.  Their demands have continued to provoke outrage.  A recent discussion in Inside Higher Ed interviewed Emeritus Professor Helen Henry, a member of the University's Academic Senate, who posited:

the debate as part of a fundamental philosophical disagreement within the university. The signatories to the letter, many of whom are based in medicine or management, have a different view of the university than faculty from other disciplines, she said.

'I don’t think there’s any question but that there are these two different mindsets that are fighting for what the university should be. It’s transparent in this letter,' said Henry, a professor emeritus of biochemistry at the Riverside campus. 'They are running businesses. But there are those of us that don’t feel this is what the university should be.'

'This is absolutely a manifestation of that clash between the people who see UC as their business … and the people who see UC’s mission as teaching, and research and service to the state. That’s a dual personality that the university always has to live with.'

Five of the university leaders demanding higher pensions for themselves have responsibilities as directors of corporations that may conflict with their academic institutions' missions, while these corporate positions ought to insulate them from financial concerns about their retirement. This corroborates Prof Henry's notion that they see themselves as businesspeople whose role is separate from, and not necessarily supportive of the university mission.

I disagree, however, with Prof Henry's implication that the University has to live with such a split among its leadership. People who lead academic institutions have a primary responsibility to support the academic mission. Their goals should not be to maximize profits, much less to enrich themselves. Letting academia, and academic medicine be lead by leaders out to make money and line their own pockets will lead to just that, but hardly better teaching, research, and patient care.

Exactech Settles, Its Regional Sales Director Pleads Guilty

The march of legal settlements by health care organizations continues.  Here is a curious story in two parts.  The first part was reported in the most detail by the Gainesville (FL) Sun:

Gainesville-based Exactech must pay $3 million and submit to a year of federal monitoring under a settlement to avoid prosecution on charges that resulted from an investigation into whether orthopedic implant manufacturers were paying kickbacks to surgeons to use their products.

The company announced the deferred prosecution agreement Tuesday after three years of an expanded federal probe.

The U.S. Attorney's Office for the District of New Jersey agrees not to prosecute charges of conspiracy to violate federal anti-kickback laws if the company avoids any violations for a year.

What did Exactech do to wind up in this pickle? It is not really clear. The article noted:

What the U.S. Attorney calls kickbacks Exactech calls consulting fees to surgeons to help develop better products — a common practice in the medical product field.

One can get a little better idea of what was going on by seeing what changes the company agreed to make:

Exactech will continue using surgeons as consultants, but under a more rigorous process that verifies that the work is needed, tracks the surgeons' work and pays them fairly.

The article went out of its way to say:

In accepting the agreement, Exactech does not admit to any wrongdoing and the U.S. Attorney acknowledges that the company's conduct did not hurt patient health or patient care.

Meanwhile, however, a short article appeared in the Parsipanny (NJ) Daily Record:

A salesman from Chester pleaded guilty to conspiring to violate a federal anti-kickback statute by entering into illegal financial deals to get surgeons to use his company's products, the US Attorney's Office said Tuesday.

Douglass Donofrio, 45, director of sales for Exactech Inc.'s northeast region, entered his guilty plea Tuesday before District Judge Garrett E. Brown in Trenton.

Exactech, a publicly traded, Gainesville, Fla.-based national manufacturer and distributor of orthopedic implant devices and supplies, simultaneously agreed to 12-month deal with the justice department to federal monitoring.

'This is a reasonable resolution, giving Exactech credit for positive steps it has taken while requiring continued reform and compliance to avoid more serious consequences,' acting U.S. Attorney Gilmore Childers said in a statement released by his office. 'The agreement does not erase the past, but supports a future corporate culture that will not tolerate kickbacks as business as usual. Unlawful consulting relationships compromise the integrity of our healthcare system, and we will continue to hold institutions and individuals accountable who are willing to put profits over patients.'

Exactech is charged in a criminal court complaint with conspiring to violate the federal anti-kickback statute.

The complaint alleges that from 2002 through late 2008, Exactech entered into consulting agreements with certain orthopedic surgeons — deals which were designed and implemented, in part, to induce the surgeons to use, and cause the purchase of, Exactech's hip and knee reconstruction and replacement products, according to Childers' office.

Note that probably because this case was small in monetary terms, reporting about it was fragmented and brief, making it very difficult to get a sense of what really was going on. 

So, while Exactech did not admit to any wrong-doing, one of its mid-level managers admitted to apparently just the sort of wrong-doing of which the company was accused. If that manager was only a lone loose cannon, why would the company have been pushed to change how it uses surgeon consultants, and why would it need "support" for "a corporate culture that will not tolerate kickbacks as business as usual?"

Nonetheless, only that one mid-level manager admits he did anything wrong.  If anyone else did anything wrong, who they were, and what they did remains unclear, hidden within a swirl of legalese.  Maybe unethical practices occurred, and maybe the new deferred prosecution agreement will prevent further unethical practices, but who can tell? 

If anything unethical did happen, there seems to no longer be any mechanism in health care to find out and  do something about it. 

This case appears to be a good example of how language can be tortured by legalistic parsing that avoids the fundamental ethical problems that now plague health care. As Dr Bernard Carroll posted recently, "legalistic charges and defenses are not the right way to go in exposing and ejecting bad actors from our field," because this approach "favors the bad actors, who flaunt their constitutional protections with the taunt, prove it."  Instead, as Dr Carroll implied, the standard in health care should require more than just avoiding felony convictions.

Even though the current case is small in monetary terms, it is a marker of unethical behavior.  The ongoing parade of legal settlements and criminal pleadings and convictions involving health care organizations, when viewed in its entirety, should convince professionals and policy-makers that health care is undergoing an ethical meltdown. 

The fines imposed by the settlements have never been large enough to be more than costs of doing business, and hence are unlikely to change behavior.  The legalistic approach has not resulted in more than a few people who authorized, directed, or implemented the bad behavior that lead to the settlements paying any personal penalties.  If we want the bad behavior to stop, we clearly need some other way to deter it.  Until we come up with one, expect it to continue, and to continue driving up costs, driving down access, and making patients' outcomes worse.

Exactech Settles, Its Regional Sales Director Pleads Guilty

The march of legal settlements by health care organizations continues.  Here is a curious story in two parts.  The first part was reported in the most detail by the Gainesville (FL) Sun:

Gainesville-based Exactech must pay $3 million and submit to a year of federal monitoring under a settlement to avoid prosecution on charges that resulted from an investigation into whether orthopedic implant manufacturers were paying kickbacks to surgeons to use their products.

The company announced the deferred prosecution agreement Tuesday after three years of an expanded federal probe.

The U.S. Attorney's Office for the District of New Jersey agrees not to prosecute charges of conspiracy to violate federal anti-kickback laws if the company avoids any violations for a year.

What did Exactech do to wind up in this pickle? It is not really clear. The article noted:

What the U.S. Attorney calls kickbacks Exactech calls consulting fees to surgeons to help develop better products — a common practice in the medical product field.

One can get a little better idea of what was going on by seeing what changes the company agreed to make:

Exactech will continue using surgeons as consultants, but under a more rigorous process that verifies that the work is needed, tracks the surgeons' work and pays them fairly.

The article went out of its way to say:

In accepting the agreement, Exactech does not admit to any wrongdoing and the U.S. Attorney acknowledges that the company's conduct did not hurt patient health or patient care.

Meanwhile, however, a short article appeared in the Parsipanny (NJ) Daily Record:

A salesman from Chester pleaded guilty to conspiring to violate a federal anti-kickback statute by entering into illegal financial deals to get surgeons to use his company's products, the US Attorney's Office said Tuesday.

Douglass Donofrio, 45, director of sales for Exactech Inc.'s northeast region, entered his guilty plea Tuesday before District Judge Garrett E. Brown in Trenton.

Exactech, a publicly traded, Gainesville, Fla.-based national manufacturer and distributor of orthopedic implant devices and supplies, simultaneously agreed to 12-month deal with the justice department to federal monitoring.

'This is a reasonable resolution, giving Exactech credit for positive steps it has taken while requiring continued reform and compliance to avoid more serious consequences,' acting U.S. Attorney Gilmore Childers said in a statement released by his office. 'The agreement does not erase the past, but supports a future corporate culture that will not tolerate kickbacks as business as usual. Unlawful consulting relationships compromise the integrity of our healthcare system, and we will continue to hold institutions and individuals accountable who are willing to put profits over patients.'

Exactech is charged in a criminal court complaint with conspiring to violate the federal anti-kickback statute.

The complaint alleges that from 2002 through late 2008, Exactech entered into consulting agreements with certain orthopedic surgeons — deals which were designed and implemented, in part, to induce the surgeons to use, and cause the purchase of, Exactech's hip and knee reconstruction and replacement products, according to Childers' office.

Note that probably because this case was small in monetary terms, reporting about it was fragmented and brief, making it very difficult to get a sense of what really was going on. 

So, while Exactech did not admit to any wrong-doing, one of its mid-level managers admitted to apparently just the sort of wrong-doing of which the company was accused. If that manager was only a lone loose cannon, why would the company have been pushed to change how it uses surgeon consultants, and why would it need "support" for "a corporate culture that will not tolerate kickbacks as business as usual?"

Nonetheless, only that one mid-level manager admits he did anything wrong.  If anyone else did anything wrong, who they were, and what they did remains unclear, hidden within a swirl of legalese.  Maybe unethical practices occurred, and maybe the new deferred prosecution agreement will prevent further unethical practices, but who can tell? 

If anything unethical did happen, there seems to no longer be any mechanism in health care to find out and  do something about it. 

This case appears to be a good example of how language can be tortured by legalistic parsing that avoids the fundamental ethical problems that now plague health care. As Dr Bernard Carroll posted recently, "legalistic charges and defenses are not the right way to go in exposing and ejecting bad actors from our field," because this approach "favors the bad actors, who flaunt their constitutional protections with the taunt, prove it."  Instead, as Dr Carroll implied, the standard in health care should require more than just avoiding felony convictions.

Even though the current case is small in monetary terms, it is a marker of unethical behavior.  The ongoing parade of legal settlements and criminal pleadings and convictions involving health care organizations, when viewed in its entirety, should convince professionals and policy-makers that health care is undergoing an ethical meltdown. 

The fines imposed by the settlements have never been large enough to be more than costs of doing business, and hence are unlikely to change behavior.  The legalistic approach has not resulted in more than a few people who authorized, directed, or implemented the bad behavior that lead to the settlements paying any personal penalties.  If we want the bad behavior to stop, we clearly need some other way to deter it.  Until we come up with one, expect it to continue, and to continue driving up costs, driving down access, and making patients' outcomes worse.

BLOGSCAN - Medtronic's Multi-Million Dollar Payments to Spine Surgeons

Starting in 2007, we discussed the huge payments made by four medical device companies to orthopedic surgeons and medical organizations related to the use of hip and knee prostheses.  (See post here with links backward.)  Payments, in the millions of dollars per year range, went to surgeons including noted academics, and leaders of the main orthopedic physicians' society.  Payments went to medical schools, teaching hospitals, and professional societies.  Many of these financial relationships were not disclosed, and the disclosures that were made rarely indicated the amounts involved.

Now the Wall Street Journal reports millions being paid to spine surgeons by Medtronic in connection with devices used in spinal fusion.  See Dr Howard Brody's discussion here on the Hooked: Ethics, Medicine, and Pharma blog, and also Felix Salmon's discussion here on the Felix Salmon blog.

What seems lacking is a clear rationale for any payments, much less for payments of the sizes listed.  The WSJ article cited a Medtronic spokesperson, "surgeons' device-development work goes beyond mere consulting when the company deems that they are contributing valuable intellectual property to a product. But that intellectual property doesn't necessarily have to be patented."  The reporters found, "search of spine-device patents awarded to the Norton surgeons turned up about a dozen total for Drs. Puno, Johnson, Campbell and Dimar, most owned by companies other than Medtronic. The search turned up no patents for Dr. Glassman."  So what intellectual property that was not or could not be patented could be worth millions a year?

BLOGSCAN - Medtronic's Multi-Million Dollar Payments to Spine Surgeons

Starting in 2007, we discussed the huge payments made by four medical device companies to orthopedic surgeons and medical organizations related to the use of hip and knee prostheses.  (See post here with links backward.)  Payments, in the millions of dollars per year range, went to surgeons including noted academics, and leaders of the main orthopedic physicians' society.  Payments went to medical schools, teaching hospitals, and professional societies.  Many of these financial relationships were not disclosed, and the disclosures that were made rarely indicated the amounts involved.

Now the Wall Street Journal reports millions being paid to spine surgeons by Medtronic in connection with devices used in spinal fusion.  See Dr Howard Brody's discussion here on the Hooked: Ethics, Medicine, and Pharma blog, and also Felix Salmon's discussion here on the Felix Salmon blog.

What seems lacking is a clear rationale for any payments, much less for payments of the sizes listed.  The WSJ article cited a Medtronic spokesperson, "surgeons' device-development work goes beyond mere consulting when the company deems that they are contributing valuable intellectual property to a product. But that intellectual property doesn't necessarily have to be patented."  The reporters found, "search of spine-device patents awarded to the Norton surgeons turned up about a dozen total for Drs. Puno, Johnson, Campbell and Dimar, most owned by companies other than Medtronic. The search turned up no patents for Dr. Glassman."  So what intellectual property that was not or could not be patented could be worth millions a year?

The Boards Who Ought to be Accountable for the Misbehavior of Health Care Corporations

I recently posted about the multiple conflicts of interest affecting a university health sciences leader.  While he was supposed to be running a medical school and an academic medical center, he was also responsible for the stewardship, as a board member, of three health major health care corporations, and a food and beverage corporation (whose products have bearing on nutrition and public health.)  .

This one case suggested how pervasive are conflicts of interest affecting the people at the top of health care leadership in the US, and also how such conflicts may be associated with problems for all the organizations involved.  The story originally came to my attention because students were demonstrating against the lavish compensation given the health sciences leader at a time of university cutbacks, suggesting that university leaders were paying more attention to their own enrichment than to the mission of the university.  At the same time, one of the corporations which he was stewarding (Genzyme) had to shut down a factory because the extremely expensive drug it was producing was found to be impure and adulterated, while its CEO continued to be compensated lavishly.  The other corporation (Medtronic) had to settle litigation accusing it of manufacturing defective products for hundreds of millions of dollars, while its CEO again continued to be compensated lavishly. 

So I thought it might be interesting to see who are the other stewards of these troubled corporations.  I consulted the official biographies of their board members from their 2010 proxy statements (Genzyme here, Medtronic here).  I looked for board members who also held leadership positions in other health care organizations whose interests may not be aligned with the two corporations of interest.  I also looked for those who held leadership positions in the discredited financial services corporation who helped usher in the global financial collapse.

The specifics of what I found follow.

Genzyme

Genzyme had 10 directors in 2010.  The following directors had relationships of interest:

-  Douglas A Berthiaume is "Chairman of the Children's Hospital (Boston) Trust Board, a member of the Children's Hospital board of trustees, and a Trustee of the University of Massachusetts Amherst Foundation."  Children's Hospital is a teaching hospital.  The University of Massachusetts includes a medical school. 
-  Robert J Bertolini "retired from Schering-Plough Corp following its merger with Merck & Co in November, 2009."  Schering-Plough was a large pharmaceutical company now combined with Merck to form an even larger company.
-  Gail K Boudreaux "has served since May 2008 as an Executive Vice President of United Health Group Incorporated."  Also, "she serves on the board of directors of America's Health Insurance Plans...."  UnitedHealth is one of the US' largest health insurance/ managed care corporations.  Incidentally,it has frequently misbehaved, as can be seen in this set of posts.  AHIP is the health insurance corporations' trade associations.
-  Robert J Carpenter "is Chairman of Hydra Biosciences Inc... He is also a trustee of the Immune Disease Institute, a non-profit institute affiliated with Children's Hospital in Boston...." 
-  Charles L Cooney "is a director of India-based Biocon Limited, a biotechnology healthcare company."
-  Victor J Dzau MD (discussed in the earlier post) is "Chancellor for Health Affairs and President and Chief Executive Officer of Duke University Health System...."  He "sits on the board of directors of Pepsico Inc, Anylam Inc, Medtronic Inc, and the Duke University Health System."
-  Senator Connie Mack III is "Chairman Emeritus of the parent board of the H. Lee Moffitt Cancer Center and Research Institute...."  He also is director of "EXACT Sciences Corporation and Moody's Corp."  EXACT Sciences is a biotechnology company that develops diagnostic test technology.  Moody's Corp is a financial ratings agency whose lax ratings of financial derivatives, perhaps arising from conflicts of interest produced by payments from the producers of the derivatives, have been implicated as a major cause of the global financial collapse.
-  Richard E Syron was from "January 2004 to September 8, 2008 ... Chairman and Chief Executive Officer of the Federal Home Loan Mortgage Corporation, commonly referred to as Freddie Mac...."    Freddie Mac as bailed out and taken over by the US government when he departed, or was forced out.  Freddie Mac, was a "government-sponsored enterprise," (GSE) one of another group of companies whose enthusiastic participation in securitizing dubious mortgages was implicated as a major cause of the global financial collapse.
- Henri A Termeer (CEO of Genzyme) is a "director of Massachusetts General Hospital, a board member of Partners HealthCare, and a member of the board of fellows of Harvard Medical School." 

So the box score for Genzyme's 10 directors: six have leadership positions at teaching hospitals, academic medical centers, medical schools or their parent universities (some such institutions are lead by more than one Genzyme director).  Seven have leadership positions in other drug, device or biotechnology corporations.  One have leadership positions in health insurance/ managed care corporations.  Two had or have leadership positions in discredited financial services corporations that were implicated in the global financial collapse.

Medtronic

Medtronic had 11 directors in 2010.  The following directors had relationships of interest:

- Richard H Anderson "was Executive Vice President of UnitedHealth Group Incorporated."  As above, UnitedHealth is a health insurance/ managed care corporation.
- Victor J Dzau (see above) is "Chancellor for Health Affairs at Duke University and President and Chief Executive Officer of the Duke University Health System."  He is "a director of Alnylam Pharmaceuticals Inc, ... PepsiCo Inc, and Genzyme Corporation." (See discussion above.)
- James T Lenahan "served as President of Johnson & Johnson from 2002 until June 2004...."  He is "director of Telecris Biotherapeutics Inc, Alton Pharma Inc and Imacor Inc."  Johnson & Johnson is a large drug, device, and biotechnology company.  Telecris, and Alton Pharma are biotechnology pharmaceutical companies.  Imacor is a medical device company.
- Denise M O'Leary "is a director of Lucille Packard Children's Hospital and Stanford Hospitals and Clinics."  Also, "she was a member of the Stanford University Board of Trustees from 1996 through 2006, where she chaired the Committee of the Medical Center...."
-  Robert C Pozen is "an advisor to Gelesis Inc."  Gelesis is a biotechnology company.
-  Jack W Schuler "has been a director of Stericycle Inc since March 1990...."  He is a "director of Quidel Corporation and Elan Corporation plc...."    Stericycle company disposes of medical waste, including that produced by medical devices.  Quidel is a biotechnology and (medical diagnostic) device company.  Elan is an multinational biotechnology and pharmaceutical company.

So the box score for Genzyme's 11 directors is: Two have leadership positions at teaching hospitals, academic medical centers, medical schools or their parent universities (some such institutions are lead by more than one Genzyme director). Ten have leadership positions in other drug, device or biotechnology corporations. One has a leadership position in health insurance/ managed care corporations. None had or have leadership positions in discredited financial services corporations that were implicated in the global financial collapse.

Summary

Just to summarize the sorts of conflicting interests these relationships suggest. 

Teaching hospitals and medical schools are supposed to provide unbiased teaching, including about issues relevant to drug and device corporations, such as choice of diagnostic strategies and treatments, and relevant health policy.  They are supposed to perform unbiased research, including research that evaluates drugs and devices.  They are supposed to provide the best possible patient care at a reasonable cost, which relates to choices of and prices paid for drugs and devices. 

Other drug, device, and biotechnology corporations may be producing, or developing products that compete with those of the index corporations.

Health insurance companies ostensibly try to control costs and improve quality in part by reducing excess utilization and bargaining down prices of drugs and devices. 

So this limited case study of the boards of directors, that is, the ostensible stewards of two health care corporations, selected because they have a common member who is the leader of a large medical school and academic medical center, and which both have histories of poor management or ethical missteps showed  - that the leadership of health care organizations is incredibly interrelated, interlocked, incestuous. 

This gave an example of how pervasive are the conflicts of interest that affect all kinds of health care organizations.  Companies that ought to be competing have interlocked directors.  Companies that ought to be negotiating at arms length have interlocked directors.  Not-for-profit academic medical institutions have leaders who are also directors of companies whose drugs their patients may take, whose devices their patients may receive, whose insurance their patients may buy, and whose products and services they may teach about and evaluate through clinical research and policy research. 

This also gives an example of how the failed culture of finance may be linked to the culture of medicine and health care.  Some of the stewards of health care organizations were also the stewards of financial services corporations whose reckless, if not arrogant, greedy and amoral leadership is widely believed to have caused the global financial collapse and our ongoing economic problems. 

Finally, this suggests how top leaders of various health care organizations may be more familiar with and identify more with each other than with their organizations, their organizations' missions, and their organizations' professionals, staff, students, clients, and patients. 

What is to be done?

I strongly believe that there needs to be much more investigation, academic, journalistic, and perhaps legal, of the identity, nature, and culture of the leaders of health care, and their relationships.  A few bloggers cannot do it all.  Obviously, the anechoic effect mitigates against medical and health care academics looking into their own leaders.  However, failing to understand who is leading our march to the brink of health care failure ought not to be something such academics would want on their conscience.

Finally, and obviously, health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment.  Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. 

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.   

The Boards Who Ought to be Accountable for the Misbehavior of Health Care Corporations

I recently posted about the multiple conflicts of interest affecting a university health sciences leader.  While he was supposed to be running a medical school and an academic medical center, he was also responsible for the stewardship, as a board member, of three health major health care corporations, and a food and beverage corporation (whose products have bearing on nutrition and public health.)  .

This one case suggested how pervasive are conflicts of interest affecting the people at the top of health care leadership in the US, and also how such conflicts may be associated with problems for all the organizations involved.  The story originally came to my attention because students were demonstrating against the lavish compensation given the health sciences leader at a time of university cutbacks, suggesting that university leaders were paying more attention to their own enrichment than to the mission of the university.  At the same time, one of the corporations which he was stewarding (Genzyme) had to shut down a factory because the extremely expensive drug it was producing was found to be impure and adulterated, while its CEO continued to be compensated lavishly.  The other corporation (Medtronic) had to settle litigation accusing it of manufacturing defective products for hundreds of millions of dollars, while its CEO again continued to be compensated lavishly. 

So I thought it might be interesting to see who are the other stewards of these troubled corporations.  I consulted the official biographies of their board members from their 2010 proxy statements (Genzyme here, Medtronic here).  I looked for board members who also held leadership positions in other health care organizations whose interests may not be aligned with the two corporations of interest.  I also looked for those who held leadership positions in the discredited financial services corporation who helped usher in the global financial collapse.

The specifics of what I found follow.

Genzyme

Genzyme had 10 directors in 2010.  The following directors had relationships of interest:

-  Douglas A Berthiaume is "Chairman of the Children's Hospital (Boston) Trust Board, a member of the Children's Hospital board of trustees, and a Trustee of the University of Massachusetts Amherst Foundation."  Children's Hospital is a teaching hospital.  The University of Massachusetts includes a medical school. 
-  Robert J Bertolini "retired from Schering-Plough Corp following its merger with Merck & Co in November, 2009."  Schering-Plough was a large pharmaceutical company now combined with Merck to form an even larger company.
-  Gail K Boudreaux "has served since May 2008 as an Executive Vice President of United Health Group Incorporated."  Also, "she serves on the board of directors of America's Health Insurance Plans...."  UnitedHealth is one of the US' largest health insurance/ managed care corporations.  Incidentally,it has frequently misbehaved, as can be seen in this set of posts.  AHIP is the health insurance corporations' trade associations.
-  Robert J Carpenter "is Chairman of Hydra Biosciences Inc... He is also a trustee of the Immune Disease Institute, a non-profit institute affiliated with Children's Hospital in Boston...." 
-  Charles L Cooney "is a director of India-based Biocon Limited, a biotechnology healthcare company."
-  Victor J Dzau MD (discussed in the earlier post) is "Chancellor for Health Affairs and President and Chief Executive Officer of Duke University Health System...."  He "sits on the board of directors of Pepsico Inc, Anylam Inc, Medtronic Inc, and the Duke University Health System."
-  Senator Connie Mack III is "Chairman Emeritus of the parent board of the H. Lee Moffitt Cancer Center and Research Institute...."  He also is director of "EXACT Sciences Corporation and Moody's Corp."  EXACT Sciences is a biotechnology company that develops diagnostic test technology.  Moody's Corp is a financial ratings agency whose lax ratings of financial derivatives, perhaps arising from conflicts of interest produced by payments from the producers of the derivatives, have been implicated as a major cause of the global financial collapse.
-  Richard E Syron was from "January 2004 to September 8, 2008 ... Chairman and Chief Executive Officer of the Federal Home Loan Mortgage Corporation, commonly referred to as Freddie Mac...."    Freddie Mac as bailed out and taken over by the US government when he departed, or was forced out.  Freddie Mac, was a "government-sponsored enterprise," (GSE) one of another group of companies whose enthusiastic participation in securitizing dubious mortgages was implicated as a major cause of the global financial collapse.
- Henri A Termeer (CEO of Genzyme) is a "director of Massachusetts General Hospital, a board member of Partners HealthCare, and a member of the board of fellows of Harvard Medical School." 

So the box score for Genzyme's 10 directors: six have leadership positions at teaching hospitals, academic medical centers, medical schools or their parent universities (some such institutions are lead by more than one Genzyme director).  Seven have leadership positions in other drug, device or biotechnology corporations.  One have leadership positions in health insurance/ managed care corporations.  Two had or have leadership positions in discredited financial services corporations that were implicated in the global financial collapse.

Medtronic

Medtronic had 11 directors in 2010.  The following directors had relationships of interest:

- Richard H Anderson "was Executive Vice President of UnitedHealth Group Incorporated."  As above, UnitedHealth is a health insurance/ managed care corporation.
- Victor J Dzau (see above) is "Chancellor for Health Affairs at Duke University and President and Chief Executive Officer of the Duke University Health System."  He is "a director of Alnylam Pharmaceuticals Inc, ... PepsiCo Inc, and Genzyme Corporation." (See discussion above.)
- James T Lenahan "served as President of Johnson & Johnson from 2002 until June 2004...."  He is "director of Telecris Biotherapeutics Inc, Alton Pharma Inc and Imacor Inc."  Johnson & Johnson is a large drug, device, and biotechnology company.  Telecris, and Alton Pharma are biotechnology pharmaceutical companies.  Imacor is a medical device company.
- Denise M O'Leary "is a director of Lucille Packard Children's Hospital and Stanford Hospitals and Clinics."  Also, "she was a member of the Stanford University Board of Trustees from 1996 through 2006, where she chaired the Committee of the Medical Center...."
-  Robert C Pozen is "an advisor to Gelesis Inc."  Gelesis is a biotechnology company.
-  Jack W Schuler "has been a director of Stericycle Inc since March 1990...."  He is a "director of Quidel Corporation and Elan Corporation plc...."    Stericycle company disposes of medical waste, including that produced by medical devices.  Quidel is a biotechnology and (medical diagnostic) device company.  Elan is an multinational biotechnology and pharmaceutical company.

So the box score for Genzyme's 11 directors is: Two have leadership positions at teaching hospitals, academic medical centers, medical schools or their parent universities (some such institutions are lead by more than one Genzyme director). Ten have leadership positions in other drug, device or biotechnology corporations. One has a leadership position in health insurance/ managed care corporations. None had or have leadership positions in discredited financial services corporations that were implicated in the global financial collapse.

Summary

Just to summarize the sorts of conflicting interests these relationships suggest. 

Teaching hospitals and medical schools are supposed to provide unbiased teaching, including about issues relevant to drug and device corporations, such as choice of diagnostic strategies and treatments, and relevant health policy.  They are supposed to perform unbiased research, including research that evaluates drugs and devices.  They are supposed to provide the best possible patient care at a reasonable cost, which relates to choices of and prices paid for drugs and devices. 

Other drug, device, and biotechnology corporations may be producing, or developing products that compete with those of the index corporations.

Health insurance companies ostensibly try to control costs and improve quality in part by reducing excess utilization and bargaining down prices of drugs and devices. 

So this limited case study of the boards of directors, that is, the ostensible stewards of two health care corporations, selected because they have a common member who is the leader of a large medical school and academic medical center, and which both have histories of poor management or ethical missteps showed  - that the leadership of health care organizations is incredibly interrelated, interlocked, incestuous. 

This gave an example of how pervasive are the conflicts of interest that affect all kinds of health care organizations.  Companies that ought to be competing have interlocked directors.  Companies that ought to be negotiating at arms length have interlocked directors.  Not-for-profit academic medical institutions have leaders who are also directors of companies whose drugs their patients may take, whose devices their patients may receive, whose insurance their patients may buy, and whose products and services they may teach about and evaluate through clinical research and policy research. 

This also gives an example of how the failed culture of finance may be linked to the culture of medicine and health care.  Some of the stewards of health care organizations were also the stewards of financial services corporations whose reckless, if not arrogant, greedy and amoral leadership is widely believed to have caused the global financial collapse and our ongoing economic problems. 

Finally, this suggests how top leaders of various health care organizations may be more familiar with and identify more with each other than with their organizations, their organizations' missions, and their organizations' professionals, staff, students, clients, and patients. 

What is to be done?

I strongly believe that there needs to be much more investigation, academic, journalistic, and perhaps legal, of the identity, nature, and culture of the leaders of health care, and their relationships.  A few bloggers cannot do it all.  Obviously, the anechoic effect mitigates against medical and health care academics looking into their own leaders.  However, failing to understand who is leading our march to the brink of health care failure ought not to be something such academics would want on their conscience.

Finally, and obviously, health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment.  Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. 

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.   

Ela Medical (Now the Sorin Group) Settles

And we return to the parade of legal settlements, which is still marching along.  The next entrant to the parade was described by the Miami Herald:

In a four-year-old case with nationwide implications, Ela Medical has agreed to pay $9.2 million to settle a whistle-blower case brought by a former Miami technician who charged the company used several schemes to pay kickbacks to South Florida doctors.

The details of the allegations were:

In the Miami case, brought by May and Ben Kuehne, Lee alleged that Ela gave money to doctors for questionable studies, had Ela techs do work on patients that doctors later billed Medicare for, gave doctors free trips and helped doctors get monitoring equipment that to led to more Medicare billing.

The moves were made by the company to boost sales in the multibillion-dollar field of cardiac devices, where pacemakers can cost up to $7,000 and defibrillators up to $18,000.

These devices have batteries that run down in about three years, the lawsuit said, and patients need to be monitored to see how much battery life their devices have left. An Ela tech performed the tests in doctors' office.

'Although Medicare required a physician to be present during the battery test, physicians never attended these battery check appointments,' the lawsuit alleged. Doctors then billed Medicare for the techs' work.

Other times, doctors were paid $2,500 to $4,000 for each Ela patient enrolled in a study, even though patients were never informed and never gave the required permission, the lawsuit said. 'The physicians had no role and in fact did nothing in furtherance of the study,' the lawsuit stated. 'However, Medicare was billed each time the study was conducted, as if the physician had participated.'

Of course, the company's statement had all the expected elements:

Closure of this investigation places this legacy issue firmly behind us and clearly enhances our ability to execute on our plans for CRM [cardiac rhythm management] in the United States. Our commitment to provide patients and healthcare providers with life-saving and life-enhancing innovation, and to conduct our business in a highly ethical manner is stronger than ever.

I leave it to my dear readers to decide on how ethically the company's previous business operations were, based on the above.

I would note that not only did the company want to put this case behind it, it seemed to want to put its old name behind it too. Ela Medical is now apparently known only by the name of its Italian parent company, the Sorin Group.

To add a final disturbing note, this case illustrates why people who see what appears to be unethical, or even illegal behavior are not rushing to report it:

On Monday, May, the attorney, said Lee 'is not talking to anybody. This has been a difficult experience.' She quit Ela when, after complaining about the company's questionable practices, she was told to transfer to California. She took a job with a competitor, but was dropped when the industry learned she had filed the lawsuit.

'She was blackballed,' May said. 'She's basically gone from $100,000 a year to minimum wage.'

One would hardly have expected Ms Lee to have kept her job at Ela once she reported what was going on there. However, it was worse than that. Being known as a whistle-blower may make one radioactive enough to preclude any employment in a segment of health care that is at all related to the one in which one blew the whistle.

The Herald article did note that Ms Lee stands to get part of the settlement. Yet this will come at least four years after the case began, as her lawyer said:

the 'money will allow her basically to start over.' If she had kept her mouth shut, 'she would have made far more money in her lifetime than she will get as a percentage of the settlement.'

As we just noted, in health care, the incentives are strongly tilted to favor financial productivity , or "making the numbers," and to disfavor ethical conduct, especially when it requires dissenting with top managers. If we really want accessible, affordable, high-quality health care, we will have to get rid of these sorts of perverse incentives.

So the march of legal settlements continues.  As in many previous cases, note that the monetary cost of the above settlement, while it seems large to normal humans, would be just slightly more than round-up error for a large multi-national company.  As I have said repeatedly,  penalties that only appear to be (relatively small) costs of doing business are unlikely to deter future bad behavior. Until the people who actually authorized, directed and implemented the bad behavior have to suffer some negative consequences, expect the bad behavior to continue. 

Ela Medical (Now the Sorin Group) Settles

And we return to the parade of legal settlements, which is still marching along.  The next entrant to the parade was described by the Miami Herald:

In a four-year-old case with nationwide implications, Ela Medical has agreed to pay $9.2 million to settle a whistle-blower case brought by a former Miami technician who charged the company used several schemes to pay kickbacks to South Florida doctors.

The details of the allegations were:

In the Miami case, brought by May and Ben Kuehne, Lee alleged that Ela gave money to doctors for questionable studies, had Ela techs do work on patients that doctors later billed Medicare for, gave doctors free trips and helped doctors get monitoring equipment that to led to more Medicare billing.

The moves were made by the company to boost sales in the multibillion-dollar field of cardiac devices, where pacemakers can cost up to $7,000 and defibrillators up to $18,000.

These devices have batteries that run down in about three years, the lawsuit said, and patients need to be monitored to see how much battery life their devices have left. An Ela tech performed the tests in doctors' office.

'Although Medicare required a physician to be present during the battery test, physicians never attended these battery check appointments,' the lawsuit alleged. Doctors then billed Medicare for the techs' work.

Other times, doctors were paid $2,500 to $4,000 for each Ela patient enrolled in a study, even though patients were never informed and never gave the required permission, the lawsuit said. 'The physicians had no role and in fact did nothing in furtherance of the study,' the lawsuit stated. 'However, Medicare was billed each time the study was conducted, as if the physician had participated.'

Of course, the company's statement had all the expected elements:

Closure of this investigation places this legacy issue firmly behind us and clearly enhances our ability to execute on our plans for CRM [cardiac rhythm management] in the United States. Our commitment to provide patients and healthcare providers with life-saving and life-enhancing innovation, and to conduct our business in a highly ethical manner is stronger than ever.

I leave it to my dear readers to decide on how ethically the company's previous business operations were, based on the above.

I would note that not only did the company want to put this case behind it, it seemed to want to put its old name behind it too. Ela Medical is now apparently known only by the name of its Italian parent company, the Sorin Group.

To add a final disturbing note, this case illustrates why people who see what appears to be unethical, or even illegal behavior are not rushing to report it:

On Monday, May, the attorney, said Lee 'is not talking to anybody. This has been a difficult experience.' She quit Ela when, after complaining about the company's questionable practices, she was told to transfer to California. She took a job with a competitor, but was dropped when the industry learned she had filed the lawsuit.

'She was blackballed,' May said. 'She's basically gone from $100,000 a year to minimum wage.'

One would hardly have expected Ms Lee to have kept her job at Ela once she reported what was going on there. However, it was worse than that. Being known as a whistle-blower may make one radioactive enough to preclude any employment in a segment of health care that is at all related to the one in which one blew the whistle.

The Herald article did note that Ms Lee stands to get part of the settlement. Yet this will come at least four years after the case began, as her lawyer said:

the 'money will allow her basically to start over.' If she had kept her mouth shut, 'she would have made far more money in her lifetime than she will get as a percentage of the settlement.'

As we just noted, in health care, the incentives are strongly tilted to favor financial productivity , or "making the numbers," and to disfavor ethical conduct, especially when it requires dissenting with top managers. If we really want accessible, affordable, high-quality health care, we will have to get rid of these sorts of perverse incentives.

So the march of legal settlements continues.  As in many previous cases, note that the monetary cost of the above settlement, while it seems large to normal humans, would be just slightly more than round-up error for a large multi-national company.  As I have said repeatedly,  penalties that only appear to be (relatively small) costs of doing business are unlikely to deter future bad behavior. Until the people who actually authorized, directed and implemented the bad behavior have to suffer some negative consequences, expect the bad behavior to continue. 

"Toxic and Dangerous?" - The Watchdog vs Medtronic's Man at the VA

An odd story that appeared earlier this month linked several people we have discussed on Health Care Renewal.

On one hand, we posted about how Dr David Polly, a spine surgeon at the University of Minnesota, testified before the US Congress in support of research on treatments of bone injuries afflicting US soldiers.  He did not then reveal that he had been paid more than one million dollars for consulting by Medtronic, the manufacturer of a bone growth product used to treat such injuries, also the source of payments of his expenses for the trip to Washington.  At the time, we suggested this case was a reminder to be skeptical about academics who are really stealth health policy advocates for industry.

On the other hand, in a post about renewed payments by makers of artificial joints to orthopedic surgeons after the US government advocated a series of deferred prosecution agreements as a cure for such apparent conflicts of interest, we quoted Dr Charles Rosen, "Nothing will change until someone goes to jail. It’s a big game."

The link between them appeared in two related articles.  First, the Minneapolis Star-Tribune reported on the appointment of another Medtronic consultant to a top leadership post in the US Department of Veterans Affairs:

In a Sept. 28 letter to Veterans Affairs Secretary Eric Shinseki, Sen. Charles Grassley asks whether Dr. Stephen Ondra's 'policy advice and decisions at the VA are vulnerable to potential conflicts of financial interest' given his prior relationship with the Fridley-based medical technology giant.

Ondra and Medtronic mutually severed their financial relationship in July 2008. But just prior to that, Medtronic paid him $3.6 million in royalties related to spine-surgery instruments, according to financial disclosure forms he submitted to the VA.

It appears that Medtronic lobbied hard for the appointment of its former consultant:

While noting that Ondra is not a Medtronic employee, Grassley characterized the surgeon's relationship with the company as 'unambiguous and substantial.' Further, Grassley notes that Ondra 'was able to penetrate the political establishment at its highest level to obtain a senior position at the VA' because of his previous ties to the company.

The details are:

Ondra's candidacy for his current post was supported by Medtronic Chief Executive William Hawkins III, who wrote a letter of recommendation to Secretary of Defense Robert Gates on his behalf. This was at the suggestion of Dr. S. Ward Casscells III, who was then assistant secretary of defense for health affairs, according to a series of internal e-mails obtained by the Star Tribune.

'I have known Dr. Casscells for many years and was comfortable in approaching him on this topic,' Hawkins wrote in a Jan. 16, 2009 e-mail to the then-head of Medtronic's $3.5 billion spine device business, Steve La Neve. (La Neve left that position earlier this year in a corporate reorganization.)

La Neve replied a day later that Ondra wanted to meet with him or with Hawkins before a reference letter was sent, 'so that it can capture his work on appropriate industry-physician relationships and transparency.'

(It is not clear whether the last sentence above is meant to be an ironic pun about regulatory capture.)

A post on Pharmalot explains what Dr Ondra's first priority was once he got his government job:

Within a few days, however, Ondra objected to the proposed nomination of another spine surgeon, Charles Rosen, as US Surgeon General. Why? As founder of the Association of Medical Ethics, Rosen publicly questioned consulting ties between doctors and device makers and, for his trouble, allegedly suffered retaliation by members of the American Academy of Orthopaedic Surgeons (see this). In a January 21, 2009 email exchange with Davd Polly, a University of Minnesota professor who was another Medtronic consultant, Ondra acknowledged never having heard of Rosen, but reacts viscerally to a recent story in The Orange County Register that details Rosen’s self-appointed role as a watchdog.

'Since this individual is toxic and dangerous I would leave nothing to chance,' he responds to Polly, who had forwarded the newspaper story to Ondra. Polly, by the way, is a nationally known spine surgeon who came under congressional scrutiny for his work several years ago for the device maker, something that Rosen had criticized (look here). 'This moment in history is too important to our country to let such a disreputable and dangerous person continue his self-promotion crusade,' Ondra continues. 'I would encourage you and any other physicians and citizens to weigh in on this to HHS and public health.'

Got that?  Medtronic pays Dr Ondra millions.  Medtronic pushes for Dr Ondra's appointment to a top VA leadership position.  Once in that position, Dr Ondra confers with another million dollar Medtronic consultant, and then works to block the appointment as Surgeon General of a known foe of the cozy web of conflicts of interest that afflicts medicine.  Thus do conflicts of interest work to promote the capture of government by special interests. 

The Pharmalot post concluded with this opinion:

'It’s obvious that Dr. Ondra benefited from his relationship with Medtronic. And since he worked to kill off the nomination of Chuck Rosen, Medtronic’s main critic, I can see how Medtronic benefited from Dr. Ondra,' says Paul Thacker, a former Grassley staff investigator and US Army specialist. 'What I don’t understand is how I and other veterans have benefited from all this back-door dealing. What’s in it for us?'

That is a good question. It appears that nothing was in it for veterans, or the US public. But everything was in it for Medtronic and the doctors it pays so well.  I would submit that it is the readiness of big health care corporations to create conflicts of interest that seduce physicians to put their loyalties to their corporate sponsors ahead of the public interest that is toxic and dangerous.

This convoluted story suggests the urgent need for full disclosure of all relationships between physicians and others who make decisions and wield influence in health care on one hand, and health care organizations on the other hand.  If physicians want their health policy efforts to be met with anything other than guffaws and cynical eye rolls, they need to seriously consider swearing off the sorts of cushy corporate relationships that Dr Ondra and Dr Polly embraced.

"Toxic and Dangerous?" - The Watchdog vs Medtronic's Man at the VA

An odd story that appeared earlier this month linked several people we have discussed on Health Care Renewal.

On one hand, we posted about how Dr David Polly, a spine surgeon at the University of Minnesota, testified before the US Congress in support of research on treatments of bone injuries afflicting US soldiers.  He did not then reveal that he had been paid more than one million dollars for consulting by Medtronic, the manufacturer of a bone growth product used to treat such injuries, also the source of payments of his expenses for the trip to Washington.  At the time, we suggested this case was a reminder to be skeptical about academics who are really stealth health policy advocates for industry.

On the other hand, in a post about renewed payments by makers of artificial joints to orthopedic surgeons after the US government advocated a series of deferred prosecution agreements as a cure for such apparent conflicts of interest, we quoted Dr Charles Rosen, "Nothing will change until someone goes to jail. It’s a big game."

The link between them appeared in two related articles.  First, the Minneapolis Star-Tribune reported on the appointment of another Medtronic consultant to a top leadership post in the US Department of Veterans Affairs:

In a Sept. 28 letter to Veterans Affairs Secretary Eric Shinseki, Sen. Charles Grassley asks whether Dr. Stephen Ondra's 'policy advice and decisions at the VA are vulnerable to potential conflicts of financial interest' given his prior relationship with the Fridley-based medical technology giant.

Ondra and Medtronic mutually severed their financial relationship in July 2008. But just prior to that, Medtronic paid him $3.6 million in royalties related to spine-surgery instruments, according to financial disclosure forms he submitted to the VA.

It appears that Medtronic lobbied hard for the appointment of its former consultant:

While noting that Ondra is not a Medtronic employee, Grassley characterized the surgeon's relationship with the company as 'unambiguous and substantial.' Further, Grassley notes that Ondra 'was able to penetrate the political establishment at its highest level to obtain a senior position at the VA' because of his previous ties to the company.

The details are:

Ondra's candidacy for his current post was supported by Medtronic Chief Executive William Hawkins III, who wrote a letter of recommendation to Secretary of Defense Robert Gates on his behalf. This was at the suggestion of Dr. S. Ward Casscells III, who was then assistant secretary of defense for health affairs, according to a series of internal e-mails obtained by the Star Tribune.

'I have known Dr. Casscells for many years and was comfortable in approaching him on this topic,' Hawkins wrote in a Jan. 16, 2009 e-mail to the then-head of Medtronic's $3.5 billion spine device business, Steve La Neve. (La Neve left that position earlier this year in a corporate reorganization.)

La Neve replied a day later that Ondra wanted to meet with him or with Hawkins before a reference letter was sent, 'so that it can capture his work on appropriate industry-physician relationships and transparency.'

(It is not clear whether the last sentence above is meant to be an ironic pun about regulatory capture.)

A post on Pharmalot explains what Dr Ondra's first priority was once he got his government job:

Within a few days, however, Ondra objected to the proposed nomination of another spine surgeon, Charles Rosen, as US Surgeon General. Why? As founder of the Association of Medical Ethics, Rosen publicly questioned consulting ties between doctors and device makers and, for his trouble, allegedly suffered retaliation by members of the American Academy of Orthopaedic Surgeons (see this). In a January 21, 2009 email exchange with Davd Polly, a University of Minnesota professor who was another Medtronic consultant, Ondra acknowledged never having heard of Rosen, but reacts viscerally to a recent story in The Orange County Register that details Rosen’s self-appointed role as a watchdog.

'Since this individual is toxic and dangerous I would leave nothing to chance,' he responds to Polly, who had forwarded the newspaper story to Ondra. Polly, by the way, is a nationally known spine surgeon who came under congressional scrutiny for his work several years ago for the device maker, something that Rosen had criticized (look here). 'This moment in history is too important to our country to let such a disreputable and dangerous person continue his self-promotion crusade,' Ondra continues. 'I would encourage you and any other physicians and citizens to weigh in on this to HHS and public health.'

Got that?  Medtronic pays Dr Ondra millions.  Medtronic pushes for Dr Ondra's appointment to a top VA leadership position.  Once in that position, Dr Ondra confers with another million dollar Medtronic consultant, and then works to block the appointment as Surgeon General of a known foe of the cozy web of conflicts of interest that afflicts medicine.  Thus do conflicts of interest work to promote the capture of government by special interests. 

The Pharmalot post concluded with this opinion:

'It’s obvious that Dr. Ondra benefited from his relationship with Medtronic. And since he worked to kill off the nomination of Chuck Rosen, Medtronic’s main critic, I can see how Medtronic benefited from Dr. Ondra,' says Paul Thacker, a former Grassley staff investigator and US Army specialist. 'What I don’t understand is how I and other veterans have benefited from all this back-door dealing. What’s in it for us?'

That is a good question. It appears that nothing was in it for veterans, or the US public. But everything was in it for Medtronic and the doctors it pays so well.  I would submit that it is the readiness of big health care corporations to create conflicts of interest that seduce physicians to put their loyalties to their corporate sponsors ahead of the public interest that is toxic and dangerous.

This convoluted story suggests the urgent need for full disclosure of all relationships between physicians and others who make decisions and wield influence in health care on one hand, and health care organizations on the other hand.  If physicians want their health policy efforts to be met with anything other than guffaws and cynical eye rolls, they need to seriously consider swearing off the sorts of cushy corporate relationships that Dr Ondra and Dr Polly embraced.

Synthes and its Subsidiary Plead Guilty, Boss Remains Billionaire.

In December, 2009, we updated the story of Swiss-based medical device company Synthes and the marketing by its Norian division of a bone cement.  At that time, US authorities charged the company with use of an unapproved product in about 200 patients, three of whom suffered untimely deaths.  At that point, four US based Synthes executives had pleaded guilty to charges related to this affair. 

Last week, another shoe dropped.  As reported by the Associated Press,

A medical devices company will admit criminality and pay the maximum $23 million fine for illegally testing bone cement on about 200 spinal patients, three of whom died in surgery, U.S. prosecutors said Monday.

Norian Corp. trained surgeons to conduct unapproved clinical tests of its bone cement from 2002 to 2004, subverting U.S. Food and Drug Administration safeguards, prosecutors said. The trials were stopped after the third patient death, they said.

The cement, which is used to fill in bone defects, is approved for use in the arm but not the load-bearing spine, authorities said. The surgeries often involved older patients with compression fractures, they said.

The results are:

Norian will plead guilty to conspiracy to impede FDA functions, a felony, and 110 misdemeanor counts of interstate shipping of misbranded Norian XR. Synthes will plead guilty to the same misdemeanor shipping count.

As part of the agreement, Norian will be sold to an outside buyer, the parent company said.

Imposing divestiture of the offending subsidiary was unusual, according to the Philadelphia Inquirer:

Forcing a divestiture of a business unit in a plea agreement was precedent-setting for the U.S. Attorney General's Office in the Philadelphia area, spokeswoman Patricia Hartman said Monday.

Officials with the Office of the Inspector General in DHHS said the divestiture should send a message to other health-care companies that Synthes' behavior had grave consequences.

'Criminal conduct can result in a company getting rid of part of their business,' Greg Demske, a top official with the Inspector General, said Monday. 'This is an egregious case, and it made us firm in our belief that we should draw a line here,' he said.

If it remained a subsidiary of Synthes, Norian would be excluded from participating in Medicare and other government-funded health care programs, which would be potentially devastating to its business. According to a divestiture agreement released Monday by the U.S. Attorney in Philadelphia, Synthes has to sell Norian by May 24.

The assets of Norian would not be allowed to be transferred to another part of the Synthes 'corporate family' as part of the divestiture, Demske said.

Synthes will update the government monthly on its plans to divest Norian, and if it fails to sell the company by the May deadline, it can be fined $10,000 a day.

So does this case signal a new toughness by US authorities in cases of bad behavior by health care corporations?

According to the Wall Street Journal, Synthes officials were not exactly quaking in their boots because of these penalties, as their spokesperson said Synthes "does not expect this settlement to have any significant financial impact." Synthes would only be liable for fines of "about $24.3 million in total." That pales in comparison to the "company['s] posted total sales of $3.4 billion last year." As for the divestiture of Norian, the WSJ reported, "a spokesman said Monday that the Norian unit is mostly active in product development and isn't actively selling products. That business has fewer than 100 employees,...."

In fact, company leadership did not seem to realize that they did anything wrong, despite the company and four executives pleading guilty to crimes, actions involving the death of three patients,

'Synthes remains committed to operating in accordance with the highest legal and ethical standards, and bringing closure to this matter will permit the company to focus on its mission to improve patient care,' the company said.

Furthermore, while this is one of the few cases in which some company executives actually may have to pay penalties (after pleading guilty to at least misdemeanors), the big fish appeared to get away. As we discussed last year, an unindicted "person no. 7" was alleged to have set up the scheme to "test" the bone cement in a clinical series. Person No. 7 was at that time identified as the company CEO. That CEO, according to the Philadelphia Inquirer last year, was one Mr Hansjorg Wyss, noted to have a fortune estimated at $5.7 billion, making him the richest man in Philadelphia, and the 83rd richest man in the world, according to Forbes magazine.  (See this post.)   The settlement of this case would apparently have no impact on his immense wealth.

So although this case has some unusual wrinkles, and may yet yield some negative consequences for some of the people involved in the direction and implementation of the wrong-doing, it would appear to leave unscathed the person who has personally profited the most from the company, and its actions, including its less savory actions.  There is progress here, but only a little.

Once again, it appears that in the eyes of the law, top corporate leaders are different from you and me.  They appear immune from the penalties that lesser individuals may suffer.  They have impunity to continue to amass wealth even wealth that results from actions that were deemed illegal.   Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Synthes and its Subsidiary Plead Guilty, Boss Remains Billionaire.

In December, 2009, we updated the story of Swiss-based medical device company Synthes and the marketing by its Norian division of a bone cement.  At that time, US authorities charged the company with use of an unapproved product in about 200 patients, three of whom suffered untimely deaths.  At that point, four US based Synthes executives had pleaded guilty to charges related to this affair. 

Last week, another shoe dropped.  As reported by the Associated Press,

A medical devices company will admit criminality and pay the maximum $23 million fine for illegally testing bone cement on about 200 spinal patients, three of whom died in surgery, U.S. prosecutors said Monday.

Norian Corp. trained surgeons to conduct unapproved clinical tests of its bone cement from 2002 to 2004, subverting U.S. Food and Drug Administration safeguards, prosecutors said. The trials were stopped after the third patient death, they said.

The cement, which is used to fill in bone defects, is approved for use in the arm but not the load-bearing spine, authorities said. The surgeries often involved older patients with compression fractures, they said.

The results are:

Norian will plead guilty to conspiracy to impede FDA functions, a felony, and 110 misdemeanor counts of interstate shipping of misbranded Norian XR. Synthes will plead guilty to the same misdemeanor shipping count.

As part of the agreement, Norian will be sold to an outside buyer, the parent company said.

Imposing divestiture of the offending subsidiary was unusual, according to the Philadelphia Inquirer:

Forcing a divestiture of a business unit in a plea agreement was precedent-setting for the U.S. Attorney General's Office in the Philadelphia area, spokeswoman Patricia Hartman said Monday.

Officials with the Office of the Inspector General in DHHS said the divestiture should send a message to other health-care companies that Synthes' behavior had grave consequences.

'Criminal conduct can result in a company getting rid of part of their business,' Greg Demske, a top official with the Inspector General, said Monday. 'This is an egregious case, and it made us firm in our belief that we should draw a line here,' he said.

If it remained a subsidiary of Synthes, Norian would be excluded from participating in Medicare and other government-funded health care programs, which would be potentially devastating to its business. According to a divestiture agreement released Monday by the U.S. Attorney in Philadelphia, Synthes has to sell Norian by May 24.

The assets of Norian would not be allowed to be transferred to another part of the Synthes 'corporate family' as part of the divestiture, Demske said.

Synthes will update the government monthly on its plans to divest Norian, and if it fails to sell the company by the May deadline, it can be fined $10,000 a day.

So does this case signal a new toughness by US authorities in cases of bad behavior by health care corporations?

According to the Wall Street Journal, Synthes officials were not exactly quaking in their boots because of these penalties, as their spokesperson said Synthes "does not expect this settlement to have any significant financial impact." Synthes would only be liable for fines of "about $24.3 million in total." That pales in comparison to the "company['s] posted total sales of $3.4 billion last year." As for the divestiture of Norian, the WSJ reported, "a spokesman said Monday that the Norian unit is mostly active in product development and isn't actively selling products. That business has fewer than 100 employees,...."

In fact, company leadership did not seem to realize that they did anything wrong, despite the company and four executives pleading guilty to crimes, actions involving the death of three patients,

'Synthes remains committed to operating in accordance with the highest legal and ethical standards, and bringing closure to this matter will permit the company to focus on its mission to improve patient care,' the company said.

Furthermore, while this is one of the few cases in which some company executives actually may have to pay penalties (after pleading guilty to at least misdemeanors), the big fish appeared to get away. As we discussed last year, an unindicted "person no. 7" was alleged to have set up the scheme to "test" the bone cement in a clinical series. Person No. 7 was at that time identified as the company CEO. That CEO, according to the Philadelphia Inquirer last year, was one Mr Hansjorg Wyss, noted to have a fortune estimated at $5.7 billion, making him the richest man in Philadelphia, and the 83rd richest man in the world, according to Forbes magazine.  (See this post.)   The settlement of this case would apparently have no impact on his immense wealth.

So although this case has some unusual wrinkles, and may yet yield some negative consequences for some of the people involved in the direction and implementation of the wrong-doing, it would appear to leave unscathed the person who has personally profited the most from the company, and its actions, including its less savory actions.  There is progress here, but only a little.

Once again, it appears that in the eyes of the law, top corporate leaders are different from you and me.  They appear immune from the penalties that lesser individuals may suffer.  They have impunity to continue to amass wealth even wealth that results from actions that were deemed illegal.   Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.