Putting a New Schein to the FDA?

When the national discussion seems preoccupied with the bonuses at AIG, the nomination of a new leader of the US Food and Drug Administration did not seem to get the attention it may have deserved. Last week, the president nominated Dr Margaret Hamburg to this position. As reported by the Los Angeles Times,

President Obama has decided to nominate former New York City Health Commissioner Margaret Hamburg to head the Food and Drug Administration, turning to a onetime Clinton administration official to help right the beleaguered regulatory agency, a source briefed on the choice said Wednesday.

Hamburg, 53, a physician who has worked extensively on bioterrorism issues, is a senior scientist at the Nuclear Threat Initiative, a Washington-based foundation focused on threats from nuclear, biological and chemical weapons.

Though less experienced as a regulator, Hamburg has extensive government experience. She served as health commissioner in New York for six years in the 1990s before becoming assistant secretary for planning and evaluation at the Department of Health and Human Services in 1997.

Tucked away at the end of the LA Times story, and not emphasized in other news articles, was a salient fact:

She sits on the board of medical supply distributor Henry Schein Inc., but would have to surrender the position if confirmed by the Senate.

Many now believe the FDA is in crisis, having failed to protect the people from unduly hazardous drugs and devices, and becoming too cozy with drug and device companies, which it may not regard, instead of the population as a whole, as the agencie's clients. Would Dr Hamburg's current position with Henry Schein Inc, however, jeopardize her ability to restore peoples' trust that the agency will put their interests, rather than those of health care corporations first?

Henry Schein Inc is a large distributor of health care supplies, including drugs and devices. For an example of its very extensive catalog, look here. Henry Schein makes its profits by selling the products that the FDA regulates, particularly drugs and devices. In her role as director of Henry Schein, Dr Hamburg had a legal responsibility to enhance the finances and profits of the company and its stockholders. As we have discussed many times previously, a corporate director has a legal obligation to advance the profits and financial fortunes of the corporation he or she serves. As Robert AG Monks put it, corporate directors are supposed to "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.]

As compensation for that loyalty, corporate directors are usually exceedingly well-paid for the nominal hours they spend in their meetings.So, according to the company's 2008 proxy statement, Dr Hamburg owned the equivalent of 63,472 shares of stock (current value, at the price of $37.32, via Google Finance, $ 2,368,775.04). Her total compensation in 2007 for her position as director was $249,151.)

Given that Dr Hamburg has spent over five years living with the obligation for unyielding loyalty to the interests of Henry Schein, and has become what many people would consider rich in the process, how easy will it be for her to turn to becoming a strict regulator of the products her former company used to sell? Time will tell. But this is the second nomination to a major health care post charged with improving the health of all citizens that has gone to someone currently obligated to protect the interests of corporations that now profiting from today's health care milieu. Let us see if this will lead to the change we need in health care.