healthy4u: Cephalon

Pay for What? - Redux: Surrealistic Pay for Health Care Corporate CEOs

Pay-for-performance has been a persistently fashionable mantra for health care business leaders and policy advocates, particularly as applied to physicians to control costs and perhaps even improve quality.  We have been highly critical of current methods proposed to measure performance and tie pay to it (e.g., <a href="http://hcrenewal.blogspot.com/2006/09/p4p-band-wagon-rolls-but-in-whose.html">here</a>), and other bloggers, notably Dr Robert Centor at DB's Medical Rants, have vigorously pursued this issue (e.g., <a href="http://www.medrants.com/archives/5837">here</a>). It is beyond ironic that meanwhile, the pay of health care organizations' leaders seems less and less related to their performance.  For example, in a recent series on local executive pay in the Boston Globe <a href="http://www.boston.com/business/articles/2010/10/03/executive_share/">there were</a> these examples: Hologic <blockquote>Hologic Inc. gave its chief executive, John W. Cumming, a $1.5 million “retention payment’’ as part of his $10.5 million pay package last year. He was promised the payment in mid-2006 if he remained with the company through the end of 2008. At the same time, the Bedford women’s health care products company posted a $2.2 billion loss, largely resulting from a big write-down related to the 2007 purchase of Cytic Corp. Cumming has since stepped down as chief executive, but remains chairman. Hologic declined to comment.</blockquote> Charles River Laboratories <blockquote>Charles River Laboratories International Inc. chief executive James C. Foster received $1.3 million in deferred compensation in a year when the company disclosed plans to cut 300 workers, or 3 percent of its workforce. Charles River declined to comment.</blockquote> Note that a Charles River board member was one of the authors of an Institute of Medicine report advocating P4P for physicians, as we posted <a href="http://hcrenewal.blogspot.com/2006/09/p4p-band-wagon-rolls-but-in-whose.html">here</a>. Ah, the irony. Boston Scientific <blockquote>New Boston Scientific Corp. CEO J. Raymond Elliott started midyear and received a $1.5 million bonus. Boston Scientific posted a $1 billion loss last year. </blockquote>Elliott got a lot more than that, as reported in a <a href="http://www.boston.com/business/articles/2010/10/03/like_sports_stars_top_business_players_command_big_bucks/">companion Boston Globe article</a>: <blockquote>Elliott, whose experience includes running another medical device company, Zimmer Holdings Inc., was paid a performance bonus of nearly $608,000 last year, in addition to a $1.5 million signing bonus and $29.4 million in stock awards and options.</blockquote> Meanwhile, the company's losses continue to mount: <blockquote>And in February, Boston Scientific agreed to pay $1.7 billion to settle patent infringement charges from rival Johnson & Johnson, making it likely the company will post another loss this year.</blockquote>Note that Boston Scientific has had its ethical as well as financial failings, especially involving the case of the faulty implantable cardiac defibrillators, which resulted in settlements of civil lawsuits alleging that it hid data about the defects, and two guilty pleas by a company subsidiary to charges that it did not notify the FDA about these problems (see post <a href="http://hcrenewal.blogspot.com/2010/04/who-guards-guardians-case-of-boston.html">here</a>). Vertex Pharmaceuticals Inc <blockquote>At Vertex Pharmaceuticals Inc., chief Matthew W. Emmens, who took over five months into the year, received $2.8 million performance award last year, a year in which the company lost $642 million.</blockquote> He actually got a lot more than that, too, as per the second Globe article: <blockquote>His pay package included more than $15 million in restricted stock and options. </blockquote> Cephalon At the same time, an <a href="http://articles.latimes.com/2010/oct/03/business/la-fi-hiltzik-20101003">op-ed </a>by Michael Hiltzik in the Los Angeles Times noted that a health care company had the most unfairly paid CEO, according to "veteran compensation consultant Fraef Crystal," <blockquote>Cephalon Inc., ... CEO, Frank Baldino, Crystal identifies as the most overpaid chief executive in his database. (Baldino's $11.1 million pay last year is 832% of what would be fair, Crystal calculated.)</blockquote> Note that Cephalon settled charges of off-label promotion of narcotics for over $400 million in 2008 (see post <a href="http://hcrenewal.blogspot.com/2008/09/whats-drug-addicts-life-worth-to.html">here</a>). Summary So the general rule seem to be that top executives of health care organizations make large, sometimes enormous amounts of money, and that occurs regardless of company or personal performance. The riches keep flowing even if the company loses millions or billions, or lays off significant chunks of its workforce. Hiltzik identified corporate executive pay as: <blockquote>the No. 1 scandal of American business — executive pay that bears scant relationship to what these people are worth. The CEO pay curve has been galloping out of control for so long that it has achieved the status of a cliche. In 1965 the average U.S. CEO earned 24 times the pay of the average worker. Four decades later the ratio was 411 to 1..</blockquote> Furthermore, <blockquote>The dismal reality of CEO pay is that it comprises two problems, not one. Top executive pay generally is too lavish in the U.S. no matter what performance standard you apply. Good performance or bad, the pay disparity between the CEO and the rank and file is larger than in any other country, contributing to rising income inequality and to its consequent social pathologies. It's also based on several flawed assumptions, argue Jay Lorsch and Rakesh Khurana of Harvard Business School in a recent article for Harvard Magazine. One is that money is the only motivating factor behind executive performance. Another is that shareholders are the only stakeholders in corporate performance whose interests matter. This is a relatively recent paradigm, they observe; as late as 1990 business groups recognized the importance of a corporation's responsibility to stakeholders such as employees, customers, suppliers and the community. The flaw in the latter assumption is that it ties CEO pay to stock prices, which they can't influence on their own. But the picture of the CEO as virtually the sole auteur of a corporation's fate permeates American society. Listen to a Meg Whitman campaign ad talking about 'the EBay Meg created.' If you pay attention you may catch a reference to the 15,000 employees who were there when she left, at least a few of whom must have had something to do with the company's success.</blockquote> A further problem is that the pay of top corporate leaders is generally set not by the share-holders, that is, the owners of the company, but by boards of their cronies, many of whom are also members of the CEO club.  As Hiltzik noted, <blockquote>although most corporate boards make a show of placing pay decisions in the hands of a committee of 'independent' directors, the members are almost always current or former top executives themselves, members of a tight club.</blockquote> By the way, as we posted <a href="http://hcrenewal.blogspot.com/2009/09/safety-net-medical-center-ceo-gets.html">here</a>, a member of both the Hologic and Vertex boards was a former hospital CEO who got a generous retirement package despite its financial straits. So while their policy flacks continue to push pay-for-performance for physicians, maybe health care corporate leaders should set an example by embracing real pay for performance themselves. To repeat, again, again, again,.... Until they do, top executives remain really different from you and me.  If we do not hold health care leaders accountable, if we do not provide them with incentives that are proportional to their actual performance, why should we expect health care organizations to do any more than satisfy their leaders' self-interest?

Pay for What? - Redux: Surrealistic Pay for Health Care Corporate CEOs

Pay-for-performance has been a persistently fashionable mantra for health care business leaders and policy advocates, particularly as applie...

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Practicing (Clinical Trials) Medicine Without a License

Another story of dubious clinical research, this time <a href="http://www.tampabay.com/news/business/article1012526.ece">reported</a> by the St Petersburg (Florida, US) Times: <blockquote> Vladimir Martin called himself 'doctor' and ran 17 clinical trials of new drugs for major pharmaceutical companies before one patient noticed he didn't have a medical license. The patient alerted the St. Petersburg Times, whose resulting story led to a state investigation. On Saturday, Martin, 43, was arrested on charges of practicing medicine without a license. He was later released from the Pinellas County Jail on $10,000 bail. The felony charge carries a maximum sentence of five years in prison and maximum fine of $5,000. The Clearwater man, who changed his last name from Kossatchev after moving to Florida in 2003, went to medical school in the former Soviet Union and practiced in a hospital in his native Ukraine. Ruth Weber, a 74-year-old Clearwater resident, told the Times in April 2008 that the man who called himself Dr. Martin enrolled her in a study for lower-back pain and adjusted the dosage of her medicine. Only licensed physicians are supposed to conduct such activities. Patients in the study were randomly selected to receive a new Johnson & Johnson painkiller called tapentadol, a placebo or the potent narcotic oxycodone. Though Dr. Robert Lee Jackson, a Clearwater osteopath, was listed by the FDA as the physician conducting the study, Weber said she never saw Jackson. In weekly visits to Alliance Medical Research Group on Belcher Road, Weber said it was Martin who drew blood, doled out medication and, at one point, doubled her dosage. Martin also conducted electrocardiograms on Weber, although his techniques were so rusty the electrodes kept slipping off, she said. Weber eventually dropped out of the study when she saw no improvement for her back pain. A second woman, Ann Reed, told investigators she also responded to an ad for a drug study trial at Alliance Medical Research. Martin took her blood, listened to her heart and gave her medications, Reed said. Martin sometimes had to stick her four times to draw blood, she said. Like Weber, Reed said she never saw Jackson during her trial, which involved 13 visits between May 2007 and March 2008. Greg Panico, a spokesman for Johnson & Johnson, said the company audited Alliance Medical after the Times' story and submitted its findings to the FDA. He declined to discuss the nature of the report, but said the drug company is no longer working with Alliance Medical. Panico also said data collected in the tapentadol study at that site was not submitted to the FDA. The drugmaker said it reported its findings to the <a href="http://www.sterlingirb.com/aboutus.php">Sterling Institutional Review Board</a> in Atlanta, which had been hired by Johnson & Johnson to oversee patient safety during the trial. Despite losing the Johnson & Johnson trial, Martin told investigators in July that he was conducting four other drug studies. </blockquote> A little Google searching turned up another example <a href="http://http://clinicaltrials.gov/ct2/show/study/NCT00387010">on ClinicalTrials.gov </a>of a commercially funded clinical study for which the Alliance Medical Research Group enrolled patients. This was a Phase III study sponsored by Cephalon, an "Open-Label Study to Evaluate the Effect of Treatment With Fentanyl Buccal Tablets on Pain Anxiety Symptoms When Used for the Management of Breakthrough Pain." Note also that Sterling Institutional Review Board appears to be another example of a for-profit, commercial institutional review board. Here we have another example of remarkably bad implementation of commercially sponsored and commercially supervised clinical trials. We have posted a number of times about sloppy and mismanagement of commercially sponsored clinical research, often under the auspices of for-profit contract research organizations (CROs) and for-profit institutional review boards (IRBs). See <a href="http://hcrenewal.blogspot.com/2006/05/saga-of-study-3014-and-safety-of.html">this 2006 vintage post </a>on the infamous study 3014 on Ketek, sponsored by Sanofi Aventis. In my humble opinion, in the contemporary business world, many managers are driven mainly by quarterly profits. However, what works best to boost profits in the short run may not be what works to produce valid clinical research that maximizes the safety of and respect afforded human research subjects. When all the organizations involved in the research, the sponsor, the organization implementing the research, and the organization supervising research ethics are for-profit, the incentives to cut corners are multiplied. Cutting corners can jeopardize the validity of the studies, and the safety and respectful treatment of study subjects. I again submit that making human experimental research into a commercial enterprise, mainly serving the marketing of drugs and devices, may not produce good science, and may not be good for patients. It might be a better idea to leave human research to not-for-profit organizations and health care professionals. Hat tip to <a href="http://pharmagossip.blogspot.com/2009/06/alliance-medical-research-group.html">PharmaGossip</a>.

Practicing (Clinical Trials) Medicine Without a License

Another story of dubious clinical research, this time reported by the St Petersburg (Florida, US) Times: Vladimir Martin called himself ...

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