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A "Very Well Paid Boob" on the Harvard Corporation?

The ongoing investigation of the global financial collapse may also shed some indirect light on what has gone wrong with health care.  Consider the recent testimony by two leaders of the nearly failed, then bailed out global financial giant Citigroup, as <a href="http://www.nytimes.com/2010/04/09/business/09panel.html">reported </a>by the New York Times. One of the leaders was Robert Rubin, <blockquote>Robert E. Rubin, the former Treasury secretary, faced withering questions from the panel, the Financial Crisis Inquiry Commission, for his spare expressions of remorse. Repeatedly playing down his role as chairman of the executive committee of Citigroup’s board, he was met with anger and disbelief. 'You were either pulling the levers or asleep at the switch,' Philip N. Angelides, the committee’s chairman, told him. Mr. Rubin stopped short of accepting personal responsibility. He grudgingly conceded that a few savvy investors saw the crisis coming, asserting that nearly everyone in the financial services industry had failed to see a dozen powerful forces — from excessive debt levels to trade imbalance — come together in a perfect storm. 'We all bear responsibility for not recognizing this, and I deeply regret that,' Mr. Rubin said. Mr. Rubin’s stance left several members of the panel angry. Mr. Rubin earned more than $100 million during a decade at Citigroup. Mr. Angelides, a former California state treasurer and a fellow Democrat, did not buy it. 'You were not a garden-variety board member,' he said. 'I think to most people chairman of the executive committee of the board of directors implies leadership. Certainly $15 million a year guaranteed implies leadership and responsibility.' </blockquote> Attempts by Mr Rubin (and to some extent, former Citigroup CEO Charles O Prince III) to disavow responsibility met with more derision. For example, yesterday, see a <a href="http://www.nytimes.com/2010/04/11/opinion/11sun1.html">New York Times editorial</a>: <blockquote>The latest public hearings of the Financial Crisis Inquiry Commission, held last week, made headlines for eliciting more apologies from financiers who presided over the market collapse. You may recall a similar flurry last year, when Lloyd Blankfein, the chairman and chief executive of Goldman Sachs, was widely credited for having apologized for his firm’s role in the financial crisis. We did not buy it then; Mr. Blankfein never said what he was sorry for or to whom he was apologizing. And we are not buying it now. Mr. Prince says he 'could not' foresee the impending collapse, when he could have and should have seen it coming. Certainly, others did. Mr. Rubin has said that under his employment agreement, he was not responsible for the bank’s operations. But he was a towering figure at Citi, a source of its credibility and prestige. That implies responsibility, no matter what his contract said. Add all that to the 'I wasn’t the only one' context of both men’s comments, and their regret translates as, 'We feel bad about an accident we were powerless to prevent.' Except that the financial crisis was not an accident and they were not powerless. The crisis was the result of irresponsibility and misjudgments by many people, including Mr. Prince and Mr. Rubin. Citi, under their leadership, epitomized the financial recklessness that ruined the economy. </blockquote> A <a href="http://seattletimes.nwsource.com/html/soundeconomywithjontalton/2011556819_crisis_committee_rubin_shows_w.html">Seattle Times columnist </a>was even more harsh, calling Rubin a "very well paid boob," and: <blockquote>Rubin was barely contrite and went back to his meme of 'who knew?,' adding the unintended comedic line about how leaders shouldn't be responsibility for the 'granularity' of little things -- such as $40 billion in essentially fraudulent collateralized debt obligations. Rubin was being paid more than $100 million as a senior adviser to Citi while it headed toward collapse and a $45 billion taxpayer rescue. So 'granularity' is in the eye of the beholder. Commission vice chairman Bill Thomas said, 'Apparently you get to the top without having had to experience anything the people underneath you do. You don't have a comprehension. You're not informed, but you get to make all this money on the upside, but there's no downside.' Indeed. Rubin and Citigroup epitomize the public policies and the corporate practices that brought the economy to the brink of a new depression. As Bill Clinton's Treasury Secretary, Rubin championed financial deregulation and the financialization of the economy as manufacturing was hollowed out. Among other things he helped keep derivatives from being regulated and encouraged the creation of 'too big to fail' institutions such as Citi. Rubin led the battle to dismantle Glass-Steagall, so Citi and its giant siblings could gamble in investment banking, while also doing commercial banking and insurance. An alum of Goldman Sachs, Rubin was fine with big compensation for executives, even if their leadership wrecked the bank (Prince walked away with $120 million). Funny how Rubin was offered the lucrative Citi position after he left such 'government service.'</blockquote> So what does this tell us about health care? As we<a href="http://hcrenewal.blogspot.com/2008/12/what-linked-parallel-declines-of.html"> noted before</a>, while Robert Rubin is no longer on the board of Citigroup, he has been a member of the Harvard Corporation since 2001. The Corporation is ultimately responsible for the US' oldest and most prestigious university, its equally prestigious medical school and teaching hospitals. Yet under Rubin's stewardship, Harvard's endowment has fallen a prodigious amount, and <a href="http://hcrenewal.blogspot.com/search/label/Harvard">Harvard </a>and its <a href="http://hcrenewal.blogspot.com/search/label/Partners%20Healthcare">Partners Healthcare</a> hospital system have faced charges of conflicts of interest and various sweetheart deals. Perhaps this is to be expected when the ultimate steward may be a "very well paid boob." While Rubin's impressive resume and wealth in 2001 may have provided a rationale for his appointment to the Corporation, what would be the rationale for his continuing service? As we have <a href="http://hcrenewal.blogspot.com/2010/02/university-president-but-no-longer.html">pointed out</a>, as the world economy was driven to near ruin by "masters of the universe," some of the same also became leaders of academia and academic medicine in their spare time. Maybe this made sense 10 or 20 years ago, but why does it still make sense? On the other hand, now that we understand how bad the leadership of finance really was, it is a little easier to understand why the leadership of health care has become so bad.

A "Very Well Paid Boob" on the Harvard Corporation?

The ongoing investigation of the global financial collapse may also shed some indirect light on what has gone wrong with health care. Consi...

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Pfizer Settles One Lawsuit, Loses Another, Pays its CEO $13.7 Million

It's deja vu all over again for Pfizer Inc, the world's largest pharmaceutical company. Settlement of Suit Alleging Neurontin Risks Concealed Pfizer has kept busy in court defending against charges that a company it acquired promoted Neurontin (gabapentin) for uses not approved by the US Food and Drug Administration (FDA), and not well supported by the evidence.  Most recently, it was convicted by a jury in California of being a racketeering influenced and corrupt organization (RICO) because of a long-term "racketeering conspiracy" involving Neurontin marketing (see post <a href="http://hcrenewal.blogspot.com/2010/03/settlement-and-conviction-round-up.html">here</a>). Now additionally, <a href="http://online.wsj.com/article/SB10001424052702304017404575165992338949212.html">according to the Wall Street Journal</a>, <blockquote>Pfizer Inc. said it reached a settlement agreement in a wrongful-death lawsuit brought by a woman who claimed her husband's use of the antiseizure drug Neurontin caused him to commit suicide in 2002. The suit was brought by Linda Shearer of Berkshire County, Mass., whose husband, Hartley Shearer, was prescribed Neurontin to control the effects of his paralysis. The suit alleged Pfizer promoted this use of the drug even though it wasn't approved by U.S. regulators. The suit alleged Pfizer knew the drug was associated with a risk of suicide, but failed to properly warn of the risk. </blockquote>The new wrinkle here is that Pfizer did not defend a suit that alleged the company knew of a potentially fatal side-effect of the drug, but failed to disclose that risk. Jury Awarded Damages for Treatment of Whistle-Blower Meanwhile, <a href="http://articles.courant.com/2010-04-01/business/hc-pfizer-verdict-0402apr02_1_pfizer-whistle-blower-stephen-j-fitzgerald">the Hartford Courant reported</a>: <blockquote>A former Pfizer scientist who claims she has been paralyzed by a virus designed at the pharmaceutical company's laboratory in Groton was awarded $1.3 million by a federal jury in Hartford Thursday following a trial that raised questions about safety practices in the dynamic field of genetic engineering. The amount of the settlement awarded to molecular biologist Becky McClain of Deep River will likely increase in coming days. After about day of deliberation, the jury also awarded McClain punitive damages, to be determined by U.S. District Judge Vanessa L. Bryant, and awarded fees to McClain's two Connecticut lawyers, Bruce E. Newman and Stephen J. Fitzgerald. McClain claimed in her suit that she was inadvertently exposed through work by a former Pfizer colleague in 2002 or 2003, to an engineered form of the lentivirus, a virus similar to the one that can lead to acquired immune deficiency syndrome, or AIDS. She further claimed that Pfizer wrongly fired her in 2005 for complaining about laboratory safety to the U.S. Occupational Safety and Health administration and to co-workers. Ultimately, the jury was not permitted during the 12-day trial to hear argument supporting McClain's claim of a causal link between her disability and virus research done at her laboratory in Groton. The jury based its verdict on evidence concerning McClain's two remaining claims: that her dismissal violated Connecticut's whistle blower law and McClain's free speech right. Her lawyers contended her complaint to federal safety regulators amounted to a whistle blower complaint and that her discussion of safety issues with fellow workers was free speech.</blockquote>So, after being convicted by a jury of being a "racketeering influenced and corrupt organization," (RICO), and settling civil and criminal fraud charges for an unprecedented $2.3 billion (see post <a href="http://hcrenewal.blogspot.com/2009/09/pfour-legal-settlements-for-pfizer-why.html">here</a>), and after many other allegations, settlements, and convictions (look <a href="http://hcrenewal.blogspot.com/search/label/Pfizer">here</a>),  Pfizer failed to defend one action, and lost another that argued Pfizer tried to hide information which put the company and/or its products in an unfavorable light. In fact, Even Pfizer CEO Jeffrey Kindler could not put much of a spin on the company's recent record. As reported by Duff Wilson <a href="http://www.nytimes.com/2010/04/01/business/01pfizer.html">in the New York Times</a>, <blockquote>The world’s largest drug company, Pfizer, has handled mergers badly, invented too few drugs and left its reputation in disrepair after two criminal cases. And that is the assessment of its own chief executive. </blockquote> CEO's Multi-Million Dollar Compensation But while all this was going on, the company did disclose (as mandated by the US Securities and Exchange Commission [SEC]) that CEO Kindler is continuing his acquisition of riches.  As reported by the AP (<a href="http://www.usatoday.com/news/health/2010-03-05-pfizer_N.htm">via USAToday</a>). <blockquote>The chief executive of drug giant Pfizer Inc., Jeffrey Kindler, received a 2009 compensation package valued by The Associated Press at $13.7 million, down 7.6% from 2008, as the board reduced the stock awards he received, citing economic pressures. The world's biggest drugmaker paid Kindler, 54, a salary of $1.6 million, up just $25,000 from the year before. But his performance bonus was bumped up to $3.5 million from $3 million in 2008, according to a filing this week with the Securities and Exchange Commission. Most of Kindler's compensation comes from long-term awards of stock options and restricted shares. The total fell 17% to $8.1 million in 2009, from $9.8 million, even though they were granted in late February, a month after Kindler announced plans to buy Wyeth for $68 billion, a sound strategy to counter Pfizer's looming revenue plunge. Kindler's other compensation — a variety of perks — totaled $449,731. That included $190,725 for Kindler's use of corporate aircraft as required by Pfizer's board, $43,099 for use of a car, $7,690 for financial counseling and $1,217 for home security.</blockquote> Even admitting that Kindler's compensation last year was slightly decreased from last year's not so small fortune, there still seems to be a huge disconnect between the company's ethical woes, legal settlements, and guilty pleas and its CEO's rewards. Once again, it seems that leaders of large health care organizations never face real accountability for their company's bad behavior. It almost goes without saying that in the two cases summarized above, no one who authorized, directed, or implemented the actions leading to the settlements or damages seems to have had any negative consequences. So once more with feeling.... In the US, we have put much of our health care system in the hands of very large organizations, for-profit and not-for-profit, without holding these organizations and their leaders accountable for their actions. The results have been increasingly rich leaders who often behave like a new aristocracy, and repeated bad behavior by the organizations they lead. Our latest effort at health care "reform" has continued to rely on large private organizations, while so far not adding to their or their leaders' accountability. In my humble opinion, if we really want to reform health care so as to improve quality, increase access, control costs, and support professionalism, we will have to make our new health care oligarchs accountable. Postscript - Pay for Health Care Reform Lobbying? By the way, a <a href="http://www.theday.com/article/20100312/NWS05/303129870">commentary</a> in The [New London, CT] Day suggested an explanation for why Kindler was so richly paid last year: <blockquote>It takes pages and pages of a company securities filing to explain and justify all the bells and whistles of Kindler's 'annual incentive award,' a complicated stew of stock options and deferred payments and plain old salary. From all of this, Timothy P. Carney of the Washington Examiner found one juicy tidbit, which especially titillated industry bloggers. It turns out Kindler's salary increase, from $1.57 million to $1.6 million, was based in part, the compensation committee suggested, on his success in making a deal with President Obama that protected the drug industry from some of the more onerous proposals of health care reform. Praising Kindler as an effective lobbyist in, among other things, heading off legislation that would allow the importing of cheaper prescription drugs, the committee said: 'These efforts included constructive participation in the U.S. legislative process to advance Pfizer's goals of achieving a more rational operating environment.' Or, he kept a finger in the dike against health care reform. Indeed, a recent report by the Sunlight Foundation, a private nonprofit dedicated to more transparency in government, indicates Kindler's extensive role in negotiating a deal for the drug companies with the Obama administration and Senate Finance Committee Chairman Max Baucus. It turns out Kindler's name turns up four times on last year's White House visitor logs. The final deal Kindler helped craft promised $80 billion in cost cutting by the drug companies but blocked much more onerous reform measures for the industry, like lowering prescription drug prices through Medicare negotiations, re-importation of drugs from other countries with lower prices and quicker release of generics onto the market. The cost-saving of such measures, if allowed to occur, could have been in the hundreds of billions of dollars, according to government analysis. Kindler, as the pay committee says, did good.</blockquote> Several of our fellow bloggers have suggested that an installment of the Public Broadcasting Service (PBS) program "Frontline" will show just how much of the recent US health care reform effort was the product of health care corporate CEOs (e.g., see <a href="http://www.gooznews.com/node/3319">this post </a>on GoozNews, and <a href="http://www.joepaduda.com/archives/001795.html">this post </a>on Managed Care Matters). We shall see once the program airs, but maybe Mr Kindler's salary was a good value for Pfizer, but a very bad one for the rest of the country.

Pfizer Settles One Lawsuit, Loses Another, Pays its CEO $13.7 Million

It's deja vu all over again for Pfizer Inc, the world's largest pharmaceutical company. Settlement of Suit Alleging Neurontin Risks ...

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Everybody's Doing It - Health Care Leaders Appeal to Common Practice

There were two examples in the recent news about how health care leaders employ logical fallacies to advance their positions. Caritas Christi / Cerberus We <a href="http://hcrenewal.blogspot.com/2010/04/more-doubts-about-private-equity-taking.html">posted</a> recently about the proposed takeover of the not-for-profit Caritas Christi hospital system by the Cerberus Capital Management private equity firm. We proposed skepticism about the idea. For-profit hospitals have not been shown to provide better, cheaper, or more accessible care than not-for-profit hospitals. There is reason to worry that a private-equity firm would put margin ahead of mission. The Boston Herald <a href="http://www.bostonherald.com/jobfind/news/healthcare/view/20100402caritas_ceo_health_reform_to_bankrupt_us/srvc=home&position=also">interviewed</a> Dr Ralph de la Toree, the current CEO of Caritas Christi, who would continue to run the health system after the takeover. Asked about the role of Cerberus, <blockquote>De la Torre dismissed concerns that Cerberus’ executives - and their investments - may not jibe with Caritas’ social justice mission. Cerberus investor J. Ezra Merkin, for example, is facing civil fraud charges because of his ties to disgraced money manager Bernard Madoff. Besides its failed Chrysler investment, Cerberus has also invested in companies, such as gunmaker Remington Arms, that some Catholics may not support. De la Torre admitted Cerberus has a diverse portfolio and said most boards of local nonprofits have members who have made their money through questionable means.</blockquote> The last sentence is a good example of the <a href="http://www.nizkor.org/features/fallacies/appeal-to-common-practice.html">appeal to common practice</a>. Basically, the logical fallacy is that because many do it, doing it must be good. Although we are often critical of the cronyism of boards of for-profit corporations and not-for profit organizations, even I would not go so far as to suggest that most boards include people who have made money unethically. Regardless of the prevalence of this pheonomenon, however, boards of health care organizations should be composed of people of integrity and honesty who support the mission of the organizations. Professor Uwe Reinhardt We recently <a href="http://hcrenewal.blogspot.com/2010/04/mainstream-media-discovers-conflicts-of.html">posted</a> about how prominent health economist and public health care intellectual Professor Uwe Reinhardt of Princeton University has failed to disclose conflicts of interest when opining about health policy. A follow-up <a href="http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/04/06/businessinsider-new-york-times-health-care-blogger-defends-lack-of-disclosure-on-his-5-million-in-health-related-stock-2010-4.DTL">interview</a> of Reinhardt on SFGate.com included: <blockquote>I invite you to look at the Wall Street Journal [reporters] and see their list of boards. </blockquote> I have no idea whether Wall Street Journal reporters fail to disclose their memberships on boards of companies relevant to the subject of their reporting. We have frequently discussed <a href="http://hcrenewal.blogspot.com/search/label/conflicts%20of%20interest">conflicts of interest</a> and how they can influence medical care, teaching and research, and health care research and policy. I agree that  such conflicts are frequent, and often go undisclosed. Again, however, Prof Reinhardt seemed to be using an appeal to common practice. Just because others have failed to disclose conflicts of interest does not make such failure right. Interested readers may want to review the interviews of De La Torre and Reinhardt to see if they can find other logical fallacies. Note that we have frequently quoted Dr Joe Collier, "people who have conflicts of interest often find giving clear advice (or opinions) particularly difficult."  [Collier J. The price of independence. Br Med J 2006; 332: 1447-9. Link <a href="http://bmj.bmjjournals.com/cgi/content/full/332/7555/1447">here</a>.] We have discussed examples of how conflicted people seem to easily resort to <a href="http://hcrenewal.blogspot.com/search/label/logical%20fallacies">logical fallacies</a> to defend their conflicts (e.g., see post <a href="http://hcrenewal.blogspot.com/2009/07/again-logical-fallacies-in-defense-of.html">here</a>.) I do not think it is too much to ask prominent health care leaders to use evidence and logic, not logical fallacies to make their arguments. Those who do use logical fallacies are inviting even more skepticism about their arguments and the agenda behind them.

Everybody's Doing It - Health Care Leaders Appeal to Common Practice

There were two examples in the recent news about how health care leaders employ logical fallacies to advance their positions. Caritas Christ...

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What Me Worry? - Leaders Prosper Despite Questions About Their Organizations' Ethics and Performance

There were two examples in the recent news about how the leaders of health care organizations seem to prosper no matter what questions are raised about their organizations' ethics or performance. WellPoint It seemed that anger over a rate increase by a subsidiary of the huge insurance company/ managed care organization WellPoint was one reason for the revival of efforts in the US to enact some sort of health care reform legislation.  In our <a href="http://hcrenewal.blogspot.com/2010/02/argument-over-insurance-rate-hikes.html">comment</a> on this controversy, we noted that questions about the ethics of WellPoint's actions have appeared again and again.  Wellpoint... <ul><li>settled a RICO (racketeer influenced corrupt organization) law-suit in California over its alleged systematic attempts to withhold payments from physicians (see post <a href="http://hcrenewal.blogspot.com/2005/07/wellpoint-settles-rico-law-suit.html">here</a>).</li><li>subsidiary New York Empire Blue Cross and Blue Shield misplaced a computer disc containing confidential information on 75,000 policy-holders (see story <a href="http://www.nytimes.com/2007/03/14/business/14insure.html">here</a>).</li><li>California Anthem Blue Cross subsidiary cancelled individual insurance policies after their owners made large claims (a practices sometimes called rescission).  The company was ordered to pay a million dollar fine in early 2007 for this (see post <a href="http://hcrenewal.blogspot.com/2007/03/wellpoint-fined-1-million-for-canceling.html">here</a>).  A state agency charged that some of these cancellations by another WellPoint subsidiary were improper (see post <a href="http://hcrenewal.blogspot.com/2007/07/more-than-half-of-wellpoints-policy.html">here</a>).  WellPoint was alleged to have pushed physicians to look for patients' medical problems that would allow rescission (see post <a href="http://hcrenewal.blogspot.com/2008/02/wellpoint-halts-attempts-to-have.html">here</a>).  It turned out that California never collected the 2007 fine noted above, allegedly because the state agency feared that WellPoint had become too powerful to take on (see post <a href="http://hcrenewal.blogspot.com/2008/07/wellpoint-settles-but-has-it-become-too.html">here</a>). But in 2008, WellPoint agreed to pay more fines for its rescission practices (see post <a href="http://hcrenewal.blogspot.com/2008/07/fines-re-statements-and-more-fines-just.html">here</a>).  In 2009, WellPoint executives were defiant about their continued intention to make rescission in hearings before the US congress (see post <a href="http://hcrenewal.blogspot.com/2009/06/managed-care-executives-will-not-limit.html">here</a>).</li><li>California Blue Cross subsidiary allegedly attempted to get physicians to sign contracts whose confidentiality provisions would have prevented them from consulting lawyers about the contract (see post <a href="http://hcrenewal.blogspot.com/2007/11/physicians-and-contracts-cautionary.html">here</a>).</li><li>formerly acclaimed CFO was fired for unclear reasons, and then allegations from numerous women of what now might be called Tiger Woods-like activities surfaced (see post <a href="http://hcrenewal.blogspot.com/2008/01/more-managed-care-management-mumbo.html">here</a>).</li><li>announced that its investment portfolio was hardly immune from the losses prevalent in late 2008 (see post <a href="http://hcrenewal.blogspot.com/2008/10/if-this-is-how-wellpoint-has-managed.html">here</a>).</li><li>was sanctioned by the US government in early 2009 for erroneously denying coverage to senior patients who subscribed to its Medicare drug plans (see post <a href="http://hcrenewal.blogspot.com/2009/01/wellpoint-sanctioned.html">here</a>).</li><li>settled charges that it had used a questionable data-base (builty by Ingenix, a subsidiary of ostensible WellPoint competitor UnitedHealth) to determine fees paid to physicians for out-of-network care (see post <a href="http://hcrenewal.blogspot.com/2009/02/wellpoint-settles.html">here</a>).  </li><li>violated state law more than 700 times over a three-year period by failing to pay medical claims on time and misrepresenting policy provisions to customers, according to the California health insurance commissioner (see post <a href="http://hcrenewal.blogspot.com/2010/02/argument-over-insurance-rate-hikes.html">here</a>). </li></ul>But a few days ago, <a href="http://www.indystar.com/article/20100403/BUSINESS/4030350/1003/BUSINESS/Stock-awards-raise-WellPoint-pay">according to the Indianapolis Star</a>: <blockquote>Large stock awards helped boost total compensation to top executives at WellPoint by 51 percent to 75 percent last year over 2008. The big jumps in take-home pay are detailed in the Indianapolis health insurer's annual proxy report to shareholders filed Friday. Angela Braly, who is chair of the board, president and chief executive, saw her 2009 total compensation rise 51 percent, to $13.1 million. That compares with $8.67 million in 2008 and $14.8 million in 2007. Braly's salary of $1.14 million barely budged from 2008, but she earned a $6.2 million stock award, almost triple the award she got in 2008. Total compensation to other top executives: Wayne DeVeydt, chief financial officer, $7.25 million, up 75 percent from 2008. Ken Goulet, executive vice president, $4.43 million, up 62 percent. Dijuana Lewis, executive vice president, $4.46 million, up 64.5 percent.</blockquote> So whatever top WellPoint executives are paid for, it is not insuring that the company avoids ethical questions about its conduct, or controls health care costs or mdoerates premiums, for that matter.  Boston Scientific, and Zimmer Holdings We just <a href="http://hcrenewal.blogspot.com/2010/04/who-guards-guardians-case-of-boston.html">commented</a> on the generous compensation given the new and former CEOs of Boston Scientific, despite a series of ethical questions about that company's conduct, culminating in a guilty plea by the company to charges that it concealed information about important and potentially dangerous defects in its products. A few days ago, I found a reminder, buried in <a href="http://www.startribune.com/business/89787947.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aUUsZ">an article </a>in the Minneapolis Star-Tribune about a dispute between Boston Scientific and St Jude Medical, that current Boston Scientific CEO Ray Elliott has a track record of collecting generous compensation despite ethical questions about the companies he has lead. <blockquote>Elliott is certainly familiar with the potential ethical minefield surrounding the relationships between sales reps and doctors. He was CEO at orthopedic devicemaker Zimmer Holdings Inc., which paid (along with four other companies) $311 million in 2007 to settle a Department of Justice investigation into the consulting fees paid to doctors.</blockquote> As we <a href="http://hcrenewal.blogspot.com/2007/10/stryker-biomet-depuy-orthopedics-zimmer.html">discussed </a>back in 2007, Zimmer Holdings Inc was one of four medical device companies which submitted to deferred prosecution agreements in response to charges that the companies implemented criminal conspiracies to violate federal anti-kickback laws. We posted several times about one aspect of this settlement, the mandate that the companies make public the payments (often huge) to orthopedic surgeons, academic institutions, and medical associations. (See posts <a href="http://hcrenewal.blogspot.com/2007/11/orthopedic-device-makers-reveal.html">here</a>, <a href="http://hcrenewal.blogspot.com/2007/11/aaos-responds-to-disclosure-of-payments.html">here</a>, <a href="http://hcrenewal.blogspot.com/2007/11/aaos-patient-discussion-guide-regarding.html">here</a>, <a href="http://hcrenewal.blogspot.com/2007/11/more-about-surgeons-who-received-large.html">here</a>, <a href="http://hcrenewal.blogspot.com/2008/06/more-multi-million-dollar-orthopods.html">here</a>.) At the time, I did not think to look into what happened to the leadership of these companies thereafter. According to the <a href="http://files.shareholder.com/downloads/ZMH/887283368x0xS950137-08-3970/1136869/filing.pdf">2008 proxy statement by Zimmer Holdings</a>, Ray Elliott conveniently retired in 2007, just before the deferred prosecution agreement was announced. Since he had been President of Zimmer since 1997 and CEO since 2001, according to the <a href="http://files.shareholder.com/downloads/ZMH/887283368x0xS950137-07-4211/1136869/filing.pdf">2007 proxy statement</a>, he appeared to have been in the top leadership of the corporation during the time the actions were performed that resulted in the deferred prosecution agreement. Nonetheless, again according to the 2008 statement, for the part of 2007 during which he served as CEO, his total compensation was $7,987,158. For 2006, his total compensation was $11,998,121. In 2007, the present value of his two pension plans were $269,764 and $5,302,050. In 2007, he owned 1,235,859 shares of stock (now worth $72,952,757 at the <a href="http://www.google.com/finance?q=NYSE%3AZMH">current price</a> of $59.03 /share), and had the right to acquire 1,169,987 more within 60 days. And of course, as we posted earlier, Boston Scientific paid him over $30 million for working part of 2009. So Mr Elliott prospered mightily from his leadership of ethically challenged Zimmer Holdings, and was then further rewarded by ethically challenged Boston Scientific. Summary We have commented again and again that while numerous health care organizations have been charged with unethical, and sometimes illegal behavior, the people who oversaw, directed, or implemented the behavior almost never have had to suffer any negative consequences.  Now we see that while some large health care organizations have been subject to penalties for unethical and illegal behavior, the leaders of these organizations have been compensated so well as to make them rich, rich beyond the dreams of most people.  So the problem is not merely that captaining an organization onto the ethical rocks costs one nothing, but that it can make one very rich. Clearly we see examples of both profoundly perverse incentives and a complete lack of accountability and responsibility affecting the leadership of major health care organizations.  Is it any wonder that these organizations continue to act unethically, and that the costs of the goods and services they provide rise continuously? If we truly want health care that is accessible, of high quality, at a fair price, and more importantly, if we want health care that is honest and focused on patients, we need to provide health care leaders with clear, rational incentives in these directions, and make them fully accountable for their actions, and the courses of their organizations under their leadership.

What Me Worry? - Leaders Prosper Despite Questions About Their Organizations' Ethics and Performance

There were two examples in the recent news about how the leaders of health care organizations seem to prosper no matter what questions are r...

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Who Guards the Guardians? - the Case of Boston Scientific

The fallout from the case of the faulty implantable cardiac defibrillators continues.  To summarize the story thus far, We started posting about Boston Scientific's travails in 2005, starting with allegations that Guidant, which is now a Boston Scientific subsidiary, hid information about defects in the implantable cardiac defibrillators (ICDs) the company manufactured. As we noted in early 2005 <a href="http://hcrenewal.blogspot.com/2005/05/guideants-short-circuit.html">here</a>, Guidant executives allegedly knew that ICDs made from 2000-2002 were at risk for short-circuiting and failing, thus making them unable to deliver potentially life saving electrical shocks meant to prevent cardiac arrests, but the company only revealed the problem in 2005. By failing to notify physicians and the public, Guidant executives let expensive and profitable, but potentially useless devices to continue to be implanted, potentially increasing the risk of sudden death for the patients who received them. Then here we <a href="http://hcrenewal.blogspot.com/2005/06/guidants-short-circuit-reloaded.html">noted</a> reports that Guidant continued to ship failure-prone devices even after it had designed and started to manufacture new ICDs that were supposed to be less likely to fail. By June, 2005 we <a href="http://hcrenewal.blogspot.com/2005/06/more-short-circuits-for-guidant.html">posted</a> that Guidant had recalled thousands of ICDs, including models that were previously not identified as likely to fail. Later that year, the case <a href="http://hcrenewal.blogspot.com/2005/07/new-england-journal-of-medicine-on.html">rated</a> an article by Robert Steinbrook in the New England Journal of Medicine. Towards the end of 2005, we <a href="http://hcrenewal.blogspot.com/2005/11/eliot-spitzer-sues-guidant-for-fraud.html">noted</a> that Eliot Spitzer had sued Guidant for fraud.  At the end of the year, more information <a href="http://hcrenewal.blogspot.com/2005/12/for-guidant-these-people-are-just.html">appeared</a>, suggesting that Guidant knew the ICDs were flawed, but continued to sell them. <a href="http://hcrenewal.blogspot.com/2006/03/more-about-guidant-it-is-possible-that.html">Still more</a> appeared early in 2006. Then the business media became interested in the bidding war between Johnson and Johnson and Boston Scientific for Guidant, provoking a bit <a href="http://hcrenewal.blogspot.com/2006/01/new-problems-for-guidant-and-boston.html">more interest</a> in the tale of the suppression of data about the flawed ICDs. Then all was quiet until 2009, when Guidant, now a Boston Scientific subsidiary, pleaded guilty to two criminal misdemeanor charges that it failed to properly notify the FDA about problems with its ICDs (see post <a href="http://hcrenewal.blogspot.com/2009/11/boston-scientific-to-plead-guilty-of.html">here</a>). Later, the Guidant subsidiary of Boston Scientific settled charges that it gave doctors kickbacks as part of a "seeding study" to use its devices. At that time, it came to light that Boston Scientific had made another settlement, in 2007, of civil lawsuits alleging that the company hid problems with its products (see post <a href="http://hcrenewal.blogspot.com/2009/12/boston-scientific-again-settles-this.html">here</a>). More details about this guilty plea have just been reported.  As <a href="http://www.startribune.com/business/89963612.html">noted</a> by the Minneapolis Star-Tribune, <blockquote>A federal judge on Monday delayed a decision on whether to accept a $296 million plea agreement between the U.S. Justice Department and Boston Scientific Corp.'s Guidant subsidiary, which was charged with concealing critical safety information involving some of its top-selling heart devices. If approved, the criminal penalty would rank as the largest ever in medical technology for a company that violated the federal Food, Drug and Cosmetic Act. But lawyers representing victims implanted with the potentially faulty devices threw a wrench into what was expected to be a routine hearing by demanding a piece of the settlement.</blockquote> It appears that this settlement would not do any specific good for patients who claim to have been harmed by being implanted with a device that the manufacturer knew at the time to be faulty. Also, the Star-Tribune noted: <blockquote>Boston Scientific bought Guidant Corp., whose cardiac rhythm division is based in Arden Hills, for $27 billion in 2006. Though troubled, the division that makes pacemakers and defibrillators reported $2.6 billion in sales last year and still employs 2,000 people locally.</blockquote> Thus, the financial penalty to be paid by Boston Scientific only would amount to little over ten percent of the yearly sales generated by the division which failed to disclose the faulty devices. Adding to the sense that Boston Scientific and its leadership will feel little pain from the "largest criminal penalty ever assessed against a medical device company" (see <a href="http://www.google.com/hostednews/ap/article/ALeqM5i6EeKMw1uQyqOJxROb_E5H2vMIeQD9ET7VCO0">this AP report</a>) was <a href="http://www.boston.com/business/articles/2010/04/06/success_or_no_ceos_score/">this op-ed </a>in the Boston Globe. It summarized just how richly the former CEO of Boston Scientific, Jim Tobin, who presided over the acquisition of Guidant and thus became responsible for its ethical lapses, and the current CEO, Ray Elliott have been compensated, in contrast to this supposedly large penalty. Re Tobin: <blockquote>Tobin came to Boston Scientific in 1999 with similar instructions to clean up somebody else’s mess. He had to close facilities, ward off competitors, and, yes, settle patent lawsuits even back then. His carrot: A million stock options, a big deal in those days. Tobin did fix some problems, and he brought the company’s new drug-eluting stent to market. Boston Scientific shares climbed, and he made about $39 million on options over the years. But Tobin also collected problems, the ones now in Elliott’s lap, and Boston Scientific shares fell again. So here’s what the board did in February last year: It awarded Tobin 2 million more stock options, just a few months before announcing his retirement. Adjusting for a stock split, the second option grant is the same size as what he got upon arrival.</blockquote> And re Elliott: <blockquote>Elliott, the man named as CEO of Boston Scientific Corp. last summer, became one of the best-paid chief executives in America in 2009. Separate national surveys published in the past week by The Wall Street Journal and The New York Times, although incomplete, come up with just one or two large-company CEOs with compensation packages that could outdo Elliott’s $33.5 million payday.</blockquote> And see also <a href="http://hcrenewal.blogspot.com/2010/03/new-investigations-of-boston-scientific.html">this Health Care Renewal post</a>.  TheBoston Globe editorialist asked "so what exactly was the point of the second award [to Tobin]?"  Perhaps this question should be directed to the <a href="http://www.bostonscientific.com/AboutUs/Leadership.bsci/,,/navRelId/1004.1012/seo.serve">Boston Scientific board</a> who approved it, and also approved Elliott's outsize pay package.  The current board includes two co-founders of the company and the current CEO, two retired politicians, a few others with whom I am not familiar, but also two academics who may be quite familiar to Health Care Renewal readers.  Recalling that Boston Scientific tried to plead guilty to charges of "making false statements ... to the FDA," and "failing to promptly notify regulators," it is striking that both these academics have had issues with transparency and free speech.  We just <a href="http://hcrenewal.blogspot.com/2010/04/mainstream-media-discovers-conflicts-of.html">posted</a> about the repeated failure of Prof Uwe Reinhardt to acknowledge the conflict of interests generated by his numerous memberships in the boards of health care companies, including Boston Scientific, when writing about health policy issues.  We have previously <a href="http://hcrenewal.blogspot.com/2006/03/new-species-of-conflict-of-interest-in.html">posted</a> about the the conflicts of Marye Anne Fox, the Chancellor of the University of California - San Diego and hence leader of its medical school and academic medical center.  Chancellor Fox has just been <a href="http://www.thefire.org/article/11612.html">criticized</a> by FIRE (the Foundation for Individual Rights in Education) for allowing the silencing of a student publication and television station which had published or broadcast opinions that apparently offended university leaders. So who in this sorry tale will stand up for quality care of patients?  The US Department of Justice is to be commended for pursuing deception by a large medical device company, but apparently could not bring itself to request a punishment for unethical practices likely to even inconvenience those responsible for the bad behavior.  The previous and current company CEOs have become quite rich without having to stand up for honesty, or patient safety.  The board of directors who are supposed to take responsibility for the overall direction of the company seem to have been happy just to go along. As I have <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">said</a> before, endlessly, we will not deter unethical behavior by health care organizations until the people who authorize, direct or implement bad behavior fear some meaningfully negative consequences.  Relatively small fines imposed on large corporations pain workers on the line and stockholders while sparing the richly paid top hired management and the boards that will not reign them in.  Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Who Guards the Guardians? - the Case of Boston Scientific

The fallout from the case of the faulty implantable cardiac defibrillators continues. To summarize the story thus far, We started posting a...

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Mainstream Media "Discovers" Conflicts of Interest of Prominent Health Policy Pundit

The main-stream media, in this case <a href="http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/04/06/businessinsider-new-york-times-health-care-blogger-secretly-holds-5-million-in-health-care-stocks-2010-4.DTL">the San Francisco Chronicle</a>, just "discovered" an important case of a conflicted health policy pundit, <blockquote>Uwe Reinhardt, a Princeton economic professor who often writes about health care for the New York Times' Economix blog, earns more than $500,000 a year working for a number of health care companies. He also holds more than $5 million worth of related stock. Reinhardt's <a href="http://www.nytimes.com/ref/business/economy/reinhardt.ready.html">NYT bio</a> does not mention these financial relationships. As the <a href="http://www.nytpick.com/2010/04/ethics-breach-princeton-prof-who-writes.html">NYTPicker points out</a>, Reinhardt's various incomes break the New York Times rules, which ban anyone who writes for the paper from having any financial interest 'in a company, enterprise or industry that figures or is likely to figure in coverage that he or she provides, edits, packages or supervises regularly.' We asked the New York Times for comment. They sent us this email: 'Professor Reinhardt is a leading expert on the economics of health care, and has provided valuable and independent insights in his blog posts. He has mentioned his service on corporate boards in the blog, but we are reviewing how to more fully describe his activities for readers of Economix.' We also asked Reinhardt for comment. He is working on one for us and we will post it here as soon as possible. Here's the breakdown of what he owns, according to NYTPicker: * Reinhardt either earns an income or stock options from the five different private health care companies for which he sits on the board of directors/serves as a trustee. * He has sat on the board of health care company, Amerigroup, since 2003. This tenure has resulted in Reinhardt's accumulation of 144,558 shares in the company and $226,531 in cash-and-stock compensation. These shares are currently valued around $4.8 million. * Reinhardt also holds 75,625 shares of Boston Scientific (worth more than $500,000 in value) and earned $213,132 from the company in 2009. He has sat on the board of this medical device manufacturing company since 2005. * Reinhardt serves as a trustee for H&Q Healthcare Investors and H&Q Life Science Investors. His 2008 income from the companies included $43,000 in income and between $1 and $10,000 worth of securities. * He also made $2.3 million from the 2007, $5.1 billion sale of Triad Hospitals to Community Health Systems.</blockquote>It only took four years for this to get into the main-stream media. The reason "discovered" is in quotes is that we have been writing about Reinhardt's conflicts of interests vis a vis his prominent opinions on health policy since 2006 on <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a>. As I wrote in a comment on the original NYTPicker post, in 2006, we first <a href="http://hcrenewal.blogspot.com/2006/03/economist-puts-down-physicians-cri-du.html">wrote</a> about a letter to the editor of the NY Times by Reinhardt dismissing a physician op-ed writer's concerns about what has gone wrong with health care.  Reinhardt's letter failed to disclose the board memberships he held at that time. In 2009, we <a href="http://hcrenewal.blogspot.com/2009/01/what-ruc-prominent-health-care-policy.html">wrote</a> about how Reinhardt left out some crucial facts in his discussion in the Economix blog of how physicians are paid. That year we also <a href="http://hcrenewal.blogspot.com/2009/05/what-influenced-paean-to-karen-ignagne.html">wrote</a> about how Reinhardt defended Ms Karen Ignagni, CEO of America's Health Insurance Plans (AHIP) in an interview quoted in a Washington Post article. In neither case above did Reinhardt or the newspaper reveal his conflicts. Note that Reinhardt is not the only case of a prominent health policy expert with undisclosed conflicts of interest. See <a href="http://hcrenewal.blogspot.com/2006/03/new-species-of-conflict-of-interest-in.html">this post </a>for some examples we had found in 2006. In fact, in my humble opinion, the public discourse about health care policy in general, and health care reform in particular has been seriously distorted by various commentators, pundits, and experts who have major conflicts of interest, usually in the form of important financial relationships with large health care organizations.  In many cases, these conflicts are not disclosed.  A related problem is the influence of various non-profit organizations that are heavily funded by those with vested interests, usually in selling particular health care products or services.  Such funding is also rarely disclosed.  I further submit that this distortion has overwhelmingly been in favor of various aspects of the status quo that have been so profitable for the discussants, and their commercial sponsors.  This distortion has meant that certain important problems, especially those that we discuss on Health Care Renewal, are rarely even mentioned in the mainstream media, in journals on health care and services research and health policy, and in political discussion.  Try, for example, to find any discussion of the impact of ill-informed, self-interested, conflicted or corrupt leadership of prominent health care organizations on costs, access and quality, or on patient outcomes.  It is simply not done to discuss the shortcomings of leadership, maybe because it is this leadership who subsidizes many of the pundits, commentators and experts.  At a minimum, participants in the health policy discussion, starting with the most prominent, should fully disclose all financial relationships that could constitute conflicts of interest.  Meanwhile, those listening to the discussion should be extremely skeptical about the opinions expressed.

Mainstream Media "Discovers" Conflicts of Interest of Prominent Health Policy Pundit

The main-stream media, in this case the San Francisco Chronicle , just "discovered" an important case of a conflicted health polic...

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Quis Custodiet Ipsos Custodes?

HAPPY TIMES AT NIMH Two weeks ago I <a href="http://hcrenewal.blogspot.com/2010/03/dr-pangloss-as-nih-institute-director.html">discussed</a> a Commentary in JAMA by Dr. Thomas Insel, Director of the National Institute of Mental Health. Over on <a href="http://carlatpsychiatry.blogspot.com/2010/03/dr-tom-insel-nimh-chief-scolds.html">Danny Carlat’s blog</a>, Dr. Insel took exception to my linking him with Charles Nemeroff, and appeared to be putting distance between himself and Dr. Nemeroff. So, I did some checking, and a correction to one of my statements is in order. I had said, “ … that Insel appointed Nemeroff as an advisor soon after he (Insel) moved to NIMH.” That was my recollection. It turns out what I recalled was instead Insel showcasing Nemeroff in the NIMH Director’s 7th Annual Research Roundtable June 10, 2003, a few months after Insel moved from Emory University to NIMH. Let the record stand corrected. At that gala meeting, held at the National Press Club in Washington, DC, Dr. Insel characterized Nemeroff as one of the “real stars of NIMH’s research community…” Nemeroff used the occasion to pimp GlaxoSmithKline’s drug paroxetine (Paxil), showing data on change in platelet stickiness after Paxil in patients with heart disease and depression. This highlighting of Paxil by Nemeroff focused on the surrogate outcome of platelet function, and contained no evidence that Paxil modified any important clinical endpoints. Nevertheless, Nemeroff speculated liberally about the place of antidepressant drugs in managing heart disease. This is the sort of stuff Insel described at the Roundtable as “ … an excellent sampling of the Institute’s exciting research endeavors.” My general point two weeks ago was that Dr. Insel, the Director of an NIH Institute, downplayed the seriousness of the ethics issues surrounding the seven academic psychiatrists he mentioned in his Commentary in JAMA. Though he spoke in platitudes about the need for transparency, the spirit of transparency did not move him to disclose his own close ties with Dr. Nemeroff, who is one of the seven. Lest there be any remaining doubt about those ties, here is Dr. Nemeroff lauding Dr. Insel at the 201st meeting of the National Advisory Mental Health Council September 13, 2002 in the presence of the NIH Director, Elias Zerhouni, MD. From the Minutes: Dr. Charles Nemeroff, Reunette W. Harris Professor and Chair, Department of Psychiatry and Behavioral Sciences, Emory University School of Medicine, commended Dr. Zerhouni’s selection of Dr. Insel as the next NIMH Director and added that Dr. Insel is the epitome of courage defined as grace under pressure. Dr. Nemeroff added that Dr. Insel will leave his current position as a most beloved professor, a respected scientist, and a great person. In the comments on Danny Carlat’s blog I called Dr. Insel’s objections to my linking him with Nemeroff disingenuous. I still think that. Dr. Insel and Dr. Nemeroff are closer than Insel now seems comfortable acknowledging. Their record of talking up each other is hard to ignore. The irregularities identified by Senator Grassley involving Nemeroff’s reporting to NIH, his conflict of interest, and his conflict of commitment occurred on Insel’s watch. Considering the appearance of cronyism in their relationship, is it even possible for Dr. Insel to investigate Dr. Nemeroff’s performance in areas like the Emory-GlaxoSmithKline-NIMH Collaborative Mood Disorders Initiative? Bernard Carroll

Quis Custodiet Ipsos Custodes?

HAPPY TIMES AT NIMH Two weeks ago I discussed a Commentary in JAMA by Dr. Thomas Insel, Director of the National Institute of Mental Health...

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