PROFESSOR NEMEROFF GOES TO LONDON

<br /><div class="MsoNormal">THREE STRIKES AND …<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">Professor Charles Nemeroff is being honored today in London. He will deliver a high profile lecture at the Institute of Psychiatry, King’s College London, a component of The University of London. IoP and its associated Maudsley Hospital have long been at the forefront of psychiatric research in Britain. The occasion today is the establishment of a new program on mood disorders, and Professor Nemeroff’s topic will be “The Neurobiology of Child Abuse: Treatment Implications.” He will be introduced by Professor Allan Young and the vote of thanks will be proposed by Professor Sir Robin Murray, a former dean of IoP-Maudsley. In the chair will be Professor Carmine Pariante, a onetime colleague of Professor Nemeroff. The current dean, Professor Shitij Kapur, seems to be staying in the background.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">On this side of the pond we are depressingly familiar with Professor Nemeroff. He is the poster boy for conflict of interest in academic psychiatry. I will not rehearse here all the ethics issues in which he has been compromised over the past 15 years. Suffice it to say that as a result of those issues he was dismissed from his departmental chairmanship at Emory University; he was required to resign as editor of the journal <i>Neuropsychopharmacology</i>; he was banned from involvement in NIH grants at Emory University for 2 years; he received an unprecedented sanction from the Ethics Committee and Council of The American College of Neuropsychopharmacology (ACNP), which included a 2-year ban on participating in ACNP meetings and committees; the Accreditation Council on Continuing Medical Education (ACCME) issued a punitive sanction on a program that he directed, finding commercial bias and requiring the program to be withdrawn; and he was referred by Senator Charles Grassley of the US Senate Finance Committee to the Inspector General of the US Department of Health and Human Services for investigation of grounds for criminal charges. <o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">The administrators of IoP-Maudsley apparently ignored these warning signals when they announced over a month ago that they had tapped Professor Nemeroff for today’s honorific lectureship. Many other professionals were shocked, however, and they voiced their disapproval widely – <a href="http://www.madinamerica.com/wp-content/uploads/2013/06/Nemeroff-letter.pdf">directly to the IoP</a>, in the <a href="http://www.independent.co.uk/life-style/health-and-families/health-news/honoured-in-britain-the-us-psychiatrist-who-took-12m-from-drug-companies-8654535.html">mainline press</a>, in the <a href="http://www.bmj.com/content/346/bmj.f3256/rr/648024">British Medical Journal</a>, in <a href="http://criticalpsychiatry.blogspot.com/2013/06/the-ethical-corruption-of-academic.html">on-line comments</a>, and even in a <a href="http://vimeo.com/68299094">video critique</a>. University Diaries ran a critical <a href="http://www.margaretsoltan.com/?p=40236">commentary</a>, as did the respected weblogs <a href="http://www.pharmalive.com/tarnished-image-psychiatrists-square-off-over-a-nemeroff-lecture">Pharmalot</a> and <a href="http://1boringoldman.com/index.php/2013/06/13/character-is-pervasive/">1Boringoldman</a>. Significantly, the letter to British Medical Journal came from a psychiatrist affiliated with IoP itself.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">The IoP <a href="http://freepdfhosting.com/5be73b1bf4.pdf">responded</a> with typical academic stonewalling. Professor Carmine Pariante and Professor Allan Young wrote to the Critical Psychiatry Network, defending the decision to engage Professor Nemeroff. Unfortunately for them, their letter contained 2 fatal mistakes. First, they highlighted the perceived academic distinction of Professor Nemeroff as justification for his selection, thereby confusing an ethics issue with a competency issue. Who cares about Professor Nemeroff’s supposed expertise? When such a compromised individual is given honorific status it sends the wrong message to junior faculty members and to trainees. It also sends the wrong message about the institution's values, as I have discussed <a href="http://hcrenewal.blogspot.com/2010/12/impeachment-its-about-institution-not.html">before</a>. The IoP will be tainted by this episode for years to come, and the responsible administrators deserve all the frowns and brickbats that will come their way.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">The second fatal error in the IoP response was to cast the issue in terms of academic freedom. That claim is rank hypocrisy. The protests are ethics complaints, not disagreements about content or professional turf. Professor Nemeroff was impeached by his peers for ethical lapses, as the record of sanctions clearly shows. That is what sparked the protests. The IoP administrators are displaying glass eyes and tin ears.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">We should also question the scientific judgment of the IoP administrators. Treatment implications of child abuse is a featured focus of Professor Nemeroff’s lecture. How much do the IoP administrators really know about Professor Nemeroff’s work in this area? Do they know how little he has published in this area? Do they know that he is on the public record with at least 2 instances of misrepresenting his work in this area?<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">Professor Nemeroff’s sole publication of original data in this area appeared in 2003 (<a href="http://www.ncbi.nlm.nih.gov/pubmed/14615578">PubMed ID 14615578</a>). It was a secondary analysis of a large clinical trial, first reported in 2000, that originally did not consider child abuse as a moderating variable in the response of chronically depressed patients to an antidepressant (nefazodone) or to cognitive behavior therapy (CBASP). The 2003 report claimed that, in patients with a history of childhood trauma, response to CBASP was superior to response to nefazodone. At the same time there was no significant difference in response rates to drug or to CBASP between patients with or without childhood trauma histories. A portion of this report was later retracted (see PNAS 2005 November 8;102(45):16530) because the data concerning reduction of Hamilton depression scores had been misrepresented. <o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">Notwithstanding the retraction, Professor Nemeroff discussed the retracted data without the necessary qualification in a 2008 Continuing Medical Education program – the same one that was <a href="http://hcrenewal.blogspot.com/2009/10/nemeroff-seroquel-and-accme.html">sanctioned by ACCME</a>. Use of retracted material in this way is inconsistent with ethically grounded teaching. It also is inconsistent with <a href="http://www.fda.gov/oc/op/goodreprint.html">FDA standards</a> for scientific reference publications. Among other requirements, the FDA standards state that scientific reference publications may not <i>“</i><i><span lang="EN">be false or misleading, such as a journal article or reference text… <b>that has been withdrawn by the journal or disclaimed by the author</b>, or…”</span></i><span lang="EN"> </span>Professor Nemeroff then went further, stating in the video record that a history of childhood abuse or neglect “predicts poor outcome… particularly to pharmacotherapy.” That claim is outright false. The data simply do not support that claim.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">Professor Nemeroff repeated these same misrepresentations <a href="http://www.veomed.com/grandrounds/archive&vid=817631&gnr=824342">on the video record</a> a second time in January 2012 when he presented Psychiatry Grand Rounds at New York University. Once again Professor Nemeroff displayed sleight of hand in palming off a nonsignificant difference as both statistically and clinically significant. To reiterate, Professor Nemeroff’s own data do not show a statistically or clinically significant difference between chronically depressed patients with and without a history of child abuse in their responses to drug or to CBASP.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">The question for today is, will Professor Nemeroff repeat these misrepresentations in his lecture at the IoP-Maudsley? Should he do that, then the 3-strike rule needs to be invoked. I nominate the administrators at IoP-Maudsley for the job of lowering the boom finally on Professor Nemeroff. That would be one way they might redeem themselves in this fiasco.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">Oh, and by the way, Professor Nemeroff has apparently done nothing more in this area since the 2003 partially retracted secondary analysis of an earlier study. But others have been looking at his claims and have not confirmed them – see, for instance the <a href="http://www.ncbi.nlm.nih.gov/pubmed/22428942">Canadian study</a> that found no difference in response rates to pharmacotherapy or cognitive behavior therapy in patients with and without histories of severe childhood maltreatment (PubMed ID 22428942). Will Professor Nemeroff acknowledge this non-confirmation of his narrative when he speaks today at the IoP-Maudsley? We are agog.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">If the administrators of IoP-Maudsley wish to continue defending their selection of Professor Nemeroff as a world expert on the treatment implications of child abuse, then who am I to argue? I don’t need to argue… the record speaks for itself.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">One final point: the IoP <a href="http://freepdfhosting.com/5be73b1bf4.pdf">response</a> to the Critical Psychiatry Network stated that Professor Nemeroff “will not be presenting any research that was funded by commercial companies or affected by commercial implications. Obviously, he will be declaring any relevant conflicts of interest prior to his lecture.” The administrators at IoP should be aware that Professor Nemeroff’s data on treatment implications of child abuse (such as they are) do, in fact, come from a commercially sponsored clinical trial. I would also bet dollars to donuts that Professor Nemeroff declares no relationship to Bristol Myers Squibb, the sponsor of that trial.</div><div class="MsoNormal"><o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">What are the larger lessons of this new <i>affaire Nemeroff</i>? Academic institutions like IoP-Maudsley need spine and due diligence to maintain decent standards and to put the hand wavers where they belong – not on center stage. Raise the bar, chaps!<o:p></o:p><br /><br /><u>BERNARD CARROLL</u><br /><u><br /></u><div class="MsoNormal"><b><u>UPDATE 06-18-2013<o:p></o:p></u></b></div><div class="MsoNormal"><br /></div><div class="MsoNormal">We are waiting for a response from the Institute of Psychiatry… it could be a long wait. We have learned that Professor Nemeroff was unwilling to make publicly available the slides he used in his lecture yesterday. Hmmm.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">Meanwhile, I should clear up some potential confusion about the data in Professor Nemeroff’s <a href="http://www.ncbi.nlm.nih.gov/pubmed/14615578">2003 publication</a> that I discussed yesterday. When I said the data showed no significant difference in response to cognitive behavior therapy (CBASP) between patients with and without early life trauma, I said that because Professor Nemeroff had made no claim that there was a difference. He made a variety of other claims, but not this one. I took this to mean that he had looked for a significant difference but didn’t find one. It is not possible for anyone to make an independent determination of what he found because he did not report the data transparently – there was no positive statement of sample sizes for different treatments, for example, and the remission rates were not consistently reported: some were stated numerically while others were only displayed graphically. For what it is worth, there might actually be a significant difference in response to CBASP between patients with and without early life trauma. We just cannot be sure. Let the record stand corrected. Maybe Professor Nemeroff can clear that up?<o:p></o:p></div><div class="MsoNormal"><br /></div><div style="margin-bottom: .0001pt; margin: 0in;">None of this alters the fact that Professor Nemeroff’s data show no significant difference in response to nefazodone between patients with and without early life trauma. And, none of this alters the misrepresentations by Professor Nemeroff that I discussed yesterday. In the <a href="http://hcrenewal.blogspot.com/2009/10/nemeroff-seroquel-and-accme.html">sanctioned CME presentation </a>in 2008 he positively stated on the video record that a history of childhood abuse or neglect “predicts poor outcome… particularly to pharmacotherapy.” That claim is outright false. The data simply do not support that claim, and, once again, he made no such claim in the 2003 publication.<o:p></o:p></div><div style="margin-bottom: .0001pt; margin: 0in;"><br /></div><div style="margin-bottom: .0001pt; margin: 0in;">Likewise, in the 2012 <a href="http://www.veomed.com/grandrounds/archive&vid=817631&gnr=824342">Grand Rounds</a> presentation at NYU, Professor Nemeroff positively stated that patients with chronic depression but without a history of childhood trauma “did better with drug than with CBASP.” That also is a false statement (see Figure 1B of the 2003 publication). There is no significant difference and none was claimed in the paper.<o:p></o:p></div><div style="margin-bottom: .0001pt; margin: 0in;"><br /></div><div style="margin-bottom: .0001pt; margin: 0in;">Meanwhile, in both these misleading presentations that are on the video record Professor Nemeroff used the retracted material that I mentioned yesterday. He used it in classic hand waving fashion to embellish his narrative, but he used it without the required qualification that was given in his retraction notice!<o:p></o:p></div><div style="margin-bottom: .0001pt; margin: 0in;"><br /></div><div style="margin-bottom: .0001pt; margin: 0in;">Aren’t we all justified in asking the Institute of Psychiatry to release Professor Nemeroff’s slides from yesterday’s much publicized lecture? <o:p></o:p></div><div style="margin-bottom: .0001pt; margin: 0in;"><br /></div><br /><div style="margin-bottom: .0001pt; margin: 0in;"><u>BERNARD CARROLL<span style="font-size: medium;"><o:p></o:p></span></u></div></div><div class="MsoNormal"><br /></div><div class="MsoNormal"><br /></div>

PROFESSOR NEMEROFF GOES TO LONDON

THREE STRIKES AND … Professor Charles Nemeroff is being honored today in London. He will deliver a high profile lecture at the Institute of ...

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IT Specialist and the job he wouldn't take: hospital management's health IT "plan" is a checklist for failure

Received unsolicited on June 14, 2013 from a computer professional whose identity I am redacting.  Posted with his permission:<br /><br /><blockquote class="tr_bq"><div><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Dr. Silverstein,</span></span></div><div style="background-color: transparent; color: black; font-style: normal;"><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></span></div><div style="background-color: transparent; color: black; font-style: normal;"><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Thank you very much for the many insights and helpful references provided on your "<b>Contemporary Issues in Medical Informatics</b>" (<a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/">http://www.ischool.drexel.edu/faculty/ssilverstein/cases/</a>) web site! <span style="background-color: transparent;">In performing my due diligence for a position as an IT Director at a small rural hospital, I have come across your writings. </span></span></span></div><div style="background-color: transparent; color: black; font-style: normal;"><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="background-color: transparent;"><br /></span></span></span></div><div style="background-color: transparent; color: black; font-style: normal;"><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="background-color: transparent;">I originally applied for this position in the hopes of leveraging my IT, project management, compliance and security experience to gain new expertise in healthcare IT. After my initial phone interview with the "CIO" and HR Director, at which I discovered that I would have the responsibility </span><span style="background-color: transparent;">to implement a poorly conceived new EMR project, </span><span style="background-color: transparent;">without the authority or resources to make it successful, additional red flags were raised which required further research. This led me to you.  </span></span></span></div><div style="background-color: transparent; color: black; font-style: normal;"><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></span></div><div style="background-color: transparent; color: black; font-style: normal;"><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">I cannot help but chuckle at the organizational, social and project management dysfunctions in medical IT, as described in your "<b>Ten Critical Rules for Applied Informatics...</b>"  (<a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=tenrules">http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=tenrules</a>).   I have encountered similar dysfunctions in the world of military and commercial IT.  With a little tweaking, your lessons learned are applicable across a wide range of IT disciplines and a good reminder of how to avoid IT project and career failures and achieve successes.</span></span></div><div style="background-color: transparent; color: black; font-style: normal;"><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;"><br /></span></span></div><div style="background-color: transparent; color: black; font-style: normal;"><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">Yet, <span style="background-color: transparent;">I understand and have come to appreciate your thesis that medical IT is fundamentally different from business IT. Even though I am convinced that I could do better than most, I have concluded that it is probably wiser for a competent healthcare informaticist to lead HIT implementation projects. I wonder how many such competent informaticists there can be! Unfortunately, since I have no background in medicine, it is probably a little late for me to become one. </span></span></span></div><div style="background-color: transparent; color: black; font-style: normal;"><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;"><span style="background-color: transparent;"><br /></span></span></span></div><div style="background-color: transparent; color: black; font-style: normal;"><span style="font-size: small;"><span style="font-family: Arial,Helvetica,sans-serif;">I certainly will not engage in this particular opportunity. <b>What I know of the hospital management's "plan" at this point is a checklist for failure.</b> The reality of this rural hospital, and apparently thousands of similar situations, is unnecessarily and depressingly tragic for patients and clinical professionals. <span style="background-color: transparent;">I appreciate your crusade to raise the bar for healthcare IT, and therefore IT in general. Thank you for saving me from jumping in to an untenable situation.</span></span></span></div></blockquote><br /><br />Ironically, and sadly, this letter is similar to others I have received dating to 1999.  Little has changed in nearly 15 years, except that with the rush to implement this unregulated, experimental technology thanks to the HITECH Act, there's likely going to be a lot more patient harm, especially at smaller hospitals new to this endeavor.<br /><br />-- SS<br /><br />

IT Specialist and the job he wouldn't take: hospital management's health IT "plan" is a checklist for failure

Received unsolicited on June 14, 2013 from a computer professional whose identity I am redacting.  Posted with his permission: Dr. Silverste...

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The Financialized Medical Center - Executives of Non-Profit Wake Forest Baptist Medical Center Make an "Investor Call," but Have no Investors

<br />We recently discussed the uncomfortable situation of Wake Forest Baptist Medical Center, the non-profit health system/ academic medical center of Wake Forest School of Medicine.  The organization suffered acute monetary losses after a problem plagued roll out of its new electronic health record.  Presiding over this mess were some extremely well paid executives who had been hailed as "visionaries" by their own public relations people. (Look <a href="http://hcrenewal.blogspot.com/2013/05/executive-compensation-as-legal.html">here</a> and <a href="http://hcrenewal.blogspot.com/2013/05/clouded-visionary-leadership-wake.html">here</a>.)<br /><br /><b>An Even Bigger Financial Loss </b><br /><br />The resourceful Richard Craver, <a href="http://www.journalnow.com/business/business_news/local/article_52778d60-d2f5-11e2-aeb0-001a4bcf6878.html">writing</a> in the Winston-Salem Journal, just documented that the financial losses due to this cybernetic chaos now seem even bigger, <br /><br /><blockquote class="tr_bq">The center said Monday in a report submitted to bond agencies that it had <i>a $62.8 million operational loss</i> and an overall loss of $3.2 million in the third quarter of fiscal year 2012-13, which ended March 31.<br /><br />Stock investment gains of $54.6 million helped offset much of the operational revenue loss.<br /><br />Still, <i>the operational loss was $13.2 million higher than the $49.6 million it reported Dec. 31</i>. At that time, the center reported $7.4 million in overall excess revenue because of investment gains.  </blockquote><b>A Call to Non-Existent Investors </b><br />  <br />That, however, was not the big news.  Mr Craver further noted,<br /><br /><blockquote class="tr_bq"><i>Wake Forest Baptist chief executive Dr. John McConnell and chief financial officer Edward Chadwick held an<a href="http://emma.msrb.org/ER677717-ER525248-ER927930.pdf"> <b>investors call</b></a> on Monday to discuss the financial performance. It is the third such presentation of the fiscal year</i>, according to the Municipal Securities Rulemaking Board’s <a href="http://www.emma.msrb.org/">www.emma.msrb.org</a> website.</blockquote><br />Mr Craver noted that there was something distinctly odd about this.  <br /><br /><blockquote class="tr_bq"><i>The investor call represents a potential blurring of the lines between how not-for-profit hospitals and corporations operate,</i> which also includes executive compensation as a hot-button topic.<br /><br />Analysts said the call is comparable to an earnings warning that corporations provide when they try to soften the negative reaction from a poorer-than-projected financial performance.<br /><br /><i>Wake Forest Baptist did not comment when asked how long has it made investor calls and who receives notifications of the presentations</i>. According to <a href="http://emma.org/">emma.org</a>, the center did not have investor calls listed prior to the first quarter of the current fiscal year.<br /><br />A search of Wake Forest Baptist’s public website did not find any references to investor calls or quarterly and annual financial reports. Spokesman Chad Campbell said the quarterly financial calls are in the public domain.</blockquote><br />While US publicly traded for-profit companies usually do schedule quarterly conference calls with investors to inform them about recent developments, Wake Forest Baptist Medical Center is clearly not a publicly held for-profit company.  It is a non-profit organization.  Non-profit organizations do not have investors or shareholders,<br /><br />For-profit corporations also may do periodic calls with bondholders.  Wake Forest Baptist Medical Center does have bondholders.  But the <a href="http://emma.msrb.org/ER677717-ER525248-ER927930.pdf">posted notice</a> for the call discussed above clearly refers to an "investor call," not a bondholders call.  One can now listen to the call (+1 855 859 2056, conference ID 90279604), and when I did, I heard the call was introduced by the operator, and by the Wake Forest Baptist Medical Center CFO as an "investor call."   <br /><br /><b>A Financialized Mindset? </b><br /><br />So what in the world is going on here?  So why would its CEO and CFO make a quarterly call to "investors?"  The idea is absurd on its face.  <br /><br />Mr Craver was able to find one person to comment, who seemed to assume that the calls were truly "investor calls," not mislabeled calls to bondholders:<br /><br /><blockquote class="tr_bq">Ken Berger, president and chief executive of Charity Navigator, said a not-for-profit hospital holding an investors call 'is <i>the antithesis of why a nonprofit exists</i>.'<br /><br />'<i>Nonprofits are not supposed to be trying to maximize shareholder value, but maximize their benefit to the communities they serve</i>,' Berger said. 'Transparency is great, whether corporation or nonprofit, for shedding light on financial performance.'<br /><br />'In this instance, the investor call doesn’t represent full transparency, but only represents more <i>morphing of a not-for-profit into a for-profit organization</i> where only a select few investors are chosen to have access to pertinent current information.'<br /></blockquote>My guess is that Mr Berger got it right.  It may be that the top executives of Wake Forest Baptist Medical Center have the mindsets of executives of a big for-profit corporation in an era of <a href="http://hcrenewal.blogspot.com/search/label/financialization">financialization</a>. <br /><br /><a href="http://economix.blogs.nytimes.com/2013/06/11/financialization-as-a-cause-of-economic-malaise/">In the New York Times Economix blog</a>, Bruce Bartlett, an economist who has served in the administration of two Republican Presidents, Ronald Reagan and George HW Bush, and has worked for two Republican legislators, Jack Kemp and Ron Paul, cited financialization as the big largely anechoic reason for the global economic malaise.  He wrote,<br /><br /><blockquote class="tr_bq"> According to <a href="http://web.williams.edu/Economics/wp/BakijaColeHeimJobsIncomeGrowthTopEarners.pdf">research</a> by the economists Jon Bakija, Adam Cole and Bradley T. Heim, <i>financialization is a principal driver of the rising share of income going to the ultrawealthy – the top 0.1 percent </i>of the income distribution.<br /> <br />Research by the University of Michigan sociologist <a href="http://cas.umkc.edu/econ/economics/faculty/wray/631Wray/Week%207/Krippner.pdf">Greta R. Krippner</a> supports this position. She notes that financialization exacerbates the well-known problem of corporate ownership and control: <i>while corporate assets are owned by shareholders, they are controlled by managers who often extract an excessive share of corporate profits for themselves.</i></blockquote><br /> As we have <a href="http://hcrenewal.blogspot.com/2012/04/health-care-dysfunction-explained-by.html">discussed</a>, for a generation business schools have taught managers that there primary goal is to maximize shareholder value, which has been interpreted to mean short-term financial performance.  Large corporations now give top managers tremendous incentives to maximize such performance, such that top managers have become rich, often the richest members of society.  Many top managers of health care organizations now come from a business background, and health care managers, even of non-profit organizations, also get large incentives.  <br /><br />Note also that the two executives on the "investor call" both had outsize compensation in 2011, the latest year for which the non-profit Wake Forest Baptist Medical Center has released the disclosure form (990 form) required by the US government.  The CEO, Dr McConnell, received over $2 million, while the CFO, Mr Chadwick, received just short of $1 million. (Look <a href="http://hcrenewal.blogspot.com/2013/05/executive-compensation-as-legal.html">here</a>.)  So it looks like they have a good reason to continue to operate a financialized organization so they can keep extracting sufficient revenue to make themselves rich.<br /><br />Clearly, though, if we want our health care organizations to preserve and protect patients' and the public health, we need them to be lead by leaders who care much more about health care than about short-term revenue and making themselves rich.<br /> <br /><br />As we have said endlessly,  true health care reform would put in place leadership that understands the health care context, upholds health care professionals' values, and puts patients' and the public's health ahead of extraneous, particularly short-term financial concerns. We need health care governance that holds health care leaders accountable, and ensures their transparency, integrity and honesty. <br /><br />

The Financialized Medical Center - Executives of Non-Profit Wake Forest Baptist Medical Center Make an "Investor Call," but Have no Investors

We recently discussed the uncomfortable situation of Wake Forest Baptist Medical Center, the non-profit health system/ academic medical cent...

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A Legal Settlement of One Aspect of the Fall of AHERF, Only 15 Years Later

It only took 15 years, but litigation related to one of the most important, but obscure cases of bad health care leadership and governance from the 1990s was finally settled.   <br /><br /><b>Background </b><br /><br />The Allegheny Health Education and Research Foundation (AHERF) was a large integrated health care system formed out of multiple mergers.  AHERF went bankrupt in 1998, leading to massive layoffs, hospital closures, and the near dissolution of a medical school (which ended up taken over by Drexel University).  We last discussed the case in 2012 <a href="http://hcrenewal.blogspot.com/2012/04/pittsburgh-experiment-ii-another-echo.html">here</a>.. A summary of other important points about it is appended below.  <br /><br />As we <a href="http://hcrenewal.blogspot.com/2008/07/10-years-later-eerie-echo-of-fall-of.html">noted</a> in 2008, although the AHERF bankruptcy appears to be the largest failure of a not-for-profit health care corporation in US history, its story has produced remarkably few echoes for doctors, other health care professionals, health care researchers, and health policy makers. I often use the fall of AHERF as an example in talks, at least the few talks I am allowed to give on such unpleasant subjects. Rarely have more than a few people in the audience heard of AHERF prior to my discussion of it.<br /><br />I only could locate <a href="http://content.healthaffairs.org/cgi/reprint/19/1/7.pdf">one article </a>in a medical or health care journal that discussed the case in detail, but was written too early to address it very completely [Burns LR, Cacciamani J, Clement J, Aquino W. The fall of the house of AHERF: the Allegheny bankruptcy. Health Aff (Millwood) 2000; 19: 7-41.]  I doubt the case is used for teaching in most medical or public health schools, although it.was a formative influence on my <a href="http://www.ncbi.nlm.nih.gov/pubmed/12719032">2003 article</a> on health care dysfunction [Poses RM. A cautionary tale: the dysfunction of American health care. Eur J Int Med 2003; 14: 123-130] and on this <a href="http://hcrenewal.blogspot.com/">Health Care Renewal</a> blog.  (A book about the case, Merger Games, by Judith Swazey, was published in 2012, and is available <a href="http://muse.jhu.edu/books/9781439907191">here</a> as  a set of PDF files from Project Muse for those with the proper password, but it has not yet had much of an impact, and I confess I have not yet read it.)  The lack of discussion of such a significant case is a prime example of the <a href="http://hcrenewal.blogspot.com/2007/08/bling-bling-poltical-correctness-and.html">anechoic effect</a>.  <br /><br /><b>One Legal Settlement, 15 Years Later, for a Secret Amount</b><br /><br />But a brief echo of the case did appear in a brief <a href="http://triblive.com/news/allegheny/3875012-74/aherf-settlement-creditors">article</a> in the Pittsburgh Tribune Review published in April, 2013: <br /><br /><blockquote class="tr_bq"><div class="News-body-text"> Lawyers would not say Tuesday how much money an accounting firm will pay to <i>settle a 13-year-old lawsuit claiming it helped destroy one of the state's largest health care systems</i>. </div><div class="News-body-text"><br /></div><div class="News-body-text"> 'It will result in a very significant recovery,' James Jones, one of the lawyers representing the unsecured creditor of the Allegheny Health Education and Research Foundation, said during a settlement hearing in Pittsburgh federal court. </div><div class="News-body-text"><br /></div><div class="News-body-text"><i>The creditors in 2000 sued Coopers & Lybrand LLP, the predecessor of PricewaterhouseCoopers LLP, claiming that if auditors in 1996 and 1997 had informed AHERF's board about the foundation's true financial condition, it would have acted to avoid a bankruptcy that resulted in huge losses.</i> The foundation's assets included the Allegheny General Hospital system. </div></blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br />It seems only fitting, given how anechoic this case has been, that much about this settlement remains obscure,</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><blockquote class="tr_bq"><div class="News-body-text"> U.S. District Judge David Cercone, in a joint session with U.S. Bankruptcy Judge Judith Fitzgerald, approved the settlement with PricewaterhouseCoopers. </div><div class="News-body-text"><br /></div><div class="News-body-text"> The company disputes the method the committee used to calculate losses and denies liability in the settlement. </div><div class="News-body-text"><br /></div><div class="News-body-text">Joseph McDonough, a lawyer for PricewaterhouseCoopers, agreed the settlement amount is significant. He and Jones declined comment. </div><div class="News-body-text"><br /></div><div class="News-body-text">Jones said during the hearing that a trial could have lasted 40 days. Preparation for the case generated more than 200 depositions, 19 expert opinions and more than a million documents, he said. </div><div class="News-body-text"><br /></div><div class="News-body-text">The committee sent more than 3,500 notices to creditors about the proposed settlement, and none objected, he said. </div><div class="News-body-text"><br /></div><div class="News-body-text"><i>Both sides agreed to keep the amount secret</i>, and they discussed with Fitzgerald how to avoid releasing the amount in filings for related bankruptcy action. </div></blockquote><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"><br /></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"></div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">Maybe if the case had somehow generated more echoes, health care professionals and policy makers, and patients and the public at large might have learned some of its lessons.  The story of AHERF is not merely that of an unlucky bankruptcy. It shows what can go wrong when health care is taken over by <a href="http://hcrenewal.blogspot.com/search/label/generic%20managers">generic managers</a> who adapt the latest management fads, and health care decision making is ruled by <a href="http://hcrenewal.blogspot.com/search/label/marketing">marketing</a>, <a href="http://hcrenewal.blogspot.com/search/label/public%20relations">public relations</a> and <a href="http://hcrenewal.blogspot.com/search/label/propaganda">propaganda</a> instead of evidence and logic, and allows power to be <a href="http://hcrenewal.blogspot.com/search/label/concentration%20of%20power">concentrated</a> in organizations run by<a href="http://hcrenewal.blogspot.com/search/label/imperial%20CEO"> imperial CEOs</a>.  .</div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;"> </div><div style="background-color: white; border: medium none; color: black; overflow: hidden; text-align: left; text-decoration: none;">We did not get a chance to learn this history, so we seem bound to repeat it.   </div></div><br /><span style="font-size: x-small;"><b>Appendix</b></span><br /><span style="font-size: x-small;"><br /></span><span style="font-size: x-small;">Some important points about AHERF not found above (see also <a href="http://www.acponline.org/chapters/ri/nl-fall04.pdf">this narrative</a>, starting on page 5):</span><span style="font-size: x-small;"><br /></span><br /><ul><li><span style="font-size: x-small;">AHERF, one of the largest health care systems of its day, was built by the poster-boy for health care imperial CEOs, Sherif Abdelhak.</span></li><li><span style="font-size: x-small;">Abdelhak, who <a href="http://www.post-gazette.com/aherf/part2.asp">started as food services purchasing manager </a>at Allegeheny General Hospital, was repeatedly hailed as a "<em>visionary</em>" (<a href="http://www.acponline.org/journals/news/mar97/phillymc.htm">in the March, 1997, ACP Observer</a>) a "genius," and the like. His plans to create a huge integrated health care system were part of the wave of the future. Abdelhak was even invited to give the prestigious John D Cooper lecture at the annual meeting of the American Association of Medical Colleges (AAMC), which was published in Academic Medicine [Abdelhak SS. How one academic health center is successfully facing the future. Acad Med 1996; 71: 329-336.] He proclaimed that "we will need to create new forms of organization that are more flexible, more adaptive, and more agile than ever before." And he announced that "my aim as chief executive has been to unleash the creativity and productive potential of every individual and to provide an environment that encourages teamwork" </span></li><li><span style="font-size: x-small;">While Abdelhak was making these grandiose promises, he paid himself and his associates very well. For example, he received $1.2 million in the mid-1990s, more than three times the average then for a hospital system CEO. He lived in a hospital supplied mansion worth almost $900,000 in 1989. Five of AHERF's top executives were in the top 10 best paid hospital executives in Philadelphia.</span></li><li><span style="font-size: x-small;">Although Abdelhak talked of teamwork, he warned the combined faculty of the new Allegheny University of the Health Sciences (AUHS): <a href="http://www.post-gazette.com/aherf/part6.asp">"Don’t cross me or you will live to regret it."</a></span></li><li><span style="font-size: x-small;">As AHERF was hemorrhaging money, Abdelhak continued to pay himself and his cronies lavishly.</span></li><li><span style="font-size: x-small;">After the AHERF bankruptcy, which was at the time the second largest bankruptcy recorded in the US, Abdelhak was charged with numerous felonies involving receiving charitable assets. In a plea bargain, <a href="http://www.post-gazette.com/localnews/20020830abdelhak0830p4.asp">he pleaded no contest </a>to misusing charitable funds, a misdemeanor, and was sentenced to more than 11 months in county prison.</span></li></ul>Posted by Roy M. Poses MD to the Health Care Renewal blog

A Legal Settlement of One Aspect of the Fall of AHERF, Only 15 Years Later

It only took 15 years, but litigation related to one of the most important, but obscure cases of bad health care leadership and governance f...

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Is the Cystic Fibrosis Foundation a Charity or a Venture Capital Firm?

We have often discussed how health care organizations now seem prone to diversion from their stated missions, often when money is the object.  While the organizations in question are frequently academic, teaching hospitals, academic medical centers, or medical schools in particular, in May, the Milwaukee Journal Sentinel <a href="http://www.jsonline.com/watchdog/watchdogreports/charitys-investment-a-prescription-for-profits-for-drug-maker-p79tfc9-208027961.html">presented</a> an example of a disease specific charity.  This article deserves considerably more attention than it apparently initially received.<br /><br /><b>Background </b><br /><br />The background was,<br /><br /><blockquote class="tr_bq">What happens when <i>a disease-fighting charity dives into venture capitalism</i>?<br /><br />In the first case of its kind, <i>the results include one of the planet's most expensive pills, huge sales projections for a drug company and windfalls for executives</i> who sold stock in the glow of enthusiastic news releases about the drug.<br /><br />Kalydeco is a breakthrough drug designed from knowledge of the genetic roots of cystic fibrosis, a lung disease that kills most victims before they reach middle age. Developed by Vertex Pharmaceuticals with a $75 million investment from the Cystic Fibrosis Foundation, it is an early example of '<i>venture philanthropy,' where a nonprofit helps finance development of a treatment in return for a cut of sales.</i></blockquote><br />Remember that while disease specific charities often sponsor basic and clinical research, in this case, the CFF sponsored drug development.  In fact, much of the research on which this development was based was sponsored by charities and the US National Institutes of Health:<br /><br /><br /><blockquote class="tr_bq">In the 1980s, Francis Collins, now director of the National Institutes of Health, was a researcher at the University of Michigan and on his way to becoming a renowned gene hunter.<br /><br />Collins and a team headed up by Lap-Chee Tsui at the Hospital for Sick Children in Toronto collaborated to identify the gene responsible for cystic fibrosis. That breakthrough involved funding from the NIH, the Cystic Fibrosis Foundation and the Howard Hughes Medical Institute, said Collins.<br /><br />Another decade of intense basic science followed, much of it funded by NIH.</blockquote><br /><b>The Price to Patients</b>  <br /><br />Despite, or perhaps because of the funding provided by CFF, Vertex chose a stratospheric price for its new drug.<br /><br /><blockquote class="tr_bq"> Yet<i> it costs each patient $307,000 a year to take two Kalydeco pills a day</i> - a price borne by taxpayers through Medicaid and other government programs and by the workers and companies who finance employee health insurance plans.<br /><br />In 2012, with less than a full-year on the market, Vertex sold $172 million worth of Kalydeco....</blockquote><br />To put that in perspective, the yearly cost of Kalydeco is approximately six times the median family income in the US. <br /><br /><br /><b>Minimizing the Harms</b> <br /><br />To put it further into perspective, keep in mind that for the moment, the data from the single best published clinical trial on Kalydeco suggests that while the drug seems to help the average patient, it is not without risks, and it is certainly not a cure. <br /><br />The largest published trial that followed patients for a reasonable amount of time appeared in 2011 in the New England Journal of Medicine.  [Ramsey BW, Davies J, McElvaney G et al.  A CFTR potentiator in patients with cystic fibrosis and the G551D mutation. N Engl J Med 2011; 365: 1663-1672.  Link <a href="http://www.nejm.org/doi/full/10.1056/NEJMoa1105185">here</a>.]  The study followed 161 patients for 48 weeks.  The patients treated with Kalydeco on average showed improved lung function (increase of FEV1 [forced expiratory volume in one second] of 10% compared to essentially no change (-0.2 percent) in the placebo group.  Treated patients were less likely to have an exacerbation of their pulmonary disease requiring hospitalization (31% vs 49%).  So the drug certainly seems to have benefits at least in the short term.  The number needed to treat to prevent one exacerbation requiring hospitalization in one year is five, which seems quite respectable.<br /><br />On the other hand, the drug may have significant harms, even thought the report of the study seems to have attempted to minimize them.  The article stated<br /><br /><blockquote class="tr_bq">there was a lower rate of serious adverse events in the ivacaftor [Kalydeco] group than in the placebo group (24% vs 42%).   </blockquote><br />However, this statement depended on a rather peculiar definition of severe adverse events.  In particular, pulmonary exacerbations of cystic fibrosis were included among severe adverse events.  Yet these are, as the term suggests, manifestations of the disease that is being treated.  Reduction of pulmonary adverse events should be and was considered a measure of efficacy.  So placing exacerbations within the definition of adverse events essentially double counts these incidents.  <br /><br />Furthermore, the presence of these within the category of adverse events swamps out other events which may in fact be adverse results of the study drug.  If one subtracts pulmonary exacerbations and hemoptysis from the counts of serious adverse events, what remains is that patients on Kalydeco were more likely to have a serious adverse event (10%) than those on placebo (4%).  Thus the apparent number needed to harm was 17.  Thus, using this peculiar definition of adverse events appears to be a way to <a href="http://hcrenewal.blogspot.com/search/label/manipulating%20clinical%20research">manipulate the analysis</a> to minimize the apparent harmfulness of the drug. <br /><br />While the study did appear to show that more patient received the benefit of avoiding a hospitalization due to a pulmonary exacerbation of cystic fibrosis than had a serious adverse event, the study did not show that the drug had overwhelming efficacy, or tremendous safety.   The study did not last long enough to show long term advantages, or to rule out rare but severe side effects.<br /><br />This is the only drug available of this type, and it may well provide benefits that outweigh harms, at least over the short-term, but it is not a wonder drug, and the rationale to charge so much money for it, other than that is what the market will bear, is not obvious.   <br /><br /><b>A Windfall for Corporate Executives, and a Question of Insider Trading</b><br /><br />The drug's approval has lead to a lot of financial success for stock holders, particularly Vertex executives:<br /><br /><blockquote class="tr_bq"> Last month, news about success of the drug sent Vertex stock soaring more than $6 billion in a single day. That surge and a similar one last May <i>allowed top executives and directors of the company to sell stock and options worth more than $100 million</i>.</blockquote><br />The executives' lavish windfall occurred in somewhat questionable circumstances:<br /><br /><blockquote class="tr_bq">Vertex and its executives have benefited greatly from Kalydeco and foundation funding.<br /><br />Last May, when <a href="http://investors.vrtx.com/releasedetail.cfm?ReleaseID=670755" target="_blank">Vertex</a> and the <a href="http://www.cff.org/aboutCFFoundation/NewsEvents/2012NewsArchive/5-7-Phase-2-Kalydeco-VX-809-Interim-Data-Results.cfm" target="_blank">foundation</a> reported positive results from a clinical trial involving Kalydeco and whether it could be combined with another drug to treat more patients, the company's stock jumped more than 70%, from $37.41 to $64.85 a share.<br /><br /><i>Five executives and two directors sold off more than <b>$35 million</b> in shares,</i> mainly at prices from about $55 to $64 a share. Many of the options were priced between $16 and $40 a share.<br /><br />Three weeks later, the <a href="http://investors.vrtx.com/releasedetail.cfm?ReleaseID=677520" target="_blank">company said it overstated</a> the effectiveness of the drug in that trial and the stock dropped about $7 a share, ultimately falling back under $40 by December.<br /><br />Vertex spokeswoman Nikki Levy said in an email the company does not comment on individual stock sales.  She said the executive stock sales either were part of pre-existing 10b5-1 plans or followed the company's internal stock trading policy. A 10b5-1 plan is an automatic trading tool in which executives specify timing or pricing of sales to avoid questions about inside information the seller had at the time.<br /><br />U.S. Sen. Chuck Grassley (R-Iowa) <a href="http://www.grassley.senate.gov/about/upload/2012-06-07-CEG-to-SEC-Vertex.pdf" target="_blank">wrote a letter</a> to the U.S. Securities and Exchange Commission, saying<i> it could appear that Vertex executives took advantage of the situation, knowing the overstated clinical trial results would eventually be made public and cause the stock price to drop.</i><br /><br />The letter said the stock sales were troubling for industry investors and the federal government, which pays billions of dollars a year for drugs through Medicaid and Medicare.<br /><br />Judith Burns, a spokeswoman for the SEC, declined to comment on the Grassley letter.<br /><br />Last month, the company's stock shot up more than 60% again, from $52.87 to $85.60, after <a href="http://investors.vrtx.com/releasedetail.cfm?ReleaseID=757597" target="_blank">positive early data</a> from a clinical trial of Kalydeco and another drug it is developing with funding from the foundation. On April 19, the day after the news was released, the company's market value jumped by more than $6 billion.<br /><br />That same day, <i>two company executives sold huge chunks of stock options. Executive Vice President and Chief Financial Officer Ian Smith alone sold 745,685 shares worth more than <b>$60 million</b>.</i> Most shares were sold at $81.50, with options purchased from $29 to $39.</blockquote><br />So at least Senator Grassley raised the question of whether Vertex executives may have taken advantage of their insider knowledge to personally profit even more from this useful but not miraculous drug meant to be used on vulnerable patients.<br /><br />Keep in mind that those huge trading gains were layered on top of already lavish compensation.  The 2013 Vertex <a href="http://investors.vrtx.com/secfiling.cfm?filingID=875320-13-13&CIK=875320">proxy statement</a>, the total compensation and stock holdings of its top executives in 2012 was:<br /><br />Jeffrey M Leiden, CEO                               <b><i> $</i></b><span style="font-family: INHERIT; font-size: 8PT;"><b><i>5,656,684 </i></b>     441,160 shares</span><br /><span style="font-family: INHERIT; font-size: 8PT;">Ian F Smith, CFO                                          <b><i> $3,109,193</i></b>      795,434</span><br /><span style="font-family: INHERIT; font-size: 8PT;">Stuart A Arbuckle, Chief Commercial Officer   <b><i>$4,808,697</i></b>         66,477</span><br /><span style="font-family: INHERIT; font-size: 8PT;">Kenneth L Horton, Chief Legal Officer             <b><i>$2,802,735</i></b>         41,161</span><br /><span style="font-family: INHERIT; font-size: 8PT;">Peter Mueller, Chief Scientific Officer              <b><i>$3,614,890</i></b>        997,651</span><br /><span style="font-family: INHERIT; font-size: 8PT;">Matthew W Emmens, Former CEO                  <b><i>$6,896,029</i></b>    1,486,748</span><br /><span style="font-family: INHERIT; font-size: 8PT;">David T Howton Jr, Fomer Chief Legal Officer <b><i>$3,447,898</i></b>           3,105</span><br /><span style="font-family: INHERIT; font-size: 10PT;"></span><br /><br /><br />So the top executives of Vertex, while their company got $75 million from an ostensible charity to develop what became an extremely expensive drug, got very rich in the process, although how they got rich may yet attract attention from the SEC.<br /><br /><b>A Windfall for the Cystic Fibrosis Foundation and its Executives</b><br /><br />Furthermore, it appears that the supposedly charitable Cystic Fibrosis Foundation also made quite a bit of money, and its executives, while not getting quite as rich as their associates in Vertex, did not do at all badly.<br /><br />As the Journal Sentinel noted,<br /><br /><blockquote class="tr_bq"><i>the foundation cashed in by selling future royalties</i> from the drug to an undisclosed firm for <i><b>$150 million</b>.</i></blockquote>Keep in mind that since the CFF was to receive royalties, the money it gave for drug development was not a grant, but an investment.<br /><br />Furthermore, according to the Foundation's 2011 form 990 (the latest available), its executives received the following total compensation from the foundation and its affiliated organizations:<br /><br />Robert J Beall, CEO                                                      <b><i>$1,073,725</i></b><br />C Richard Mattingly, COO                                              <b><i>$759,799</i></b><br />Preston W Campbell MD, Exec VP of Medical Affairs     <b><i>$736,031</i></b><br />Vera H Twigg, CFO                                                         <b><i>$445,183</i></b><br />Ann Palmer, Senior VP                                                     <b><i>$276,029</i></b>  <br />Daniel Klein, Senior VP                                                    <b><i>$277,300</i></b><br />Gregory August, CIO                                                       <b><i>$262,698</i></b><br />David McLoughlin, Senior VP                                          <b><i>$316,122</i></b><br />Glen Goldmark, VP                                                          <b><i>$253,215</i></b><br />Amy DeMaria, Senior VP                                                 <b><i>$241,672</i></b><br />Mary Dwight, Senior VP                                                   <b><i>$246,232</i></b><br /><br />These compensation amounts may be much lower than the gargantuan pay dealt out to for-profit health care corporate executives, but they are very high for those who are managing a supposed charity meant to help vulnerable patients.<br /><br /><b>A More Complex Web</b><br /><br />While profiting from its underwriting of the development of Kalydeco, the CFF also sponsored guidelines about the treatment of cystic fibrosis, with not unexpected results.<br /><br /><blockquote class="tr_bq">Last month, new treatment guidelines for doctors who handle cystic fibrosis patients strongly recommended use of Kalydeco. The guidelines were funded by the Cystic Fibrosis Foundation.<br /><br /><i>Three of the 10 authors of the guidelines were employees of the foundation and four others worked for institutions that received grants from the foundation</i>. The chairman, Peter Mogayzel, is a professor of pediatrics at Johns Hopkins University, which foundation tax records show received more than $2 million in grants from 2009 through 2011.</blockquote>These guidelines hardly look like they would be deemed trustworthy according to the Institute of Medicine's standards (look <a href="http://hcrenewal.blogspot.com/2012/11/what-if-institute-of-medicine-wrote.html">here</a>).  However, they certainly look like they might help sell ivacaftor, and hence help justify higher pay for the executives listed above.<br /><br /><b>Criticism of Venture Philanthropy</b><br /><br />Merriam-Webster online <a href="http://www.merriam-webster.com/dictionary/charity">suggests</a> one definition of a charity is an institution funded by a gift for public benevolent purposes.<br /><br />The Cystic Fibrosis Foundation appears to be such a charity, but now one that functions more as a venture capitalist.  In this case, it did provide venture capital to develop a new drug for its disease of interest.  However, the foundation appeared to have done so not to provide public benevolence, but to generate a  return on its investment.  It is using that return not for public benevolence, but to provide more venture capital to other drug companies, presumably with the goal of getting further returns.  Meanwhile, its executives make generous compensation for people who are supposed to be running a charity.  Finally, the drug has an astronomical price, and its pricing has helped make investors in and executives of the company supported by the CFF very rich. <br /><br />This has not been lost on some dissidents, per the Journal Sentinel,<br /><br /><blockquote class="tr_bq">'The concept of a charitable, not-for-profit taking on the role of a venture capitalist is new and difficult to digest at the moment,' said Paul Quinton, a cystic fibrosis researcher at the University of California, Riverside and the University California, San Diego.<br /><br />Quinton, who has cystic fibrosis, is one of 28 doctors and scientists who sent a <a href="http://media.jsonline.com/documents/CFletteruse.pdf">letter</a> to Vertex <i>calling the price of Kalydeco 'unconscionable.'</i> A copy of the letter was provided to the Journal Sentinel and MedPage Today. Kalydeco, the doctors wrote, costs 10 times more than what a typical cystic fibrosis patient pays in total drug costs.<br /><br />'This action could appear to be <i>leveraging pain and suffering into huge financial gain for speculators, some of whom were your top executives who reportedly made millions of dollars in a single day,' </i>the doctors wrote.</blockquote><br />Vertex responded with seeming contempt,<br /><br /><blockquote class="tr_bq"> Since receiving the letter last July, Vertex has <i>raised the annual price of Kalydeco another $13,000.</i></blockquote><br /><br />The funding by the supposedly charitable CFF of guidelines that promote the drug it financed has also drawn criticism,<br /><br /><blockquote class="tr_bq"> 'It is <i>definitely a conflict of interest,</i>' said Eric Campbell, an associate professor at Harvard Medical School who has researched conflicts of interest in patient treatment guidelines.<br /><br />In the past, drug companies have been criticized for funding treatment guidelines that recommend their drugs. It is no different if the guidelines are funded by a foundation that gets royalties from drug sales, Campbell said.</blockquote><br />Also,<br /><br /><blockquote class="tr_bq">'It is concerning that the organization now stands to profit when patients choose to use the drug,' ... [Prof Lisa Schwartz of Dartmouth Medical School] said. 'Financial entanglement with industry, even with the best of intentions, creates a conflict of interest.' </blockquote><br />However, the very well paid CEO of the CFF pooh poohed concerns about conflicts of interest, <br /><br /><br /><blockquote class="tr_bq">Robert Beall, president of the Cystic Fibrosis Foundation, said that without its financial support, drugs such as Kalydeco would never get to patients. Neither insurance companies nor patients have voiced any concern to him about conflicts of interest, he said.<br /><br />'They applaud the decision and our business model to the utmost,' Beall said. 'The patients are excited.'<br /><br />He rejected the idea of using the royalty money to help patients pay for the medical care, noting that the foundation needed the money to entice drug companies to get involved in risky cystic fibrosis drug research.</blockquote><br /><br />One wonders when patients would ever have the opportunity to voice any "concerns" to Mr Beall, who also disdained any restraints on the price of the drug,<br /><br /><blockquote class="tr_bq">.Beall said the foundation did not ask Vertex to price the drug more affordably. <br /><br />'That would have been a deal-breaker,' he said.</blockquote>That seems to put making money ahead of patients' needs.  Was this venture philanthropy, or vulture philanthropy?  <br /><br /><b> Summary</b><br /><br />We have discussed numerous cases in which non-profit health care organizations seem to put short term revenue ahead of their missions to further patients' and the public's health.  In this case, a disease specific charity seems to have foregone its mission to directly support patient care, teaching, or research to provide venture capital, an action which lead to a profit for the organization, huge profits for a drug company, large rewards for the charity's executives, and even greater wealth for the drug company's executives.  It did also lead to the marketing of a beneficial drug, but at a breathtaking price that no middle-class patient without exceedingly good insurance could afford.   <br /><br />Where is the public benevolence here?  Where is the charity?  How much is about patients and how much is about  making insider executives wealthy?  <br /><br />As we have said until blue in the face, true health care reform would ensure health care organizational leadership that upholds the health care mission, not their personal finances.  

Is the Cystic Fibrosis Foundation a Charity or a Venture Capital Firm?

We have often discussed how health care organizations now seem prone to diversion from their stated missions, often when money is the object...

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Long After the Start of the "War on Terror," a Conflict of Interest about an Anthrax Scare Comes to Light

In May, David Willman writing for the Los Angeles Times broke a <a href="http://www.latimes.com/news/nationworld/nation/la-na-anthrax-resistant-20130519-dto,0,3192936.htmlstory">story</a> of a somewhat new variant on the conflict of interest theme, one that has not gotten a lot of attention, but should.<br /><br />The issue was medical, with a twist, - how to best treat a bioterror attack with anthrax engineered to be resistant to multiple drugs, an event that luckily is not known to ever have occurred.  The story came from the bad old days of the "war on terror," but only has now come to light years later. <br /><br /><b>The Alarm Raiser</b><br /><br />The story opened thus,<br /><br /><blockquote class="tr_bq">Over the last decade, <i>former Navy Secretary Richard J. Danzig, a prominent lawyer, presidential advisor and biowarfare consultant to the Pentagon and the Department of Homeland Security, has urged the government to counter what he called a major threat to national security. </i><br /><br /><i>Terrorists, he warned, could easily engineer a devastating killer germ: a form of anthrax resistant to common antibiotics.</i></blockquote><br />In particular,<br /><br /><br /><blockquote class="tr_bq">Danzig began warning about antibiotic-resistant anthrax after the terrorist attacks of Sept. 11, 2001, and the mailings of anthrax-laced letters that fall.<br /><br />The powdered anthrax in the letters killed five people but was not resistant to common antibiotics. Asked what gave rise to his <i>concern about resistant strains,</i> Danzig cited conversations with 'people whose technical skills exceed mine.' One of them, Dr. Robert P. Kadlec, a bioterrorism advisor in the Bush White House, said he and others were concerned that terrorists could develop such a weapon.<br /><br />Danzig has s<i>ounded the alarm in published papers and in private briefings and seminars for biodefense and intelligence officials.</i><br /><br />In a 2003 report funded by the Pentagon, "<a href="http://documents.latimes.com/catastrophic-bioterrorism-what-be-done/" target="_blank">Catastrophic Bioterrorism — What Is To Be Done?</a>" he wrote that it would be '<i>quite easy' for terrorists to produce antibiotic-resistant anthrax.</i> He has expanded on that theme over the years, including in a 2009 paper for the Pentagon.<br /><br />In the 2003 report, published while raxi [raxibacumab, an anthrax anti-toxin] was in development at Human Genome, Danzig said<i> a drug to combat resistant strains of anthrax should be produced 'as soon as possible' and that stockpiling such a treatment, 'even if expensive and in limited supply' would deter an attack</i>.<br /><br />John Vitko Jr., a top Homeland Security official during the Bush and Obama administrations, said he turned frequently to Danzig for advice on biodefense matters — and<i> read and 'paid attention to' his 'Catastrophic Bioterrorism' report.</i></blockquote><br />Note that while Danzig is a lawyer, and certainly not a physician or biomedical researcher, he had major credibility in the defense field, particularly in anti-terrorism, so his recommendations had great influence.<br /><br /><blockquote class="tr_bq">He served as a Pentagon appointee during the Carter administration and as undersecretary and then secretary of the Navy under President Clinton. He has a long-standing interest in biowarfare.<br /><br />During the 2008 presidential campaign, Danzig advised then-Sen. Barack Obama on national security and bioterrorism. After Obama's election, Danzig was named to the Pentagon's Defense Policy Board and the President's Intelligence Advisory Board, in addition to his consulting positions with the Defense Department and Homeland Security.</blockquote><br />So apparently at least partly due to Mr Danzig's persistent warnings, the government took action,<br /><br /><blockquote class="tr_bq"> In 2004, President Bush signed into law Project BioShield, which provided billions of dollars for biodefense drugs.<br /><br />The contracts are administered by the Department of Health and Human Services, based on advice from federal agencies and consultants. Homeland Security must certify the need for a drug before the government can buy it.<br /><br /> <i>Danzig, through his seminars, writings and consulting duties, has helped frame the discussion over whether a given biological threat is 'material' </i>and whether the government should stockpile medicines to defend against it.</blockquote><br />Also,<br /><br /><br /><blockquote class="tr_bq">Speaking of Danzig's broader role as a government advisor, Vitko said:<i> 'Richard's got incredible insights into this and I think has made major contributions'</i><br /><br />He called Danzig one of '<i>the major bio player'</i> and said his views had informed a range of policy considerations, including 'how many countermeasures do you need, of what kind.'<br /><br />It was in response to advice from Vitko and his staff that Homeland Security Secretary Tom Ridge in 2004 <i>declared anthrax a 'material threat,'</i> the certification required for the government to buy drugs to fight it.<br /><br /><i>The drug the government bought was raxibacumab, or raxi, an anthrax anti-toxin made by Human Genome Sciences Inc.  </i><br /><i><br /></i><i>In 2006, the Department of Health and Human Services finalized its first order of raxi — 20,000 doses at a cost of $174 million.</i><br /><br />That year, Ridge's successor, Michael Chertoff, signed a second, more specific declaration, <i>adding 'multi-drug-resistant' anthrax to the government's list of material threats.</i><br /><br />Asked the basis for the second declaration, Vitko said: 'I think the concern was more forward-looking, and saying, 'How could the threat evolve, and are we prepared for that?''<br /><br />Since 2009, the Obama administration has ordered an additional 45,000 doses of raxi for $160 million.</blockquote><br />There was just one catch.<br /><br /><b>The Undisclosed Conflict</b><br /><br />Mr Danzig had a largely undisclosed conflict of interest.  He was on the board of directors of Human Genome Sciences Inc, the company whose drug his constant warnings and exhortations lead the government to buy.<br /><br /><blockquote class="tr_bq">When <i>Human Genome named Danzig to its board on May 24, 2001,</i> the company's chief executive said his high-level federal experience would 'serve us well.'</blockquote><br />He thus was on the board on September 11, 2001, and later when the events on that day and soon after apparently induced him to start sounding the alarm about resistant anthrax, and he stayed on the board as he continued sounding alarms, and after the government started buying his company's drug.<br /><br /><br /><blockquote class="tr_bq">During his 11-year tenure on the board, which ended in August, <i>Danzig collected at least $1,054,255 in director's fees and by cashing in grants of Human Genome stock and stock options,</i> according to Fred Whittlesey of Compensation Venture Group, who reviewed the company's Securities and Exchange Commission filings for The Times.<br /><br />Nearly half of Danzig's compensation came from the stock options, of which he had been granted 184,000 by the end of 2011, Whittlesey said.</blockquote><br />Danzig did not seem to think that serving on the board of the company which made the primary drug directed at the perhaps hypothetical disease about which Danzig was sounding the warning constituted any sort of conflict of interest.<br /><br /><br /><blockquote class="tr_bq">Danzig said in an interview that he believed his position at Human Genome<i> posed no conflict.</i><br /><br />He said he had tried to improve policymakers' understanding of biodefense issues, including the threat of antibiotic-resistant anthrax, but <i>never lobbied the government to purchase raxi.</i><br /><br />'My view was I'm not going to get involved in selling that,' Danzig said. 'But at the same time now, should I not say what I think is right in the government circles with regard to this? And my answer was, 'If I have occasion to comment on this, it ought to be<i> in general, as a policy matter, not as a particular procurement.'</i><br /><br />'I feel that I've acted very properly with regard to this'' he said.</blockquote><br />He also apparently did not feel he needed to disclose his board membership to most of the people he was trying to persuade to be alarmed about resistant anthrax, and to pursue a treatment, such as that made by the company on whose board he sat.<br /><br /><blockquote class="tr_bq"> A number of senior federal officials whom Danzig advised on the threat of bioterrorism and what to do about it said they were unaware of his role at Human Genome.<br /><br />Dr. Philip K. Russell, a biodefense official in the George W. Bush administration who attended invitation-only seminars on bioterrorism led by Danzig, said<i> he did not know about Danzig's tie to the biotech company until The Times asked him about it.</i></blockquote><br />Also,<br /><br /><blockquote class="tr_bq"> <i>Vitko said he knew nothing of Danzig's involvement with Human Genome until a Times reporter asked him about it.</i><br /><br />'I'm surprised I didn't,' Vitko said. 'I'm not aware of it.'<br /><br />Five other present or former biodefense officials who conferred with Danzig said they, too, had been unaware of his position with the company. Danzig, they said, made no mention of it in their presence during group discussions he led or in smaller meetings.</blockquote><br />Furthermore,<br /><br /><br /><blockquote class="tr_bq">A Times search found seven papers Danzig had written on bioterrorism since 2001. <i>In only one of those did he disclose his tie to Human Genome.</i><br /><br />As an advisor to the federal government, Danzig is required to file confidential forms annually, revealing any outside affiliations but not his related compensation. Danzig said he had noted his position with the biotech firm on the forms.<br /><br />Asked whether he mentioned his corporate role during contacts with government officials, Danzig replied: 'If I thought any of it posed a potential conflict that might cause somebody who knew about it to discount my views, I would tell them.'</blockquote><br />Some people disagreed with Danzig's failure to perceive a conflict of interest<br /><br /><blockquote class="tr_bq"><i> 'Holy smoke—that was a horrible conflict of interest,' </i>said Russell, a physician and retired Army major general who helped lead the government's efforts to prepare for biological attacks.</blockquote><br /><br /><b>The Take-Over by a Familiar Corporation</b><br /><br />By the way, Human Genome Science was eventually bought out by a bigger company which has had its own sets of issues regarding conflicts of interest, GlaxoSmithKline,<br /><br /><blockquote class="tr_bq"> Human Genome was acquired by GlaxoSmithKline in August [presumably 2012] for $3.6 billion.</blockquote><br />It may yet stand to make even more money from raxi,<br /><br /><blockquote class="tr_bq"> Because raxi loses its potency after three years in storage, the government's supply will expire as of 2015, according to federal documents and people familiar with the matter. </blockquote><br /><b>Summary</b><br /><br />This appears to be a variant on the "key opinion leader" (KOL) theme writ large.  Mr Danzig clearly functioned as a very major key opinion leader about bioterrorism.  Like many KOLs we have previously discussed, he had financial interests that favored the company whose drugs his key opinion leadership seemed to be favoring.  His influence seems to have lead to huge purchases of these drugs. Like many KOLs who are physicians or health care academics, Mr Danzig seems utterly blind to the possibility that his multiple efforts to emphasize the importance of the supposed disease for which his company made a drug could somehow be viewed as a conflict of interest, or to why failure to tell his audiences about his major relationship to this company might have appeared just a small bit dishonest.  We have seen many medical/ health care KOLs who deny that somehow their opinions could have been influenced by their financial relationships, or that their audiences deserved at least to be aware of these relationships.  Yet, of course, Mr Danzig is not a doctor, and he was trying to influence government purchasers of drugs, not physician prescribers of it.<br /><br />It does seem that the leadership of health care organizations, particularly but certainly not limited to pharmaceutical and biotechnology companies, have no lack of imagination about how to construct financial relationships with influential people who could help sell their products, whether or not they acknowledge what amounts to their marketing roles. <br /><br />Given that this story involved influencing the government, it will be interesting to see at this late date whether it results in any legal action.  After all, as David Willman pointed out,<br /><br /><blockquote class="tr_bq"> Federal law bars U.S. officials, including consultants, from giving advice on matters in which they or a company on whose board they serve have 'a financial interest.'</blockquote>It will also be interesting to see if it gets any more attention.  Only a few blogs have noted it, but at least they included <a href="http://www.the-scientist.com/?articles.view/articleNo/35639/title/Selling-an-Anthrax-Scare-/">The Scientist</a>.<br /><br /><br />Yet our country has an unfortunately very long history of corporate leaders getting close to political leaders who then may overlook the legal niceties when their friends' interests are at stake.  Nonetheless, true health care reform would require all those who have decision making power over patients, health policy, or the public health to be completely transparent about their conflicts of interest, and would ban the more serious variants of conflicts of interest, even if that might cost some already rich people a bit of money.  I am not holding my breath, however, about when this might happen.<br /><br />

Long After the Start of the "War on Terror," a Conflict of Interest about an Anthrax Scare Comes to Light

In May, David Willman writing for the Los Angeles Times broke a story of a somewhat new variant on the conflict of interest theme, one that...

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Want to help a hospital go bankrupt? Get a bad EHR - Westchester hospitals' sale price over $54 million, Hospitals' debt about $200M

<div style="text-align: center;">- Posted at the Healthcare Renewal Blog on June 3, 2013 -  </div><br /><a href="http://www.ssmc.org/homepagess.cfm">Sound Shore Medical Center</a> (New Rochelle, NY) is filing for bankruptcy protection:<br /><br /><blockquote class="tr_bq">Montefiore Medical Center is offering to buy Sound Shore Health System for $54 million plus furniture and equipment, according to the latter’s bankruptcy filing — which also reveals just how far the troubled Westchester health network had fallen into the red. <br /><br />Sound Shore Medical Center in New Rochelle, Mount Vernon Hospital and five related entities have about $200 million in debts owed to more than 3,000 creditors, while possessing only $159.6 million in assets, the U.S. Bankruptcy Court documents show. <b>Sound Shore filed for Chapter 11 bankruptcy protection Wednesday as the first step in discharging its debts and selling itself to the Montefiore system.</b></blockquote><br />Why were they in the red?<br /><br />You can read the full article "<b>Westchester hospitals' sale price over $54 million; Hospitals' debt about $200M</b>" in The Journal News for yourself at this link: <a href="http://www.lohud.com/article/20130530/NEWS/305300081/Westchester-hospitals-sale-price-over-54-million?odyssey=tab|topnews|text|News&gcheck=1">http://www.lohud.com/article/20130530/NEWS/305300081/Westchester-hospitals-sale-price-over-54-million?odyssey=tab|topnews|text|News&gcheck=1</a>, but there's this interesting passage:<br /><br /><blockquote class="tr_bq">... Beginning in 2006, the hospitals saw falling patient volume and a change in their case mix. That led to “significant” losses in recent years, negative cash book balances and bills paid more than 225 days late. <b>A 2011 electronic medical record and billing system conversion caused major delays in billing and cash collection that still haven’t been fully solved. </b></blockquote><br />(This passage has a familiar ring to it; e.g., see SEC Count 9 at "<b>Florida Hospital gets an 'F' on Informatics</b>" at  <a href="http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=miami">http://www.ischool.drexel.edu/faculty/ssilverstein/cases/?loc=cases&sloc=miami</a>.)<br /><br />A 2011 EHR and billing conversion?  It's now 2013.<br /><br />How many hospital IT personnel does it take to <strike>screw in</strike> implement a <strike>light bulb</strike> new EHR?<br /><br />-- SS<br /><br />

Want to help a hospital go bankrupt? Get a bad EHR - Westchester hospitals' sale price over $54 million, Hospitals' debt about $200M

- Posted at the Healthcare Renewal Blog on June 3, 2013 -  Sound Shore Medical Center (New Rochelle, NY) is filing for bankruptcy protectio...

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