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Leaders of Discredited Financial Rating Agencies as Leaders of Health Care

This is the latest in our informal series on the cross-linkages between the thinking and leadership that lead to the global financial collapse/ great recession and that current in health care.  Last month, a US Senate sub-committee held hearings on the role of the rating agencies, actually for-profit corporations that evaluated securities, including derivatives, in the collapse.  The Fundamentally Conflicted Rating Agencies To briefly provide some background, these agencies were hired by the firms that created these securities to evaluate them.  Because the securities were complex, they were hard for investors to evaluate.  Investors had become used to using the rating agencies' evaluations as benchmarks for the quality and riskiness of complex securities.  Many did not seem to realize that the agencies themselves were for-profit corporations, or subsidiaries thereof, which made more money the more securities they rated.  The rating agencies gave many of their highest ratings (AAA) to securities that later failed.  (See an informal video discussion by corporate governance expert Robert A G Monks <a href="http://ragmonks.blogspot.com/2010/04/bob-monks-discusses-ratings-agencies.html">here</a>.) Some key quotes from the news coverage follow. <blockquote>Former credit rating agency officials said on Friday that the quest for market share fueled a drive for short-term profits, sacrificing credit quality in the process. Eric Kolchinsky, who was in charge of the Moody's (MCO.N) unit that rated subprime CDOs, or collateralized debt obligations, said that people 'across the financial food chain, from the mortgage broker to the CDO banker, were compensated based on quantity rather than quality,' according to testimony prepared for a Senate panel. 'The situation was no different at the rating agencies.'</blockquote><a href="http://www.reuters.com/article/idUSN2315396020100423?type=marketsNews">from Reuters</a> <blockquote>Former Moody’s Investors Service and Standard & Poor’s employees said they were excluded from assessing mortgage bonds if they questioned Wall Street’s conclusions and that credit-rating companies focused on protecting business at the expense of accurate grading. Richard Michalek, a former managing director in Moody’s structured products derivatives group, told the Senate Permanent Subcommittee on Investigations at a hearing today that managers said he was 'not welcome on deals' involving certain banks. Eric Kolchinsky, who led the Moody’s group that rated collateralized debt obligations made up of mortgage bonds, said he was berated by his boss when the company lost business after implementing more conservative ratings. S&P wrongly concluded that its increasing profits amid an inflated U.S. housing market was based on 'superior management skill and insight,' said Frank Raiter, a former managing director at the company. In reality, regulators had made the firm part of 'an oligopoly' by requiring investors to hold assets it rated, Raiter said.</blockquote><a href="http://www.businessweek.com/news/2010-04-23/moody-s-s-p-influenced-by-wall-street-senate-finds-update1-.html">per Bloomberg</a> <blockquote>The documents show, sometimes in excruciating detail, the conflicts of interest that many claim lie at the heart of the ratings business model and the concerns of employees about what was happening inside the companies well before the crisis broke. One employee at Standard & Poor's, the world's largest rating agency, said its handling of awkward questions in the summer of 2007 made it 'sound like the Nixon White House'.</blockquote> And, <blockquote>As one Moody's managing director wrote to his superiors in 2007, the company's errors, made it look 'either incompetent at credit analysis, or like we sold our soul to the devil for revenue, or a little bit of both'.</blockquote><a href="http://www.ft.com/cms/s/0/a3a9900e-4f39-11df-b8f4-00144feab49a.html">per the Financial Times</a> The two companies targeted by these hearings were Moodys, and Standard & Poors (a subsidiary of McGraw-Hill Inc). Overlaps with Health Care Leadership: Moody's Corporation Perusal of the roster of the Moody's board of directors in 2008, per that year's <a href="http://ir.moodys.com/secfiling.cfm?filingID=950123-07-4224">proxy statement</a>, reveals the following overlaps with health care leadership, of its 8 directors. Connie Mack - is also on the boards of EXACT Sciences Corporation (a biotechnology company), and <a href="http://hcrenewal.blogspot.com/search/label/Genzyme">Genzyme</a>.  He is the chair of the <a href="http://hcrenewal.blogspot.com/2010/02/hospital-executive-pay-in-land-where.html">H. Lee Moffitt Cancer Center</a>. Henry A McKinnell Jr - was chairman of the board and CEO from 2001-06 of <a href="http://hcrenewal.blogspot.com/search/label/Pfizer">Pfizer Inc</a>. Basil L Anderson - is a member of the board of directors of <a href="http://hcrenewal.blogspot.com/search/label/Becton%20Dickinson">Becton Dickinson</a>. Overlaps with Health Care Leadership: McGraw-Hill Inc Via the company's 2008<a href="http://www.mcgraw-hill.com/2008mhpproxy/statement.pdf"> proxy statement</a>, of 12 directors: Sir Winfried Bischoff - is a director of <a href="http://hcrenewal.blogspot.com/search/label/Eli%20Lilly">Eli Lilly and Company</a>. Linda Koch Lorimer - is Vice President and Secretary of <a href="http://hcrenewal.blogspot.com/search/label/Yale">Yale University</a>, and a Director of Yale-New Haven Hospital. Kurt L Schmoke - is a Trustee of the Howard Hughes Medical Institute Sidney Taurel - was chairman and CEO of <a href="http://hcrenewal.blogspot.com/search/label/Eli%20Lilly">Eli Lilly and Company</a>. Summary So, in summary, the 20 board members of one for-profit "ratings agency," and of the corporation of which the other major "ratings agency" was a subsidiary, served on the boards of 2 biotechnology corporations (EXACT Sciences Corporation and Genzyme), one medical device company (Becton-Dickinson), one pharmaceutical company (Eli Lilly) , 2 major academic medical centers (Moffitt Cancer Center and Yale-New Haven), and one medical research institution (Howard Hughes).  Two were recent former CEOs and chairmen of the boards of 2 of the world's largest pharmaceutical companies (Pfizer and Eli Lilly).  Most of these health care organizations have been involved with cases we have discussed on Health Care Renewal (see links above). Given the serious concerns about the conflicts of interest that became the core of these corporations' business models, and their central role in the global financial collapse, one has to wonder why so many of the directors who presided over them still have such influential positions in health care organizations? 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. It seems reasonable to hypothesize that some of the problems of academia, and particularly the problems of medical academia, may have been at least enabled by leadership more used to working in an increasingly amoral marketplace than to upholding the academic mission. The failures of the leadership and governance of finance thus suggest we need to re-examine the leadership of health care.

Leaders of Discredited Financial Rating Agencies as Leaders of Health Care

This is the latest in our informal series on the cross-linkages between the thinking and leadership that lead to the global financial collap...

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Why Pretend An Advertising Executive and Chamber of Commerce Leader Are Public Health Experts?

Obesity as a public health problem has been the subject of considerable discussion.  So that luminaries from the prestigious Partners Healthcare system and Massachusetts Blue Cross Blue Shield would weigh in on the issue at a public meeting should surprise no one.  But see this <a href="http://www.bostonherald.com/business/healthcare/view.bg?articleid=1247334&srvc=rss">report</a> by the Boston Herald: <blockquote>When asked about rising health-care costs, Jack Connors - chairman of the Partners chain, which includes Mass. General and Brigham and Women’s hospitals - said yesterday, 'Taking care of yourself starts at home.' 'What happened to individual responsibility?' Connors said at a Greater Boston Chamber of Commerce breakfast at the Westin Boston Waterfront. 'Why is obesity such an epidemic (when) we all know that a big part of being healthy is exercising and eating the right food?' Blue Cross Blue Shield Chairman Paul Guzzi echoed Connors’ attitude yesterday. 'What is the responsibility of the individual?' said Guzzi, who as the chamber’s chief executive hosted Senate President Therese Murray’s speech on health care yesterday, despite his dual role as Blue Cross chairman.</blockquote> Jack Connors is currently chair of the board of Partners Healthcare.  A quick biography is <a href="http://phx.corporate-ir.net/phoenix.zhtml?c=68329&p=irol-govBio&ID=110624">here</a>: <blockquote>John M. Connors, Jr., 67, Chairman Emeritus of Hill Holliday (formerly Hill, Holliday, Connors, Cosmopulos, Inc). (full service marketing and communications company) since 2006. Chairman of Hill, Holliday, Connors, Cosmopulos, Inc. from 1995 until 2006, during which time Mr. Connors also served as President and Chief Executive Officer until 2003. Mr. Connors was a founding partner of Hill, Holliday, Connors, Cosmopulos. Director of Covidien Ltd. Mr. Connors’ 40 years of business experience includes cofounding and developing one of the top advertising and marketing communications firms in the United States, advising many of the top branded companies in the world, and serving on the boards of dozens of entities, including public companies, private companies, hospitals and colleges. (Biographical Information as of 4/16/10)</blockquote> Although Mr Connors did once run a medical education and communications company (see <a href="http://hcrenewal.blogspot.com/2009/06/mans-best-hospital-run-by-boss-of-mecc.html">this post</a>), he has no obvious direct experience or training in biology, epidemiology, public health, or medicine. Similarly, <a href="http://www.bostonchamber.com/about/about_the_ceo.aspx">here</a> is biography of Paul Guzzi: <blockquote>Paul Guzzi is president and chief executive officer of the Greater Boston Chamber of Commerce, one of the region’s leading business associations. Mr. Guzzi brings extensive experience in both business and government to his work at the Chamber. A former Massachusetts secretary of state and chief secretary to the Governor, as well as a member of the management teams of two Fortune 500 companies; he is a leading advocate for economic development and job creation. Prior to leading the Chamber, Mr. Guzzi was vice president of state and community affairs for Boston College. Previously, he was a consultant for Heidrick & Struggles, an international recruitment and consulting firm. Mr. Guzzi also served as a vice president at Data General Corporation and as a senior vice president at Wang Laboratories. During his tenure at Wang, he worked closely with Dr. An Wang to oversee the restoration and transformation of what is now the Wang Theatre. Mr. Guzzi began his public service career as a state representative from Newton in 1970. He was elected Massachusetts secretary of state in 1974. Mr. Guzzi served as a chief of staff for Governor Edward King and chief administrator of the Board of Regents of Public Higher Education. A graduate of Harvard University, Mr. Guzzi holds a Bachelor of Arts degree in government. He completed the Harvard Business School Management Development Program. He was also an officer in the U.S. Marine Corps Reserve. </blockquote> Again, Mr Guzzi has no obvious training or experience in biology, epidemiology, public health, or medicine. So maybe it should be no surprise that the Boston Herald article chronicled some skepticism about these worthies' public health pronouncements. <blockquote>Calling the pair’s comments 'pure smoke blowing,' Boston University public health professor Alan Sager said, 'Sure individual responsibility matters, but the responsibility for efficient, affordable, high-quality health care for all Americans falls on everybody who works in health care.'</blockquote> By the way, <blockquote>Connors said a major reason for rising health-care costs is that a high percentage of people who leave the hospital are later readmitted, because they don’t follow their doctors’ directions. He owns a company, Dovetail Health, that makes money by helping elderly patients readjust to life after hospitalization, including staying on their medications.</blockquote> Every week I get piles of notices of "healthcare" conferences at which most of the speakers are health care organizational executives with no obvious expertise or experience in actual health care, or in biology, epidemiology, public health or medicine. I think I dimly remember a time when most people who gave public remarks on health care actually knew something about health care, not just about making money (often personally in large amounts) from the health care "industry." Note that while the Herald was able to find people who were skeptical about these health care leaders' remarks, there was no report that their audience (presumably made up mainly of business people) roared with laughter at their efforts to talk about controversial topics which they did not seem to really understand. We need to ask why we have become so deferential to leaders of large (and and least heretofore prestigious) health care organizations that we treat them like true experts on biology, epidemiology, public health or medicine when they have no obvious expertise, or even knowledge in these areas? Thanks to one of our anonymous scouts for a tip on this item.

Why Pretend An Advertising Executive and Chamber of Commerce Leader Are Public Health Experts?

Obesity as a public health problem has been the subject of considerable discussion. So that luminaries from the prestigious Partners Health...

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$19 Million Means Never Having to Say You Are Sorry?

Johnson and Johnson, the giant diversified health care company, recently shut down a factory that manufactured non-prescription childrens' medication, and recalled its products.  The findings from a US Food and Drug Administration (FDA) inspection of the plant were striking.  As described <a href="http://www.reuters.com/article/idUSTRE6466YI20100508">by Reuters</a>, <blockquote>The company recalled 40 widely used children's pain and allergy medications, saying some may have a higher concentration of their active ingredients, while others may be contaminated. J&J has had four recalls in the past year of over-the-counter medicines. In an FDA report issued on Tuesday, inspectors said they found thick dust, grime and contaminated ingredients at the J&J plant that produces Children's Tylenol and dozens of other products recalled last week.</blockquote> This infuriated the member of Congress who chairs a sub-committee which oversees the FDA: <blockquote>Democratic Representative Rosa DeLauro sent a letter to the Food and Drug Administration asking questions about how the agency can respond to recalls and quality control lapses. 'I am concerned that the agency does not possess the authority to take appropriate action to address potentially criminal behavior by a corporation,' DeLauro wrote in the letter to FDA Commissioner Margaret Hamburg.</blockquote> Furthermore, <blockquote>DeLauro, in her letter, said the company's 'disregard' for manufacturing standards was 'both unnerving and unethical.' 'The corporate oversight observed at this facility appears to be symptomatic of reckless behavior that is clearly unacceptable,' she wrote.</blockquote> The Reuters report then noted: <blockquote>J&J has called the manufacturing problems unacceptable and vowed to fix them. The company has suspended production at the Pennsylvania plant where the recalled children's products are made.</blockquote> Moreover, the company CEO took to the blogsphere (<a href="http://jnjbtw.com/2010/05/to-all-who-use-our-products-from-bill-weldon/">via the company's JNJ BTW blog</a>) to give his response (below in its entirety). <blockquote>To All Who Use Our Products, We have a responsibility at Johnson & Johnson to provide you with the highest-quality products possible, and we have worked hard to fulfill that responsibility day-by-day for over a century. The recent recalls of some over-the-counter medicines from our McNeil Consumer Healthcare operating company are a matter of great concern. They are a disappointment to me, and to the employees of the Johnson & Johnson Family of Companies. You can be confident that we will make whatever changes are needed at McNeil to fully restore the quality of its manufacturing. As reported, McNeil has suspended all manufacturing operations at its facility in Fort Washington, Pa., until we can be sure that they are operating under the standards we demand of ourselves, and which our customers expect of us. McNeil has also retained independent quality experts to assist in this regard and is re-evaluating quality systems and manufacturing processes across the organization. I have been assured that the chance of a serious medical event from the recalled products is remote. Even so, this does not give us comfort; one of our companies has let you down. For now, please check your infants’ or children’s forms of TYLENOL®, MOTRIN®, ZYRTEC® or BENADRYL® and discard any medicines that are being recalled. You can check the list of recalled lots, apply for refunds, and get more information about the recall at McNeil’s dedicated website (http://mcneilproductrecall.com), or by calling 888-222-6036. We will work hard to earn back your confidence. Sincerely, Bill Weldon</blockquote> This seems like a very important case, because it involves a pharmaceutical company apparently violating its most fundamental responsibility, to provide pure, unadulterated medicine to the public.  While the current case did not apparently lead to major health consequences to patients (as did the <a href="http://hcrenewal.blogspot.com/2010/05/more-questions-no-answers-about-case-of.html">case of the contaminated heparin</a>), it still suggests very basic flaws with Johnson & Johnson's operations. Thus, what is striking about the CEO's message is its remote tone.  He characterizes the problems at the factory as a reason for "great concern" and "a disappointment."  Such language seems designed to reduce the CEO's own connection to the problems at the factory.  This is the language one might use to describe someone else's conduct.  (For example, Politician X's vote on the bill "caused me great concern," and "was a disappointment.") On the other hand, although the CEO wrote about collective responsibility, ("we have a responsibility at Johnson and Johnson,"), he never suggested he had any responsibility or was accountable for what happened.  Of course, we have frequently seen language like this when health care organizations are accused of practices that violate their fundamental responsibilities, or could threaten health and safety.  Rather than embracing responsibility, often leaders use language that suggests a fear of admitting anything that could create legal liability. However,  supposedly the rationale for entrusting so much power, and providing so much compensation to CEOs and other top executives, including those of health care organizations, is the tremendous responsibility they undertake.  In fact, the <a href="http://files.shareholder.com/downloads/JNJ/911088465x0x359543/AA8DC9C8-C2E9-406E-9BC4-9BCBC25DF730/y81646_d-i001_a_UC.pdf">Johnson & Johnson 2010 proxy statement</a> provides this justification for the executives' stratospheric pay: <blockquote>Pay for Performance —All components of compensation should be tied to the performance of the individual executive officer and his or her specific business unit or function and/or the Company overall. • Credo Values— The manner in which financial and strategic objectives are achieved is important. While not always quantifiable, the manner in which employees achieve results should also be a key element of the individual performance review process. During the performance review process, the Company’s set of core values—trustworthiness, respect, responsibility, fairness, caring and citizenship—as set forth in Our Credo should be used to assess how objectives are achieved. • Accountability for Short- and Long-Term Performance — Annual performance bonuses and long term incentives should reward an appropriate balance of short- and long-term financial and strategic business results, with an emphasis on managing the business for the long-term.</blockquote> It then goes on the emphasize the company's Credo: <blockquote>Importance of Credo Values For more than 65 years, the Johnson & Johnson Credo has guided the actions of the Company and its executive officers in fulfilling their responsibilities to the Company’s customers, employees, community and shareholders. In assessing the executive officers’ contributions to the Company’s performance, the Committee not only looks to results-oriented measures of performance, but also considers how those results were achieved— whether the decisions and actions leading to the results were consistent with the values embodied in the Credo— and the long-term impact of an executive officer’s decisions. Credo based behavior is not something that can be precisely measured and, thus, there is no formula for how Credo-based behavior can, or will, impact an executive’s compensation. The Committee and the Chairman/CEO use their judgment and experience to evaluate whether an executive’s actions were aligned with the Company’s Credo values.</blockquote> Thus, last year Mr Weldon's total compensation was $19,847,026. Such an amount ought to pay for a vast amount of responsibility and accountability. (Also, the total compensation of Ms C A Goggins, the Worldwide Chairman of the Consumer Group, who I presume to the the executive just below the CEO who is responsible for products made by the factory which had to be closed, was $5,345,737.) So again the rules for the executives of big health care organizations seem to be heads they win, tails we lose.  They are paid enough to turn them into a new aristocracy supposedly because of the tremendous responsibility and accountability they assume.  However, when things go wrong, responsibility and accountability vanish in a haze of concern and disappointment (with other peoples' actions.) On Health Care Renewal we continue to be concerned with and disappointed about our dysfunctional health care system, and its worsening problems with costs, quality and access as long as it is lead by people who can become rich without any responsibility or accountability for their actions.  The robber barons that arose in the late 19th century lead our country and the world into the great depression.  The new health care robber barons will soon lead us into the great health care depression.

$19 Million Means Never Having to Say You Are Sorry?

Johnson and Johnson, the giant diversified health care company, recently shut down a factory that manufactured non-prescription childrens...

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Novartis Settles, Again

We certainly could not go another week without discussing another settlement of charges of unethical behavior by a major health care organization.  This time, as <a href="http://online.wsj.com/article/SB10001424052748703866704575224662623128150.html">reported</a> by the Wall Street Journal, it was Swiss pharmaceutical company Novartis: <blockquote> Novartis AG will pay $72.5 million to settle U.S. Justice Department allegations it submitted false claims for off-label uses of a cystic-fibrosis drug. The drug, tobramycin or TOBI, joined the Novartis portfolio as part of its 2005 takeover of biotechnology firm Chiron Corp. In a release Tuesday, the Justice Department said that, between 2001 and 2006, Chiron, and then Novartis, marketed unapproved uses for TOBI, which the Food and Drug Administration approved as an inhaled antibiotic for treating certain cystic-fibrosis patients. </blockquote> This is not even the first US legal settlement this year for Novartis: <blockquote>Earlier this year, Novartis said its U.S. subsidiary struck an agreement with the U.S. Attorney's Office in Pennsylvania to settle a criminal investigation of the company's marketing of the epilepsy drug Trileptal. Novartis agreed to plead guilty to violating the U.S. Food, Drug and Cosmetic Act, and to pay a $185 million fine.</blockquote> We had posted on that previous settlement <a href="http://hcrenewal.blogspot.com/2010/01/drowning-our-sorrows-in-ketchup.html">here</a>. So the march of <a href="http://hcrenewal.blogspot.com/search/label/legal%20settlements">legal settlements</a> continues.  It seems that practically every major pharmaceutical corporation has participated in multiple settlements since we started Health Care Renewal.  Yet the process does not seem to deter continuing bad behavior.  In the current case, like nearly all the others, the corporation will pay what seems to be a huge fine. However, the amount is a pittance compared to the corporation's revenue, and is likely to be viewed as only a small cost of doing a very lucrative business by corporate executives. In very few cases does any individual suffer any negative consequence for approving, ordering or implementing the unethical behavior.  A large fine's impact can be spread among share-holders, employees, and clients/ customers/ patients, and hence poses no threat to executives planning the next bit of unethical behavior. As I have said 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.  Real health care reform needs to make health care leaders accountable, and especially accountable for the bad behavior that helped make them rich.

Novartis Settles, Again

We certainly could not go another week without discussing another settlement of charges of unethical behavior by a major health care organiz...

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More Questions, No Answers About the Case of the Deadly Heparin - Some Congressmen Weigh In

In 2008, we started posting on how the "active pharmaceutical ingredient" of heparin made in China under apparently primitive conditions, contaminated accidentally or deliberately, was sold in the US bearing the label of a large American pharmaceutical company. Ultimately, many patients were sickened, or died. A summary of our posts on the topic, in smaller type, is below. - We have posted several times, recently <a href="http://hcrenewal.blogspot.com/2008/03/heparin-in-era-of-hogwash.html">here</a> and <a href="http://hcrenewal.blogspot.com/2008/03/fake-heparin-then-sick-and-dead.html">here</a>, about the tragic case of suddenly allergenic heparin. Although heparin, an intravenous biologic anti-coagulant, has been in use for over 70 years, serious allergic reactions to it had heretofore been rare. Starting late last year, hundreds of such reactions, and now 21 deaths were reported in the US after intravenous heparin infusions.All the heparin related to these events in the US was made by Baxter International. - We then learned that although the heparin carried the Baxter label, it was not really made by Baxter. The company had outsourced production of the active ingredient to a long, and ultimately mysterious supply chain. Baxter got the active ingredient from a US company, Scientific Protein Laboratories LLC, which in turn obtained it from a factory in China operated by Changzhou SPL, which in turn was owned by Scientific Protein Laboratories and by Changzhou Techpool Pharmaceutical Co. Changzhou SPL, in turn, got it from several consolidators or wholesalers, who in turn got it from numerous small, unidentified "workshops," which seemed to produce the product in often primitive and unsanitary conditions. None of the stops in the Chinese supply chain had apparently been inspected by the US Food and Drug Administration nor its Chinese counterpart. - Most recently, we found out that the Baxter International labelled heparin was contaminated with over-sulfated chondroitin sulfate, a substance not found in nature, but which mimics heparin according to the simple laboratory tests used in the Chinese facilities to check incoming heparin. (See post <a href="http://hcrenewal.blogspot.com/2008/03/fake-heparin-then-sick-and-dead.html">here</a>.) Further testing revealed that the contamination seemed to have taken place in China prior to the provision of the heparin to Changzhou SPL. (See post <a href="http://hcrenewal.blogspot.com/2008/03/who-was-responsible-for-purity-of.html">here</a>.) It is not clear whether Baxter International or Scientific Protein Laboratories had inspected most of the steps in the supply chain, or even knew what went on there. - The Baxter and Scientific Protein Laboratories CEOs did not seem aware of where they got the heparin on which the Baxter International label was eventually affixed. But one report in the New York Times alleged that Scientific Protein Laboratories would not pay enough for heparin to satisfy any sources other than the small "workshops." - Leaders of all organizations involved, Baxter International, Scientific Protein Laboratories, Changzhou SPL, the Chinese government, and the US Food and Drug Administration, and the US Congress assigned blame to each other, but none took individual or organizational responsibility. (See post <a href="http://hcrenewal.blogspot.com/2008/05/blaming-some-dude-for-contaminated.html">here</a>.) - Researchers (who turned out to have financial ties to a company which is developing an anti-coagulant drug that could compete with the heparin made by Baxter International) investigated the biological mechanisms by which the contamination of the heparin lead to adverse effects, but no one investigated further how the contamination occurred, or who was responsible.  (See post <a href="http://hcrenewal.blogspot.com/2009/08/who-investigated-case-of-deadly.html">here</a>.) - Hundreds of lawsuits against Baxter have now been filed, so far without resolution.  (See post <a href="http://hcrenewal.blogspot.com/2010/01/blog-post.html">here</a>.) - A recent government report which attracted little attention warned of the dangers of pharmaceutical ingredients made in China and subject to virtually no oversight. (See post <a href="http://hcrenewal.blogspot.com/2010/04/another-echo-of-case-of-deadly-heparin.html">here</a>.) Last week, minority (Republican) members of a committee of the US House of Representatives sent a letter to the Commissioner of the US Food and Drug Administration (FDA) raising a number of concerns of its investigation of contaminated heparin from China.  The letter was summarized in <a href="http://www.theheart.org/">http://www.theheart.org/</a> (<a href="http://www.theheart.org/article/1072875.do">here</a>), but so far has not been noticed by any main-stream media outlets.  The main concerns raised in the letter were: <blockquote>1. The FDA has not adequately followed up specific and credible information linking Chinese heparin firms to counterfeit heparin or contaminated heparin in several different supply chains. 2. The FDA inspected several Chinese heparin firms in 2008 and 2009 for regulatory compliance issues but did not conduct these inspections consistently and adequately for determining the source of the heparin contamination. 3. The FDA has not adequately followed up with the Chinese government about the heparin contamination-source investigation.</blockquote> Curiously, though, most of the letter detailed concerns about an FDA inspection of a company called Chongqing Imperial Bio-Chem Co, Ltd, which appears to be separate from any of the firms mentioned above which seemed to be involved with the heparin ultimately sold in the US under the Baxter label.  In fact, I have not seen to date any report on the contamination of that heparin, supposedly whose active ingredient Baxter obtained from  a US company, Scientific Protein Laboratories LLC, which in turn obtained it from a factory in China operated by Changzhou SPL, which in turn was owned by Scientific Protein Laboratories and by Changzhou Techpool Pharmaceutical Co. Changzhou SPL, in turn, got it from several consolidators or wholesalers, who in turn got it from numerous small, unidentified "workshops," which seemed to produce the product in often primitive and unsanitary conditions.  Nor have I seen any report on the responsibility of any of these parties for the purity and safety of the heparin.  In particular, given that the heparin was sold in containers with the Baxter International label, and hence given that the doctors, nurses and pharmacists involved in its administration likely thought that it was actually made by Baxter, I have not seen any further discussion of that company's responsibility to provide a pure, safe, unadulterated product to its US patients.  And all this still begs the question that most of the coverage of the deadly heparin also begged. Are American pharmaceutical companies so besotted with the need for cost-savings that they are willing to buy active pharmaceutical ingredients with unknown provenance overseas as if they were a pig in a poke? If so, why do we allow company leadership to potentially sacrifice quality, and sell adulterated drugs just to enrich their bottom lines (and their executives' salaries)? As a postscript, a <a href="http://dealbook.blogs.nytimes.com/2010/04/30/bringing-home-the-bacon-tripe-based-drug-hits-gold/">report</a> last week in a New York Times blog reminds us of the monetary stakes here: <blockquote>A drug harvested from pigs’ intestines has made a low-profile Chinese couple the nation’s wealthiest overnight. Husband and wife Li Li and Li Tan’s Shenzhen Hepalink Pharmaceutical sold 10 percent of its shares this week in an I.P.O. that values their stake at about $6.2 billion, The Financial Times reported. The I.P.O. also earned Goldman Sachs a near 200-fold profit on its original $5 million investment. According to the newspaper, analysts say Hepalink’s high valuation is a result of the company being the only one in China that is accredited by the U.S. Food and Drug Administration [presumably after the above case of the deadly heparin] to export the 'active pharmaceutical ingredient' heparin after it has been harvested.</blockquote> This amount of money sloshing around suggests that the reason this case remains so persistently <a href="http://hcrenewal.blogspot.com/search/label/anechoic%20effect">anechoic</a> is fear of offending those who have been getting very rich from the products of pigs' intestines. I hope that more investigators with intestinal fortitude step in to investigate the out-sourcing of drug production to dubious suppliers before more patients are poisoned.

More Questions, No Answers About the Case of the Deadly Heparin - Some Congressmen Weigh In

In 2008, we started posting on how the "active pharmaceutical ingredient" of heparin made in China under apparently primitive cond...

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David Blumenthal on health IT safety: nothing to see here, move along

At "<a href="http://hcrenewal.blogspot.com/2010/02/fda-on-health-it-adverse-consequences.html">FDA on Health IT Adverse Consequences: 44 Reported Injuries And 6 Deaths In Two Years, Probably Just Tip of Iceberg</a>" I wrote about a meeting of the HIT Policy Committee, Adoption/Certification Workgroup on February 25, 2010. The topic was "HIT safety." The agenda, presenters and presentations are available <a href="http://healthit.hhs.gov/portal/server.pt?open=512&objID=1473&&PageID=17117&mode=2&in_hi_userid=11673&cached=true">at this link</a>. At this meeting FDA testimony was given by Jeffrey Shuren, Director of FDA’s Center for Devices and Radiological Health. Dr. Shuren noted several categories of health IT-induced adverse consequences known by FDA. This information was striking. He wrote: <blockquote>... In the past two years, we have received 260 reports of HIT-related malfunctions with the potential for patient harm – including 44 reported injuries and 6 reported deaths. Because these reports are purely voluntary, they may represent only the tip of the iceberg in terms of the HIT-related problems that exist.</blockquote> Well, there's absolutely nothing to worry about, according to the Office of the National Coordinator and Dr. David Blumenthal. Nothing to see here. Move on. Blumenthal has just reportedly stated that: <blockquote><a href="http://www.massdevice.com/news/blumenthal-evidence-adverse-events-with-emrs-anecdotal-and-fragmented">http://www.massdevice.com/news/blumenthal-evidence-adverse-events-with-emrs-anecdotal-and-fragmented</a> ... [Blumenthal's] department is confident that its mission remains unchanged in trying to push all healthcare establishments to adopt EMRs as a standard practice. "The [ONC] committee [investigating FDA reports of HIT endangement] said that nothing it had found would give them any pause that a policy of introducing EMR's could impede patient safety," he said.</blockquote> I ask a simple question: <ul><li>Are these the words to be reasonably expected from an academic physician/scientist?</li></ul> Perhaps I'm a bit behind these postmodern times, but I once believed the perhaps now old-fashioned and obsolete view that a scientist would not base a conclusion of medical safety in national dissemination of drug, device, or whatever on some analysis of anecdotal data, whether 'preliminary' or final. Due to reasons such as the lack of knowledge of FDA as a place to report HIT problems, as well as fear by clinicians in reporting HIT problems at all, the cited FDA data (260 HIT-related adverse events over two years, including 44 reported injuries and six deaths) is most certainly anecdotal and incomplete, and potentially (per FDA's Jeff Shuren, MD, JD) the "tip of the iceberg." I would not take the FDA data to be anything but a possible red flag, not a source of truth, one way or the other. For example, the scant reports of health IT bugs and defects -- many of which admittedly could cause medical error -- in another database, MAUDE, voluntarily submitted by just a tiny fraction of the HIT vendors, should give a scientist pause. They are a sentinel. (See my Oct. 2009 post "<a href="http://hcrenewal.blogspot.com/2009/10/out-policy-is-to-always-have-unabashed.html">Our Policy Is To Always Have Unabashed Faith In The Computer ... Except When It Screws Up, And Then It's The Doctor's Fault</a>" for several MAUDE database examples). <blockquote> (Feb. 2011 addendum - see my more recent post about MAUDE health IT defects reports <a href="http://hcrenewal.blogspot.com/2011/01/maude-and-hit-risk-mother-mary-what-in.html">at this link</a>.) </blockquote>Obviously, the unreported, unrecognized (and therefore uncorrected) bugs and defects have the same potential. Those MAUDE reports alone should provide an impetus to call for full, rigorous, scientific, uncensored investigations on HIT safety, not make pronouncements on safety to a national audience. Proof by lack of evidence is not what I was taught in medical school. Blumenthal appears to be speaking not as a scientist, but as a marketer and (of course) politician. This is quite disappointing. However, as the man said, nothing to see here, move along. By the way, I am assuming the "analysis" will be open to public scrutiny. -- SS

David Blumenthal on health IT safety: nothing to see here, move along

At " FDA on Health IT Adverse Consequences: 44 Reported Injuries And 6 Deaths In Two Years, Probably Just Tip of Iceberg " I wrote...

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Board Member Blows Whistle on Health Insurance Company's Accounting

We previously posted about some of the travails of for-profit health insurance company/ managed care organization Wellcare.  In August, 2009, we <a href="http://hcrenewal.blogspot.com/2009/08/wellcare-did-not-contest-that-its.html">posted</a> about Wellcare's "admission" that it had made numerous questionable campaign contributions.  In May, 2009 we <a href="http://hcrenewal.blogspot.com/2009/05/wellcare-settles-accepts-deferred.html">posted</a> about WellCare's submission to a deferred prosecution agreemeent based on charges that it defrauded state programs by inflating its expenses. In 2007, we <a href="http://hcrenewal.blogspot.com/2007/11/health-plans-programs-cancelled-for.html">posted</a> about how the state of Connecticut stopped WellCare from running a plan for poor children after the company refused to reveal what it was paying physicians, and why it was failing to pay for particular services. So WellCare has been cited for three different kinds of unethical behavior in 2007-09. Here's a <a href="http://online.wsj.com/article/SB10001424052748704388304575202260647832760.html">story</a> about Wellcare with a new twist in the Wall Street Journal: <blockquote>A prominent director at WellCare Health Plans Inc. resigned Wednesday and raised questions about accounting practices at the Medicare and Medicaid company. Regina Herzlinger, the head of the board's audit committee and a professor of business administration at Harvard Business School, said internal audits found WellCare overbilled the Illinois Medicaid program by $1 million in 2009 and potentially overcharged states for almost $500,000 worth of maternity care. Additionally, the Tampa, Fla., company ran afoul of Georgia's requirements that it account for each patient visit for which it paid providers, resulting in a $610,000 fine, she said. Ms. Herzlinger said those problems, which the company corrected last year and this year after an internal auditor discovered them, are evidence of weak accounting practices. Ms. Herzlinger said she had hoped to provide oversight, as chairwoman of the audit committee, but that the board didn't renominate her for re-election at this year's annual meeting of shareholders. Ms. Herzlinger alleges that the board forced her out for asking questions about accounting problems and corporate-governance practices.</blockquote> Wellcare offered the response one might expect: <blockquote>WellCare said good corporate-governance practices require it to bring in new board members periodically to provide a fresh perspective. The company said the accounting errors Ms. Herzlinger identified were relatively small and the company's own internal controls identified them, indicating that its processes are working well. The company said the board chose not to renominate Ms. Herzlinger. 'At any company, you are always going to have these kinds of immaterial amounts pop up,' said Thomas Tran, WellCare's chief financial officer, who added that it is important to 'address them and document them and learn from them to change your processes.'</blockquote> That might have been more convincing were Wellcare not to have the track-record discussed above. Every now and then we have discussed cases of whistle-blowers from within health care organizations, but I cannot remember another instance in which the whistle-blower was on the board of directors.  In our post of August, 2009, we noted Prof Herzlinger's position on the Wellcare board, and urged her, as a main stream health policy expert, "to acknowledge that health care leadership may be unaccountable, opaque, dishonest, and sometimes flagrantly corrupt."  We also urged her to "pay a bit more attention to the mischief being committed by those who answer to her."  From this new story, it looked like she did just that, and hopefully made a contribution to more transparent and honest governance of health care organizations.  Good for her! It is time for the often well-paid and not over-worked members of the board of directors of health care corporations to take some responsibility for the actions of the corporations over which they are supposed to exercise stewardship.

Board Member Blows Whistle on Health Insurance Company's Accounting

We previously posted about some of the travails of for-profit health insurance company/ managed care organization Wellcare. In August, 2009...

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