Sunday, July 20, 2008

SCHATZBERG DISCLOSURE

SCHATZBERG DISCLOSURES

Questions continue to buzz about Dr. Alan Schatzberg’s and Stanford’s claims that he complied with the university’s disclosure requirements. Dr. Schatzberg is chair of Stanford’s department of psychiatry and the founder of a company called Corcept Therapeutics. I have commented previously on the University’s (mis)management of Dr. Schatzberg’s conflict of interest vis a vis Corcept and his NIH funding.

The two most informative documents released by Stanford University are dated 23 May 2008 and 25 June 2008. The first is an amended response to Senator Charles Grassley. The second is a public statement concerning Sen. Grassley’s investigation of Dr. Schatzberg through the Senate Finance Committee.. The complete texts are available on-line here: http://ucomm.stanford.edu/news/052308conflict_of_interest.pdf (1)

and here http://ucomm.stanford.edu/news/062508conflict_of_interest.pdf (2)

Additional perspective is to be found in an article in the Stanford Daily here:
http://www.stanforddaily.com/article/2008/7/10/senatorTargetsSchatzbergForConflictOfInterest (3)

Stanford’s policy requires that
“Disclosure of potential conflicts of interest at the time of any transaction,
such as when the faculty member receives a research grant or gift or has
intellectual property licensed, is a critical component of our conflict of
interest policy. Transactional disclosures of conflicts of interest are required
when submitting a grant, negotiating a contract, during licensing activities,
submitting protocols for human subjects research or animal research, entering
into material transfer agreements or collaboration agreements, receiving gifts
or entering into procurement activities. … Our standard for a significant
financial interest is whether the faculty member has received $10,000 or more in
income, holds $10,000 or more in equity in equity for publicly traded companies
or has any equity if the company is privately held. This ad hoc disclosure is
used to mitigate, manage or remove such specific conflicts, and, for all
research funded by NIH, as a basis for reporting to NIH. All such conflicts are
also reported in the annual disclosure, and thus are also part of the University
information on conflict of interest (emphases added) (1).
Likewise, the Stanford Daily reported that
“the University said in its letter to Grassley that it holds a “zero-dollar
threshold for disclosure.” This requires that faculty members divulge any and
all financial gains made through outside interactions that could have bearing on
what they are doing on campus.” (3)
The sale of Corcept Therapeutics stock by Dr. Schatzberg in 2005 was not reported to the University. (1) Dr. Schatzberg’s attempted sales of stock in 2002 and 2004 in connection with Corcept’s planned stock IPOs also were not reported to the University. (1) Proceeds of the 2005 sale to Dr. Schatzberg were over $109,000. Projected proceeds of the failed attempts to sell stock during the IPOs were $7-11 million. In terms of the policy described above, these must be considered “transactions” and “income” and “financial gains.” Stanford did not document compliance by Dr. Schatzberg with University policy. The stock sale is not mentioned in Dr. Schatzberg’s 2005 disclosure to the University. (1) Indeed, Stanford prevaricated on this issue by stating “…information about his stock ownership and stock sales was publicly disclosed through SEC filings and is available online through financial reporting services.” (2)

This explanation is laughable. Since when does a University rely on SEC filings and online financial reporting services to learn about the transactions and financial conflicts of its faculty members in order to discharge its fiduciary duty to disclose these transactions to NIH?

Even worse, the American Psychiatric Association has parroted Stanford’s assertion that Dr. Schatzberg made the required disclosures. In an interview with the New York Times, Dr. Nada L. Stotland, president of the psychiatric association, said the group had studied Mr. Grassley’s letter and Stanford’s response and agreed with Stanford. Dr. Schatzberg will take over as president of the association as planned, she said. The association and the University here are being disingenuous – treating an ethical issue as a technical legalism. But even on legally technical grounds their case fails. Is that the standard that Stanford and the APA wish to state for the record?

Once again, it is time for Stanford to get real about the boundary between commerce and academia. And, in view of the unjustified promotion of their commercial interest by Dr. Schatzberg and his corporate associates through academic outlets, it is time for the American Psychiatric Association to grasp the nettle and to reconsider Dr. Schatzberg’s fitness to serve as president in 2009.

3 comments:

Kathy said...

I'll start by disclosing my conflicts -- I work at Stanford and am an alum. I have read this blog and the materials referenced, and am not able to follow some of the concerns. For example, the blog implies that Stanford used SEC filings to learn about conflict of interest and that this is "laughable". However, my reading of Stanford's action is that they commented on SEC filings, but did not imply that this is how they learn about conflict of interest. In the public statement pdf shared by the blog author, Stanford states:
"Dr. Schatzberg has consistently disclosed on his annual conflict-of-interest forms his ownership
of equity in Corcept Therapeutics in excess of $100,000 (the highest dollar category on the
form). Once his financial interest was disclosed, further information was obtained in connection
with managing any conflict of interest with research at Stanford. Such conflicts are reviewed by the Conflict of Interests Committee at the School of Medicine as well as the Institutional Review
Board, which reviews proposed research involving human subjects. As part of the further
conflict of interest review, Dr. Schatzberg disclosed in writing his ownership of the Corcept
stock and its actual value. As a result, Stanford was fully aware of the value of his stock based on
his disclosures to the University. In addition, information about his stock ownership and stock
sales was publicly disclosed through SEC filings and is available online through financial
reporting services."

I have not had any discussions with anyone at Stanford about this matter. I follow the Health Care Renewal blog because of a strong desire for understanding and promoting ethical behavior in health care. However, I worry about sensationalism in this area, and think that throwing dirt on prestigious academic institutions is a great way to pull readers in. Thankfully, the blog author made it easy for me to get to the primary sources, which I hope others read as well.

Bernard Carroll said...

Thank you for your comment, Kathy. I will try to point out where the misunderstandings might arise.

Senator Grassley expressed concern that, even though Stanford was aware of Dr. Schatzberg's equity interest in Corcept Therapeutics, the University did not disclose the true value of this interest in its response to him. Sen. Grassley remarked on the disconnect between the disclosed nominal value of "over $100,000" and the actual value of approximately $6 million.

A related concern was that Dr. Schatzberg's transaction of selling stock was not reported to the University. This transaction resulted in a realized financial gain of around $109,000 to Dr. Schatzberg. Apparently, the University was not aware, either, of Dr. Schatzberg's efforts to sell stock worth $7-11 million in 2002 and 2004 in connection with Corcept's planned IPOs. Sen. Grassley also raised questions about Stanford's failure to disclose these consummated or intended transactions to him.

As I described in my most recent post, these consummated or intended transactions do appear to fall under Stanford's reporting policy, which I quoted at length. When Stanford referred to SEC filings and online financial information services in connection to these transactions then it acknowledged de facto that it did not have independent disclosure of them by Dr. Schatzberg. The SEC filings were not made by Corcept Therapeutics in the spirit of disclosure, they were made because it is required by law. That is precisely what Sen. Grassley is working up to in this area of academic-corporate boundaries.

Moreover, even if the parties still try to dismiss Sen. Grassley's concerns on technicalities (which seems to be a real stretch) there remains the issue of transparency. The faculty disclosures requested by Stanford, the disclosures provided to Stanford by Dr. Schatzberg, and the disclosure provided by Stanford to Sen. Grassley are not designed to be really transparent on these key issues.

The follow-on issue is the University's obligation to report salient financial conflicts to NIH. If the University doesn't know about them then they cannot be reported.

Bernard Carroll

Anonymous said...

Kathy, you seem confused. Stanford said that Schatzberg had revealed the full amount of his conflict with Corcept. Well, if that was the case, then why was Senator Grassley only provided with a disclosure of greater than $100,000?

Apparently, this "disclosure" of millions was not in Schatzberg's file.