More than Just a Conflict of Interest? - Should Rutgers University's Own Contract Research Organizations Report to the Board of Covance?

Transparency International's 2013 global survey showed that over 40% of Americans think the country's health care is corrupt (see this post).  Transparency International defines corruption as abuse of entrusted power for private gain.  It is likely that one reason many US citizens feel this way is that they have become aware of the web of conflicts of interest that now permeates health care.

The Institute of Medicine defined conflicts of interest in medicine as occurring "when an individual or institution has a secondary interest that creates a risk of undue influence on decisions or actions affecting a primary interest."  Since the primary interest of physicians is to provide good care that puts patients' interests first, and the primary interests of academic medicine are to provide education and research of quality and integrity, conflicts of interest affecting physicians or academic medical institutions increase the risk of abuse of the entrusted power defined by these primary interests.

The most striking conflicts may occur when one person simultaneously runs two different health care organizations whose missions and interests are at odds.  For example, we have been documenting since 2006 how some top leaders of academic medicine simultaneously sit on boards of directors of health care corporations.  Thus, for example, the dean of a prestigious medical school may sit on the board of a large pharmaceutical company.  That person is supposedly responsible both for the honest education of students, including unbiased education about the use of drugs, and for a company whose revenue depends on selling more drugs at higher prices.

Rutgers University President, Director of VWR International and Covance

Such conflicts attracted little public notice when we first blogged about them, but now occasionally attract more attention.  For example, the NorthJersey.com just reported on the conflicts affecting the President of Rutgers University, which includes two medical schools and many other academic health care components,

As he leads the transformation of the state’s flagship university into a medical research hub with national aspirations, Rutgers University President Robert Barchi is also collecting hundreds of thousands of dollars for privately advising two firms that do millions of dollars of business with Rutgers related to scientific research.

In particular,

both firms have a business relationship with Rutgers. Those relationships predate Barchi’s appointment. They could expand, however, with Rutgers’ recent merger with most of the University of Medicine and Dentistry of New Jersey.

Rutgers has paid VWR International, a publicly traded lab supply company, and its subsidiaries a total of $15 million since 2008, records show. It is on pace to pay the company $2 million this calendar year, even though a contract with the firm expired in 2012. A university spokesman said the deal was extended, but an official who handles public records requests said a copy of the extension was not on file. Covance Inc., a pharmaceutical research firm, has been paid about $100,000 by Rutgers since 2008. It supplies products and services used in biological research.

Those two companies paid Barchi a combined $317,000 in fees and stock awards last year to sit on each company’s board, part-time advisory positions he has held more than seven years. Barchi has also accumulated stock in both companies — in the case of Covance, worth the equivalent of $2.5 million as of Friday, according to corporate filings. The annual fees supplement Barchi’s annual pay at Rutgers, which is worth up to $747,000 after bonuses.

Dr Barchi argued that since he had disclosed these relationships to the university board of governors, it is all good,

'I disclosed my membership on the board fully during the search process, both on my résumé and in discussions with Rutgers board of governors members,' Barchi wrote in a statement issued in response to questions and an interview request submitted through a spokesman. 'Rutgers University recognizes the value of having its chief executives serve on corporate boards. ... Recognizing the potential for a conflict, however, since becoming president at Rutgers I have not been involved in any decisions at Rutgers involving' the companies.

Members of the university governing board did not seem too troubled either.

'It was fully disclosed,' said Gordon MacInnes, a member of the governing board. 'I don’t see any inherent conflict.'

However, NorthJersey.com found some people who thought there could be a real issue since the university has direct financial relationships with both companies on whose board Dr Barchi sits.

Cary Nelson, a past president of the American Association of University Professors who has written a dozen books on higher education policy and conflicts of interest, said Barchi’s arrangement 'is not an ambiguous case, unfortunately,' calling it a clear conflict.

There’s a danger of impropriety, Nelson said, even if Barchi never actively exerts influence on behalf of the companies he advises. For example, officials who make large buying decisions for the university may choose contracts with the companies to curry favor with the president or because they 'don’t want to make waves,' he said.

Nelson is the co-author of an extensive report for the professors’ association due out at the end of this year that will suggest university policies to avoid such problems.

'What we say is that no administrator should serve on a corporate board or have any kind of financial relationship with a company that does business with the university,' he said. 'That’s a fundamental principle that has to be honored.'

Public Notice

Unlike some cases we have previously discussed (for example, here and here), this one produced an immediate kerfuffle, if not an uproar.  The New York Times reported on it.  Already editorialists (e.g., here) and a few politicians (look here) have called for Dr Barchi to step down from his corporate board positions. For example, per again NorthJersey.com,

'This is a two-way financial arrangement that creates a textbook example of a conflict of interest,' said Senate Majority Leader Loretta Weinberg, a Teaneck Democrat, who called on him to resign from his advisory posts for the companies, VWR International and Covance Inc. 'The president of the university is on the payroll of companies that are paid millions of dollars by the school. Even if Mr. Barchi avoids direct involvement in business decisions between Rutgers and these firms, the appearance of a conflict could undermine his credibility at a key time in the evolution of the university.'

Some Additional Perspective

Dr Barchi's conflicts of interest have drawn considerable more coverage than similar conflicts of other academic health care leaders whom we have discussed in the past. Unlike these previous cases, they have also provoked upset, if not some outrage.

Yet there could be more outrage, because this case is actually worse than it has been so far publicly described.

First, the public discussion seems not to have taken into account the nature of Dr Barchi's responsibilities to VWR International and Covance.  He is not on advisory boards to these two companies, as implied by the initial NorthJersey.com report.  He is a member of both these companies' boards of directors.

As we noted in 2008,  the issue goes beyond just the often generous payments board service entails. The important consideration is that directors of public for-profit corporations have a duty to "demonstrate unyielding loyalty to the company's shareholders" [Per Monks RAG, Minow N. Corporate Governance, 3rd edition. Malden, MA: Blackwell Publishing, 2004. P.200.]   (Many people would now argue that many current corporate directors function more like cronies of top management than representatives of the shareholders).

But the important message is the boards of directors are responsible for the governance and overall direction of the company.  For example, the 2013 Covance proxy statement includes, "The Board of Directors provides oversight of senior management in its operation of the Company."   The members of the board have a fiduciary duty to align with the companies' interests which goes beyond whatever loyalty their compensation from the company ought to inspire.  Thus, the extreme conflict between, for example, one person's roles as a university president responsible for education, including unbiased education of physicians about drugs,  and a director of a drug company ought to be obvious.

Dr Barchi, is not a director of a drug company, but the director of a contract research organization.  The description of Covance in the NorthJersey.com article above was incomplete.  In fact, the Covance web-site describes the company as "one of the world’s largest and most comprehensive drug development services companies."  In particular, Covance functions as a contract research organization (CRO).  Its work includes running clinical research for pharmaceutical and biotechnology companies, including "Early Patient Studies,Clinical Development (Phase II-III)."

As university president, Dr Barchi is simultaneously responsible for educating students about clinical research, and for the integrity of clinical research performed within the university.  More acutely, however, he actually is responsible for several contract research organizations that appear to be competing with Covance.

As more clinical research has been taken over by CROs, some academic institutions have decided to compete directly with CROs.  In particular, Rutgers University, in particular, seems to have its own CROs.  First, as proclaimed by its Biopharma Educational Initiative, "Rutgers Biomedical and Health Sciences is one of the largest health care research institutions in the US with our own (emerging) contract research organization."  The Rutgers Clinical Research Organization asserts "Rutgers CRO connects industry, patients and academic collaborators with the University's state-wide academic resources."  Meanwhile the Rutgers New Jersey Medical School Institute of Genomic Medicine states "the IGM functions as an academic contract research organization (CRO) dedicated to biomarker discovery and the clinical evaluation of biomarkers.".

Thus, not only does Dr Barchi's role in the governance of Covance seem to present a conflict with his role in upholding the integrity of research at Rutgers, but it could conceivably be anti-competitive.  While one may question whether university's should directly compete with CROs, as long as they do, it seems they ought not to be run by those responsible for the governance of the CROs with which they are ostensibly competing.

Summary

As the web of conflicts of interest that entangles health care becomes more visible, the risks of corruption that it generates become more obvious.  I hope as disclosure improves, public outrage about health care corruption will increase.   Ultimately, true health care reform requires more than disclosing conflicts of interest.

The IOM  report  on conflicts of interest suggested full disclosure of all payments that could be considered conflicts of interest, banning clinical research by conflicted individuals, prohibiting academic physicians from giving "drug talks" whose content was provided by industry, and developing methods to fund continuing medical education independent from industry.  This report, and its recommendations have gotten scant attention, maybe because they would threaten a status quo that enriches conflicted health professionals and the companies that create these conflicts.  However, in my humble opinion, implementing all the report's recommendations would only be a beginning down the road of restoring the integrity of clinical care, teaching, and research.

Hat tip to Prof Margaret Soltan on the University Diaries blog.

See also the comments by Dr Carl Elliott on the Fear and Loathing in Bioethics blog.  

ADDENDUM (24 July, 2013) - see additional comments here and here by Prof Margaret Soltan on the University Diaries blog.