Background: Academic Health Care Leaders Also Serving as Directors of For-Profit Health Care Corporations
First Discovered Cases
In 2006, we first noticed that leaders of academic medicine also were serving as board members of large for-profit health care corporations. The first example we discussed was that of Marye Anne Fox, Chancellor (equivalent to president) of the University of California - San Diego, and hence the person to whom the University of California, San Diego School of Medicine and its academic medical center report. The conflict was between this position, and her service as a member of the board of directors of Boston Scientific, a medical device manufacture, and the board of directors of Pharmaceutical Product Development Inc., a contract research organization.
Later that year, we discussed a "new species of conflict of interest." At that time we wrote:
Medical schools and their academic medical centers and teaching hospitals must deal with all sorts of health care companies, drug and device manufacturers, information technology venders, managed care organizations and health insurers, etc, in the course of fulfilling their patient care, teaching, and research missions. Thus, it seems that service on the board of directors of a such public for-profit health care company would generate a severe conflict for an academic health care leader, because such service entails a fiduciary duty to uphold the interests of the company and its stockholders. Such a duty ought on its face to have a much more important effect on thinking and decision making than receiving a gift, or even being paid for research or consulting services. Furthermore, the financial rewards for service on a company board, which usually include directors' fees and stock options, are comparable to the most highly paid consulting positions. What supports the interests of the company, however, may not always be good for the medical school, academic medical center or teaching hospital.
Since 2006, we continued to find colorful examples of such conflicts of interest, e.g.,
- In 2006, the UnitedHealth board included multiple academic leaders, at least one of whom seemed partly responsible as a member of the board compensation committee for allowing the then UnitedHealth CEO to collect many backdated stock options (look here)
- In 2009, some attributed the problems at George Washington University's medical school that caused it to be put on probation to the conflict of interest of its provost and vice president for health affairs, who also sat on the board of Universal Health Services, which owned the university hospital (look here)...
Through more recent years,
- In 2014, members of the AMA committee that has an outsize role in how the government fixes the pay of US doctors wer also found to be members of boards of directors of such companies as Kindred Healthcare, Hanger Inc, and Sante. (Look here.)
- In 2015, the academic physician and research unit leader nominated to be the new head of the US Food and Drug was a director of Portola Pharmaceuticals (look here)...
Look here for even more
Our Early Cross-Sectional Study
In 2007, we did a somewhat rough and ready research project based on 2005 data to determine the prevalence of such conflicts. The results were presented in abstract form,(1) but not published as an article:
In 2005, there were 164 US health care companies in the 2005 S&P 1500, and 125 US medical schools. We identified 198 people who served on the companies' boards of directors who had faculty or leadership positions at these medical schools. Of the 125 medical schools, 65 schools had at least one faculty member and/or leader who also served on a health care corporation's board of directors. 15 schools had more than five, and 4 had more than 10 such individuals. Of the 125 schools, 7 reported to university presidents who were also directors of health care corporations, and 11 schools reported to vice-presidents for health affairs who were also such corporate directors. Four schools were lead by deans who were also health care corporate directors, and 10 schools had academic medical center CEOs who were such directors. 22 schools had at least one top leader who was also a director of a health care corporation. 36 schools reported to university boards of trustees which each included at least one director of a health care corporation, and 12 schools' own boards of trustees included at least one such director.
more than one-half of US medical schools had a leader or faculty member who also was a director of a major US for-profit publicly traded Bpure^ health care corporation, more than one-sixth of schools had a top leader who was also such a director, and more than one-fifth reported to boards of trustees which included such directors.
More Modern and Complete Data
Unfortunately, we never wrote a full paper about this work, although the likelihood we could have gotten it published around 2007 was very small. It is fortunate that Anderson and colleagues did a more complete and current version of this project, which was published online this week by the British Medical Journal.(2)
Their methodology was similar to our earlier work, but more sophisticated. They obtained data on the 2013 board members of 446 public for-profit US companies listed on New York Stock Exchange or NASDAQ and classified as in the healthcare sector, including pharmaceutical, biotechnology, medical equipment and supply companies and health care providers from the companies' 2014 proxy statements.
Their results were striking, suggesting even a greater prevalence of conflicted academic leaders than our preliminary results suggested
Directors were affiliated with 85 geographically diverse non-profit academic institutions, including 19 of the top 20 National Institute of Health funded medical schools and all of the 17 US News honor roll hospitals. Overall, these 279 academically affiliated directors included 73 leaders, 121 professors, and 85 trustees. Leaders included 17 chief executive officers and 11 vice presidents or executive officers of health systems and hospitals; 15 university presidents, provosts, and chancellors; and eight medical school deans or presidents.
The new study also described the direct financial relationships among the academic leaders, professors and trustees and the corporations on whose boards they served.
The total annual compensation to academically affiliated directors for their services to companies was $54 995 786 (£35 836 000; €49 185 900) (median individual compensation $193 000) and directors beneficially owned 59 831 477 shares of company stock (median 50 699 shares).
As we have suggested, Anderson et al stated that being on the board of directors of a for-profit health care corporation creates conflicts of interest beyond those created by simply having a financial relationship with a health care company, e.g., by participating in a commercially sponsored research project or acting as a consultant to a company.
Similar to individuals engaging in consulting relationships, directors on industry boards enter a formal contract with the company and receive financial payment for services; however, they are subject to two important differences. Firstly, unlike consultants who are compensated to provide expertise on a specific issue, directors are subject to a fiduciary responsibility to company shareholders to advance the general interests of the company and increase profits. Secondly, directors are reimbursed both through larger cash fees than typical consulting contracts and through stock options, the value of which is directly tied to the financial success of the company.
They also added the reminder that,
Though the missions of academia and for profit companies can overlap, they may also diverge, specifically when the for profit mission of industry competes with the non-profit taxpayer funded clinical and research missions of academic medical and research institutions.
previous guidelines have emphasized the relationships of clinicians and researchers with industry, but institutional conflicts of interest, which arise when administrators, including executive officers, trustees, and clinical leaders have a financial relationship with industry, are increasingly recognized and pose a unique set of risks to academic missions.
We have written again and again on the problem of conflicts of interest affecting health care professionals, academics, and policy makers. The worst such conflicts may occur when individuals are simultaneously leaders of large mission-oriented health care non-profit organizations, such as teaching hospitals, medical schools, or research institutes, and board members of for-profit health care corporations. Despite our attempts to raise such issues as important, and probably important causes of health care dysfunction, they have remained anechoic.
Now a broadly based study of this no longer so "new species" of conflict of interest has appeared in one of the biggest and most prestigious medical journals. Let us hope it will bring this issue to the forefront, and also partially counter those who have been preaching that concerns about conflicts of interest in health care are overblown.
As we have said again and again, the web of conflicts of interest that is pervasive in medicine and health care is now threatening to strangle medicine and health care. Furthermore, this web is now strong enough to have effectively transformed US health care into an oligarchy or plutocracy. Health care is effectively run by a relatively small group of people, mainly professional managers plus a few (lapsed?) health care professionals, who simultaneously run or influence multiple corporations and organizations.
For patients and the public to trust health care professionals and health care organizations, they need to know that these individuals and organizations are putting patients' and the public's health ahead of private gain. Health care professionals who care for patients, those who teach about medicine and health care, clinical researchers, and those who make medical and health care policy should do so free from conflicts of interest that might inhibit their abilities to put patients and the public's health first.
Health care professionals ought to make it their highest priority to ensure that the organizations for which they work, or with which they interact also put patients' and the public's health ahead of private gain, especially the private gain of the organizations' leaders and their cronies.
ADDENDUM (16 November, 2015) - Note that an abbreviated version of this post has appeared as an electronic "rapid response" to the article by Anderson et al (link here), although the published form has on it our original submission date.
1. Poses RM, Smith WR, Crausman R, Maulitz R. Selling them the rope: prevalence of for-profit health care corporate dirctors among academic medical leaders. J Gen Intern Med 2007; 22 (Suppl 1): 98.
2. Anderson TS, Good CB, Gellad WF. Prevalence and compensation of academic leaders, professors and trustees on publicly trade US healthcare company boards of directors: cross sectional study. Brit Med J 2015; 351:h4826. Link here.