Transparency International US Corruption Barometer: Striking Increases in Public Perceptions of Government Corruption in the US, Especially in the White House

Introduction: Transparency International's 2017 Global Corruption Barometer US Results

Last month, Transparency International (TI) released the results of its 2017 US Corruption Barometer, a global survey of peoples' perceptions of the degree to which their national institutions are corrupt.  We discussed the results from the US, based on data collected in late 2016, which showed that

the US had results suggesting it has important problems with corruption.  More than one-third of US respondents thought that most executive branch leaders, legislators, and business executives are involved in corruption,  Just less than one-third thought that most government officials are involved in corruption.  More than one-half of US respondents thought that the government is handling the fight against corruption badly.  More than one-third thought that corruption had gotten worse in the previous year.  More than 20% thought it is not socially acceptable to report corruption.

Furthermore, the US had the worst results, compared to the other four developed countries, in four categories, and did not have the best results in any.

Unfortunately, since this data was collected no later than January, 2017, it did not reflect events during the Trump presidency.  There are reasons to think that things are now worse.

Since Trump's inauguration we have frequently posted about apparent conflicts of interest and corruption affecting health and health care policy and regulation under that regime. (Our most recent post was here. Older ones are included here.)

In particular, the Trump regime chose many people for health care leadership positions who would have to transit the revolving door from health care corporations to these new jobs.  In them they would be able to affect policies or regulations which could influence these same corporations.  The most striking recent example was the nomination of the former top US executive of global pharmaceutical company Eli Lilly to be Secretary of the Department of Health and Human Services, (look here.)

But the Global Corruption Barometer survey was done too early to be affected by these phenomena.  .

Transparency International's New 2017 US Corruption Barometer

However, this week Transparency International released results of a new 2017 US version of the Corruption Barometer.  It was based on data collected during the Trump regime, from October to November, 2017.  (The news release is here, and the full report is here.)   Its results were striking, and did corroborate our case based observations.

From the press release, here are the key results:

- 44 per cent of Americans believe that corruption is pervasive in the White House, up from 36 per cent in 2016.

- 58 per cent of people say the level of corruption has risen in the past twelve months, up from 34 per cent who said the same in January 2016.

- Almost 7 out of 10 people believe the government is failing to fight corruption, up from half in 2016.

- 55 per cent gave fear of retaliation as the main reason not to report corruption, up from 31 per cent in 2016.

- Close to a third of African-Americans surveyed see the police as highly corrupt, compared to a fifth across the survey overall.

- 74 per cent said ordinary people can make a difference in the fight against corruption, up 4 percentage points from 2016.

Note that:

In both 2016 and 2017, the Office of the President, members of Congress and government officials were seen as the most corrupt. In 2017, the White House overtook Congress.

Local government fared better than federal institutions, indicating that people place more trust in their representatives closer to home. Judges are seen as the least corrupt of the nine groups we asked about.

In constrast, the proportion of people who believe business executives are seriously involved with corruption was stable at 32%.


Also,

the survey revealed a worrying increase in those who say that the main reason people do not report corruption is because they are afraid of the consequences, up from 31 per cent in 2016 to 55 per cent in 2017. Sixteen per cent said the main reason people do not report corruption is because nothing will be done.

Here is a graphic from the report that shows the proportions of respondents who thought most or all of those who worked in particular institutuions were involved in corruption:




Here is a graphic form the report showing how well respondents thought the government is fighting corruption (2016 vs 2017):



Media Response

Unlike the 2017 Global Corruption Barometer report, the new US report got some media attention, at least there were reports by the Washington Post, Newsweek and NPR.

It was striking that all focused on how the public's opinion about Trump administration corruption was corroborated by an extensive series of cases, including those in health care that we discussed, but also many more.  The most extensive summary of cases was in Newsweek. 

Since before he took office, Trump and his family’s personal conflicts of interest, and his agencies’ revolving doors, have been widely reported on in the media and heavily criticized by ethics lawyers and government watchdogs.

While the president handed off day-to-day oversight of his company to his sons Eric and Donald Jr., his hotels and golf courses have become vehicles for lobbyists and foreign dignitaries to curry favor with the administration, and, in the case of the golf courses, actually meet and play with the golf-loving president.

Shortly before his election last year, the Trump campaign trotted out a new slogan and a five-point plan for ethics reform that featured new lobbying restrictions. The plan was called 'drain the swamp.'

But a year later, he had stocked his agencies with lobbyists for industries that were regulated by the agencies, and his administration has been rocked by almost daily legal and investigatory bombshells related to corruption. Trump is being sued in Maryland and Washington, D.C., for violating the 'emoluments clause' of the U.S. Constitution by running his Trump International Hotel in Washington, D.C.; Paul Manafort, the second Trump campaign manager, has been indicted on money-laundering charges; Trump’s first national security adviser, Michael Flynn, has pleaded guilty to lying to the FBI in an investigation that also uncovered secret lobbying work for the Turkish government; and his son-in-law, Jared Kushner, failed to disclose $1 billion in loans tied to his real estate company, and has repeatedly had to revise his financial-disclosure forms to add items he 'forgot.'

At least six Trump Cabinet secretaries are being investigated for or asked about exorbitant travel expenses, including using government planes for private business, security details or business dealings.

Cabinet members, including Veterans Affairs Secretary David Shulkin and Interior Secretary Ryan Zinke, have used travel to combine business with pleasure and fundraising. Shulkin took in a Wimbledon tennis game on business, and Treasury Secretary Steven Mnuchin reportedly spent at least $800,000 on nonwork travel, including a viewing of the August 21 solar eclipse. He also requested a jet for his honeymoon, and to take his wife to the Fort Knox gold reserve.

The president’s hiring of his daughter Ivanka and son-in-law are at odds with the federal anti-nepotism law, which states that 'a public official may not appoint, employ, promote, advance, or advocate for appointment, employment, promotion, or advancement, in or to a civilian position in the agency in which he is serving or over which he exercises jurisdiction or control any individual who is a relative of the public official.' His Justice Department gave him an exemption, however.

I would also note that the Sunlight Foundation has found that President Trump has over 600 conflicts of interest, and that his family has over 1100 (look here).


Summary


We have previously insisted that health care corruption is an important cause of US health care dysfunction, and that any efforts to truly reform health care require addressing health care corruption.  For example, here we said,

if we really want to reform health care, in the little time we may have before our health care bubble bursts, we will need to take strong action against health care corruption.  Such action will really disturb the insiders within large health care organizations who have gotten rich from their organizations' misbehavior, and thus taking such action will require some courage.

But in the US, since the beginning of the Trump regime, health care corruption appears to be getting worse, in the context of severely worsening corruption in the executive branch of government.

Transparency International modestly suggested its results indicate

our elected leaders in Washington have much more work to do to win back the trust of citizens

They did have concrete recommendations (detailed in the full report):

1. Transparency in political spending:

Make all spending on politics genuinely transparent, with:

- real-time information accessible in online, machine-readable form to the public

- transparency on political spending by publicly traded companies

- transparency to the public on every level of influence, from political ad campaigns, to lobbying, to bundled campaign contributions.

2. Prevention of revolving doors:

Stop the unchecked exchange of personnel among corporations, lobbyists and our elected and high-level government officials.

3. Establishing who owns what:

End the use of anonymous shell companies, which can be a source of conflict of interest and/or vehicles for illicit activity.

4. Strengthening the ethics infrastructure:

Reinforce the independence and oversight capabilities of the Office of Government Ethics.

5. Protection of whistleblowers:

Improve and implement laws and regulations to protect the whistleblowers who expose corruption and other misconduct by the government and its contractors.

6. Providing basic access to information:

Increase access to information about the government, as a means to empower the public to fight corruption.

IMHO these provide a good framework for immediate action.  However, it seems highly unlikely that given its record, the current regime would be interested in any of them.  But I live in hope.

Heads They Win, Tails We Lose - Non-Profit Hospital Executives Paid Generously After They Were Shown the Door

On Health Care Renewal, we have been decrying American health care dysfunction since 2004.  For years, the US consistently has had the most expensive health care system of any developed country.  For that exhorbitant price, it provides at best medicocre access to and quality of care.  The latest (2017) international comparison of health systems produced by the Commonwealth Fund shows that the US spends about 16% of its gross domestic product (GDP) on health care, compared to less than 12% spent by 10 other countries.  The US ranked no better than fifth on performance rankings measuring care process, access, administrative efficiency, equity, and health care outcomes.  It had the worst access, equity and health outcomes.

Even given that some of the measures used are debatable, these are dismal results.  No wonder US physicians are demoralized and burnt-out, as we first noted in our 2003 article. [Poses RM.   A cautionary tale: the dysfunction of American health care. Eur J Intern Med 14 (2003) 123–130. Link here.] 

Health care dysfunction is commonly discussed in the US, especially since health care reform became a legislative priority during the Obama administration.  The resulting Affordable Care Act (ACA, "Obamacare") resulted in some improvement in access to health insurance, but problems with access, quality and cost remain.

It is hard to understand how such a dysfunctional system continues without considering who benefits from it. One group who greatly benefit is health care organizational managers.  We have frequently discussed their luxurious and ever increasing pay.  Furthermore, often their pay seems wildly disproportionate to their accomplishments.  For example, in June, 2017 we profiled the CEO of safety-net hospital who made over $1 million a year from an institution charged with caring for the poor.  His institution demonstrated no great achievements in clinical care or improving patient outcomes.  Meanwhile it was alleged that he tried to increase revenue via unethical means, and was even cozy with organized crime.  

Such executive compensation is rarely challenged, but when it is, the responses are formulaic.  Justifications are made by public relations flacks who are accountable to these executives, or the executives' cronies on their boards of trustees.  As I wrote in 2015,  and in May, 2016,  It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they were authored as public relations talking points. Additional examples appear here, here here, here, here, and here, here and here. 

They talking points are:
- We have to pay competitive rates
- We have to pay enough to retain at least competent executives, given how hard it is to be an executive
- Our executives are not merely competitive, but brilliant (and have to be to do such a difficult job).

As we discussed recently, these talking points are easily debunked.  Additionally, rarely do those who mouth them in support of a particular leader show evidence that they apply to that leader. Could so many highly paid executives be so brilliant?

Instead we now we present cases from the second part of 2017 in which non-profit hospital executives were given lavish compensation just after they were forced out of their jobs.In alphabetical order by the states in which the hospitals are located...

Florida: Broward Health Vice President Got $214,008 After Allegations of Improper Payments Lead to Resignation

As reported by the Broward County (FL) Sun-Sentinel first on August 7, 2017,

Doris Peek resigned July 20 as senior vice president of Broward Health, which runs five hospitals and various clinics, after a law firm hired by Broward Health accused her of improperly directing nearly $1.7 million to a company owned by a prominent Republican consultant. At the time of the report, Broward Health released a statement saying that it took the report 'very seriously' and that 'every individual at Broward Health is held accountable in order to uphold established legal and ethical standards.'

Peek’s severance agreement, released by Broward Health in response to a public records request from the Sun-Sentinel, states that she will receive $214,008, most of which represents six months’ severance and the rest accrued leave.

Under the agreement, signed by Broward Health interim chief executive officer Beverly Capasso, Peek may cooperate with any government investigators or regulators looking into Broward Health, a taxpayer-supported system legally known as the North Broward Hospital District. But she promised to not take Broward Health to court and 'not engage in any activity either oral or written which disparage or adversely affect Broward Health.'

Such non-disparagement clauses are common in severance agreements, although they have been criticized for allowing employers to cover up problems.

The hospital administration gave no clear reason for the generosity of the agreement.  

Asked why Broward Health would agree to such a payment, considering the highly critical contents of the report, Broward Health’s public relations agency, EvClay Public Relations, released this statement: 'It is the policy of Broward Health to not discuss severance agreements.' Pressed on the reason for this, the agency provided this statement: 'We respect the privacy of our employees.'

Given the placement of the non-disparagement clause in the agreement it is worth considering that the interim CEO, Ms Beverly Capasso, who approved the contract, was also under a cloud at the time it was written. The Sun Sentinel had previously reported,

The new chief executive of Broward’s largest public hospital system holds a master’s degree in health administration from a defunct university that has been identified by federal investigators as a diploma mill.

Beverly Capasso, who was just awarded a $650,000 annual salary to run Broward Health, received the degree from Kennedy-Western University, a mail and online institution based in California and Wyoming that closed in 2009 after failing to gain accreditation. Her resume invokes the degree at the very top, giving her name as 'Bev Capasso RN, BSN MHA.'

Furthermore, soon after the severance agreement was announced, the Sun-Sentinel reported more resignations among Broward Health management,

Two more top Broward Health executives quit this week, deepening the leadership turmoil at the taxpayer-supported hospital system.

Dionne Wong, senior vice president for human resources, and Mark Sprada, interim chief executive of Broward Health Medical Center in Fort Lauderdale, both resigned. 

And in the months since, other major management problems became apparent.

The resignations come after Broward Health’s credit rating was lowered last month by S&P Global Ratings, which cited weak financial results and the leadership turmoil at the troubled system, legally known as the North Broward Hospital District.

After that, the hospital system was also alleged to have given a no-bid contract to 21st Century Oncology, allegedly with the involvement of Florida governor Rick Scott (News-Press, September 25); and  has been under grand jury investigation for violations of the open meeting law (Sun-Sentinel, September 26).

Ms Peek was allegedly involved in improper contracting.  While Ms Peek may not have been responsible for all the additional trouble and turmoil at the hospital system, she surely participated in it.  On the other hand, there is no obvious offsetting evidence of the brilliance of her management.    Why reward her with such a generous severance package?

Georgia: South Georgia Medical Center CEO Will Get More than $2M After Allegations of Violations of Open Meeting Law Lead to Termination

As reported by the Valdosta (GA) Daily Times, July 6, 2017,

The former South Georgia Medical Center CEO will be paid more than $2 million over the next three years, for doing nothing.

Raymond Snead was ousted as CEO in March, but he’ll stay on the payrolls for a while, according to his termination letter.

The April 19, 2017 letter, effectively firing Snead, called the ouster a 'termination without cause.'

The hospital will continue to pay Snead $650,000 per year — his base annual salary — for the next three years, the letter says. He’ll also get a $2,000 car allowance each month during that period.

The local Hospital Authority, which governs the hospital, also gave Snead and his wife the option to receive health benefits for the three years. He took the offer, said Sam Allen, Hospital Authority chairman.

However, it appears that this executive also had not previously covered himself in glory, certainly not sufficient to justify this level of post-employment compensation.

Snead became CEO in September 2015, and the hospital had been under fire for poor management practices under his watch.

There also was a major issue with an apparent subordinate of Snead's on his watch.

Snead’s ouster came on the heels of the resignation of hospital attorney Walter New.

New, along with the entire Hospital Authority, got into trouble in 2016 when the group held a closed meeting without the public’s knowledge, which is a violation of Georgia law.

Furthermore, City Councilman Robert Yost

has called repeatedly for the resignations of Hospital Authority members, saying their mismanagement has caused the hospital great harm. 'They have run the ER into the ground. They have run off doctors, nurses and regular employees, some who have worked there for 25 to 30 years,” he said at the June 22 City Council meeting.

'They have intimidated employees and treated them like dirt. When it is time to reappoint the City of Valdosta’s representatives on this authority, I say let’s make sure they are all reappointed.'

'… (They) have again made very bad business decisions on our behalf and they should all be fired.'

Again, it seems that Snead's management was the opposite of brilliant, yet he was allowed to walk away with a multi-million dollar severance package. 

North Carolina: Nash UNC Health Center CEO Will Get More than $1M After Concerns about Revenue Losses and Patient Safety Lead to Retirement

As reported by the Rocky Mount (NC) Telegram, July 16, 2017, Larry Chewning the CEO of Nash UNC Health Care retired

with around $1 million since he has an ironclad two-year rolling contract, according to multiple sources familiar with the situation but not authorized to speak publicly on the matter.

Chewning didn't deny the amount he is receiving....

However, it turns out that he did not actually retire, but,

was asked to step down late last month by the local hospital board but was allowed to announce he was retiring.

The hospital was hardly transparent about the facts of the case, which were futher confused by (perhaps deliberately) complicated corporate relationships:

Inquiries into Chewning's salary and severance package led the Telegram on a goose chase involving lawyers, public relations spokesmen and uninformed officials.

Beginning with Chewning, there has been a series of refusals to disclose the salary of the top executive at a publicly-owned hospital in a state-owned network of hospitals. Drilling down, it was discovered that all the CEOs in the UNC system except for the UNC Medical Center in Chapel Hill are employed by Rex Hospital, a privately-owned hospital in Raleigh.

'I am legally precluded from disclosing any information from my employment agreement with Rex Hospital,' Chewning said, including the contact information for Don Esposito, Rex Hospital's general counsel.

Esposito referred the Telegram to Alan Wolf, the media relations manager for UNC Health Care and UNC REX Healthcare.

'We comply with all legal requirements, but it's not our practice to disclose salary information, for competitive and privacy reasons,' Wolf said. 'Mr. Chewning is employed by Rex Hospital Inc., which is not a North Carolina governmental entity and therefore is not subject to Chapter 132, the Public Records Act.'

How public hospitals can have CEOs who are employees of a separate, private hospital system was not explained.

Even local government officials were kept in the dark.

Nash County officials said they understood that's they way it had to be, but none of them knew the CEO was being paid through Rex, which makes their salaries private.

Furthermore,

At least one member of the local hospital board said they don't understand how the process works and isn't sure how the hospital will get a new CEO. 'As part of the management agreement, UNC Health Care provides Nash with a CEO,' Wolf said. 'Having a centralized management team gives UNC Health Care more control over decisions and operations at its affiliated hospitals.'

But the hospital CEOs "provided" by state institution UNC all are employed by Rex?

Perhaps all this secrecy just added to the cognitive dissonance created when considering how Chewning's lucrative retirement package might have been related to events that lead up to Chewning's retirement:

Chewning's exit comes after the hospital has been losing money and in the wake of a negative patient safety report. Chewning will remain with the hospital while his replacement is sought, according to his retirement announcement.

So Chewning's management was hardly brilliant.  Yet those responsible for hospital governance were not only happy to let the CEO walk away with a munificent retirement package, they also did their best to obscure the facts of the matter

Ohio: Ohio State University Werner Medical Center CEO Receiving More than $1M Per Year as Senior Consultant After Complaints by Physicians Lead to Resignation

According to the Columbus (OH) Dispatch, August 16, 2017, after Dr Sheldon Retchin, the CEO of Ohio State University Wexner Medical Center resigned in May, but

from his resignation, which was announced on May 10, through June 30, Retchin was still paid the CEO and executive vice president salary and benefits for performing 'transitional duties,...

That base salary was $1.1 million.

[To make full disclosure, note that I was a colleague of Dr Retchin's when we were both young  faculty members in the Department of Internal Medicine at the Medical College of Virginia from 1987 - 1994.]

Thereafter,

a contract obtained by the The Dispatch on Tuesday shows that, since July 1, Retchin has been serving as senior advisor to the president for health policy at a base salary of $500,000 annually.  The university is also making a $600,000 annual contribution to a retirement plan for Retchin, who will hold the position for two years.

So his total compensation would be at least $1.1 million a year for two years post-retirement.  Also,

the new contract says he will be paid a 35 percent performance bonus.

The rationale for this new position per university spokesman Chris Davey was that

Retchin will make important contributions to Ohio State.

'Sheldon Retchin is a nationally known leader in health-care policy,' Davey said. 'During his two-year administrative appointment, he will advise the university concerning the critical issues of health-care reform, Medicaid policy and data-driven improvements to health outcomes.'

Left unsaid is that $1.1 million a year seems like greatly inflated compensation for a health policy adviser.

Also left unsaid were the circumstances surrounding Dr Retchin's departure.

Complaints against Rechin surfaced after a May 1 letter signed by 25 leading physicians criticized his leadership.  That was followed by a letter from five doctors representing the senior leadership of the medical center's Neurological Institute.  Another group of 14 physicians, who head clinical departments at the medical center, had engaged in discussions with top university l eaders.

Upon Retchin's resignation, the university issued a statement in which it said that allegations raised in the letters were untrue.  That prompted another critical letter from leaders in the College of Medicine's Department of Internal Medicine.

A report from a local television station's news department provided further details about why the physicians declared no confidence in Dr Retchin

Dozens of doctors and professors have written letters expressing 'no confidence' in the CEO of Ohio State's Wexner Medical Center.

10TV has obtained three letters from three different groups of doctors and staff members, including department chairs and senior leadership.

They all described problems with management and morale that they said are damaging care and endangering patients and issued a 'Vote of No Confidence' in CEO Sheldon Retchin and his leadership team.

They accused Retchin of a 'management style that is inconsistent with the University's values of excellence, integrity, transparency and trust' and of fostering a culture where physicians have been described as 'lazy' and the program called 'a complete mess.'

It has led to what they call a 'dramatic impact on morale' and 'an increasing number of faculty resignations.'

They said the consequences reach beyond the walls of the Wexner citing an ongoing shortage of doctors which in their words, 'endanger(s) patient safety and lowers the quality of care,' adding to the stress of remaining faculty.

Furthermore,

In the first letter, 25 staffers who signed it said they represent many more employees, but limited the number signing out of concern for retaliation.

They complained of threats against faculty leaders who don't 'get on board' with the plans of medical center leadership.

From the information publicly available, I cannot tell whether the complaints about patient safety and quality of care are valid.  Certainly, however, Dr Retchin's management was questionable.  Creating this degree of anger among the physician staff of an academic medical center hardly seems the mark of brilliant leadership.  Yet Dr Retchin, like the other executives above, seems to have been generously rewarded after he was forced out.

Summary

The plutocratic compensation given leaders of non-profit hospitals is usually justified by the need to competitively pay exceptionally brilliant leaders.  Yet even leaders whose records seem to be the opposite of brilliance often end up handsomely rewarded.  Thes are examples of perverse incentives.

Other aspects of top health care managers' pay provide perverse incentives.  While ostensibly tied to hospitals' economic performance, their pay is rarely tied to clinical performance, health care outcomes, health care quality, or patients' safety.  Furthermore, how managers are paid seems wildly out of step with how other organizational employees, espeically health care medical professionals, are paid.

Exalted pay of hospital managers occurred after managers largely supplanted health care professionals as leaders of health care organizations.  This is part of a societal wave of "managerialism."  Most organizations are now run by generic managers, rather than people familiar with the particulars of the organizations' work.  The best current example is the election of a business executive with an MBA to the Presidency of the United States.

Rather than putting patient care first, paying managers sufficiently to make them rich now seems to be the leading goal of hospitals. I postulate that managerialism is a major reason the US health care system costs much more than that of any other developed country, while providing mediocre access and health care quality.

Improving the situation might first require changing regulation of executive compensation practices in hospitals, improving its oversight, and making hospital boards of trustees more accountable.  But that would be just a few small steps in the right direction

True health care reform might require something more revolutionary, the reversal of the managers' coup d'etat, returning leadership of health care to health care professionals who actually care about patients and put their and the public's health first, ahead of their personal gain.  Of course, that might not be possible without a societal revolution to separate managers from the levers of power in government, industry, and non-profit organizations. 

One Barely Noticed Settlement by Pfizer Suggests the Futility of Polite Protests about Health Policy

A few days ago we noticed just one more marcher in the parade of legal settlements.  But it was once again a huge health care corporation, and it had aspects that demanded attention.

Pfizer Makes $94 Million Settlement of Allegations of Fraud to Delay Generic Competition


A tiny item in Becker's Hospital News on November 28, 2017, stated:

Pfizer will pay $94 million to resolve allegations that it used fraudulent patents to delay generic competition for its anti-inflammatory drug Celebrex.

The lawsuit, brought by 32 direct purchasers of Celebrex in April and certified a class action lawsuit in August, claimed Pfizer attempted to revive its invalidated patent by making material misrepresentations to the U.S. Patent and Trademark Office. As a result, the U.S. PTO granted Pfizer a new patent based on this reportedly inaccurate information.

Further, the plaintiffs — including American Sales Co., Rochester Drug Co-Operative, Cesar Castillo and more — allege Pfizer filed a lawsuit against five generic manufacturers for infringing upon the fraudulently obtained patent to maintain monopoly over the drug.

That was about it.  I could find no more extensive coverage of this settlement in any source publicly available without a subscription.  So this settlement, like many previous ones which suggested less than perfection on the part of the leadership of our dysfunctional health care system, was anechoic.

Also, as is typical of settlements made by big health care corporations of unethical behavior, this settlement appeared small compared to the magnitude of the revenues likely generated by alleged bad behavior; and this settlement did not impose any negative consequences on any individual who might have authorized, enabled, directed, or implemented the bad behavior, and may have benefited from that behavior (for example, by getting a bigger bonus because of the revenue brought it).  Thus, it fit right in with the march of legal settlements that we have been documenting for years.  It was a slap on the corporate wrists that was unlikely to deter future bad behavior, and amounted to a grant of impunity to the corporate managers who were involved in and personally profited from the bad behavior.

Furthermore, the settlement seemingly was not informed by previous bad behavior by the corporation or its managers.  Pfizer, in fact, has a long and very sorry record of such behavior as documented by legal settlements, convictions and guilty pleas, and other governmental actions.  In the last few years we have noted....

Pfizer Fined $106M in UK for Using Monopoly on Production of Generic Phenytoin to Overcharge National Health Service

As reported by the Wall Street Journal on December 7, 2016,

The U.K.’s top antitrust regulator slapped Pfizer Inc. PFE 0.25% with a record $107 million fine, alleging it overcharged the national health-care system for an epilepsy treatment.

The Competition and Markets Authority said Pfizer and drug-distribution company Flynn Pharma Ltd. broke competition law by charging unfair prices in the U.K. for the drug, phenytoin sodium, used by about 48,000 patients in the country.

The CMA said the £84.2 million Pfizer fine was the highest it had ever imposed....

The article suggested that Pfizer took advantage of a loophole in UK law.  Drug companies must negotiate prices of branded drugs with the British NHS, but

Unbranded, or generic, drugs may be freely priced, but competition between suppliers typically drives the cost down.

The regulator said Pfizer and Flynn Pharma “deliberately debranded” the drug in 2012 to raise the price and were able to do so because there were no competing suppliers.

The CMA said the price of a 100-milligram pack of phenytoin sodium shot up—to £67.50 from £2.83—after Pfizer sold the rights to sell the drug to Flynn Pharma in September 2012. It said the price decreased to £54 in May 2014.

Before the agreement, Pfizer had sold phenytoin sodium capsules directly to U.K. wholesalers and pharmacies under the brand name Epanutin.

The price increase was partly because Pfizer, which continued to manufacture phenytoin sodium, sold the drug to Flynn Pharma at up to 17 times the price than it charged wholesalers and pharmacies previously, the regulator said. Flynn Pharma raised the price further still.

So this was the resolution of yet more anti-competitive behavior by Pfizer which allowed it to overcharge  taxpayers.  Like the settlement above, it allowed the Pfizer management involved impunity.

Pfizer Made $486 Million Settlement of  Allegations It Bilked Shareholders by Concealing Research Showing the Harms of Celebrex

As reported by Reuters in August, 2016,

Pfizer Inc (PFE.N) on Tuesday said it has reached a $486 million settlement of litigation accusing it of causing big losses for shareholders by concealing safety risks associated with its Celebrex and Bextra pain-relieving drugs.

As usual, there were no penalties for any individuals who may have been involved with the bilking.

Note that while this particular lawsuit was about financial losses to shareholders, concealing the harms of this drug obviously had the potential of allowing harms to patients.  Of course, this was just the most the second most recent settlement involving Celebrex.

Pfizer's Track Record Prior to mid-2016

Our over 100 posts on Pfizer can be found here.  Since 2000, Pfizer's troubles started, according to the Philadelphia Inquirer, with the following...

- In 2002, Pfizer and subsidiaries Warner-Lambert and Parke-Davis agreed to pay $49 million to settle allegations that the company fraudulently avoided paying fully rebates owed to the state and federal governments under the national Medicaid Rebate program for the cholesterol-lowering drug Lipitor.
- In 2004, Pfizer agreed to pay $430 million to settle DOJ claims involving the off-label promotion of the epilepsy drug Neurontin by subsidiary Warner-Lambert. The promotions included flying doctors to lavish resorts and paying them hefty speakers' fees to tout the drug. The company said the activity took place years before it bought Warner-Lambert in 2000.
- In 2007, Pfizer agreed to pay $34.7 million in fines to settle Department of Justice allegations that it improperly promoted the human growth hormone product Genotropin. The drugmaker's Pharmacia & Upjohn Co. subsidiary pleaded guilty to offering a kickback to a pharmacy-benefits manager to sell more of the drug.

Thereafter,
- In 2009, Pfizer paid a $2.3 billion settlement of civil and criminal allegations and a Pfizer subsidiary entered a guilty plea to charges it violated federal law regarding its marketing of Bextra (see post here).
- Pfizer was involved in two other major cases from then to early 2010, including one in which a jury found the company guilty of violating the RICO (racketeer-influenced corrupt organization) statute (see post here).  In that year the company was listed as one of the pharmaceutical "big four" companies in terms of defrauding the government (see post here).
- In early 2011, Pfizer's Pharmacia subsidiary settled allegations that it inflated drugs costs paid by New York (see post here).
- In March, 2011, a settlement was announced in a long-running class action case which involved allegations that another Pfizer subsidiary had exposed many people to asbestos (see this story in Bloomberg).
- In October, 2011, Pfizer settled allegations that it illegally marketed bladder control drug Detrol (see this post).
- In August, 2012, Pfizer settled allegations that its subsidiaries bribed foreign (that is, with respect to the US) government officials, including government-employed doctors (see this post).
- In December, 2012, Pfizer settled federal charges that its Wyeth subsidiary deceptively marketed the proton pump inhibitor drug Protonix, using systematic efforts to deceive approved by top management, and settled charges by multiple states' Attorneys' General that it deceptively marketed Zyvox and Lyrica (see this post).
- In January, 2013, Pfizer settled Texas charges that it had misreported information to and over-billed Medicaid (see this post).
- In July, 2013, Pfizer settled charges of illegal marketing of Rapamune (see this post.)
- In April, 2014, Pfizer settled allegations of anti-trust law violations for delaying generic versions of Neurontin( see this post).
- In June, 2014, Pfizer settled another lawsuit alleging illegal marketing of Neurontin (see this post).
- In 2015, a settlement by Pfizer of a shareholders' lawsuit stemming from charges of illegal marketing was announced (see this post).
- In October, 2015, a  UK judge found that the company had threatened health care professionals for using a generic competitor (see this post).
- In February, 2016, Pfizer settled a lawsuit for $785 million for overcharging the US government for Protonix (look here).

That is a stupifyingly bad ethical record stretching over about 17 years.  Yet each new settlement seems to disregard all the others before.  And since 2000, no top Pfizer executive has ever suffered any negative consequences for any of this  behavior.  All CEOs who have retired did so as rich men.


Summary

Pfizer provides an amazing example of a huge health care corporation that just marches along, settling or otherwise resolving case after case of over-charging, anti-competitive behavior, deception, sometimes fraud, bribery, and various other unethical and potentially illegal behaviors, without ever too greatly inconveniencing the managers and top executives who have been profiting from this behavior.   We have again and again railed against how the US government (and actually governments of other developed countries) have use light-touch regulation on big health care corporations that allows impunity for their top leaders.  For example, we wrote in 2015,

As long as top managers of big health care organizations can act with impunity, can avoid all responsibility for their organizations' bad behaviors, and can personally profit wildly from their companies actions, the health care death spiral will continue.  Will we continue to cry out in the wilderness, or will anyone else see the writing on the wall?

But it gets worse.  Note that two of the recent Pfizer settlements were of private litigation in which the US government was not involved.  One was of alleged anti-competitive behavior, and the other of alleged deceptions that could have resulted in patient harm.  Both of these could have been causes of government action, but were not.  So it appears that the US government is getting less inclined to do anything to challenge the impunity of top corporate leaders.

Instead, the current Trump regime and its allies in Congress seem hell-bent on further rewarding top corporate leaders.  For example, while the supposed tax reform legislation that just passed Congress was pushed by Trump as a way to improve the economy, it looks like it will most benefit corporate leaders.  A story in Bloomberg on November 29, 2017, stated,

Major companies including Cisco Systems Inc., Pfizer Inc. and Coca-Cola Co. say they’ll turn over most gains from proposed corporate tax cuts to their shareholders, undercutting President Donald Trump’s promise that his plan will create jobs and boost wages for the middle class.

The president has held fast to his pledge even as top executives’ comments have run counter to it for months. Instead of hiring more workers or raising their pay, many companies say they’ll first increase dividends or buy back their own shares.

In particular,

Robert Bradway, chief executive of Amgen Inc., said in an Oct. 25 earnings call that the company has been “actively returning capital in the form of growing dividend and buyback and I’d expect us to continue that.” Executives including Coca-Cola CEO James Quincey, Pfizer Chief Financial Officer Frank D’Amelio and Cisco CFO Kelly Kramer have recently made similar statements.

Share buybacks, like dividend increases, tend to benefit stockholders, but not workers (much less customers, or in Pfizer's case, patients), 

in testimony before the bicameral Joint Economic Committee on Wednesday, Federal Reserve Chair Janet Yellen said that the plans outlined by corporate executives to reward investors were unlikely to raise wages for workers.

'I don’t think share buybacks would increase wages,' Yellen said when asked by Michigan Democratic Senator Gary Peters about the impact of CEOs’ plans. Investment in capital and equipment, not buybacks, would raise productivity and pay, she said.

Left unstated is that top corporate executives are now paid mainly in stock shares and stock options.  So they would be major beneficiaries of increased dividends and increased stock prices.

For example, the Pfizer 2017 proxy statement lists the following share holdings of its top-paid executives:

                                      common stock shares     stock units

Group President, Pfizer Innovation Health
Albert Bourla DVM, PhD         112,489                           30,653

Executive Vice President, Business Operations
and CFO
Frank A D'Amelio                     342,176                             76,009

President, Worldwide Research and Development
Mikael Dolsten MD, PhD           50,820                            191,189

Former Group President,
Global Innovative Pharma Business
Geno J Germano                        115,712                           35,546

Chairman of the Board, CEO
Ian C Read                                645,370                       317,117

Group President, Pfizer Essential Health
John D Young                            92,434                            78,559

Note that Mr D'Amelio was quoted in the article above.  As an owner of more than 400,000 Pfizer shares or share equivalents, he would be expected to substantially personally profit from increases in dividends and stock buybacks.

And how likely is it that the Trump regime will respond to any entreaties about tougher law enforcement and more rigorous regulation of pharmaceutical and other large health care corporations?  After all, huge numbers of executive branch appointments to positions that deal with health care have been coming through the revolving door from health care corporations and  their lobbying firms, etc.  At the time of his appointment, the current head of the US Food and Drug Administration had huge conflicts of interest generated by his former positions in and allied with the pharmaceutical industry (look here and here).  The gentleman currently nominated to be Secretary of the Department of Health and Human Services was a former top executive at pharmaceutical giant Eli Lilly (look here).

And do we really expect rigorous law enforcement from a regime whose former national security adviser just pleaded guilty to lying to the Federal Bureau of Investigation (look here);  and whose former national security adviser and current nominee to be Ambassador to Singapore K T McFarland was just shown to have admitted that Russia had "thrown" the election to Mr Trump, but seemed to think that Mr Trump should then reward Russia by reducing sanctions imposed by the Obama administration (look here)?

The Sunlight Foundation has found that President Trump has over 600 conflicts of interest, and that his family has over 1100 (look here).  Do we really expect his regime to improve the integrity of  health care leadership? 

It is now past time to expect that our polite protests about health policy and measured calls for true health care reform will have any impact on health policy, as long as the inmates are in control of the asylum.  We need wholesale changes in  top health care leadership in government, and wholesale changes in the top leadership of the government, if we want anything even slightly resembling true health care reform. Achieving true health care reform will require much more than polite protests.

In US, More than One-Third Think Government and Business Leaders are Corrupt, Media Shrug

We have noted  (most recently here),  that health care corruption, particularly its global nature and its presence in developed countries like the US, is a taboo topic and thus remains anechoic.  Yet corruption in general, and health care corruption in particular, are huge global problems.

Transparency International just released the full results of the 2017 version of its Global Corruption Barometer.  (The November 14, 2017 news release is here.  The full report is available here.  Details about the methods are here. Country by country results are here.)

The report summarizes responses from 162,136 people to surveys done in 119 countries from 2016 to January, 2017.

Key Issues

The surveys asked about peoples' perceptions of corruption in various parts of government, including corruption affecting:
- the top executives (prime minister, president)
- the national legislature
- government officials

It also asked about corruption in business in general.  (Unfortunately, this version of the barometer did not specifically aska about health care.  Nonetheless, corruption in business and government is clearly relevant to corruption in health care, and to health car dysfunction.)

The survey, for the first time, also asked about how well government is dealing with corruption, and whether citizens feel empowered to challenge corruption.

Results in the US and Some Comparable Countries

Just like in 2013, while the US did not have the worst results, neither did it have results worthy of pride.  (Keep in mind, as well, that these surveys were all done before the Trump administration began, so they do not reflect any changes brought about by that.  We have seen many indications that corruption and its risk factor, conflicts of interest, are much worse under the Trump regime than previous administrations, e.g., look here.)

Some key results from the US, compared to three other developed Western countries (Austrialia, France, Germany, and the UK, but not Canada) follow. The numbers are those who agree with the header statements. (When the US had the best result of all 5, I highlighted that in green.  When it had the worst result, I highlighted it in red.)

Corruption Increased in Past Year (presumably 2016)

Australia     34%

France         44%

Germany      -

UK               48%

US                37%

Most of  President/ Prime Minister and Officials in that Office are Involved in Corruption

Australia      15%

France          35%

Germany         7%

UK                27%

US                 36%

Most Legislators are Involved in Corruption

Australia       12%

France           35%

Germany         6%

UK                 28%

US                  41%

Most Government Officials are Involved in Corruption

Australia        12%

France            31%

Germany          6%

UK                  25%

US                   32%

Most Business Executives are Involved in Corruption

Australia         20%

France             17%

Germany         33%

UK                   21%

US                   35%

Government is Handling the Fight Against Corruption Badly

Australia         41%

France             64%

Germany         24%

UK                  57%

US                   51%

It is Not Socially Acceptable to Report Corruption

Australia          22%

France             24%

Germany         12%

UK                  23%

US                   23%

Summary: Many People Believe Corruption Seriously Affects US Government and Business, but the Topic is Taboo

Thus once again, the US had results suggesting it has important problems with corruption.  More than one-third of US respondents thought that most executive branch leaders, legislators, and business executives are involved in corruption,  Just less than one-third thought that most government officials are involved in corruption.  More than one-half of US respondents thought that the government is handling the fight against corruption badly.  More than one-third thought that corruption had gotten worse in the previous year.  More than 20% thought it is not socially acceptable to report corruption.

Furthermore, the US had the worst results, compared to the other four developed countries, in four categories, and did not have the best results in any.

Thus, this survey suggested that substantial minorities of people thought that corruption in government and business was a major problem in 2016, and that perceptions of such corruption were no better, and likely worse in the US than in some comparable developed countries.


These would seem to be important, if discouraging results.  But in the US, they do not appear to be considered news, and it is likely that so far, hardly anyone in the US outside of readers of this blog have heard any of this.

To date, there has been no coverage that I can find of the 2017 Global Corruption Barometer results in the US at all, much less coverage in the US that focused on US results.  (I admit that since the full report was released, there has been litttle coverage of it anywhere.  Transparency International did release multiple reports on regional results earlier this year, but not including North America.  These did get some coverage in affected countries at the time.)

We have frequently noted how discussion of health care corruption has been nearly a taboo topic in the US, anechoic, presumably because its discussion would offend the people it makes rich and powerful. As suggested by the recent Transparency International report on corruption in the pharmaceutical industry,

However, strong control over key processes combined with huge resources and big profits to be made make the pharmaceutical industry particularly vulnerable to corruption. Pharmaceutical companies have the opportunity to use their influence and resources to exploit weak governance structures and divert policy and institutions away from public health objectives and towards their own profit maximising interests.

Presumably the leaders of other kinds of corrupt organizations can do the same. 

When health care corruption is discussed in English speaking developed countries, it is almost always in terms of a problem that affects somewhere else, mainly benighted less developed countries.  At best, the corruption that gets discussed is low level.  In the US, frequent examples are the "pill mills"  and various cheats of government and private insurance programs by practitioners and patients that lately have been decried as a cause of the narcotics crisis (e.g., look here).  (In contrast, the US government has been less inclined to address the activities of the leaders of the pharmaceutical companies who have pushed legal narcotics, e.g., see this post). 

However, Health Care Renewal has stressed "grand corruption," the corruption of health care leaders.  We have noted the continuing impunity of top health care corporate managers.  Health care corporations have allegedly used kickbacks and fraud to enhance their revenue, but at best such corporations have been able to make legal settlements that result in fines that small relative to their  multi-billion revenues without admitting guilt.  Almost never are top corporate managers subject to any negative consequences. 

Furthermore, of late there is reason to worry about worsening corruption of US government leaders in the health care sphere.  The Trump regime is being increasingly identified with corruption and impunity itself.   There has been an apparent recent increase in one particular species of corruption, the revolving door phenomenon, affecting appointments of key government health regulators and health care and public health policy makers, as noted most recently here.

However, the silence so far that has greeted Transparency International's latest Global Corruption Barometer in the US shows that corruption, including health care corruption, remains a taboo topic. 


So as I have said till blue in the face.... if we really want to reform health care, in the little time we may have before our health care bubble bursts, we will need to take strong action against health care corruption.  Such action will really disturb the insiders within large health care organizations who have gotten rich from their organizations' misbehavior, and thus taking such action will require some courage.  Yet such action cannot begin until we acknowledge and freely discuss the problem.  The first step against health care corruption is to be able to say or write the words, health care corruption.

Perpetual Revolving Motion: Yet More Transits Through the Health Care Revolving Door

The pace of people spinning through the US federal revolving door seems unprecedented. 

Most were people going from the health care corporations to government positions regulating or making policy influencing those same corporations.  Since our last roundup, of 11 days ago, we have found two more significant travelers from industry to government, and one from the previous administration to industry.  In addition, we realized that the case of one of the travelers discussed only last month is more significant than we realized.


Nina Devlin from Mylan to Senior Communications Adviser for the US Food and Drug Administration (FDA)

As reported extremely briefly by The Hill on Oct 27, 2017,

The Food and Drug Administration (FDA) has hired a senior executive from EpiPen maker Mylan to be a senior communications adviser in the agency, CBS News reported Friday.

Nina Devlin, who was the head of global communications at Mylan, was reportedly hired on Oct. 15 and reports to the FDA's chief of staff.

At the time Ms Devlin was doing public relations for Mylan,

Mylan reached a $465 million settlement with the federal government stemming from a Justice Department claim that it had overcharged the government for EpiPens.

The EpiPen is a medical device that treats dangerous allergic reactions by injecting epinephrine.
Accusations that Mylan overcharged for EpiPens got so much media attention that it seemed superflouous to discuss this case on Health Care Renewal. However, we did discuss some earlier and more obscure Mylan shenanigans here.

So this appointment is troubling because Ms Devlin went straight from a pharmaceutical company to the main federal agency regulating pharmaceutical companies, and she went from a company with a notably recently checquered ethical record.

Scott Mungo from Vice President for Safety Etc for Fedex to Assistant Secretary of Labor for the Occupational Safety and Health Administration (OSHA)

This case was described by Allgov.Com on November 12, 2017.  Mr Mungo's recent career was described thus,

In February 2000, Mugno was named managing director for corporate safety, health and fire prevention at FedEx. He held that post until December 2011, when he was named vice president for safety, sustainability and vehicle maintenance for the company’s FedEx Ground unit. Along with his more conventional duties there, Mugno served as 'brain coach' and 'den mother' for FedEx drivers participating in National Truck Driving Championship competitions. FedEx drivers often won their events. Mugno was in that job when nominated for the OSHA post.

In November 2012, Mugno was added to the Research Advisory Committee of the American Transportation Research Institute, and was its chairman at the time of his OSHA nomination. He is also chairman of the U.S. Chamber of Commerce OSHA subcommittee.

Mr Mungo's record suggests that he may be more sympathetic to the interests of big corporate executives than to the safety and health of their workers. Per Allgov,

Industry groups welcomed Mugno’s appointment to OSHA, who has represented the American Trucking Associations at Congressional hearings, believing that he will continue the Trump administration’s drive to weaken worker-protection regulations put in place under the Obama administration. In 2006, Mugno told the U.S. Chamber of Commerce that the actions of employees deserved more scrutiny, pointing out that obese workers and workers with high blood pressure and high cholesterol levels impact workplace safety. That same year, he told the publication Business Insurance: 'We’ve got to free OSHA from its own statutory and regulatory handcuffs.' He noted that much has changed since OSHA was established in 1971, and that some regulations should perhaps be subject to sunset provisions.

Another reason for Mungo's appointment might have been

Mugno was an enthusiastic Trump supporter, even attending the inauguration.

Dr Karen DeSalvo from National Coordinator for Health Information Technology and Assistant Secretary of Health and Human Services to Member of the Board of Directors, Humana

As reported by Louisville Business First on November 13, 2017,

Humana (NYSE: HUM), a Louisville-based health insurance and health services company, named Dr. Karen DeSalvo as the 12th member of its board of directors.

DeSalvo, 52, is a former government public health administrator and university administrator, according to a news release. Most recently, she held two overlapping roles with the U.S. Department of Health and Human Services: national coordinator for health information technology from January 2014 until August 2016 and the assistant secretary for health in the HHS department from October 2014 until January 2017.

Dr DeSalvo will now be responsible for the governance of a large health insurance company with a considerable Medicare supplement business, and which certainly has important interactions with electronic health records after having been the principal government officer overseeing EHRs, and an administrator within the agency that runs Medicare and other government insurance programs.

Joe Grogan, Lobbyist for Gilead to Director of Health Programs, Office of Management and the Budget

We had briefly discussed Mr Grogan's move from pharmaceutical manufacturer Gilead to the "White House working group on drug prices" here.  A November 13, 2017 article in the Washington Post makes it clear that Mr Grogan's influence over health care in general and the pharmaceutical industry in particular is much broader than what we described.  Not only did it specify his title to be Director of Health Programs for the OMB, but it also included:

Grogan, perhaps more than any other member of Trump’s administration, holds the power to nix or give the nod to hundreds of regulations shaping how the federal government runs Medicare, Medicaid, the Affordable Care Act marketplaces, the FDA, the CDC and all the other sub-agencies contained within the sprawl of the Department of Health and Human Services.

Furthermore,

It’s fair to say that virtually every rule change proposed or enacted by HHS — from easing reporting requirements for doctors to exempting more employers from paying for birth control to rolling back drug discounts — have Grogan’s mark on them in some way.

'Whether it’s a big home health regulations or nursing homes or hospitals, I can tell you it’s a 90 percent Joe call,' [former CMS administrator Tom] Scully said.

The article made explicit that Mr Grogan's decisions are influenced by his industry background:

In 2006, he went to the FDA as a policy adviser, and from there joined the drug industry -- first at Amgen and then at Gilead Sciences. Those who know him say he brings those industry sensibilities to the OMB job.

'Philosophically, he’s very focused on making sure he understands the way that private industry operates and interacts with the government,' AdvaMed chief executive Scott Whitaker told me.

But of course, as a member of the executive branch, he is supposed to foster government of, by and for the people, not of, by and for big pharmaceutical corporations.  This is all more disturbing because of the sketchy ethical track record of his former employer, Gilead.  We have discussed the company's excessive pricing and promotion of its anti-viral drugs for the treatment of hepatitis C, which went way beyond any evidence of the drugs' benefits to patients.  While these drugs can abolish detectable hepatitis C virus in patients' blood over the short-term, there is no good evidence that they produce any long-term benefits, particularly that they prevent the known complications of hepatitis C, or extend patients' lives. 

Summary

On and on it goes.  The revolving door has been a chronic problem for the US federal government, but the level of revolving door activity in the current regime seems way beyond anything we have seen before.  It seems we chronical multiple instances of people going from important health care corporate positions to government positions that regulate or make policy affecting those same corporations for every instance of someone coming from the previous administrations to industry.

As we have noted now again and again and again....    The revolving door is a species of conflict of interest. Worse, some experts have suggested that the revolving door is in fact corruption.  As we noted here, the experts from the distinguished European anti-corruption group U4 wrote,

The literature makes clear that the revolving door process is a source of valuable political connections for private firms. But it generates corruption risks and has strong distortionary effects on the economy, especially when this power is concentrated within a few firms.

The ongoing parade of people transiting the revolving door from industry to the Trump administration once again suggests how the revolving door may enable certain of those with private vested interests to have excess influence, way beyond that of ordinary citizens, on how the government works, and that the country is still increasingly being run by a cozy group of insiders with ties to both government and industry. This has been termed crony capitalism. The latest cohort and now this most flagrant example of revolving door transits suggests that regulatory capture is likely to become much worse in the near future.

So, as we have said before [before, before...] The continuing egregiousness of the revolving door in health care shows how health care leadership can play mutually beneficial games, regardless of the their effects on patients' and the public's health.  Once again, true health care reform would cut the ties between government and corporate leaders and their cronies that have lead to government of, for and by corporate executives rather than the people at large.

Give Us Those Old Time Conflcts of Interest: Stephen Parente, Key Opinion Leader for UnitedHealth and Redeemer of Former CEO William McGuire to Assistant Secretary of HHS

This latest revolving door case echoes scandals of long ago.

Background: CEO Dr William McGuire and the UnitedHealth Affair

A long time ago,in a galaxy far, far away, actually, from 2006 through 2008, we posted frequently about shenanigans at huge for-profit health insurance/ managed care company UnitedHealth.  We often discussed the patient-unfriendliness of its policies and processes (look here), despite its apparently high-minded past mission statements and public relations, as a function of its persistently bad leadership.

In 2008, we wrote....  One hypothesis is that UHG has trouble adhering to its idealistic mission because of the shortcomings of its leadership.The story of the fall of its recent CEO, Dr William McGuire, was strikingly instructive. As we have previously discussed, (see these posts here, here, and here from 2006 with links backward) Dr McGuire received outrageously lavish remuneration, which stood in stark contrast to the previous UHG mission's pledge to "make health care more affordable."

Controversy has swirled over the timing of huge stock option grants given to Dr McGuire (see post here), leading to his resignation in October, 2006 (see post here). More recently, McGuire agreed to pay back some of those options, although that would reportedly leave him with more than $800 million worth of them (see post here).

Later, Dr McGuire paid $30 million to settle a class action lawsuit over these stock options, and agreed to return 3.68 million stock options to the company.  At the time this was one of the largest cash settlements produced by a class-action lawsuit over financial instruments.  There was supposedly a criminal investigation of the case ongoing in 2008, but I cannot find any record that it produced indictments or convictions.

So Dr McGuire was able to escape this situation with relative impunity.  Then, despite those tributions, we noted that Mr McGuire, however, was quickly offered a bit of redemption. In particular, at the same time, the Minneapolis Star-Tribune reported, Dr McGuire seems to have found ways to keep busy,

The University of Minnesota is courting William McGuire, the health insurance executive who lost his job in a stock options scandal, as "executive in residence" at its business school.

Stephen Parente, director of the Medical Industry Leadership Institute in the Carlson School of Management, said the school had given him the go-ahead to explore the idea with McGuire, former chief executive of Minnetonka-based UnitedHealth Group.

'We are courting him to be an executive-in-residence at Carlson,' Parente said, adding that McGuire's immense experience in health care is what appealed to the university.

Parente said he first reached out to McGuire in August 2007, inviting him to be the keynote speaker at an invitation-only event attended by 70 to 80 guests at the Lafayette Club in Minnetonka Beach. The subject of McGuire's talk was the future of health care.
McGuire hit familiar themes during the hourlong speech, including the need for universal access to health care and the need to track the quality of care by physicians and to pay them accordingly.

Parente said his approach to McGuire was along the lines of: 'We don't really care about the stock options. You know stuff. Tell us what you think.'

Since then, McGuire has attended two seminars at the Carlson school, including one where he arrived unannounced.

There was some discussion within the school, Parente said, on whether it was appropriate to engage McGuire, given the lawsuits and investigations in which he was embroiled. The conclusion was that it was.

'It's one thing if you're bringing in a criminal to speak. But if someone's under investigation, that's fair game,' he said.

Since then, McGuire has acted as "ad hoc kitchen-cabinet adviser" to him, Parente said.

In June, when Parente presented a paper titled 'Is Consumerism at Odds with Prevention?' at the American Society of Health Economics at Duke University, he listed McGuire as one of six co-authors.

At the time, we thought it was all pretty outrageous.  However, we could not find out why the business school in general, and Mr Parente in particular was so enamored of Dr McGuire despite his checkered past.

Now nine years later, and only out of the investigative reporting inspired by the Trump regime was this explained in retrospect.

Mr Parente Transits the Revolving Door from the Medical Industry Leadership Institute (MILI) to the US Department of Health and Human Services (DHHS) 

As we discussed briefly in October, 2017, as briefly reported within a larger August, 2017 ProPublica report on the many patients moving from industry to the Trump regime, Mr Parente was nominated to be Assistant Secretary of Health and Human Services (DHHS) for planning and evaluation.  That article listed him as coming from a position as Principal, Health Systems Innovation Network LLC, but did not mention the Medical Industry Leadership Group. 

This DHHS position is important, as explained in an October 30, 2017 Politico article. .

In his role as assistant secretary, Parente would be the 'principal advisor' to the HHS secretary on policy development and 'responsible for major activities in policy coordination, legislation development, strategic planning, policy research, evaluation, and economic analysis,' according to HHS' website. The job, known as ASPE, has been a springboard for policy leaders; it was filled by Bobby Jindal, the future Louisiana governor, and Ben Sasse, the future Nebraska senator, during the George W. Bush administration.

Moreover, the article also explained that Mr Parente's financial relationships and previous commercial work extended far beyond Health Systems Innovation LLC. 

Parente, a 52-year-old economist, has long maintained close ties both to UnitedHealth and to other insurers. A specialist in health care finance, he holds an academic chair at the university called the Minnesota Insurance Industry Endowed Chair. It is funded by Thrivent Financial and Securian Financial Group, which offer a variety of insurance products. UnitedHealth in 2010 made a five-year, $1 million gift to his center, and Blue Cross Blue Shield of Minnesota also was one of five corporate donors that made $30,000 annual gifts to Parente’s academic center.

'Without the support of corporations, MILI would not have evolved beyond [the] start-up stage,' Parente said in a 2015 interview with his business school’s magazine.

Beyond the university, Parente has served as the chairman of the Health Care Cost Institute, a nonprofit research consortium backed by UnitedHealth, Aetna, Humana and Kaiser Permanente. Parente also has a private consulting business that has done work for UnitedHealth and other health care organizations.

In addition,

Parente’s longtime center is intended to bring together academics and the industry and help foster career opportunities for students, school officials say. The center supports research into industry challenges, and students attend lectures taught by executives at UnitedHealth and other industry companies. 'MILI offers national and international firms access to the rigorous intellectual community we have established,' the center’s website touts.

According to a University of Minnesota department directory, Parente is still listed as the director of the small center, which he helped launch more than a decade ago and had led since 2006. School officials say he is no longer leading the center. The center also has a staffer who handles administrative duties, but the institute has been viewed as 'a one-man shop' run by Parente for years, according to two individuals who have knowledge of its operations. Eight other people, three of whom either previously worked for UnitedHealth or currently work there, are listed as part-time instructors at MILI.

Some experts interviewed by Politico explained the importance of Mr Parente's arrangements with UnitedHealth.

'I absolutely think there’s a concern here,' said Wendell Potter, a former insurance executive who’s now a consumer advocate.

Given Parente’s years of work with the insurance industry, 'I would imagine that he would certainly have a bias toward the current model of health insurers,' Potter added.

Potter, a frequent critic of the insurance industry who once ran Cigna’s communications, said that the industry’s gifts to universities are 'widespread' and part of a broader strategy to encourage pro-industry research. [Insurers] absolutely want to make sure that their interests are protected, and they are seen by this administration as … effective and efficient and a crucial part of the health care system,' Potter said.

In other words, it is likely that Mr Parente and his institute were funded as part of a systematic stealth health policy advocacy campaign by UnitedHealth.  Furthermore, it is likely that Mr Parente, especially given that he was a paid consultant to UnitedHealth, functioned as a key opinion leader for it, especially concerned with advocating not for UnitedHealth's products, as many health care professional key opinion leaders do for drug, device and biotechnology companies, but for UnitedHealth's policies.

It seems that Mr Parente has been recently advocating for policies aligned with UnitedHealth, viz

UnitedHealth, like all insurers, also is heavily affected by the rules and regulations published by HHS, which can be informed by the analysis conducted by the office Parente has been nominated to run. As an academic, Parente has played a role in the Obamacare fight, offering supportive analysis of separate proposals by House Speaker Paul Ryan and then-Rep. Tom Price to repeal and replace the Affordable Care Act. He’s also criticized the law as too costly and warned that it would effectively lead to an insurance market death spiral. 'The autopsy will show that [Obamacare] died from a lack of affordability, leaving behind millions of Americans who were sold a bill of goods,' Parente wrote in a 2014 op-ed for The Wall Street Journal, in which he predicted that 40 million Americans would be uninsured by 2024. Since that article, the number of uninsured has fallen from 36 million in 2014 to about 28 million this year.

And UnitedHealth seemed to have added to the center's financial pot in hopes of further cementing Mr Parente's relationship with the company

Five months after President Donald Trump nominated Stephen Parente to be an assistant secretary for Health and Human Services, the nation's largest health insurer quietly gave a $1.2 million gift to a tiny academic research center that Parente helped found and served as director over the past decade.

Discussion

So here is just the latest embellishment in the march of people transiting the revolving door from health care corporations, and related firms, such as lobbying firms, the the executive branch during the Trump administration. 

Fortunately, good investigative journalists have looked more deeply into this cases, showcasing its more interesting aspects.  First, Mr Parente was not simply a corporate executive moving to the executive branch where he would be able to influence the fortunes of his former corporation.  Mr Parente was apparently a distinguished academic in a business school.  However  he had conflicts of interest, albeit not obvious ones.  These were similar to those affecting many health care academics, as we have frequently discussed.  Making his conflicts inapparent may have allowed him to more effectively advocate for his commercial colleagues in the guise of a disinterested academic.  This is the same game many health care professionals and academics have played (that of the key opinion leader), although many more in the apparent service of pharmaceutical and device marketing than in the service of corporate policy goals.  Nonetheless, such marketing or public relations, carried on by apparently unbiased academics who may really be paid, directly or indirectly, by corporate marketing or public relations departments, is much more insidious and deceptive than marketing or public relations carried out by identifiable corporate spokespeople. 

And now one of these deceptive corporate advocates is already in the executive branch, and perhaps on his way to an even more influential role.

This argues again for the importance of the dangers presented by the web of conflicts of interest that now drapes over medicine, health care, the government, and it seems the whole society.   I say again that all conflictis of interest affecting any medical, health care, or health policy decision makers should be revealed in detail, and most ought to be banned. 

This case also again argues for paying attention to the problem of the revolving door.  As we have said all too many times,...   The continuing egregiousness of the revolving door in health care shows how health care leadership can play mutually beneficial games, regardless of the their effects on patients' and the public's health.  Once again, true health care reform would cut the ties between government and corporate leaders and their cronies that have lead to government of, for and by corporate executives rather than the people at large.

Finally, this case argues that impunity, especially of top health care (and other leaders) has consequences.  One wonders what might have happened had Dr McGuire suffered much more severe negative consequences after the stock backdating case.  Mr Parente would not have been able to get further into the graces of UnitedHealth by giving a distinguisehd academic position to its apparently disgraced former CEO.  Maybe Mr Parente's career trajectory would have been different.  Who knows?  But still.... If we do not make health care leaders accountable for patients' and the public's health, leaving them free to put self-enrichment first, all our health will be further impoverished.