Just Another Small Health Care Scam... the Trump Network and its Bogus Diagnostic Tests and Unproven Vitamin Treatments Resurfaces

Introduction

On Health Care Renewal, we frequently discuss deceptive marketing schemes designed to sell tests and treatments whose benefits for patients do not clearly outweigh their harms, and sometimes which are useless or dangerous.  In fact, we have to be selective about discussing such cases, because they are all too common.  Therefore, we tend to focus on cases involving the biggest and most powerful health care organizations, and/or the worst risks to patients.

We have generally not discussed the myriad promotions of dubious "nutritional" tests and therapies, because there are just so many of them, the players involved are generally small, and these products were effectively deregulated in the US by the 1994 Dietary Supplement Health and Education Act.

However,...

Just Another Multi-Level Marketing Scam?

In 2016, we posted about what appeared to be just another nutritional scam, but one that seemed at the time to have broader implications.  A colorful account of how it worked came from a 2011 New Yorker article, which focused on a marketer named Izzo:

He would order the vitamins from a company called Ideal Health. She would earn a commission on the sale and he, in turn, would become a part of her team and encourage other people to buy the vitamins. For those sales, Izzo would earn a commission, as would she (his 'upline'), and then the people he sold the vitamins to would become part of his sales team and would go on to create their own sales teams, who would go on to create their own sales teams, etc., ad infinitum, all of them funneling commissions from their sales up to Izzo and the woman on the phone. As he listened, 'something clicked,' Izzo says. 'I saw the beauty of the business model. And I said, ‘How can I do this, and do this big?’ '

Note that this was an interesting scam in that it involved a multi-level marketing (MLM) model, which sometimes are called pyramid schemes. What most interested the New Yorker back then, however. was that the scam got connected to a prominent, flashy New York businessman, one Donald J Trump, yes, that Donald J Trump:

'The name is hot!' Donald Trump booms over the speakerphone from his office at 725 Fifth Avenue, where, ever since The Apprentice breathed new life into his brand, he has presided over an ever-diversifying array of businesses. He is, of course, speaking of his own name. 'It’s on fire!'

In March 2009, Trump purchased Ideal Health, rebranding it the Trump Network. Though the packaging has now been imprinted with the Trump family crest, the product line is still much the same. There are the two multivitamins: Prime Essentials and the more expensive Custom Essentials, the ingredients of which are determined by the Trump Network–branded PrivaTest, a urine test that claims to determine which vitamins the user needs. There’s also a line of healthy snacks for kids called Snazzle Snaxxs, QuikStik energy drinks, and a Silhouette Solutions diet program. With the Trump investment, the company has added a skin-care line that goes by the seductively foreign name BioCé Cosmeceuticals.

How much of a scam was this?  The trick to this scheme was that it involved not only the sale of nutritional supplements, but the use of bogus urine testing to develop customized nutritional regimens.

 The Trump Network sold many health and wellness products, and its main one was a customized nutritional supplement whose composition was determined by a urine test, called the PrivaTest.

A former marketer provided STAT with a kit for Ideal Health’s PrivaTest. It contained a urine collection cup, five test tubes, a cold pack, a biohazard bag, a prepaid FedEx mailing label, and detailed instructions. Customers collected their urine and shipped it to a lab for analysis. That lab analyzed the urine with three tests and produced a report, which was sent to The Trump Network.

The Trump Network bundled the report with a package of pills and shipped it all back to the customer. The pills were marketed as 'Custom Essentials,' formulations based on the results of the test and manufactured by another lab. In all, there were 48 formulations.

According to an archived version of The Trump Network’s website that can still be found online, the PrivaTest, along with a month’s worth of the Custom Essentials, cost $139.95. Retesting was available for $99.95, plus shipping and handling. The company recommended retesting every nine to 12 months.

Other products purportedly tested for food allergies, stress, and digestive health. One claimed to measure 'the balance between your ‘good’ estrogen and your ‘bad’ estrogen.'

There was, however, no evidence that any of this testing meant anything, or that nutritional regimens constructed using it would do any good for patients.   First, there appeared to be no publicly available data on how the tests worked, what they actually tested, or how accurate they were.  Then there was no data about how the test results could rationally be used to suggest particular mixes of vitamin supplements.  Also, there was apparently no public data about what vitamins were in the potions sent to consumers, their purity, their strength, etc.

The New Yorker asked some experts about this:

 While the FDA may not have evaluated the tests or supplements, independent scientists have — and raised many questions.

Cohen, one of several scientists who reviewed materials from Ideal Health and The Trump Network, said that the tests were marketed too broadly and seemed to be 'pathologizing normal human life.'

The website, for example, recommended its “AllerTest” to anyone who had dark circles under their eyes, occasional digestive problems, fluctuating blood sugar, sinus and respiratory problems, or tiredness after eating.

'Does your blood sugar fluctuate?' Cohen said, laughing. 'If your blood sugar does not fluctuate, you are extremely ill. You will not be long on this planet.'

What’s more, the AllerTest did not measure food allergies, as the network’s website claimed it would, according to outside analysis of materials from the testing lab and Ideal Health publications.

The test measured information about an antibody known as immunoglobulin G, or IgG, according to company publications. The antibody is normally produced in the body and not indicative of a food allergy, said Dr. Robert Wood, director of pediatric allergy and immunology at Johns Hopkins School of Medicine.

'There’s no disease condition for which the IgG antibodies have any relevance at all,' Wood said.

Note that this did not discuss, but implied that administering bogus tests to people and patients could either make them think they have important medical problems when they do not, or make them think that they do not have problems which they actually have.  Thus systematically administering bogus tests to a population could harm that population.

 In any event, like many such scams, the whole thing eventually faded away, and Trump pulled out of the licensing deal in 2011.

There basically ended our post, noting that maybe it was significant that a then 2016 presidential candidate who was favored to win the Republican nomination once got involved in such an obvious, if relatively small-time health care scam (and one involving a possible pyramid scheme, and bogus diagnostic testing to boot).  And yet this story, like many involving unethical health care practices, seemed to fade away.  Of course, in this case, it was also rapidly drowned out by the increasing chaos being produced by Trump and his cronies.

But wait, there is more.

The Class Action Lawsuit Against Trump and Family for Allegedly Fraudulent Multi-Level Marketing Schemes

The Trump candidacy, of course, despite many predictions to the contrary, did not fade away.

And in 2018, a story appeared that again was nearly drowned out by the then ongoing Trump chaos.  As reported by the NY Times in October, a lawsuit surfaced:

The 160-page complaint alleges that Mr. Trump and his family received secret payments from three business entities in exchange for promoting them as legitimate opportunities, when in reality they were get-rich-quick schemes that harmed investors, many of whom were unsophisticated and struggling financially.

Those business entities were ACN, a telecommunications marketing company that paid Mr. Trump millions of dollars to endorse its products; the Trump Network, a vitamin marketing enterprise; and the Trump Institute, which the suit said offered 'extravagantly priced multiday training seminars' on Mr. Trump’s real estate 'secrets.'

Voila, the Trump Network scam reappears.

Of course, early in the NYT article was the caveat:

the lawsuit comes just days before the midterm elections, raising questions about whether its timing is politically motivated.

The Times always likes to report on both sides of the argument, regardless of the merits, but anyway...


Again, all was silent, while chaos raged about other matters, at least until early 2019, when Trump's legal filed their protest asking a judge to dismiss the lawsuit, as reported by Bloomberg,

In a filing Monday, the Trumps claimed they had nothing to do with any alleged fraud. Donald Trump provided celebrity endorsements to ACN from 2006 to 2015, but never owned or controlled the company. And the plaintiffs haven’t identified a single fraudulent statement made by any of the other defendants, the family said.

'No plaintiff is alleged to have paid or lost money to the defendants or to any Trump business, and no defendant is alleged to have solicited any plaintiff for anything,' the Trumps said in the court filing. 'It is undisputed that ACN -- and ACN alone -- through a network of ACN representatives, solicited and collected fees from plaintiffs, for the benefit of ACN'”

At least in the Bloomberg report, there was not a word about the small health care scam that was also alleged, and certainly not about the evidence from that New Yorker article from long ago about how involved Trump was in that, but never mind, and all was silent once again, until....

However, in July, 2019,this month, the judge ruled, again per Bloomberg,

President Donald Trump, his company and three of his children must face a class-action lawsuit in which people claim they were scammed into spending money on fraudulent, multilevel marketing ventures and a dubious live-seminar program.

U.S. District Judge Lorna Schofield in Manhattan ruled Wednesday that the case can go forward with claims of fraud, unfair competition, and deceptive trade practices. The decision likely opens the door for the plaintiffs to start gathering evidence from Trump and his company, including documents and testimony.

The implications are important.  The suit is not just against the Trump Organization, but against Donald J Trump personally, and three of his children.  Absent another challenge from the Trumps et al, there could soon be a discovery process, meaning lots of documents, emails, etc, the sorts of information Trump et al have struggled to keep secret in other contexts, might be disclosed.  Furthermore, additional coverage of this legal development underlined Trump's personal involvement with these schemes - as did, by the way, the old New Yorker coverage of the Trump Network nutritional testing scam, facts that long vanished from the public eye.

For example, Salon reported,

The complaint added, 'Central to Defendants' fraudulent scheme was a company called ACN, a multi-level marketing company ('MLM') that offers a business opportunity to individual participants. From 2005 to at least 2015, Defendants received millions of dollars in secret payments to promote and endorse ACN. In return, Donald J. Trump ('Trump') told prospective investors that '[y]ou have a great opportunity before you at ACN without any of the risks most entrepreneurs have to take,' and that ACN's flagship videophone was doing 'half-a-billion dollars' worth of sales a year.' Trump also told investors that he had 'experienced the opportunity' and 'done a lot of research,' and that his endorsement was 'not for any money.' Not a word of this was true.'"

It has since been revealed that Donald Trump earned $450,000 each for three speeches that he delivered for American Communications Network.

So it appears that Trump personally profited quite a bit from these little scams

Discussion

The nearly anechoic Trump Network story just adds to Trump's and cronies' long history of deception, unethical behavior, and to the questions about crime and corruption that have swirled around them for years, including times well before anyone ever could conceive of Trump as US President.  However, unlike many of the other cases (see this most recent summary here), this one involves health care, diagnostic testing, and patients, not just investors, as potential victims.

Thus this just adds to concerns that the Trump regime is enabling worsening of the ongoing problem of health care corruption in the US.  As we have said before, 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. 

Yet,  Health Care Renewal has stressed "grand corruption," or 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.

In the last few years, as discussed here, voluminous reports have surfaced about the corruption of the Trump regime (although none of which, of course, mentioned the small case of Trump's sleazy health care scams).  They included numerous, ongoing cases of Trump's violations of the emoluments clauses of the US Constitution, which forbids a President from receiving payments from foreign countries, of US or state and local governments.  They included numerous appointments of gross instances of the revolving door, in which people with leadership positions in industries, including health care corporations, were given control over agencies which regulate and enforce laws pertaining to the corporations they previously served. They included numerous instances in which US government decisions were made seemingly to benefit Trump, his associates, and his conflicted appointees.  They included instances in which the federal government was used to promote Trump's ongoing business interests.

And now they should include one small health care scam that might have harmed patients.

So anyone concerned about health care corruption needs to realize that when the fish is rotting from the head, it makes little sense to try to clean up minor problems halfway towards the tail. Why would a corrupt regime led by a president who is actively benefiting from corruption act to reduce corruption? The only way we can now address health care corruption is to excise the corruption at the heart of our government.  

It was just a small health care scam...

"Like Watching a Slow Train Crash": AHERF to Hahnemann & Drexel, Part Deux

The Hahnemann Tragedy: Not All That Anechoic, But How Relevant Anyway?

There are so many health policy narratives right now entering new phases: CMS's head slamming the very idea of a public option; prescription drug costs; the opiate crisis now including both the Sacklers and J&D--all repeatedly subjects of this blog. So my dander's up over all these things more than something maybe unique to one town. Personally I'm finding it hard to stop and cone down on something that's for now mainly affected the U.S. Delaware River Valley. Philadelphia in particular.

Which is just the point that Dr. Poses, HCR's intrepid editor, recently made here around the closure of Hahnemann. (Its counterpart, Medical College of Pennsylvania Hospital, was closed by 2004.) Why has this major loss of a local health asset been so anechoic, a term I coined decades ago? Or has it actually been anechoic beyond the DelVal? Dr. Poses has urged me to blog on the Allegheny and Hahnemann debacles and their sequellae. It now occurs to me I can offer a useful extension, if not corrective, to his Part One on the events leading to the present demise of what's often been Philly's hospital and training venue of last resort, Hahnemann University Hospital.

Herewith, Part Deux. I lived through the whole sordid mess as a clinician and educator. I did so before, during, and after the late, unlamented, Allegheny University of the Health Sciences (a branch of Pittsburgh's AHERF) and its most important recent partner, Drexel University College of Medicine (DUCOM). Tellingly, we should call them frenemies, never true and trusted partners despite protestations to the contrary.

(To get ahead of the story only a bit: by the late 1990s, Drexel had inherited the bulk of academic and out-patient assets from Abdelhak's "AHERF East" expansion. Much less has been written or understood about Drexel's role in this narrative.)

So here's a perspective that will, I think, offer at least a little something new for everyone who trudges through it. It runs long.

Back, then, for a moment, to the "anechoic effect." Interestingly, the demise of Allegheny and now that of Hahnemann haven't lacked for echoes. Much has been written--indeed, the literature's so rich I'll only cite the most important milestones here--about it, and attention was fitfully paid nationally. The documentary trail is rich locally. But not only there. Look in peer reviewed widely read world wide including one exhaustive monograph out of a major university press. Or put ["tenet healthcare" hahnemann philadelphia] into a search engine, omitting the square brackets.

In what follows I yield to the impulse to pepper official accounts with my own and colleagues' observations, up to and including some insalubrious details. For some of these there is really nothing to cite. Thus, since I'm peppering, feel free to take my account with a grain of salt. Remind, me, however, to come back to the question: if the story was really not anechoic--let's say at worst hypoechoic--why do folks still not pay attention? Is there something unique about the Philadelphia setting, or are there lessons-learned that can be applied to other's settings?

After all, it wasn't exclusively (to coin a phrase) just The Philadelphia Story. From the outset, it was a statewide story, soon becoming a national story with the 1998 bankruptcy and consequent incursion of Tenet Healthcare, a for-profit out of Texas and California. Also it was always a money story, where "follow the money" goes back way beyond Bob Woodward and Carl Bernstein. Money stories are almost always generalizable. And yet ... I'm still not sure about this one.

All the basic facts of history below are easily checked, when provided for readability sans citation or link, via any good search engine.

Early Days.

Start at two ends of the same state of Pennsylvania, truly a "swing state" in so many ways, long before it joined Wisconsin in tipping the nation into chaos in 2016. By the early 1990s two things were clear. Pittsburgh had the state's most aggressive yet in another sense most defensive health care institution in what became the Allegheny Health, Education and Research Foundation, AHERF. It arose out of both the feared domination of Pitt and the ambition of a group of physicians and administrators led by a pre-AHERF hospital cafeteria director, post-AHERF jailed petroleum pirate, the late Sherif Abdelhak.

Abdelhak was not the only buccaneer involved in the story, though, either before, during, or after the 1998 bankruptcy. The crimes--or, rather, let's be careful, "departures from accepted norms"--of Abdelhak and his immediate Pittsburgh cronies were the worst. To keep his newly-cobbled-together statewide medical school afloat by the mid-90s, he'd already started quietly raiding any number of foundations, gifts, pensions and endowments that had supported worthy activities. (I participated in a class action suit around one of those.) Such activities continued uninterrupted for a while, with only faint rumbles heard early on at the institution Abdelhak had merged into the oddly-styled "MCP♦Hahnemann College of Medicine," and then its immediate progeny AUHS: Allegheny University of the Health Sciences.

AUHS's President Sherif Abdelhak gave the plenary lecture to the Association of American Medical Colleges (AAMC), the Cooper Lecture, in 1996, joining pre-bankruptcy luminaries such as Paul Beeson and Uwe Reinhardt beforehand and (post-bankruptcy) Clayton Christensen or Rita Charon in this prestigious venue. Everyone in 1996 was keen to hear, without cynicism, how he was pulling off his entrepreneurial hat trick. Cynicism came considerably later.

It was never clear to me whether it was AUHS or more broadly AHERF that suddenly and traumatically landed on the auction block in 1998. Long before their merger, both of the predecessor medical schools, Medical College of Pennsylvania and Hahnemann, each with its own wholly-owned non-profit teaching hospital, had been pressured financially and mismanaged. No one was all that surprised that they acceded to merger, even though no one was all that happy about the strange bedfellows that resulted. By the mid-1990s, Philadelphians already knew the city was over-medicalized both clinically and educationally.

The two most salient characteristics of this shotgun marriage were its "T" and "W" on a SWOT quad chart. Do the math: its main strength, such as it was and still the case in Philly real estate circles, was location. The medical schools and hospitals were rather dilapidated then and now. But at least Hahnemann offered a prime location just north of what was to become the Convention Center district. So the "S" was not so amazing despite a few additional clinical assets over the years (assessed at length here and here).

(Ironically, in the books just cited, institutional biographies were commissioned for joint sesquicentennials and both were published hard on the heels of bankruptcy. They reward reading. And yet, from such a reading you'll perhaps come away with the impression: "say what?!? you combined two med schools reeling from such radically different traditions and thought culture clash wouldn't impact the result?)

And there, along with failure to invest, lay a critical weakness. Culture matters. The medical cultures clashed with each other, with the new parent university, and with the business cultures of Tenet and its successor.

In retrospect and probably in prospect, the opportunities for the new medical school and the hospital--what remained Hahnemann University Hospital because subsequent hospital owners wanted to differentiate it from Drexel's academic receivership--were few and far between. That's because the threat, and this is crucial, was something that may in fact be unique to Philadelphia.

Because of its history--and this is a decidedly mixed blessing with certain blandishments that persist pleasantly to this day--Philadelphia was always an over-medicalized place since the onset of its gradual but inexorable post-19th century and -industrial decline. For generations, depending on how you count, it had either five or six medical schools, each with its own elaborate teaching hospital plant, not to mention myriad other smaller hospitals. Encroaching further were suburban hospitals in the 20th century and outpatient surgical centers in the 21st. Each poached lucrative business away not just from Hahnemann but from all the university hospitals. Something had to give, an event now playing out at the bottom of the health-care and -education food chain.

Hahnemann was situated in a location, journalists now observe, with one of the least favorable payer bases of any central Philadelphia hospitals. Only the now-defunct Philadelphia General Hospital over in West Philly, still there as recently as the 1970s along with the Civic Center where Strom Thurmond held forth in 1948, was poorer. (PGH and the Civic Center are now wiped from the face of Google Maps, supplanted by grand edifices built by ever-expanding Penn-affiliated organizations.)

When the bankruptcy hit AHERF, having stripped the former organizations' academic assets, was ill-equipped to attract investment or do much other than give up the ghost. It had essentially been a health care Ponzi Scheme. Below I connect the dots with larger national trends described in a key article published over the name of Penn's university president. But before I do that let me describe some of the highlights, or lowlights, of the early years after AHERF went into receivership.

Brokering a Deal

In 2019 Philadelphia will now "de-medicalize" some more, through the long-overdue shift of the medical school and clinical training facilities to a new east-central Pennsylvania location. But unlike the present circumstance, in the late 1990s it was deemed unacceptable for all those hospital employees and all those jobs and all those patients to lose their places in the Philly firmament.

The politicians swung into action, casting about for some cure for the institutional patient.

Those figures--let's simply name Ed Rendell and Arlen Specter for starters--saved the patient by dismembering it. They'd always go on to say there was no choice, and it's probably true. The inpatient facilities went to an out-of-state, for-profit organization as I already mentioned.  Clinical training and health undergraduate programs (medical and many others) went to Drexel. The serial name changes I described above continued. The jewel in the rather rusty crown, the med school, soon became Drexel University College of Medicine under Constantine Papadakis, the late Greek-born engineer and the university's then-President, .

What followed was a striking litany of unforced errors. Had both Tenet and Drexel not made so many mistakes, it's possible the endgame just might have gone a different way. We'll obviously never know with any certainty.

The Next Chapter: Greek Tragedy

What happened next is at least as important as anything AHERF miscreants did in sealing the fate of both institutions. It was not just Tenet against Drexel. It was also Drexel against Drexel.

It's hard to know which of these sets of conflicts was most consequential in weakening the edifice after the bankruptcy. In either case it's important to understand that there not two but three boards, three administrator-coteries, and three financial silos. Drexel quickly erected a "firewall" between its health schools and its traditional West Philadelphia campus, with disastrous results.

Start with Tenet against Drexel. It's fairly easy to dispose of this conflict, since as Poses points out, ruthless business thinking immediate took hold for Hahnemann University Hospital. Make concessions and collaborate with clinical research planning? Not a chance. Tenet rushed to hive off its information technology out of reach of Drexel, installing an incompatible EHR. Some Tenet lawyer may come after me and berate me for ignoring "how much we at Tenet did for Drexel," but I can assure you and her that on balance, most decisions were made to streamline, not to say strip bare, Hahnemann activities such that Drexel research languished at the Hahnemann campus. Ironically it was only hold-overs from certain AHERF-era grants such as the tobacco settlements and the Robert Wood Johnson Foundation that helped tide medical school departments over, at least for a while.

We come, then, to "Drexel versus Drexel." In some ways these conflicts were even more pernicious. The firewall between the two sides of the river promoted such a trend. After all, mimicking the sins of the Tenet fathers, the two Drexel "silos" themselves rushed to hive off their own IT groups one from the other. (This has since been reversed, a healthy dose of too-little-too-late.) Not without some justification, the Drexel "original" board was paranoid that Drexel Med would bring down its new foster-parent institution.

And foster child is what Drexel Med, and for a while its corollary health schools, became. Papadakis, the engineer-entrepreneur, had already made his main focus the dilapidated West Philly campus. So he emphasized physical development over everything else, neglecting even his own West Philadelphia faculty almost as much as that of the medical school. With one or two notable exceptions he hired poor administrators. One of them, an early medical school dean, mimicked Abdelhak by embarking on a relationship with a medical student. (Abdelhak's now-physician wife later divorced him. It seems uninteresting what happened to the medical dean and the weather girl-turned-med-student who went on to become his wife.) Ironically, the best administrators at Drexel Med were those already present when Drexel took over. But not many stayed on to help.

Hence, Drexel versus Drexel. Drexel Main Campus mimicked AHERF in many ways in looting the medical school, taxing it heavily. Perhaps the worst example of this, a truly damaging sort of virtual taxation, was Papadakis running roughshod over the internal processes of the struggling DUCOM. At one critical juncture, he required an estimable new dean, who'd followed the fine gentleman described above, to eliminate all searches for replacement department chairs, as their predecessors headed for the exits. He froze all the acting chairs in place, resulting in a further weakening of the administrative infrastructure. This should have been a quitting issue for many--but most had already booked because of Abdelhak and his earlier regime. And indeed soon thereafter that new dean, Richard Homan, who'd just had every single one of his chair searches shot out from under him, did leave for a much better deanship elsewhere.

The remaining departmental structures were, and even now remain, riddled with inadequacies and opportunities for outright fraud. Last time I checked, about six months to a year ago, heads were still rolling as a result. Over on the Main Campus there is a new president who, while an improvement over Papadakis, focuses on new buildings, which, of course, attract new money.

Echoes Are Heard

In 2004, at the end of a decade at the University of Pennsylvania during which she had her own battles with the health-school leaderships, its scientist-president Judith Rodin published an influential piece in AAMC's widely-read flagship publication, Academic Medicine. Giving credit where due, it was "contributed to" and likely co-authored or first-drafted by philosopher administrator Stephen Steinberg, to whom Rodin gave brief thanks in a footnote. Without once mentioning Allegheny it was a far-seeing autopsy of much that was going wrong in American medicine, typified--I know this from talking to Steinberg--by Allegheny, down to that moment when Rodin left Penn to head up the Rockefeller Foundation. It's worth re-reviewing now, fifteen years later.

Rodin and Steinberg noted how they'd seen the "terrifying perils of the vertically integrated academic health system, ... the University of Pennsylvania's newly created integrated health system [and] how dramatic shifts in federal policies and market forces threatened to take down our health system—and the rest of the university with it." She adverted to how, just

... as Penn led the way in the creation of the nation's first vertically integrated health system in 1993, so, too, were we among the first to feel the full effects of dramatically increased insurance claim denials and delays, and reduced Medicare payments, both overall and for medical education, that followed in the wake of the Balanced Budget Act of 1997. At the same time, we were providing $100-million per year in unreimbursed or underreimbursed indigent hospital care. As a result, the University of Pennsylvania Health System lost $350 million from 1997 to 2000, created $800 million in debt, and its bond rating was downgraded by Moody's Investors Services from Aa3 to A1, while the outlook for the university's higher AA rating was changed from “stable” to “negative.”

So the times were tough all up and down the food chain.

Rodin and Steinberg went on to prescribe Penn's "cure," not as novel as she implied but still emerging from an abyss hence now able to prescribe a "sow's-ear-to-silk-purse" transformation.

At that point, we faced the same fundamental choices as many of our peers: risk serious financial and educational damage to the rest of the university by continuing to absorb the Health System's deficits; eliminate the threat to the university's financial health by spinning off, selling, or otherwise separating the Health System from the university; or strategically plan and manage our way out of the financial crisis, and do so in a way that would make us less vulnerable to future potential perturbations.... [We] had to consider two separate—but ultimately related—questions. First, why were we in the business of integrated academic medicine, and why on earth would we want to stay in it, given the—by then obvious—risks? Second, if we were going to stay in it, how would we make it work, for our patients, for our faculty, and for our students, and—both academically and financially—for the university as an institution? Ironically, the answer to both questions was more and better integration—just the strategy that got us into so much trouble—but applied very differently this time. Applied more horizontally, and less vertically.

In other words, "we zig when they zag." But of course, Drexel, like other local schools (notably Jefferson, still today expanding with the absorption of Philadelphia University) was trying its damndest to do the same thing. At least Drexel was claiming to try to integrate, undertaking steps including adding schools of law and business and reintegrating information technology. So it boils down I think to "how rich were you when you started," and "how many unforced errors"? Winners get to write the history. Those at the bottom of the food chain, if they drop off, don't get to. No surprises here. Drexel (and others) were trying to integrate "horizontally." But with a lot less money, a lot less reputation, and no real cushion.

Next, in 2011, an eminent sociologist-historian, the late Judith Swazey, published a lengthy history of the Allegheny-Hahnemann disaster. In Merger Games, Swazey, per one reviewer

vividly document[ed] fundamental patterns inherent in practically all corporate reorganizations and mergers, and dissects why they succeed or fail. Because of these highly important and ever so timely lessons, the information in this book should ... reach the widest possible audience and to that end it should be made into a movie. It has all the ingredients of a terrific box office success. [Editorial note: not!!!] And at the same time it should be made into a Harvard Business School case study because these lessons ... need to be understood by tomorrow's organizational leaders.

In another way, of course, Swazey's reception, or lack thereof, may prove Poses's point. People don't pay much attention. Why?  Perhaps just simple hubris. They avert their eyes if there's the least rationale to do so, a plight now afflicting our entire country. It may have been just too easy, too glib to think of Philadelphia as overmedicalized, someone needing to drop off the rotten bottom of the food chain, bad managers making it worse--God knows they did!--and free-standing schools of health having little ballast during times of economic stress. In any case another reviewer, one who lived through it as I did, long before Hahnemann died went onto the Amazon website and described the experience in terms of "watching a slow train crash."

Impact on Patients

Well, not just the patients. Consider faculty members, many of whom have devoted decades to teaching subjects like anatomy or admitting to Hahnemann and accumulating significant coteries of devoted patients. Those patients aren't going to follow some fine physicians, or the ones who elect to migrate, out to Berks County, Pennsylvania.

Just yesterday I spoke to someone knowledgeable about the impact on the area's preeminent medical school, Penn, in terms of eye patients. This individual described to me a tripling of the numbers of patients appearing at the walk-in clinic, in almost overnight fashion. Imagine having to deal suddenly with three times the number of emergency walk-ins, triage them, get them to appropriate consultants. In time the impact will likely be diffused and absorbed, just as happened two generations ago with the  1977 closure of Philadelphia General Hospital. Nothing entirely new here. And yet, to say "move on, folks, nothing to see here," as some might be tempted to do, would be a shame.

Conclusion

In this account I've added some textural detail to the knock-on effects of the Allegheny bankruptcy. It's rich with irony. So many questions about what I have included actually remain unanswered. To what extent were Drexel administrators complicit with those from Tenet in insuring the slow steady decline of the involved institutions.

One thing is certain. Only in the past year and a half to two years, give or take, have some of the errors been addressed. For example, a clever strategy was only recently put into effect to undo the effects of Drexel's freeze on the hiring of department chairs based on real searches for quality. A number of chairs, some well meaning but most less than fully adequate, have finally been pushed out. Just in time for Drexel Med to move to another part of Pennsylvania, and for the heirs of its hospitals to give up the ghost entirely.

A Stealth Health Policy Advocate Goes Through the Revolving Door ... Now to Chair the White House Council of Economic Advisers

In 2017, we noted that President Trump had appointed a member of his Council of Economic Advisers who previously was a master corporate stealth health policy advocate.  Now he is getting a promotion.

Prof Tomas Philipson to be Named to Chair of the President's Council of Economic Advisers

On June 29, the Washington Post reported,

President Trump plans to name economist Tomas Philipson as the next head of the White House Council of Economic Advisers, according to senior administration officials.

Philipson has worked at the White House for nearly two years as a senior economist after serving briefly on the transition team. Best known for his research on health care, Philipson has been a key player in the Trump administration’s efforts to lower drug prices and push back against Democrats’ proposals for a Medicare-for-all system.

The Post noted that during his tenure on the Council it released a report warning of the financial dangers of proposals for a national single payer health insurance system ("Medicare for all"), which is labelled "socialism."

Also, it quoted him as saying

Deregulation is the cornerstone of the president’s pro-growth economic policies that has been implemented since he took office,

The article also briefly described his "long career and academia and public service."

An article on the NPR site included this testimonial:

'Tom is a very fresh thinker,' said Mark McClellan, a veteran of the George W. Bush administration who recruited Philipson to work for him, first at the FDA and later at the Centers for Medicare & Medicaid Services. 'Tom had a great background in health economics and wanted to do work that was very policy relevant. So it was a win-win.'

A health economist as the chief White House economic adviser sounds like a good idea on its face, but the reality is much more complex.  

Philipson's Career as a Master Stealth Health Policy Advocate

In February, 2017, months before Philipson ascended to the Council, a ProPublica article noted that Philipson was "the third co-founder of Precision Health Economics" (PHE).

As we said later in 2017, PHE was in the business of using its experts' academic credentials to help pharmaceutical and biotechnology companies influence public policy in their favor. From the ProPublica article

Over the last three years, pharmaceutical companies have mounted a public relations blitz to tout new cures for the hepatitis C virus and persuade insurers, including government programs such as Medicare and Medicaid, to cover the costs.

So,

To persuade payers and the public, the industry has deployed a potent new ally, a company whose marquee figures are leading economists and health care experts at the nation’s top universities. The company, Precision Health Economics, consults for three leading makers of new hepatitis C treatments: Gilead, Bristol-Myers Squibb, and AbbVie.

Furthermore,

This is just an extension of the way that the drug industry has been involved in every phase of medical education and medical research,' said Harvard Medical School professor Eric G. Campbell, who studies medical conflicts of interest. 'They are using this group of economists it appears to provide data in high-profile journals to have a positive impact on policy.'

PHE has worked with some of the biggest pharmaceutical and biotechnology companies and trade groups. In particular,

The roster includes Abbott Nutrition, AbbVie, Amgen, Biogen, Bristol-Myers Squibb, Celgene, Gilead, Intuitive Surgical, Janssen [a subsidiary of Johnson and Johnson], Merck, the National Pharmaceutical Council, Novartis, Otsuka, Pfizer, PhRMA, rEVO Biologics, Shire and Takeda.

ProPublica described some of the tactics PHE uses:

The firm participates in many aspects of a drug’s launch, both advising on 'pricing strategies' and then demonstrating the value of a drug once it comes on the market, according to its brochure. 'Led by professors at elite research universities,' the group boasts of a range of valuable services it has delivered to clients, including generating 'academic publications in the world’s leading research journals” and helping to lead “formal public debates in prestigious, closely watched forums.'

PHE has worked on campaigns to persuade the government and insurers to increase what they would pay for oncology drugs, and for Amgen's PCSK9 inhibitor (Repatha) for hypercholesterolemia.
 
Tomas Philipson was one of the principals of PHE:

Precision Health Economics may be well-positioned to influence the Trump administration. Tomas Philipson, an economist at the University of Chicago and the third co-founder of Precision Health Economics, reportedly served briefly as a senior health care adviser for the Trump transition team. He did not respond to requests for comment.

He has taken an active role in stealth health policy advocacy campaigns run by PHE.  For example, as part of the PHE campaign to advocate for generous government and commercial insurance payments for Repatha, Philipson disparaged an analysis by the Institute of Clinical and Economic Review which had suggested the drug was overpriced:

Philipson, the Precision Health Economics co-founder, and Jena wrote an op-ed in Forbes, citing the institute’s research and deriding its approach to value pricing as 'pseudo-science and voodoo economics.'

PHE and its principals, including Philipson, often failed to disclose relevant conflicts of interest.  For example, re the above Forbes article,

Only Philipson disclosed his ties to Precision Health Economics, and neither academic disclosed that Amgen was a client of the firm.

Failing to disclose the Amgen funding of their work in this context appeared deceptive.

Up to the time of his appointment to the Council of Economic Advisers, Philipson seemed to be enhancing his position at PHE.  In particular, in 2015, after PHE was bought out by a privately held biotechnology company, "Philipson ... [was] listed as chief economist and the chair of the strategy and innovation board."


However, Philipson's previous work on stealth advocacy campaigns for pharmaceutical and biotechnology companies did not prevent him from becoming a member of the Council of Economic Advisers.  Now that Philipson is likely to ascend to the chair of the Council, Philipson's previous record of stealth health policy advocacy has been anechoic.

Summary and Conclusions

The anechoic nature of this latest case shows how we are becoming numb to many common abuses in health care in the face of even worse abuses in the larger political economy, the ultimate defining down of deviancy.

Nonetheless, let me first emphasize that Philipson came through the revolving door from his role as a stealth health policy advocate to become a major Trump regime economic adviser.

We and others have said again and again that the revolving door is a species of conflict of interest. Worse, some experts have suggested that the revolving door is in fact corruption.  In particular, 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.

In the Trump era, many people have come through the incoming revolving door, that is, people with significant leadership positions in health care corporations or related groups have attained leadership positions in government agencies whose regulations or policies could affect their former employers.  Many examples, starting with Philipson's initial appointment to the Council, appeared here.  The more people transit the revolving door from the world of big corporations to government, the more government appears rigged to do the bidding of big corporations and their  munificently paid leaders.


Furthermore,  have previously noted that promotion of health policies that allowed overheated selling of overpriced and over-hyped health care products and services included various deceptive public relations practices, including orchestrated stealth health policy advocacy campaigns.  Third party strategies used patient advocacy organizations and medical societies that had institutional conflicts of interest due to their funding from companies selling health care products and services, or to the influence of conflicted leaders and board members.  Some deceptive public relations campaigns were extreme enough to be characterized as propaganda or disinformation.

Philipson is not merely an adviser to pharmaceutical and biotechnology companies.  He was an active participant and innovator in stealth health policy advocacy (or maybe stealth lobbying.)   Putting an innovator in stealth health policy advocacy and lobbying in the top economic position in the White House will only amp up the power of propagandists and disinformation purveyors in government.

Meanwhile, top health care (and other) corporate management is increasingly merging with the current administration in one giant corporatist entity which is not in the interests of health care. To derig the system, we need wholesale, real health care reform that would make health care leaders accountable for what their organizations do, and 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.


However, before thinking about true health care reform, we need top accomplish wholesale government reform. We need to excise the deception, crime and corruption at the heart of our government and restore government by the people, of the people, and for the people. 

Another Echo of the Fall of the House of AHERF: Hahnemann University Hospital to Close Its Doors, Stranding Patients, Leaving Trainees without an Educational Site, and Leaving Staff and Health Care Professionals Unemployed

Those who cannot remember the past are condemned to repeat it. [George Santayana]

The impending closure of a big teaching hospital in Philadelphia did not get much national attention, but should have.

The Closing of Hahnemann University Hospital

On June 26, 2019, the Philadelphia Inquirer reported:

Hahnemann University Hospital will close in early September, with the wind-down of services at the 496-bed facility starting immediately, hospital officials said Wednesday.

Officials representing American Academic Health System LLC, which bought Hahnemann and St. Christopher’s Hospital for Children early last year for $170 million, said the closing 'on or about Sept. 6' would be orderly.

The closure would likely have big impacts on health care and medical education in Philadelphia, and on health care professionals and other hospital workers.  The article quoted the president of the Pennsylvania Association of Satff Nurses and Allied Professionals:

Hahnemann is a safety-net hospital that for decades has provided care to an under-served community,

Oddly enough, I could not find much more in the media about projected impacts on patients.  A July 2 Philadelphia Inquirer article stated

Hahnemann University Hospital’s pending closure and immediate move to turn away critically ill emergency patients threatens a safety net that has served close to 150 emergency room patients a day — many of them poor minorities who rely on the hospital for even primary care.

Close to half of the people admitted to Hahnemann were on Medicaid and two-thirds are black or Latino, according to an Inquirer analysis of state inpatient billing data.

Also,

Hahnemann had 17,000 inpatient stays and 53,000 emergency room visits in 2017, making it the eighth-busiest E.R. in the city, according to state Department of Health statistics.

The plight of the hospital's current house staff got a bit more attention.  An Inquirer article on July 3, stated,

The impending closure of Hahnemann University Hospital is forcing about 570 residents who work at the Center City institution to find a new place to continue their training.

Also,

Hahnemann’s closure is causing 'the largest orphaning of medical residents in the history of the United States,' Drexel University said in a Philadelphia Court of Common Pleas lawsuit against Hahnemann and its corporate parents. Drexel handles the educational side of Hahnemann’s residency programs.

And then there were the other employees of the hospital to think about.  An NBC10 Philadelphia article on June 26 included,

The closure would leave around 800 union nurses, said the union, which represents around 8,500 nurses across the state.

In addition,

The nurses are among about 2,500 employees that PAHS says are employed at the medical center.

A major teaching hospital will close, abandoning many poor and vulnerable patients, orphaning 570 house-staff and leaving about 800 nurses and about 1700 other staff unemployed, and the national media take no notice?  The numbness is striking.


Reactions to the Bankruptcy of Hahnemann

Also, in my humble opinion, the reactions to the impending bankruptcy were somewhat muted even in the local media.

The media did feature some complacent reactions from local health care experts with ties to other competing hospital systems or to  for-profit hospital management who seemed confident that everything would work out.  For example, from the June 26 Inquirer article:

But with more hospital beds per capita than many urban areas, Philadelphia is better equipped to handle the impact of a closure than many places, said Stuart H. Fine, an associate professor in Temple University’s College of Public Health.

'Philadelphia is fortunate to have enough hospital beds for the city’s needs, even if Hahnemann closes,' he said. 'I’m not minimizing the impact of this closure on those patients who live right by Hahnemann, rely upon it for their care, and will have difficulty traveling to other locations.'

The article, though, failed to mention that Mr Fine, per his bio on the Temple website, is a former hospital manager with a health administration, but not a public health or medical background, viz:

After having served as a health system CEO for more than 30 years, Dr. Stuart H. Fine joined the faculty of Temple University in 2014 as Associate Professor & Director of Programs in Healthcare Management for the Fox School of Business.

A few public relations people from other local hospitals seemed pleased about getting some of Hahnemann's business, but I could find no opinions from actual public health experts.

On the other hand, there was outrage from unionized employees (look here for an account of a small public protest by union members.)

The Governor of Pennsylvania and the Mayor of Philadelphia, both Democrats, issued a statement saying

We continue to stand in solidarity with the workers, patients and community. For months, the commonwealth and city have been working aggressively to protect patient care at Hahnemann and find solutions to maintain current medical services at the hospital,

However, they did not propose very strong action

While it is clear that the hospital’s current operation is no longer financially viable, we are both committed to working with potential investors to find support for the restructuring of Hahnemann and for protecting St. Christopher’s Hospital for Children

Note that they did not seem to question the notion that any continuation of Hahnemann would have to be as a for-profit corporate entity funded by "investors."

The American Association of Medical Colleges put an informational article on its website, featuring an interview with Janis Orlowski, MD, AAMC chief health care officer. However, the article only discussed the nuts and bolts of how Hahnemann housestaff might go about trying to find new positions.  There was no hint of outrage, and nothing about anything the AAMC might do beyond that.

The only discussion about the bankruptcy beyond the Philadelphia area that I could find came from presidential candidate Sen Bernie Sanders (D-VT), who was quoted in Politco a few days after the bankruptcy announcement:

'The business model of America’s current health care system is not about healing people or providing access to medical care — it is about making as much money as possible for insurance companies, drug companies and wealthy investors,' the Democratic presidential candidate said.

'The situation in Philadelphia illustrates the entire problem: In a city with one of the highest poverty rates in the country, a major hospital serving low-income communities is on the verge of laying off 2,500 people, abandoning 500 medical residents, and closing its operations thanks to an investment firm looking to make as much money as possible in a corporate fire sale.'

The Vermont senator added that he stood in solidarity with the nurses and others who are fighting to keep the hospital 'from being destroyed by Joel Freedman and his investment firm' and reiterated his call for 'Medicare for All.'

Per the Inquirer, again, Sen Sanders is also planning a rally for July 15, and plans "to call for Philadelphia, state and federal officials to find a way to keep Hahnemann open."

A major teaching hospital will close, abandoning many poor and vulnerable patients, orphaning 570 house-staff and leaving about 800 nurses and about 1700 other staff unemployed, and there is no national outrage, particularly from health care professionals?  The learned helplessness is striking.


Finally, lacking in what reporting there has been, however, is much explanation for why a big teaching hospital is coming to such a sudden, and ignominous end, particularly, since in a sense it has all been done before.  One gets the impression of deep seated ennui.


A Very Late Echo of the Fall of the House of AHERF

There might be a reason for that.  It has all been done before.

The June 26, Inquirer article did mention, somewhat as an aside:

Hahnemann, which traces its roots to a homeopathic medical college opened in 1848, has been through a tumultuous era dating to at least 1993, when Allegheny Health, Education, and Research Foundation acquired it as part of rapid expansion that led in 1998 to what was then the nation’s largest nonprofit health-care bankruptcy.

Tenet Healthcare Corp. bought Hahnemann and eight other Allegheny hospitals in the Philadelphia region but quickly scaled back, hanging on to just Hahnemann and St. Christopher’s, which were frequently the subject of sales negotiations that failed until Freedman decided to leap across the country from his Southern California base.

The Freedman to which this refers is one Joel Freedman, president and founder of American Academic Health Systems LLC, the last for-profit firm to own the hospital.

So Hahnemann and one other hospital were already the only survivors of the eight hospitals Tenet bought in 1998?  I could find a 2017 article that stated that all other hospitals it owned in Philadelphai were either sold or closed by then.  One hospital it sold, the Graduate Hospital, was converted into a long term care facility (look here). The fate of the other six hospitals seems anechoic. 

However, the lassitude greeting the demise of the last remaining hospitals was foreshadowed by the story of Tenet's precursor in the Philadelphia "market," the Allegheny Health, Education and Research Foundation (AHERF) whose demise has been much discussed on our humble blog as a harbinger of the dysfunction that would afflict US health care.

As we noted in 2008 (and discussed most recently in 2013 here), although the AHERF bankruptcy appears to be the largest failure of a not-for-profit health care corporation in US history, its story has produced remarkably few echoes for doctors, other health care professionals, health care researchers, and health policy makers. I often use the fall of AHERF as major example in talks, at least the few talks I am allowed to give on such unpleasant subjects. Rarely have more than a few people in the audience heard of AHERF prior to my discussion of it. I only could locate one article in a medical or health care journal that discussed the case in detail, albeit incompletely since it was written before Abdelhak's guilty plea [Burns LR, Cacciamani J, Clement J, Aquino W. The fall of the house of AHERF: the Allegheny bankruptcy. Health Aff (Millwood) 2000; 19: 7-41.] I doubt the case is used for teaching in most medical or public health schools. The lack of discussion of such a significant case is a prime example of the anechoic effect.

Some of the important points of this case will sound familiar  (see also this narrative, starting on page 5):

• AHERF, one of the largest health care systems of its day, was built by the poster-boy for health care imperial CEOs, Sherif Abdelhak.
• Abdelhak, who started as food services purchasing manager at Allegeheny General Hospital, was repeatedly hailed as a "visionary" (in the March, 1997, ACP Observer) a "genius," and the like. His plans to create a huge integrated health care system were part of the wave of the future. Abdelhak was even invited to give the prestigious John D Cooper lecture at the annual meeting of the American Association of Medical Colleges (AAMC), which was published in Academic Medicine [Abdelhak SS. How one academic health center is successfully facing the future. Acad Med 1996; 71: 329-336.] He proclaimed that "we will need to create new forms of organization that are more flexible, more adaptive, and more agile than ever before." And he announced that "my aim as chief executive has been to unleash the creativity and productive potential of every individual and to provide an environment that encourages teamwork"
• While Abdelhak was making these grandiose promises, he paid himself and his associates very well. For example, he received $1.2 million in the mid-1990s, more than three times the average then for a hospital system CEO. He lived in a hospital supplied mansion worth almost $900,000 in 1989. Five of AHERF's top executives were in the top 10 best paid hospital executives in Philadelphia.
• Although Abdelhak talked of teamwork, he warned the combined faculty of the new Allegheny University of the Health Sciences (AUHS): "Don’t cross me or you will live to regret it."
• As AHERF was hemorrhaging money, Abdelhak continued to pay himself and his cronies lavishly.
• After the AHERF bankruptcy, which was at the time the second largest bankruptcy recorded in the US, Abdelhak was charged with numerous felonies involving receiving charitable assets. In a plea bargain, he pleaded no contest to misusing charitable funds, a misdemeanor, and was sentenced to more than 11 months in county prison.

Note that at its peak, AHERF had 14 hospital in its network.  After its bankrupcy, it transferred 8 hospitals, including Hahnemann and the Medical College of Pennsylvania teaching hospital to Tenet.  In 2003 Tenet closed MCP (look here).  Tenet is a for-profit hospital system with its own history of bad behavior (look here).  So out of a 14 hospital network ultimately only one, not Hahnemann apparently will survive.

However, few people, even in Philadelphia seem to remember that history, and therefore seem to have drawn lessons from it.  However, had they, perhaps they would have concluded, as we asserted in 2013,

The story of AHERF is not merely that of an unlucky bankruptcy. It shows what can go wrong when health care is taken over by generic managers who adapt the latest management fads, and health care decision making is ruled by marketing, public relations and propaganda instead of evidence and logic, and allows power to be concentrated in organizations run by imperial CEOs.  We did not get a chance to learn this history, so we seem bound to repeat it.

And as we asserted in 2011, 

Saving health care will take clear thinking and hard work by a lot of people. The "visionaries," if we let them, are likely to depart with a huge cache of money, leaving us and health care worse off. If it is just "not done" to talk about cases such as that of AHERF, and other examples of "recent unpleasantness," how will be learn not to fall for the propaganda?

Of course, it is those who benefit from the propaganda who do not want us catching on to their game.

If physicians, health professionals, health care researchers, and health policy makers do not learn the lessons of the fall of AHERF, and now the fall of one of its two surviving hospital components, they will be doomed to see its endless repetitions, throughout the land.

With apologies to the Bare Naked Ladies - "it's all been done before"

Making the Revolving Door Great Again: Recent FDA Commissioner Dr Scott Gottlieb Joins the Pfizer Board of Directors

It has been less than six weeks since our last post on the revolving door. 

That post emphasized cases of the outgoing revolving door, that is, of people leaving leadership positions in governmental bodies which regulate health care or make health care policy, then soon obtaining jobs in the health care industry, particularly organizations which they previously regulated or were affected by the policies they made, the outgoing revolving door. Now we have another big case.

Former US Food and Drug Agency (FDA) Commissioner to Join Pfizer Board


As we discussed in May, 2019, here, Dr Scott Gottlieb, FDA Commisioner from 2017 to May, 2019,  had been no stranger to the revolving door.  Prior to assuming leadership of the FDA, he had relationships with multiple for-profit health care corporations, which drew wide notice when he was appointed to head the FDA in 2017, as we noted at that time here.  Also, Dr Gottlieb was clearly very comfortable with the pharmaceutical and biotechnology industries.  For example, in 2007-2008, we discussed many examples of Dr Gottlieb's strident promotion of the interests of these industries (look here, here, here and here).

Very quickly after leaving the FDA in 2019, Dr Gottlieb rejoined his old venture capital firm, New Enterprise Associates, as a full-time partner investing partner specializing in life sciences companies.
Then, as reported by CNBC on June 27, 2019,

Scott Gottlieb, who stepped down as Food and Drug Administration Commissioner in April, will join Pfizer’s board of directors, the company announced Thursday.

Gottlieb resigned from the FDA this spring after nearly two years at the helm.

This seemed like an even more consequential case of the outgoing revolving door, obviously, because Dr Gottlieb held an extremely important position of responsibility in health care regulation, and because he quickly moved on to hold an important position of governance in one of the world's largest pharmaceutical/ biotechnology companies.  It also occurs as the next big thing after an unrelenting stream of revolving door issues affecting health care policy and regulation in the Trump regime (look here)

An Immediate Protest by Senator Elizabeth Warren


So this time, not only did dissidents like your obedient servant mutter online, but a US Senator authored a swift rebuke.  As reported by Sheila Kaplan in the New York Times,

Senator Elizabeth Warren on Tuesday called on Dr. Scott Gottlieb, the former commissioner of the Food and Drug Administration, to resign from the board of Pfizer, saying his decision to join one of the country’s leading pharmaceutical companies 'smacks of corruption.'

Ms. Warren, who is seeking the Democratic presidential nomination, said in a public letter to Dr. Gottlieb that the revolving door between government and industry 'makes the American people rightly cynical and distrustful about whether high-level Trump administration officials are working for them, or for their future corporate employers.'

The explicit reference to "corruption" is notable.  Most people would think of cases of the outgoing revolving door as conflicts of interest.  The concern is that people in government regulatory or policy positions might bias their decision making, possibly unconsciously, to increase the likelihood of lucrative employment after the end of their government service.  Transparency International's definition of corruption is abuse of entrusted power for private gain.  The outgoing revolving door seems to make such abuse more likely, but does not mandate it.

However, as we noted here, some, including experts from the distinguished European anti-corruption group U4, think the revolving door is corruption

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.

Senator Warren now seems to agree, at least in the case of Dr Gottlieb's move to the Pfizer board.

Did Dr Gottlieb's FDA Favor Pfizer?

In fact, within days, two reports surfaced that suggested possible reasons to think that Dr Gottlieb's FDA had taken actions that would have benefited Pfizer, and hence that his appointment to its board might be corrupt.

Drop in FDA Enforcement Activities During Gottlieb's Tenure

First, Science Magazine noted considerable evidence that the FDA during the Trump and Gottlieb era had notably deregulated the pharmaceutical industry.

By several measures ... FDA’s compliance and enforcement actions have plummeted since President Donald Trump took office, Science has found.

In particular,

The agency’s 'warning letters'—a key tool for keeping dangerous or ineffective drugs and devices and tainted foods off the market—have fallen by one-third, for example. Such letters typically demand swift corrections to protect public health and safety. FDA records from Trump’s inauguration through 22 May show the agency issued 1033 warning letters, compared with 1532 for the most recent equivalent period under former President Barack Obama.

Also,

Warnings from the FDA Center for Devices and Radiological Health, which helps ensure the safety and quality of medical devices, and from some of the agency’s district offices—including Philadelphia, Florida, and New York—have dropped even more steeply, by more than two-thirds. Two district offices have not issued a warning in more than 2 years.

And,

Several other FDA actions under Trump show similar declines when measured against the end of the Obama administration. FDA inspection reports labeled 'official action indicated'—typically a trigger for warning letters or similar actions—have fallen by about half under Trump and are continuing to trend downward. Even FDA’s rare injunctions, a more forceful step than warnings to prevent sales or distribution of unsafe or otherwise illegal products, fell from 35 in the last part of the Obama administration to 26 under Trump. (During a comparable period at the start of the Obama years, FDA issued 51 injunctions.) The agency’s 'untitled letters'—for concerns that fall short of thresholds for formal warnings—also have dropped sharply under Trump.

Several experts interviewed by Science emphasized the importance of these findings.

'FDA’s power to enforce its requirements is an important part of how it achieves its public health mission,' says Patricia Zettler, a law professor at Ohio State University in Columbus and former FDA attorney. 'If FDA is not using that power, it sends a signal that violations will be tolerated.'

Dr Gottlieb defended his former agency's regulatory role, and implied, of course, that any criticisms were political:

Scott Gottlieb, Trump’s first FDA commissioner, defended his record after reviewing a summary of Science’s data. 'We were pretty aggressive,' he wrote in an email. 'I don’t think you can paint us with a political narrative—that just because we were a Republican administration, somehow we must have ratcheted down enforcement activity. We didn’t.'

However, given the magnitude of the changes found, it is reasonable to wonder if Pfizer executives noted, and approved.

Lax Regulation of a Pfizer Drug (Xeljanz)

The next day, an article in the Milwaukee Journal Sentinel by John Fauber noted what appeared to be lax enforcement specifically involving a Pfizer product.

Unlike European drug regulators, the U.S. Food and Drug Administration under Scott Gottlieb did not say doctors should stop prescribing a potentially dangerous dose of a drug made by Pfizer — a company whose board Gottlieb soon joined.

In February, when Gottlieb still was head of the FDA, a Pfizer safety trial showed that rheumatoid arthritis patients who got a higher dose of the drug Xeljanz had a 'statistically and clinically important difference' of blood clots in the lungs and deaths.

The safety trial, which was required by the FDA, did not focus on the other two conditions for which the drug is approved — ulcerative colitis and psoriatic arthritis. The trial involved patients 50 or older with at least one risk factor for cardiovascular disease.

After safety concerns were found, Pfizer immediately stopped giving the higher dose to those in the trial.

Regulators in Europe went further.

The European Medicines Agency said in May doctors must stop giving the high dose to all patients who were at higher risk for blood clots, including those with ulcerative colitis for whom the higher dose was already recommended.

The FDA did not take that action, though it warned doctors about the safety findings that were discovered in the trial.

One ethics expert interviewed by Mr Fauber raised clear concerns about corruption.

'It sounds like a reward for a job well done,' said Carl Elliot, a physician and professor of bioethics at the University of Minnesota, when told by the Milwaukee Journal Sentinel about the FDA's failure to halt prescribing of the potentially dangerous high dose of the drug.

'It sure does look suspicious.'

Dr Gottlieb, not unexpectedly, denied direct involvement in the decision.

Decisions regarding Xeljanz were made by the agency’s career professional staff without my involvement. I did not participate in any matters involving this drug while I was at FDA

However, Senator Warren's concerns about corruption were heightened:

'Unfortunately, Scott Gottlieb joining the board of Pfizer will raise these kinds of questions about FDA decisions concerning Pfizer, whether it’s this or others,' Warren said in a statement to the Journal Sentinel. 'He shouldn’t have joined Pfizer’s board.'

IMHO, concerns that under the Dr Gottlieb the FDA could have taken a lax approach to drug industry regulation, particularly in the case of Pfizer's Xeljanz, ought to be enough to launch an investigation into whether his appointment to the Pfizer board was corrupt.

Dr Gottlieb Will Now Engage in Governance of a Company with an Already Spotty Ethical Record

Dr Gottlieb's appointment to the Pfizer board shuld raise major ethical questions.

Another set of questions he ought to contemplate is how he will deal with his new responsibility for Pfizer's conduct given the company's chequered ethical record.

We have long been posting about an amazing series of ethical missteps by Pfizer leadership, evidenced by various legal settlements, regulatory sanctions, and occasional guilty pleas.    Our most recent post on the subject, in 2018, noted how Pfizer settled charges of giving kickbacks to patients through disease advocacy organization to mask the prices of its drugs.  Our over 100 posts on Pfizer can be found here.

The company's track record from 2000 to 2017 is staggering.

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).
- In August, 2016, Pfizer made a $486 million settlement of allegations it bilked shareholders by concealing research showing the harms of Celebrex (look here for this and next two items)
- In December, 2016, Pfizer fined $106M in UK for using monopoly on production of generic phenytoin to overcharge National Health Service
- In November, 2017, Pfizer made $94 million settlement of allegations of fraud to delay generic competition

That Dr Gottlieb waltzed through the revolving door to a major role in the governance of Prizer does not give me great confidence that he will be part of the solution to the company's ongoing ethics problems.

Discussion: the Swamp Gets Swampier

 President Trump came to office promising to drain the swamp.

[An alligator in the Everglades, 1963]

At least in terms of health care, Dr Gottlieb's transit through the revolving door is just the latest example of how the swamp waters are rising.  So, as we have said again and again...

Our health care system appears to be rigged to favor of leadership and management of large companies, as opposed to health professionals, and particularly as opposed to patients.  For years now we have discussed stories which include allegations of severe misbehavior by large health care companies affirmed by legal settlements, but which only involve paltry financial penalties to the companies, and almost never any negative consequences to any humans, demonstrating the impunity of health care managers and executives. Furthermore, these stories are often relatively anechoic, noted often only briefly in the media, and have inspired no real action by the US government. We have previously discussed how market fundamentalism (or neoliberalism) led to deregulation, which enabled deception, fraud, bribery, and intimidation to become standard business practices, and allowed increasing concentration of power by large corporations. Managerialism allowed the top leaders of these corporations and their insider cronies to amass increasing power and money. Everyone else, other employees, stockholders of public corporations, customers, vendors and suppliers, and the public at large lost out.   These changes led to an increasingly costly system which produced increasingly bad results for patients and the public.

We have called for years for what we sometimes term "true health care reform" to derig the system. Unfortunately, despite our hopes, perceptions of a rigged system may not always inspire honest reform. Instead, they can enable the rise of demagogues and would be dictators who promise only they can solve the problem.  Donald Trump cried out that only he could fix our problems and drain our swamps.  However, at least in terms of policing white-collar crime, particularly in health care, he seems to be letting the swamp waters rise.

Nonetheless, let us remember the need for wholesale, real health care reform that would make health care leaders accountable for what their organizations do, and 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.