The Shame of US Health Care Dysfunction: Hookworm Returns to Alabama

An article just published online(1), and reported so far in only one major media outlet (the Guardian, based in the UK) showed how hookworm, now considered a disease of poor, third world countries, has returned to the American south.  This in a country which spends more per capita on health care than any other supposedly developed country.

Background - the Supposed Eradication of Hookworm

A 2009 article in Health Affairs documented the supposed elimination of common diseases once found in US.(2)  The background of the article included:

In 1916 a new textbook appeared on the 'endemic diseases of the southern states.' With chapters on malaria, pellagra, and intestinal worms, the book’s authors identified the region as particularly, and peculiarly, diseased. Absent was the dominant southern disease of the nineteenth century: yellow fever. Although yellow fever had traveled hand in hand with the import trade of southern cities, the twentieth-century triad of pellagra, malaria, and hookworm was inextricably linked with the rural poverty engendered by cotton culture and the tenant labor system that evolved to replace slavery after the Civil War. The rural farm worker had little money or access to health care, ate a poor diet, and lived in a subtropical landscape that was host to parasitic worms and mosquitoes. In 1916 the South’s endemic diseases appeared to be thoroughly entrenched. Later, in the depths of the Great Depression, these diseases continued to plague southerners. Yet by 1950 southerners were almost free of them all.

The article noted that hookworm in particular was associated with the South:

Hookworm disease was once associated so much with the South that when a baseball commentator referred to southern players as coming from the 'Hookworm Belt' in 1947, the phrase needed no explanation. The hookworm is a tiny parasite that latches onto the wall of the small intestine, secretes an anticoagulant to promote bleeding, and feeds on the host’s blood. About 110 worms can consume a teaspoon of blood a day. A well-fed host with adequate iron intake can usually replace the lost iron and plasma proteins of a mild infection, but a malnourished person harboring sizable numbers of parasites will become anemic and protein deficient. In children the disease stunted physical and cognitive development. It made them weak, apathetic, and perpetually tired.

In the beginning of the 20th century, the Rockefeller Foundation launched a campaign that probably began the apparent eradication of hookworm.

In 1902, however, Charles Stiles, a medical zoologist, recognized in southerners the same symptoms he had seen among European hookworm victims. Once he started looking, he found a startling prevalence of the disease. He convinced representatives of the Rockefeller Foundation to take up the cause of hookworm eradication, and in 1909 the philanthropy launched an all-out assault on the disease. Their initial surveys found 43 percent of those surveyed to be infected with hookworm; in some areas the percentage rose into the 90s.

The Rockefeller campaign stressed education, treatment, and the assumption by local and state boards of health of the responsibility to carry on what the foundation had begun. With a million dollars in their coffers, the Rockefeller men spread across the South, offering lantern shows about the hookworm, testing and treating individuals, and pushing the construction of sanitary privies. Surveys of rural schools and churches found that 80 percent lacked any sort of privy; private homes were even less likely to have sanitary facilities. Children of all classes went barefoot in the summer, often not wearing shoes until they were teenagers. By 1914, when Rockefeller ended its U.S. campaign, the prevalence of infection had been cut to 39 percent, but the message of hookworm and its implications was now well known throughout the South. The campaign also energized southern public health, leaving a legacy of empowered institutions on the state and local levels.

For more on the history of the Rockefeller Foundation campaign, look here.  I hope the Foundation will not mind me using a picture of a hookworm treatment clinic from 1923.

Hookworm persisted for a surprisingly long time after these initial eradication efforts, although it seemed to be nearly gone by the 1980s.  The article noted that

Even in the 1960s there was persistent infection in coastal South Carolina (3 percent) and eastern Kentucky (14 percent). One source reported that hookworm prevalence in southern Georgia went from 60 percent in 1910 to 13 percent in 1964 and to 6 percent in 1970.

So the disease prevalence fell from over 40% in the early 20th century to a few percent by the 1980s.  One particular mechanism for the decrease was basically better plumbing.

Concerns about typhoid, which was frequently fatal, drove the cities to put in sewers and running water, and fears that the privies of the poor would infect the affluent meant that even the poorer sections of towns had sanitary waste disposal throughout much of South in the 1920s. Slowly the expectation grew that the sanitary privy was essential for adequate housing. In North Carolina in the 1940s, the state board of health required them by law.

So the problem appeared to be solved.  I learned about hookworm in a course in tropical diseases in medical school in the 1970s.  At the time, since I was not planning to go into global health, the knowledge did not seem very relevent.  I suspect that such courses were no longer very prevalent in medical school.

That was then.  This is now.

Hookworm Returns to the Impoverished US South

The new article by McKenna et al noted that hookworm is still very common globally.  In addition, it noted that the conditions are again ripe for the return of hookworm, and presumably other ailments now considered irrelevant to developed countries, to parts of the US.  In particular, the advances in plumbing so important to the eradication of hookworm are no longer so much in evidence.

According to the Alabama Center for Rural Enterprise (ACRE), an organization that addresses poverty and economic development in one of the poorest areas of the nation, there continues to be residences without adequate sanitation systems, increasing exposure to open sewage near dwellings. The “Black-Belt” soil native to this area is composed of a firm sedimentary limestone bed overlain with a layer of dark, rich soils, which requires expensive septic systems for proper waste disposal. In Lowndes County, Alabama, where the per capita income is $18,046, and 31.4% of the population lives below the poverty line, sanitation systems are unaffordable. For rural, impoverished individuals, the main form of waste removal involves use of 'straight piping,' a method involving a series of ditches or crudely constructed piping systems to guide human waste away from the residence. Most pipes never reach more than 10 meters in length, and during rainstorms or flooding, the residents report visible stool entering their homes (reported by ACRE, unpublished data).

The investigators therefore performed an epidemiological study in Lowndes County.  There sample size was small.  However, their findings were striking.  More than one-third (34.%) of subjects tested positive for necator americanus, the American hookworm.  This is close to the prevalence reported back in the early twentieth century.

The Guardian article provided vivid anecdotal evidence about the state of public health in rural Alabama that likely contributed to this result.  The reporter's tour of Lowndes county revealed vividly inadequate sewage systems.  He documented that in Alabama, "public health" was ostensibly insured by making it a criminal offense for people to have inadequate sewage systems.

people were afraid to report the problems, given the spate of criminal prosecutions that were launched by Alabama state between 2002 and 2008 against residents who were open-piping sewage from their homes, unable to afford proper treatment systems. One grandmother was jailed over a weekend for failing to buy a septic tank that cost more than her entire annual income.

'People are scared. They don’t like to speak out as they’re worried the health department will come round and cause trouble,' [community activist Aaron] Thigpen said.

Apparently the state government does not see that it has any resonsibility to provide adequate sewer systems, or provide any help to people to improve sanitation, even those clearly unable to affort it on their own.  Consider, for example, the plight of Ruby Rudolf

Rudolph, now 66, does have her own septic tank at the back of her house, which she shows us in the sweltering 41C (105F) heat. But it doesn’t function properly and when it rains the tank spills over, spreading raw waste all over the yard. 'That’s better than when it flushes back into the house, and I’ve had that too,' she said.

She’s been told a replacement system would cost her at least $12,000, which is beyond her means. She runs through her finances: she gets up at 4am every day to do an early shift at a Mapco convenience store, which brings in less than $1,200 a month. From that amount she has to pay $611 for her mortgage and there’s the electricity bill that can be more than $300 a month when it’s hot and the air conditioning is busy. There’s not a lot left to put toward a new tank.

Left entirely unsaid in the scholarly article or the Guardian story is the likelihood that any residents of these rural Alabama counties have access to any other ways to mitigate the hookworm problem.  Left also unsaid is whether they have access to health care professionals who could test them or treat them for hookworm.

Conclusions

As we have noted endlessly, the US spends more per capita on health care than any other developed country.  US politicians used to make the claim that the country has the best health care system in the world, often to ward off any attempts at true health care reform.  However, US rankings on various measures - some of which may be disputed - of health care processes and outcomes have been decidedly mediocre.  (See for example the latest Commonwealth Fund study here.)

The new study of hookworm prevalence was not based on a big, systematic, or geographically diverse sample.  However it is striking, and dismaying that a disease once thought to be eradicated is again alive and well in the poorer parts of a very rich country. 

Note that while the eradication of hookworm was partially attributed to the energizing of public health in the south, currently public health officials seem to think their job is to arrest poor people who cannot afford adequate sanitation.  The government does not seem to think it has a responsibility to assure working sewers or other forms of basic sanitation.  There also seems to be a governmental abandonment of public health focused on reaching individuals who might most be at risk of disease.

Meanwhile, the country, as we have said before, has seen the diversion of tremendous amounts of health care and public health dollars into the pockets of health care managers, their cronies, health care management and administration in general, and in some cases investors.  This appears in turn to be a consequence of deregulating the system, allowing concentration of power,  allowing the commercialization of various kinds of health care organizations (insurance, hospitals, medical practices, etc), and of turning health care leadership over to managers trained in business schools (managerialism) with no appreciation of health care professionals' values, and with perverse incentives focused on increasing their organizations' revenue and hence their personal enrichment.  We can spend untold sums on new treatments with dubious margins of benefits vs harms, but not on basic public health or access to primary care. 

And hookworm is back. 

Shame on us. 

References

1.  McKenna ML, McAtee S, Bryan PE et al.  Human intestinal parasite burden and poor sanitation in rural Alabama.  Am J Trop Med Hygeine 2017; https://doi.org/10.4269/ajtmh.17-0396

2.  Humphreys M. How four once common diseases were eliminated from the American south.  Health Aff 2009; 28: 1734-1744.  Link here. 

The Rich (Hospital Managers) Get Richer - Carolinas Healthcare Raises Executive Compensation Once Again

It's that time of year again.  Carolinas Healthcare has made public its executive compensation, and once again, its CEO got a big raise, and many other executives made more than a million dollars. And once again, the CEO's raise exceeds the rate of inflation, and seems totally unrelated to how well the health system fulfilled its mission.

The History of Executive Compensation at Carolinas Healthcare

About a year ago, we noted that CEO Michael Tarwater got $5.3 million in total compensation.  In fact, we have been following his compensation since 2009 (see also posts in 2011, 2012, and 2013).  It started big, and got bigger.

- $3.4 million in 2009
- $3.7 million in 2010
- $4.2 million in 2011
- $4.76 million in 2012
- $4.9 million in 2013
- $5.3 million in 2014

The Latest Increases

Now the yearly update by Karen Garloch writing in the Charlotte Observer:

-$6.6 million in 2015

That is a 26% increase in one year, and an almost 100% increase since 2009, increases far greater than inflation.  The 2015 compensation broke down as follows:

In 2015, Tarwater received a salary of $1.28 million, two bonuses totaling $5 million, and other compensation, including retirement and health benefits of $305,318....

In contrast, the bonuses given to non-management personnel by the system were orders of magnitude smaller:

Among nonmanagement employees, more than 22,000 in Carolinas HealthCare’s Charlotte-area hospitals received 2015 incentive bonuses of $1,000 each, and 7,674 others received bonuses of $300 or $600 each, Moore said. Another “special bonus” program benefited about 24,000 employees, who received $1,000 each, and 7,568 others, who got $300 or $600 each. Total bonuses for nonmanagement employees came to $53.4 million, in addition to annual pay raises that averaged 2 percent.

Although that total sounds large in isolation, consider that one person, the CEO, got a bonus equal to one-tenth of all the bonuses given to over 24,000 other employees.

Other top executives also did very well for themselves.  

▪ Joseph Piemont, former chief operating officer: $3,200,326
▪ Greg Gombar, chief financial officer: $2, 334,150
▪ Terrence Akin, CEO of Cone Health: $1,964,482
▪ Dr. Roger Ray, chief physician executive: $1,957,065
▪ John Knox, chief administrative officer: $1,507,984
▪ Paul Franz, executive vice president: $1,500,245
▪ Dennis Phillips, executive vice president: $1,400,487
▪ Keith Smith, general counsel: $1,317,919
▪ Debra Plousha Moore, chief human resources officer: $1,306,477

CHS hospital presidents - 2015
▪ Phyllis Wingate, president, CHS NorthEast: $1,045,784
 ▪ Spencer Lilly, president, Carolinas Medical Center: $868,610
▪ Christopher Hummer, president, CHS Pineville: $711,685
▪ Michael Lutes, president, CHS Union: $690,719
▪ Brian Gwyn, president, CHS Cleveland: $664,034
▪ William Leonard, president, CHS University: $530,493
▪ Peter Acker, president, CHS Lincoln: $475,758
▪ Alfred Taylor, president, Stanly Regional Medical Center: $455,665
▪ Robert Larrison, president, Carolinas Rehabilitation: $407,503

The Usual Talking Points for Justification

Hospital management used the usual talking points to justify the pay they received,  As I wrote last year 

It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they are talking points, possibly crafted as a public relations ploy. We first listed the talking points here, and then provided additional examples of their use. here, here here, here, here, and here, here and here. 

They 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).

So, as if on cue, according to an article in the Charlotte Business Journal,

Carolinas HealthCare said in a statement that its executive compensation program is 'designed to attract, recruit and retain high-performing executives by providing market-competitive, reasonable and fair compensation.'

It notes that recruiting and retaining talent enables the health-care system to pursue 'its mission, lead in the transformation of healthcare and provide best-in-class care to our communities.'

Despite Evidence of Less than High Performance


But some recent news articles suggested that Carolinas Healthcare management is not so high-performing.  For example, we found the following articles, discussed in chronological order,

"Lawsuit: Hospitals Cheated Medicare out of Millions" (Charlotte Observer, September 2, 2015)

A newly unsealed lawsuit alleges that Carolinas Medical Center and N.C. Baptist Hospital have fraudulently obtained tens of millions of dollars from Medicare and Medicaid through an arrangement that artificially inflated their expenses.

The federal suit, filed by Forsyth County whistleblower Joe Vincoli, contends that the two hospitals overstated their costs – and thereby extracted more money from Medicare – by using a company that they own to provide health benefits to their employees.

"Employee Satisfaction at Carolinas HealthCare System Dropped in 2015" (Charlotte Observer, November 6, 2015)

The system had been rated at the 99th percentile in 2012, the 95th percentile in 2013-4, and dropped to the 76th percentile in 2015. The article stated that employees blamed staffing issues and poor leadership.

"Rehab Center Drops Program" (WSOC-TV, January 5, 2016)

The inpatient drug treatment program at First Step at Carolinas Medical Center - Union was dropped for reasons said to be "part financial- and part research-based." The overseer of the local drug treatment court decried the loss of a "very valuable" program.

"Hospitals Failed to Report Outbreaks Linked to Tainted Scopes, Senate Report Says" (Los Angeles Times, January 22, 2016)

This article lead with the failure of Carolinas Medical Center to report an infection apparently caused by the use of an endoscope that later was implicated in multiple infections at multiple hospitals.  The article noted that

Federal law requires hospitals to report deaths from a medical device to the FDA within 10 days. If the device seriously injures a patient, the hospital must notify the manufacturer within 10 days. Both notices require hospitals to fill out what the FDA calls Form 3500A.

"Notice: 360 to Lose Jobs at Health Care Facility" (WSOC-TV, January 26, 2016)

The article noted layoffs at Carolinas Medical Center- Main Rehabilitation program but noted "it's not clear why the positions are being eliminated."

So instead of high performance, the recent track-record of hospital system management included allegations of defrauding the federal government, a marked decrease in employee satisfaction, the closing of an apparently valuable rehabilitation program, the failure to report apparent adverse effects of a medical device despite requirements in federal law, and layoffs at a rehabilitation facility.  

No wonder that Karen Garloch reported in her February, 2016 article,

On hearing about the latest CHS compensation report, Mecklenburg County commissioner Pat Cotham said, 'It’s kind of depressing. … Nothing against Mr. Tarwater personally. He’s led a successful organization. … Generally I struggle with these multimillion-dollar deals. Is anybody really that valuable?'

The question becomes more acute given that it is not even clear whether Carolinas Healthcare is a private non-profit organization or a government agency.  As we noted last year, per Ms Garloch,

The system is technically a hospital authority, created by state law in 1943, and is run by a self-perpetuating board that includes top community and business leaders whose nominations get approval from the commissioners’ chairman. Over the years, chairmen have acknowledged that action is basically a rubber stamp.

A recently closed investigation by the U.S. Department of Labor focused on whether the hospital system is a governmental agency, as it claims. On Thursday, commissioner Bill James said that question remains open and might have bearing on compensation.

James said documents in the investigation included a statement by a lawyer for CHS who said hospital debts 'have been and will be backstopped by the County’s taxing power.' But James said state law has given commissioners no oversight role in connection with CHS.

'I don’t know how CHS can expect taxpayers to ‘backstop’ their billions of debt with County tax dollars without any oversight over it,' James wrote in an email.

'I do not know what is just compensation for a hospital CEO,' James wrote. But he added that most government agencies have 'typical limitations on pay.'

You would think that all those people who loudly critique spending by the "gummint" would be loudly decrying pay at Carolinas Healthcare.  However, I can find no evidence of such protests.

Summary

Whether the top managers of Carolinas Healthcare are government bureaucrats or non-profit executives, they seem to manage to pay themselves more each year, regardless of what other employees are paid, regardless of inflation, and regardless of how well the organization is upholding its health care mission.  This is another example of ho hospital managers have become "value extractors."  The opportunity to extract value has become a major driver of managerial decision making.  And this decision making is probably the major reason our health care system is so expensive and inaccessible, and why it provides such mediocre care for so much money.

So to repeat, true health care reform would put in place leadership that understands the health care context, upholds health care professionals' values, and puts patients' and the public's health ahead of extraneous, particularly short-term financial concerns. We need health care governance that holds health care leaders accountable, and ensures their transparency, integrity and honesty.

The $5.3 Million a Year Government Bureaucrat - The Top Administrator, or CEO of a "Government Entity," Charlotte-Mecklenburg Hospital Authority, "Doing Business as" Carolinas Healthcare Gets a Raise

The pay given to top managers of health care organizations continues its seemingly inexorable rise, and the justifications for it seem to be increasingly perfunctory.  However, a closer look at individual cases can generate even more questions about how we got to this pass.  Our latest example arises from a recent news article about the compensation of top managers at Carolinas Healthcare.  

CEO Pay Levitating Since 2009

In 2011, we started following executive compensation at the hospital system now known as Carolinas Healthcare. Our posts in 2011, 2012, and 2013 all fit the same pattern.The total compensation given to its CEO, Michael C Tarwater, was
- $3.4 million in 2009
- $3.7 million in 2010
- $4.2 million in 2011
- $4.76 million in 2012
- $4.9 million in 2013 (per the Charlotte Observer)


In February, 2014, per Karen Garloch reporting in the Charlotte Observer, we have the newest figure:
- $5.3 million in 2014

The details were

the system’s CEO Michael Tarwater received $5.3 million in total compensation in 2014, an increase of 7.7 percent over the previous year.

Tarwater, 61, who has led the $8 billion nonprofit system since 2002, received a salary of $1.3 million, two bonuses totaling $3.3 million, and other compensation, including retirement and health benefits of $690,280,...

In addition, other top managers also were paid in the millions:

• Joseph Piemont, president and chief operating officer: $3,558,907, 6.3 percent increase
• Greg Gombar, chief financial officer: $2,340,613, 4.7 percent increase
• Laurence Hinsdale, executive vice president: $1,918,371, 2.2 percent decrease
• Paul Franz, executive vice president: $1,721,104, 2.9 percent decrease
• Dr. Roger Ray, chief physician executive: $1,619,584, 5 percent increase
• John Miller, chief executive officer, AnMed Health: $1,598,205, change not available
• John Knox, chief administrative officer: $1,434,112, 2.5 percent increase
• Dennis Phillips, executive vice president: $1,391,918, 3.3 percent decrease
• Debra Plousha Moore, chief human resources officer: $1,269,022, 5.2 percent increase

Not unexpectedly, those who are supposed to be exerting stewardship over Carolinas Healthcare provided just another version of the standard talking points to justify this largesse.

'Having talented leaders capable of managing one of the nation’s most comprehensive health care systems in a very complex environment allows Carolinas HealthCare System to maintain its mission and provide the best care to all of our communities,' said board Chairman Edward Brown, president of Hendrick Automotive Group.

As we have repeated far more often than I would like (most recently here)

It seems nearly every attempt made to defend the outsize compensation given hospital and health system executives involves the same arguments, thus suggesting they are talking points, possibly crafted as a public relations ploy. We first listed the talking points here, and then provided additional examples of their use. here, here here, here, here, and here, here and here. 

They 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).

For the most recent update on Carolinas Healthcare, the board chairman only bothered with the last point.

So far, the case of compensation of top hired managers at Carolinas Healthcare looks very similar to many other cases at other big health care systems.  But this case has a big twist.

A Public Authority Whose Mission is to Serve the Poor

In 2012, we posted, based on another article that year by the indomitable Ms Garloch, how Carolinas Healthcare really is the Charlotte-Mecklenburg Hospital Authority, a public hospital authority created by North Carolina state law to serve the poor.  But faced with declining revenues in the 1980's, hospital management decided to try to attract paying patients, which allowed the Charlotte-Mecklenburg Hospital Authority to transform into a big hospital system.  Charlotte-Mecklenburg Hospital Authority managers came up with the idea of using a snappy new name, so the public hospital authority began "doing business as" Carolinas Healthcare, never mind whether a public hospital authority should really be considered as "doing business."

Yet the organization is still a public health authority.  Its charter and governance have never been changed.  Since the 1980s, however, Charlotte-Mecklenburg Health Authority bureaucrats have represented the organization as "government entity" when that is advantageous to them, or as a "non-profit hospital system" at other times.  

For example, it still gets to raise capital through directly issuing tax exempt municipal bonds.  For example, see this MunicipalBonds.com summary of a recent bond issue.

Also, at least through 2011, it was financed directly by Mecklenburg county to serve the poor, which, again was the Charlotte-Mecklenburg Hospital Authority's original mission.  In a 2012 article in the Charlotte Observer, Karen Garloch wrote,

last June, county commissioners voted to stop paying Carolinas HealthCare $16 million a year to care for the uninsured. With a profit of $428 million in 2010 and nearly $2 billion in reserves, the system no longer needed taxpayers’ help, commissioners concluded.

County Manager Harry Jones said the subsidy was important at one time, 'but circumstances have changed.' He cited a 1994 county committee report that raised this question:

'Given the current profitability of the hospitals, is it not reasonable to suggest that the hospitals become marginally less profitable by absorbing greater indigent care costs?'

Again, in 2011, the US Department of Labor began investigating Carolinas Healthcare about its provision of health benefits to its employees via Medcost, an entity whose ownership it shared with NC Baptist Hospital.  US federal law (ERISA) in general bans companies from providing health benefits to employees via subsidiaries.  NC Baptist settled similar charges in 2013.  The investigation of Carolinas Healthcare is not complete, but ironically a point of contention is its argument that it is a "government entity," and hence the law does not apply to it.  (See this article in the Winston-Salem Journal.)

On the other hand, Charlotte-Mecklenburg Hospital Authority bureaucrats have maintained that the organization, under the new name they chose, does not have the obligations to be transparent that other public entities have.  As Ms Garloch wrote in 2012,

It’s a public organization with a private attitude – open to 'all God’s children,' as hospital officials like to say, but not as open and transparent as other government agencies.

Then,

Basic facts about the hospital system can be hard to get.

For this series, Observer reporters asked Carolinas HealthCare to disclose total administrative expenses for 2010. A corresponding figure was publicly available from Novant through audited financial statements.

Several months after the question was posed, Carolinas HealthCare spokeswoman Gail Rosenberg

responded: 'We do not have the information … on a system-wide basis.'

Mecklenburg officials have criticized the system for lack of transparency.

Last year, [County Manager Harry] Jones declared the system in breach of contract because it failed to share data about the county-owned psychiatric hospital that is managed by Carolinas HealthCare.

'As a governmental entity, (the hospital system) should be more than willing to account to the taxpayers on how they spend … its money,' Jones wrote to Michael Tarwater, the hospital system’s CEO.

In fact, the argument that Carolinas Healthcare is Charlotte-Mecklenburg Hospital Authority, and hence is as a government agency obligated to a degree of transparency was confirmed by a judge in December, 2014, as again reported by the Charlotte Observer.  A lower court had dismissed a lawsuit that contended that Carolinas Heathcare had "violated state public record laws" by keeping confidential a legal settlement it had made with the former Wachovia bank.  However, the lawyer appealed, and

Hospital lawyers had argued that the state public records law doesn’t cover settlements arising from litigation by a government agency.

But in Wednesday’s ruling, a three-judge panel of the appeals court unanimously rejected that argument. The public records act doesn’t specifically exempt such settlement documents, the court concluded.

Disproportionate Pay for Non-Profit Hospital Executives, Much Less Government Bureaucrats

Thus there is a very good argument that the CEO and other top "executives" of Carolinas Healthcare are really the top government bureaucrats at Charlotte-Mecklenburg Health Authority.  But these executives' pay seems out of line even if they were the managers of a non-profit health care system.  In particular, the rising compensation given top management does not square with top management's recent layoffs of middle management.  In 2014, the Charlotte Observer reported,

Carolinas HealthCare System has eliminated more than 100 management positions – including two jobs that paid a total of about $3 million – as part of a goal to trim $110 million in expenses from next year’s budget, hospital officials announced Tuesday.

Cutbacks are necessary, in part, because of federal and state budget cuts in Medicare and Medicaid reimbursement for seniors, low-income and disabled patients, CEO Michael Tarwater said.

Furthermore, despite the board chairman's assertion that the "executives'" pay is deserved for fulfilling the mission, officially the mission of the Charlotte-Mecklenburg Health Authority is still to serve the poor, as far as I can tell.  Yet, in recent years, there have been questions raised about how well the organization serves the poor.  In 2012, we noted that the system had become known for its aggressive attempts to get payment from indigent patients.  In 2013, we noted that the system had pursued legal action against tens of thousands of patients.


Summary

The public discussion about Charlotte-Mecklenburg Hospital Authority, "doing business as" Caroloinas Healthcare, has been confusing.  However, it seems clear, in my humble opinion, that it is still a public, that is government entity.

This raises huge questions.  One is why has it not been more subject to the appropriate political leadership?  In fact, Ms Garloch's 2012 article noted that

The 1943 hospital authority law intentionally kept elected officials and politics out of operations. The link is that the commissioners’ chairman must sign off on hospital board nominees.

It has been a rubber stamp.

County officials remember once in 30 years that a proposed board member was rejected. That was in 2008 when nominees included Gloria Pace King, who had been ousted as CEO of the United Way of the Central Carolinas because of public outcry over her $2 million pension package.

So it appears political leadership could have been exerted, at least to the extent of vetoing the board's proposed new candidates for board membership, but that has never been done, for unclear reasons.

Other questions are how did the bureaucrats in charge of this entity get away with massively changing the nature of its operations de facto without being subject to any political oversight, and without having to change its charter and governance to correspond to these changes?  Finally, how did its top hired bureaucrats (whether they are called managers, or executives really is immaterial) get to pay themselves at least an order of magnitude more than any government bureaucrat of whom I am aware, to pay themselves according to the current outrageous standard for executives of for-profit corporations?

I do not have the capacity to do the investigations necessary to answer these questions.  Hopefully, not only will reporters like Ms Garloch continue to dig deeper, but given this case's implications, it will become subject of more official investigations.

Meanwhile, it has become not merely a great example of how top hired management pay in health care continues to rise past any levels that can be rationally justified, but of what I once called the managers' coup d'etat.  It shows how hired bureaucrats, absent adequate supervision and accountability, have managed to transform health care organizations into instruments of their own enrichment.  To repeat,  true health care reform would put in place leadership that understands the health care context, upholds health care professionals' values, and puts patients' and the public's health ahead of extraneous, particularly short-term financial concerns. We need health care governance that holds health care leaders accountable, and ensures their transparency, integrity and honesty.

But this sort of reform would challenge the interests of managers who are getting very rich off the current system.  So I am afraid the US may end up going far down this final common pathway before enough people manifest enough strength to make real changes.   

    

Long After the Start of the "War on Terror," a Conflict of Interest about an Anthrax Scare Comes to Light

In May, David Willman writing for the Los Angeles Times broke a story of a somewhat new variant on the conflict of interest theme, one that has not gotten a lot of attention, but should.

The issue was medical, with a twist, - how to best treat a bioterror attack with anthrax engineered to be resistant to multiple drugs, an event that luckily is not known to ever have occurred.  The story came from the bad old days of the "war on terror," but only has now come to light years later.

The Alarm Raiser

The story opened thus,

Over the last decade, former Navy Secretary Richard J. Danzig, a prominent lawyer, presidential advisor and biowarfare consultant to the Pentagon and the Department of Homeland Security, has urged the government to counter what he called a major threat to national security.

Terrorists, he warned, could easily engineer a devastating killer germ: a form of anthrax resistant to common antibiotics.

In particular,

Danzig began warning about antibiotic-resistant anthrax after the terrorist attacks of Sept. 11, 2001, and the mailings of anthrax-laced letters that fall.

The powdered anthrax in the letters killed five people but was not resistant to common antibiotics. Asked what gave rise to his concern about resistant strains, Danzig cited conversations with 'people whose technical skills exceed mine.' One of them, Dr. Robert P. Kadlec, a bioterrorism advisor in the Bush White House, said he and others were concerned that terrorists could develop such a weapon.

Danzig has sounded the alarm in published papers and in private briefings and seminars for biodefense and intelligence officials.

In a 2003 report funded by the Pentagon, "Catastrophic Bioterrorism — What Is To Be Done?" he wrote that it would be 'quite easy' for terrorists to produce antibiotic-resistant anthrax. He has expanded on that theme over the years, including in a 2009 paper for the Pentagon.

In the 2003 report, published while raxi [raxibacumab, an anthrax anti-toxin] was in development at Human Genome, Danzig said a drug to combat resistant strains of anthrax should be produced 'as soon as possible' and that stockpiling such a treatment, 'even if expensive and in limited supply' would deter an attack.

John Vitko Jr., a top Homeland Security official during the Bush and Obama administrations, said he turned frequently to Danzig for advice on biodefense matters — and read and 'paid attention to' his 'Catastrophic Bioterrorism' report.

Note that while Danzig is a lawyer, and certainly not a physician or biomedical researcher, he had major credibility in the defense field, particularly in anti-terrorism, so his recommendations had great influence.

He served as a Pentagon appointee during the Carter administration and as undersecretary and then secretary of the Navy under President Clinton. He has a long-standing interest in biowarfare.

During the 2008 presidential campaign, Danzig advised then-Sen. Barack Obama on national security and bioterrorism. After Obama's election, Danzig was named to the Pentagon's Defense Policy Board and the President's Intelligence Advisory Board, in addition to his consulting positions with the Defense Department and Homeland Security.

So apparently at least partly due to Mr Danzig's persistent warnings, the government took action,

 In 2004, President Bush signed into law Project BioShield, which provided billions of dollars for biodefense drugs.

The contracts are administered by the Department of Health and Human Services, based on advice from federal agencies and consultants. Homeland Security must certify the need for a drug before the government can buy it.

 Danzig, through his seminars, writings and consulting duties, has helped frame the discussion over whether a given biological threat is 'material' and whether the government should stockpile medicines to defend against it.

Also,

Speaking of Danzig's broader role as a government advisor, Vitko said: 'Richard's got incredible insights into this and I think has made major contributions'

He called Danzig one of 'the major bio player' and said his views had informed a range of policy considerations, including 'how many countermeasures do you need, of what kind.'

It was in response to advice from Vitko and his staff that Homeland Security Secretary Tom Ridge in 2004 declared anthrax a 'material threat,' the certification required for the government to buy drugs to fight it.

The drug the government bought was raxibacumab, or raxi, an anthrax anti-toxin made by Human Genome Sciences Inc.  

In 2006, the Department of Health and Human Services finalized its first order of raxi — 20,000 doses at a cost of $174 million.

That year, Ridge's successor, Michael Chertoff, signed a second, more specific declaration, adding 'multi-drug-resistant' anthrax to the government's list of material threats.

Asked the basis for the second declaration, Vitko said: 'I think the concern was more forward-looking, and saying, 'How could the threat evolve, and are we prepared for that?''

Since 2009, the Obama administration has ordered an additional 45,000 doses of raxi for $160 million.

There was just one catch.

The Undisclosed Conflict

Mr Danzig had a largely undisclosed conflict of interest.  He was on the board of directors of Human Genome Sciences Inc, the company whose drug his constant warnings and exhortations lead the government to buy.

When Human Genome named Danzig to its board on May 24, 2001, the company's chief executive said his high-level federal experience would 'serve us well.'

He thus was on the board on September 11, 2001, and later when the events on that day and soon after apparently induced him to start sounding the alarm about resistant anthrax, and he stayed on the board as he continued sounding alarms, and after the government started buying his company's drug.

During his 11-year tenure on the board, which ended in August, Danzig collected at least $1,054,255 in director's fees and by cashing in grants of Human Genome stock and stock options, according to Fred Whittlesey of Compensation Venture Group, who reviewed the company's Securities and Exchange Commission filings for The Times.

Nearly half of Danzig's compensation came from the stock options, of which he had been granted 184,000 by the end of 2011, Whittlesey said.

Danzig did not seem to think that serving on the board of the company which made the primary drug directed at the perhaps hypothetical disease about which Danzig was sounding the warning constituted any sort of conflict of interest.

Danzig said in an interview that he believed his position at Human Genome posed no conflict.

He said he had tried to improve policymakers' understanding of biodefense issues, including the threat of antibiotic-resistant anthrax, but never lobbied the government to purchase raxi.

'My view was I'm not going to get involved in selling that,' Danzig said. 'But at the same time now, should I not say what I think is right in the government circles with regard to this? And my answer was, 'If I have occasion to comment on this, it ought to be in general, as a policy matter, not as a particular procurement.'

'I feel that I've acted very properly with regard to this'' he said.

He also apparently did not feel he needed to disclose his board membership to most of the people he was trying to persuade to be alarmed about resistant anthrax, and to pursue a treatment, such as that made by the company on whose board he sat.

 A number of senior federal officials whom Danzig advised on the threat of bioterrorism and what to do about it said they were unaware of his role at Human Genome.

Dr. Philip K. Russell, a biodefense official in the George W. Bush administration who attended invitation-only seminars on bioterrorism led by Danzig, said he did not know about Danzig's tie to the biotech company until The Times asked him about it.

Also,

 Vitko said he knew nothing of Danzig's involvement with Human Genome until a Times reporter asked him about it.

'I'm surprised I didn't,' Vitko said. 'I'm not aware of it.'

Five other present or former biodefense officials who conferred with Danzig said they, too, had been unaware of his position with the company. Danzig, they said, made no mention of it in their presence during group discussions he led or in smaller meetings.

Furthermore,

A Times search found seven papers Danzig had written on bioterrorism since 2001. In only one of those did he disclose his tie to Human Genome.

As an advisor to the federal government, Danzig is required to file confidential forms annually, revealing any outside affiliations but not his related compensation. Danzig said he had noted his position with the biotech firm on the forms.

Asked whether he mentioned his corporate role during contacts with government officials, Danzig replied: 'If I thought any of it posed a potential conflict that might cause somebody who knew about it to discount my views, I would tell them.'

Some people disagreed with Danzig's failure to perceive a conflict of interest

 'Holy smoke—that was a horrible conflict of interest,' said Russell, a physician and retired Army major general who helped lead the government's efforts to prepare for biological attacks.

The Take-Over by a Familiar Corporation

By the way, Human Genome Science was eventually bought out by a bigger company which has had its own sets of issues regarding conflicts of interest, GlaxoSmithKline,

 Human Genome was acquired by GlaxoSmithKline in August [presumably 2012] for $3.6 billion.

It may yet stand to make even more money from raxi,

 Because raxi loses its potency after three years in storage, the government's supply will expire as of 2015, according to federal documents and people familiar with the matter. 

Summary

This appears to be a variant on the "key opinion leader" (KOL) theme writ large.  Mr Danzig clearly functioned as a very major key opinion leader about bioterrorism.  Like many KOLs we have previously discussed, he had financial interests that favored the company whose drugs his key opinion leadership seemed to be favoring.  His influence seems to have lead to huge purchases of these drugs. Like many KOLs who are physicians or health care academics, Mr Danzig seems utterly blind to the possibility that his multiple efforts to emphasize the importance of the supposed disease for which his company made a drug could somehow be viewed as a conflict of interest, or to why failure to tell his audiences about his major relationship to this company might have appeared just a small bit dishonest.  We have seen many medical/ health care KOLs who deny that somehow their opinions could have been influenced by their financial relationships, or that their audiences deserved at least to be aware of these relationships.  Yet, of course, Mr Danzig is not a doctor, and he was trying to influence government purchasers of drugs, not physician prescribers of it.

It does seem that the leadership of health care organizations, particularly but certainly not limited to pharmaceutical and biotechnology companies, have no lack of imagination about how to construct financial relationships with influential people who could help sell their products, whether or not they acknowledge what amounts to their marketing roles.

Given that this story involved influencing the government, it will be interesting to see at this late date whether it results in any legal action.  After all, as David Willman pointed out,

 Federal law bars U.S. officials, including consultants, from giving advice on matters in which they or a company on whose board they serve have 'a financial interest.'

It will also be interesting to see if it gets any more attention.  Only a few blogs have noted it, but at least they included The Scientist.


Yet our country has an unfortunately very long history of corporate leaders getting close to political leaders who then may overlook the legal niceties when their friends' interests are at stake.  Nonetheless, true health care reform would require all those who have decision making power over patients, health policy, or the public health to be completely transparent about their conflicts of interest, and would ban the more serious variants of conflicts of interest, even if that might cost some already rich people a bit of money.  I am not holding my breath, however, about when this might happen.

More Cause for Hope - After Novartis Chairman's Rescinded Golden Parachute, Swiss Voters Give Control of Hired Executives' Salaries Back to Owners

Recently, we discussed the latest stupefyingly big golden parachute given to a departing pharmaceutical executive.  Former Novartis CEO and outgoing chairman Daniel Vasella was to be given more than $75 million, after making multiple millions previously, ostensibly so he would not go to work for a competitor.  After a public outcry, the company cancelled the plan, and Vasella admitted a "mistake."  This was the only instance in recent memory in which a big health care organization pulled back some huge executive pay package due to public protest.

Swiss Voters Give Control of Pay of Hired Executives Back to Company Owners

Now Swiss voters have approved a referendum which would actually let the owners of public companies, the stockholders, decide how much to pay hired executives.  As summarized by the New York Times,

Swiss citizens voted Sunday to impose some of the world’s most severe restrictions on executive compensation, ignoring a warning from the business lobby that such curbs would undermine the country’s investor-friendly image.

 The vote gives shareholders of companies listed in Switzerland a binding say on the overall pay packages for executives and directors. Pension funds holding shares in a company would be obligated to take part in votes on compensation packages.

In addition, companies would no longer be allowed to give bonuses to executives joining or leaving the business, or to executives when their company was taken over. Violations could result in fines equal to up to six years of salary and a prison sentence of up to three years. 

The new rules in Switzerland would be unprecedented in the current era.  

Those who are Ostensibly Pro-Business Defend Hired Executives, not Owners

Despite the fact that the new rules would give control over one type of hired employees, hired executives, back to the shareholders, the owners of companies, spokespeople for big companies, but presumably really for their top executives, claimed that the rule would be bad for shareholders.

 

Ahead of the vote, [the Swiss business federation] EconomieSuisse and Mr. Minder’s other opponents warned of dire consequences if the referendum passed, notably in terms of keeping Switzerland attractive to foreign companies and investors. 

But [chief proponent of the new rules] Mr. Minder argued that Switzerland would benefit if it gave shareholders control over the companies in which they invested.

Furthermore, the Guardian reported, 

Minder says the massive sums demonstrate that company boards have lost control of pay and prefer to fork out 'astronomical' salaries rather than pay dividends to shareholders.

Minder told the Swiss daily Le Temps that the only solution was to give shareholders the power to set pay.

 A Bloomberg article suggested that driving the vote were how the Swiss are

 worried about how long they can fend off the crisis that has engulfed the rest of Europe, and dissatisfied with a feeling of being ripped off by their elites.

'It is scandalous. No one deserves to be paid such monstrously high salaries, especially when their employees get paid not much in comparison,' Marianne Lecoultre, a pensioner who lives in a modest flat on the outskirts of Geneva, told me. 

The Germans are Thinking of Making Hired Executives More Accountable

The German media outlet Deutsche Welle reported that there is now more interest in returning control of hired executive pay to company owners there as well.

 After Swiss citizens voted Sunday to impose controls on executive pay, a similar debate has started in Germany. 

Furthermore,

Joachim Poß, the parliamentary leader of the opposition Social Democratic Party, told the daily Neue Osnabrücker Zeitung that the outcome of the referendum was an important step towards restricting the money-grabbing prevalent in corporate management,

He noted that the referendum was encouragement for an initiative at the EU level, and added that 'people do no longer accept perverted bonus systems, neither in banks nor in the real economy.'

Summary: Ripped Off by Health Care Elites

I can start to imagine how supposedly pro-business people in the US will dismiss actions taken by European countries as anti-business and probably "job killing," even though these actions actually gave more control of publicly held business to their owners, not to government, which would seem to be fully in support of capitalism.  Again, maybe some people making the loudest pro-business noises are really sympathetic to, if not paid by, the hired managers of businesses who have put their enrichment ahead of the interests of other employees, customers, clients or patients, the business owners (stockholders, that is), and the public at large. 

Enormous compensation of hired health care executives, out of all proportion, if related at all to whether their work had any positive effect on patients' or the public's health, has long been a concern on Health Care Renewal.  For example, back in 2006, we posted repeatedly (look here for links) about the billion dollar plus fortune amassed by the then CEO of UnitedHealthcare which vividly contrasted with the company's avowal to "make health care more affordable."  That seemed to be an example back then of a rip off by a member of the health care elite.  Now the notion that our top elites have been generally ripping us off is becoming more widespread.

In my humble opinion, the perverse incentives generated by a system that allows top executives to make almost unlimited amounts, regardless of all other considerations, has been a major reason for US and global health care dysfunction.  Making executive compensation less perverse, and ultimately making health care leaders accountable for the effects of what they do on patients' and the public's health may be an absolutely necessary step to make our health care system more functional.  Now at least there is some precedent, admittedly from Europe, for making top hired managers more accountable. 


As Pierre Briancon wrote in Reuters,

 Corporate boards had better take notice: public outrage at what looks like persistent and unapologetic greed in the most severe economic slump in decades is forcing governments to step in. Throughout Europe, indignation at private excess has become a policy problem for administrations trying to explain the need to cut public spending.

In addition,

Self-moderation doesn’t work and self-interest continues to prevail. Throughout the Western world, corporate boards have paid lip service to the need to take into account public opinion, and nothing much has changed either in the banking industry – the symbol of immoderation – or in the wider corporate world. In desperation, governments are taking more forceful action – sometimes reluctantly: the Swiss referendum followed a failure by the country’s parliament to heed to public indignation.

Government intervention can often be clumsy, and it is fraught with the risk of unintended consequences. But it is the right of governments to legislate on social ills – and excessive and provocative private-sector pay has become one. Meanwhile the lobbies promising economic apocalypse have failed to make their case – and to scare anyone with warnings that 'talent' – as they call it – may relocate to friendlier countries. It would be in the interest of all if they stopped turning a deaf ear to calls for decency emanating even from countries like Switzerland, which is hardly a hotbed of Soviet-style command economics.

Even though the final impetus for the overwhelming majority vote on the Swiss referendum came from a ridiculous golden parachute from a pharmaceutical company, the discussion so far has not centered on health care.  So I get to close with something I have repeated on and on, now with a little hope that it may not be considered so extreme....

 Health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

Another Reason for Hope? - Concern about Excessive Executive Pay in Health Care Goes Mainstream

Another recent case suggested that the problem of excess, disproportionate compensation of health care executives is becoming more of a mainstream concern. 

The Case of Eastern Connecticut Health Network

The case appeared in the Manchester (CT) Journal-Inquirer (link requires subscription).  Here are the basics:

ECHN Inc., which owns Mancester Memorial and Rockville General hospitals, reported to the IRS last year that the company paid its president and CEO, Peter J Karl, a total of $1,042,200 in salary and fringe benefits.  That's a 30.7 percent increase over Karl's compensation reported in the previous year,....

ECHN also reported that six other top executives were paid between $254,640 and $591,090, representing increases of as much as 20.6 percent. 

ECHN is yet another relatively small non-profit hospital system with a million dollar plus CEO.

For comment on this, I turn back to the Journal-Inquirer article.  One person the reporter interviewed

says the big salaries and bonuses paid to top officials at Eastern Connecticut Health Network are part of a national scandal over executive compensation propelled by the 'pursuit of talent for short-term gains.'

'The hospital industry is emblematic of what's happened in executive compensation in the United States, where the multiple of the lowest- paid employee to get to the salary of the highest-paid employee has just exploded over the last 30 years,'....

Furthermore, the person interviewed noted that hospital executives were bemoaning decreases in payments to their institutions by state government "while making 10 to 20 times as much money as" the state governor makes.  In this case, the CEO, Mr Karl's "compensation package was 6.9 times [Governor Daniel P] Malloy's salary of $150,000."

A second person interviewed said

Salaries have gotten to the point where they have skyrocketed and are out of control.

He also raised an issue about conflicts of interest affecting the ECHN board

he agreed with state health care advocate, Victoria Veltri, who told the Journal Inquirer last week that nearly $1 million in business deals between ECHN and five members of its board of trustees require further scrutiny

Criticism from the Mainstream

I have been coy about who the commentators were, but bear with me.

So we see in this one somewhat obscure newspaper article about one small regional hospital system points that we have been raising for years about the perverse incentives generated by excess executive compensation in health care.  We have frequently discussed how such compensation is often completely untethered to the organizations' financial results, much less its positive effects on patients' and the public's health.  Compensation often rises faster than inflation, faster than revenue (and sometimes when revenue declines and deficits loom), and even when the organization is facing financial, clinical, or ethical challenges.  Thus it often seems that the primary goal of the organization has become enriching top executives (look here for a recent example).  As the first commentator noted above, this seems to arise out of the business school dogma that puts short-term revenue ahead of all other goals (which we discussed here, and can be termed financialization.)

But our concerns do seem to be getting more mainstream.  The first commentator above was actually the Governor of Connecticut, Dannel P Malloy, himself.  The second commenter was Connecticut state Senator Steve Cassano.  So prominent politicians are beginning to see the perversity of excess executive compensation in health care at a time of still burgeoning health care costs and still threatened health care access and quality. 

So maybe some more people will listen this time when we repeat....  Health care organizations need leaders that uphold the core values of health care, and focus on and are accountable for the mission, not on secondary responsibilities that conflict with these values and their mission, and not on self-enrichment. Leaders ought to be rewarded reasonably, but not lavishly, for doing what ultimately improves patient care, or when applicable, good education and good research. On the other hand, those who authorize, direct and implement bad behavior ought to suffer negative consequences sufficient to deter future bad behavior.

If we do not fix the severe problems affecting the leadership and governance of health care, and do not increase accountability, integrity and transparency of health care leadership and governance, we will be as much to blame as the leaders when the system collapses.

If gov't officials can't deal with bendy bananas, curvy cucumbers and water for hydration, how can they possibly consider issues with computers?

I present this story with almost no commentary except this post's title, the simple observation that keeping government out of many aspects of out lives is not a bad idea, and a few minor points:

The Telegraph

EU bans claim that water can prevent dehydration

Brussels bureaucrats were ridiculed yesterday after banning drink manufacturers from claiming that water can prevent dehydration.

By Victoria Ward and Nick Collins

6:20AM GMT 18 Nov 2011

EU officials concluded that, following a three-year investigation, there was no evidence to prove the previously undisputed fact.

Producers of bottled water are now forbidden by law from making the claim and will face a two-year jail sentence if they defy the edict, which comes into force in the UK next month.

Last night, critics claimed the EU was at odds with both science and common sense. Conservative MEP Roger Helmer said: “This is stupidity writ large.

“The euro is burning, the EU is falling apart and yet here they are: highly-paid, highly-pensioned officials worrying about the obvious qualities of water and trying to deny us the right to say what is patently true.

“If ever there were an episode which demonstrates the folly of the great European project then this is it.”

NHS health guidelines state clearly that drinking water helps avoid dehydration, and that Britons should drink at least 1.2 litres per day.

The Department for Health disputed the wisdom of the new law. A spokesman said: “Of course water hydrates. While we support the EU in preventing false claims about products, we need to exercise common sense as far as possible."

German professors Dr Andreas Hahn and Dr Moritz Hagenmeyer, who advise food manufacturers on how to advertise their products, asked the European Commission if the claim could be made on labels.

They compiled what they assumed was an uncontroversial statement in order to test new laws which allow products to claim they can reduce the risk of disease, subject to EU approval.

They applied for the right to state that “regular consumption of significant amounts of water can reduce the risk of development of dehydration” as well as preventing a decrease in performance.

However, last February, the European Food Standards Authority (EFSA) refused to approve the statement.

A meeting of 21 scientists in Parma, Italy, concluded that reduced water content in the body was a symptom of dehydration and not something that drinking water could subsequently control.

Now the EFSA verdict has been turned into an EU directive which was issued on Wednesday.

Ukip MEP Paul Nuttall said the ruling made the “bendy banana law” look “positively sane”.

He said: “I had to read this four or five times before I believed it. It is a perfect example of what Brussels does best. Spend three years, with 20 separate pieces of correspondence before summoning 21 professors to Parma where they decide with great solemnity that drinking water cannot be sold as a way to combat dehydration.

“Then they make this judgment law and make it clear that if anybody dares sell water claiming that it is effective against dehydration they could get into serious legal bother.

EU regulations, which aim to uphold food standards across member states, are frequently criticised.

Rules banning bent bananas and curved cucumbers [what?? - ed.] were scrapped in 2008 after causing international ridicule.

Prof Hahn, from the Institute for Food Science and Human Nutrition at Hanover Leibniz University, said the European Commission had made another mistake with its latest ruling.

“What is our reaction to the outcome? Let us put it this way: We are neither surprised nor delighted.

“The European Commission is wrong; it should have authorised the claim. That should be more than clear to anyone who has consumed water in the past, and who has not? We fear there is something wrong in the state of Europe.”

Prof Brian Ratcliffe, spokesman for the Nutrition Society, said dehydration was usually caused by a clinical condition [like hot weather and low fluid intake? - ed.] and that one could remain adequately hydrated without drinking water. [As the study was done in Italy, perhaps they had something else in mind? - ed.]

Water? Where we're going, we don't need water.

He said: “The EU is saying that this does not reduce the risk of dehydration and that is correct.

“This claim is trying to imply that there is something special about bottled water which is not a reasonable claim.”

Hard as this is to believe, the ruling is no April Fool's joke.

-- SS

Guest Blog: Mediator, symptom of a broken French system

Elena Pasca blogs at PharmaCritique, and is a member of the Fondation Sciences Citoyennes.  She discusses the pharmaceutical industry in France, and relationships among that industry and physicians and the government.  She demonstrates that the issues we discuss on Health Care Renewal are global.

Introduction

A few weeks ago, the French health minister proposed a new law to improve pharmacovigilance, drug evaluation and transparency issues. It will be discussed in September by the Parliament. Let’s see what the actual situation is in France.


The Médiator (benfluorex) scandal raises not only pharmacovigilance issues. The first question that comes to one’s mind is how could the drugmaker Servier, who knew about its dangers, keep Médiator on the market for 30 years, despite the repeated alerts and the withdrawal of other amphetamines from the same drug class?

The answer goes far behind pharmacovigilance dysfunction. Médiator is not an isolated case, but an epiphenomenon of structural failures on every organisational level of the French health care, drug evaluation and health information system. The entire system is broken, and there still are dozens of defective and too risky drugs on the French market.

Most relevant for US readers is not to list all the alerts starting in the seventies with the fenfluramines. It’s to understand that the entire system was organised in order to be as industry friendly as possible. And the announced measures aren’t going far enough to change this fact.

Private profits before public health

In July 2009, president Nicolas Sarkozy decorated Jacques Servier with the Légion d’honneur and criticised again what he considered to be a huge amount of administrative regulations in the pharmaceutical branch. For him as the former business attorney of Servier, whose electoral program stipulated “cleaning business law”, too much regulation means less business, less competitive French drugmakers.

President Sarkozy’s health policy clearly favours the pharmaceutical industry, especially Sanofi-Aventis. His choice of Alzheimer disease as the first public health issue is not naïve. Sarkozy’s brothers have multiple conflicts of interests and ties with Sanofi-Aventis, the insurance industry and the organisations and institutions involved in the health care of the elderly, as I pointed out in an investigation published on Pharmacritique. And Sanofi hasn’t yet any me-too from the anticholinesterase drug class largely prescribed to Alzheimer patients, despite repeated proof of their ineffectiveness and of their side effects.

As a direct result of Sarkozy’s policy, publicly funded research will be exploited through public-private partnerships to produce immediate results – and neglecting fundamental research bringing new knowledge and thus real therapeutic progress. The intellectual property policy clearly favours private profits.

The European research policy has the same aims: the Innovative Medicines Initiative is clearly oriented toward “innovation” meant as competitive advantage for the pharmaceutical industry, not as an improvement in disease understanding and treatment. The exploitation of public research for private corporate profits has been criticised by the Helmholtz Gemeinschat (union of the German public research centres).

A few weeks ago, 98 European NGOs and organisations wrote an open letter criticising the Common Strategic Framework for EU Research and Innovation Funding and asking for a responsible European research policy: “Public Research should benefit Society, not Big Business”.

Conflicts of interests are everywhere, corrupting the entire health care system

In France, except for two journals (Prescrire and Pratiques), the entire medical press is completely dependent on drugmakers and their advertising. Especially family physicians receive such journals for free. They include no disclosures, so there’s no possibility to sort out advertising from information. Most of those journals are owned by a trust whose leader is Gérard Kouchner, brother of the former health minister Dr. Bernard Kouchner. (See this post on PharmaCritique.)

To this misinformation by the sponsored press has to be added another source of bias: continuing medical education [CME] is funded up to 98% by the pharmaceutical industry. And up to 97% of self-employed physicians still receive drug reps and consider them to be a comfortable, if not reliable, information source.

As long as I can go back, all health ministers have had conflicts of interest. In a hearing by the Parliament’s committee on Médiator, Gérard Kouchner was questioned about his journals’ silence about the risks of this drug and about the book written by the whistleblower Dr. Irène Frachon. He answered those journals are serious, no odd news, no sensationalism… As if informing physicians about severe side effects of a drug and experts’ conflicts of interests and drugmaker influence wouldn’t be serious enough…

The state can’t control conflicts of interest and implement oversight because the medical corporation is well organised (trade unions…) and opposes every reform or measure restricting its freedom. And the medical lobby knows how to use its political influence. Commercial interests, entrepreneurship, industrial funding (research, travel, professional activities, CME…) are organised and encouraged by the Order of Physicians. Despite of the 1994 law prohibiting gifts, dining, wining and lodging continues. Daily corruption is widely accepted, since it is approved by the Order of Physicians… Organised medicine’s unusually strong influence over France’s health care system is well described by Marc Rodwin in his book “Conflicts of Interest and the Future of Medicine. The United States, France, and Japan” (Oxford University Press 2011).

The French FDA – AFSSAPS - is financed up to 80% by the pharmaceutical industry, via taxes. Up to 70% of the AFSSAPS experts have conflicts of interest. But the real percentage must be higher, because the recently introduced disclosures aren’t verified, and omissions or false declarations aren’t prosecuted. In a 2007 report, AFSSAPS officials had to acknowledge their strategy of “managing” conflicts of interests wasn’t a success...

The more drugs the agency approves, the more money it gets. Drugmakers exploit competition existing among European agencies to earn more money, and they also know which country will easily approve their drugs, opening the door for a homologation by the EMA (European Medicines Agency). When a drugmaker knows this or that drug is defective, approval is not even attempted in the US, but only in certain European countries. Why risk a defeat that could damage its image?

For example, during the swine flu epidemics, some vaccine makers haven’t asked for approval in the USA, because their vaccines contain new technologies (MDCK cells, adjuvants such as squalen) they wanted to “test” on European people first, before submitting them to the FDA. The German independent journal Arznei-Telegramm revealed the existence of a market analysis counselling this strategy (2009; 40: 85-7).

None of the swine flu vaccines commercialised in Europe were approved in the US. The same laboratories produced different vaccines, and new technologies were used instead of the classical ones, in the name of the… emergency. Since then, hundreds of cases of narcolepsy were reported, especially among children and teen-agers, as a side effect of GSK’s Pandemrix (containing squalen).  (See this post on PharmaCritique.)

Complete lack of information about drugs and their adverse reactions

Pharmacovigilance in France is rather pharmacosomnolence: the AFSSAPS reacts late after others western countries when it comes to puttin a defective drug off the market. On the opposite, it easily accepts homologation demands. If you compare the drugs available in France and the USA, you’ll find lots of drugs rapidly withdrawn or rejected by the FDA, or even unknown in the US: etoricoxib (Arcoxia), nimesulid, rimonabant (Acomplia), lots of progestagens, veraliprid (Agréal)… After the FDA decision, it took 11 years to take Distilbene (DES) off the French market. Vioxx continued for years on the French market after its withdrawal in the US. Mediator was withdrawn 1997 in the US, 2010 in France. And so on.

In a 2008 article, Donald Light highlighted “Europeans are kept in ignorance about dangerous drugs” (Rev Prescrire 2008;28(297):553). He gave several examples of drugs such as aprotinin, olanzapine, etoricoxib, sleeping drugs… where safety alerts have been made public by the FDA and relayed by the US media, and compared this information with the silence in France. Before the Médiator scandal, the French media weren’t interested in drug safety, conflicts of interest, corruption, bias in the medical research…

But it’s even worse. The public has no access to the official prescribing information, reserved to physicians paying for the Vidal (equivalent of the Physicians’ Desk Reference), edited by a private company… I compared the prescribing information of lots for drugs available in the US and in France, produced by the same drug companies, approved in the same indications. The information is so different, as if they weren’t the same drugs…

France has few relevant regulations and laws, so the country is a paradise for the pharmaceutical industry, and for industries, lobbies and business in general. There’s no FOIA, no way for watchdogs – even for official watchdog agencies – to get real information. In a 2007 report, the IGAS (General Inspection of Social Affairs, France’s OIG) only could give estimations, based on extrapolations, about lobbying and marketing expenses of the pharmaceutical industry.

Consumers International published the results of a 2008 conducted inquiry about drugmakers’ legal obligations in the US compared to Europe. 12 drugmakers answered and all agreed the requirements aren’t at all the same, in regard of transparency and disclosures, in regard of complete information about drugs, and so on.

So why would drugmakers give an information no one requires and no one wants?

Pharmacovigilance is subordinated to drug approval, and until recently, patients couldn’t report side effects. A pharmacovigilance official told me that even now, adverse reaction reports without documentation and follow-up aren’t always counted. The regional pharmacovigilance centres don’t forward them to the AFSSAPS.

There’s no transparency about the specific phases of the drug evaluation system, in terms of risk/benefits, and there’s no evaluation at all in terms of cost/effectiveness and economic efficiency. The Haute Autorité de Santé was created for this kind of quality and economic efficiency evaluation, like the German IQWIG and the British NICE. But everything it does is officialise drugmaker marketing claims and “assess” the improvement in the actual benefit. But it’s only a formal assessment, and I don’t remember of a drug dismissed by this agency because of insufficient improvement…

In January 2011, president Sarkozy appointed Pr. Jean-Luc Harousseau as the head of the Haute Autorité de Santé, despite all the recent promises to reform the system and fight against the conflicts of interest of experts and officials. Pr. Harousseau is the perfect example of French opinion leaders with political and industrial interests that become experts and leaders of national institutions: he was politically involved in Sarkozy’s party (UMP); he and his research teams earned more than 200.000 euros in the 3 years before his nomination.  (See this post on PharmaCritique.)

Philippe Lamoureux, the former head of INPES (National Institute for Prevention and Health Education) went over to the LEEM (French PhRMA), without any “cooling off” period. (See this post on PharmCritique.)

The revolving doors turn very easily in France, as well as in Europe. ALTER-EU (Alliance for Lobbying Transparency and Ethics Regulation) reported about EMA’s former director, Thomas Löngrenn, who took a job as a lobbyist for the pharmaceutical industry, just like other European commissioners. And Guido Rasi, the next EMA director, said at a colloquium in Bologna that an expert without conflicts of interest is not interesting, because drug companies only work with the best…

Some other points in brief:

- there’s no Sunshine Act or any similar obligation in France;

- the 2002 law requiring a disclosure for health professionals talking publicly about a drug is not applied;

- no whistleblower protection (so that libel law is used all the time against them in SLAPP’s: strategic lawsuits against public participation);

- there are no specific laws (like the US False Claims Act or RICO) allowing trials for defective drugs or other abuses; no possibility for a qui tam lawsuit;

- no law to prosecute corruption and its consequences (like the US Federal Anti Kickback Statute);

- no law enabling class actions;

- no specific qualifications for victims of defective drugs (“injury”, “aggravated deception” are those used by Médiator victims and their families…);

- taxpayers pay for the victims (if ever they can get recognition and damages);

- no physician liability for prescriptions and their consequences, or for conflicts of interest and corruption;

- no FOIA; a minimalist law called CADA (« accès aux documents administratifs ») preserves secrecy of data and of conflicts of interests in the name of industrial property and private life protection);

- no corporate integrity agreement;

- no attorney general asset redistribution programs (well, without trials, there’s no need for such frameworks…);

- no disclosure in scientific publications.

Direct-to-consumer advertising is prohibited by law. A good point. But this prohibition is by-passed all the time. Pharmaceutical firms sponsor “health education campaigns” organised together with public institutions, medical societies and/or patient associations tied to drugmakers. For example, a public campaign whose official goal is to raise awareness about the “dangers” of cholesterol is meant to transform a risk factor in a disease, medicalise more and more people who will look for the statins commercialised by the sponsor Pfizer. Not to speak about the repeated attempts of the European Commission to impose the “pharmaceutical package” wanted by EFPIA (European Federation of Pharmaceutical Industry Associations), i.e. enable drugmakers to have a direct access to patients and provide “information”, and weaken pharmacovigilance through several regulations exposed in this text by Prescrire International.

Worst of both socialised medicine and market logic

The French system allies the worst side of socialised medicine and of the market and competition-based system.

Co-payments were introduced a few years ago, but cost reimbursement is still good. Everyone has a public insurance (“régime général”) that covers about 65% of the costs, for a quite large list of drugs and procedures. For the remaining 35%, each individual has to pay for a private insurance. There is a public “universal” insurance for people earning less than 650 euros a month. Nevertheless, about 23% give up health care, because of the costs, and especially because of excessive charges exceeding the statutory fees. This rate is much higher in dental and optical care, where public coverage is almost inexistent.

So what’s the problem, compared with countries without universal health insurance? The problem is lack of organisation, poor economic efficiency and quality, in regard of the high costs. Primary care isn’t organised as it should be in a socialised system. Most of it consists of self-employed physicians working alone, and the same applies for self-employed specialists outside hospitals. They work without coordination and oversight. More and more for-profit hospitals are founded, to treat lucrative, acute diseases, leaving the chronic ones and all complications to public hospitals that still do a good job, but are chronically deficient, because of inappropriate activity-based payment model and budget distribution, and because of budgetary restrictions as a result of an irrational policy of economic management and accountable cost containment.

This lack of organisation originates in organised medicine’s resistance to any restriction and oversight. It hinders every evaluation in terms of quality and leads to specific forms of conflicts of interest and global poor quality. The recent introduction of some pay-for-performance measures worsens the problem; incentives are paid by the social security for objectives that aren’t subjected to any evaluation. Family physicians get up to 9.000 euros extra a year if they obtain the wanted percentages of regular breast screening, influenza vaccines in elderly, and so on. It’s not prevention, but overmedicalisation and aggressive preventive medicine as described by David Sackett.

Organised medicine dominates and shapes France’s medical economy and health care organisation. It also blocks the development of not-for-profit hospitals, created by mutual insurers, as well as any form of medical centres employing physicians. Every attempt to regulate charges exceeding the statutory fees is blocked.

The Order of Physicians is the only “judge” in cases of misconduct, and it rarely forwards the proof to the public watchdogs or to prosecutors. Self-regulation through voluntary codes of conduct is the rule, for the medical corporation as well as for the pharmaceutical industry.

This can’t be called “socialised medicine” and contradicts the republican principles originating in the French revolution, fought to put a stop to corporations and their influence on public decision, on politics and on economy.

Medical consumerism and physician financial interests complete themselves, and “socialised medicine” isn’t appropriate anymore to describe the French system. The dangers for public health care and coverage were pointed out in a paper written by the former medical director of social security, Pr. Claude Béraud.  (See this post on PharmaCritique.)

Of course, such a system isn’t affordable in the long term. And this is exactly what ultra-capitalists and right-wing politicians want, in order to demolish socialised medicine and public health care and promote private health maintenance organisations and insurances.

Passivity, no awareness, no criticism

Another consequence of a deformed conception of socialised medicine is patients’ lack of health education, of healthy skepticism, of criticism and of action. Before the Médiator scandal, patients were too confident in what they thought to be state protection on every level : an approved drug was thought to be sure and useful, an opinion leader’s discourse promoting some new drug was thought to express the highest technical standards, and so on. There was no awareness at all about conflicts of interest.

Physicians’ awareness wasn’t much better. For example, Arnold Relman wrote his paper about “The new medical-industrial complex” in 1980. In France, it took 25 years until Jean-Claude Salomon wrote “The medical-financial complex”…

The only resistance comes from a few organisations, such as the independent medical journal Prescrire and the grassroots NGO Fondation Sciences Citoyennes, and from a few personalities such as senator François Autain, Pr. Claude Béraud and a few others, mentioned by Marc Rodwin in his book “Conflicts of Interest and the Future of Medicine. The United States, France, and Japan”.

The Fondation Sciences Citoyennes and the European Alliance for Lobbying Transparency and Ethic Regulation regularly protest and start actions and proposals about revolving doors, lobbying, conflicts of interests and corruption in all areas, as well as law proposals about expertise deontology and whistleblower protection.

Lots of reports without consequences

The left-wing representatives in the two parliament chambers have put in place hearings about the Mediator scandal, but no enquiry that could enable them to investigate the structural causes of repeated drug and conflicts of interest problems and take concrete measures. Some of the representatives are members of the “Club Hippocrate”, sponsored by Glaxo Smith Kline…

The congressman Bernard Debré and the former medicine professor Philippe Even, known for his longstanding criticism, have written a vehement report about the drug evaluation system. Without consequences. The Inspector General for Social Affairs (IGAS) has published a report on Médiator that clearly points out the responsibilities: every single institution has failed, from the drug agency to the political instances and the medical organisations. The last report of the same IGAS, published in June, contains concrete and pragmatic proposals on how to deeply reform the entire pharmacovigilance and drug evaluation system.

The assessment process initiated by the health minister Xavier Bertrand – Assises du Médicament – has nothing to do with a trial assessing facts (“assises” means a trial with jurors). The working groups were clearly dominated by LEEM (the French PhRMA) representatives and by opinion leaders tied to drugmakers. Most of the independent organisations and critiques were not allowed to participate, “in order to respect a balance” between different interests. Fondation Sciences Citoyennes was excluded and described the situation in this detailed press release, asking independent NGOs to organise counter-Assises. 


The law proposal presented on the 1st August by Xavier Bertrand contains some long due measures, but no real progress.

The pharmaceutical industry’s interests won’t be endangered by any measures and laws arising from the Médiator scandal.

Elena Pasca
Pharmacritique, Fondation Sciences Citoyennes

ADDENDUM - Elena Pasca asked me to insert her thanks that we published her guest post.  But we owe her considerable thanks for her efforts to explain the French situation, and show how the issues we discuss on Health Care Renewal are truly global.