Former FDA Commissioner, CMS Administrator McClellan adds Johnson and Johnson Board Membership to Positions with General Atlantic LLC, Capital Royalty, Castlight Health, and AvivReit

Our latest example of the interchangeability of top insiders within corporate health care and the government agencies that are supposed to regulate corporate health care comes via an announcement from Johnson and Johnson,

Johnson & Johnson (NYSE: JNJ) announced today that Mark B. McClellan, M.D., Ph.D., Senior Fellow in Economic Studies, and Director of the Initiative on Value and Innovation in Health Care, Brookings Institution, will join the Board of Directors on October 15, 2013.  Dr. McClellan will serve on the Regulatory, Compliance & Government Affairs Committee and the Science, Technology & Sustainability Committee of the Board.

As former commissioner of the U.S. Food and Drug Administration (FDA) from 2002 to 2004, and as the former administrator of the Centers for Medicare & Medicaid Services for the U.S. Department of Health and Human Services from 2004 to 2006, Dr. McClellan has more than two decades of public service and academic research experience. From 2001 to 2002, he served as a member of the President's Council of Economic Advisers and senior director for health care policy at the White House. During President William J. Clinton's administration, Dr. McClellan held the position of deputy assistant secretary of the Treasury for economic policy.

So Dr McClellan has gone from running the US Food and Drug Administration, the primary government regulator of the pharmaceutical industry, to stewardship of one of the biggest pharmaceutical (and biotechnology and device) companies.

Not noted in that announcement was that Dr McClellan has been collecting positions in health care corporations since at least 2009.  The examples I found included in chronological order:

2009 - General Atlantic LLC

This appears to be a private equity firm which claims to be a "leading global investment firm."

From a 2010 a Mergers & Acquisitions article,

A year ago, the firm hired Dr Mark McClellan, previously a commissioner of the Food & Drug Administration, to its healthcare practice as a special advisor.

According to the firm's current website, he is still a special advisor.  

2010 - Capital Royalty LP

In a 2010 press release, this apparently private equity firm claimed to be

a market pioneer and innovator in healthcare investing with a focus on intellectual property investments in FDA-approved biopharmaceutical assets

In that release, it announced the creation of a Strategic Advisory Committee that included Dr Mark McClellan.  He still sits on that committee. 

2012 - Castlight Health

In a 2012 press release, this firm claimed to be

developer of a personalized health care shopping portal offering unbiased information about health care cost and quality

That press release announced the addition of Dr McClellan to the firm's Advisory Board, on which he still sits. 

2013 - AvivReit

This firm "specializes in the ownership and triple-net leasing of post-acute and long-term care skilled nursing facilities (SNFs)" per its website.

Dr McClellan is currently on its board of directors.  He apparently was appointed in 2013. 

Notably, I did not see anything in any of these firms' announcements about Dr McClellan or their biographies of him that noted his board or advisory committee positions with other firms.

Summary

Dr Mark McClellan rose through the ranks in the US executive branch ending with positions as FDA commissioner and administrator of the Center for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services (DHHS).  He served under two presidents, Clinton and George W Bush.  Within 3 years of exiting DHHS, he picked up his first important commercial position, at General Atlantic LLC, and then added other positions with Capital Royalty, Castlight Health, AvivReit, and now the biggest of all, Johnson and Johnson.  Meanwhile he apparently continues at the Brookings Institution.  He must be one very busy man.

This case could be lumped with those of another former FDA commissioner and Secretary of Health and Human Services who ended up as a Director of Medtronic (see this post),  another Secretary of DHHS who ended up on the boards of multiple health care corporations (see this post), a director of the National Institutes of Health (NIH) who became a Sanofi executive, etc, etc (see this post).

While some might argue whether his acquisition of a leading advisory position with a private equity firm three years after he left DHHS technically constituted a spin through the revolving door, Dr McClellan's cumulative acquisition of four more such positions within the following four years certainly demonstrates how our corporate dominated health care system and the government agencies which are supposed to be regulating it to assure the health and safety of patients, and the maintenance of the public health seem to be run by an interchangeable cast of insiders.  We have asked before whether we can trust federal regulators to put patients' and the public's health first when they know they could easily become  candidates for lucrative private positions in the companies they regulate, or which are affected by their regulations, presumably assuming they have not done too much during their time in government to offend the leaders of such companies.

We have noted that the system in which government and big corporations largely overlap in terms of their leadership and presumably goals is called corporatism.  One can argue that such systems end up being run primarily for the benefit of corporate and government insiders.

 Until we dispel the fog of corporatism that has spread over the government that was once supposed to be of the people, by the people, and for the people, expect no real health care reform, and expect continuing rising costs, declining access, and worsening patient care. Obviously, true health care reform would start with the government and its officials putting patients' and the public's health first, way ahead of the financial comfort of corporate leaders.

I would note that neither the currently controversial and now operational Affordable Care Act, nor any of its opponents schemes for alternatives addresses this issue.

by Roy M. Poses MD for Health Care Renewal 

Another Revolving Door Variant: From Academia with Millions in Medtronic Royalties, to the White House, to the Health Care Service Corp

The revolving door spins, and where it will stop, nobody knows...

In October, 2010, we noted questions about how Dr Stephen Ondra got to be a Senior Policy Adviser for the US Department of Veterans Affairs. A veteran who was a neurosurgery professor at Northwestern University, Dr Ondra had received millions of dollars in royalties from device manufacturer Medtronic, whose CEO supported his appointment to the government position  (see this post).  As soon as he was appointed, he publicly opposed a nominee for US Surgeon General who had been critical of the medical device industry, and its financial ties to doctors.

After going to Washington, Dr Ondra apparently also served in the Executive Office of the President, in the White House, but returned to Northwestern University in 2012.  However, he did not stay there for long.

This month, a post on Forbes indicated he is moving on again, and back to the corporate side of health care.

the nation’s fourth-largest health insurance company is naming a key former health advisor to President Obama as its top doctor.

Dr. Stephen Ondra, will become senior vice president and chief medical officer at Health Care Service Corp., the Chicago-based parent company of Blue Cross plans in Illinois, Texas, Oklahoma and New Mexico. The plan has more than 13 million health plan members and is looking to grow even more, announcing last year a proposed partnership with the Blue Cross plan in Montana.

Health Care Service Corp is a mutual insurance company, that is, a company owned by its policy-holders rather than stock holders.  However, that does apparently not make it any more ascetic than a typical for-profit insurance company, at least in terms of generosity towards its top hired executives.  As Crain's Chicago Business reported in 2012,

New federal regulations intended to force health insurers to spend less on administration didn't keep the parent of Blue Cross & Blue Shield of Illinois from paying CEO Patricia Hemingway Hall more than $12.9 million in 2011, a 61 percent raise.

The Health Care Service Corp. chief executive's total compensation last year dwarfed the $8 million she received in 2010, according to a filing with the Illinois Department of Insurance. The 2011 increase was fueled by an $11.8 million bonus, which was 69 percent above her 2010 bonus of $7 million.

Ms. Hall wasn't alone in getting a big raise at Health Care Service, whose insurance business booked net income of more than $1 billion in 2011, for the second straight year.

The 10 highest-paid executives at the Chicago-based mutual company — which operates Blue Cross plans in Illinois and three other states — earned a collective $41.7 million, 65 percent more than the $25.3 million they were paid in 2010.

 If Dr Ondra's new position puts him among the latter group of executives, he too stands to make millions a year. 

So to recap Dr Ondra's career so far, in 2010 he was a medical school professor who had earned millions in royalties from Medtronic.  He then went to top leadership positions in the US Veterans Department and Executive Office of the President.  He returned briefly to Northwestern University, only to leave again for a top executive position in for-profit insurance company Health Care Service Corp, where he is likely to make millions more.

Thus Dr Ondra is our latest interesting example of the "revolving door" phenomenon in health care.  He started as an erstwhile academic physician but with a very major financial relationship with a medical device company.  He then went through the door the first time into the US government, and then a second time from the government to a for-profit insurance company, with just a brief stop-over in academia.

By the way, it appears that all of this is quite legal.  It does again raise questions about whether health care leaders in government with previous relationships with industry might still feel undue sympathy to the interests of industry, as might government leaders who can expect future jobs in industry.

Moreover, this case, like previous cases we have discussed,  indicates how leadership in academic health care, corporate health care, and the government tend to blend together.  Leaders of one type of organization have more and more in common with leaders of the other types of organizations than they do with their lesser ranked colleagues, and certainly than with other health care constituencies.  So the more the revolving door revolves, the more we wonder about the corporatism of health care, about how health care seems to be increasingly run by an amorphous group of academic/ corporate/ government leaders whose loyalties may be more to each other than to academic and professional values, patients' and the public's health, and government of, by and for the people.

How the "Revolving Door" and Other Aspects of Corporatism Benefited Amgen Just After its Settlement and Guilty Plea

At least here in these United States, our health care corporatism is bipartisan.  Here we present a sorry story of how a company that should have been shamed by dishonest behavior that likely harmed patients instead apparently was awarded special treatment through its cozy relationships with top government leaders
 
Accusations of Kickbacks and Deceptive Marketing of Aranesp 

Last month, biotechnology giant pleaded guilty to a charge of misbranding and settled civil charges with the US government for $762 million (look here).  Soon after, New York Times article described the unethical practices the company was alleged to have performed.  It opened with a vivid anecdote:

'I hope no one is taping this,' the Amgen manager remarked at a company sales meeting in 2005.

The manager then boasted of how she had given a $10,000 unrestricted grant to a pet project of a doctor who was an adviser to the local  Medicare contractor. In turn, she said, the doctor would help persuade the contractor to provide reimbursement for an unapproved use of Amgen’s anemia drug, Aranesp. 

Since that account appeared to be of a quid pro quo, it did sound like some a kickback or bribery.  In addition,

Amgen is also accused of offering kickbacks to doctors and clinics to induce them to use its drugs. These reportedly came as cash, rebates, free samples, educational and research grants, dinners and travel, and other inducements.   

Of course, since this was the usual sort of settlement we see of health care corporate wrongdoing, in which the reason the company is paying what appears to be a large fine remains ambiguous,

Except for those in the criminal count, Amgen denied the other accusations, though it did issue a statement on Wednesday acknowledging the settlement.

'The government raised important concerns in the criminal prosecution,' Cynthia M. Patton, chief compliance officer at Amgen, said in the statement. 'Amgen acknowledges that mistakes were made, and we did not live up to our standards.'

"Mistakes were made," what a handy phrase to avoid acknowledging that a real person or person made those mistakes.  Why government prosecutors did not leverage instances in which the mistakes were made by an identifiable person, for example, the manager in the anecdote above, to find out who ultimately authorized and directed the kickbacks and deceptive marketing, and then seek to indict them is a mystery.  The US Department of Justice now seems to be disinclined to ever pursue top  health care corporate executives who may have done wrong, while they exuberantly pursue fines from the companies they direct, fines which have almost no personal impact on those who authorized, directed or implemented the bad behavior.
  
The Times article also included a telling allegation that behind this apparent misbehavior was a changed corporate culture that put short-term revenue ahead of all other considerations.  

the corporate culture changed starting around 2000. That was when new management came in and Aranesp was approved, setting up a fierce marketing battle with Johnson & Johnson and its rival anemia drug, Procrit.

'It was more important to make your numbers than to follow the rules,' said [former Amgen sales representative and now whistle-blower Jill] ...Osiecki, who was based in Milwaukee and sold Aranesp. 

We have discussed how the "make your numbers" culture seems to have resulted from an over-generalization of the prevalent belief in business schools that "maximizing shareholder value," which usually seems to mean maximizing short-term revenue and/or doing whatever it takes to boost stock prices in the short-term (look here).  In companies which make potentially beneficial but also potentially hazardous drugs, the risks of "make your numbers" are obvious.

Shameful Consequences for Patients 

These were disconcerting revelations.  They showed that some unidentified employees, probably including top leaders of a major health care corporation seemed to use kickbacks and lies to deceptively market a drug just to "make their numbers," and thus most likely score healthy bonuses.  Yet this drug is clearly dangerous.  The official Aranesp label states (in a black box warning, in capital letters):

 ESAs INCREASE THE RISK OF DEATH, MYOCARDIAL INFARCTION, STROKE, VENOUS THROMBOEMBOLISM, THROMBOSIS OF VASCULAR ACCESS AND TUMOR PROGRESSION OR RECURRENCE

Thus deceptive and unethical marketing practices likely lead to overuse of the drug, and overuse of the drug likely lead to sick (via myocardial infarction [heart attack], stroke, venous thromboembolism or thrombosis of vascular access [drug clots], or tumor progression) or dead patients.

One would think that the consequences of the particular bad behavior alleged in this case would have lead to more zealous prosecution and to the pursuit of actual people who authorized, directed or implemented the bad behavior.  However, it did not.


One would also think that the nature and consequences of this bad behavior would harm the reputation of the company and its leadership.  Instead, it appears that soon after the settlement was announced, top US elected leaders were fawning over this company and its leadership, and rushing to legislate special treatment for it.

Special Treatment from Legislators

Yet soon after these disconcerting revelations that should have shamed Amgen and its leadership, it appears that the company benefited from legislation narrowly crafted mainly just for to suit its interests, and with the aid of allies from both parties within the US government.  That story was again just reported by the New York Times.  The basics are:

Just two weeks after pleading guilty in a major federal fraud case, Amgen, the world’s largest biotechnology firm, scored a largely unnoticed coup on Capitol Hill: Lawmakers inserted a paragraph into the "fiscal cliff"  bill that did not mention the company by name but strongly favored one of its drugs. 

 

The language buried in Section 632 of the law delays a set of Medicare price restraints on a class of drugs that includes Sensipar, a lucrative Amgen pill used by kidney dialysis patients.

The provision gives Amgen an additional two years to sell Sensipar without government controls. The news was so welcome that the company’s chief executive quickly relayed it to investment analysts.  But it is projected to cost Medicare up to $500 million over that period.[That would almost make up for the fine the company had to pay for illegal marketing and to settle kickback charges - Ed]

Amgen, which has a small army of 74 lobbyists in the capital, was the only company to argue aggressively for the delay, according to several Congressional aides of both parties. 

But the Times article noted that it was not just the size of its army of lobbyists that did it.  

 Amgen has deep financial and political ties to lawmakers like Senate Minority Leader Mitch McConnell, Republican of Kentucky, and Senators Max Baucus, Democrat of Montana, and Orrin G Hatch, Republican of Utah, who hold heavy sway over Medicare payment policy as the leaders of the Finance Committee. 

In particular, Amgen

has a deep bench of Washington lobbyists that includes Jeff Forbes, the former chief of staff to Mr. Baucus; Hunter Bates, the former chief of staff for Mr. McConnell; and Tony Podesta, whose fast-growing lobbying firm has unusually close ties to the White House.

Amgen’s employees and political action committee have distributed nearly $5 million in contributions to political candidates and committees since 2007, including $67,750 to Mr. Baucus, the Finance Committee chairman, and $59,000 to Mr. Hatch, the committee’s ranking Republican. They gave an additional $73,000 to Mr. McConnell, some of it at a fund-raising event for him that it helped sponsor in December while the debate over the fiscal legislation was under way. More than $141,000 has also gone from Amgen employees to President Obama’s campaigns.

What distinguishes the company’s efforts in Washington is the diversity and intensity of its public policy campaigns. Amgen and its foundation have directed hundreds of thousands of dollars in charitable contributions to influential groups like the Congressional Black Caucus and to lesser-known groups like the Utah Families Foundation, which was founded by Mr. Hatch and brings the senator positive coverage in his state’s news media.

Amgen has sent large donations to Glacier PAC, sponsored by Mr. Baucus in Montana, and OrrinPAc, a political action committee controlled by Mr. Hatch in Utah.

And when Mr. Hatch faced a rare primary challenge last year, a nonprofit group calling itself Freedom Path sponsored advertisements in Utah that attacked his opponent, an effort that tax records released in November show was financed in large part by the Pharmaceutical Research and Manufacturers of America, a trade group that includes Amgen.

In some cases, the company’s former employees have found important posts inside the Capitol. They include Dan Todd, one of Mr. Hatch’s top Finance Committee staff members on health and Medicare policy, who worked as a health policy analyst for Amgen’s government affairs office from 2005 to 2009. Mr. Todd, who joined Mr. Hatch’s staff in 2011, was directly involved in negotiating the dialysis components of the fiscal bill, and he met with 'all the stakeholders,' Mr. Hatch’s spokeswoman said, not disputing when asked that this included Amgen lobbyists.

In addition, a NY Times editorial today pointed out that Mitch McConnell, the Senate Minority Leader, (Republican - Kentucky) who "exerted great influence over the fiscal negotiations and praised the Medicare provisions" presumably including the specific provision that helped Amgen, also has "political and financial ties to Amgen."  Furthermore, Senator McConnell's willingness to use taxpayer's money to pay Amgen more seemed to contradict his "public statements [which] usually emphasize the need to cut federal spending on entitlement programs, as they did in Lexington Friday," as reported by WEKU (the National Public Radio Station at Eastern Kentucky University ).  

Can We Reform Health Care in the Corporatist States of America?  

 In summary, Amgen seems to have leveraged its use of former legislative aides affiliated with both political parties as lobbyists, and its presumed influence over former employees who are currently legislative aides, that is, to people who have transited revolving doors in both directions, to influence policy in its corporate favor.  It has also leveraged its contributions directly to politicians, to political action committees (PACs), and to non-profit advocacy groups to influence policy in its direction for this purpose.  All this leverage apparently resulted in continuing government favoritism to a company the government had just convicted of a crime, and to a company whose actions likely led to sick and dead patients.  Furthermore, legislators who publicly deplore excess government spending and enlarging government deficits supported spending more taxpayer money to favor a particular company that they ought to have shunned. 


The New York Times editorial deplored this case first as

a disheartening example of how intense lobbying and financial contributions can distort the legislative process in Washington

and second as

a classic example of the power of special interests to shape legislation and shows how hard it may be to carry out the reforms needed to cut health care costs. 

But it was really much worse than that.   This case certainly shows the ongoing coziness between big health care organizations and government (this time, mainly legislative) leaders, facilitated by the apparently very common "revolving door" interchange of influential people between corporate management and government.  Note that this coziness has now become bipartisan.  However, this was not merely expensive favoritism.  It was hypocritical expensive favoritism that benefited a corporation that ought to have been shamed and shunned for behavior that did not merely cost the government money, but likely harmed patients, sometimes even fatally. 

President Theodore Roosevelt condemned malefactors of great wealth.  Our current political leaders in both parties seem to put their ties to corporate insiders who work for executives of great wealth ahead of any consideration of what might be good for patients, public health, or the citizenry at large.  

So the US now seems to be run by a soft, informal version of corporatism, the system in which government and big corporations overlap and jointly rule the people.  Since these days big corporations are run largely without accountability by increasingly rich executives, this ends up meaning government by the oligarchs, for the oligarchs, and of the oligarchs.  President Lincoln and President Theodore Roosevelt might be rolling in their graves.  

To meaningfully reform health care, it seems like we need to meaningfully reform our entire political system, and both make leaders of health care organizations accountable, and make government again of the people, by the people, and for the people.