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Archive for the ‘Law and Medicine Conflicts’ Category

Can the Public Benefit Company Structure Save US Healthcare?

Curator: Stephen J. Williams, Ph.D.

According to Centers for Medicare and Medicare Services (CMS.gov) healthcare spending per capita has reached 17.7 percent of GDP with, according to CMS data:

From 1960 through 2013, health spending rose from $147 per person to $9,255 per person, an average annual increase of 8.1 percent.

the National Health Expenditure Accounts (NHEA) are the official estimates of total health care spending in the United States. Dating back to 1960, the NHEA measures annual U.S. expenditures for health care goods and services, public health activities, government administration, the net cost of health insurance, and investment related to health care. The data are presented by type of service, sources of funding, and type of sponsor.

Graph: US National Healthcare Expenditures as a percent of Gross Domestic Product from 1960 to current. Recession periods are shown in bars. Note that the general trend has been increasing healthcare expenditures with only small times of decrease for example 2020 in year of COVID19 pandemic. In addition most of the years have been inflationary with almost no deflationary periods, either according to CPI or healthcare costs, specifically.

U.S. health care spending grew 4.6 percent in 2019, reaching $3.8 trillion or $11,582 per person.  As a share of the nation’s Gross Domestic Product, health spending accounted for 17.7 percent.

And as this spending grew (demand for health care services) associated costs also rose but as the statistical analyses shows there was little improvement in many health outcome metrics during the same time. 

Graph of the Growth of National Health Expenditures (NHE) versus the growth of GDP. Note most years from 1960 growth rate of NHE has always been higher than GDP, resulting in a seemingly hyperinflationary effect of healthcare. Also note how there are years when this disconnect is even greater, as there were years when NHE grew while there were recessionary periods in the general economy.

It appears that US healthcare may be on the precipice of a transformational shift, but what will this shift look like? The following post examines if the corporate structure of US healthcare needs to be changed and what role does a Public Benefit Company have in this much needed transformation.

Hippocratic Oath

I swear by Apollo the physician, and Asclepius, and Hygieia and Panacea and all the gods and goddesses as my witnesses, that, according to my ability and judgement, I will keep this Oath and this contract:

To hold him who taught me this art equally dear to me as my parents, to be a partner in life with him, and to fulfill his needs when required; to look upon his offspring as equals to my own siblings, and to teach them this art, if they shall wish to learn it, without fee or contract; and that by the set rules, lectures, and every other mode of instruction, I will impart a knowledge of the art to my own sons, and those of my teachers, and to students bound by this contract and having sworn this Oath to the law of medicine, but to no others.

I will use those dietary regimens which will benefit my patients according to my greatest ability and judgement, and I will do no harm or injustice to them.

I will not give a lethal drug to anyone if I am asked, nor will I advise such a plan; and similarly I will not give a woman a pessary to cause an abortion.

In purity and according to divine law will I carry out my life and my art.

I will not use the knife, even upon those suffering from stones, but I will leave this to those who are trained in this craft.

Into whatever homes I go, I will enter them for the benefit of the sick, avoiding any voluntary act of impropriety or corruption, including the seduction of women or men, whether they are free men or slaves.

Whatever I see or hear in the lives of my patients, whether in connection with my professional practice or not, which ought not to be spoken of outside, I will keep secret, as considering all such things to be private.

So long as I maintain this Oath faithfully and without corruption, may it be granted to me to partake of life fully and the practice of my art, gaining the respect of all men for all time. However, should I transgress this Oath and violate it, may the opposite be my fate.

Translated by Michael North, National Library of Medicine, 2002.

Much of the following information can be found on the Health Affairs Blog in a post entitled

Public Benefit Corporations: A Third Option For Health Care Delivery?

By Soleil Shah, Jimmy J. Qian, Amol S. Navathe, Nirav R. Shah

Limitations of For Profit and Non-Profit Hospitals

For profit represent ~ 25% of US hospitals and are owned and governed by shareholders, and can raise equity through stock and bond markets.

According to most annual reports, the CEOs incorrectly assume they are legally bound as fiduciaries to maximize shareholder value.  This was a paradigm shift in priorities of companies which started around the mid 1980s, a phenomenon discussed below.  

A by-product of this business goal, to maximize shareholder value, is that CEO pay and compensation is naturally tied to equity markets.  A means for this is promoting cost efficiencies, even in the midst of financial hardships.

A clear example of the failure of this system can be seen during the 2020- current COVID19 pandemic in the US. According to the Medicare Payment Advisory Commission, four large US hospitals were able to decrease their operating expenses by $2.3 billion just in Q2 2020.  This amounted to 65% of their revenue; in comparison three large NONPROFIT hospitals reduced their operating expense by an aggregate $13 million (only 1% of their revenue), evident that in lean times for-profit will resort to drastic cost cutting at expense of service, even in times of critical demands for healthcare.

Because of their tax structure and perceived fiduciary responsibilities, for-profit organizations (unlike non-profit and public benefit corporations) are not legally required to conduct community health need assessments, establish financial assistance policies, nor limit hospital charges for those eligible for financial assistance.  In addition to the difference in tax liability, for-profit, unlike their non-profit counterparts, at least with hospitals, are not funded in part by state or local government.  As we will see, a large part of operating revenue for non-profit university based hospitals is state and city funding.

Therefore risk for financial responsibility is usually assumed by the patient, and in worst case, by the marginalized patient populations on to the public sector.

Tax Structure Considerations of for-profit healthcare

Financials of major for-profit healthcare entities (2020 annual)

Non-profit Healthcare systems

Nonprofits represent about half of all hospitals in the US.  Most of these exist as a university structure, so retain the benefits of being private health systems and retaining the funding and tax benefits attributed to most systems of higher education. And these nonprofits can be very profitable.  After taking in consideration the state, local, and federal tax exemptions these nonprofits enjoy, as well as tax-free donations from contributors (including large personal trust funds), a nonprofit can accumulate a large amount of revenue after expenses.  In fact 82 nonprofit hospitals had $33 billion of net asset increase year-over-year (20% increase) from 2016 to 2017.  The caveat is that this revenue over expenses is usually spent on research or increased patient services (this may mean expanding the physical infrastructure of the hospital or disseminating internal grant money to clinical investigators, expanding the hospital/university research assets which could result in securing even larger amount of external funding from government sources.

And although this model may work well for intercity university/healthcare systems, it is usually a struggle for the rural nonprofit hospitals.  In 2020, ten out of 17 rural hospitals that went under were nonprofits.  And this is not just true in the tough pandemic year.  Over the past two decades multitude of nonprofit rural hospitals had to sell and be taken over by larger for-profit entities. 

Hospital consolidation has led to a worse patient experience and no real significant changes in readmission or mortality data.  (The article below is how over 130 rural hospitals have closed since 2010, creating a medical emergency in rural US healthcare)

https://www.nationalgeographic.com/history/article/appalachian-hospitals-are-disappearing

And according to the article below it is only to get worse

The authors of the Health Affairs blog feel a major disadvantage of both the for-profit and non-profit healthcare systems is “that both face limited accountability with respect to anticompettive mergers and acquisitions.”

More hospital consolidation is expected post-pandemic

Aug 10, 2020

By Rich Daly, HFMA Senior Writer and Editor

News | Coronavirus

More hospital consolidation is expected post-pandemic

  • Hospital deal volume is likely to accelerate due to the financial damage inflicted by the coronavirus pandemic.
  • The anticipated increase in volume did not show up in the latest quarter, when deals were sharply down.
  • The pandemic may have given hospitals leverage in coming policy fights over billing and the creation of “public option” health plans.

Hospital consolidation is likely to increase after the COVID-19 pandemic, say both critics and supporters of the merger-and-acquisition (M&A) trend.

The financial effects of the coronavirus pandemic are expected to drive more consolidation between and among hospitals and physician practices, a group of policy professionals told a recent Washington, D.C.-based web briefing sponsored by the Alliance for Health Policy.

“There is a real danger that this could lead to more consolidation, which if we’re not careful could lead to higher prices,” said Karyn Schwartz, a senior fellow at the Kaiser Family Foundation (KFF).

Schwartz cited a recent KFF analysis of available research that concluded “provider consolidation leads to higher health care prices for private insurance; this is true for both horizontal and vertical consolidation.”

Kenneth Kaufman, managing director and chair of Kaufman Hall, noted that crises tend to push financially struggling organizations “further behind.”

“I wouldn’t be surprised at all if that happens,” Kaufman said. “That will lead to further consolidation in the provider market.”

The initial rounds of federal assistance from the CARES Act, which were based first on Medicare revenue and then on net patient revenue, may fuel consolidation, said Mark Miller, PhD, executive vice president of healthcare for Arnold Ventures. That’s because the funding formulas favored organizations that already had higher revenues, he said, and provided less assistance to low-revenue organizations.

HHS has distributed $116.2 billion from the $175 billion in provider funding available through the CARES Act and the Paycheck Protection Program and Health Care Enhancement Act. The largest distributions used the two revenue formulas cited by Miller.

No surge in M&A yet

The expected burst in hospital M&A activity has yet to occur. Kaufman Hall identified 14 transactions in the second quarter of 2020, far fewer than in the same quarter in any of the four preceding years, when second-quarter transactions totaled between 19 and 31. The latest deals were not focused on small hospitals, with average seller revenue of more than $800 million — far larger than the previous second-quarter high of $409 million in 2018.

Six of the 14 announced transactions were divestitures by major for-profit health systems, including Community Health Systems, Quorum and HCA.

Kaufman Hall’s analysis of the recent deals identified another pandemic-related factor that may fuel hospital M&A: closer ties between hospitals. The analysis cited the example of  Lifespan and Care New England, which had suspended merger talks in 2019. More recently, in a joint announcement, the CEOs of the two systems noted that because of the COVID-19 crisis, the two systems “have been working together in unprecedented ways” and “have agreed to enter into an exploration process to understand the pros and cons of what a formal continuation of this collaboration could look like in the future.”

The M&A outlook for rural hospitals

The pandemic has had less of a negative effect on the finances of rural hospitals that previously joined larger health systems, said Suzie Desai, senior director of not-for-profit healthcare for S&P Global.

A CEO of a health system with a large rural network told Kaufman the federal grants that the system received for its rural hospitals were much larger than the grants paid through the general provider fund.

“If that was true across the board, then the federal government recognized that many rural hospitals could be at risk of not being able to make payroll; actually running out of money,” Kaufman said. “And they seem to have bent over backwards to make sure that didn’t happen.”  

Other CARES Act funding distributed to providers included:

  • $12.8 billion for 959 safety net hospitals
  • $11 billion to almost 4,000 rural healthcare providers and hospitals in urban areas that have certain special rural designations in Medicare

Telehealth has helped rural hospitals but has not been sufficient to address the financial losses inflicted by the pandemic, Desai said.

Other coming trends include a sharper cost focus

Desai expects an increasing focus “over the next couple years” on hospital costs because of the rising share of revenue received from Medicare and Medicaid. She expects increased efforts to use technology and data to lower costs.

Billy Wynne, JD, chairman of Wynne Health Group, expects telehealth restrictions to remain relaxed after the pandemic.

Also, the perceptions of the public and politicians about the financial health of hospitals are likely to give those organizations leverage in coming policy fights over changes such as banning surprise billing and creating so-called public-option health plans, Wynne said. As an example, he cited the Colorado legislature’s suspension of the launch of a public option “in part because of sensitivities around hospital finances in the COVID pandemic.”

“Once the dust settles, it’ll be interesting to see if their leverage has increased or decreased due to what we’ve been through,” Wynne said.

About the Author

Rich Daly, HFMA Senior Writer and Editor,

is based in the Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Source: https://www.hfma.org/topics/news/2020/08/more-hospital-consolidation-is-expected-post-pandemic.html

From Harvard Medical School

Hospital Mergers and Quality of Care

A new study looks at the quality of care at hospitals acquired in a recent wave of consolidations

By JAKE MILLER January 16, 2020 Research

Two train tracks merge in a blurry sunset.

Image: NirutiStock / iStock / Getty Images Plus       

The quality of care at hospitals acquired during a recent wave of consolidations has gotten worse or stayed the same, according to a study led by Harvard Medical School scientists published Jan. 2 in NEJM.

The findings deal a blow to the often-cited arguments that hospital consolidation would improve care. A flurry of earlier studies showed that mergers increase prices. Now after analyzing patient outcomes after hundreds of hospital mergers, the new research also dashes the hopes that this more expensive care might be of higher quality.

Get more HMS news here

“Our findings call into question claims that hospital mergers are good for patients—and beg the question of what we are getting from higher hospital prices,” said study senior author J. Michael McWilliams, the Warren Alpert Foundation Professor of Health Care Policy in the Blavatnik Institute at HMS and an HMS professor of medicine and a practicing general internist at Brigham and Women’s Hospital.

McWilliams noted that rising hospital prices have been one of the leading drivers of unsustainable growth in U.S. health spending.   

To examine the impact of hospital mergers on quality of care, researchers from HMS and Harvard Business School examined patient outcomes from nearly 250 hospital mergers that took place between 2009 and 2013. Using data collected by the Centers for Medicare and Medicaid Services, they analyzed variables such as 30-day readmission and mortality rates among patients discharged from a hospital, as well as clinical measures such as timely antibiotic treatment of patients with bacterial pneumonia. The researchers also factored in patient experiences, such as whether those who received care at a given hospital would recommend it to others. For their analysis, the team compared trends in these indicators between 246 hospitals acquired in merger transactions and unaffected hospitals.

The verdict? Consolidation did not improve hospital performance, and patient-experience scores deteriorated somewhat after the mergers.

The study was not designed to examine the reasons behind the worsening in patient experience. Weakening of competition due to hospital mergers could have contributed, the researchers said, but deeper exploration suggested other potential mechanisms. Notably, the analysis found the decline in patient-experience scores occurred mainly in hospitals acquired by hospitals that already had a poor patient-experience score—a finding that suggests acquisitions facilitate the spread of low quality care but not of high quality care.

The researchers caution that isolated, individual mergers may have still yielded positive results—something that an aggregate analysis is not powered to capture. And the researchers could only examine measurable aspects of quality. The trend in hospital performance on these standard measures, however, appears to point to a net effect of overall decline, the team said.

“Since our study estimated the average effects of mergers, we can’t rule out the possibility that some mergers are good for patient care,” said first author Nancy Beaulieu, research associate in health care policy at HMS. “But this evidence should give us pause when considering arguments for hospitals mergers.”

The work was supported by the Agency for Healthcare Research and Quality (grant no. U19HS024072).

Co-investigators included Bruce Landon and Jesse Dalton from HMS, Ifedayo Kuye, from the University of California, San Francisco, and Leemore Dafny from Harvard Business School and the National Bureau of Economic Research.

Source: https://hms.harvard.edu/news/hospital-mergers-quality-care

Public Benefit Corporations (PBC)

     Public benefit corporations (versus Benefit Corporate status, which is more of a pledge) are separate legal entities which exist as a hybrid, for-profit/nonprofit company but is mandated to 

  1. Pursue a general or specific public benefit
  2. Consider the non-financial interests of its shareholders and other STAKEHOLDERS when making decision
  3. report how well it is achieving its overall public benefit objectives
  4. Have limited fiduciary responsibility to investors that remains IN SCOPE of public benefit goal

In essence, the public benefit corporations executives are mandated to run the company for the benefit of STAKEHOLDERS first, if those STAKEHOLDERS are the public beneficiary of the company’s goals.  This in essence moves the needle away from the traditional C-Corp overvaluing the needs of shareholders and brings back the mission of the company and in the case of healthcare, the needs of its stakeholders, the consumers of healthcare.

     PBCs are legal entities recognized by states rather than by the federal government.  So far, in 2020 about 37 states allow companies to incorporate as a PBC.  Stipulations of the charter include semiannual reporting of the public benefits bestowed by the company and how well it is achieving its public benefit mandate.  There are about 3,000 US PBCs. Some companies have felt it was in their company mission and financial interest to change incorporation as a PBC.

Some well known PBCs include

  1. Ben and Jerry’s Ice Cream
  2. American Red Cross
  3. Susan B. Komen Foundation
  4. Allbirds (a shoe startup valued at $1.7 billion when made switch)
  5. Bombas (the sock company that donates extra socks when you buy a pair)
  6. Lemonade (a publicly traded insurance PBC that has beneficiaries select a nonprofit that the company will donate to)

Although the number of PBCs in the healthcare arena is increasing

  1. Not many PBCs are in the area of healthcare delivery 
  2. Noone is quite sure what the economic model would look like for a healthcare delivery PBC

Some example of hospital PBC include NYC Health + Hospitals and Community First Medical Center in Chicago.

Benefits of moving a hospital to PBC Status

  1. PBCs are held legally accountable to a predefined public benefit.  For hospitals this could be delivering cost-effective quality of care and affordable to a local citizenry or an economically disadvantaged population.  PBCs must produce at least an annual report on the public benefits it has achieved contrasted against a third party standard.  For example a hospital could include data of Medicaid related mortality risks, data neither the C-corp nor the nonprofit 501c would have to report on.  Most nonprofits and charities report their taxes on a schedule H or Form 990, which only has to report the officer’s compensation as well as monies given to charitable organizations, or other 501 organizations.  The nonprofit would show a balance of zero as the donated money for that year would be allocated out for various purposes. Hospitals, even as nonprofits, are not required to submit all this data.  Right now in US the ACA just requires any hospital that receives government or ACA insurance payments to report certain outcome statistics.  Although varying state by state, a PBC should have a “benefit officer” to make sure the mandate is being met.  In some cases a PBC benefit officer could sue the board for putting shareholder interest over the public benefit mandate.
  2. A PBC can include community stakeholders in the articles of incorporation thus giving a voice to local community members.  This would be especially beneficial for a hospital serving, say, a rural community.
  3. PBCs do have advantages of the for-profit companies as they are not limited to non-equity forms of investment.  A PBC can raise money in the equity markets or take on debt and finance it.  These financial instruments are unavailable to the non-profit.  Yet one interesting aspect is that PBCs require a HIGHER voting threshold by shareholders than a traditional for profit company in the ability to change their public benefit or convert their PBC back to a for-profit.

Limitations of the PBC

  1. Little incentive financially for current and future hospitals to incorporate as a PBC.  Herein lies a huge roadblock given the state of our reimbursement structure in this country.  Although there may be an incentive with regard to hiring and retention of staff drawn to the organization’s social purpose.  There have been, in the past, suggestions to allow hospitals that incorporate at PBC to receive some tax benefit, but this legislation has not gone through either at state or federal level. (put link to tax article).  
  2. In order for there to be value to constituents (patients) there must be strong accountability measures.  This will require the utmost in ethical behavior by a board and executives.  We have witnessed, through M&A by large health groups, anticompetitive and near monopoly behavior.
  3. There are no federal guidelines but varying guidelines from state to state.  There must be some federal recognition of the PBC status when it comes to healthcare, such as that the government is one of the biggest payers of US healthcare.

This is a great interview with ArcHealth, a PBC healthcare system.

Source: https://www.archealthjustice.com/arc-health-as-public-benefit-company-and-social-enterprise-what-is-the-difference/

Arc Health as a Public Benefit Company and Social Enterprise – What is the difference?

Mar 3, 2021 | Healthcare

Arc Health PBC is a public benefit corporation, a mission-driven for-profit company that utilizes a market-driven approach to achieving our short and long-term social goals. As a public benefit corporation, Arc Health is also a social enterprise working to further our mission of providing healthcare to rural, underserved, and indigenous communities through business practices that improve the recruitment and retention of quality healthcare providers.

What is a Social Enterprise?

While there is no one exact definition, according to the Social Enterprise Alliance, a social enterprise is an “organization that addresses a basic unmet need or solves a social or environmental problem through a market-driven approach.” A social enterprise is not a distinct legal entity, but instead, an “ideological spectrum marrying commercial approaches with social good.” Social enterprises foster a dual-bottom-line – simultaneously seeking profits and social impact. Arc Health, like many social enterprises, seeks to be self–sustainable. 

Two primary structures fall under the social enterprise umbrella: nonprofits and for-profit organizations. There are also related entities within both structures that could be considered social enterprises. Any of these listed structures can be regarded as a social enterprise depending on if and how involved they are with socially beneficial programs.

What is a Public Benefit Corporation?

Public Benefit Corporations (PBCs), also known as benefit corporations, are “for-profit companies that balance maximizing value to stakeholders with a legally binding commitment to a social or environmental mission.” PBCs operate as for-profit entities with no tax advantages or exemptions. Still, they must have a “purpose of creating general public benefit,” such as promoting the arts or science, preserving the environment, or providing benefits to underserved communities. PBCs must attain a higher degree of corporate purpose, expanded accountability, and expected transparency. 

There are now  over 3,000 registered PBCs, comprising approximately 0.1% of American businesses.

 As a PBC, Arc Health expects to access capital through individual investors who seek financial returns, rather than through donations. Arc Health’s investors make investments with a clear understanding of the balance the company must strike between financial returns (I.e., profitability) and social purpose. Therefore, investors expect the company to be operationally profitable to ensure a financial return on their investments, while also making clear to all stakeholders and the public that generating social impact is the priority. 

What is the difference between a Social Enterprise and PBC?

Social enterprises and PBCs emulate similar ideals that value the importance and need to invoke social change vis-a-vis working in a market-driven industry. Public benefit corporations fall under the social enterprise umbrella. An organization may choose to use a social enterprise model and incorporate itself as either a not-for-profit, C-Corp, PBC, or other corporate structure.  

How did Arc Health Become a Public Benefit Corporation?

Arc Health was initially formed as a C-Corp. In 2019, Arc Health’s CEO and Co-Founder, Dave Shaffer, guided the conversion from a C-Corp to a PBC, incorporated in Delaware. Today, Arc Health follows guidelines and expectations for PBCs, including adhering to the State of Delaware’s requirements for PBCs. 

Why is Arc Health a Social Enterprise and Public Benefit Corporation?

Arc Health believes it is essential to commit ourselves to our mission and demonstrate our dedication through our actions. We work to adhere to the core values of accountability, transparency, and purpose. As a registered public benefit company and a social enterprise, we execute our drive to achieve health equity in tangible and effective ways that the communities we work with, our stakeholders, and our providers expect of us.  

90% of Americans say that companies must not only say a product or service is beneficial, but they also need to prove its benefit.

When we partner with health clinics and hospitals, we aim to provide services that enact lasting change. For example, we work with healthcare providers who desire to contribute both clinical and non-clinical skills. In 2020, Arc Health clinicians developed COVID-19 response protocols and educational materials about the vaccines. They participated in pain management working groups. They identified and followed up with kids in the community who were overdue for a well-child check. Arc Health providers should be driven by a desire to develop a long-term relationship with a healthcare service provider and participate in its successes and challenges.   

Paradigm Shift in the 1980’s: Companies Start to Emphasize Shareholders Over Stakeholders

So earlier in this post we had mentioned about a shift in philosophy at the corporate boardroom that affected how comparate thought, value, and responsibility: Companies in the 1980s started to shift their focus and value only the needs of corporate ShAREHOLDERS at the expense of their  traditional STAKEHOLDERS (customers, clients).  Many movies and books have been written on this and debatable if deliberate or a by-product of M&A, hostile takeovers, and the stock market in general but the effect was that the consumer was relegated as having less value, even though marketing budgets are very high.  The fiduciary responsibility of the executive was now defined in terms of satisfying shareholders, who were now  big huge and powerful brokerage houses, private equity, and hedge funds.  A good explanation by Medium.com Tyler Lasicki is given below.

From the Medium.com

Source: https://medium.com/swlh/the-shareholder-v-stakeholder-contrast-a-brief-history-c5a6cfcaa111

The Shareholder V. Stakeholder Contrast, a Brief History

Tyler Lasicki

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May 26, 2020 · 14 min read

Introduction

In a famous 1970 New York Times Article, Milton Friedman postulated that the CEO, as an employee of the shareholder, must strive to provide the highest possible return for all shareholders. Since that article, the United States has embraced this idea as the fundamental philosophy supporting the ultimate purpose of businesses — The Shareholders Come First.

In August of 2019, the Business Roundtable, a group made up of the most influential U.S CEOs, published a letter shifting their stance on the purpose of a corporation. Regardless of whether this piece of paper will actually result in any systematic changes has yet to be seen, however this newly stated purpose of business is a dramatic shift from the position Milton Friedman took in 1970. According to the statement, these corporations will no longer prioritize maximizing profits for shareholders, but instead turn their focus to benefiting all stakeholders — including citizens, customers, suppliers, employees, on par with shareholders. 

Now the social responsibility of a company and the CEO was to maxiimize the profits even at the expense of any previous social responsibility they once had.

Small sample of the 181 Signatures attached to the Business Roundtable’s letter

What has happened over the past 50 years that has led to such a fundamental change in ideology? What has happened to make the CEO’s of America’s largest corporations suddenly change their stance on such a foundational principle of what it means to be an American business?

Since diving into this subject, I have come to find that the “American fundamental principle” of putting shareholders first is one that is actually not all that fundamental. In fact, for a large portion of our nation’s history this ideology was actually seen as the unpopular position.

Key ideological shifts in U.S. history

This post dives into a brief history of these two contrasting ideological viewpoints in an attempt to contextualize the forces behind both sides — specifically, the most recent shift (1970–2019). This basic idea of what is most important; the stakeholder or the shareholder, is the underlying reason as to why many things are the way they are today. A corporation’s priority of shareholder or stakeholder ultimately impacts employee salaries, benefits, quality of life within communities, environmental conditions, even the access to education children can receive. It affects our lives in a breadth and depth of ways and now that corporations may be changing positions (yet again) to focus on a model that prioritizes the stakeholder, it is important to understand why.

Looking forward, if stakeholder priority ends up being the popular position among American businesses, how long will it last for? What could lead to its downfall? And what will managers do to ensure a long term stakeholder-friendly business model?

It is clear to me the reasons that have led to these shifts in ideology are rather nuanced, however I want to highlight a few trends that have had a major impact on businesses changing their priorities while also providing context as to why things have shifted.

The Ascendancy of Shareholder Value

Following the 1929 stock market crash and the Great Depression, stakeholder primacy became the popular perspective within corporate America. Stakeholder primacy is the idea that corporations are to consider a wider group of interested parties (not just shareholders) whose positions need to be taken into consideration by corporate governance. According to this point of view, rather than solely being an agent for shareholders, management’s responsibilities were to be dispersed among all of its constituencies, even if it meant a reduction in shareholder value. This ideology lasted as the dominant position for roughly 40 years, in part due to public opinion and strong views on corporate responsibility, but also through state adoption of stakeholder laws.

By the mid-1970s, falling corporate profitability and stagnant share prices had been the norm for a decade. This poor economic performance influenced a growing concern in the U.S. regarding the perceived divergence between manager and shareholder interest. Many held the position that profits and share prices were suffering as a result of corporation’s increased attention on stakeholder groups.

This noticeable divergence in interests sparked many academics to focus their research on corporate management’s motivations in decision making regarding their allocation of resources. This branch of research would later be known as agency theory, which focused on the relationship between principals (shareholders) and their agents (management). Research at the time outlined how over the previous decades corporate management had pursued strategies that were not likely to optimize resources from a shareholder’s perspective. These findings were part of a seismic shift of corporate philosophy, changing priority from the stakeholders of a business to the shareholders.

By 1982, the U.S. economy started to recover from a prolonged period of high inflation and low economic growth. This recovery acted as a catalyst for change in many industries, leaving many corporate management teams to struggle in response to these changes. Their business performance suffered as a result. These distressed businesses became targets for a group of new investors…private equity firms.

Now the paradigm shift had its biggest backer…. private equity!  And private equity care about ONE thing….. THEIR OWN SHARE VALUE and subsequently meaning corporate profit, which became the most important directive for the CEO.

So it is all hopeless now? Can there be a shift back to the good ‘ol days?  

Well some changes are taking place at top corporate levels which may help the stakeholders to have a voice at the table, as the following IRMagazine article states.

And once again this is being led by the Business Roundtable, the same Business Roundtable that proposed the shift back in the 1970s.

Andrew Holt

Andrew Holt

REPORTER

  •  
  •  

SHAREHOLDER VALUE

CORPORATE GOVERNANCE

Shift from shareholder value to stakeholder-focused model for top US firms

AUG 23, 2019

Business Roundtable reveals corporations to drop idea they function to serve shareholders only

Source: https://www.irmagazine.com/esg/shift-shareholder-value-stakeholder-focused-model-top-us-firms

Andrew Holt

Andrew Holt

REPORTER

n a major corporate shift, shareholder value is no longer the main objective of the US’ top company CEOs, according to the Business Roundtable, which instead emphasizes the ‘purpose of a corporation’ and a stakeholder-focused model.

The influential body – a group of chief executive officers from major US corporations – has stressed the idea of a corporation dropping the age-old notion that corporations function first and foremost to serve their shareholders and maximize profits.

Rather, the focus should be on investing in employees, delivering value to customers, dealing ethically with suppliers and supporting outside communities as the vanguard of American business, according to a Business Roundtable statement.

‘While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,’ reads the statement, signed by 181 CEOs. ‘We commit to deliver value to all of them, for the future success of our companies, our communities and our country.’

Gary LaBranche, president and CEO of NIRI, tells IR Magazine that this is part of a wider trend: ‘The redefinition of purpose from shareholder-focused to stakeholder-focused is not new to NIRI members. For example, a 2014 IR Update article by the late Professor Lynn Stout urges a more inclusive way of thinking about corporate purpose.’ 

NIRI has also addressed this concept at many venues, including the senior roundtable annual meeting and the NIRI Annual Conference, adds LaBranche. This trend was further seen in the NIRI policy statement on ESG disclosure, released in January this year. 

Analyzing the meaning of this change in more detail, LaBranche adds: ‘The statement is a revolutionary break with the Business Roundtable’s previous position that the purpose of the corporation is to create value for shareholders, which was a long-held position championed by Milton Friedman.

‘The challenge is that Friedman’s thought leadership helped to inspire the legal and regulatory regime that places wealth creation for shareholders as the ‘prime directive’ for corporate executives.

‘Thus, commentators like Mike Allen of Axios are quick to point out that some shareholders may actually use the new statement to accuse CEOs of worrying about things beyond increasing the value of their shares, which, Allen reminds us, is the CEOs’ fiduciary responsibility.

‘So while the new Business Roundtable statement reflects a much-needed rebalancing and modernization that speaks to the comprehensive responsibilities of corporate citizens, we can expect that some shareholders will push back on this more inclusive view of who should benefit from corporate efforts and the capital that makes it happen. The new statement may not mark the dawn of a new day, but it perhaps signals the twilight of the Friedman era.’

In a similarly reflective way, Jamie Dimon, chairman and CEO of JPMorgan Chase & Co and chairman of the Business Roundtable, says: ‘The American dream is alive, but fraying. Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.’

Note:  Mr Dimon has been very vocal for many years on corporate social responsibility, especially since the financial troubles of 2009.

Other related articles published on this Open Access Online Scientific Journal on Healthcare Issues include the following:

Opportunity Mapping of the E-Health Sector prior to COVID19 Outbreak
mHealth market growth in America, Europe, & APAC
Ethics Behind Genetic Testing in Breast Cancer: A Webinar by Laura Carfang of survivingbreastcancer.org
The Inequality and Health Disparity seen with the COVID-19 Pandemic Is Similar to Past Pandemics
Live Notes from @HarvardMed Bioethics: Authors Jerome Groopman, MD & Pamela Hartzband, MD, discuss Your Medical Mind
COVID-related financial losses at Mass General Brigham
Personalized Medicine, Omics, and Health Disparities in Cancer:  Can Personalized Medicine Help Reduce the Disparity Problem?

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US Responses to Coronavirus Outbreak Expose Many Flaws in Our Medical System

US Responses to Coronavirus Outbreak Expose Many Flaws in Our Medical System

Curator: Stephen J. Williams, Ph.D.

The  coronavirus pandemic has affected almost every country in every continent however, after months of the novel advent of novel COVID-19 cases, it has become apparent that the varied clinical responses in this epidemic (and outcomes) have laid bare some of the strong and weak aspects in, both our worldwide capabilities to respond to infectious outbreaks in a global coordinated response and in individual countries’ response to their localized epidemics.

 

Some nations, like Israel, have initiated a coordinated government-private-health system wide action plan and have shown success in limiting both new cases and COVID-19 related deaths.  After the initial Wuhan China outbreak, China closed borders and the government initiated health related procedures including the building of new hospitals. As of writing today, Wuhan has experienced no new cases of COVID-19 for two straight days.

 

However, the response in the US has been perplexing and has highlighted some glaring problems that have been augmented in this crisis, in the view of this writer.    In my view, which has been formulated after social discussion with members in the field ,these issues can be centered on three major areas of deficiencies in the United States that have hindered a rapid and successful response to this current crisis and potential future crises of this nature.

 

 

  1. The mistrust or misunderstanding of science in the United States
  2. Lack of communication and connection between patients and those involved in the healthcare industry
  3. Socio-geographical inequalities within the US healthcare system

 

1. The mistrust or misunderstanding of science in the United States

 

For the past decade, anyone involved in science, whether directly as active bench scientists, regulatory scientists, scientists involved in science and health policy, or environmental scientists can attest to the constant pressure to not only defend their profession but also to defend the entire scientific process and community from an onslaught of misinformation, mistrust and anxiety toward the field of science.  This can be seen in many of the editorials in scientific publications including the journal Science and Scientific American (as shown below)

 

Stepping Away from Microscopes, Thousands Protest War on Science

Boston rally coincides with annual American Association for the Advancement of Science (AAAS) conference and is a precursor to the March for Science in Washington, D.C.

byLauren McCauley, staff writer

Responding to the troubling suppression of science under the Trump administration, thousands of scientists, allies, and frontline communities are holding a rally in Boston’s Copley Square on Sunday.

#standupforscience Tweets

 

“Science serves the common good,” reads the call to action. “It protects the health of our communities, the safety of our families, the education of our children, the foundation of our economy and jobs, and the future we all want to live in and preserve for coming generations.”

It continues: 

But it’s under attack—both science itself, and the unalienable rights that scientists help uphold and protect. 

From the muzzling of scientists and government agencies, to the immigration ban, the deletion of scientific data, and the de-funding of public science, the erosion of our institutions of science is a dangerous direction for our country. Real people and communities bear the brunt of these actions.

The rally was planned to coincide with the annual American Association for the Advancement of Science (AAAS) conference, which draws thousands of science professionals, and is a precursor to the March for Science in Washington, D.C. and in cities around the world on April 22.

 

Source: https://www.commondreams.org/news/2017/02/19/stepping-away-microscopes-thousands-protest-war-science

https://images.app.goo.gl/UXizCsX4g5wZjVtz9

 

https://www.washingtonpost.com/video/c/embed/85438fbe-278d-11e7-928e-3624539060e8

 

 

The American Association for Cancer Research (AACR) also had marches for public awareness of science and meaningful science policy at their annual conference in Washington, D.C. in 2017 (see here for free recordings of some talks including Joe Biden’s announcement of the Cancer Moonshot program) and also sponsored events such as the Rally for Medical Research.  This patient advocacy effort is led by the cancer clinicians and scientific researchers to rally public support for cancer research for the benefit of those affected by the disease.

Source: https://leadingdiscoveries.aacr.org/cancer-patients-front-and-center/

 

 

     However, some feel that scientists are being too sensitive and that science policy and science-based decision making may not be under that much of a threat in this country. Yet even as some people think that there is no actual war on science and on scientists they realize that the public is not engaged in science and may not be sympathetic to the scientific process or trust scientists’ opinions. 

 

   

From Scientific American: Is There Really a War on Science? People who oppose vaccines, GMOs and climate change evidence may be more anxious than antagonistic

 

Certainly, opponents of genetically modified crops, vaccinations that are required for children and climate science have become louder and more organized in recent times. But opponents typically live in separate camps and protest single issues, not science as a whole, said science historian and philosopher Roberta Millstein of the University of California, Davis. She spoke at a standing-room only panel session at the American Association for the Advancement of Science’s annual meeting, held in Washington, D.C. All the speakers advocated for a scientifically informed citizenry and public policy, and most discouraged broadly applied battle-themed rhetoric.

 

Source: https://www.scientificamerican.com/article/is-there-really-a-war-on-science/

 

      In general, it appears to be a major misunderstanding by the public of the scientific process, and principles of scientific discovery, which may be the fault of miscommunication by scientists or agendas which have the goals of subverting or misdirecting public policy decisions from scientific discourse and investigation.

 

This can lead to an information vacuum, which, in this age of rapid social media communication,

can quickly perpetuate misinformation.

 

This perpetuation of misinformation was very evident in a Twitter feed discussion with Dr. Eric Topol, M.D. (cardiologist and Founder and Director of the Scripps Research Translational  Institute) on the US President’s tweet on the use of the antimalarial drug hydroxychloroquine based on President Trump referencing a single study in the International Journal of Antimicrobial Agents.  The Twitter thread became a sort of “scientific journal club” with input from international scientists discussing and critiquing the results in the paper.  

 

Please note that when we scientists CRITIQUE a paper it does not mean CRITICIZE it.  A critique is merely an in depth analysis of the results and conclusions with an open discussion on the paper.  This is part of the normal peer review process.

 

Below is the original Tweet by Dr. Eric Topol as well as the ensuing tweet thread

 

https://twitter.com/EricTopol/status/1241442247133900801?s=20

 

Within the tweet thread it was discussed some of the limitations or study design flaws of the referenced paper leading the scientists in this impromptu discussion that the study could not reasonably conclude that hydroxychloroquine was not a reliable therapeutic for this coronavirus strain.

 

The lesson: The public has to realize CRITIQUE does not mean CRITICISM.

 

Scientific discourse has to occur to allow for the proper critique of results.  When this is allowed science becomes better, more robust, and we protect ourselves from maybe heading down an incorrect path, which may have major impacts on a clinical outcome, in this case.

 

 

2.  Lack of communication and connection between patients and those involved in the healthcare industry

 

In normal times, it is imperative for the patient-physician relationship to be intact in order for the physician to be able to communicate proper information to their patient during and after therapy/care.  In these critical times, this relationship and good communication skills becomes even more important.

 

Recently, I have had multiple communications, either through Twitter, Facebook, and other social media outlets with cancer patients, cancer advocacy groups, and cancer survivorship forums concerning their risks of getting infected with the coronavirus and how they should handle various aspects of their therapy, whether they were currently undergoing therapy or just about to start chemotherapy.  This made me realize that there were a huge subset of patients who were not receiving all the information and support they needed; namely patients who are immunocompromised.

 

These are patients represent

  1. cancer patient undergoing/or about to start chemotherapy
  2. Patients taking immunosuppressive drugs: organ transplant recipients, patients with autoimmune diseases, multiple sclerosis patients
  3. Patients with immunodeficiency disorders

 

These concerns prompted me to write a posting curating the guidance from National Cancer Institute (NCI) designated cancer centers to cancer patients concerning their risk to COVID19 (which can be found here).

 

Surprisingly, there were only 14 of the 51 US NCI Cancer Centers which had posted guidance (either there own or from organizations like NCI or the National Cancer Coalition Network (NCCN).  Most of the guidance to patients had stemmed from a paper written by Dr. Markham of the Fred Hutchinson Cancer Center in Seattle Washington, the first major US city which was impacted by COVID19.

 

Also I was surprised at the reactions to this posting, with patients and oncologists enthusiastic to discuss concerns around the coronavirus problem.  This led to having additional contact with patients and oncologists who, as I was surprised, are not having these conversations with each other or are totally confused on courses of action during this pandemic.  There was a true need for each party, both patients/caregivers and physicians/oncologists to be able to communicate with each other and disseminate good information.

 

Last night there was a Tweet conversation on Twitter #OTChat sponsored by @OncologyTimes.  A few tweets are included below

https://twitter.com/OncologyTimes/status/1242611841613864960?s=20

https://twitter.com/OncologyTimes/status/1242616756658753538?s=20

https://twitter.com/OncologyTimes/status/1242615906846547978?s=20

 

The Lesson:  Rapid Communication of Vital Information in times of stress is crucial in maintaining a good patient/physician relationship and preventing Misinformation.

 

3.  Socio-geographical Inequalities in the US Healthcare System

It has become very clear that the US healthcare system is fractioned and multiple inequalities (based on race, sex, geography, socio-economic status, age) exist across the whole healthcare system.  These inequalities are exacerbated in times of stress, especially when access to care is limited.

 

An example:

 

On May 12, 2015, an Amtrak Northeast Regional train from Washington, D.C. bound for New York City derailed and wrecked on the Northeast Corridor in the Port Richmond neighborhood of Philadelphia, Pennsylvania. Of 238 passengers and 5 crew on board, 8 were killed and over 200 injured, 11 critically. The train was traveling at 102 mph (164 km/h) in a 50 mph (80 km/h) zone of curved tracks when it derailed.[3]

Some of the passengers had to be extricated from the wrecked cars. Many of the passengers and local residents helped first responders during the rescue operation. Five local hospitals treated the injured. The derailment disrupted train service for several days. 

(Source Wikipedia https://en.wikipedia.org/wiki/2015_Philadelphia_train_derailment)

What was not reported was the difficulties that first responders, namely paramedics had in finding an emergency room capable of taking on the massive load of patients.  In the years prior to this accident, several hospitals, due to monetary reasons, had to close their emergency rooms or reduce them in size. In addition only two in Philadelphia were capable of accepting gun shot victims (Temple University Hospital was the closest to the derailment but one of the emergency rooms which would accept gun shot victims. This was important as Temple University ER, being in North Philadelphia, is usually very busy on any given night.  The stress to the local health system revealed how one disaster could easily overburden many hospitals.

 

Over the past decade many hospitals, especially rural hospitals, have been shuttered or consolidated into bigger health systems.  The graphic below shows this

From Bloomberg: US Hospital Closings Leave Patients with Nowhere to go

 

 

https://images.app.goo.gl/JdZ6UtaG3Ra3EA3J8

 

Note the huge swath of hospital closures in the midwest, especially in rural areas.  This has become an ongoing problem as the health care system deals with rising costs.

 

Lesson:  Epidemic Stresses an already stressed out US healthcare system

 

Please see our Coronavirus Portal at

https://pharmaceuticalintelligence.com/coronavirus-portal/

 

for more up-to-date scientific, clinical information as well as persona stories, videos, interviews and economic impact analyses

and @pharma_BI

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What drug interfered with the performance of Sharapova?

Larry H. Bernstein, MD, FCAP, Curator

LPBI

 

Meldonium — The Drug That Brought Down Sharapova

Gayle Nicholas Scott, PharmD

When tennis player Maria Sharapova recently revealed that she had tested positive for the banned drug meldonium, the reaction of most healthcare providers was, “What is it?”

Meldonium is manufactured and sold as Mildronate by the pharmaceutical company Grindeks in the Baltic nation of Latvia. Meldonium is not available in the United States or elsewhere in the European Union (it was grandfathered in Latvia) other than via purchase on the Internet.

The World Anti-Doping Agency classifies meldonium as a “metabolic modulator” and moved the drug from its watch list to its list of banned substances in January 2016.

Other “metabolic modulators” are insulin and trimetazidine, an anti-ischemic metabolic agent that increases myocardial glucose utilization through inhibition of fatty acid metabolism.[1,2] Trimetazidine is approved in the European Union for the treatment of angina, but it is not approved in the United States.

The chemical name for meldonium is trimethylhydrazinium propionate. Meldonium works by decreasing the availability of levocarnitine (L-carnitine). L-carnitine is found naturally in milk and meats, and also can be synthesized by the body from lysine and methionine with the help of gamma-butyrobetaine hydroxylase. L-carnitine helps move long-chain fatty acids into the mitochondria for oxidation and energy production in the muscles.

Ironically, L-carnitine, which meldonium inhibits, is taken as a dietary supplement alone and as an ingredient in energy drinks to increase athletic performance. (L-carnitine is available in the United States as the prescription drug Carnitor®, which is indicated for carnitine deficiency owing to inborn errors of metabolism and for end-stage renal disease requiring dialysis.) After two decades of research, no consistent evidence has emerged indicating that carnitine supplements can improve exercise or physical performance. Carnitine supplements do not appear to increase the body’s use of oxygen or improve metabolic status when exercising, and may not increase the amount of carnitine in muscle.[3,4]Carnitine is not on the list of banned substances.[1]

As a modulator of L-carnitine metabolism, meldonium inhibits gamma-butyrobetaine hydroxylase and L-carnitine transmembrane transport of long-chain fatty acids, thus decreasing L-carnitine levels in tissue and plasma. Reducing the amount of bioavailable L-carnitine shifts the source of metabolic energy production from fatty acid oxidation to glucose metabolism. Aerobic glucose oxidation consumes less oxygen than fatty acid oxidation and increases the effectiveness of adenosine triphosphate (ATP) generation. Additionally, meldonium appears to increase glucose uptake. In ischemic conditions (hypoxia), meldonium appears to restore the balance between cellular oxygen supply and demand, and prevents ATP transport impairment.[3,5]

All published clinical efficacy studies on meldonium, except one,[6] are in Russian. Abstracts of randomized controlled trials have reported the efficacy of meldonium in reducing angina, arrhythmias, and anxiety and other early sequelae of myocardial infarction[7-10]; as an “adaptogen” in patients with cardiovascular disease[11,12]; and in treating angina and reducing myocardial ischemia after percutaneous coronary intervention,[6,13,14] heart failure,[15] and diabetic peripheral neuropathy.[16] Doses, when included in the abstracts, ranged from 750 to 1000 mg per day. Only one abstract mentioned adverse effects, stating that none occurred.[7]

A pharmacokinetic study of meldonium showed that the drug has a dose-dependent half-life and volume of distribution with accumulation on multiple-dose administration. In eight healthy volunteers who received meldonium for 13 days, almost all reported insomnia, half reported burping, and one quarter reported “dreaminess.” No serious adverse effects were reported.[17]

A study in healthy, nonvegetarian volunteers receiving 1000 mg meldonium per day for 4 weeks showed that plasma concentrations of L-carnitine decreased by 18%. Urine samples showed an increase in L-carnitine excretion. Adverse effects were not mentioned.[18] Meldonium is excreted in the urine largely unchanged, making urine testing a valid monitor presence of meldonium.[19]

No long-term studies on the safety and efficacy of meldonium have been published. No studies on the effect of meldonium on athletic performance in humans have been published. One study on the reliability of urine testing in professional sports[19]mentions an article and an abstract, but neither of those appears in PubMed. The abstract purports to be a review of “recent studies on mildronate especially in fields associated with physical work capabilities and sport” but cites only the study mentioned in the urine testing review.[20] Most articles about meldonium cited on PubMed are by Latvian authors.

Animal research suggests the potential usefulness of meldonium in Alzheimer disease,[21-23] Parkinson disease,[24,25] and diabetes.[26-29] Meldonium increased sexual activity in boars[30] but not in male rats.[31] Research in rodents found that meldonium can cause carnitine deficiency in offspring, so the drug should not be taken in pregnancy.[32]

Because meldonium is excreted renally, serum levels may be higher in patients with reduced kidney function, and the drug may accumulate with repeated dosing.[19] L-carnitine appears to antagonize the effects of meldonium[33]; otherwise, drug interactions are not known.

To recap, meldonium is an interesting drug developed by Latvian researchers. Published research suggests that it may be an effective treatment for cardiovascular diseases, such as angina. Little information about its adverse effects has been published, however, and the long-term safety of meldonium is not known. And although reliable research on meldonium’s use for athletic performance is not available, the World Anti-Doping Agency has declared it a banned substance.

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The late Cambridge Mayor Alfred Vellucci welcomed Life Sciences Labs to Cambridge, MA – June 1976

Reporter: Aviva Lev-Ari, PhD, RN

How Cambridge became the Life Sciences Capital

Worth watching is the video below, which captures the initial Cambridge City Council hearing on recombinant DNA research from June 1976. The first speaker is the late Cambridge mayor Alfred Vellucci.

Vellucci hoped to pass a two-year moratorium on gene splicing in Cambridge. Instead, the council passed a three-month moratorium, and created a board of nine Cambridge citizens — including a nun and a nurse — to explore whether the work should be allowed, and if so, what safeguards would be necessary. A few days after the board was created, the pro and con tables showed up at the Kendall Square marketplace.

At the time, says Phillip Sharp, an MIT professor, Cambridge felt like a manufacturing town that had seen better days. He recalls being surrounded by candy, textile, and leather factories. Sharp hosted the citizens review committee at MIT, explaining what the research scientists there planned to do. “I think we built a relationship,” he says.

By early 1977, the citizens committee had proposed a framework to ensure that any DNA-related experiments were done under fairly stringent safety controls, and Cambridge became the first city in the world to regulate research using genetic material.

 

WATCH VIDEO

How Cambridge became the life sciences capital

Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter@ScottKirsner and on betaboston.com.

SOURCE

How Cambridge became the life sciences capital

http://www.betaboston.com/news/2016/03/17/how-cambridge-became-the-life-sciences-capital/

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Supreme Court reverses Zimmer win in $20m knee implant lawsuit

Reported by: Irina Robu, PhD

The Pennsylvania Supreme Court yesterday reversed a state appeals court’s decision to overturn a $20 million verdict against in a knee implant lawsuit. Margo Pollet had a double knee replacement procedure in 2006 using Zimmer’s Gender Solutions devices but after making a Zimmer promotional video which included riding a bicycle and running on treadmill, she claimed that it damaged her knees. She sued for negligence saying the injuries occured during filming the video. A jury awarded Polett millions in damages after finding that Zimmer was 34% culpable. The jury also put 30% of the blame on Polett herself and 36% on the marketing firm Public Communications for its involvement with the ad.

The Pennsylvania Superior Court last October ruled that the lower court incorrectly shifted the burden of proof onto Zimmer by asking the company to provide alternative explanations for Polett’s revisions surgeries, thus leading the jury to a potentially false conclusion, and ordered a new trial. 

“In sum, the trial court’s ruling that Dr. Booth’s expert testimony as to causation was not barred by [Pennsylvania law] was amply supported by the evidence of record, and thus was reasonable. Consequently, we conclude that the trial court did not abuse its discretion in allowing Dr. Booth to render an expert opinion at trial, and that the  Superior Court erred by reassessing the evidence relied upon by the trial court in making its ruling, and by supplanting the trial court’s findings with its own evaluation of that evidence. We, therefore, reverse the order of the Superior Court as to this issue,” McCloskey Todd wrote.

The Supreme Court ordered the Superior Court to review whether the trial court was wrong to deny the defendants’ bid to overturn the verdict.

Source

http://www.massdevice.com/pennsylvania-supreme-court-reverses-zimmer-win-in-20m-knee-implant-lawsuit/?utm_source=newsletter-151031&utm_medium=email&utm_campaign=newsletter-151031&utm_source=hs_email&utm_medium=email&utm_content=23330293&_hsenc=p2ANqtz–nywdqI8Oozk—hLR5sGhUzi28TI0dySIJ7JSoVr72yV8Y9K535Br78ZKs9nHBieb7asND2eZS2iTcUV9OHRqCaUTZlvqQHU7BNH4C6r82Zh13vQ&_hsmi=23330293

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pathway and network analysis of complex ‘omics data

Larry H. Bernstein, MD, FCAP, Curator

LPBI

 

While blood tests can be used to detect some cancers, the FDA said a San Diego company has no proof its blood test works in patients who have not already been diagnosed with some form of the disease.

WASHINGTON, Sept. 25 (UPI) — A San Diego company selling an early cancer detection test was notified by the U.S. Food and Drug Administration it can find no evidence the test actually works, and is concerned it could prove to be harmful for some people.

Pathway Genomics debuted its CancerIntercept test in early September with claims it can detect cancer cell DNA in the blood, picking up mutations linked to as many as 10 different cancers. The goal is to catch cancer early in people who are “otherwise healthy” and not showing symptoms of the disease.

“Based on our review of your promotional materials and the research publication cited above, we believe you are offering a high risk test that has not received adequate clinical validation and may harm the public health,” said FDA Deputy Director James L. Woods in a letter to the company.

CancerIntercept is billed by the company as a blood test looking for DNA fragments in the bloodstream and testing them for 96 genomic markers it says are found in several specific tumor types.

The direct-to-consumer test can be purchased through the Pathway Genomics website, with programs ranging from a one-time test to a quarterly “subscription” for people who want regular testing.

The company states, in several sections of its website, “the presence of one or more of these genomic markers in a patient’s bloodstream may indicate that the patient has a previously undetected cancer. However, the test is not diagnostic, and thus, follow-up screening and clinical testing would be required to confirm the presence or absence of a specific cancer in the patient.”

The FDA is concerned that people may seek treatment for tumors that do not require medical attention, or spend money and possibly seek out treatment they do not need at all — in either case, unnecessary treatment for cancer is potentially harmful to people, the agency said.

CancerIntercept has not been approved by the FDA for use as a medical device, nor has it been subjected to peer review as most tests of its type would be. The company published a white paper on its website which outlines how the test works, supporting its efficacy with references to several clinical trials on detection of mutated DNA in the bloodstream.

Glenn Braunstein, Chief Medical Officer at Pathway Genomics, told The VergePathway had validated its tests with “hundreds” of patients, though those patients had well-defined, often advanced cancers.

In the letter from the FDA, Woods requests the company provide a timeline for meeting with the agency to review plans for future longitudinal studies on the product and specific details on studies that have been conducted before it was made available to consumers.

http://www.upi.com/Health_News/2015/09/25/FDA-Start-ups-cancer-blood-test-may-be-harmful/4191443181676/

The clinical laboratory is an essential player in the treatment of cancer providing a diagnostic, potentially a prognostic, and follow-up treatment armamentarium.  The laboratory diagnostics industry has grown over the last half century into  a highly accurate, well regulated industry with highly automated and point of care technologies.  Prior to introduction, the tests that are put on the market have to be validated prior to introduction.

How are they validated?

The most common approach is for the test to be used concomitantly with treatment in a clinical trial. Measurements may be made prior to surgical biopsy and treatment, and at a month or 6 months to a year later.  The pharmaceutical and diagnostics industries are independent, even though a large company may have both pharmaceutical and diagnostic divisions.  Consequently, the integration of diagnostics and therapeutics occurs on the front lines of patient care.

How this discrepancy between the FDA and the manufacturer could occur is not clear because prior to introduction, the test would have to be rigorously reviewed by the American Association for Clinical Chemistry, the largest and most competent organization to cover the scientific work, having industry-based committees.  The only problem is that the companies may have products that are patented and have competing claims or interests. This is perhaps most likely to be problematic in the competitive environment of  genomics testing.

The company here reported on is Pathway Genomics, that offers Ingenuity for pathway and variant analysis.  There is no concern about the analysis methods, that are well studied.  The concern is the validation of such method for screening of patients without prior diagnosis.

Model, analyze, and understand the complex biological and chemical systems at the core of life science research with IPA

QIAGEN’S Ingenuity Pathway Analysis (IPA) has been broadly adopted by the life science research community and is cited in thousands of peer-reviewed journal articles.

https://youtu.be/_HDkjuxYRcY

https://youtu.be/_HDkjuxYRcY?t=25

For the analysis and interpretation of ’omics data
Market Leading Pathway Analysis
Unlock the insights buried in experimental data by quickly identifying relationships, mechanisms, functions, and pathways of relevance.
Predictive Causal Analytics
Powerful causal analytics at your fingertips help you to build a more complete regulatory picture and a better understanding of the biology underlying a given gene expression study.
NGS/RNA-Seq Data Analysis
Get a better understanding of the isoform-specific biology resulting from RNA-Seq experiments.
Identify causal variants from human sequencing data
Ingenuity IPA Interpret Biological Meaning Graphic

http://www.ingenuity.com/wp-content/uploads/2014/01/variant-analyisis-interpretation.png

Rapidly Identify and Prioritize Variants

Ingenuity Variant Analysis combines analytical tools and integrated content to help you rapidly identify and prioritize variants by drilling down to a small, targeted subset of compelling variants based both upon published biological evidence and your own knowledge of disease biology. With Variant Analysis, you can interrogate your variants from multiple biological perspectives, explore different biological hypotheses, and identify the most promising variants for follow-up.

Variant Analysis used in NCI-60 Interpretation of Genomic Variants

The NCI-60 Data Set offers tremendous promise in the development and prescription of cancer drugs

97% of surveyed researchers are satisfied with the ease of use of Ingenuity Variant Analysis and we are honored that they chose to share the data through our Publish tool.

See the research verified by TechValidate

“Being a bioinformatician, I appreciated the speed and the complexity of analysis. Without Variant Analysis, I couldn’t have completed the analysis of 700 exomes in such a short time …. I found Variant Analysis very intuitive and easy to use.”

Francesco Lescai, Senior Research Associate in Genome Analysis, University College of London.

This appears to be the new rocky road to verification for validity in diagnostic and treatment application.

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The Vibrant Philly Biotech Scene: Focus on KannaLife Sciences and the Discipline and Potential of Pharmacognosy

Curator and Interviewer: Stephen J. Williams, Ph.D.

 

philly2nightThis post is the third in a series of posts highlighting interviews with Philadelphia area biotech startup CEO’s and show how a vibrant biotech startup scene is evolving in the city as well as the Delaware Valley area. Philadelphia has been home to some of the nation’s oldest biotechs including Cephalon, Centocor, hundreds of spinouts from a multitude of universities as well as home of the first cloned animal (a frog), the first transgenic mouse, and Nobel laureates in the field of molecular biology and genetics. Although some recent disheartening news about the fall in rankings of Philadelphia as a biotech hub and recent remarks by CEO’s of former area companies has dominated the news, biotech incubators like the University City Science Center and Bucks County Biotechnology Center as well as a reinvigorated investment community (like PCCI and MABA) are bringing Philadelphia back. And although much work is needed to bring the Philadelphia area back to its former glory days (including political will at the state level) there are many bright spots such as the innovative young companies as outlined in these posts.

In today’s post, I had the opportunity to talk with both Dr. William Kinney, Chief Scientific Officer and Thoma Kikis, Founder/CMO of KannaLife Sciences based in the Pennsylvania Biotech Center of Bucks County.   KannaLifeSciences, although highlighted in national media reports and Headline news (HLN TV)for their work on cannabis-derived compounds, is a phyto-medical company focused on the discipline surrounding pharmacognosy, the branch of pharmacology dealing with natural drugs and their constituents.

Below is the interview with Dr. Kinney and Mr. Kikis of KannaLife Sciences and Leaders in Pharmaceutical Business Intelligence (LPBI)

 

PA Biotech Questions answered by Dr. William Kinney, Chief Scientific Officer of KannaLife Sciences

 

 

LPBI: Your parent company   is based in New York. Why did you choose the Bucks County Pennsylvania Biotechnology Center?

 

Dr. Kinney: The Bucks County Pennsylvania Biotechnology Center has several aspects that were attractive to us.  They have a rich talent pool of pharmaceutically trained medicinal chemists, an NIH trained CNS pharmacologist,  a scientific focus on liver disease, and a premier natural product collection.

 

LBPI: The Blumberg Institute and Natural Products Discovery Institute has acquired a massive phytochemical library. How does this resource benefit the present and future plans for KannaLife?

 

Dr. Kinney: KannaLife is actively mining this collection for new sources of neuroprotective agents and is in the process of characterizing the active components of a specific biologically active plant extract.  Jason Clement of the NPDI has taken a lead on these scientific studies and is on our Advisory Board. 

 

LPBI: Was the state of Pennsylvania and local industry groups support KannaLife’s move into the Doylestown incubator?

 

Dr. Kinney: The move was not State influenced by state or industry groups. 

 

LPBI: Has the partnership with Ben Franklin Partners and the Center provided you with investment opportunities?

 

Dr. Kinney: Ben Franklin Partners has not yet been consulted as a source of capital.

 

LPBI: The discipline of pharmacognosy, although over a century old, has relied on individual investigators and mainly academic laboratories to make initial discoveries on medicinal uses of natural products. Although there have been many great successes (taxol, many antibiotics, glycosides, etc.) many big pharmaceutical companies have abandoned this strategy considering it a slow, innefective process. Given the access you have to the chemical library there at Buck County Technology Center, the potential you had identified with cannabanoids in diseases related to oxidative stress, how can KannaLife enhance the efficiency of finding therapeutic and potential preventive uses for natural products?

 

Dr. Kinney: KannaLife has the opportunity to improve upon natural molecules that have shown medically uses, but have limitations related to safety and bioavailability. By applying industry standard medicinal chemistry optimization and assay methods, progress is being made in improving upon nature.  In addition KannaLife has access to one of the most commercially successful natural products scientists and collections in the industry.

 

LPBI: How does the clinical & regulatory experience in the Philadelphia area help a company like Kannalife?

 

Dr. Kinney: Within the region, KannaLife has access to professionals in all areas of drug development either by hiring displaced professionals or partnering with regional contract research organizations.

 

LPBI  You are focusing on an interesting mechanism of action (oxidative stress) and find your direction appealing (find compounds to reverse this, determine relevant disease states {like HCE} then screen these compounds in those disease models {in hippocampal slices}).  As oxidative stress is related to many diseases are you trying to develop your natural products as preventative strategies, even though those type of clinical trials usually require massive numbers of trial participants or are you looking to partner with a larger company to do this?

 

Dr. Kinney: Our strategy is to initially pursue Hepatic Encephalophy (HE) as the lead orphan disease indication and then partner with other organizations to broaden into other areas that would benefit from a neuroprotective agent.  It is expected the HE will be responsive to an acute treatment regimen.   We are pursuing both natural products and new chemical entities for this development path.

 

 

General Questions answered by Thoma Kikis, Founder/CMO of KannaLife Sciences

 

LPBI: How did KannaLife get the patent from the National Institutes of Health?

 

My name is Thoma Kikis I’m the co-founder of KannaLife Sciences. In 2010, my partner Dean Petkanas and I founded KannaLife and we set course applying for the exclusive license of the ‘507 patent held by the US Government Health and Human Services and National Institutes of Health (NIH). We spent close to 2 years working on acquiring an exclusive license from NIH to commercially develop Patent 6,630,507 “Cannabinoids as Antioxidants and Neuroprotectants.” In 2012, we were granted exclusivity from NIH to develop a treatment for a disease called Hepatic Encephalopathy (HE), a brain liver disease that stems from cirrhosis.

 

Cannabinoids are the chemicals that compose the Cannabis plant. There are over 85 known isolated Cannabinoids in Cannabis. The cannabis plant is a repository for chemicals, there are over 400 chemicals in the entire plant. We are currently working on non-psychoactive cannabinoids, cannabidiol being at the forefront.

 

As we started our work on HE and saw promising results in the area of neuroprotection we sought out another license from the NIH on the same patent to treat CTE (Chronic Traumatic Encephalopathy), in August of 2014 we were granted the additional license. CTE is a concussion related traumatic brain disease with long term effects mostly suffered by contact sports players including football, hockey, soccer, lacrosse, boxing and active military soldiers.

 

To date we are the only license holders of the US Government held patent on cannabinoids.

 

 

LPBI: How long has this project been going on?

 

We have been working on the overall project since 2010. We first started work on early research for CTE in early-2013.

 

 

LPBI: Tell me about the project. What are the goals?

 

Our focus has always been on treating diseases that effect the Brain. Currently we are looking for solutions in therapeutic agents designed to reduce oxidative stress, and act as immuno-modulators and neuroprotectants.

 

KannaLife has an overall commitment to discover and understand new phytochemicals. This diversification of scientific and commercial interests strongly indicates a balanced and thoughtful approach to our goals of providing standardized, safer and more effective medicines in a socially responsible way.

 

Currently our research has focused on the non-psychoactive cannabidiol (CBD). Exploring the appropriate uses and limitations and improving its safety and Metered Dosing. CBD has a limited therapeutic window and poor bioavailability upon oral dosing, making delivery of a consistent therapeutic dose challenging. We are also developing new CBD-like molecules to overcome these limitations and evaluating new phytochemicals from non-regulated plants.

 

KannaLife’s research is led by experienced pharmaceutically trained professionals; Our Scientific team out of the Pennsylvania Biotechnology Center is led by Dr. William Kinney and Dr. Douglas Brenneman both with decades of experience in pharmaceutical R&D.

 

 

LPBI: How do cannabinoids help neurological damage? -What sort of neurological damage do they help?

 

Cannabinoids and specifically cannabidiol work to relieve oxidative stress, and act as immuno-modulators and neuroprotectants.

 

So far our pre-clinical results show that cannabidiol is a good candidate as a neuroprotectant as the patent attests to. Our current studies have been to protect neuronal cells from toxicity. For HE we have been looking specifically at ammonia and ethanol toxicity.

 

 

– How did it go from treating general neurological damage to treating CTE? Is there any proof yet that cannabinoids can help prevent CTE? What proof?

 

We started examining toxicity first with ammonia and ethanol in HE and then posed the question; If CBD is a neuroprotectant against toxicity then we need to examine what it can do for other toxins. We looked at CTE and the toxin that causes it, tau. We just acquired the license in August from the NIH for CTE and are beginning our pre-clinical work in the area of CTE now with Dr. Ron Tuma and Dr. Sara Jane Ward at Temple University in Philadelphia.

 

 

LPBI: How long until a treatment could be ready? What’s the timeline?

 

We will have research findings in the coming year. We plan on filing an IND (Investigational New Drug application) with the FDA for CBD and our molecules in 2015 for HE and file for CTE once our studies are done.

 

 

LPBI: What other groups are you working with regarding CTE?

 

We are getting good support from former NFL players who want solutions to the problem of concussions and CTE. This is a very frightening topic for many players, especially with the controversy and lawsuits surrounding it. I have personally spoken to several former NFL players, some who have CTE and many are frightened at what the future holds.

 

We enrolled a former player, Marvin Washington. Marvin was an 11 year NFL vet with NY Jets, SF 49ers and won a SuperBowl on the 1998 Denver Broncos. He has been leading the charge on KannaLife’s behalf to raise awareness to the potential solution for CTE.

 

We tried approaching the NFL in 2013 but they didn’t want to meet. I can understand that they don’t want to take a position. But ultimately, they’re going to have to make a decision and look into different research to treat concussions. They have already given the NIH $30 Million for research into football related injuries and we hold a license with the NIH, so we wanted to have a discussion. But currently cannabinoids are part of their substance abuse policy connected to marijuana. Our message to the NFL is that they need to lead the science, not follow it.

 

Can you imagine the NFL’s stance on marijuana treating concussions and CTE? These are topics they don’t want to touch but will have to at some point.

 

LPBI: Thank you both Dr. Kinney and Mr. Kikis.

 

Please look for future posts in this series on the Philly Biotech Scene on this site

Also, if you would like your Philadelphia biotech startup to be highlighted in this series please contact me or

http://pharmaceuticalintelligence.com at:

sjwilliamspa@comcast.net or @StephenJWillia2  or @pharma_BI.

Our site is read by ~ thousand international readers DAILY and thousands of Twitter followers including venture capital.

 

Other posts on this site in this VIBRANT PHILLY BIOTECH SCENE SERIES OR referring to PHILADELPHIA BIOTECH include:

The Vibrant Philly Biotech Scene: Focus on Computer-Aided Drug Design and Gfree Bio, LLC

RAbD Biotech Presents at 1st Pitch Life Sciences-Philadelphia

The Vibrant Philly Biotech Scene: Focus on Vaccines and Philimmune, LLC

What VCs Think about Your Pitch? Panel Summary of 1st Pitch Life Science Philly

1st Pitch Life Science- Philadelphia- What VCs Really Think of your Pitch

LytPhage Presents at 1st Pitch Life Sciences-Philadelphia

Hastke Inc. Presents at 1st Pitch Life Sciences-Philadelphia

PCCI’s 7th Annual Roundtable “Crowdfunding for Life Sciences: A Bridge Over Troubled Waters?” May 12 2014 Embassy Suites Hotel, Chesterbrook PA 6:00-9:30 PM

Pfizer Cambridge Collaborative Innovation Events: ‘The Role of Innovation Districts in Metropolitan Areas to Drive the Global an | Basecamp Business

Mapping the Universe of Pharmaceutical Business Intelligence: The Model developed by LPBI and the Model of Best Practices LLC

 

 

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Why did this occur? The matter of Individual Actions Undermining Trust, The Patent Dilemma and The Value of a Clinical Trials

Why did this occur? The matter of Individual Actions Undermining Trust, The Patent Dilemma and The Value of a Clinical Trials

Reporter and Curator: Larry H. Bernstein, MD, FCAP

 

he large amount of funding tied to continued research and support of postdoctoral fellows leads one to ask how following the money can lead to discredited work in th elite scientific community.

Moreover, the pressure to publish in prestigious journals with high impact factors is a road to academic promotion.  In the last twenty years, it is unusual to find submissions for review with less than 6-8 authors, with the statement that all contributed to the work.  These factors can’t be discounted outright, but it is easy for work to fall through the cracks when a key investigator has over 200 publications and holds tenure in a great research environment.  But that is where we find ourselves today.

There is another issue that comes up, which is also related to the issue of carrying out research, and then protecting the work for commercialization.  It is more complicated in the sense that it is necessary to determine whether there is prior art, and then there is the possibility that after the cost of filing patent and a 6 year delay in obtaining protection, there is as great a cost in bringing the patent to finasl production.

I.  Individual actions undermining trust.

II. The patent dilemma.

III. The value of a clinical trial.

IV. The value contributions of RAP physicians
(radiologists, anesthesiologists, and pathologists – the last for discussion)
Those who maintain and inform the integrity of medical and surgical decisions

 

I. Top heart lab comes under fire

Kelly Servick

Science 18 July 2014: Vol. 345 no. 6194 p. 254 DOI: 10.1126/science.345.6194.25

 

In the study of cardiac regeneration, Piero Anversa is among the heavy hitters. His research into the heart’s repair mechanisms helped kick-start the field of cardiac cell therapy (see main story). After more than 4 decades of research and 350 papers, he heads a lab at Harvard Medical School’s Brigham and Women’s Hospital (BWH) in Boston that has more than $6 million in active grant funding from the National Institutes of Health (NIH). He is also an outspoken voice in a field full of disagreement.

So when an ongoing BWH investigation of the lab came to light earlier this year, Anversa’s colleagues were transfixed. “Reactions in the field run the gamut from disbelief to vindication,” says Mark Sussman, a cardiovascular researcher at San Diego State University in California who has collaborated with Anversa. By Sussman’s account, Anversa’s reputation for “pushing the envelope” and “challenging existing dogma” has generated some criticism. Others, however, say that the disputes run deeper—to doubts about a cell therapy his lab has developed and about the group’s scientific integrity. Anversa told Science he was unable to comment during the investigation.

“People are talking about this all the time—at every scientific meeting I go to,” says Charles Murry, a cardiovascular pathologist at the University of Washington, Seattle. “It’s of grave concern to people in the field, but it’s been frustrating,” because no information is available about BWH’s investigation. BWH would not comment for this article, other than to say that it addresses concerns about its researchers confidentially.

In April, however, the journal Circulation agreed to Harvard’s request to retract a 2012 paper on which Anversa is a corresponding author, citing “compromised” data. The Lancet also issued an “Expression of Concern” about a 2011 paper reporting results from a clinical trial, known as SCIPIO, on which Anversa collaborated. According to a notice from the journal, two supplemental figures are at issue.

For some, Anversa’s status has earned him the benefit of the doubt. “Obviously, this is very disconcerting,” says Timothy Kamp, a cardiologist at the University of Wisconsin, Madison, but “I would be surprised if it was an implication of a whole career of research.”

Throughout that career, Anversa has argued that the heart is a prolific, lifelong factory for new muscle cells. Most now accept the view that the adult heart can regenerate muscle, but many have sparred with Anversa over his high estimates for the rate of this turnover, which he maintained in the retracted Circulation paper.

Anversa’s group also pioneered a method of separating cells with potential regenerative abilities from other cardiac tissue based on the presence of a protein called c-kit. After publishing evidence that these cardiac c-kit+cells spur new muscle growth in rodent hearts, the group collaborated in the SCIPIO trial to inject them into patients with heart failure. In The Lancet, the scientists reported that the therapy was safe and showed modest ability to strengthen the heart—evidence that many found intriguing and provocative. Roberto Bolli, the cardiologist whose group at the University of Louisville in Kentucky ran the SCIPIO trial, plans to test c-kit+ cells in further clinical trials as part of the NIH-funded Cardiovascular Cell Therapy Research Network.

But others have been unable to reproduce the dramatic effects Anversa saw in animals, and some have questioned whether these cells really have stem cell–like properties. In May, a group led by Jeffery Molkentin, a molecular biologist at Cincinnati Children’s Hospital Medical Center in Ohio, published a paper in Nature tracing the genetic lineage of c-kit+ cells that reside in the heart. He concluded that although they did make new muscle cells, the number is “astonishingly low” and likely not enough to contribute to the repair of damaged hearts. Still, Molkentin says that he “believe[s] in their therapeutic potential” and that he and Anversa have discussed collaborating.

Now, an anonymous blogger claims that problems in the Anversa lab go beyond controversial findings. In a letter published on the blog Retraction Watch on 30 May, a former research fellow in the Anversa lab described a lab culture focused on protecting the c-kit+ cell hypothesis: “[A]ll data that did not point to the ‘truth’ of the hypothesis were considered wrong,” the person wrote. But another former lab member offers a different perspective. “I had a great experience,” says Federica Limana, a cardiovascular disease researcher at IRCCS San Raffaele Pisana in Rome who spent 2 years of her Ph.D. work with the group in 1999 and 2000, as it was beginning to investigate c-kit+ cells. “In that period, there was no such pressure” to produce any particular result, she says.

Accusations about the lab’s integrity, combined with continued silence from BWH, are deeply troubling for scientists who have staked their research on theories that Anversa helped pioneer. Some have criticized BWH for requesting retractions in the midst of an investigation. “Scientific reputations and careers hang in the balance,” Sussman says, “so everyone should wait until all facts are clearly and fully disclosed.”

 

II.  Trolling Along: Recent Commotion About Patent Trolls

July 17, 2014

PriceWaterhouseCoopers recently released a study about 2014 Patent Litigation. PwC’s ultimate conclusion was that case volume increased vastly and damages continue a general decline, but what’s making headlines everywhere is that “patent trolls” now account for 67% of all new patent lawsuits (see, e.g., Washington Post and Fast Company).

Surprisingly, looking at PwC’s study, the word “troll” is not to be found. So, with regard to patent trolls, what does this study really mean for companies, patent owners and casual onlookers?

First of all, who are these trolls?

“Patent Troll” is a label applied to patent owners who do not make or manufacture a product, or offer a service. Patent trolls live (and die) by suing others for allegedly practicing an invention that is claimed by their patents.

The politically correct term is Non-practicing Entity (NPE). PwC solely uses the term NPE, which it defines as an entity that does not have the capability to design, manufacture, or distribute products with features protected by the patent.

So, what’s so bad about them?

The common impression of an NPEs is a business venture looking to collect and monetize assets (i.e., patents). In the most basic strategy, an NPE typically buys patents with broad claims that cover a wide variety of technologies and markets, and then sues a large group of alleged patent infringers in the hope to collect a licensing royalty or a settlement. NPEs typically don’t want to spend money on a trial unless they have to, and one tactic uses settlements with smaller businesses to build a “war chest” for potential suits with larger companies.

NPEs initiating a lawsuit can be viewed positively, such as a just defense of the lowly inventor who sold his patent to someone (with deeper pockets) who could fund the litigation to protect the inventor’s hard work against a mega-conglomerate who ripped off his idea.

Or NPE litigation can be seen negatively, such as an attorney’s demand letter on behalf of an anonymous shell corporation to shake down dozens of five-figure settlements from all the local small businesses that have ever used a fax machine.

NPEs can waste a company’s valuable time and resources with lawsuits, yet also bring value to their patent portfolios by energizing a patent sales and licensing market. There are unscrupulous NPEs, but it’s hardly the black and white situation that some media outlets are depicting.

What did PwC say about trolls?

Well, the PwC study looked at the success rates and awards of patent litigation decisions. One conclusion is that damages awards for NPEs averaged more than triple those for practicing entities over the last four years. We’ll come back to this statistic.

Another key observation is that NPEs have been successful 25% of the time overall, versus 35% for practicing entities. This makes sense because of the burden of proof the NPEs carry as a plaintiff at trial and the relative lack of success for NPEs at summary judgment. However, PwC’s report states that both types of entities win about two-thirds of their trials.

But what about this “67% of all patent trials are initiated by trolls” discussion?

The 67% number comes from the RPX Corporation’s litigation report (produced January 2014) that quantified the percentage of NPE cases filed in 2013 as 67%, compared to 64% in 2012, 47% in 2011, 30% in 2010 and 28% in 2009.

PwC refers to the RPX statistics to accentuate that this new study indicates that only 20% ofdecisions in 2013 involved NPE-filed cases, so the general conclusion would be that NPE cases tend to settle or be dismissed prior to a court’s decision. Admittedly, this is indicative of the prevalent “spray and pray” strategy where NPEs prefer to collect many settlement checks from several “targets” and avoid the courtroom.

In this study, who else is an NPE?

If someone were looking to dramatize the role of “trolls,” the name can be thrown around liberally (and hurtfully) to anyone who owns and asserts a patent without offering a product or a service. For instance, colleges and universities fall under the NPE umbrella as their research and development often ends with a series of published papers rather than a marketable product on an assembly line.

In fact, PwC distinguishes universities and non-profits from companies and individuals within their NPE analysis, with only about 5% of the NPE cases from 1995 to 2013 being attributed to universities and non-profits. Almost 50% of the NPE cases are attributed to an “individual,” who could be the listed inventor for the patent or a third-party assignee.

The word “troll” is obviously a derogatory term used to connote greed and hiding (under a bridge), but the term has adopted a newer, meme-like status as trolls are currently depicted as lacking any contribution to society and merely living off of others’ misfortunes and fears. [Three Billy Goats Gruff]. This is not always the truth with NPEs (e.g., universities).

No one wants to be called a troll—especially in front of a jury—so we’ve even recently seen courts bar defendants from referring to NPEs as such colorful terms as a “corporate shell,” “bounty hunter,” “privateer,” or someone “playing the lawsuit lottery.” [Judge Koh Bans Use Of Term ” Patent Troll” In Apple Jury Trial]

Regardless of the portrayal of an NPE, most people in the patent world distinguish the “trolls” by the strength of the patent, merits of the alleged infringement and their behavior upon notification. Often these are expressed as “frivolity” of the case and “gamesmanship” of the attorneys. Courts are able to punish plaintiffs who bring frivolous claims against a party and state bar associations are tasked with monitoring the ethics of attorneys. The USPTO is tasked with working to strengthen the quality of patents.

What’s the take-away from this study regarding NPEs?

The study focuses on patent litigation that produced a decision, therefore the most important and relevant conclusion is that, over the last four years, average damages awards for NPEs are more than triple the damages for practicing entities. Everything else in these articles, such as the initiation of litigation by NPEs, settlement percentages, and the general behavior of patent trolls is pure inference beyond the scope of the study.

This may sound sympathetic to trolls, but keep in mind that the study highlights that NPEs have more than triple the damages on average compared to practicing entities and it is meant to shock the reader a bit. One explanation for this is that NPEs are in the best position to choose the patents they want to assert and choose the targets they wish to sue—especially when the NPE is willing to ride that patent all the way to the end of a long, expensive trial. Sometimes settling is not an option. Chart 2b indicates that the disparity in the damages awarded to NPEs relative to practicing entities has always been big (since 2000), but perhaps going from two-fold from 2000 – 2009 to three times as much in the past 4 years indicates that NPEs are improving at finding patents and/or picking battles to take all the way to a court decision. More than anything, this seems to reflect the growth in the concept of patents as a business asset.

The PwC report is chock full of interesting patterns and trends of litigation results, so it’s a shame that the 67% number makes the headlines—far more interesting are the charts comparing success rates by 4-year periods (Chart 6b) or success rates for NPEs and practicing entities in front of a jury verusin front of a bench (Chart 6c), as well as other tables that reveal statistics for specific districts of the federal courts. Even the stats that look at the success rates of each type of NPE are telling because the reader sees that universities and non-profits have a higher success rate than non-practicing companies or individuals.

What do we do about the trolls?

The White House has recently called for Congress to do something about the trolls as horror stories of scams and shake-downs are shared. A bill was gaining momentum in the Senate, when Senator Leahy took it off the agenda in early July. That bill had miraculously passed 325-91 in the House and President Obama was willing to sign it if the Senate were to pass it. The bill was opposed by trial attorneys, universities, and bio-pharmaceutical businesses who felt as though the law would severely inhibit everyone’s access to the courts in order to hinder just the trolls. Regardless, most people think that the sitting Congressmen merely wanted a “win” prior to the mid-term elections and that patent reform is unlikely to reappear until next term.

In the meantime, the Supreme Court has recently reiterated rules concerning attorney fee-shifting on frivolous patent cases, as well as clarifying the validity of software patents. Time will tell if these changes have any effects on the damages awards that PwC’s study examined or even if they cause a chilling of the number of patent lawsuit filings.

Furthermore, new ways to challenge the validity of asserted patents have been initiated via the America Invents Act. For example, the Inter Partes Review (IPR) has yielded frightening preliminary statistics as to slowing, if not killing, patents that have been asserted in a suit. While these administrative trials are not cheap, many view these new tools at the Patent Trial and Appeals Board as anti-troll measures. It will be interesting to watch how the USPTO implements these procedures in the near future, especially while former Google counsel, Acting Director Michelle K. Lee, oversees the office.

In the private sector, Silicon Valley has recently seen a handful of tech companies come together as the License on Transfer Network, a group hoping to disarm the “Patent Assertion Entities.” Joining the LOT Network comes via an agreement that creates a license for use of a patent by anyone in the LOT network once that patent is sold. The thought is that the NPEs who consider purchasing patents from companies in the LOT Network will have fewer companies to sue since the license to the other active LOT participants will have triggered upon the transfer and, thus, the NPE will not be as inclined to “troll.” For instance, if a member-company such as Google were to sell a patent to a non-member company and an NPE bought that patent, the NPE would not be able to sue any members of the LOT Network with that patent.

Other notes

NPEs are only as evil as the people who run them—that being said, there are plenty of horror stories of small businesses receiving phantom demand letters that threaten a patent infringement suit without identifying themselves or the patent. This is an out-and-out scam and a plague on society that results in wasted time and resource, and inevitably higher prices on the consumer end.

It is a sin and a shame that patent rights can be misused in scams and shake-downs of businesses around us, but there is a reason that U.S. courts are so often used to defend patent rights. The PwC study, at minimum, reflects the high stakes of the patent market and perhaps the fragility. Nevertheless, merely monitoring the courts may not keep the trolls at bay.

I’d love to hear your thoughts.

*This is provided for informational purposes only, and does not constitute legal or financial advice. The information expressed is subject to change at any time and should be checked for completeness, accuracy and current applicability. For advice, consult a suitably licensed attorney or patent agent.

 

III. Large-scale analysis finds majority of clinical trials don’t provide meaningful evidence

Ineffective TreatmentsMedical Ethics • Tags: Center for Drug Evaluation and ResearchClinical trialCTTIDuke University HospitalFDAFood and Drug AdministrationNational Institutes of HealthUnited States National Library of Medicine

04 May 2012

DURHAM, N.C.— The largest comprehensive analysis of ClinicalTrials.gov finds that clinical trials are falling short of producing high-quality evidence needed to guide medical decision-making. The analysis, published today in JAMA, found the majority of clinical trials is small, and there are significant differences among methodical approaches, including randomizing, blinding and the use of data monitoring committees.

“Our analysis raises questions about the best methods for generating evidence, as well as the capacity of the clinical trials enterprise to supply sufficient amounts of high quality evidence to ensure confidence in guideline recommendations,” said Robert Califf, M.D., first author of the paper, vice chancellor for clinical research at Duke University Medical Center, and director of the Duke Translational Medicine Institute.

The analysis was conducted by the Clinical Trials Transformation Initiative (CTTI), a public private partnership founded by the Food and Drug Administration (FDA) and Duke. It extends the usability of the data in ClinicalTrials.gov for research by placing the data through September 27, 2010 into a database structured to facilitate aggregate analysis. This publically accessible database facilitates the assessment of the clinical trials enterprise in a more comprehensive manner than ever before and enables the identification of trends by study type.

 

The National Library of Medicine (NLM), a part of the National Institutes of Health, developed and manages ClinicalTrials.gov. This site maintains a registry of past, current, and planned clinical research studies.

“Since 2007, the Food and Drug Administration Amendment Act has required registration of clinical trials, and the expanded scope and rigor of trial registration policies internationally is producing more complete data from around the world,” stated Deborah Zarin, MD, director, ClinicalTrials.gov, and assistant director for clinical research projects, NLM. “We have amassed over 120,000 registered clinical trials. This rich repository of data has a lot to say about the national and international research portfolio.”

This CTTI project was a collaborative effort by informaticians, statisticians and project managers from NLM, FDA and Duke. CTTI comprises more than 60 member organizations with the goal of identifying practices that will improve the quality and efficiency of clinical trials.

“Since the ClinicalTrials.gov registry contains studies sponsored by multiple entities, including government, industry, foundations and universities, CTTI leaders recognized that it might be a valuable source for benchmarking the state of the clinical trials enterprise,” stated Judith Kramer, MD, executive director of CTTI.

The project goal was to produce an easily accessible database incorporating advances in informatics to permit a detailed characterization of the body of clinical research and facilitate analysis of groups of studies by therapeutic areas, by type of sponsor, by number of participants and by many other parameters.

“Analysis of the entire portfolio will enable the many entities in the clinical trials enterprise to examine their practices in comparison with others,” says Califf. “For example, 96% of clinical trials have ≤1000 participants, and 62% have ≤ 100. While there are many excellent small clinical trials, these studies will not be able to inform patients, doctors and consumers about the choices they must make to prevent and treat disease.”

The analysis showed heterogeneity in median trial size, with cardiovascular trials tending to be twice as large as those in oncology and trials in mental health falling in the middle. It also showed major differences in the use of randomization, blinding, and data monitoring committees, critical issues often used to judge the quality of evidence for medical decisions in clinical practice guidelines and systematic overviews.

“These results reinforce the importance of exploration, analysis and inspection of our clinical trials enterprise,” said Rachel Behrman Sherman, MD, associate director for the Office of Medical Policy at the FDA’s Center for Drug Evaluation and Research. “Generation of this evidence will contribute to our understanding of the number of studies in different phases of research, the therapeutic areas, and ways we can improve data collection about clinical trials, eventually improving the quality of clinical trials.”

Related articles

 

IV.  Lawmakers urge CMS to extend MU hardship exemption for pathologists

 

Eighty-nine members of Congress have asked the Centers for Medicare & Medicaid Services to give pathologists a break and extend the hardship exemption they currently enjoy for all of Stage 3 of the Meaningful Use program.In the letter–dated July 10 and addressed to CMS Administrator Marilyn Tavenner–the lawmakers point out that CMS had recognized in its 2012 final rule implementing Stage 2 of the program that it was difficult for pathologists to meet the Meaningful Use requirements and granted a one year exception for 2015, the first year that penalties will be imposed. They now are asking that the exception be expanded to include the full five-year maximum allowed under the American Recovery and Reinvestment Act.

“Pathologists have limited direct contact with patients and do not operate in EHRs,” the letter states. “Instead, pathologists use sophisticated computerized laboratory information systems (LISs) to support the work of analyzing patient specimens and generating test results. These LISs exchange laboratory and pathology data with EHRs.”

Interestingly, the lawmakers’ exemption request is only on behalf of pathologists, even though CMS had granted the one-year hardship exception to pathologists, radiologists and anesthesiologists.

Rep. Tom Price (R-Ga.), one of the members spearheading the letter, had also introduced a bill (H.R. 1309) in March 2013 that would exclude pathologists from the incentives and penalties of the Meaningful Use program. The bill, which has 31 cosponsors, is currently sitting in committee. That bill also does not include relief for radiologists or anesthesiologists.

CMS has provided some flexibility about the hardship exceptions in the past, most recently by allowing providers to apply for one due to EHR vendor delays in upgrading to Stage 2 of the program.

However, CMS also noted in the 2012 rule granting the one-year exception that it was granting the exception in large part because of the then-current lack of health information exchange and that “physicians in these three specialties should not expect that this exception will continue indefinitely, nor should they expect that we will grant the exception for the full 5-year period permitted by statute.”

To learn more:
– read the letter (.pdf)

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Reason in Hobby Lobby

Curator: Larry H. Bernstein, MD, FCAP

 

This is a Part 4 followup of the Hobby Lobby legal precedent.

  • Where has the reason gone?

http://pharmaceuticalintelligence.com/2014/07/07/where-has-reason-gone-2/

  • Justice Ginsberg written dissent – Third Part

http://pharmaceuticalintelligence.com/2014/07/08/justice-ginsberg-written-dissent/

  • The physicians’ view of Supreme Court on an issue of public health

http://pharmaceuticalintelligence.com/2014/07/08/the-physicians-view-of-supreme-court-on-an-issue-of-public-health/

  •  Reason in Hobby Lobby

http://pharmaceuticalintelligence.com/2014/07/08/reason-in-hobby-lobby/

 

 Reason in Hobby Lobby

 

 

Reason #1 SCOTUS Will Regret Hobby Lobby byMan from Wasichustan

After oral arguments in the Hobby Lobby case, I wrote a very misnamed but widely read diary in which I echoed Attorney and Ring of Fire radio host Mike Papantonio’s argument that the SCOTUS would never rule in favor of Hobby Lobby for a really Big Business reason: It pierces the corporate veil.  If Hobby Lobby’s owners can give their Corporation religion, their religion gives Hobby Lobby’s owners–and any other owner, shareholder, officer, whatever–liability for the actions of the corporation.  Mr. Papantonio, who happens to be one of America’s preeminent trial lawyers, sees it as an opportunity to sue owners for the company’s negligence. Some other people, it turns out, agree with his assessment and expand on what it means….

That separation is what legal and business scholars call the “corporate veil,” and it’s fundamental to the entire operation. Now, thanks to the Hobby Lobby case, it’s in question. By letting Hobby Lobby’s owners assert their personal religious rights over an entire corporation, the Supreme Court has poked a major hole in the veil. In other words, if a company is not truly separate from its owners, the owners could be made responsible for its debts and other burdens.  So says Alex Park, writing in Salon today.

“If religious shareholders can do it, why can’t creditors and government regulators pierce the corporate veil in the other direction?” Burt Neuborne, a law professor at New York University, asked in an email. That’s a question raised by 44 other law professors, who filed a friends-of-the-court brief that implored the Court to reject Hobby Lobby’s argument and hold the veil in place. Here’s what they argued: Allowing a corporation, through either shareholder vote or board resolution, to take on and assert the religious beliefs of its shareholders in order to avoid having to comply with a generally-applicable law with a secular purpose is fundamentally at odds with the entire concept of incorporation.

Creating such an unprecedented and idiosyncratic tear in the corporate veil would also carry with it unintended consequences, many of which are not easily foreseen. This is definitely going to complicate things for the religious extremists on the SCOTUS and empire wide as these lawsuits inevitably proliferate.  Putting on the popcorn….now.

George Takei’s blistering response to #HobbyLobby: Could a Muslim Corp impose Sharia Law?

byVyan   THU JUL 03, 2014 AT 09:12 AM PDT “The ruling elevates the rights of a FOR-PROFIT CORPORATION over those of its women employees and opens the door to all manner of claims that a company can refuse services based on its owner’s religion,” Takei wrote.

(O)ne wonders,” he said, “whether the case would have come out differently if a Muslim-run chain business attempted to impose Sharia law on its employees.” “Hobby Lobby is not a church. It’s a business — and a big one at that,” he continued. “Businesses must and should be required to comply with neutrally crafted laws of general applicability.

Your boss should not have a say over your healthcare. Just as Justice Ginsberg and Mr Takei have suggested, the Hyper-Religious are already attempting to capitalize on the SCOTUS new granting of the rights of an individual to a corporate entity. In this decision the SCOTUS Majority opinion claimed that they were not granting the equal legitimacy of such follow on requests, but they’ve kicked open the door. Takei – bless his soul – also pointed out the basic hypocrisy of Hobby Lobby’s business practices in regards to religion.  Noting that… …Hobby Lobby has invested in multiple companies that manufacture abortion drugs and birth control. The company receives most of its merchandise from China, a country where overpopulation has led to mandatory abortions and sterilizations for women who try to have more than one child.

What the battle over birth control is really about     byteacherken

in a 2012 piece at Alternet by Sara Robinson. Conservative bishops and Congressmen are fighting a rear-guard action against one of the most revolutionary changes in human history. Robinson suggests 500 years from now looking back, the three great achievements of the 20th Century are likely to be the invention of the integrated circuit (without which the internet does not exist), the Moon landing (which she thinks will carry the same impact as Magellan’s circumnavigation of the globe), and the mass availability of nearly 100% effective contraception.

 Free Birth Control is Emerging Standard for Women   RICARDO ALONSO-ZALDIVAR, Associated Press       07/07/2014

WASHINGTON (AP) — More than half of privately insured women are getting free birth control under President Barack Obama’s health law, a major coverage shift that’s likely to advance. This week the Supreme Court allowed some employers with religious scruples to opt out, but most companies appear to be going in the opposite direction. Recent data from the IMS Institute document a sharp change during 2013. The share of privately insured women who got their birth control pills without a copayment jumped to 56 percent, from 14 percent in 2012. The law’s requirement that most health plans cover birth control as prevention, at no additional cost to women, took full effect in 2013. The average annual saving for women was $269. “It’s a big number,” said institute director Michael Kleinrock. The institute is the research arm of IMS Health, a Connecticut-based technology company that uses pharmacy records to track prescription drug sales. The core of Obama’s law — taxpayer-subsidized coverage for the uninsured — benefits a relatively small share of Americans. But free preventive care— from flu shots to colonoscopies —is a dividend of sorts for the majority with employer coverage.

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Where has Reason Gone?

 

Writer and Curator: Larry H. Bernstein, MD, FCAP

 

UPDATED on  8 July 2014

 

This will be a series of presentations on the Supreme Court decision on Hobby Lobby, it’s impact, and the distamce it places on Chief Justic Roberts’ decision to go with a 5-4 majority after this year achieving a direction of concensus largely undivided decisions.  Both Justice Kennedy and Chief Justice Roberts could have taken a different position with a much appreciated decision, or the alternative was to send the case back to the lower court.  That did not happen, and the consequences are unfolding.

  • Where has the reason gone?

http://pharmaceuticalintelligence.com/2014/07/07/where-has-reason-gone-2/

  • Justice Ginsberg written dissent – Third Part

http://pharmaceuticalintelligence.com/2014/07/08/justice-ginsberg-written-dissent/

  • The physicians’ view of Supreme Court on an issue of public health

http://pharmaceuticalintelligence.com/2014/07/08/the-physicians-view-of-supreme-court-on-an-issue-of-public-health/

  •  Reason in Hobby Lobby

http://pharmaceuticalintelligence.com/2014/07/08/reason-in-hobby-lobby/

 

Where has the Reason Gone?

We are in a period of widespread instability that is bereft of  comprehensibility, not just in Asia, the Middle East, and Africa, but also imposing constrainsts on our constitutional government.  This web sight is concerned with science and also health.  Science is challenged to figure out the complexity of biology and the physical world.  But it has been challenged for centuries by an uncompromizing view of how to organize a society, driven by hatred and violence, and excused by fanatical views. We have a most advanced society in the US, self selected to be the leader of nations.  Yet we have a separation of powers in the presidency, two houses of Congress, and a judiciary that cannot function for the good of the people.  The Congress is at war within itself , unable to carry out its obligations, and only functioning to blockade the presidential authority.

But most disconcerting is a third branch, the judiciary, with Supreme Court Justices, all of whom are political appointmnt for LIFE, and half of who have shown sufficient incompetence to wonder how they can stay in office.  Perhaps, what we don’t have to keep them in line is a periodic review of performance by the American Association of Legal Constitutional Scholars.  What we have is as good as it gets, but not good enough. I refrain from saying more, and proceed to the most recent ABSURD events.   In the Hobby Lobby case, the Court’s conservative majority held that closely held corporations are entitled to some of the same religious rights as people. That means corporations can decide whether or not birth control is covered in the health plans of female employees. Corporations are not people, period. A boss’s religious views should not trump a physician’s medical judgement or a woman’s considered need .

The White House must move fast on expanding contraception coverage.

One proposal…would assign companies’ insurers or health plan administrators for contraceptive coverage… Another would give the administration itself a larger role.” Robert Pear and Adam Liptak in The New York Times.

A rare but potentially important dissent?

“Dissents to Supreme Court orders are rare, and a 17-page dissent to a curt, four-paragraph order is extraordinary. But Sotomayor is on to something: What the majority did in Hobby Lobby, was to allow the plaintiff also to determine what constitutes a ‘substantial burden’ upon it.” Daniel Fisher in Forbes.

Here’s what everyone has been missing in this debate.

“Ginsburg, in her scathing dissent…made an important point about women’s health that’s been almost entirely overlooked elsewhere: For many American women, the birth-control pill has nothing to do with controlling births. It’s a life-saving medicine….The decision…may affect millions of women who suffer from a variety of medical conditions. These women depend on the pill to regulate their hormones and do everything from ease pain to reduce the risk of cancer. These medical benefits have nothing to do with sex or the prevention of pregnancy….Even if these women never have sex once in their lives, they need to be on birth control.” Lucia Graves in National Journal.

“The share of privately insured women who got their birth control pills without a copayment jumped to 56 percent, from 14 percent in 2012. The law’s requirement that most health plans cover birth control as prevention, at no additional cost to women, took full effect in 2013. The average annual saving for women was $269.” Ricardo Alonso-Zaldivar in the Associated Press.

In Hobby Lobby, Supremes grant religious objection rights to for-profit corporations.

by Adam  B In a widely-awaited-but-still-85 percent-as-sucky-as-you-feared 5-4 decision this morning,the Supreme Court of the United States has held that for-profit corporations are “persons” for purposes of the Religious Freedom Restoration Act, and that their religious rights were unduly burdened by the contraceptive mandate provisions of the Affordable Care Act. Because the contraceptive mandate was not the least restrictive means available for the government to provide such coverage—in the Court’s mind, the Government could just assume the costs itself, and already provided an opt-out for religious non-profit employers—the mandate on private employers violates the law. The Court was careful to limit its opinion (in theory) to these facts.

  • It applies only to closely held corporations, and not publicly traded ones.
  • It applies to the contraceptive mandate and
  • not religious objections to all laws in general,

believing that the “compelling interest” struck a sensible balance between religious liberty and competing prior governmental interests. But … we’ll see about that. Justice Ginsburg, writing for the four dissenting Justices, refers to the decision thusly:

In a decision of startling breadth, the Court holds that commercial enterprises, including corporations, along with partnerships and sole proprietorships, can opt out of any law (saving only tax laws) they judge incompatible with their sincerely held religious beliefs.

Compelling governmental interests in uniform compliance with the law, and disadvantages that religion-based opt-outs impose on others, hold no sway, the Court decides,

  • at least when there is a “less restrictive alternative.”

And such an alternative, the Court suggests, there always will be whenever, in lieu of tolling an enterprise claiming a religion-based exemption, the government, i.e., the general public, can pick up the tab….

Religious organizations exist to serve a community of believers.

For-profit corporations do not fit that bill.

Moreover, history is not on the Court’s side. Recognition of the discrete characters of “ecclesiastical and lay” corporations dates back to Blackstone, see 1 W. Blackstone, Commentaries on the Laws of England 458 (1765), and was reiterated by this Court centuries before the enactment of the Internal Revenue Code. See Terrett v. Taylor, 9 Cranch 43, 49 (1815) (describing religious corporations); Trustees of Dartmouth College, 4 Wheat., at 645 (discussing “eleemosynary” corporations, including those “created for the promotion of religion”). To reiterate,

“for-profit corporations are different from religious non-profits in that they use labor to make a profit, rather than to perpetuate [the] religious value[s] [shared by a community of believers].”

Let’s be clear, explains Justice Alito for the five majority opinion, corporations are people too (in aggregate) (for purposes of this statute): As we will show,

  • Congress provided protection for people like the Hahns and Greens by employing a familiar legal fiction: It included corporations within RFRA’s definition of “persons.”

It is important to keep in mind that the purpose of this fiction is to provide protection for human beings. A corporation is simply a form of organization used by human beings to achieve desired ends. An established body of law specifies the rights and obligations of the people (including shareholders, officers, and employees) who are associated with a corporation in one way or another. When rights, whether constitutional or statutory, are extended to corporations, the purpose is to protect the rights of these people. For example, extending Fourth Amendment protection to corporations protects the privacy interests of employees and others associated with the company. Protecting corporations from government seizure of their property without just compensation protects all those who have a stake in the corporations’ financial well-being. And …   protecting the free-exercise rights of corporations like Hobby Lobby, Conestoga, and Mardel protects the religious liberty of the humans who own and control those companies…

This statement extends the rights beyond the statement above in that it cannot apply to a closely held corporation with only the owner having fiduciary interest

Indeed, the opinion claims, you can go back over 50 years and find the Court not questioning that a for-profit corporation’s had religious rightsin that 1961 case, a kosher supermarket seeking the right to be open on Sundays despite Massachusetts blue laws. [To which the dissent counters, “The suggestion is barely there. True, one of the five challengers to the Sunday closing law … was a corporation owned by four Orthodox Jews. The other challengers were human individuals, not artificial, law-created entities, so there was no need to determine whether the corporation could institute the litigation.”]

The Court insists that this isn’t something publicly traded companies are going to get involved in. We could use corporate law principles to suss out what their religious beliefs are: HHS contends that Congress could not have wanted RFRA to apply to for-profit corporations because it is difficult as a practical matter to ascertain the sincere “beliefs” of a corporation. HHS goes so far as to raise the specter of “divisive, polarizing proxy battles over the religious identity of large, publicly traded corporations such as IBM or General Electric.” These cases, however, do not involve publicly traded corporations, and it seems unlikely that the sort of corporate giants to which HHS refers will often assert RFRA claims. HHS has not pointed to any example of a publicly traded corporation asserting RFRA rights, and numerous practical restraints would likely prevent that from occurring. For example,

  • the idea that unrelated shareholders—including institutional investors with their own set of stakeholders—would agree to run a corporation under the same religious beliefs seems improbable. In any event, we have no occasion in these cases to consider RFRA’s applicability to such companies.
  • The companies in the cases before us are closely held corporations, each owned and controlled by members of a single family, and no one has disputed the sincerity of their religious beliefs.

HHS has also provided no evidence that the purported problem of determining the sincerity of an asserted religious belief moved Congress to exclude for-profit corporations from RFRA’s protection…. HHS and the principal dissent express concern about the possibility of disputes among the owners of corporations, but that is not a problem that arises because of RFRA or that is unique to this context. The owners of closely held corporations may—and sometimes do—disagree about the conduct of business. Even if RFRA did not exist, the owners of a company might well have a dispute relating to religion…. Courts will turn to that structure and the underlying state law in resolving disputes.

So, what about the contraceptive mandate?

Interestingly, the Court concedes for sake of argument that it serves a compelling state interest. But, still, that’s not enough. By requiring the Hahns and Greens and their companies to arrange for such coverage, the HHS mandate demands that they engage in conduct that seriously violates their religious beliefs. If the Hahns and Greens and their companies do not yield to this demand, the economic consequences will be severe. If the companies continue to offer group health plans that do not cover the contraceptives at issue, they will be taxed $100 per day for each affected individual. For Hobby Lobby, the bill could amount to $1.3 million per day or about $475 million per year; for Conestoga, the assessment could be $90,000 per day or $33 million per year; and for Mardel, it could be $40,000 per day or about $15 million per year. These sums are surely substantial. … Are their religious beliefs loony? The Court’s not going to look into that.

The sincerity is what counts, and that creates a burden: …If I may ask—how do you measure sincerity?

How much it will spend on litigating its case!

The Hahns and Greens believe that providing the coverage demanded by the HHS regulations is connected to the

destruction of an embryo in a way that is sufficient to make it immoral for them to provide the coverage.

This belief implicates a difficult and important question of religion and moral philosophy, namely, the circumstances under which it is wrong for a person to perform an act that is innocent in itself but that has the effect of enabling or facilitating the commission of an immoral act by another.

Arrogating the authority to provide a binding national answer to this religious and philosophical question, HHS and the principal dissent in effect tell the plaintiffs

  • that their beliefs are flawed. …
  • we have repeatedly refused to take such a step.

See, e.g., Smith, 494 U. S., at 887 (“Repeatedly and in many different contexts, we have warned that courts must not presume to determine . . . the plausibility of a religious claim”)

Incredible!!      So, RFRA applies,   there’s a burden, and the contraceptive mandate fails the test.

The least-restrictive-means standard is exceptionally demanding, and it is not satisfied here.  HHS has not shown that it lacks other means of achieving its desired goal without imposing a substantial burden on the exercise of religion by the objecting parties in these cases. See §§2000bb–1(a), (b) (requiring the Government to “demonstrat[e] that application of [a substantial] burden to the person . . . is the least restrictive means of furthering [a] compelling governmental interest” (emphasis added)).

The most straightforward way of doing this would be for the Government to assume the cost of providing the four contraceptives at issue to any women who are unable to obtain them under their health-insurance policies due to their employers’ religious objections. This would certainly be less restrictive of the plaintiffs’ religious liberty, and HHS has not shown that this is not a viable alternative. HHS has not provided any estimate of the average cost per employee of providing access to these contraceptives, two of which, according to the FDA, are designed primarily for emergency use. Nor has HHS provided any statistics regarding the number of employees who might be affected because they work for corporations like Hobby Lobby, Conestoga, and Mardel. Nor has HHS told us that it is unable to provide such statistics. It seems likely, however, that the cost of providing the forms of contraceptives at issue in these cases (if not all FDA-approved contraceptives) would be minor when compared with the overall cost of ACA.

According to one of the Congressional Budget Office’s most recent forecasts, ACA’s insurance-coverage provisions will cost the Federal Government more than $1.3 trillion through the next decade. If, as HHS tells us, providing all women with cost-free access to all FDA-approved methods of contraception is a Government interest of the highest order, it is hard to understand HHS’s argument that it cannot be required under RFRA to pay anything in order to achieve this important goal.

HHS contends that RFRA does not permit us to take this option into account because “RFRA cannot be used to require creation of entirely new programs.”  But we see nothing in RFRA that supports this argument, and drawing the line between the “creation of an entirely new program” and the modification of an existing program (which RFRA surely allows) would be fraught with problems. And don’t worry, Justice Alito insists! This is a really, really narrow holding, and doesn’t create religious exemptions to good laws: HHS and the principal dissent argue that a ruling in favor of the objecting parties in these cases will

  • lead to a flood of religious objections regarding a wide variety of medical procedures and drugs, such as vaccinations and blood transfusions,

but HHS has made no effort to substantiate this prediction. HHS points to no evidence that insurance plans in existence prior to the enactment of ACA excluded coverage for such items. Nor has HHS provided evidence that any significant number of employers sought exemption, on religious grounds, from any of ACA’s coverage requirements other than the contraceptive mandate. …

What are the credentials for Alito and associates in the domain of medical therapies?  None!

[O]ur decision in these cases is concerned solely with the contraceptive mandate.

Our decision should not be understood to hold that an insurance-coverage mandate must necessarily fall if it conflicts with an employer’s religious beliefs. Other coverage requirements, such as immunizations, may be supported by different interests (for example, the need to combat the spread of infectious diseases) and may involve different arguments about the least restrictive means of providing them. The principal dissent raises the possibility that discrimination in hiring, for example on the basis of race, might be cloaked as religious practice to escape legal sanction. Our decision today provides no such shield. The Government has a compelling interest in providing an equal opportunity to participate in the workforce without regard to race, and prohibitions on racial discrimination are precisely tailored to achieve that critical goal. Justice Kennedy adds an additional concurrence to remind everyone that Justice Kennedy believes in the Court, America, and his own importance:

In our constitutional tradition, freedom means that all persons have the right to believe or strive to believe in a divine creator and a divine law. For those who choose this course, free exercise is essential in preserving their own dignity and in striving for a self-definition shaped by their religious precepts. Free exercise in this sense implicates more than just freedom of belief. It means, too, the right to express those beliefs and to establish one’s religious(or nonreligious) self-definition in the political, civic, and economic life of our larger community.

But in a complex society and an era of pervasive governmental regulation, defining the proper realm for free exercise can be difficult. … “[T]he American community is today, as it long has been, a rich mosaic of religious faiths.” Town of Greece v. Galloway, 572 U. S. __ (2014) (Kagan, J., dissenting) (slip op., at 15). Among the reasons the United States is so open, so tolerant, and so free is that no person may be restricted or demeaned by government in exercising his or her religion. Yet neither may that same exercise unduly restrict other persons, such as employees, in protecting their own interests, interests the law deems compelling.

In these cases the means to reconcile those two priorities are at hand in the existing accommodation the Government has designed, identified, and used for circumstances closely parallel to those presented here. RFRA requires the Government to use this less restrictive means. Justice Ginsburg writes the principal dissent, and begins by reminding us of the importance of sexual autonomy, and the economic stakes for women in this litigation: “The ability of women to participate equally in the economic and social life of the Nation has been facilitated by their ability to control their reproductive lives.” Planned Parenthood of Southeastern Pa. v. Casey, 505 U. S. 833, 856 (1992).Congress acted on that understanding when, as part of a nationwide insurance program intended to be comprehensive, it called for coverage of preventive care responsive to women’s needs.

… The [ACA] had a large gap, however; it left out preventive services that “many women’s health advocates and medical professionals believe are critically important.” 155 Cong. Rec. 28841 (2009) (statement of Sen. Boxer). To correct this oversight, Senator Barbara Mikulski introduced the Women’s Health Amendment, which added to the ACA’s minimum coverage requirements a new category of preventive services specific to women’s health…Women paid significantly more than men for preventive care, the amendment’s proponents noted; in fact, cost barriers operated to block many women from obtaining needed care at all. See, e.g., id., at 29070 (statement of Sen. Feinstein) (“Women of childbearing age spend 68 percent more in out-of-pocket health care costs than men.”); id., at 29302 (statement of Sen. Mikulski) (“copayments are [often] so high that [women] avoid getting [preventive and screening services] in the first place”). And increased access to contraceptive services, the sponsors comprehended, would yield important public health gains. See, e.g., id., at 29768 (statement of Sen. Durbin) (“This bill will expand health insurance coverage to the vast majority of [the 17 million women of reproductive age in the United States who are uninsured] . . . . This expanded access will reduce unintended pregnancies.”). And the dissenters deride as unfounded the Court’s new recognition of religious rights for for-profit corporations: Until this litigation, no decision of this Court recognized a for-profit corporation’s qualification for a religious exemption from a generally applicable law, whether under the Free Exercise Clause or RFRA.

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