Millions to Health Insurance CEOs, But Blame Everyone Else for Rising Health Care Costs

The revelations about the huge golden parachute given the outgoing CEO of ostensibly non-profit Massachusetts Blue Cross Blue Shield induced some public discussion about the disconnect between executive compensation and the mission of health care organization (see most recent post here).  Several other recent stories should generate more discussion on these issues. 

First, new proxy statements revealed the compensation of executives of two large for-profit health care insurers/ managed care companies.  In alphabetical order,

Cigna

As reported by the AP, via ABC news, the CEO got a big raise:

Cigna Corp. CEO David M. Cordani's total compensation more than doubled in 2010, his first year as leader of the nation's fourth-largest health insurer, and a period in which the company's earnings, revenue and enrollment all climb.

Cordani, 45, received compensation valued at $15.1 million last year from the Philadelphia managed-care company, according to an Associated Press analysis of a regulatory filing Friday.

That included a $1 million salary, a performance-related bonus totaling more than $7.3 million and stock and option awards adding up to $6.7 million.

In 2009, Cordani's compensation was $6.5 million, but he did not serve for the entire year. Note that according to the 2009 proxy, the previous CEO, H Edward Hanway, received $12,236,740 in total compensation in 2008, his last year as CEO.

What was the rationale for the huge rise in Cordani's compensation from 2009 to 2010? (And implicitly, the fairly large increase compared to Hanway's compensation in his last year?)

The company said in its proxy statement filed with the Securities and Exchange Commission that Cigna 'effectively executed on its growth strategy under Cordani's leadership last year.

'Revenue rose significantly in 2010, reflecting strong premium growth in (Cigna's) ongoing business segments,' the proxy said.

Cigna earned about $1.35 billion, or $4.89 per share, on $21.25 billion in revenue in 2010. That was up from $1.3 billion, or $4.73 per share, on $18.41 billion in revenue in 2009. The insurer's medical membership climbed 4 percent to 11.4 million people compared to the final quarter of 2009, when it fell more than 5 percent. That helped raise premiums and fees in health care, the insurer's largest segment.

Also,

Cigna shares climbed 4 percent to close 2010 at $36.66, while the Standard & Poor's 500 index rose 12.8 percent.

So to recap, Cigna's current CEO's total compensation doubled in a year while earnings and the stock price rose about 4%.

WellPoint

Also reported by AP, via the Washington Post, the CEO got a small raise (but ended up with compensation similar to Mr Cordani's above):

The president and CEO of health insurer WellPoint Inc. received a 3 percent boost in total compensation in 2010 even as the company�s profit and enrollment numbers slipped during a transitional year for U.S. health care companies.

The Indianapolis-based insurer awarded Angela Braly a total pay package worth $13.4 million up from $13.1 million in 2009. Wellpoint disclosed the compensation � which includes salary, bonus and other awards � in a filing with federal financial regulators late Friday.

On the other hand, the company did not do so well financially:

The insurer�s profit fell sharply last year compared with 2009, when the sale of its NextRx subsidiary contributed $2.2 billion in after-tax income. Medical enrollment also slid 1 percent last year to 33.3 million members.

So what was the rationale for even a small raise (over an already huge compensation package)?

In the company�s filing, Wellpoint�s board of directors highlighted accomplishments by management, including reducing general expenses by 3 percent.

Also,

A Wellpoint spokeswoman stressed Friday that the company�s pay formula rewards executives for improving enrollee health, boosting share prices and meeting other pre-set goals.

'For the CEO, almost 90 percent of total target compensation is based on company performance and is tied to meeting established goals,' Kristin Binns said in a statement.

So while Cigna did slightly better financially than last year, its CEO's total compensation doubled to well over $10 million, and while WellPoint did slightly worse financially than last year, its CEO's total compensation increased, again remaining well over $10 million.  It seems that the leaders of top health care organizations will continue to get richer, no matter how well their organizations performed financially, let alone what effect they had on patients' and the public's health.
So What Drives Up Health Care Costs?

Just to distract from CEOs getting increases in their already huge compensation that seem disproportionate to any reasonable measure of their companies' financial performance, health care insurers continued to deny any responsibility for the rise in health care costs.

For example, the San Francisco Chronicle published a story entitled, "Insurer Wants Focus on What Drives Up Health Costs," which had a familiar ring:

When health insurers notify members that rates are going up - often in the punishing double-digits - they typically blame rising medical costs.

They say the problem really isn't theirs; it's all the other pieces of the health-care puzzle that drive up costs that must be passed on to customers.

Don't blame you, don't blame me, blame that fella behind the tree.
It went on to name all the usual suspects (color-coded for comparison below):

Insurers say their costs grow in part because of new medical technologies and the rising price of pharmaceutical products and medical equipment.

The consolidation of hospitals and doctors into large networks also makes it hard to keep prices low, as do waste, fraud and malpractice, they say. The system also lacks incentives for hospitals and doctors to curb costs. For example, they can charge twice by repeating tests and procedures, and by readmitting patients.

Insurers also say they lose money with policies people buy on their own, as opposed to group coverage from employers. Because the individual policies are more expensive, healthier people tend to avoid them, leaving insurers with a sicker pool.

Poor reimbursement from government programs such as Medi-Cal also forces insurers to raise private insurance prices to make up the slack, they say.

Finally, as people get older and fatter, they gobble up more health care resources.

'When you're looking at growth in premiums, the largest engine of that growth are those medical costs,' said Charles Bacchi, executive vice president of the California Association of Health Plans, which represents health insurers. He said critics who claim that insurers raise prices to increase profits and pad executive salaries are wrong, and that insurers' average profit margin has remained at 3 to 5 percent for years.

First, note that the executive compensation, the administrative costs, the marketing, public relations and lobbying costs all come off the top of revenues before any profits are generated, and before any possible dividends get paid to stock-holders.   I suspect that the insurance industry spokespeople immediately switch the topic to profits and investors' results to distract from those who really make money from health insurance companies, the top executives, and all those managers, bureaucrats, marketers, public relations people, and lobbyists who never touch patients and never deliver any care.  As Wendell Potter has written, many people like to blame government bureaucrats for health care's problems. They may deserve some blame, but not any more, and perhaps less than corporate bureaucrats and executives.

Recall further what Wendell Potter described in Deadly Spin. All those health insurance corporate public relations people were earning good salaries in part based on their ability to distract the public and policy-makers from the insurance companies' roles in health care dysfunction. Potter wrote (p. 110):

Rather than admit responsibility for the failures, insurance executives pointed the finger of blame at their customers, the 'consumers' of health care, and, of course, the providers of care. In introducing the concept of their new silver bullet - consumer driven health care - insurance executives claimed that the 'real drivers of health care costs' (one of my CEO's favorite expressions) were the people who sought care when they really didn't need it and the doctors and hospitals who were all too willing to provide this unnecessary care. Sure, the aging population and expensive new technology were also factors, but the main culprits were people who just didn't realize how expensive health care had become.

Note the similarities among the "real drivers of health care costs" promulgated by the corporate PR people and the defense of the health insurers' role mounted above (some of the more obvious color-coded). Note that the defenses never explain why the insurance companies seem unable to negotiate prices down, and why they all use the physician payment schedule derived from the recommendations of the secretive RUC.

For some final irony, the Chronicle found an academic who was not too hard on the health insurance companies:

Glenn Melnick, a health economist at the University of Southern California, sympathizes with many of the insurers' arguments.

He blamed rising costs mainly on higher prices charged by hospitals and doctors, which account for the largest portion of health care spending.

The reporter did not note Prof Melnick's full title, Professor and Blue Cross of California Chair in Health Care Finance. Oops.

So in summary, health care costs continue rising, access keeps declining, and there is no evidence of improvements in quality. Large health care organizations blame each other for the problems, but nearly all of them continue to make their top executives extremely rich. Although the amounts diverted to these executives cannot solely account for the rise in health care costs, the perverse incentives given those who lead health care are likely a major cause of the problems. A health care system run by leaders who are comfortable becoming extremely rich while the health care crisis worsens is a likely recipe for dysfunction.

We now know commercial health insurers deploy well paid public relations departments to use stealthy if not downright deceptive means to distract those who want to address what really causes health care dysfunction (see this post.) It is likely that all large health care organizations use similar stealth advocacy strategies. These strategies have successfully distracted the conversation away from problems with health care leadership and governance, at least until now.

As we have said before, far too often the leaders of not-for-profit health care institutions seem more interested in padding their own bottom lines than upholding the institutions' missions. They often seem entirely unaware of their duty to put those missions ahead of their own self-interest. Like the financial services sector in the era of "greed is good," health care too often seems run by "insiders hijacking established institutions for their personal benefit." True health care reform would encourage leadership of health care who understand health care and care about its mission, rather than those who see a quick way to make a small fortune.

Furthermore, we need an open discussion of the real issues related to health care dysfunction, not one stifled by the anechoic effect, spun by corporate PR, and dominated by "third parties" whose conflicts of interest are hidden. 

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Once More with Feeling: Another Defense of Conflicts of Interest Based on Logical Fallacies

Despite increasing recognition of the adverse effects of health care professionals' and health care institutions' conflicts of interest on health care, such financial relationships continue to have their prominent defenders.  The latest example was an article in Medscape General Surgery by Frank J Veith MD, entitled "Physicians and Industry: Fix the Relationships, but Keep Them Going."  Dr Veith is a prominent vascular surgeon who "received numerous awards and honors as a leader, outstanding teacher, and innovator in vascular surgery," according to New York University

We have noted before how defenders of conflicted professionals and professional societies often employ logical fallacies to support their arguments.  Some recent examples were discussed here, by a prominent ostensibly libertarian attorney and law professor; here, published in a well-known medical journal by the former director of "medical communications" for a large pharmaceutical firm; and here, by the president of a large medical society, published again in a well-known medical journal.

Dr Veith seems to be continuing that tradition. His approach emphasized frequent repetition of the same fallacious argument.

Straw Man: "Totally Interrupt All Doctor-Industry Relationships"

Dr Veith's main argument seemed to be with attempts to prevent physicians from having any relationships with industry, presumably including not just financial relationships, but professional collaborations or even personal friendships.  For example, he wrote about

a recent initiative to completely sever the relationship between industry and doctors has gained traction. This initiative has been supported by several states, including Massachusetts and Vermont, and universities, such as Harvard, Stanford, the University of Massachusetts, and the University of Michigan, which have enacted draconian laws or policies designed to separate doctors and industry and to interrupt any relationship between them.

Furthermore,

Even many individual physicians have sanctimoniously jumped on the bandwagon and written articles or opinion pieces attacking the evils of any relationship between industry and doctors, suggesting the severance of any such relationships.

Then later, Dr Veith wrote,

We should establish rules to prevent or minimize the abuses, but we should not totally interrupt all doctor-industry relationships. To do so is wrong-headed and would eliminate the many beneficial effects that accrue to medical care and society from these relationships. It would be throwing the baby out with the bathwater.

Finally, he concluded thus,

These will be far better solutions than completely eliminating all industry-doctor relationships.... Such safeguards will be better than the present trend for institutions and governments to enact strict measures to separate physicians from industry.

Despite making this argument at least four times, the problem is that Dr Veith provided no citations, much less evidence that such "draconian" policies have been enacted or even advocated.

There have been new policies on conflicts of interest suggested or adopted by some organizations. None, to my knowledge have been exactly "draconian."

For example, Harvard University does have a new policy on conflicts of interest. Maybe Dr Veith was referring to it above when he mentioned Harvard. However, in an interview about the new policy involving university leaders published in the Harvard Gazette, the Vice Provost of the University said,

The University is not designed to be an ivory tower isolated from the world. So the trick is to be able to have a robust system for affording faculty opportunities to engage with the commercial world and at the same time not threaten in any way their own fundamental integrity or that of Harvard.

That hardly sounds like a policy that completely severs all relationships between faculty and industry.
So Dr Veith's main premise seems to be based on a multiply repeated straw-man argument. He argued again and again against a policy that no one seems to be advocating. (And even I, as a hard-liner about conflicts of interest, have never advocated a complete interruption of all relationships of any kind between all physicians and all of industry.)

Appeal to Fear: You Will be "Blighted"

Perhaps just to spice things up, Dr Veith warned of the dire consequences of the "draconian" policies that no one was advocating:

Those institutions that choose such inquisitional approaches will be blighted and suffer competitive disadvantages.

Dr Veith had asserted multiple benefits of continuing relationships among physicians, health care institutions, and commercial firm. He presented no evidence to support his assertions, most of which can be questioned (see below). His warning that institutions will be "blighted" was based on his assertion that the stringent policy no one advocated would eliminate these unproven benefits, hence his warning of  something so severe as "blight" seemed to be an appeal to fear.

Ad Hominem: "Sanctimonious" Physicians Leading a "Witch Hunt"

As noted above, Dr Veith referred to anonymous physicians who "sanctimoniously jumped on the bandwagon," thus leading to

The initiative to separate industry from physicians and surgeons [which] has taken on the trappings of a witch hunt.

And again,

Their leaders should recognize this and resist the temptation to join the separation witch hunt....

My interpretation is that this was an implied set of ad hominems. Those who supposedly advocated the "draconian" policy were made out to be "sanctimonious" witch hunters. After just having seen "The Crucible," I could also argue that the use of the term "witch hunt," with its current extreme emotional references (apparently to a case in which presumably innocent people were hanged), amounted to an appeal to emotion and an appeal to fear.

Summary

I must admit Dr Veith's entire set of arguments was not completely based on logical fallacies.  However, the rest of his arguments hardly appeared even-handed.  He presented a series of assertions about the benefits of such relationships, including that they "foster innovation and development," that "industry-sponsored medical education helps to keep physicians informed about new developments," that industry sponsored education about devices prevents "difficult and dangerous" practices, and helps physicians use devices "better and more safely."  He provided no evidence in favor of these claims, and seemed to ignore arguments about the hazards of payments to physicians biasing their clinical practice, teaching and research.

I should also note that these arguments were made by a physician who appears to have his own personal financial relationships with industry.  In the Medscape article, Dr Veith "disclosed no relevant financial relationships."   However, as a member of the editorial board of Medscape General Surgery, Dr Veith "disclosed the following relevant financial relationships: Owns stock, stock options, or bonds from: Vascular Innovations, Inc."  Furthermore, the disclosure summary for the iCON2011 conference includes the following for Dr Veith, "Honorarium/Expenses: Cook Medical, Cordis, WL Gore, Medtronic." Finally, Dr Veith apparently runs the Veith Symposium, which in 2010 acknowledged the following commercial sponsors: Aastrom, Abbott Vascular, Aptus Endosystems Inc, Atrium, Bard Peripheral Vascular, Boston Scientific, Cook Medical, Cordis Cardiac and Vascular Institute, Delcath Systems Inc, Gore, Hansen Medical, Lombard Medical Technologies, Maquet, Medtronic, Organogenesis Inc, Sanofi-Aventis, St. Jude Medical, Tenaxis Medical, Triavascular, Vascutek Terumo.

So Dr Veith's article continues the tradition of defenses of physicians' and health care institutions' conflicts of interest based on logical fallacies and unbalanced and unsupported assertions.  Also, note that all the examples of such defenses we have discussed were made by people with their own financial relationships with drug, device, and/or biotechnology companies, although some of them disclosed these relationships.  I have yet to see a defense of such conflicts based on logic and evidence, or a defense of such conflicts made by someone who has absolutely no conflicts of his or her own. 

The currently prevalent relationships with health care corporations among academic physicians, researchers, and other decision makers and influencers in health care have been lucrative for them.  I have yet to see a coherent, logical argument that these relationships are good for patients, medical education, biomedical or clinical science, or public health made by anyone, much less someone who does not have such relationships.

I will note that the defenses of conflicts of interest begin to seem drearily similar.  Not only do they often use the same logical fallacies, but they repeat the same stale and unsupported arguments about the benefits of financial relationships with industry: that they foster "innovation," and that they provide better educational opportunities than unconflicted programs and educators.  We now know that the managed care industry has engineered stealth health policy advocacy campaigns that furnish talking points to "third parties" which may get caught up in the larger policy discourse (see posts here and here).  I wonder whether some such stealth health policy advocacy campaign by pharmaceutical, device and/or biotechnology companies seeded the discourse about conflicts of interest with some of the logical fallacies and unproven assertions that have become so familiar. 

We need to elevate our discourse about health care policy.  People involved in health policy discussions should at least disclose their conflicts of interest when making their points.  We should be very skeptical of  arguments and look carefully for the evidence and logic that supports them.  When we find that evidence and logic is lacking, be even more skeptical about who benefits from them. 

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Wendell Potter's "Deadly Spin"

We recently discussed how Wendell Potter, author of Deadly Spin, has provided a chilling picture of health care corporate disinformation campaigns and the tactics used therein.  I finally had a chance to read the whole book, which should be read by anyone interested in concentration and abuse of power in health care.

Let me summarize some of its main points.

The Unholy History of Public Relations

Mr Potter set "PR" in its historical context, and noted parallels among the modern deceptions he recounts and how the father of PR white-washed tobacco companies, and with the propaganda and disinformation used by 20th century totalitarian states to cement their rule.

How Deceptive PR Changed the Course of Health Care

As noted earlier, Mr Potter recounted how deceptive PR campaigns subverted the health care reform plans of US President Bill Clinton, reduced the impact of Michael Moore's movie, "Sicko," and helped to remodel the recent health care reform bill to reduce its threat to commercial health insurers.  He further noted how PR distracted public attention from the growing faults of a health care system based on commercial health insurance, and how practical and legal safeguards against abuses by insurance companies were eroded. 

Making More by Providing Less Care

Mr Potter catalogued the tactics insurance companies use to reduce care and increase revenue, such as rescision, elimination of coverage for groups with high costs, the use of high deductibles disguised as "consumer choice," etc.

The Tactics of Stealth Health Policy Advocacy

As noted in our earlier post, Mr Potter described "charm offensives;" the deliberate creation of distractions, including the planting of memes for short-term goals that went on to have long-term adverse effects; fear mongering; the use of front groups, including "astroturf," (faux disease advocacy and/or grass roots organizations), public policy advocacy groups, and tame (and conflicted) scientific/professional groups; and intelligence gathering.  He provided some practical advice for detecting such tactics. For example, be very suspicious of policy advocacy by groups with no apparent address or an address identical to that of a PR firm, or with anonymous leaders and/or anonymous financial backing.

Why Good People Do Bad Things

Mr Potter provides some insight into the rationalization and compartmentalization that allow apparently upstanding people to peddle deceptive PR.

Memes Metastasizing

Mr Potter noted how memes are created to fit short term goals.  My observation is that these memes may then acquire lives of their own that then may have long term adverse effects.  Think about "the best health care system in the world," fears of "government bureaucrats," but not corporate bureaucrats running health care, to what the label "junk science" may be applied, and where fears of the "nanny state" came from.

Summary

Mr Potter seems to be the only known example of a defector from the ranks of the leadership of modern corporate health care prompted by conscience.  Anyone who finds this blog useful should find his book at least equally useful.  (To those from outside the US:  although most of Mr Potter's experience was with the US system, the role of PR in society here is likely not that different from its role in other developed countries.)

I hope to return to some of the issues he raises in more detail from time to time.

Bravo, Wendell Potter, for returning from the "dark side."

 Note that I have added Mr Potter's blog to our blog-roll.

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Mainstream Media "Discovers" Conflicts of Interest of Prominent Health Policy Pundit

The main-stream media, in this case the San Francisco Chronicle, just "discovered" an important case of a conflicted health policy pundit,

Uwe Reinhardt, a Princeton economic professor who often writes about health care for the New York Times' Economix blog, earns more than $500,000 a year working for a number of health care companies. He also holds more than $5 million worth of related stock.

Reinhardt's NYT bio does not mention these financial relationships.

As the NYTPicker points out, Reinhardt's various incomes break the New York Times rules, which ban anyone who writes for the paper from having any financial interest 'in a company, enterprise or industry that figures or is likely to figure in coverage that he or she provides, edits, packages or supervises regularly.'

We asked the New York Times for comment. They sent us this email:

'Professor Reinhardt is a leading expert on the economics of health care, and has provided valuable and independent insights in his blog posts. He has mentioned his service on corporate boards in the blog, but we are reviewing how to more fully describe his activities for readers of Economix.'

We also asked Reinhardt for comment. He is working on one for us and we will post it here as soon as possible.

Here's the breakdown of what he owns, according to NYTPicker:

* Reinhardt either earns an income or stock options from the five different private health care companies for which he sits on the board of directors/serves as a trustee.
* He has sat on the board of health care company, Amerigroup, since 2003. This tenure has resulted in Reinhardt's accumulation of 144,558 shares in the company and $226,531 in cash-and-stock compensation. These shares are currently valued around $4.8 million.
* Reinhardt also holds 75,625 shares of Boston Scientific (worth more than $500,000 in value) and earned $213,132 from the company in 2009. He has sat on the board of this medical device manufacturing company since 2005.
* Reinhardt serves as a trustee for H&Q Healthcare Investors and H&Q Life Science Investors. His 2008 income from the companies included $43,000 in income and between $1 and $10,000 worth of securities.
* He also made $2.3 million from the 2007, $5.1 billion sale of Triad Hospitals to Community Health Systems.

It only took four years for this to get into the main-stream media. The reason "discovered" is in quotes is that we have been writing about Reinhardt's conflicts of interests vis a vis his prominent opinions on health policy since 2006 on Health Care Renewal.

As I wrote in a comment on the original NYTPicker post, in 2006, we first wrote about a letter to the editor of the NY Times by Reinhardt dismissing a physician op-ed writer's concerns about what has gone wrong with health care.  Reinhardt's letter failed to disclose the board memberships he held at that time. In 2009, we wrote about how Reinhardt left out some crucial facts in his discussion in the Economix blog of how physicians are paid. That year we also wrote about how Reinhardt defended Ms Karen Ignagni, CEO of America's Health Insurance Plans (AHIP) in an interview quoted in a Washington Post article.

In neither case above did Reinhardt or the newspaper reveal his conflicts.

Note that Reinhardt is not the only case of a prominent health policy expert with undisclosed conflicts of interest. See this post for some examples we had found in 2006.

In fact, in my humble opinion, the public discourse about health care policy in general, and health care reform in particular has been seriously distorted by various commentators, pundits, and experts who have major conflicts of interest, usually in the form of important financial relationships with large health care organizations.  In many cases, these conflicts are not disclosed.  A related problem is the influence of various non-profit organizations that are heavily funded by those with vested interests, usually in selling particular health care products or services.  Such funding is also rarely disclosed. 

I further submit that this distortion has overwhelmingly been in favor of various aspects of the status quo that have been so profitable for the discussants, and their commercial sponsors.  This distortion has meant that certain important problems, especially those that we discuss on Health Care Renewal, are rarely even mentioned in the mainstream media, in journals on health care and services research and health policy, and in political discussion.  Try, for example, to find any discussion of the impact of ill-informed, self-interested, conflicted or corrupt leadership of prominent health care organizations on costs, access and quality, or on patient outcomes.  It is simply not done to discuss the shortcomings of leadership, maybe because it is this leadership who subsidizes many of the pundits, commentators and experts. 

At a minimum, participants in the health policy discussion, starting with the most prominent, should fully disclose all financial relationships that could constitute conflicts of interest. 

Meanwhile, those listening to the discussion should be extremely skeptical about the opinions expressed. 

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An Alliance on Mental Illness or for Pharmaceutical Companies?

A recent article by Gardner Harris in the New York Times focused on the financial links among health care corporations and not-for-profit disease (or patient) advocacy groups.

A majority of the donations made to the National Alliance on Mental Illness, one of the nation�s most influential disease advocacy groups, have come from drug makers in recent years, according to Congressional investigators.

The alliance, known as NAMI, has long been criticized for coordinating some of its lobbying efforts with drug makers and for pushing legislation that also benefits industry.

Last spring, Senator Charles E. Grassley, Republican of Iowa, sent letters to the alliance and about a dozen other influential disease and patient advocacy organizations asking about their ties to drug and device makers. The request was part of his investigation into the drug industry�s influence on the practice of medicine.

The mental health alliance, which is hugely influential in many state capitols, has refused for years to disclose specifics of its fund-raising, saying the details were private.

But according to investigators in Mr. Grassley�s office and documents obtained by The New York Times, drug makers from 2006 to 2008 contributed nearly $23 million to the alliance, about three-quarters of its donations.

Even the group�s executive director, Michael Fitzpatrick, said in an interview that the drug companies� donations were excessive and that things would change.

However, he tried to downplay the influence of the pharmaceutical industry on the Alliance.

'I understand that NAMI gets painted as being in the pockets of pharmaceutical companies, and somehow that all we care about is pharmaceuticals,' Mr. Fitzpatrick said. 'It�s simply not true.'

Note the careful wording of this denial, though. He did not deny that most of what NAMI cares about is pharmaceuticals.

Moreover, the article suggested how cozy pharmaceutical companies and the Alliance's leadership have become.

The close ties between the alliance and drug makers were on stark display last week, when the organization held its annual gala at the Andrew W. Mellon Auditorium on Constitution Avenue in Washington. Tickets were $300 each. Before a dinner of roasted red bell pepper soup, beef tenderloin and tilapia, Dr. Stephen H. Feinstein, president of the alliance�s board, thanked Bristol-Myers Squibb, the pharmaceutical company.

'For the past five years, Bristol-Myers has sponsored this dinner at the highest level,' Dr. Feinstein said.

He then introduced Dr. Fred Grossman, chief of neuroscience research at Bristol-Myers, who told the audience that 'now, more than ever, our enduring relationship with NAMI must remain strong.'

Documents obtained by The New York Times show that drug makers have over the years given the mental health alliance � along with millions of dollars in donations � direct advice about how to advocate forcefully for issues that affect industry profits.

In a letter today to the NY Times, NAMI Executive Director Fitzpatrick tried again to correct "misimpressions."

First, the National Alliance on Mental Illness, or NAMI, has always disclosed corporate and foundation sources of revenue. Until this year, specific amounts remained private for competitive fund-raising reasons.

Second, your estimate that pharmaceutical companies account for three-quarters of �donations� has been misinterpreted as a share of NAMI�s total annual budget � which is actually about 50 percent.

Perusal of the 2008 NAMI Annual Report does include this impressive list of "Corporate Partners":

Abbott
Alexza Pharmaceuticals
Amazon
AstraZeneca
Blue Cross Blue Shield
Bristol-Myers Squibb
College of Psychiatric and Neurologic
Pharmacists
Corcept Therapeutics
Cyberonics
Delivery Agent, Inc.
Forest Laboratories
GEO Care
GoodSearch.com
The Health Central Network
Janssen Pharmaceutica
Eli Lilly and Company
Magellan Health Services
McNeil Pediatrics
Neuronetics
Novartis
Otsuka America Pharmaceuticals
Pfizer
PhRMA
RF Binder
Sanofi-Aventis
Shire
Solvay
Validus Pharmaceuticals
WellPoint
Wyeth
YTB Travel Network

The NAMI web-site now includes lists of specific corporate donations that individually exceeded $5000 since the beginning of 2009. So far this year, the biggest pharmaceutical corporate donors appear to be AstraZeneca ($350,000), Bristol-Myers-Squibb ($506,205), and Eli Lilly ($675,500). 

Looking at the latest Form 990 filed on behalf of NAMI with the US Internal Revenue Service (available from GuideStar here)  provides more interesting detail. (Keep in mind that the 2008 form covers July 1, 2007 to June 30, 2008.)   This form listed the organization's total revenue as $13,788,288, and expenses as $12,796,205.  These expenses included $1,785,060 (13.9%) for management and $1,520,637 (11.9% ) for fund-raising.  The form listed eight NAMI executives who made more than $100,00 a year, including Mr Fitzpatrick ($210,685 total compensation).

So, in summary, it appears that corporate donations, mainly from a few large pharmaceutical companies, supply a substantial portion, (maybe half, if I read the letter by Mr Fitzpatrick correctly) of the annual budget of NAMI. About one-quarter of that budget is spent on administration and fund-raising, including six-figure salaries for at least eight executives.  So who do you expect would more easily get access to the $200K+/year NAMI Executive Director, an executive of a pharmaceutical firm that supplies more than $500,000 a year, or a NAMI member who pays $35 dues?

Here we have another example of a respected patient advocacy organization which gets a substantial portion of its revenue from (presumably the marketing departments of) a few large pharmaceutical companies.  (See another example here.)  Its well-paid executive director can at best bring himself to deny that the only purpose of the organization is to support pharmaceutical marketing and lobbying.  It seems reasonable that for supplying half the budget, the pharmaceutical companies expect considerable help not only with marketing but also with advocacy of policies that favor their corporate goals. 

As I have said before, I do not have a problem with pharmaceutical and other health care corporations marketing their products, and expressing their views on policy. I do have a problem with corporate marketing or policy advocacy is disguised as grass-roots, not-for-profit education and advocacy.  If ostensibly not-for-profit disease (or patient) advocacy organizations like NAMI want to continue to accept corporate money, they should make it clear that they speak for their corporate donors as well as, and probably with priority over their members and patients with the diseases of interest.  Well-intentioned people who pay their dues, and/or make small contributions to NAMI to help the mentally ill might want to consider whether they are likely to have any influence compared to the individual pharmaceutical executives who oversee $500,000+ a year corporate donations.

ADDENDUM (2 November, 2009) - See also comments on the Furious Seasons blog.

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