conflict of interest

The Washington Post‘s “Senate Panel Ban Seen as Double Standard” deals with the latest attempt to eliminate so-called “conflicts of interest” between appointees to government defense-related positions. Appointees must divest themselves — often at great cost — of all investments in any firm that does business with the military.

The article notes this same prohibition has not been extended to federal legislators serving on military committees. A more relevant point is that this policy discourages individuals knowledgeable about military procurement (that is, those involved in the process) from serving in government. This point was raised recently in a C-SPAN interview with Lord John Wakeham, a distinguished parliamentarian from England.

He argued that before going into politics, an individual should first make some money, learn how the world operates.  Banning links to the market weakens the ability of legislators to make reasonable policy decisions. Lord Wakeham instead favors “disclosure.” And he, in my view, is quite right. A vigilant media can be expected to scrutinize the decisions of individuals in government in any event.

The recent trend to ban “conflicts of interest” threatens many things. The challenge is not to eliminate such conflicts, an impossibility in any event, but rather to manage them to achieve more creative outcomes. Moreover, the bias which sees only economic conflicts as meriting policy reform means the relative weight given ideological conflicts is exacerbated. History suggests there are much greater risks involved in enhancing the power of ideology than in economic scandals.

Unfortunately, the power of ideology has increased greatly in the last few decades. Those worried about the bitterness of partisan conflict in recent years should reconsider. After all, the tyrants of history were not primarily motivated by money, but rather power. Do we wish these “public servants” to be our role models for the future?

The average American spends over 26 hours per year doing taxes. That’s too much. The obvious solution is to simplify the 70,000-page tax code. But that’s politically difficult. So Austan Goolsbee, among others, has an alternative idea: have the IRS do your taxes for you.

This return-free system is a bad idea for a lot of reasons. One of them is the obvious conflict of interest when your tax collector is also your tax preparer.

Another reason is that the IRS is not up to the task. As I explain in an op-ed being distributed by McClatchy News Services, the IRS rarely has all the information it needs to fill out an accurate return for any one individual, household, or business. People change jobs. They have kids. They get married, and sometimes divorced. They buy homes and cars. Who knows what kinds of deductions they qualify for? The IRS probably doesn’t.

And if the IRS makes a mistake on your return, you would be liable for it. If you want to stay on the right side of the law, you would have to calculate your own taxes anyway, to make sure the IRS got it right. So much for saving time.
Return-free systems have already been tried in California and the UK. Neither attempt can be called a success.
It is heartening that officials are looking for ways to reduce the burden of doing taxes. But a return-free system would treat only the symptom, and poorly at that. The root problem is an arcane, 70,000 page tax code. The solution is to simplify it.

Sen. Charles Grassley (R-Ia.) has been on a tear lately, badgering the Food and Drug Administration about whether it’s doing enough to crack down on financial conflicts of interest among doctors who participate in clinical trials to test new medicines.  Grassley suggests that the payment of consulting fees to doctors could create a “potential bias that may compromise the reliability of data” generated to support the approval of drugs and medical devices.

While collaborative arrangements between medical products manufacturers and academic researchers has in fact been a huge boon for medical progress during the past half century or so, and financial connections are not the only source of relevant bias, it’s not entirely unreasonable to be alert to possible conflicts of interest.  What’s hypocritical about Grassley’s crusade is that he only seems to be concerned about financial conflicts of interest when they’re used to condemn products he doesn’t happen to like.

Take, for example, Grassley’s partnership with Cleveland Clinic cardiologist Steven Nissen and their joint campaign against the GSK diabetes drug Avandia.  There’s been a fair amount of news over the past couple of years describing the controversy over Avandia (see here, here, and here for examples).  The drug appears to work wonders for the treatment of Type II diabetes, but research conducted by Dr. Nissen indicates that it also leads to a significant elevated risk of cardiovascular events, such as heart attack and stroke.  Nissen was a key source for a February 2010 Senate Finance Committee report condemning Avandia, which was instigated by Grassley, and both men think that Avandia should be pulled from the market.  They would have gotten away with it too, except that lots of patients actually taking the drug have decided that the huge health benefits associated with controlling their diabetes far outweigh the higher cardiac risk.  They demanded to have continued access to the drug.  So, last month, FDA decided to keep Avandia on the market, but place heavy restrictions on its use.  Nissen said that “more than 99 percent of Avandia use in the U.S. will disappear” because of the restrictions.

So, where’s the hypocricy?  It turns out that Nissen just happens to be one of the investigators on a study purporting to show that Avandia’s closest competitor, Takeda Pharmaceutical’s drug Actos, is superior to Avandia because it doesn’t increase cardiac risk.  And, as it turns out, Takeda provided $25,000 in funding to Nissen’s Cleveland Clinic team to conduct the Actos study.  As my 5-year-old son, who is newly taken with episodes of the classic cartoon Scooby-Doo, might say … “Ruh-Roh!”  The golden boy, upon whose research Grassley’s crusade against Avandia has been built, has taken funding from a GSK competitor to conduct research that boosts Actos over Avandia.  Can you say “conflict of interest”, boys and girls?

Now, just to be clear, I want to explain that Steven Nissen is a highly regarded scientist, and there appears to be no good reason to believe his research on Avandia or Actos has actually been biased by the funding from Takeda.  (Although the kind of meta-analysis Nissen used to study Avandia has inherent methodological weaknesses that make the findings suspect.  But that’s an argument for another day.)  So, it’s not entirely inappropriate for either the FDA or Charles Grassley to listen to what Nissen has to say.  But, for someone like Chuck Grassley who’s been riding a hobby horse against financial conflicts of interest in the pharmaceutical industry, the arrangement ought to have come under a bit more scrutiny.

Your host Richard Morrison welcomes back returning guest co-hosts Michelle Minton and Jeremy Lott for Episode 54 of the LibertyWeek podcast. We start with ominous hints of new taxes, California state employees making strike threats and the possible antitrust implications of the Microhoo partnership. We continue with a double-dipping pay scandal, the suppression of dissent in Venezuela and some fully transparent Olympic News.

Your hosts Richard Morrison and Cord Blomquist are joined by special guest co-host Jeremy Lott for a very swashbuckling Episode 38 of LibertyWeek. We start with the rescue of Capt. Richard Phillips from Somali pirates by the U.S. Navy and Special Forces, look into the murky finances of AIG CEO Edward Liddy in Scandal Watch, and figure out what ISPs are up to in Technology News. We also get an update on how West Virginia is about to become even more Wild and Wonderful, and finally we answer the call for wealthy, multilingual volunteers in Olympic News.