NOTE: If you’ve already visited this post, revisit it. I’ve appended lots of updates.
Senator Grassley has switched coasts. He’s moved from Harvard’s Joseph Biederman to Stanford’s Alan Schatzberg in his tour of greed among America’s top research psychiatrists.
Since Grassley’s exercise — discovering professors who routinely lie about how much money they’re making from firms looking to profit from the psychotropics the professors are researching — is like shooting fish in a barrel, we can expect Grassley to saunter over to the middle of the country when he’s finished with Schatzberg — University of Chicago? Michigan? — and do the same thing. Targets, given pathetic conflict of interest policies at most universities, are plentiful.
For all that Grassley will uncover, UD wonders if he really gets to be considered an anti-corruption crusader when the corruption just sits there waiting for someone with eyes and a calculator to show up. UD’s a huge admirer of Grassley, but she thinks he’d agree that there’s no sport in this at all.
For instance, Stanford only asks its researchers to report drug company money involvement over $100,000. So Schatzberg complies with Stanford’s rules when he tells them, as he did, that his holdings in such a company are indeed over that amount.
He didn’t need to specify that he stands to earn six million dollars more than that amount. From a drug company he founded.
Schatzberg reported to the university that his stock holdings in Corcept are worth “over $100,000,” when, in fact, the psychiatrist’s stake is worth more than $6 million.
Grassley acknowledged Stanford’s disclosure rules didn’t oblige Schatzberg to be more forthcoming…
And why should he be more forthcoming? The rules don’t oblige him to, and it looks really shitty in terms of his scientific integrity that he stands to make not thousands but millions of dollars if trial outcomes are positive.
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Update: Some more reactions to Schatzberg.
Arthur Caplan, medical ethicist: “The continuing number of problematic cases regarding investigator disclosures makes it clear that universities, academic health centers and professional societies must set clear conflict-of-interest standards for all to follow – or Congress is likely to do so.”
Understand what Caplan’s saying here. The greed and cynicism of some of our most prominent professors, coupled with the indifference or cluelessness of our universities in regard to their sometimes scientifically questionable or even fraudulent activities, may mean that the autonomy of our universities — in UD’s opinion, the central reason American universities are the best in the world — will be seriously compromised. The “problematic cases” to which Caplan refers are about the American university’s invasion by mercenaries, for whom the ethos of scholarship is a joke. As flagrant campus corruption attracts more and more attention from the government, elected officials will legislate the good practices universities can’t seem to manage themselves.
For the reality is that universities can set all the conflict of interest standards they like, but a university is not a policing agency. It will always tend to respect, trust, and support its professors in their research, and it will seldom have the investigative capacity to find financial or research wrongdoing, or the judicial capacity to punish it in a serious way. If universities can no longer trust their professors to do honest science and to remain intellectually and morally independent of drug companies, the universities have a couple of choices open to them:
1.] They can hire a permanent team of financial investigators of the sort Grassley has on his staff, and this team can regularly investigate faculty who receive grants and who have financial interests in various companies. Professors would be called in for questioning, their tax documents might be scrutinized, their business associates interviewed. In short, the university can make itself over into a policing agency.
2.] The university can relax and accept the fact that because ” drug makers have displaced the U.S. National Institutes of Health as the primary source of research financing,” some of its professors in the sciences are not professors at all, but contract employees of drug companies. Leave research integrity to the National Institutes of Health; our campus is about enhancing the profits of drug companies and enriching our researchers.
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Another Update: Here are some comments on a Wall Street Journal blog’s comment thread. UD has no way of knowing whether the information in them is correct, but they sound plausible.
Aside from the unreported sale of shares to which Sen. Grassley called attention, which netted Dr. Schatzberg a little over $100,000, Stanford and Dr. Schatzberg might claim that he made almost no money from the company. This was not for want of trying. In connection with Corcept’s planned IPOs, Dr. Schatzberg made 2 very determined runs at selling large parcels of stock. Reflecting Sen. Grassley’s concern about oversight, it seems these would never have been reported to Stanford under the institution’s existing rules or, if they ever were, it would only have been after the fact. Here are the specifics.
28 January 2002. Corcept Therapeutics, Inc. filed an S-1-A statement with the SEC containing the terms of its proposed IPO of company stock. The total number of shares offered was 4,500,000 at a projected sale price of $14-$16 per share. Proceeds from the sale of 4,000,000 shares were slated for company operations. Proceeds from the sale of 500,000 shares by a selling stockholder were not slated for company operations. The selling stockholder was identified as Alan F. Schatzberg, M.D. Had this plan been consummated, Dr. Schatzberg would have benefited by $7,000,000 at an IPO sale price of $14 per share. The cost basis of these 500,000 shares to Dr. Schatzberg was less than $200. This planned IPO in 2002 was later withdrawn due to market conditions.
19 March 2004. Corcept Therapeutics, Inc. filed an S-1-A statement with the SEC. This document provided details of the proposed second attempt to consummate the company’s IPO. A total of 5,000,000 shares was proposed for sale at an issue price of $15-$17 per share. A selling stockholder proposed the sale of an additional 750,000 shares pursuant to the underwriters’ exercise of their over-allotment options. Proceeds from the sale of the over-allotment were not slated to go to the operating capital of the company. The selling stockholder was identified as Dr. Alan Schatzberg. Had this plan been consummated, Dr. Schatzberg would have benefited to the extent of $11,250,000 at an IPO price of $15 per share. The cost basis of these 750,000 shares to Dr. Schatzberg was less than $300.
14 April 2004. IPO occurred, with Corcept Therapeutics, Inc. selling 4.5 million of 5 million offered shares at $12.00, which netted $54,000,000 to working capital of the company. An over-allotment option of 750,000 shares owned by Dr. Schatzberg was withdrawn when the opening price was reduced to $12 from a projected $15 – $17.
It is indeed problematic when financial transactions of this magnitude can potentially go unreported to the University by faculty members who are required to recuse themselves from hands-on involvement in related NIH-supported projects. Sen. Grassley’s call for a review of Stanford’s reporting requirements is timely.
Comment by Bernard Carroll
An anonymous reader writes:
Not only is the professor’s stake in the company that would benefit from his publicly-funded research (in other words we tax-payers are already footing the bill for his work) an obviously gross conflict of interest, but the University is committing itself publicly in the WSJ to calling this an “appropriate and well-managed interaction[s] between industry and academic medicine”. Truly unbelievable.
A third comment:
Dr. Robert Rubin, Vice Chair at UCLA pointed out last year that Stanford has some investments in Schatzberg’s company.
Maybe that’s why Stanford is allowing this doctor to continue to oversee research for which he may benefit handsomely? But if Stanford stands to make money, maybe they should have supported the studies themselves instead of using federal funds.
Comment by Mike Becton
A fourth:
So Grassley thinks Corcept stock is worth a lot, while Schatzberg has been trying to sell it and the company’s IPO attempts have gathered less money than hoped.
Maybe insider Schatzberg knows more about the underlying value of the stock (and mifepristone’s utility in psychiatry) than Grassley does…
Comment by Sell Corcept short
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Update Number Whatever: From The Carlat Psychiatry Blog:
I do find it incredible that Stanford finds it acceptable for him to serve as the chairman of an academic department. As chairman of psychiatry, Dr. Schatzberg is involved with many decisions having to with hiring staff and funding research. While I have no doubt that he is an ethical person, the fact that he owns $6 million in stocks can never be far from his mind. If it were me, I’d be thinking about it when I woke up in the morning, during my coffee breaks, my meals, and while I was brushing my teeth at night. We’re talking $6 million here, people.
He doesn’t have the cash yet. He will only be able [to] get it if his company issues a successful IPO, and that will happen only if his drug, mifespristone, looks successful. Here are some problematic possible scenarios. A young professor in his department is up for promotion. But he is researching a medication in direct competition with mifepristone. Dr. Schatzberg has to make a decision, knowing that this could have an eventual impact on his ability to retire with $6 million.
Another scenario. A psychiatry resident has written a wonderful review paper on antidepressants which has been submitted for a departmental award. In it, the resident has concluded that mifepristone is not a promising agent. Schatzberg has to decide who will get the award.
Equally amazing to me is [that] the American Psychiatric Association has no policy forbidding this level of conflict of interest in candidates for APA president. Shatzberg won the most recent election, and will be installed as APA president next May. What will happen if and when Dr. Schatzberg is asked to make decisions regarding the appropriate relationships between the pharmaceutical industry and the organization?
Let Dr. Schatzberg have his pharmaceutical company. But his financial entanglements are far too significant to have [him] entrusted to positions of leadership at major institutions.
Making tough decisions is part of life, and Dr. Schatzberg needs to decide between being a tycoon and an educator. He can’t have it both ways.
June 27th, 2008 at 4:19PM
Although I’m a Dem, I’ve been very impressed with what I’ve seen of Grassley.
June 27th, 2008 at 4:27PM
The worst I’ve heard about him is that he gets his share of pork for his state.
June 27th, 2008 at 7:55PM
Hi Margaret, I work in the Office of Public Affairs at Stanford, and I wanted to point you to the university’s statement and letters to Senator Grassley about the story. In particular (quoting from the statement): "Dr. Schatzberg disclosed in writing his ownership of the Corcept stock and its actual value. As a result, Stanford was fully aware of the value of his stock based on his disclosures to the university." The link to the statement and letters is as follows, and might be of interest to you and your blog readers: http://ucomm.stanford.edu/news/conflict_of_interest.html
Also, contrary to one of the comments excerpted above, the university has no stock in Corcept Therapeutics. Stanford had received a small amount of equity in the company under a technology license, and the university divested itself of this stock, pursuant to its conflict of interest policy.
Thanks much, Ian
June 27th, 2008 at 8:10PM
Thank you, Ian — I’d already had a look at what you link to, but I’ll reread it.
I guess the bottom line for me is that if the university was aware of the value of the stock, it should have started asking Schatzberg some serious questions about his priorities, financial, research, and academic. That much money is a real red flag. Or should have been.
Also – It’s my understanding that Stanford was unaware of significant differences between the amounts of money he reported to you that he received from various drug companies over the years and the actual much higher amounts (these disparities were uncovered by Grassley’s staff) he received.
I think one has to put a lot of things together in this case having to do with possible deception, weak research integrity, institutional oversight, and greed. I will not be surprised if more conflict of interest questions in regard to Schatzberg are raised. But I stand ready to be wrong about all of this, and I appreciate your willingness to clarify Stanford’s position for me and my readers.
June 27th, 2008 at 9:38PM
No problem, thanks so much for taking another look at Stanford’s statement and letters to Senator Grassley. Hopefully, these documents can help address some of your concerns about (a) specific actions the university took to ensure that conflicts of interest did not influence Dr. Schatzberg’s research and (b) potential discrepancies identified by Senator Grassley’s office between Dr. Schatzberg’s and the pharmaceutical companies’ disclosures. The concerns you’ve raised are extremely important, and I’ll be sure to let you know if the university releases additional information on this.
June 27th, 2008 at 10:17PM
I appreciate it, Ian.
June 28th, 2008 at 6:58PM
There has been an ominous development — the Wall Street Journal Healthblog story and thread to which Margaret Soltan referred above has been CENSORED. That’s right, it has vanished into thin air, like it never existed. Searching the wsj healthblog site every which way yields nothing. There are still plenty of older stories and discussion about Sen. Grassley’s activities, but this one concerning Stanford University and Dr. Schatzberg has just disappeared.
My guess is that somebody got to the wsj with a legal threat. Um, who might that have been?
Didn’t it become clear with Nixon and Watergate that coverups, threats and stonewalling are counterproductive in the long run?
June 28th, 2008 at 8:26PM
Bernard: It’s all here, in the Google cache of the piece:
http://72.14.205.104/search?q=cache:vpo3qG8gBJEJ:blogs.wsj.com/health/2008/06/25/grassley-questions-stanford-psychiatrists-industry-ties/+schatzberg+stanford+wall+street+journal&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a
Note that I’ve changed the link in my post as well.
Thank you for alerting me to this.
UD
June 29th, 2008 at 7:58AM
Thank you for the Google cache link. Most readers, like myself, would not be familiar with that way around the block.
I have requested an explanation of this censorship from the Wall Street Journal Healthblog blogmeisters. No response yet.
June 29th, 2008 at 9:03AM
Jacob Goldstein from the wsj healthblog has just replied to my query. Here is his statement: "Thank you for bringing this to my attention. The post was updated yesterday, and due to a system error was taken down at that time. The post is back up now at its original url."
So, no censorship after all. That’s a good thing. I apologize to anyone whose blood pressure was raised by the false alarm.
Barney Carroll.
June 29th, 2008 at 9:30AM
Hi again Barney: Glad to hear it was a system error!
June 29th, 2008 at 7:42PM
I’m wondering how Ian Hsu can honestly write that Stanford "has no stock in Corcept Therapeutics" when anyone googling "Corcept Therapeutice" and "Stanford University" finds several hits pointing out that Stanford had a licensing agreement with the company.
Apparently this licensing agreement was ongoing as Schatzberg was publishing on the Corcept drug. For instance, there’s this Stanford press release praising Schatzberg work for Corcept….er, or is Stanford?
Stanford Researchers Study Controversial Drug as Treatment for Psychotic Major Depression
I guess it’s all in the tense, right Ian? "Has" and not "had".
June 29th, 2008 at 11:55PM
Hi Bernard, many thanks for following up with the WSJ.
Hi Jerry, Stanford’s institutional conflict of interest policy (which triggered the university’s divestiture of Corcept equity) can be found at http://www.stanford.edu/dept/DoR/rph/4-7.html
Hopefully, this can shed some light on how the university handled conflict of interest with respect to its equity holdings. The following background (excerpted from the university’s statement) provides some additional context with respect to Dr. Schatzberg’s mifepristone research before and after he had a financial interest in Corcept:
"Dr. Schatzberg was the original principal investigator on an NIMH grant in the 1990s that looked at the biology of psychotic depression. That work led to Stanford’s receiving a patent for certain uses of the drug mifepristone; Stanford, in turn licensed that patent to Corcept. Before the patent was issued, Dr. Schatzberg did not have any financial interest in this drug. Once he was aware he was going to have a financial interest in mifepristone, he disclosed it and Stanford University managed the conflict of interest. As part of that process, Dr. Schatzberg has not had responsibility for any aspect of the conduct of the grant’s research related to mifespristone. He remains the principal investigator on the original NIMH grant, which has been extended through the years and covers a range of issues involved in the bilogy of psychotic depression, such as psychological testing and brain imaging, as well as continuing work on mifepristone, the drug in which he has a financial interest. We would like to underscore that Dr. Schatzberg has not been involved in managing or conducting any human subjects research involving Mifepristone, a pharmaceutical that Corcept licenses for the treatment of psychotic major depression."
June 30th, 2008 at 3:29AM
There is further discussion of Dr. Schatzberg’s so-called arm’s-length relaionship to Stanford’s NIH grants here:http://hcrenewal.blogspot.com/2008/06/stanford-schatzberg-and-corcept.html#links
June 30th, 2008 at 6:23AM
Ian, thanks for the update. Would you like to explain when Stanford divested itself from Corcept and how much money Stanford took before divestiture? And before the divestiture, how many trials had Schatzberg done, and how many press releases did Stanford put out pumping up the results?
Finally, can you point faculty in the direction of other grant making bodies that allow professors to take money for research that they aren’t allowed to be involved with?
June 30th, 2008 at 1:42PM
You limit the universities to two options: hiring accountant & police or giving up.
An accumulation of well read intellectuals sitting in such a place ought to be able to decipher more alternatives.
We do not have radar at every place on every road. A few speed traps keep us in line more or less. This is because the violators are punished. Some university based economists can even calculate the size of the penalty required to keep people in line given the likelihood of getting caught.
So all we really need to do is take names & kick ass.
June 30th, 2008 at 5:07PM
Stanford to Ban Drug Makers’ Gifts to Doctors, Even Pens
Published: September 12, 2006
By Andrew Pollack
Stanford University Medical Center will prohibit its physicians from accepting even small gifts like pens and mugs from pharmaceutical sales representatives under a new policy intended to limit industry influence on patient care and doctor education….
“We want to secure the public trust to value what happens in academic medicine,” Dr. Philip A. Pizzo, dean of the Stanford School of Medicine, said in an interview.
The new policy does not cover consulting agreements between faculty members and companies aimed at developing drugs or medical devices. Those are governed by an existing conflict-of-interest policy….
A Stanford spokeswoman said having a financial interest is not necessarily a conflict if the faculty member is not providing patient care.
June 30th, 2008 at 9:00PM
As a board certified psychiatrist and one who has been nothing less than incredibly harsh about the behaviors of my so called colleagues and alleged mentors throughout my training and active career, this story reeks of profoundly poor judgment by everyone involved in promoting this physician’s poor choices as a clinician, academician, department chair, and soon to be president of the American Psychiatric Association.
I am so sick and tired of this kind and polite rhetoric when responsible, caring physicians, who go to work every day to clinical care settings and try to help ill, impaired people, have to listen and give credibility to corrupt, greedy, uncaring "leaders" who tarnish the field of psychiatry even further than it has unfortunately endured to now.
This revelation can lead to one of two endpoints that could possibly salvage what is "Enronesque" in direction as of now:
1. Stanford can demand, not ask, for Dr Schatzberg’s resignation as department chair, effective immediately, that would hopefully lead to the further reconsideration of his pending appointment as APA President by the APA Board, who I would hope has some higher level of authority than the President’s position, thus showing the public that Universities and Physician organizations can rise and show accountability and responsibility to those it allegedly serves.
Or, and I add much less likely,
2. Dr Schatzberg can spontaneously resign such positions on his own now and present a sincere, accountable apology to all who have been mislead and harmed by his incredibly poor judgment in this affair. In doing so, he could show that even when someone exercises such a pathetic example of selfishness and insensitivity to the needs of patients, students, colleagues, and peers, that in the end insight and judgment for the better can prevail.
And now, I will wake up from this daydream and go back to my career as a psychiatrist, who will continue to be embarassed and shamed by the people I am supposed to call leaders and innovators.
How much lower can we go, doctors?
July 1st, 2008 at 7:25AM
The complete citation:
Stanford to Ban Drug Makers’ Gifts to Doctors, Even Pens
New York Times
Published: September 12, 2006
By Andrew Pollack
http://www.nytimes.com/2006/09/12/business/12drug.html
Sorry about that.
July 3rd, 2008 at 11:52PM
For those interested in ethics and conflict of interest matters, I have completed an article with the title "Corporate Self Interest and Vagus Nerve Stimulation for Depression" to be published in the Skeptical Inquirer in the Sept./Oct. issue. The material belongs to the journal, but I can say now that the article links Allan Schatzberg with Charles Nemeroff of Emory in a financial collaboration that is not related to their professional collaboration as authors of a fine textbook. Unethical "birds of an feather" flock together. But big Pharma and big Universities will love them eternally!
July 4th, 2008 at 5:14PM
[...] on Schatzberg here. Margaret Soltan, 5:14PM Posted in: Uncategorized, snapshots from [...]
July 31st, 2008 at 11:23AM
I need to correct my previous comment. While Stanford did divest the stock it received through its technology licensing program as required by its conflict of interest policy, I was just made aware that several years later a Stanford Graduate School of Business investment fund, whose purpose is to benefit the business school’s education programs, purchased $100,000 of stock in Corcept Therapeutics.
July 31st, 2008 at 11:53AM
Thank you for that correction, Ian.
July 31st, 2008 at 12:15PM
[...] This lengthy post, with important comments from researchers and physicians in the comment thread, reviewed the ongoing conflict of interest scandal at Stanford involving Alan Schatzberg. Senator Charles Grassley heads an investigation of this and other instances of high-profile greed and compromised academic integrity among medical researchers at a number of American universities. [...]