To several U.S. senators, it looked wasteful, even outrageous. Every year, taxpayers pay for at least $750 million worth of expensive pharmaceuticals that are simply thrown away. Companies ship many of the drugs in “Costco”-size vials, one lawmaker said, that once opened usually cannot be resealed or saved for other patients. Yet pharma gets paid for every drop.
So Congress turned to the prestigious National Academies of Sciences, Engineering and Medicine for advice, given its reputation for “independent, objective reports” on such matters. The national academies’ influential report, released in February, struck physicians who’ve tracked the issue as distinctly friendly to Big Pharma. It advised against an effort to recoup millions for the discarded drugs. It concluded that Medicare should stop tracking the cost of the drug waste altogether.
Yet the report left out a few key facts, a KHN investigation has found.
Among them: One committee member was paid $1.4 million to serve on the board of a pharmaceutical corporation in 2019 and in 2020 joined the board of a biotechnology company that lists government “cost containment” efforts as a risk to its bottom line.
Another committee member reported consulting income from 11 to 13 pharmaceutical companies, including eight that Medicare records show have earned millions billing for drug waste. His pharma ties were disclosed in unrelated publications in 2019 through this year.
Those committee members said they reported relevant relationships to the national academies and that the information is readily available outside of the report.
What’s more: The National Academy of Sciences itself for years has been collecting generous gifts from foundations, universities and corporations, including at least $10 million from major drugmakers since 2015, its treasurer reports show. Among the donors are companies with millions to retain or lose over the drug waste committee’s findings.
The fact that those relationships were not disclosed in the final report by an organization charted in 1863 to advise the nation amounts to “egregious” failures, said Sheldon Krimsky, a Tufts University professor and expert on conflicts of interest in science.
“The amount of money you’re reporting is really substantial,” he said. “It really raises questions about the independence” of the national academies.
In a statement emailed to KHN, the national academies said the two members with undisclosed board and consulting roles had “no current conflicts of interest during the time the [drug waste] study was being conducted” from January 2020 through February. The report did disclose conflicts for two others on the 14-member board. The report in question was paid for by federal officials, and “funds from for-profit organizations with a direct financial interest in the outcome of a study may not be used to fund advisory consensus studies, except in rare circumstances,” national academies spokesperson Dana Korsen said in the emailed statement.
She also said the organization is implementing a new conflict-of-interest policy that will be fully in place this fall.
“Protecting the integrity, independence, and objectivity of our study process is of the utmost importance to the National Academies,” her statement said.
The committee’s failure to call for concrete changes — and the millions in gifts from pharmaceutical companies to the national academies — looked familiar to David Mitchell, president of Patients for Affordable Drugs and a cancer patient who relies for his survival on a drug with high waste costs.
“We have found in our work that pharma is like an octopus,” he said, “and at the end of each tentacle is a wad of cash.”
Waste Shocked Policymakers in 2016
Dr. Peter Bach and colleagues published an explosive paper in 2016 that for the first time showed that taxpayers and health insurance rate payers were bankrolling an estimated $2.8 billion a year in drug waste. The findings encompassed all U.S. health care — not just what’s reported by doctor’s offices to Medicare — and were covered widely in the news.
Bach, a researcher with the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center, found that medications infused in doctors’ offices often arrived in vial sizes fit for a linebacker but might be given to a waif. Given sterility and other concerns, the extra milligrams, often for cancer therapies that can cost thousands of dollars per dose, were typically discarded.
Congress and policymakers took notice.
In 2017, Sens. Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa) introduced a bill urging health care agencies to develop a “joint action plan” to address the waste. Sens. Dick Durbin (D-Ill.) and Rob Portman (R-Ohio) introduced an even stronger measure in 2019 and again this year that would allow Medicare to recoup the cost of the wasted drugs. None of the bills has passed.
The refund mandate made it into a broader drug pricing measure that also failed, but not before the Congressional Budget Office took a close look in 2020 and estimated $9 billion could be saved over a decade.
Medicare officials also urged doctors to use a billing code to document the amount taxpayers were spending on wasted drugs each year — which amounted to $753 million in 2019 alone, Medicare data shows.
Before and while Bach’s paper was making waves, physicians who would eventually be on the national academies committee were forging alliances with the pharmaceutical industry.
Dr. Kavita Patel reported earning a speaking fee in 2015 from the Pharmaceutical Research and Manufacturers of America, or PhRMA, of $5,001 to $15,000. She also accrued assets valued at more than $50,000 for her role as a pharmaceutical company board member, according to 2015 and 2018 disclosures filed with the Government Accountability Office.
Dr. Anupam Jena, who also served on the committee, wrote a 2018 article with staff members of PhRMA arguing that medications should be valued not for their actual benefit, but rather for the potential for innovation that comes with making new therapies.
The ‘Kiss of Death’
In 2016, lawmakers called for an independent study of the drug waste. In September 2019, the National Academy of Sciences was awarded $1.2 million to complete the report.
At the outset of its study in January 2020, national academies committee members declared their potential conflicts of interest in a closed session, according to the meeting agenda.
Bach was among the physicians and other experts who later presented to the national academies committee. He said his team had laid out two possible solutions from the start: Have companies make a variety of vial sizes to minimize waste, or pursue refunds.
Former Medicare administrator Donald Berwickpresented to the committee at a June 2020, virtual meeting, exhorting its members to defy the expectation that they’d be one more committee that failed to do anything meaningful about health costs.
“Someone’s got to begin to set a standard and say, ‘Nope, this money is too important for … us to accede to this,’” Berwick told the committee.
The report’s recommendations were “the result of extensive fact-finding, full committee discussions and unanimous consensus,” said committee chairperson Dr. Edward Shortliffe, chair emeritus and adjunct professor in the Department of Biomedical Informatics at Columbia University.
The report, though, did not meet Berwick’s call to action. In a webinar summarizing the report findings, Jena described the drugs as valuable enough to justify the total cost of each vial, completely used or not. Patel and others summarized the findings in a STAT opinion piece, saying the committee argued against tracking the money wasted and instead called for a “whole of government” approach.
Bach said the conclusions were “better than pharma could have ever hoped for” and called the whole-of-government idea the “kiss of death.”
Berwick said that he was “disappointed” by the conclusions and that all committee members’ industry relationships should have been reported. He noted that, in his experience, committee members have been very open about conflicts and the national academies dismissed those who had them.
Presented with KHN’s findings about certain committee members’ undisclosed pharmaceutical company income and consulting relationships, Bach said they raise serious concerns.
“The conflicts align just way too closely with the results,” he said. “That’s what makes it hard to ignore.”
‘Current’ Conflicts Don’t Tell Full Story
Conflicts of interest became a hot topic more than a decade ago, amid a series of scandals over Big Pharma quietly backing influential doctors.
Reforms followed, with countless medical journals, nonprofits and government agencies strengthening their conflict-of-interest policies.
The national academies came under scrutiny in 2014 and 2016 for failing to disclose conflicts among committee members advising federal officials on opioid use and in 2017 on genetically modified crops.
Its webpage on conflicts underscores why strong disclosure rules are important: “The institution should not be placed in a situation where others could reasonably question, and perhaps discount or dismiss, the work of the committee simply because of the existence of such conflicting interests.”
Yet conflict-of-interest experts interviewed by KHN said the national academies stands out by considering only “current” conflicts and not those going back three years, as is more typical. Korsen said the National Academy of Sciences is working toward requiring five years of disclosures.
Several experts said that, given the trust placed in — and $200 million in federal funding awarded to — the national academies, a number of conflicts should have been disclosed in the report.
They include those of Patel, who is described in her report biography as a Brookings Institution fellow, a primary care physician in Washington, D.C., and former Obama administration policy adviser.
The national academies declined to provide the conflict-of-interest form that Patel or any other member filled out at the outset of the committee’s work in early 2020.
Unrelated Securities and Exchange Commission records show that, before she joined the committee in 2020, Patel’s role as a board member for Tesaro, a developer of cancer medications, became very lucrative when GlaxoSmithKline bought the company. At the time of the 2019 sale, Patel was in line to receive an estimated $1.4 million for her shares and stock options, according to a December 2018 Tesaro securities filing.
Also in 2020, Patel was appointed to the board of Sigilon Therapeutics, a biotech company with no product on the market. The company awarded her stock options then worth an estimated $369,000, an SEC filing shows.
Sigilon described state and federal efforts to control costs as a risk to its business in an annual report to investors: “Any cost containment measures could significantly decrease … the price we might establish for our products.”
The national academies’ lack of disclosure of those roles “to me is a violation of almost all the standards that I’m aware of for disclosing conflicts of interest,” said Krimsky, of Tufts.
Patel told KHN she “fully and transparently participated” in the disclosure process and “provided all of the information requested.” She said: “In addition, many of the financial relationships incurred over the course of my work had already been disclosed in the public record.”
Patel was the lead writer on the Feb. 25 opinion piece in STAT that summarizes the committee’s report as focusing on the need to reduce inefficiencies, “rather than on trying to recover from pharmaceutical companies the financial worth of the portion of drug that was not used.”
Patel said she was “objective in all of my contributions” to the national academies report.
The national academies — as an organization — reported in its 2016 treasurer report that while 84% of its funding in 2011 was from federal agencies, the amount was failing. So it was working to “grow the non-federally sponsored work.”
“It will be very important for the future of the institution to continue vigorous efforts to diversify its sources of income,” the treasurer report says.
A KHN review of treasurer reports from 2015 through 2020 shows that pharmaceutical companies have given consistently to the national academies. Drugmakers donated at least $10 million over those years. Their giving is reported in ranges, often $100,000 to $500,000, and that total assumes they gave the lowest amount in each range each year.
A 2018 treasurer report recognized Merck & Co. for more than $5 million in cumulative giving and 10 other drugmakers for donating more than $1 million.
None of those donations was listed in the drug waste report. But listing them would reassure readers, said Genevieve Kanter, a University of Pennsylvania assistant professor of medical ethics and health policy.
“If the national academies is interested in producing a credible, independent report,” she said, “I think they would report all of those donations in the report itself.”
Jena, a Harvard Medical School associate professor, physician at Massachusetts General Hospital and an economist, also had no conflicts disclosed in the report.
Jena has disclosed consulting fees from a dozen major pharmaceutical companies, articles in the Journal of the American Medical Association and The BMJ show. Most of those companies have a direct financial interest in the drug waste matter, a KHN review of Medicare data shows. He said he disclosed all his consulting relationships to the national academies.
After the report came out, he took the lead on a Health Affairs article that says Medicare should stop tallying the waste money.
“Attempts by public payers to recoup overpayments are unlikely to be successful since they may simply end up paying higher prices” if drugmakers raise the price tag for the medications.
That article initially omitted his consulting relationships with numerous pharmaceutical companies — but journal editors updated the disclosures after KHN inquired.
Jay Hancock and Megan Kalata contributed to this report.
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.
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