Industries and Professions

COI issues can vary considerably by industry , and the same can be said with respect to ethics standards for various professions (e.g., law, journalism). In this section of the blog we will seek to explore, among other things, broader lessons for business organizations that might be drawn from industry- and profession-specific COI matters.

Professionalism and conflicts of interest

Last Friday, Dylan Byers’ Media Blog in Politico announced a new Conflict of Interest Series, noting:  “Almost everywhere you look there’s someone in the media who’s ever more connected with the subjects they cover.”  The Media Blog has indeed covered a number of potential COIs in this industry, including, most recently, those involving  Stephanie Cutter  and Newt Gingrich .  While the specific topic of media COIs is, of course, noteworthy (and was indeed the subject of a recent post  in these pages), more intriguing to me are the questions of why there should be a growing number of actual or perceived conflicts of interest involving journalism and what, if anything, should be done about it.

While it is conceivable that the reason for this possible increase in journalism-related COIs is that there are simply more media organizations than ever before – assuming that the number of cable TV and internet news sources has more than offset the steep decline in the number of newspapers – I think that the cause lies elsewhere: the involvement in journalism of individuals who are not professional journalists (as evidenced by the two examples cited above).  Such individuals are not only more likely to have other (and potentially conflicting) interests than are full-time journalists, but they are also more likely to lack the ethical grounding relevant to their work that hopefully comes with being  a professional.

This may sound snobby, but I should emphasize that I am not suggesting that professions consist  only or even mainly of members of the ethics nobility.   Indeed, over the past two years this blog has run numerous posts on ethical failures in various professions – including auditing, financial services , medicine , economics,  law (my own profession) and even dentistry.  Moreover, it is possible that the phenomenon of “moral compensation”  – the behaviorist notion that moral behavior on one occasion can license other immoral behavior – has an adverse impact on ethics by professionals, i.e., the feeling that one is being ethical by following professional standards might make it easier to be unethical with respect to issues not clearly covered by such rules (although I should stress that I have not seen “moral compensation” studies addressed to this specific context).

But being in a profession does align one’s economic interest with professional ethical standards, in that the failure to abide by such standards creates more risks to the individual than it would for outsiders.  Indeed, in a fascinating discussion last week led by Steve Priest  at the annual conference of the Ethics & Compliance Officer Association it was evident that the emerging profession of C&E itself could benefit from a body of enforced professional standards.

And if there is a positive correlation between professionalism and ethicality (as on some level there must be) the type of shortfall discussed above in connection with media conflicts should also be of a concern in other contexts.  An example of this might be the recent case from the UK  in which  a Big Four accounting firm took the position that its employees engaged in non-audit work needn’t be guided by the profession’s ethical standards – a pernicious view given the confusion that this could cause to those who  dealt with the firm and one that justly helped earn the firm a record breaking fine from the Financial Reporting Council.   

But it would be impossible to hold back whatever are the tides that seem to be causing an influx of non-professionals into some types of profession-based organizations.  For this reason, entities that employ both sorts of workers should protect themselves – and those who rely on their presumptive professionalism – through implementing C&E programs (meaning more than just codes of conduct) that not only help to instill professional values through the entire workforces and but also to exercise resolve in enforcing those standards.

Dangerously narrow views of public – and self – interest

Last week the Financial Reporting Council (FRC), the  body that regulates the accounting  profession in the UK, fined Deloitte L.L.P.  £14 million pounds – a record setting penalty for that body – and issued the firm a severe reprimand, as well as fining  a former director of the firm £250,000 and banning him from  accounting work for three years.  As described in the NY Times,  the case arose from the firm’s work for MG Rover, a  failed automaker, and for the “’Phoenix Four,’ four businessmen who took over the automaker in 2000 and ran it into the ground, taking out millions of pounds for themselves in highly dubious transactions before the company failed.” Although Deloitte had been the company’s auditor it was not the audits that were faulted but the corporate finance work run by the former director – particularly its “very prominent role” in some of the questionable transactions.

In the UK, “ethics rules require accountants to consider the ‘public interest’, but Deloitte argued that this duty was inapplicable to corporate finance work.”  The FRC rejected this argument, noting that, among other things, the applicable rules make no such distinction.   The FRC’s decision on this issue seems correct to me, as one can readily imagine the difficulty clients and others would have in trying to discern whether an employee of an accounting firm was in any given instance being guided by a very high standard of ethicality (as a public interest test entails) or something less.  Indeed, the notion of an ethical carve out would tend to diminish the overall trust the public has in accountants, and that would be bad not only for the profession but – given the key role they play in various aspects of business life – the economy generally.

But is it possible to have an overly narrow view of self interest? Eddie Lampert of Sears may have had just that,  as described by Jonathan Haidt and David Sloan Wilson in their new column  for Forbes –  “Darwin at Work.”   The article is based in part on a recent profile of Lampert by Mina Kimes in  Bloomberg BusinessWeek,  which had noted: “’Lampert runs Sears like a hedge fund portfolio, with dozens of autonomous businesses competing for his attention and money. An outspoken advocate of free-market economics and fan of the novelist Ayn Rand, he created the model because he expected the invisible hand of the market to drive better results. If the company’s leaders were told to act selfishly, he argued, they would run their divisions in a rational manner, boosting overall performance.”

Haidt and Wilson write: “The results have been disastrous, in part because Lampert was ideologically committed to the metaphor of the invisible hand and the associated idea that people are purely selfish. Ideology is a lens – it makes some things more visible, others less so. Lampert’s ideology prevented him from seeing that he was destroying the invisible band – the bond that forms around groups that can trust each other and work together toward shared goals.  Evolution is a different lens – one that we believe brings unparalleled focus and resolution when examining complex human systems. A brief look through the evolutionary lens would have made it obvious how dysfunctional Lampert’s reorganization was likely to be.”

They further note: “Evolution is all about competition, and the dramatic effects that competition has on the structure and behavior of organisms over time. But here’s the key idea: competition occurs at multiple levels simultaneously, and the winner at any one level generally succeeds by suppressing destructive forms of competition at the level below.”  Finally, they suggest that “the next time someone suggests changing the organizational chart, incentives, or culture of your company to ‘align incentives’ or appeal to selfish interests, ask them if they have thought about the full range of motives evolution has bequeathed to our complex species.”

In effect, what Haight and Wilson are doing is identifying a different type of conflict of interest – where an interest – or at least one’s perception of such – conflicts with human nature itself. It is an important area to pursue, and I certainly look forward to reading more of Darwin at Work.

Using behavioral ethics means to reduce legal ethics risks

In various prior posts the COI Blog has explored the potential impact of “behavioral ethics” on how compliance and ethics programs are designed and deployed, and separately has asked whether law firms should have C&E programs to address legal-practice-related risks.  So, I was delighted to learn recently of a soon-to-be-published paper which more or less seeks to connect these two topics, and also does much more than that.

In “Behavioral Legal Ethics,” – which will soon appear in the Arizona State Law Journal  and a draft of which is available for free download here –   Jennifer K. Robbennolt, Professor of Law and Psychology at the University of Illinois    and Jean R. Sternlight, Director of the Saltman Center for Conflict Resolution and Michael and Sonja Saltman Professor of Law, William S. Boyd School of Law, University of Nevada Las Vegas  offer what is apparently the first comprehensive overview ever published of the many  implications of behavioral psychology for legal ethics.  They initially describe how – through “ethical blind spots,” slippery slopes, “ethical fading” and other behavioral ethics phenomena – lawyers (as well as others) are affected by “bounded ethicality.”   They next review how various professional norms and contexts (such as the principal/agent relationship) can lead to unethical conduct by attorneys, as can the intense economic pressures of legal practice and the relatively high status and power of many members of the profession.   Added to this parade of horribles are various factors – such as the “illusion of courage” –  that give attorneys (and others) a misleading sense of comfort that they will respond appropriately when faced with the misconduct of others.

Additionally, unlike many other behavioral ethics studies, Robbennolt and Sternlight also offer detailed and – to my mind –  compelling possible solutions to the ethics risks they identify.  On an individual level, these include attorneys:  maintaining an awareness of the impact of psychology on ethical issues they may face,  doing more actively to consider ethics in their professional lives and to be more self-critical, planning ahead as to how  they would deal with ethical dilemmas,  and recognizing and confronting others’ unethical conduct.

Most important from my perspective are the article’s recommendations on an organizational – i.e., C&E program –  level.  Among other things, the authors propose enhancing the ethical culture of the entities in which lawyers practice (i.e., firms, corporate law departments, government agencies, etc.),  such as by discussing and modeling appropriate professional conduct  and improving  ethics education (with the latter effort including helping lawyers understand behaviorist risks).  With respect to the important (and challenging)  area of C&E-related incentives, the authors recommend  that organizations do more both to protect lawyers from the various stresses – financial and other – that can contribute to ethical failures, and also to reward ethical behavior (i.e., use of positive incentives).

The authors suggest as well that organizations take greater steps to promote attorneys reporting of suspected ethics violations, including by:

–          making  “clear that ensuring organization-wide ethical compliance is part of attorneys’ job responsibilities and will benefit the organization”;

–          providing many channels through which to report suspected violations – including the appointment of  an ethics counsel, an ethics committee, or an ethics ombudsperson; and

–          “publiciz[ing] instances in which reporting led to positive change, while at the same time being careful to protect confidentiality and not to  spark retaliation.”

Finally, they argue that law firms should monitor the ethical conduct of their attorneys (such as using “software to monitor billing patterns…”).

For readers of this blog who share my interest both in behavioral ethics and compliance programs for lawyers, “Behavioral Legal Ethics” is an important article indeed (and I am looking forward to the publication of the final version in the coming months).

Conflicts of interest in the press

One of the top COI stories of the past week concerned how ESPN’s financial relationship with the NFL  may have caused it to withdraw from  collaborating on a documentary about the league’s dealing with players’ traumatic head injuries.  Earlier in the month another sports news COI  issue – whether John Henry’s purchase of the Boston Globe would impact that paper’s coverage of the Red Sox, which Henry also owns – received a fair bit of attention. So did the purchase of the another paper  – the Washington Post by Amazon’s  Jeff Bezos,  which raised somewhat weightier COI concerns than did the Globe purchase.  This therefore seems like a good moment to take a look at press conflicts.

As with many areas of business-related conflicts,  press conflicts exist on two levels: organizational and individual.  Organizational conflicts arise out of the press ownership – e.g., the concern with the Henry and Bezos acquisitions, and other financial relationships at the entity level, e.g.,   ESPN’s deal to broadcast NFL games,  including, most obviously, relationships with advertisers. Of course, the more that newspapers are part of larger business entities, the greater the likelihood of such risks will be. With individual COI’s the interest is usually at the reporter (or perhaps editor or producer) level.

Additionally, in discerning the relevant ethical framework for press COIs  it is important to consider the press’s critical role in maintaining our democratic society.  That is, given that trust in the press is essential to maintaining that role – like other “market failures” discussed in this recent post – preventing harm to that trust arguably should not be left totally to the push and pull of market forces.   This would suggest the need for a strong legal or ethical approach to addressing COIs in the press.

However, any legal response of this sort would be problematic as a form of interference with press freedom.  For this reason, the  ethical (and compliance) measures to prevent COIs in the press should be especially potent.

This is not an area about which I had much prior knowledge, but I was pleased to learn that the NY Times has what appears to be a good set of standards  regarding COIs.  For instance, regarding advertising COI, the Times’ standards provide: “Our company and our local units treat advertisers as fairly and openly as they treat our audiences and news sources. The relationship between the company and advertisers rests on the understanding that news and advertising are separate – that those who deal with either one have distinct obligations and interests, and each group respects the other’s professional responsibilities” and goes on to set forth detailed guidance regarding a number of contexts in which the paper’s advertising and news functions might need to deal with each other.  With respect to individual COIs, the same source provides guidance on a)  journalists paying their own way to and at events they cover, b) receiving of gifts and entertainment;  c) steering clear of advice giving roles; d) entering competitions and contests; e) collaborations and testimonials;  f) public speaking and the receipt of speakers fees; g) family-based conflicts; h) financial conflicts; i) free-lance work; j) dealing with competitors; and k) social media use.

The Times standards make an interesting read for one who spends a lot of time reviewing C&E policies and procedures.  Indeed, it would be rare to find COI policies as detailed as these in the great majority of industries.

Needless to say, the Times is not unique in this respect. The BBC also has what seem to be a very comprehensive and rigorous set of COI standards for its journalists.   Of course, just as the map is not the territory, sound ethical policy and procedures are not the same as a full-fledged compliance and ethics program.  But they are a good foundation for one.

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For information on the larger world of ethics in journalism (beyond that of COIs) visit the website of the Center for Journalism at the University of Wisconsin’s School of Journalism.

Massive but (mostly) harmless conflicts of interest

The conflicts of interest will be enormous when  the recently announced merger between Publicis and Omnicom – each a giant ad agency (or collection of agencies) in its own right – is finalized.  Both companies, through their respective subsidiaries,  represent major players in such industries as automotive,   telecommunications,  food,  beverages, and beer (as described in this article) .   Are conflicts of this sort something that business-ethics-minded individuals should find of concern?

Not in my view – because such conflicts can, at least as a general matter,  be addressed by market forces.  By contrast, truly dangerous conflicts typically involve one of several types of “market failures.”

The first such failure is “information asymmetry,” meaning where market players lack the information needed to make an informed – and hence optimal – decision.  In the COI context, this can occur when a conflict isn’t fully disclosed, which, in some cases, can be seen not only as an ethical breach but a legally actionable instance of fraud or corruption.  To this classic type of information asymmetry one should add the various findings of behavioral ethicists – some discussed in this earlier post – showing that, for a variety of reasons,   even when COIs are disclosed the information doesn’t seem to be processed in an optimal manner. (I’m not sure if this would truly count as an information asymmetry, but it is in that neck of the woods.)

The other most often relevant market failure to COIs concerns externalities, meaning where the cost of a COI is not borne by the individual/entity in a position to address it but by a third party who doesn’t have a seat at the decision making table.  COIs in the health care field – the costs of which are passed on in large measure to taxpayers and insurance companies – are a prominent example of the great harm that externalities can cause.  Moreover, the phenomenon of   “moral hazard” – also addressed in various prior posts – can be seen as causing harm in this way.   Of course, some COIs – like public-sector corruption – involve more than one type of  market failure.

COIs caused by the mergers of ad agencies certainly don’t raise the issue of externalities, at least not as a general matter. For the sake of completeness, I should note that if the merger creates a monopoly that would be yet another form of market failure –  but this seems very unlikely to ever happen, due to (what I assume are) relatively low barriers to entry in the advertising industry.

Finally, while it is possible that the above-mentioned behaviorist findings about the weakness of disclosure does raise the prospect  of information asymmetry (or the behaviorist version thereof) in this setting,  I think that the strong presence of market forces in the form of competitors pointing out to advertisers  the risks of staying with a conflicted agency would largely negate harms of this sort too.  Indeed, astute ad agencies looking to recruit new clients could do worse than trying to utilize some of this behaviorist science for their commercial advantage.

For further reading:

here’s a description of the various forms of market failures;  

here’s a piece about another context  – joint venture governance  – in which COIs should not be seen as inherently troublesome; and

here’s something on how market failures should factor into anti-corruption risk assessment.

A comparative approach to conflicts of interest

In a recent article in the Penn State Law Review, Conflicts of Interest in Medicine, Research and Law: A Comparison, Stacey A. Tovino of the University of Nevada at Las Vegas law school reviews approaches to managing COIs in three different professional settings.  The piece begins with an analysis of legal regimes regarding COIs in clinical medicine, and particularly those arising from the involvement of individuals who, whether due to age or otherwise, have impaired decision making capacities; then examines how different state laws address COIs in human subjects research (a context that, “[u]nlike treatment…is fraught with” COIs); and, finally, compares and contrasts the above-mentioned approaches with those used for managing COIs in the context of legal representation.

Tovino “finds that the law imposes more stringent duties relating to the identification and management of conflicts of interest in the context of legal representation compared to the contexts of clinical medicine and human subjects research.” Among other things, the latter standards do not “recognize and explicitly refer to the concept of ‘conflict of interest,’” to the extent the former does.  They are also less stringent with respect to disclosure of conflicts than are the relevant legal representation standards, and the same is true regarding aspects of conflicts management.  Based on this analysis, Tovino argues that “state laws governing conflicts of interest in clinical medicine and human subject research should consider borrowing approaches to conflicts management that are set forth in state rules of attorney professional conduct.”

I applaud Tovino’s exercise in comparative COI analysis.  Indeed, in establishing this blog, one of my goals was to provide a compendium of information about the treatment of COIs in different industries or other business contexts (the beginnings of which are collected here)  in the hope that those dealing with conflicts in one setting – whether as regulators, compliance personnel or in other roles – can benefit from the experience of others in doing so.

(Thanks to Bill Sachs of HCCS  for letting me know about Tovino’s article.)

More on compliance programs for corporate-lawyer risks

Recently, we ran a post on the possible need for law firms to have compliance programs to prevent/detect  bill padding.  In today’s post we examine a different area of lawyer misconduct  – misuse of the attorney-client privilege, and  a different segment of the profession – members of law departments rather than of firms, with an eye toward suggesting a compliance program remedy in the post that will immediately follow this one.

The attorney-client privilege can, of course, be an invaluable tool for supporting a C&E program mission, as the confidentiality it promises helps companies uncover and address wrongdoing – and thereby comply with legal requirements –  without fear that their efforts will be used against them.  For instance, last week the Wall Street Journal reported  that a company that had suffered a security breach hired a law firm to investigate the breach because the law firm “could offer something a forensic firm couldn’t: attorney-client privilege and the secrecy it confers.”

But unlike the case with law firms, when the privilege is asserted by in-house lawyers a question often arises as to whether  the matter at issue in fact entailed the lawyer providing legal advice or instead was her merely dealing with an administrative or business matter.  For instance, in a case decided last year in a different (i.e., non-C&E)  context,   a federal district court in Pennsylvania court held that emails on which  an in-house counsel was copied were nonetheless not privileged because they principally concerned the latter type of work.

Of course, many aspects of C&E programs – although having their origins in legal mandates – can be seen as principally administrative/business-related. Indeed, this possibility could actually increase as C&E-related expectations become settled.

Moreover, raising the privilege without sufficient basis is itself not without risks beyond the loss of confidentiality for the communications in question. Courts have warned lawyers against misuse of the privilege.  For instance, in United States v. Davis, (131 F.R.D. 391, 401 (S.D.N.Y. 1990)) the court cautioned that an in-house attorney’s degree and office should not be used to create a “privileged sanctuary” for corporate records. Indeed, in the high-profile tobacco industry criminal investigation in 1990’s, some company lawyers were investigated by the Justice Department under fraud/obstruction theory for what was seen as a possible bad faith use of the privilege to hide sensitive information. Although no charges were brought, one can imagine a set of circumstances where the outcome could be different.

So, this is not an issue to be taken lightly. Part two of this post will explore how companies can develop a strong approach to privilege – while not going over the above-referenced line – through a compliance program framework.

A new player in the conflicts of interest pageant

“It is difficult to get a man to understand something, when his salary depends on his not understanding it” These famous words were uttered by Upton Sinclair long ago but, although his concern was more with politics than the types of conflicts of interest discussed in this blog, its logic is no less applicable to the latter – and no less forceful with the passage of time.  If money can’t always buy people’s souls, it still very frequently affects their understanding and actions. And, in at least one way, the situation may be getting worse.

The pageant of COIs indeed seems endless: lawyers, financial advisors, journalists, economists, medical doctors, auditors, compensation consultants.  (For more on this see the posts collected  in the  Industries and Professions tab on the left hand side of the screen.)  To this list should now be added – dental researchers.

According to story last month in Medscape Today News, a recent published study showed: “Researchers are more likely to report positive results about dental treatments if they get paid by the [companies’] marketing the treatments… In an analysis of 135 randomized clinical trials from leading dental journals, those in which the authors had a conflict of interest were 2.4 times more likely to have positive results, the study shows.”

The article did note the view of a “former editor-in-chief of the Journal of the American Dental Association and past president of the [International Association for Dental Research ] … that she is confident existing safeguards will keep the dental literature from being distorted.” On the other hand, one of the study’s authors – University of Toronto researcher Romina Brignardello-Petersen, DDS –  said, “many readers do not know how to assess the evidence critically…To be completely honest, probably it does have a big impact because most people who use the literature are not accustomed to doing critical analysis of it.”

Still, this may be a difficult problem to address.  As also noted by Dr. Brignardello-Petersen, “’unfortunately, it would be very hard to conduct clinical research if there was no sponsorship… . Randomized clinical trials are expensive to conduct, and researchers have a bigger opportunity to conduct research if they work with one of the companies,’”  a factor which is particularly relevant to dentistry  given that government funding for research in that field is “meager.”

Indeed, at a time when government funding for other types of medical research is increasingly in jeopardy, it is scary to contemplate the broader implications of the dental research COI study.  But Sinclair wouldn’t be surprised by any of it.

 

Preventing bill padding by lawyers: a case for compliance programs?

According to a story in yesterday’s New York Times, a global law firm – DLA Piper –  has recently been accused of overcharging a client.  The firm has denied the allegations – which arose in connection with a lawsuit it brought to collect fees from the client. A subsequent story reprinted a letter distributed within the firm by several senior partners stating that DLA Piper “has always adhered to the highest level of ethics and integrity in all of its work, including billing practices…”  What struck me about the letter is that there is nothing in it to suggest that the firm uses compliance program measures to actually maintain the highest level of ethics and integrity in billing matters by the several thousand lawyers who work for it, and how much more persuasive the letter would have been had it included a discussion of this sort.

Of course, this may have been a mere drafting oversight, since the firm clearly recognizes the value of compliance programs  for its clients  and indeed expresses pride in the expertise of its partners who help clients with such programs.  One hopes that the firm would have applied this expertise to protecting its clients from the possibility of bill padding.

Still, if DLA Piper, in fact, has not instituted real compliance measures to address this risk area I imagine that it isn’t alone among large law firms in that regard.  Indeed, at a conference held last fall by the Practising Law Institute, a noted federal judge gave a very thoughtful presentation on the ever growing importance of compliance programs – but when asked by an attendee (me) if he thought that law firms should have them to prevent overbilling, responded that, given the professional standards applicable to the field, this wasn’t necessary.

I don’t for a minute suggest that law firms need to implement the sort of process-heavy compliance programs expected of financial services providers, health-care related companies, defense contractors or organizations with serious FCPA risks.  But as some law firms increasingly swell in size, then a culture of professionalism will presumably provide less protection against billing abuses than was once the case.  Additionally, given the desperate need that some lawyers may have in this market to hold on to their jobs, and the pressure in some firms to hit time charging quotas, the case for billing related compliance programs becomes greater still.

Moreover, even before the job market for lawyers turned sour, research had shown that the problem of billing fraud was indeed growing.  According to the results of two surveys of attorneys conducted by Prof. William Ross at the Cumberland School of Law: “approximately two-thirds of the respondents to the 2006-07 survey and 1995-96 surveys stated that they had specific knowledge of bill padding. Moreover, the attorneys who responded to the most recent survey seemed, on the whole, to be less ethical in their billing practices than those [who] responded to the earlier surveys. For example, 54.6 percent admitted that the prospect of billing additional time had at least sometimes influenced their decision to do work that they otherwise would not have performed, compared with only 40.3 percent in the 1996 survey. Similarly, the percentage of attorneys who admitted that they had engaged in ‘double billing’ rose from 23 percent in 1996-96 to 34.7 percent in 2006-07. The percentage of the attorneys who believed that this practice was unethical fell from 64.7 percent in 1995-96 to only 51.8 percent in 2006-07… .”

So, the problem is real, and so is the need to take meaningful steps to address it.  Hopefully, the allegations against DLA Piper will provide a good opportunity for other large law firms to ask themselves:  if we were accused of overcharging, would we be able to point to real preventive efforts? Moreover,  by implementing such efforts, firms can prevent bill padding in the first place.

(A related post: Should dentists and lawyers be rotated, like auditors?)

What does the government “teach” about conflicts of interest?

Our government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example,” Justice Brandeis famously wrote in his dissent in Olmstead v U.S.  So, what has the government taught us lately about conflicts of interest?

According to this story in the New York Times,  a report recently issued by the Inspector General of the Department of Health and Human Services found that “the federal Medicare agency had not clearly defined ‘conflict of interest’” concerning doctors and pharmacists who make Medicare coverage-related decisions about pharmaceuticals, and “did not enforce standards meant to prevent such conflicts from influencing coverage decisions by the panels, known as pharmacy and therapeutics committees.’ ” The report also found that, “’23 percent of [such] committees did not have recusal policies’ requiring members to abstain from discussions or votes when they had conflicts of interest related to a particular drug.”  The story noted, too, that a “former Medicare official who is a consultant to many insurers and was not involved in the report, said, ‘Hundreds of millions, even billions, of dollars are at stake each year in decisions about whether and how a drug is covered by a Medicare drug plan.’” The original of the report – which identifies numerous other COI-related problems – can be found here,  and note that “the acting administrator of the federal Centers for Medicare and Medicaid Services… defended her agency’s work, [saying that] beneficiaries were adequately protected”; that  “[t]he inspector general ‘did not identify any actual conflicts of interest’”; and that her office did  not “believe it necessary to establish a uniform definition or standards for managing conflicts.”

As with a number of the stories covered in these pages, this one is pretty complex and resolving the many specific issues raised in it is beyond the scope/resources of my humble blog.  But assuming that the broad outlines of the piece are reasonably accurate (or even that just some of them are), I can say – as one who has  spent much of the past two decades reviewing compliance programs – that it has been a long time since I’ve seen a private organization take this loose an approach to conflicts of interest management (at least where the risks of COIs are significant, which they undoubtedly are in this case).

So, what is the government “teaching” here?  The lesson is not, I think, that conflicts of interest don’t matter, so much as that rigorous compliance measures to identify and mitigate conflicts are not necessary.  This indeed can be seen as part of a larger lesson from the government’s general failure to implement strong compliance measures with respect to its own operations.   (Note that there are a few exceptions to this – most notably the Federal Bureau of Investigation, which does have a rigorous compliance program.)  Until the government decides “eats its own dog food” (to borrow from a less lofty metaphor than that used by Brandeis) when it comes to compliance and ethics, it may be disappointed in the performance of the rest of its “students.”

(For further reading on this general topic I encourage you to explore the web site of the Rutgers Center for Government Compliance & Ethics.)