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How Long Can Advisors Avoid Public Disclosure of Their Conflicts of Interest?

By Bob Clark

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Over the weekend, my local newspaper—The Santa Fe New Mexican—ran a story called “Drug companies pay thousands to local doctors.” It seems that the investigative journalism coop named ProPublica has compiled a national database using public documents and disclosures of drug companies about monies paid to doctors, nurses and pharmacists. Apparently, about 40% of drug companies currently disclose this information, which shows they paid a total of $761.3 million to health practitioners since 2009, and a new federal law will take effect next year compelling all drug companies to do so. 

While the “Dollars for Docs” database is accessible on the Internet, the New Mexican pointed out that 11 Santa Fe healthcare providers are on the ProPublica database, receiving some $2.2 million. The paper went on to list the four local doctors receiving the highest amounts (going back to 2009), ranging from $33,694 to $153, 032. The payments were for various services from research to speaking for professional education at venues large and small (Hobbs and Roswell, N.M., for example), including medical schools.   

While the doctors who were quoted in the article said they enjoyed being involved in continuing education, and one of them pointed out that he would have made more money by staying in the office and seeing patients, the article included only one statement about the ethical nature of these payments: “What has become apparent over the years is that there are certain incentives by the pharmaceutical companies that are strong enough that physicians cannot mange those conflicts well, so it becomes problematic in their being able to render an unbiased prescription, for example,” said Margaret McLean of the Markkula Center for Applied Ethics at Santa Clara University.

Yes, most of us can probably agree this is yet another example of some people and the media rendering a simplified (possibly predetermined) judgment about a more complex situation. And yes, at least to my mind, singling out a few of the doctors in the paper for public condemnation was unfair. But make no mistake, these kinds of stories are also effective. As New Mexico state senator Dede Feldman put it: “I think the pharmaceutical companies, knowing this is bad PR, have curbed some of the more excessive lunches and stuff.” 

Also make no mistake that if someone can create a database like this for doctors, they can also create databases for other professions, such as, oh, I don’t know, maybe financial advisors. A similar database might disclose the compensation sources of various financial professionals: if they are W-2 employees of a bank or brokerage firm, who paid their 1099 income, who paid their commissions, who paid their trails, who paid for their due diligence trips, etc. How do you think this will play to a media that thinks buying lunch for a doctor to talk to a group of med students will compromise their professional judgment? 

I know we’re not there yet. But we will be: it’s just a matter of time. Our current financial services industry is largely based on the public’s confusion about the loyalties of various financial advisors and their inherent financial conflicts of interest. But sooner or later, they’ll get the message: the media and the Internet will see to that. 

The question is whether the duties and the conflicts will be sorted out in a rational, orderly, business-like manner. Or will the industry leave its restructuring to special interest groups with their own agendas,  little understanding of the real issues involved or a stake in the eventual outcome?

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