Bad Medicine?

Editor’s note: I’ve spent the past four and a half years learning about the exciting subject of tax exempt organizations, AKA non profit groups. This article involves learning up the steep j-curves of new and different subjects. This laundry list includes clinical trials, cultured skin substitutes, institutional review boards, conflicts of interest, Food and Drug Administration (FDA) regulations, patents and Security and Exchange Commission (SEC) regulations. Digging in these new directions began on November 8 when I got a Google News Alert about this year’s FDA warning letter sent to the Shriners Hospital for Children (SHC) in Cincinnati. This led me to look into the FDA warning letters also sent to SHC Sacramento and the University of Cincinnati (U of C) College of Medicine and ended by comparing an unusual pattern of mortgage activity undertaken by Shriner executives with the “buy low, sell high” performance of a biotechnology company who is marketing a product co-developed with SHC, Tampa. There is a strong possibility that these transactions may be randomly coincidental. – Sandy Frost, Starbucks, WA

If I was smart, I’d write a John Grisham type “fiction” book about all this. This investigation has uncovered all the elements of a best seller to include appendant Masonic bodies that secretly revolve around partying and, allegedly, orgies that would make Bacchus blush. Corporate vengeance. The possibility of wide spread tax fraud and corruption. And the worst-case-scenario possibility that those in positions of public trust may have used burned children as guinea pigs for their own personal gain.

This article now throws a few new prisms into the lens for a deeper look behind the scenes. On one hand, the Shriners rightly tout their charity work of providing free medical care to crippled and burned children. In contrast, the Shriners’ dark side is shadowed by a 20+ year history of punishing, throwing out and suing those who question them, while they quietly continue to do things behind the scenes like file less-than-complete tax returns.

About the suing? Judge Charlene Honeywell of the Hillsborough County Thirteenth Circuit Court will hold a hearing on January 18, 2008, at 0900 on the court’s own motion to dismiss the defamation complaint filed by the Shriners against whistleblowers Vernon Hill, himself a Shriner, and IRS agent, Paul Dolnier because the Shriners have “failed to prosecute” the lawsuit for the past year.

Various SHC have partnered with medical colleges to conduct clinical studies designed to discover and commercialize new burn treatments. The FDA is charged with making sure that these medical facilities meet certain guidelines and follow strict protocols concerning conflicts of interest and the protection of human subjects.

The conflict of interest policy enforces Title 42 of the Public Health regulations and states:

“This subpart promotes objectivity in research by establishing standards to ensure there is no reasonable expectation that the design, conduct or reporting of research funded under PHS grants or cooperative agreements will be biased by any conflicting financial interest of an Investigator.” In other words, the investigator is not supposed to cook the books so his invention can be commercialized and marketed for millions.

The “Informed Consent – Protection of Human Subjects” regulation states:

“No clinical investigator may involve a human being as a subject in research unless the investigator has obtained the legally effective informed consent from the subject. (In this case, from the parents of the burned children) Informed consent is a written notification to human subjects involved in clinical investigations that provides them with sufficient opportunity to consider whether or not to participate in the study.”

Each facility has an institutional review board (IRB) to monitor these studies for protocol violations.

From Wikipedia:

“An institutional review board/independent ethics committee (IRB/IEC) is a group that has been formally designated to approve, monitor, and review biomedical and behavioral research involving humans with the alleged aim to protect the rights and welfare of the subjects. In the United States, Food and Drug Administration (FDA) and HHS regulations have empowered IRBs to approve, require modifications in or disapprove research as well as perform critical oversight functions for research conducted on human subjects that are scientific, ethical, and regulatory. IRBs are themselves regulated by the Office for Human Research Protections (OHRP) and were developed in direct response to research abuses earlier in the twentieth century. Two of the most notorious of these abuses were the experiments of Nazi physicians that became a focus of the post-World War II Nuremberg Trials, and the Tuskegee Syphilis Study, an unethical and scientifically unjustifiable project conducted between 1932 and 1972 by the U.S. Public Health Service on poor, illiterate black men in rural Alabama.”

If the FDA inspects such a facility, overseen by an IRB, and finds violations, warning letters are issued.

For example, the FDA sent warning letters to two Shriners Hospitals for Children and to the University of Cincinnati for alleged violations of clinical study regulations.

According to the FDA News, the January 12, 2007 warning letter addressed to Dr. Richard Kagan, MD., Chief of Staff, SHC Cincinnati, cited the hospital for “failure to report and accurately document unanticipated and anticipated adverse device events to the sponsor and the reviewing IRB.” The letter also stated that the FDA inspection report “revealed serious violations” of regulations regarding Investigational Device Exemptions and Protection of Human Subjects by failing to obtain informed consent and failing to maintain accurate and complete case histories for each subject.

The March 6, 2006 warning letter addressed to Dr. David G. Greenhalgh, M.D., Chief of Burns, SHC Sacramento, described “objectionable conditions” that were found during a similar type of inspection for a different clinical study.

The letter cited the hospital for failing to “ensure an investigation is conducted in accordance with the signed agreement with the sponsor, the investigational plan, applicable FDA regulations and any conditions of approval imposed by the FDA or the IRB.” The warning letter continues that the Shriners Hospital “revised or removed sections of the protocol prior to obtaining approval from the sponsor.” Additionally, the hospital was cited for also failing to maintain “accurate, complete and current records regarding the receipt, use or disposition of a study device” and for failing to “maintain each subject’s case history and exposure to the device, including all relevant observations.”

The third FDA warning letter, dated January 29, 2007, was sent to David M. Stern, MD, who is the Dean of the University Of Cincinnati College Of Medicine, the sponsor of the burn treatment clinical trial conducted in conjunction with SHC Cincinnati. The FDA also cited “objectionable conditions” and that:

“The inspection was conducted under a program designed to ensure that data and information contained in requests for Investigational Device Exemptions, Premarket Approval (PMA applications), and Premarket Notification submissions (510K) are scientifically valid and accurate. Another objective of the program is to ensure that human subjects are protected from undue hazard or risk during the course of scientific investigations.”

The FDA cited the U of C for “failure to secure the investigator’s compliance with the signed investigator agreement, the investigational plan, applicable FDA regulations, and any other conditions of approval imposed by the reviewing Institutional Review Board (IRB) or FDA; for “failure to ensure adequate monitoring of the investigation and failure to include written procedures for monitoring the investigation in the investigational plan”; for “failure to label the device as investigational”; and for “failure to maintain accurate, complete and current device shipment and disposition records.”

These alleged violations were identified during a premarket approval inspection of a cultured skin substitute invented by Dr. Steven Boyce, who works for both Cincinnati facilities.

Boyce lists his professional and research qualifications as current Director of the Skin Substitute Laboratories and the Department of Tissue Engineering as well as the Senior Investigator for the Research Department for SHC, Cincinnati. He is also a Professor with tenure with the Department of Surgery at the University of Cincinnati College of Medicine. His work at both facilities includes overseeing a clinical study into burn treatments. He has invented and patented the technology for a cultured skin substitute, trademarked “PERMADERM.”

SHC Cincinnati published a fact sheet on “Cultured Skin & Other Skin Use” that states:

“First degree and second degree burns heal naturally through the body’s own ability to replace damaged skin. A third degree burn or full thickness will not heal and requires grafting.”

The fact sheet further states that “The Cincinnati Shriners Cultured Skin Substitute” was developed through nearly two decades of research by Dr. Steven Boyce. The process begins when a business card size piece of skin is taken from the burned child and is cultured to grow in about three weeks to the size of 100 business cards. The cultured skin substitute is then taken to surgery for application to the burn site.

The long and involved process to launch this clinical study began in 1998, the same year that Boyce registered his own biotechnology company, Cutanogen, with the Ohio Secretary of State.

Investigators must disclose any business interests in order to avoid a conflict of interest. According to a U of C official, Boyce told the Institutional Review Board he owned a company (Cutanogen) and to avoid the conflict of interest, the IRB told him to name Dr. Richard Kagan, who is also on the U of C faculty, as principal investigator.
Though the IRB told Boyce to name Kagan as principal investigator, Boyce lists himself here as principal investigator for three Investigational Device Exemptions (IDE) filed with the FDA including IDE G900205, IDE G960013 and IDE G980023. He is also listed here as principal investigator for the Office of Orphan Products Development grant that funded his research into “Cultured Skin Substitutes for Closure of Burn Wounds.”

On February 1, 2006, Cambrex Corporation announced in a press release “the purchase agreement for all the stock Cutanogen Corporation, a privately-held biotechnology company that is focused on products used to treat patients with severe burns” for “$1.5 million to be fully paid at closing with additional purchase price payments of up to $4.8 million subject to the achievement of certain regulatory and commercial milestones.”

The press release continued that Cambrex intended to begin a pivotal trial for PermaDerm cultured skin by the end of 2006 and that the trial was estimated to take 15 months. “Upon completion of the clinical trial data,” the release continues, “the Company expects to submit the results to the FDA in its application for Premarket Approval (PMA) for commercial sale. A PMA is the FDA process of scientific and regulatory review to evaluate the safety and effectiveness of Class III medical devices.”

The FDA inspections took place around the same time that Cambrex announced the purchase of Boyce’s company and a year later, the warning letters challenged the scientific validity and accuracy of “data and information contained in requests for Investigational Device Exemptions, Premarket Approval (PMA) applications and Premarket Notification submissions (510K).”

In 2002, another cultured skin substitute was registered with the U.S. Patent Office. This one was developed cooperatively with MIT, SHC Tampa and Integra Health. Over a year ago, a pattern of unusual mortgage activity was discovered recorded with the Hillsborough County Clerk and with the Massachusetts Registry of Deeds. These transactions are unusual because those Shriner executives taking out the mortgages repaid them quickly with some repaid in a matter of days and/or weeks.

For example, one Shriner executive took out a mortgage for $51,000 around April 5, 2001 and paid it back about four months later at a rate of approximately $12,750 a month. Around the same time, Integra stock increased from about $12 a share to about $28 a share for a hypothetical profit of nearly $68,000.

Another Shriner executive paid back a $100,000 mortgage, which was about 40% of his annual salary, from July, 2002 to July, 2003. During the same time, Integra stock prices went from about $17.50 a share to nearly $25 a share for a hypothetical profit of $36,000.

Another Shriner executive took out a mortgage for $1 million in February, 1996 and paid it back ten years later on October, 27, 2006. Integra prices coincided from $23.50 a share up to $37.13 a share for a possible profit of over $580,000. The same executive took out a mortgage for $300,000 in October, 2000 and repaid it on the same day, October, 27, 2006. Integra prices coincided from about $11.36 a share up to $37.13 a share for a possible profit of $680,000. The same executive took out a mortgage for $140,000 on September 18, 1996 and repaid it on the same day, October 27, 2006. Integra prices coincided from about $13.75 a share to $37.13 a share for a possible profit of $238,000, for a combined hypothetical profit of about $1.5 million.

Other unusual mortgages don’t seem to be tied to anything but our curiosity as to how executives of a non profit charity can consistently repay their mortgages so quickly? One former Shriner executive took out a $150,000 mortgage on March 10, 1987 and repaid it about three months later on June 12, 1987. Another Shriner executive took out a mortgage for $142,000 on July 3, 1996 and paid it back in about two and a half years on December 22, 1998.

So, is any of this illegal?

Probably not, except that the Shriners Hospitals for Children should have disclosed much of this information on their tax returns including:

• Program achievements, including the patents.

• A million dollar grant given in 2003 to Shriners Cincinnati Burns Hospital from the First Third Bank.

• A wrongful death lawsuit.

• Over 40 malpractice lawsuits, some settled in 2006, 2005, 2004 and 2001.

• Personal mortgages given to executives and employees.

In re-examining a scenario now landscaped with FDA violations, malpractice lawsuits, incomplete tax returns and a naggingly unusual pattern of mortgage activity, who will now wonder:

Did anyone in a position of public trust use inside information obtained from research conducted at non profit facilities for their own personal gain?

Only the FDA, the IRS and Securities and Exchange Commission can know for sure.

All copies of material reprinted or duplicated from by Sandy Frost must include the following credit line: From http://sandyfrost.newsvine.com/ Copyright © 2007 by Sandy Frost. Used by permission.