Memorial Sloan Kettering’s Conflicts-of-Interest Imbroglio: Four Lessons for Chief Compliance Officers

In the past four weeks, the world-renowned Memorial Sloan Kettering Cancer Center (MSK) in New York has experienced considerable turmoil, as a result of a series of media reports focusing on substantial conflicts of interest by MSK senior leaders:

• On September 13, Dr. José Baselga, MSK’s chief medical officer, resigned his position, soon after the New York Times and ProPublica reported that Dr. Baselga had “fail[ed] to disclose millions of dollars in payments from health care companies,” including failure to disclose his outside financial ties in dozens of research articles that he had written for leading medical journals.
• On September 29, the Times and ProPublica reported that a MSK vice president, Dr. Gregory Raskin, was required to turn over to MSK nearly $1.4 million of a windfall stake in stock options he had received from a biotech company, Y-mAbs Therapeutics, for representing MSK on Y-mAbs’s board.
• On October 1, the Times and ProPublica reported that in an October 1 meeting with MSK’s staff, the chairman of MSK’s board of managers and overseers, Douglas A. Warner III, told the staff that Dr. Baselga “crossed lines that we should have done more to stop” and had gone “off the reservation” in his dealings with health-care and drug companies. Warner also acknowledged that “while we pushed back on a lot and discussed a lot, we were not as effective as we should have been,” and that Dr. Baselga “reported to me, and I wish I had done more to keep him away from the line.”

Note: MSK’s situation, even at this early stage of developments, contains four lessons that chief compliance officers in any industry should note and share with their companies’ senior executives.  First, corporate conflict-of-interest policies and associated standards and internal controls should leave no doubt about which types of outside financial interests are prohibited, which are permissible with appropriate full disclosure and prior approval, and which are permitted without the need for disclosure or prior approval.  According to ProPublica, Memorial Sloan Kettering did not have a prohibition against employees accepting personal compensation when they represent MSK on corporate boards. Other hospitals, cancer centers, and research institutions, however, have more clearly stated limitations or prohibitions on such outside ties. For example, the Cleveland Clinic reportedly prohibits employees from personally profiting when they are representing the Cleveland Clinic’s interests, and Partners HealthCare© (founded by Brigham and Women’s Hospital and Massachusetts General Hospital) has a highly detailed policy on employee interactions with industry and other outside entities.

Second, the rapid sequence of events that followed the initial reporting by the Times and ProPublica shows how quickly damage to corporate reputation and internal morale can expand when serious undisclosed intracorporate conflicts of interest are publicly reported.  In his meeting yesterday with MSK staff, Warner reportedly “acknowledged ‘widespread anger’ among staff members and that the hospital’s reputation had been harmed.”

Third, if a company needs to address an intracorporate crisis with the media, it must make sure that its key messages in public statements are consistent.  In MSK’s case, an MSK spokesperson stressed that Dr. Baselga resigned and was not fired, but also stated that in the October 1 meeting Warner and MSK’s chief executive, Dr. Craig B. Thompson, were referring not to Dr. Baselga’s ties to outside companies but to a “conflict of commitment.”  The spokesperson added, “Dr. Baselga wanted to take on more, join more boards, be involved in more outside efforts. . . . He was overextended.”  Inconsistencies in public disclosures may well invite further adverse media coverage and complicate the task of crisis management.

Finally, a company in the midst of a crisis management situation must take special pains to manage its dissemination of information about internal discussions while it is still formulating a comprehensive response to the crisis.  The October 1 report by the Times and ProPublica stated that a preliminary transcript of Warner’s meeting with the hospital staff “was inadvertently emailed by the hospital to a reporter for The New York Times.”