Medical research oversight from the corporate governance perspective: comparing institutional review boards and corporate boards.

• Author: Saver, Richard S.

TABLE OF CONTENTS INTRODUCTION I. LEGAL BACKGROUND: THE EVOLUTION OF IRBS AND THEIR ROLE IN RESEARCH REGULATION A. The Initial Peer Review Committees in the 1950s and 1960s B. The National Research Act, Report of the National Commission, and Initial Regulations C. Alternatives and What Might Have Been D. Regulatory Requirements and the Role of IRBs Today II. THE SHARED MONITORING LIMITATIONS OF IRBS AND CORPORATE BOARDS A. Agency Relationships and the Classic Monitoring Function of Both Boards B. Imperfect Agents and Weak Monitoring Bodies 1. Election and Removal 2. Board Size, Composition, and Insider/Outsider Mix 3. Time Constraints 4. Information Constraints 5. Compensation 6. Vague Performance Standards and Difficulty in Evaluating Effort 7. Limited Liability 8. Group-Think Problems, Social Bonds, and Conformity Pressures III. MULTIPLE BOARD ROLES AND THE MONITORING TRADE-OFF A. The Mediating Hierarch Role B. Monitoring Trade-off Problems C. Service Role and Further Exploration of the Monitoring Trade-off D. Problems with One-Size-Fits-All IRB Reform IV. IMPLICATIONS OF THE CORPORATE GOVERNANCE PERSPECTIVE FOR IRB REFORM A. Increasing the Number of Outsiders on IRBs B. Enhanced IRB Role in Reviewing Financial Conflicts of Interest V. THE IMPORTANCE OF NORMS FOR UNDERSTANDING IRB CONDUCT A. Norms Theory and Board Dynamics B. Norms and IRB Reform CONCLUSION INTRODUCTION

Dr. John Mendelsohn did not have a very good year in 2001. As president of the prestigious University of Texas M.D. Anderson Cancer Center, Mendelsohn enjoyed a reputation as one of the best cancer doctors in the country. He also worked as a high profile ambassador for the institution. Under his tenure, M.D. Anderson raised its public visibility, attracted record donations from private philanthropists, and doubled both its budget and federal research funding. (1)

But, in 2001 two seemingly unrelated business disasters hit in succession--Enron and ImClone. Dr. Mendelsohn figured prominently in the news again, but this was not the typical favorable coverage. In the ImClone fiasco, Mendelsohn's involvement made more sense. Dr. Mendelsohn served on the corporate board of ImClone, a New York biotechnology company, owned ImClone stock, and helped develop its leading experimental cancer drug, Erbitux. (2) In early 2001, ImClone's fortunes seemed to be riding high on the prospects of Erbitux receiving full approval by the Food and Drug Administration (FDA) relatively early in the drug's testing cycle. In late December of that year, however, the FDA declined to give the drug early approval, questioning some of the clinical trial data and concluding that more testing needed to be done before it could be cleared as safe and effective for clinical care. ImClone's stock price plummeted when this bad news hit the financial markets. (3) The downward turn of events then generated an insider trading scandal of epic proportions. Securities regulators accused Samuel Waksal, ImClone's CEO, of tipping family members to sell their ImClone stock in advance of the FDA announcement. (4) The ImClone scandal also engulfed lifestyle entrepreneur Martha Stewart. Ms. Stewart was convicted on federal criminal charges of obstruction of justice and related counts arising from a governmental investigation as to whether she sold her ImClone stock based on an illegal inside tip. (5)

With the Waksal and Stewart charges dominating the news, another troubling aspect of the ImClone saga received considerably less attention. Clinical investigators tested Erbitux on approximately 195 research subjects at M.D. Anderson. All this occurred while Dr. Mendelsohn simultaneously served as M.D. Anderson's president and yet remained financially and operationally involved with ImClone, including still serving on the ImClone corporate board. (6) The research subjects were not told that the medical center's president had a very large financial stake in the company developing the experimental drug. (7) In fact, Mendelsohn made approximately $6 million on the sale of twenty percent of his ImClone shares in November 2001. (8) Although Mendelsohn did not directly conduct the Erbitux trials at M.D. Anderson--other faculty members did the actual research--critics still questioned the potentially serious conflict of interest for M.D. Anderson's top executive and for the medical center generally. (9)

Among the concerns arising from the Erbitux episode, the relatively passive role of M.D. Anderson's institutional review board (IRB) stands out. Why did the M.D. Anderson IRB allow all of this to happen in the first place? IRBs, the federally required research review committees at major academic medical centers, are responsible for reviewing, approving, and monitoring research protocols involving human subjects. (10) Did the oversight body fail to take appropriate actions? Should it have investigated the potential conflicts of interest and moved the Erbitux clinical trials to another medical center? Should the IRB have at least insisted that research subjects be told about the financial ties during the informed consent process? (11)

ImClone actually presented the second major headache for Dr. Mendelsohn in 2001. He also had the misfortune of being associated with the downfall of Enron, one of the major business disasters in American history. Enron, an energy trading giant and the seventh largest company in the United States shortly before its collapse, began to unravel in mid-2001. Enron management insiders allegedly had caused the company to enter into a number of off balance sheet transactions with affiliated entities under arrangements benefiting several of the insiders while hiding the corporation's true financial debt. When Enron issued restated financial statements revealing more accurate debt estimates, swift and severe market disfavor resulted, eventually culminating with the company declaring bankruptcy in December 2001. (12) Dr. Mendelsohn's connection to Enron surprised many. Although a research doctor, he served on Enron's board of directors as well as on the board's audit committee. He apparently had performed his role as ambassador for M.D. Anderson Cancer Center quite well, forging relationships with the business and social elite in Houston, which later earned him an invitation onto the Enron board. (13)

Among the many questions emanating from the Enron debacle: where was the Enron corporate board? Boards of directors are supposed to monitor management for the benefit of shareholders. Why did the Enron board allegedly approve the questionable off balance sheet transactions and waive conflict of interest policies for senior executives? Did the Enron directors really even know and truly understand the grave financial risks senior management caused the corporation to take? Why did the board not suspect alleged self-dealing and false financial reporting by management insiders when numerous signals indicated something might be wrong? (14)

The connection between the conduct of the Enron corporate board and the conduct of the M.D. Anderson Cancer Center IRB might, at first blush, seem to be a fluke. One entity, a corporate board elected by shareholders, appears to have very little to do with the other, an internal research oversight committee, other than the fortuitous involvement of Dr. Mendelsohn. The major proposition of this Article, however, is that there is indeed a very strong connection. The alleged problems with the Enron corporate board resonate with and have major implications for understanding the alleged monitoring deficiencies of the M.D. Anderson Cancer Center IRB. This Article contends that policy makers and health law scholars interested in better understanding and improving research oversight performed by the nation's IRBs should pay more attention to the role of boards of directors in corporate governance.

Like London and Paris in A Tale of Two Cities, this is "the best of times" and "the worst of times" for IRBs and corporate boards. (15) As a result of several high profile research subject deaths at major institutions, such as Johns Hopkins University (16) and the University of Pennsylvania, (17) IRBs have come under increasing fire. Leading academic medical centers have had their research programs temporarily suspended because of IRBs' alleged failures to protect research subjects. (18) A recent series of critical government reports concludes that IRBs review too many protocols in too rapid a timeframe while lacking sufficient resources and expertise. (19) Critics charge that the IRB system of review simply is tilted too much in favor of researcher and institutional interests at the expense of human subject protection. (20) In short, this has been called a time of "crisis" in which IRBs are "under strain" and awaiting serious reform. (21)

Meanwhile, with recent high profile business disasters at large, publicly traded corporations such as Enron and WorldCom, (22) these are also very unsettling, difficult times in corporate boardrooms. The conduct of corporate boards features prominently in the current business scandals. (23) As with the current period of IRB crisis, this is perceived to be a critical time for corporate boards, "a watershed moment in U.S. corporate governance." (24)

Although IRBs and corporate boards both seem to be navigating troubled waters, not all is bleak. For one, because of the renewed attention, reformers have come forward with ideas to improve the monitoring effectiveness of both corporate boards and IRBs. On the corporate governance side, significant legal and regulatory changes are already underway. For example, the recent Sarbanes-Oxley Act and revisions to the New York Stock Exchange and National Association of Securities Dealers listing requirements are pushing corporations to adopt different approaches to board composition and conduct. (25) Market pressures and other factors have also contributed to a renewed interest in more...