Princess Health and Cyberonics' Top Leaders Forced Out Over Back-Dated Stock Options. Princessiccia

Princess Health and Cyberonics' Top Leaders Forced Out Over Back-Dated Stock Options. Princessiccia

Cyberonics executive compensation stock manipulation

Gusty 14:19 Add Comment

We had previously posted about the curious way in which Cyberonics' vagus nerve stimulator device was assessed as a treatment for severe depression by a US Food and Drug Administration (FDA) panel. Although a randomized controlled trial failed to show any improvements due to the device that could not be explained by chance alone, after some emotional patient testimonials, the panel voted to approve the device. One panelist later said it was "nuts."

We also posted about questions regarding the authors of an article sponsored by the company about the vagus nerve stimulator. These questions revolved around undisclosed conflicts of interest, and the extent a ghost-author was responsible for the article.

Cyberonics also came to our attention because of questions about stock-options granted to its top executives. Now, according to the Houston Chronicle,

Two top executives have exited Cyberonics, after it disclosed that its stock options problems are much broader than previously reported.

On Monday, investors bid up shares of the Houston-based medical device maker, which said Chairman and CEO Robert Cummins and Chief Financial Officer Pamela Westbrook resigned.

The duo was replaced, on an interim basis, by three people: Tony Coelho as chairman, Reese Terry Jr. as chief executive and John Riccardi as chief financial officer. George Parker was appointed as interim chief operating officer.

The personnel changes came as Cyberonics reported widespread stock option problems in a filing Friday with the U.S. Securities and Exchange Commission.

Before Friday, the company had acknowledged only one instance where stock options were at issue. Those options were given to top executives in June 2004, on the day before the stock market had a chance to react to positive news about a Cyberonics product. Some analysts have described the 2004 options activity as 'make-your-own-luck' grants. Others have called it springloading. On June 9, the SEC began an informal investigation into the two-year-old options.

On Friday, Cyberonics said a board committee that reviewed the company's stock option grants concluded that 'incorrect measurement dates were used for certain stock option grants made principally during the period from 1999 through 2003.'

Cyberonics estimates its financial statements from that period would need to be adjusted to reflect about $10 million in additional 'noncash compensation charges' because of the backdating activity.

It's funny how questionable financial practices seem to go hand-in-hand with dodgy marketing and strange science. In my humble opinion, cases like this suggest the urgent need for better governance of health care organizations, meaning governance that is transparent, accountable, and ethical. But given the way many helath care organizations are currently run, should it be any surprise that costs constantly go up, access constantly goes down, quality is constantly questioned, and health care professionals are increasingly miserable?

Princess Health and Questionable Deliberations on the Vagus Nerve Stimulator to Treat Severe Depression. Princessiccia

Princess Health and Questionable Deliberations on the Vagus Nerve Stimulator to Treat Severe Depression. Princessiccia

Cyberonics FDA

Gusty 15:01 Add Comment

The NY Times reports on the curious deliberations by a US Food and Drug Administration (FDA) expert advisory panel on the approval of an implanted vagus nerve stimulator as a treatment for severe depression. The committee was informed about the results of a randomized controlled trial which, as far as I can tell after several PubMed searches, has not yet been published.
The Times reports the trial showed that 17/111 patients who had the stimulator implanted and turned on had improvements in "standard measures of disease severity," while 11/110 who had it implanted, but not turned on also improved. This small increase in the likelihood of improvement was not statistically significant, i.e., could have been due to chance alone, rather than be an effect of the device. Furthermore, the absolute benefit increase implied by these data is at most 4.3%. That is, were 100 people to get the device, this data implies only 4 of them might improve because of it, while the rest would either not improve, or would have improved even without it.
Nonetheless, after hearing some emotional testimonials by patients who claimed that the device helped them, the advisory committee voted to make the device "approvable." The panel's chair, Dr. Kyra Becker, said "the feeling was that anything that gives these people hope is potentially worthwhile." However, one dissenter, Dr. Richard Malone, was bewildered by the panel's decision, "I walked out of there thinking I was nuts. It was stunning, but then I find much of life stunning."
The FDA does not have as rigorous standards to approve devices as those to approve drugs. However, when a device costs $15,000, is invasive, cannot be easily removed, and at best seems as if it may help only a small minority of patients, as is the case for the vagus nerve stimulator, the wisdom of these relatively lax standards comes into question.
Another question is why a scientific advisory committee, staffed ostensibly by medical experts, seemed more attentive to testimonials than to the results of a randomized controlled trial. Perhaps we will get some answers from an investigation by the Senate Finance Committee, which apparently is ongoing.

Princess Health and Questionable Deliberations on the Vagus Nerve Stimulator to Treat Severe Depression.Princessiccia

Princess Health and Questionable Deliberations on the Vagus Nerve Stimulator to Treat Severe Depression.Princessiccia

Cyberonics FDA

Gusty 15:01 Add Comment

The NY Times reports on the curious deliberations by a US Food and Drug Administration (FDA) expert advisory panel on the approval of an implanted vagus nerve stimulator as a treatment for severe depression. The committee was informed about the results of a randomized controlled trial which, as far as I can tell after several PubMed searches, has not yet been published.
The Times reports the trial showed that 17/111 patients who had the stimulator implanted and turned on had improvements in "standard measures of disease severity," while 11/110 who had it implanted, but not turned on also improved. This small increase in the likelihood of improvement was not statistically significant, i.e., could have been due to chance alone, rather than be an effect of the device. Furthermore, the absolute benefit increase implied by these data is at most 4.3%. That is, were 100 people to get the device, this data implies only 4 of them might improve because of it, while the rest would either not improve, or would have improved even without it.
Nonetheless, after hearing some emotional testimonials by patients who claimed that the device helped them, the advisory committee voted to make the device "approvable." The panel's chair, Dr. Kyra Becker, said "the feeling was that anything that gives these people hope is potentially worthwhile." However, one dissenter, Dr. Richard Malone, was bewildered by the panel's decision, "I walked out of there thinking I was nuts. It was stunning, but then I find much of life stunning."
The FDA does not have as rigorous standards to approve devices as those to approve drugs. However, when a device costs $15,000, is invasive, cannot be easily removed, and at best seems as if it may help only a small minority of patients, as is the case for the vagus nerve stimulator, the wisdom of these relatively lax standards comes into question.
Another question is why a scientific advisory committee, staffed ostensibly by medical experts, seemed more attentive to testimonials than to the results of a randomized controlled trial. Perhaps we will get some answers from an investigation by the Senate Finance Committee, which apparently is ongoing.