The Institute of Medicine and the doctrine of perpetual conflict.

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The Institute of Medicine’s 2009 report on Conflict of Interest in Medical Research, Education, and Practice aims to encourage institutions to develop conflict of interest (COI) policies to safeguard against circumstances in which individual members of the institution, or the institution itself, could risk neglecting primary professional interests (e.g., the welfare of patients or the integrity of medical research) in favor of secondary interests, such as financial gain.

As the IOM correctly notes, the means by which COI leads to a failure of professional responsibility is through bias, conscious or unconscious.  Conflict of interest policies, then, are codes of conducts erected to prevent bias from unduly influencing one’s professional actions.

I have no objection to the aim of the report or to the way in which the IOM defines COI (p. 46).  But given that the overwhelming bulk of the document’s analysis and recommendations serve to specifically guard against conflicts of interest arising from financial relationships and, furthermore, from financial relationships with commercial rather than non-commercial entities, it is worth examining whether this emphasis does not itself reveal a bias or prejudice against private enterprise.

We should note in passing that the IOM defends its focus on financial ties in pragmatic terms:

The reason is not that financial gains are necessarily more corrupting than the other interests but that they are relatively more objective, fungible, and quantifiable. A financial interest therefore tends to be more effectively and fairly regulated than other secondary interests.

Since the IOM’s overarching aim is to offer “principles” by which reasonable codes of conduct could be constructed (p. 45), this acknowledged retreat to pragmatism is a limitation that should not be overlooked.  In many respect, Lisa Rosenbaum’s series of articles was to highlight the limitation of such a narrow focus.

The IOM report fails to expressly identify why it should single out commercial entities, rather non-commercial, non-profit organizations.  But a clue is given in the following statement:

At the same time, these relationships [between physicians and researcher on the one hand and pharmaceutical, medical device, and biotechnology companies, on the other hand] have also created significant risks that the financial goals of industry may conflict with the professional goals of medicine. The goals of for-profit medical companies are to produce products that improve health and, at the same time, to ensure a financial return to shareholders. (emphasis added)

For the IOM, then, commercial activity is separable into two aims.  One the one hand, improving health, and on the other, making a profit.

This view of commercial activity betrays a common misunderstanding about the nature of economic exchange.  Indeed, those who single out “for profit” companies, typically view commercial activity at best as a zero-sum game (services or products are exchanged for money if they are “equal in value”) or, at worse, as an action where one party profits at the expense of the other.  Under such an understanding of exchange, profit-seeking is seen as an activity separable from the production of a good or service, and the producer is invariably considered with some suspicion.  Most of the outcry against Rosenbaum’s articles comes from academics who hold such a view.

In reality, a voluntary, commercial exchange is one that must be characterized by mutual benefit, one where both parties profit.  The exchange takes place precisely because producers value the customers’ money more than they value the products on the shelves and conversely, consumers value the product more than they value the money in their pocket.  The producer’s monetary profit takes place if and only if  the customer’s non-monetary profit is realized.  If that were not the case, no exchange would ever take place.  Why bother paying money for anything if, at best, the value of what you obtain will be equal to what you have spent?

As Jeffrey Tucker pointed out in a delightful essay, the mutual “gift” of free exchange is at the basis of personal and social welfare:

At some point today, you will undoubtedly engage in some economic exchange. Use the opportunity to reflect on what a glorious dynamic underlies it. You can say, “thank you.” The person who takes your money can say, “thank you.” Such opportunities account for most of the peace and prosperity we enjoy this side of heaven.

The principle of the mutual benefit of exchange has eluded us for centuries until it was first discovered by late medieval scholastic analysts, and finally clearly formulated by the classical liberal economists in the 18th century.  Unfortunately, it remains woefully under-appreciated to this day, particularly in academic circles.

Now, granted, analysis of economic relationships in medicine must be evaluated carefully.  The ultimate recipients of medical goods and services (patient and/or physicians, as the case may be) are not necessarily in the same position as the buyer of a quart of milk or of a smartphone.  The distinctions must examined, and the analysis adjusted as needed (stay tuned!), but unless one recognizes the general principle that economic exchange is mutually beneficial to both parties, one will be saddled with an intractable bias, one that views free exchange as a perpetual conflict of interests.(*)


(*) A passage from Ludwig von Mises’ 1957 Theory and History is also instructive and relevant here:

Those charging the [Classical] economists with bias refer to their alleged eagerness to serve “the interests.” In the context of their accusation this refers to selfish pursuit of the well-being of special groups to the prejudice of the common weal. Now it must be remembered that the idea of the common weal in the sense of a harmony of the interests of all members of society is a modern idea and that it owes its origin precisely to the teachings of the Classical economists. Older generations believed that there is an irreconcilable conflict of interests among men and among groups of men. The gain of one is invariably the damage of others; no man profits but by the loss of others. We may call this tenet the Montaigne dogma because in modern times it was first expounded by Montaigne. It was the essence of the teachings of Mercantilism and the main target of the Classical economists’ critique of Mercantilism, to which they opposed their doctrine of the harmony of the rightly understood or long-run interests of all members of a market society.

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