Drug Regulation

Dr David Graham, described by the FT as a safety official, told US senators last week that the FDA system was broken because of a conflict of interest.

According to the Financial Times, the FDA once enjoyed a high reputation. Few consumers challenged its judgement. The FT writes: "Such trust is one reason why the US public has been more willing than Europeans to accept foodstuffs containing genetically modified organisms."

So what has eroded this authority trust? The FT identifies two factors that may be relevant.

1. One can detect a regulatory cycle in drug approval. Testing standards became tougher after Thalidomide, were relaxed when AIDS stimulated demand for new and experimental drugs, and so on.
2. Division of responsibility and inconsistent handling of drugs at different stages of the innovation lifecycle. Approval follows one process; monitoring of approved drugs is done by a different department and follows a different process.
   

Oscillation and internal contradiction are both natural phenomena of complex systems, and tend to have a destabilizing effect on trust. One obvious response to this is to distrust complexity. But denial of complexity may merely create a false illusion of trust. Authentic trust may just have to accept oscillation and contradiction.

So whither the FDA - towards a restoration of authority, or towards an engagement with authenticity (if we can believe that)? Either way, a more intelligent and honest attitude to risk (as recommended by the FT) will be useful.

Source: FT Editorial No Pain-Free Option (November 20, 2004)

Who trusts James Murdoch?

John writes "if your business exists solely to serve the needs of its shareholders, why would I, not being a shareholder, believe you will take care of my interests?"

Yes, but which shareholders? Since the Murdoch family has an interest in both News International and Sky, there is a potential conflict of interest when it comes to prices paid by Sky to News International. It is the non-Murdoch shareholders who have to trust James Murdoch that he will put the interests of all Sky shareholders above the interests of the Murdoch family. Or can Rupert Murdoch (who engineered the CEO role at Sky for his son) trust James to place the Murdoch interests above the Sky interests?

Remember Enron, reminds John. The Enron bosses were shareholders too - but they were quietly dumping their shares.

Trust and Conflicts of Interest

Questions of trust often involve appreciating (Vickers) or making sense of (Weick) a person's judgements/actions. Do these judgements/actions seem reasonable given the position, perspective and partial knowledge of the person at the time? Can we make better sense of these judgements/actions by framing them within an alternative agenda (e.g. conflict of interest)?

For example, if James Murdoch, as CEO of BSkyB agrees a particular deal with News International, can we regard this deal as reasonable and fair, or is there any evidence that he has been influenced by a family relationship to the management of News International?

In the case of “related party transactions” – which way is the burden of proof? Is it for James Murdoch to demonstrate that he has not been influenced – perhaps by stepping aside from the detailed negotiations – or is it for his critics to show evidence that he has? (There are sometimes codes of practice and Chinese walls for potential conflicts of interest, but the general question remains open.)

If James Murdoch goes through several tough negotiations and produces good results for BSkyB, the shareholders may start to trust him more. They may never be willing to suspend all disbelief and waive all scrutiny, but this would be no different to the situation facing any other CEO.

(Note - this is quite different from the Sleeper pattern, where a security threat lies dormant for an extended period. The difference is that a sleeper carefully avoids situations where the threat he poses might be prematurely exposed.)