2centsworth.info

Remember the old TV ad’ with guy from the day-time soap saying “I’m not really a Doctor, I just play one on TV.”

Those were more innocent times, I cannot imagine the various actors playing doctors in today’s drug adverts bothering to warn us. In response, of course, we have grown more cynical about advertising in general and prescription drug advertising in particular.

But what if the guy really is a Doctor… Can you believe him then? I guess not… Or, at the very least, you better find out who is slipping money into his pocket.

The New York Times had a piece today entitled Generic Smear Campaign (May 9th 2006 by DANIEL CARLAT) which describes how doctors are no longer simply being paid to tout the benefits of various drugs… They are actually being paid to discredit or smear competitors’ drugs. Specifically, they are being paid to trash lower-cost, safer, generic drugs.

The article describes how three pharmaceutical companies (Sepracor, Sanofi-Aventis, and Takeda) have been paying university-affiliated psychiatrists to publish articles trashing a generic drug called trazodone. According to the New York Times piece, trazadone has been around for 25 years, has a good safety record, and costs as little as 10 cents a pill. In contrast the products from Sepracor, Sanofi-Aventis, and Takeda cost as much as $3 a pill. But every time a doctor prescribes the 10 cent trazadone pill it is a lost $3 sale for one of these pharmaceutical giants. Hence the disinformation campaign. And they are apparently having no problems finding psychiatrists willing to pocket their ethics along with some cash.

This all comes at the same time as Wyeth, another large pharmaceutical company, is pressuring the FDA to clamp down on the prescribing of bio-identical hormone replacement therapies (HRT) claiming they pose significant health risks to the women taking them. Of course, Wyeth’s touching concern with women’s heath has absolutely nothing to do with the fact that the women are turning to the bio-identical HRT after a major 2002 health study found that Wyeth’s synthetic HRT increased a woman’s risk of heart attack, breast cancer, and stroke.

As a WashingtonPost.com article (Firm Seeks Crackdown on Custom Made Drugs by By ANDREW BRIDGES, The Associated Press April 21, 2006) put it:

Those findings hit Wyeth hard. Sales of the company’s Prempro and Premphase, which combine estrogen and progestin, and its Premarin, an estrogen-only pill, fell to $880 million in 2004 from $2.07 billion in 2001, the year before the Women’s Health Initiative released its hormone-replacement results. Compounding pharmacists and their backers allege that Wyeth seeks to stifle competition by calling in the FDA.

And, of course, with GW’s guys running the FDA, they may well succeed.

Another interesting New York Times article, entitled Doctors Object to Gathering of Drug Data by Stephanie Saul in the Thursday May 4th 2006 edition.

It is an interesting example of what I call the “soft corruption” that is evident all across US society, business, and government.

A group of data-mining companies (the article mentions IMS Health, Verispan, Dendrite International, and Wolters Kluwer) pay various retail drugstore chains (e.g. Walgreens and CVS) to provide them with electronic data on each prescription they handle. This data would include the prescribing doctor’s name and the details of the drug prescribed.

The data-mining companies then match up this data with dossiers on each doctor provided to them by the American Medical Association. The data provided in what the AMA calls the Masterfile includes the doctor’s specialty, board certification, and disciplinary records. The AMA did not disclose to the NYT reporters how much they get paid for this information but did state that the AMA’s total revenue from the sale of information was $40 million per year.

The AMA is opposing any attempts to restrict access to this data in spite of the fact that, according the NYT article:

A Gallup Poll commissioned by the A.M.A. in 2004 found that two-thirds of doctors surveyed were opposed to the release of such data to pharmaceutical representatives, and that 77 percent felt that an opt-out program would alleviate concerns about the release of data. Nearly a quarter of the doctors were not even aware that the pharmaceutical industry had access to such information.

The data-mining companies (IMS Health, Verispan, Dendrite International, and Wolters Kluwer) match up the prescription records with doctors’ dossier’s provided by the AMA and then sell that information to the pharmaceutical companies for use by the industry’s 90,000 salesmen.

And what do the salesmen do with this information? They can use it to reward doctors who frequently prescribe their drugs with various “perks” including gifts, and meals. It also allows them to target what the industry calls “cowboys”, doctors who are willing to prescribe a drug as soon as it comes on the market.

The “soft corruption” in this case is exhibited by the AMA which is behaving against the wishes of two thirds of its own members because it does not want to lose millions of dollars in revenue. (And, it would appear, selling information about its own members without their knowledge or approval.)

You also have an entire industry (the article states that IMS Health’s annual revenue last year was $1.75 billion, presumably their competitors’ revenues are on a similar scale) based on facilitating the ability of the pharmaceutical industry to corruptly influence doctors to prescribe drugs against their patients’ interests.

And I am not sure we should let the retail drugstore chains off the hook, either. They are selling information about what each doctor prescribes without getting permission from the doctors.

There was an interesting editorial in the July 27th USA Today talking about the attempt by the Republicans to do away with what they call the “Death Tax” and what the rest of us know as the Estate Tax. Basically, it is a tax on inherited wealth.

Doing away with it was on the top of GW’s legislative agenda from the beginning of his first term. (After all, George Senior is getting on in years and repealing the estate tax will save GW millions of dollars when GH kicks the bucket.)

The main Republican tactic has been to give the Estate Tax an unattractive name… After all, who could be in favor of the Death Tax? And to get everybody all teary-eyed with the thought of hundreds of “family farms” being sold because of this huge tax burden imposed by the evil IRS and the Death Tax.

The USA Today editorial was quoting from an analysis done by FactCheck.org and itemized some rather interesting facts:

• Only 1% of all the estates settled in 2003 paid any “Death Tax”
• Of the 18,000 estates that did pay “Death Tax” in 2003 only 340 were a single farm or small business
• Eliminating the “Death Tax” will cost the Treasury $196 billion over the next ten years (Which will have to be paid by other less wealthy taxpayers or will result in a commensurate increase in our already jaw-dropping national debt…)
• Under the current Estate Tax, estates worth between $1 million and $2 million only pay %4.7

The bottom line is that repealing the “Death Tax” will actually hurt 99% of the population and will only benefit the richest 1% of the population which just happens to include the President, every member of his cabinet, and a substantial fraction of “our” Senators and Representatives.

One last quote from the USA Today editorial “The Senate measure, which is still being negotiated, would tax inherited wealth of millions of dollars at a lower rate than what a teacher pays on a $70,000 annual salary. It would also give inherited wealth a more privileged status than money made from hard work or putting capital at risk.”

Over the last couple of years we have had some unfortunate examples of how people with demonstrated physical courage (e.g. John McCain, Colin Powell, and John Kerry) have failed when it was moral courage that was asked of them.

In all three cases, it would appear they have allowed their political ambitions to compromise their moral convictions.

In the case of McCain and Powell, one suspects that both secretly despise Bush and recognize his many failings yet they both publicly embrace him. Probably because they would otherwise forfeit the support of the Republican apparatus in any future political endeavors.

One gets the impression that the backroom Republican strategists have very cleverly played McCain versus Giuliani… “Rudy, you have to support GW now if you don’t want us to nominate John in 2008″ and vice reverse. And, sad to say, they have both fallen for it. Risking death, imprisonment, and torture in your 20’s doesn’t mean you will vote your convictions in your 50’s.

In the case of Kerry, he did flip-flop. I have no doubt that Kerry (along with many other members of Congress) doubted the wisdom of invading Iraq but he was reading the polls and planned to run for President so he voted in support of the invasion. Jumping out of a Swift boat in your twenties with an M-16 doesn’t mean you will vote your convictions when you are in your 50’s.

And as for Powell, one can only shake one’s head. Kerry never ranked higher than lieutenant. Powell was a General and Chairman of the Joint Chiefs. Powell must have known what a disaster the Iraq invasion was going to be. He must have had a pretty good idea of both the human and financial cost. And he must have been fairly sure that there were no WMD’s and no connection between Al Qaeda and Saddam. Since he does not appear to have any further political ambitions one is puzzled as to his motivations in supporting such a disasterous and incompetently planned debacle.

Corporate governance is the achille’s heel of American capitalism. The headlines over the last several years have been full of stories about senior executives run amok completely unchecked by boards of directors packed with their cronies.

One suspects that Osama is a bit chagrined. In retrospect, he should have sent his young disciples to business school instead of flight school. Not only might they have done more actual damage to the US economy but they’d have got rich in the bargain. And instead of risking death or an indeterminate stay at Guantanamo, they’d only have faced a few months in a nice, low security, federal prison.

In theory, of course, the executives of a company are responsible for maximizing shareholder value while providing a good working environment for employees, and good products and services to customers. The board is meant to monitor the actions of the executives and the financial state of the company and make sure that the executives are competently and effectively meeting their responsibilities.

In fact, as we all know, the board of directors is handpicked by the senior executives primarily for their complacency. They are either long-time cronies or they are “people of prominence” (e.g. retired government officials, university professors, etc.) who are happy to pick up a six-figure salary for, in essence, a “no-show” job.

If the board members just rubberstamp the decisions of the senior executives they continue to get significant amounts of money for showing up at a few board meetings each year. And if the executives get caught doing something scandalous?… What’s the worst thing that will happen to the board members?… They might be forced to resign or not have their board membership renewed…. Not much of a disincentive.

Again, in theory, the board is supposed to be elected by the shareholders but we all know that most shareholders either ignore their proxy votes or blindly vote for the management slate. (Heck, I own stocks and mutual funds and I seldom vote my proxies either.)

The other facet of the Corporate Governance is that of the legal protection that incorporating provides to both the senior executives and the board. There have been a number of recent cases involving Wallstreet firms where the companies involved paid millions of dollars in fines for crimes committed by their executives. Which, of course, means the fines were paid by the shareholders… not the executives who actually committed the crimes. And, of course, it is unheard of for board members to face any kind of fines for malfeasance that happens on their watch.

And we have seen the astonishing spectacle of CEO’s who made $100 millions per year saying that they were, shocked! shocked! to find out that their company’s accounts were being cooked into a fine bankruptcy stew. And saying, without apparent embarrassment, that they really couldn’t be held responsible for these mundane details.

So what to do?

• We need to remove most of the civil and all of the criminal protections that incorporation provides for executives and board members. The protection of incorporation should apply solely to the shareholders.
• We need to do what we can to require that board members be independant of the executives.
• We need to make the criminal and civil penalties for white collar crime much tougher. If there ever was a type of crime that would be affected by deterrence it is white collar crime. These are clever well educated people with lots of other lucrative options than resorting to crime.
• We need to have some automatic penalties for large corporate bankruptcies. For example, all senior executives and board members of a large corporation which enters into bankruptcy should should have to show cause as to why they should not forfeit all the compensation they received from the corporation. If they can convince the court they were not negligent, they can keep their compensation… Otherwise it goes to into the bankruptcy pot. (I suspect this will be the most controversial of my suggestions…
• We need to encourage large shareholders (mutual funds, pension funds, etc.) to be more activist in their relationship with the board… And by extension, management.
• We need to hold the external accountants responsible when companies they are auditing are found to have behaved fraudulently. Again, whenever a major account fraud is found, the external accountants should have to automatically re-imburse the company for all fees they received for auditing the books.
• We need to encourage, rather than discourage, State Attorneys General to be activist in their pursuit of corporate crime.

Capitalism is all about incentives and opportunities. Corporate executives have huge financial incentives and opportunities to commit crimes… And Boards of Directors and Auditors have similar incentives to aid and abet them. We need similarly weighty disincentives to discourage them.

{Finally, has anyone been keeping track of which business schools produce the largest number of corporate felons? Why don’t some of the business correspondents run through all the folks that have been convicted or plead guilty at Adelphia, Worldcom, Healthsouth, Enron, etc. etc. and see where they got their MBA’s. And then go to the two or three leading miscreant-producing institutions and ask the deans about their “business ethics” classes.}