Two examples emerged in the last few days to indicate that Big Pharma’s CEOs are unable or unwilling to control the functional departments of their companies.  The first involves GlaxoSmithKline (GSK) where CEO J.P. Garnier actually instigated the problem instead of managing it.

    In response to major controversy and an FDA advisory committee hearing over the safety of GSK’s diabetes drug, Avandia, Garnier launched a George Bush/Karl Rove style of PR blitz.  The campaign started by blithely ignoring the empirical reality of three separate studies (by Steven Nissen in The New England Journal, GSK itself and the FDA staff) that found Avandia raised the risk of myocardial infarction by 30%-40%.  Instead GSK cried that it was a political victim.  In a self-righteous and self-pitying display, the company’s US Pharmaceuticals president, Chris Viehbacher claimed on June 15, "In the end science will win."  Then on July 9 the company’s media relations people arranged for Garnier to give the Wall Street Journal the benefit of his successful experience at managing
through crisis.  There we learned his battle tested lessons such as “fight data with data,” communicate with employees daily, and other drivel to the effect that a dog has four legs. 

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It would have been hard for the Times to have lobbed the Health 2.0 conference a slower pitch. They have a nice piece today, Dr. Google and Dr. Microsoft, explaining how, as health care information becomes increasingly centered around and focused on patients, the various IT giants are mobilizing. They’re competing to provide solutions that put the patient in control but that ensures that their information is secure, accessible and useful to all the parties involved. The article pays the most attention to the two behemoths, Google and Microsoft, but acknowledges the larger cast of characters who are in this space, most of whom will be presenting at Matthew and Indu’s meeting in San Francisco on September 20.

While the Times article is a good overview that acknowledges the significant challenges facing each of the entrants to Health 2.0 space, it is still just a taste. To get a richer flavor of the upcoming meeting and a deeper sense of what one of the players, Google Health, is probably up to, read through Vince Kuraitis’  very thorough analysis. It certainly was an eye-opener for me.

As you might imagine, yesterday’s post on the excessive and deceptive nature of broker compensation raised a few hackles. I received several protests from brokers/agents who argued that they are saddled with inordinate responsibilities in exchange for their commissions.

In the interests of fairness, we should first keep in mind that what brokers do for the money is distinct from the inappropriateness of the scale and manner of their compensation. These are separate issues, and despite what many of them say, it is difficult to reconcile their inherent financial conflicts with the plans and their representation that they are employer advocates.

Then we should put aside most people’s two natural responses to brokers’ pleas that we appreciate their workload: 1) Who cares? and 2) How is this different than the rest of us?

But with those issues out of the way, brokers’ arguments about the relationship between their compensation and responsibilities do make a significant statement about their role as flak-catchers, trouble-shooters and intermediaries between an increasingly dysfunction and unresponsive health plan system and increasingly irate enrollees and employer benefits managers. Here are a couple more comments, from the same, very articulate broker I quoted yesterday.

As a personal aside I want to emphasize that this guy’s not whining – he was the one who brought up the subject of crazy broker compensation in the first place. Instead, he’s trying to present a balanced perspective on how brokers are a cog in a much larger set of gears that are spinning out of control.

Your readers probably think I sit on my fat butt and collect big paychecks and do nothing for them.

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OK. Now that Matthew’s away, let take a break from picking on the doctors, the hospitals, the health plans, the drug companies, and the device companies. Let’s talk about the brokers.

Brokers, you’ll recall, connect health plans and employers. They typically represent themselves as unbiased, protecting employers’ interests and helping them objectively negotiate the hall of mirrors on the path to buying health benefits.

There’s only one problem with this story. Brokers are generally paid sales commissions by the health plans. They are not paid by the employer, but by the insurance companies. Which of course makes them maybe a teensy bit less objective than we might like.

And they’re not simply paid. They’re paid VERY WELL, often 6%-10% or more of the premium.

Here’s a note I received over the weekend from a broker pal in Florida where, like everywhere else, the explosion in health care cost is pricing increasing percentages of small business purchasers out of the coverage market. Prospects are increasingly hard to find and close, so the plans have been raising the bounties. He writes:

One specific thing I remember from your presentation several years ago is really ringing true.  You mentioned that we, as agents/brokers, were probably being overpaid for our services (via inflated commissions).  I was probably the only agent in the room who agreed with you. Well, it has gotten worse in Florida.  One carrier is paying $30 per employee per month regardless of premium for groups of 4-50; another is paying a whopping $41 a month per employee!   For most of last year and the first six months of this year, another carrier was paying a base commission of 5% of gross premium (with production bonuses pushing that to 7% for most agents/brokers), AND was paying a $1,000 bonus each month for any agent who submitted two groups of  more than 4 employees; $5,000 each month for those agents submitting 3 -5 groups of at least 4 employees each; and $7500 for 6 groups per month or more.  Many of us were getting at least the $5000 bonus each month, sometimes for as little as 15 or 20 covered employees TOTAL for the month!  This means that they were paying us either 5% or 7% of gross premium AND a huge bonus, which annualized pushed most of my business with that group close to 10% commission average. That’s ludicrous when the public is scrambling to try to pay premiums – and it is indicative of how out-of-whack our current insurance market is.The industry is heading down the tubes, slowly but surely.  I now think it is inevitable that the government will eventually weigh in, and I don’t see how it can be otherwise (especially in a low-wage state like Florida, where small group health insurance premiums for families in their 50’s and 60’s can easily approach $2,000 a month and more).

Let’s talk for a moment about the employer with 50 employees who is buying coverage in good faith. What would be the response to the knowledge that on a one year 50 employee contract, $24,600 ($41x12x50) goes to the broker. This is the person who convinced you to buy a particular plan, though if you had gone with the plan he disparaged, he might have taken home only half that.

Both are excessive, of course, but the deeper issue is whether the employer knows that the broker will be paid a commission by the chosen plan, and the size of that commission.

It’s simply another case showing that, without transparency, the health care marketplace can’t work and the walls come closer to tumbling down.

The NY Times, certainly not known as the bastion of the Right, snuck a very important article into the ‘non’ news day of Saturday. Interesting that this did not get saved for the front page on a Monday…

In it, some of the dirty secrets of the SCHIP bill passed earlier in the US House get revealed. Specifically, the article details attempts to provide special relief to specific companies currently ‘in favor’ with the political class. Several dozens hospitals, never mentioned by name, are slated to see multimillion dollar increases in their Medicare funds.

Hospitals are designated by their Medicare number, or location, or distance from a city with a certain population, to receive an arbitrary ‘most favored nation’ status.

Rep. Pete Stark, who has a diagnosis and solution to every hint of health care related inequality and corruption- link is one of dozens available… () , suddenly has lost his powers of deduction. “It’s always been thus,” Mr. Stark said in an interview. “I am at a loss to explain why.”

Even more stunning is his admission that, “Granting relief to particular hospitals is sometimes a way for Congress to improve “the equity and fairness” of Medicare payments, Mr. Stark said. Under Medicare, he added, “you are basically setting prices, and the system is clumsy.”

Though, in this case, nearly all the chicanery lies at the doorstep of Democrats, at least one Republican is involved as well. Herein lies, of course, the problem of over-investing power in the hands of government and their bureaucratic appointees.

THCB should be proud that the analysis here recognizes that policy details matter—and that hiding detritus in legislation can undermine the stated goal of the legislation. SCHIP was purported to make access to health insurance more fair and more just.

The NY Times exposes that, in addition to being bad policy, the legislators are more interested in supporting political financiers and whomever else they deem a favored political class at the time.

Yet Nancy Pelosi, who claimed the title of ‘most ethical Congress in history’, apparently has nothing to say. Instead, she sticks a spokesperson out to say, “It’s easy to criticize individual provisions of large, complex bills, but “the focus should be on the huge number of uninsured children who will be eligible for life-saving health care under our bill.”

In other words, the majority leader treats us all as nameless, faceless clones that are supposed to echo the words, “move along”.