McKesson’s CEO Cashes In

They say you get what you negotiate, not what you deserve.

Well, here’s the proof from the cover story in last Thursday’s Wall Street Journal: How Some Firms Boost the Boss's Pension.

In case you missed it, this story focuses on an obscure formula that some companies use to jack up lump sum pension payouts for the top brass. The story prominently features John Hammergren, CEO of drug wholesaler McKesson.

If Mr. Hammergren had quit or retired last March, he would have been entitled to a lump-sum pension of $84.6 million, which the article claims is “among the highest for any U.S. executive.” And because McKesson used its own discount rate rather than the IRS-set rate, his pension would have included an extra $18.2 million.

Mr. Hammergren has reportedly also negotiated a few unusual pension boosters: “McKesson credits him with years he didn't serve, and also counts 150% of his annual bonus in the final pay calculation, instead of just the bonus he was actually paid.” See for yourself (on page 2).

Whatever. It’s a free market. Thanks to some sort of change in Federal disclosure rules, shareholders are now fully informed about the plan and can make their own judgments. Nonetheless, I’m still surprised that McKesson’s Board would go along with such “enhancements” to an already generous plan.

Phillies win!! Economy doomed?

Woo-hoooo!!!

The Philadelphia Phillies, the hometown team of your friendly neighborhood blogger, are World Series champions for the first time since 1980! There were loud celebrations in the streets of Philadelphia last night, but few overturned cars and no mass arrests.

Gosh, Adam, what could this mean for the U.S. economic outlook? Funny you should ask!

Two smart-aleck economists at Economy.com put together a sobering analysis called A World Series of Irrational Exuberance, concluding: “The data strongly suggest that a Philadelphia Phillies victory in the current World Series spells bad news for the economic cycle.” Check out this chart from their article:

Oh well. The parade is tomorrow afternoon right outside my office. Stop by if you are in the neighborhood.

The Subprime Primer: A Brief Diversion

Given the turmoil in the financial markets, I feel compelled to pass along my all-time favorite explanation the key issues behind the subprime mortgage crisis -- as told in the form of a cartoon slide show! Click here or on the cartoon below.

Yes, I know this blog usually focuses on commercial issues in the pharmaceutical industry, but this cartoon is accurate and quite funny. I'm not sure who created it, but I've cleaned it up to remove the profanity in the original. You can find a link to the R-rated version on Greg Mankiw’s blog, which is where I found it.

We now return to our regularly scheduled blogging...

Pharmacy Supply Chain: News Update

Whoa! There’s some very intriguing news out this morning on a few key Drug Channels topics.

Here’s a quick run-down:

Wholesalers Merge, Form Big One
The so-called “Big 3” wholesalers – AmerisourceBergen (ABC), Cardinal Health (CAH), and McKesson (MCK) – stunned Wall Street this morning by announcing a three-way merger that will create The Big One. While the transaction is still subject to regulatory approval, the new firm is scheduled to be called McKameriCardigen. Larry Marsh, Healthcare Distribution & Technology analyst at Lehman Brothers, praised the deal because “my workload just dropped by two-thirds.”

California’s e-pedigree date changed yet again!
The California Board of Pharmacy stunned the pharmaceutical industry again yesterday when they voted to shift the deadline for implementation of e-pedigree laws, this time to November 9, 2010. The Board noted that November 9 is also National Scrapple Day, which they claimed “was appropriate for the task confronting the industry.” When asked why the Board will not settle on a single date, Executive Officer of the Board Virgina Herold reportedly replied: “Where’s the sport in that?”

PCMA Makes New Commitment to Transparency
Responding to recent calls for greater transparency, the Pharmaceutical Care Management Association (PCMA) announced the design of its new corporate headquarters. According to PCMA spokesperson Derek Smalls, the new building will be modeled on Philip Johnson’s famed Glass House. “Every vertical and horizontal surface, from office door to bathroom stall, will be made of clear, pure, diaphanous glass.” Mr. Smalls also noted that the design will aid PCMA’s lobbying efforts in support of Pharmacy Benefit Managers because “we will now be able to throw the first stone.”

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Oh, by the way… it’s April Fool’s Day.

Death by AMP

I just discovered an intriguing website that quantifies the final impact of AMP.

Try it yourself.
1. Go to this website.
2. Select "AMP" from the drop down menu.
3. Enter your specific data.
4. Click the button for your personalized results.

It turns out that 183.82 cans will stop me from writing about pharmacy economics anymore. YMMV.

Have a Happy Thanksgiving!

Ask your doctor...

And now for something completely different!

First, read about Hardee's new 920 calorie breakfast burrito, which has half a day's calories and a full day's worth of saturated fat and salt. Wow, that's really efficient!

Then watch Bill Maher's video below on the pharma industry. Sure, he takes some cheap shots at our industry, but he does have a valid point in a land of 920 calorie burritos. (Warning: Do NOT watch this video if you have no sense of humor or are easily offended by people like Bill Maher.)

Best line: "So ask your doctor if getting off your ass is right for you!"

Hat tips to Health Care Blog and Pharmalot.

The Trouble with Florida

What the %$#@&! is wrong in Florida?!

Maybe you'll ask the same question after reading three stories sent in by intrepid Drug Channels readers:

I'll have a Viagra Chimichanga, extra salsa
La Mexican is a Fort Myers restaurant/pharmacy/check cashier that serves you real Mexican food along with your counterfeit drugs -- mostly fakes from Mexico and Europe. According to the article: "The illegal distribution of prescription drugs is an increasing problem in Southwest Florida, said Larry Long, spokesman for the FDLE in Fort Myers." Overall, we've seen an increase in people obtaining prescription medicines illegally," he said. "People are dying from overdoses of prescription medicines." Senator Byron Dorgan is reportedly going to hold hearings to make sure La Mexican did not use Canadian beef.

#1 in Medicare Fraud
According to a new OIG report, Florida is now the leader in Medicare fraud for HIV/AIDS drugs. (See Aberrant Billing In South Florida For Beneficiaries With HIV/AIDS.) Providers in just three south Florida counties -- Miami-Dade, Broward, and Palm Beach -- accounted for 8 percent of Medicare beneficiaries with HIV/AIDS but billed Medicare more than 22 times as much as the entire rest of the U.S.! The OIG glumly notes: "CMS has had limited success in controlling the aberrant billing practices of South Florida infusion therapy providers." Oh.

Still #1 in Diversion!
In August, Florida's Diversion Response Team reported another banner year in its 2006-07 Annual Report. According to the report, the DRT opened 50 new diversion cases from in the 12 months ending June 30, 2007. Yes, that's the first year of Florida's pedigree law. Alas, no report from the year before the pedigree law.

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Unfortunately, these are just the two most recent episodes in Florida's shameful drug distribution history.

Think about it. Florida was the setting for Dangerous Doses: A True Story of Cops, Counterfeiters, and the Contamination of America's Drug Supply, an expose of drug diversion by essentially unregulated drug wholesalers. (Great book, especially if you want to know why Florida passed a pedigree law.) AmerisourceBergen (ABC) had its DEA license suspended in Orlando earlier this year. It was recently reinstated.

Apparently, Florida is losing population, prompting The Wall Street Journal to ask: Is Florida Over? Maybe they are fleeing the rampant counterfeits in that swampy state.

Anyone care to defend the sunshine state?

Chips and Fish?

In case you missed the news, Kodak has applied for a patent on a digestible RFID tag. (Read the edible radio patent application.) The IT editor at Industry Week cleverly refers to the tag as the trackable part of your nutritious breakfast.

I'm sure that this invention has many valuable uses in diagnosis and treatment of disease. Personally, I can't help wondering about the new meaning of "end-to-end" security for the pharmaceutical supply chain ...

Santa's Supply Chain

This is my final post of 2006. I'm grateful for the positive response to my blog and very much appreciate the many positive emails and comments that I have received since launching 6 months ago.

Let's wrap-up the year with some homegrown Drug Channels supply chain humor, straight from the pages of The Wall Street Jovial:

Santa's Supply Chain Keeps Pace, Despite Changes

I will be back with my outlook for 2007 on January 2. Until then, have a great holiday!

Adam