WSJ’s blog on health and the business of health.
February 7, 2008, 5:04 pm
Whistleblowing Merck Sales Rep Makes More than CEO
Posted by Jacob Goldstein
What pays more: Running Merck or filing a lawsuit in federal court alleging that the company broke the law in marketing its drugs? Here’s a clue: A former Merck sales rep named Dean Steinke made $68.2 million today.
Steinke’s rich because he filed a so-called “whistleblower” lawsuit that led to one of today’s big settlements between Merck and state and federal officials. Under the law, people who file such suits are entitled to a cut of government settlements that result.
Steinke worked for Merck from 1995 to 2001, first as a sales rep then as a manager for the Michigan sales region, Dow Jones Newswires reports. So if we divide his six years at the company by the $68.2 million he’ll be paid under the settlement, he made $11.37 million a year at Merck. And that’s not even counting the salary, bonus and company car from his day job.
In 2006 (the most recent year for which Merck executive salaries are available), Merck CEO Dick Clark’s total compensation package was valued at $10.24 million, according to an SEC filing.
Merck will report its 2007 executive compensation packages in the next month or so. We’ll be watching to see whether Clark gets enough of a raise to pass Steinke.
Bonus Millions: A New Orleans doc named William St. John LaCorte also filed a so-called whistleblower suit and landed $27 million out of todays settlements, the WSJ reports.
How Sloan-Kettering Kicked Educational Drug Money Habit
Posted by Jacob Goldstein
The drug and device industries spend more than a billion dollars a year funding continuing medical education (CME) for doctors and other health-care providers. But amid wariness over the industries’ influence on the content, some hospitals are trying to wean themselves from that money and see if they can run educational programs on their own.
One big-time example: Memorial Sloan-Kettering Cancer Center, which turned off the industry spigot early last year, notes a publication called Medical Meetings. The hospital previously relied on industry for about a quarter of its educational funding, and made cuts large and small to adapt.
Sloan-Kettering has a few advantages over many hospitals — a world-famous name, plenty of in-house experts and an on-site conference center that seats 350, to name a few. Now, the cancer hospital holds more meetings on campus (instead of hotel ballrooms) and relies more on internal speakers (instead of flying in speakers from out of town).
But the cancer hospital made other changes that anyone could make. It cut back on sending junk mail and buying ads in journals to promote its CME events to potential attendees. Sloan-Kettering got rid of free lunches for everyone and raised registration fees by 10% to 20% for non-MSKCC participants.
“When you really focus on the quality of the program — and stop worrying about the amenities and the place where you can hold it — then you’re looking at what the objective of CME is,” Thomas Fahey, Jr., chairman of the hospital’s CME committee, told Medical Meetings. “In the long run, this will keep us much more focused on what’s important.”
More Heartache for Pfizer Over Lipitor Pitchman Jarvik
Posted by Jacob Goldstein
Congress has been asking questions for a month now about what Robert Jarvik’s doing endorsing Lipitor. That’s landed Jarvik on the Health Blog and on Good Morning America and on the front page of today’s New York Times.
Also today, ABC News reports on its web site that Jarvik was guaranteed $1.35 million for the ads, which promote Pfizer’s megablockbuster cholesterol drug.
The ads makes much of the fact that Jarvik, who invented an artificial heart, is a doctor, and show him in a white coat. But Jarvik has never practiced medicine and isn’t licensed to do so. For that matter, the Times notes, the commercial appears to show Jarvik rowing — but it’s actually a stunt double at the oars. “He’s about as much an outdoorsman as Woody Allen,” one of Jarvik’s colleagues told the Times. “He can’t row.”
In a statement, Jarvik says “I have the training, experience, and medical knowledge to understand the conclusions of the extensive clinical trials that have been conducted to study the safety and effectiveness of Lipitor.”
Jarvik declined to comment for the Times story, but he went on Good Morning America last month to discuss the ads, and told Diane Sawyer it was an “educational campaign.”
“What about generics? Why don’t you mention generics?” Sawyer asked.
“I don’t know. We have talked about generics in the ads,” he said.
Sawyer: “You have?”
Jarvik: “Or maybe there’s an ad that hasn’t come out yet that you haven’t seen.”
Pricing of Old Drugs Haunts Merck
Posted by Jacob Goldstein
Merck has agreed to pay more than $649 million to settle allegations that the company underpaid rebates to Medicaid. The investigations and settlements took so long that all of the drugs involved are now has-beens for the company.
At issue: so-called “nominal pricing.” Drugmakers are obligated to offer Medicaid their best prices. But Merck was accused of giving what amounted to better discounts to hospitals, which helped the company achieve certain market-share goals. A few years back, the Senate looked into nominal pricing by 19 drug companies.
The allegations in the cases involve the company’s behavior from 1996 through 2006, and involve the heartburn remedy Pepcid and cholesterol-fighters Mevacor and Zocor, all of which are now generic, as well as the painkiller Vioxx, which was pulled from the market in 2004, the company said. (The Pepcid-related stuff ended in 2001, according to the company.)
The two settlements were announced today in cases that involve the federal government, the District of Columbia and 49 states. In one, Merck agreed to pay $250 million plus interest. In the other, the company has agreed to pay $399 million plus interest. The company didn’t admit wrongdoing as part of the settlement.
This announcement and the sums shouldn’t come as too much of a shock to attentive investors. Merck said in December that it was taking a charge of $670 million to settle federal and state claims related to nominal pricing and other issues.
Plus, when you’ve already stomached a $4.85 billion Vioxx settlement, what’s another $670 million?
Update: Merck also settled allegations that it improperly paid doctors to prescribe its products, the WSJ reports.
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