Gerard M. Martineau was the bag man of Blue Cross [and Blue Shield of Rhode Island] and CVS — but he was 8 million bags short.
Now, the former Rhode Island House majority leader is the second ex-legislator, after John Celona, to admit to selling his office in the federal State House corruption probe known as Operation Dollar Bill.
As part of a $900,000 corruption scheme that the longtime Woonsocket Democrat has admitted to, Martineau sold 10 million bags to Blue Cross & Blue Shield of Rhode Island — but fewer than 2 million bags were ever manufactured, according to court documents filed yesterday by federal prosecutors.
Besides inflating invoices for phantom bags, Martineau also admitted using his power to act favorably on legislation that benefited CVS and Blue Cross, most notably by thwarting pharmacy-choice legislation that both companies opposed from 1999 to 2002, when he left the General Assembly after 16 years.
While Martineau was doing the companies’ bidding at the State House, he was paid $715,000 in commissions by CVS and $175,500 by Blue Cross for paper and plastic bags, according to charges filed in federal court yesterday.
Martineau, who co-chaired a working group of state health officials, lawmakers and lobbyists that led to his sponsorship of landmark health-insurance reform in 2000, also admits that he failed to disclose his financial ties to Blue Cross and CVS while he sat in a position to influence hundreds of health-care bills.
The main focus of Martineau's now admittedly illegal enterprise was health care legislation.
On March 1, 1999 — weeks after the introduction of pharmacy-choice legislation opposed by CVS and Blue Cross — someone at CVS wrote Martineau that the company was examining its plastic-bag contracts and invited him to submit a contract proposal. That same day, Martineau told a newspaper reporter that he had changed his opinion on pharmacy-choice legislation, and now believed it was unnecessary.
In April, CVS invited Martineau to submit another proposal, this time for paper bags. The same day, the House Corporations Committee voted 17-0 against four pharmacy-choice bills. Martineau, the information says, 'opposed that legislation and used his power, influence and authority as Majority Leader to influence the vote in the Corporations Committee to help obtain that result.'
In the following months, the information says, CVS awarded paper and plastic bag contracts to manufacturers in Canada and New Jersey. In each case, Martineau’s Upland Group received commissions.
Over the next three legislative sessions, in 2000, 2001 and 2002, Martineau thwarted pharmacy-choice legislation and also used his influence to affect several other bills of interest to CVS, including fair pricing for prescription drugs, pharmaceutical assistance for the elderly and competition from mail-order and Canadian pharmacies.
Martineau was also doing business with Blue Cross. In 1998, when he was chairman of the House Corporations Committee, Martineau solicited bag business from an unidentified Blue Cross executive who had come to the State House to lobby him on legislation. Although Blue Cross did not use bags, Martineau proposed that the insurer place advertisements on bags and distribute them for free to about 29 independent pharmacies that had become part of Blue Cross’ exclusive pharmacy network — a network administered by CVS.
The first order, Martineau proposed, should be for 1 million bags, at $19,500 per million. Blue Cross hired him, the information says, 'without comparing prices, obtaining other bids, analyzing the effectiveness of the advertising approach, determining specifically where the bags were to be delivered or assessing the need for the quantity of bags proposed.'
Blue Cross issued its first purchase order, for 1 million bags, on Jan. 5, 1999 — the first day of the legislative session. On Jan. 27, about a week after the insurer issued a $19,500 check to Martineau’s company, Martineau met, as the majority leader, with lobbyists for Blue Cross and CVS to discuss pharmacy-choice and other health-care legislation.
Over the next few years, a pattern emerged. Blue Cross lobbyists would meet with Martineau to discuss legislation, he would support their agenda and he would sell them bags. In 1999, when Blue Cross was experiencing financial difficulties, Martineau was the primary sponsor of a Health Conversion Act that would have facilitated the sale of Blue Cross to a for-profit company. A Blue Cross lobbyist referred to the act as 'The Martineau Conversion Bill.'
On May 1, 2000, a Blue Cross executive sent Martineau a list of 'those House bills which are of significant concern.' In 2002, Martineau sponsored legislation delaying rate restrictions on small employers — 'our number one priority,' according to a Blue Cross report.
This, of course, is just the latest story about conflicts of interest and corruption in health care in this small state. One state senator is already in jail for selling his office to local health care organizations, particularly, a local medical center (see post here). The CEO and one other former executive of that medical center were also convicted of mail fraud (see post here), and the medical center is now operating under a federal deferred prosecution agreement (see post here), and under new management.
But lest anyone scoff that this sort of corruption is merely a Rhode Island problem, I would point to similar cases in other US states (e.g., UMDNJ, the largest medical university in the country, is also operating under a deferred prosecution agreement, as summarized in this recent post). It is also worth revisiting Transparency International's 2006 Global Corruption Report which asserted health care corruption is a global problem that has raised costs, denied access, and hurt quality worldwide.
One particularly important element of this current case is, I believe, its links to health policy, rather than the day to day operation of health care. Although the state legislator may have been just seeking to feather his own nest, he did so by influencing bills which affected health policy at least state-wide, and formed part of a larger mosaic of health policy making. To some extent, the defeat of pharmacy-choice legislation, which would have disrupted the cozy business relationships among specific insurers and specific pharmacies, seems to have occurred because of Martineau's sale of his office.
One wonders how much health policy in a larger sense has ended up mainly serving private interests?
Another particularly important element of this case is how it has not been discussed in a health care context. Other previous cases in the state that had large effects on health care also have largely not been discussed in their health context, and have never had visibility in the medical or health care literature. Justice then and now was primarily pursued by the civil authorities charged with enforcing the law in general. There was no framework for enforcement or ethics that seemed to bear directly on the health care issues involved.
This points out some important voids in health care. Health care organizations (like Rhode Island Blue Cross, and CVS in this case), generally:
- Do not have explicit ethical codes that apply to their management as well as to their rank-and-file.
- Do not have inspectors general, ombudsmen, or the like to help enforce such codes.
- Do not have specific protection for whistle-blowers.
- Are not required to have leaders who are licensed, or have met any specific competency or ethical standards.
- Are not required by government or accrediting bodies to adhere to a higher standard of ethics than any other organizations, e.g., a higher standard than applies to garbage-hauling companies.
Is something wrong with this picture?