Wednesday, February 13, 2008

'P' is for Poor Management?

An editorial entitled 'P' is for Profit appeared yesterday about the latest Merck scandal that was mentioned in posts "What Are Those Consulting Fees and Speakers' Honoraria Really For?" and "Healthcare scandal-of-the-week: Merck settles Medicaid lawsuits." This company has a large presence in the Philadelphia region, and the editorial contains an important message:

Philadelphia Inquirer - editorials

'P' is for profit

Tue., Feb. 12, 2008

In 1952, Time magazine put Merck & Co. Inc. president George W. Merck on its cover, along with his quote: "Medicine is for people, not for profits." That admonition supposedly has guided Merck ever since. But the drug maker has run into a string of legal troubles that raise questions about the application of Mr. Merck's mantra.

... just last week, Merck agreed to pay $650 million to settle charges that it routinely cheated the federal government by overbilling Medicaid for its most popular drugs. Merck didn't admit any wrongdoing. The agreement was one of the largest health-care fraud settlements ever.

... The Medicaid case arose out of a whistleblower suit filed by a former Merck sales manager, H. Dean Steinke, who will get about $68 million. He first complained to Merck, but said his supervisor told him: "I don't care how you do it, but get the damn business."

That sure doesn't sound like putting people before profits.

I agree with that assessment; however, in the field of social informatics, we analyze social and organizational issues underlying behaviors, primarily around information and communications technologies. More broadly speaking, but in that same vein, this episode raises several social questions:

  • Is the company being wrongly blamed, as opposed to an individual?
  • Might the individual's actions have been based on some other motivation(s) besides greed?
  • Is the company at fault in any way for this type of behaviors in employees?

Let's answer those questions.

First, I believe it is wrong to condemn an entire company for the actions of one individual, or group of individuals. Many fine, ethical people work in pharmas, including my former colleagues at Merck, who did and do take George Merck's words to heart.

Second, what might motivate a middle manager to instruct a sales manager to "get the damn business" [by any means possible]?

How about fear of layoffs and the fear of the demoralization, instability and insecurity that engenders? (Also see the post "Do Demoralizing Pharma Personnel Practices Contribute to Unsafe Drugs?")

One of Merck's strengths in promoting ethical conduct by its employees was a "social contract" that worked as follows: if you perform well, you have a secure career. In fact, prior to 2003 when a drastic cultural shift occurred, Merck had not had a mass downsizing in its 100+ year history. People could live by the George Merck creed and be assured of stability.

In November 2003, the "Equinox layoff" program of 4,400 occurred, marking a major cultural shift and a quite marked decimation of the "social contract" with employees. (Frequent announcements of further layoffs have appeared regularly in the press, and up to ~ 10,000 people have apparently been separated since the 2003 social contract termination.) In the post-layoff counseling sessions at an outplacement firm in my case, I observed a multitude of highly intelligent, capable adults up to VP level sitting at a table, highly demoralized, worried about mortgages (and foreclosure), paying tuition for kids in college, etc.

One separatee in 2003 was a former medical instructor who taught me during my residency days who was a few years older than I; his wife was ill with cancer and he had significant other expenses as well. He remained unemployed for several years until I lost touch of his whereabouts. In my own case, mid 2003 was a very bad time for hiring nationally. At age 46 at the time, it took me a full 18 months to secure new employment and all I had received was a few month's severance. I believe age discrimination is quite real. (My new position was in academia where that phenomenon is probably less common.)

Now, like most major pharma corporations, the company has reserves of billions of dollars. The endowments of major universities pale in comparison. In reality, executives do not have to continually "re-engineer" the corporation through layoffs, except to please Wall Street (and coincidentally raise their own compensation higher into the stratosphere). If greed exists, it begins in the executive suite.

Imagine a middle manager or sales representative watching senior manager shred the social contract with employees. Imagine them watching former colleagues led out the door and humiliated, to face the spectre of unemployment because "their services were no longer needed." Imagine them watching the senior executives arrange lucrative contracts and golden parachutes, while shuttling daily between PA and NJ sites and to provincial homes in a fleet of luxurious corporate heli-choppers (it costs million to maintain such a fleet), or in some cases in weekly corporate jet flights for executives who live cross-country, such as in the midwest. I am certainly annoyed by the daily sight of these choppers over my neighborhood.

Telecommunications-equipped limos are not good enough to travel the ~80 miles on the NJ turnpike or PA/NJ interstates in this culture.

In such a culture, it is perhaps understandible why a family man with a good track record might feel compelled to stretch ethical boundaries to "make the numbers" -- not out of pure greed, but in an attempt to avoid the layoff axe. As I cited from one state's Bureau of Unemployment in the post "Happy Accidents in pharma doubtful: Tax Break Used by Drug Makers Failed to Add Jobs", the stress of losing a job is like the stress of a death in the family or a divorce. It involves loss of wages and benefits, role as worker and provider, dignity and self esteem, loss of the "American Dream", loss of trust, loss of control over your life, loss of the pattern of daily life, and loss of the "work family."

While I do not at all condone unethical behaviors, such behaviors by line employees to avoid a stress equivalent to a death in the family are at least understandible, contextually, outside the sphere of pure greed and/or criminality.

So, in answer to the third bulleted question above, yes, a company's sick culture does contribute to an employee's behavior. A system of dehumanizing personnel practices and perverse incentives [which can be for personal gain, or for basic social stability] affects not just senior people, but everyone.

To put people under the duress of frequent "restructuring" while senior management live it up, and expecting people to hold the line ethically is simply bad human engineering. It is a perfect setup for mayhem.

'P' is as much for Poor Human Engineering and its root causation - Poor Management - as it is for profit.

Lastly, one final provocative question:

  • Can non-medical business executives who've never actually sacrificed for patient care, as any physician or nurse has, truly understand -- at a gut level -- the creed of George Merck that "Medicine is for people, not for profits?"

-- SS

Addendum: thanks to reader Steve Lucas for pointing out the extremely unfortunate story in the WSJ health blogs below. I was unaware of it when I wrote the post above. Would it be too far off the mark to suggest a connection? A 47-year-old research chemist is likely to be someone with a fair amount of seniority - and a lot to lose:

A Chemist Found Dead at a Merck Plant
Posted by Jacob Goldstein

Tue., Feb. 12, 2008

A Merck chemist was found dead this weekend, apparently after swallowing “a bit of white powder from one beaker and some liquid from another,” the Star-Ledger reports. A co-worker came across the 47-year-old man on sprawled on the floor of the research library at a company plant in Rahway, N.J. The beakers were found near his body.

A hazmat team said the substances smelled of “bitter almonds and chlorine,” according to the article. Cyanide can smell of bitter almonds, but officials have yet to determine the chemicals involved in this case.

Police are investigating the possibility of a suicide, and a Merck spokesman told the paper that the death wasn’t work-related. The man’s name hasn’t been released, and police wouldn’t say whether he left a note. About 4,300 people work in manufacturing, research and development jobs at the Rahway plant, which is open 24 hours a day, seven days a week, the Star-Ledger wrote.

I also note this in the linked Star Ledger story:

"Merck spokesman Chris Garland emphasized today that the death was not work-related. " ... Two glass beakers containing the unknown substances were found on the floor near the man's body, [Police Capt.] Mikajlo said. He added the man, who lived in Middlesex County, appeared to have swallowed the chemicals in succession.

I should add that if this occurred in the research library (building 86, above the cafeteria), this was not a place where chemicals and beakers were present or allowed to be taken. This would seem a very deliberate act in any case. To say the death is not "work related" seems very premature.


Roy M. Poses MD said...

A similar issue was raised by comments on this post (originally about the resignation of the director of the NIEHS, see our relevant post here:
See in particular the comments about Jack Welch, the former CEO of General Electric (the parent company of GE Healthcare, see our recent post here:

Most relevant are:
<<< >>>

"Our business leader told him we had already cut off all of our fat, and some of our muscle and bone. Welch replaced him with a hatchet man who got rid of every engineering group that had the word 'research' or the word 'development' in their title. (We hid one last office under the name 'Advance Design'.) Ten years later our competitors had caught up and surpassed us."

"I don't know Welch personally, but things became untenable for me when the people he hired percolated down to my level. They get very antagonistic when you try to explain how reality differs from their simplistic assumptions, and when something goes wrong, the blame always flows downhill from them."

"Here are a couple of direct quotes which he was so proud of that he included them in annual reports. When asked how he could keep laying off people from the same business year after year (I think by an interviwer from 'Business Week), he coined the phrase, 'You can always squeeze more blood out of the lemon.' When asked in that same interview whether layoffs had a bad effect on employee morale and loyalty, he replied, 'What idiot is loyal to a company?'"

"I started under GE engineering managers who had fought in WWII, and who believed crazy things like, if someone has busted their hump for GE for 20-30 years, visiting up to 60 power stations a year in far-away places to keep GE turbines running and customers happy, you don't throw them away like used kleenex so the business can make x% more profit. They all took early retirement or left to do consulting work in Welch's first decade."

"Welch had one great talent: using smoke and mirrors to make Wall Street happy."

"There was no need to go halfway around the world after meglomaniacal, sociopathic dictators when there are so many of them here, running large corporations."
<<< >>>

Welch, who many in the management world seem to think is at least a minor deity, the commentator charged was good at saving costs by getting rid of talented, loyal professional staff (chiefly engineers). This was one under a climate of fear that began with top management, but most affected the middle managers who had to fire the engineers. The results, of course, were short-term cost savings, and long term bad effects on quality of products.

The problems seem to have something to do with valuing charisma and confidence over competence, valuing short-term over long-term profit, and not valuing ethics at all. Such thinking seems to be rampant in business.

Since soo many people in the business world revere the Welch model, and business-think has taken over health care, similar scenarios are likely being played out throughout health care.

Anonymous said...

I do not think one has to look far to see the personal toll being taken by Merck employees. The Feb. 12th WSJ Health Blog highlights the apparent suicide of a Merck employee. Everything is speculation at this point, but is not hard to imagine job pressures being a major part of this persons desire to end their life.

Remember the recent report that the man who invented Lipitor has been layoff.

I do take exception to your comment regarding MBA's. Many MBA's have worked hard to complete their eductions, myself included, and have seen the toll bad management takes on employees. We are not the one's promoted. In a conversation with the Dean of my program I was told I should not be allowed to graduate, in part, because I was not pretentious enough and I had a social conscious.

The problems with senior management in pharma has less to do with education than with a get rich quick sales mentality. The MBA only adds a greasy sheen of importance to people who otherwise would not find employment.

Steve Lucas

MedInformaticsMD said...

From the Wall St. Journal blog:

A Merck chemist was found dead this weekend, apparently after swallowing “a bit of white powder from one beaker and some liquid from another,” the Star-Ledger reports. A co-worker came across the 47-year-old man on sprawled on the floor of the research library at a company plant in Rahway, N.J. The beakers were found near his body.

Sadly, that's my former department. I was Director of the research libraries at both Rahway and West Point.

I have seen the type of "GE-Welch" management style in a number of healthcare organizations. It's one of the root causes for healthcare IT dysfunction that prevents healthcare from fully leveraging the benefits of health IT - whatever those might be (listen to my webcast on this issue at the Government Health IT site here).

An essay I wrote some years ago on competence vs. incompetence is here: On unqualified decision making as an obstacle to clinical computing progress.

MedInformaticsMD said...

I do take exception to your comment regarding MBA's ... The MBA only adds a greasy sheen of importance to people who otherwise would not find employment.

Sorry on the former. Agreed on the latter.