Thursday, September 03, 2009

Pfizer's $2,300,000,000 Settlement No Longer Anechoic

Re the $2.3 billion dollar Pfizer settlement, in the headlines today...

Health Care Renewal readers learned about it in February, here.

At the time, we mentioned how little coverage the news had received, a manifestation of the anechoic effect.

We said this about it then:

We have posted about numerous settlements of charges of misbehavior by drug, device, insurance and other health care organizations. Stacking them all up suggests the magnitude of bad behavior by the leaders of health care organizations. Yet it's not clear that all these monetary penalties are discouraging bad behavior.

In almost all cases, the monetary penalties accrue to the organization as a whole, not to the individuals whose behavior incited the settlement. And I have not so far ever heard of a case in which the organization which has to pay a settlement turns around and enforces a penalty upon the responsible leaders. Thus, the deterrent effect, even of large penalties, is thus diffuse. An executive, knowing that bad behavior may increase short term profits, and hence may markedly increase his or her compensation in the short run, may be undeterred by the threat of a future settlement that he or she does not have to pay. Instead, the settlement may come out of the pockets of stock-holders, employees as a whole, customers, clients, or patients, or the public.

If we want to prevent health care leaders from continuing "childish" behaviors, allowing health care to "spin out of control," (as per President Obama' inaugural address, see post here), we must do a better job of enforcing negative consequences, as the mother of any five-year old will tell us.

Rest assured we will have more to say about this topic, now that it is in the headlines.

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