Friday, April 01, 2005

After Vioxx Withdrawal, How Did the Merck CEO Get a "Performance" Bonus?

USA Today has an article (with accompanying data table) about the resurgence of stratospheric pay for corporate CEOs. For example, Ray Gilmartin, CEO of Merck, most recently received a salary of US $1.6 million, plus a $1.4 million bonus, and stock options worth $19.2 million. Also, he exercised other stock options, gaining a further $34.8 million. Gilmartin's got the bonus because he met his "personal performance objectives."
However, USA Today noted that Merck's stock price fell 30% last year after it withdrew Vioxx because of its risk of severe cardiovascular adverse events. The withdrawal of Vioxx gained sufficient notoreity to be easily called a debacle. Furthermore, as has been extensively documented (for example, see these "Perspectives" from the New England Journal of Medicine, FitzGerald GA. Coxibs and cardiovascular disease; Topol EJ. Failing the public health - Rofecoxib, Merck and the FDA; and Psaty BM, Furberg CD. Cox-2 inhibitors - lessons in drug safety.), Merck marketed Vioxx extensively as a general purpose pain reliever even though there was no data it was better than conventional non-steroidal anti-inflammatory drugs like aspirin and ibuprofen. (It did have the advantage of causing fewer severe gastro-intestinal adverse effects for at risk patients.) Furthermore, although Merck had data suggesting Vioxx's cardiovascular adverse effects for years, it consistently minimized them to physicians and the public.
Merck's degree of culpability for the over-use and then withdrawal of Vioxx will be argued for a long time. But it is easy to argue, as Psaty and Furberg did, that "physicians are dismayed, pharmaceutical companies are embarrassed and financially threatened, and patients are injured."
How these results justified Gilmartin's "personal performance" bonus boggles the mind. Rather, the Merck CEO seems to be yet another example of how health care leaders remain insulated from the consequences of their actions. Per the USA Today article, "directors remain largely beholden to management when it comes to compensation. The era of CEO pay packages befitting royalty still reigns." The article quoted an expert on CEO compensation, "most directors are in the ostrich crowd, sticking their heads in the sand and doing what they've always done."
The accompanying table shows the compensation of the CEOs of some of the largest companies in the US, including some other health care CEOs whose pay only seems to go up, regardless of how they perform. But the Vioxx calamity should warn us what to expect if health care leaders remain unaccountable.

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