Exploring Human Potential

David Brooks: Remarkable Essay on Positive vs. Negative Leadership.

Posted on | June 3, 2017 | 7 Comments

Mike Magee

For over three decades, I’ve been following and contributing to the literature on leadership – most specifically on the traits that separate positive leaders from negative leaders. This past week, David Brooks wrote an editorial in the New York Times focused on Donald Trump’s leadership, and reacting to a Wall Street Journal editorial by Trump cabinet members H.R. McMaster and Gary Cohn, that is truly remarkable.

It reflects everything I believe in, and creates a much needed sense of hope that goodness will prevail. Here are a few of his words, presented in the hope that they will encourage you to read his remarkable essay:

“the Trump project…asserts that selfishness is the sole driver of human affairs. It grows out of a worldview that life is a competitive struggle for gain. It implies that cooperative communities are hypocritical covers for the selfish jockeying underneath…In this worldview, morality has nothing to do with anything. Altruism, trust, cooperation and virtue are unaffordable luxuries in the struggle of all against all. Everything is about self-interest.”

“The error is that it misunderstands what drives human action. Of course people are driven by selfish motivations — for individual status, wealth and power. But they are also motivated by another set of drives — for solidarity, love and moral fulfillment — that are equally and sometimes more powerful.”

Take a moment now to read David Brook’s “Donald Trump Poisons The World”.

The U.S. Pharmaceutical Supply Chain – The Gray and Black Market

Posted on | May 30, 2017 | No Comments



Mike Magee

With the U.S. Pharmaceutical supply chain, what you see is not what you get. As we saw last week there are roughly 4 1/2 billion prescriptions filled each year. Just under 50% of American residents have filled 1 prescription in the past 30 days. The 1st Tier drug supply chain above describes the players who are visible to Americans. But underneath this layer lies an invisible and deeply corrupted 2nd tier. If you think I’m talking about counterfeit drugs from overseas, you are only partly correct.

For nearly two decades, Pfizer and the pharmaceutical industry in its wake, have been waging a pitched battle against reimportation of drugs from Canada and beyond. This effort came naturally to Pfizer since its popular CEO Ed Pratt had fought a decade long battle to protect the companies intellectual property rights which reached fruition in 1994 GATT trade agreements.

Intellectual property rights are a critical cornerstone to the integrity of geographic market based pricing.  Parallel imports, from Canada for example, represent an end-run around US based pricing and the standard 1st tier distribution profit sharing conventions. It’s all about profitability, but since Pfizer couldn’t say that they have hidden behind a very real but marginal issue – drug counterfeiting. This was disingenuous on a number of levels which I’ll return to in a moment.

One small element of the sophisticated public affairs and government relations campaign to prohibit drug reimportation into the US was to sow fear where ever and when ever possible. This opaque process saw the light of day briefly in 2010 when the industry funded American Council on Science and Health penned a Wall Street Op-Ed signed by their Medical Affairs lead, Gilbert Ross MD. In the piece, he inadvertently spills the real truth when he writes, “But there is an even more important reason why importing drugs is dangerous. Importing foreign drugs or reimporting American-made drugs is a back-door way of introducing price controls in America. Many foreign countries, including Canada, impose price controls on drugs, which is why reimporting American-made drugs is cheaper than simply buying drugs that haven’t left the country.”

By then, embargoes against reimportation were well enforced after two terms under Bush and an agreement tied to PhRMA support of Obamacare. Part of the reason they prevailed tracks back to over a decade of hard labor by Pfizer employee, John Theriault, who had joined the company in 1996 straight out of the FBI where he had served for 25 years as a Special Agent in the Bureau’s Senior Executive Service.

Originally focusing on the brazen IP violations of countries like India and Brazil that copied and sold products atom for atom, his work had evolved by 2002 as he headed up an in house drug SWAT team of around forty investigators from the FBI and Homeland Security. Testifying before Congress in 2002, he stated that “Soon after we launched Viagra, we began receiving reports that it was available in markets where it had not yet been approved. We made purchases of the product in those markets and tested for authenticity. In most cases we found authentic product that had been diverted from approved markets. But in one instance, a man in New Delhi complained that the product was not effective. We tested it and found our first counterfeit.”

Around this time John briefed our group in Corporate Affairs on the issue. The first two-thirds of his presentation was familiar to me, and carried no surprises. But he then flashed a slide with the words “gray market”, a term I was unfamiliar with, and my ears perked up. Like many other doctors, I had presumed that the pharmaceuticals I prescribed to my patients had been produced by FDA approved pharmaceutical firms, utilizing highly regulated Good Manufacturing Practices. Those products made their way to the local pharmacy or hospital, I believed, by passing though one of maybe two or three major distributors, who took their commission, and maintained a careful record of each and every product transfer.

What I learned that day was that nothing could be further from the truth. The reality was that there were three major distributors, AmerisourceBergen, Cardinal Health, or McKesson ,who controlled the flow of perhaps 80% of the nation’s drugs between manufacturer and the distribution chain of 60,000 pharmacies. But there were also nearly 1000 other players – small businesses, legally moving product in and out of the system for profit, and no one was able to assure the integrity of the system. As a result, original product was routinely being repackaged, adulterated, forged and counterfeited, within the many cracks of the disintegrated and irrational US health care system.

The gray market was in fact the American market of choice. These lawful small operators diverted product approaching expiration dates to retailers who couldn’t make ends meet. They also sold high on the market when product supplies became scarce, hoarding them and then jacking up prices an average 650%. They sold back and forth to each other, with some “pharmacies” never serving a single customer, but rather selling only to other middle men. And now, with counterfeited drugs penetrating the supply, these middle men, who lived on the edge of law, were fast at work turning a “grey market” into a “black market”.

That day, two things were made clear to me. First was that nearly every pharmacy in the US was currently vulnerable to selling product that might be harmful. Second, that the argument that reimportation of drugs from Canada would expose Americans to a grave risk by infecting the vaulted US pharmaceutical distribution system was absurd. We had our own intra-US “drug arbitrage” system with an unlimited number of unregulated entry and exit points. The nationalized Canadian system was far more secure than our own. But that was not the conclusion drawn from this internal Pfizer meeting. Rather, it was decided to not raise the issue of the US “gray market” in pharmaceuticals, but instead focus on the problem of worldwide drug counterfeiting.

In 2004, John was back before the government’s Drug Importation Task Force and did raise the gray market issue, but in the process conflated it with the threat of overseas counterfeiters. He said, “In May 2003…with the recall of more than 18,000,000 repackaged ‘Lipitor’ tablets from the legitimate pharmaceutical drug supply in the U.S., the final truth came crashing down, exposing the vulnerabilities of our distribution system…To put that recall into perspective, more than 600,000 U.S. residents, after visiting their local pharmacy, or placing an order with their health plan by phone, mail or internet, may have received a thirty day supply of Lipitor that contained counterfeit tablets.”

These products didn’t originate in China or India but rather in Nebraska by distributor Med-Pro, and in Missouri by distributor, Albers Medical, and in Illinois by distributor Alliance Pharmaceutical. Alliance had received its’ supply from Med-Pro, and had in turn sold it to Prescription Rx, who had already filled over 4000 prescriptions before being caught up in the sting in October, 2003.

To his credit, John did warn the Taskforce that day that the US house was not in order and laid the blame on wholesalers. He said, “The traditional distribution chain, where a manufacturer sells to a wholesaler who sells to retailers, is well understood. However, when products start flowing from wholesaler to wholesaler to wholesaler, or from pharmacy to pharmacy to pharmacy, existing oversight mechanisms lose force. Therefore we believe that the provisions in the Prescription Drug Marketing Act of 1988 requiring wholesalers to provide their customers with a pedigree documenting the sales history of the pharmaceutical products they sell should be implemented immediately. Due to lobbying efforts by wholesalers, the regulations to implement this requirement have not yet been finalized.”

The “pedigree” he refers to is a tracking system, the use of new RFID electronic codes which Pfizer had already tested and found to be effective. The legislation to enforce nationwide pedigree tracking from original source has been rendered ineffective for over a decade by lobbyists for the trade associations representing members of the US drug cartel. PhRMA has remained relatively silent and impotent on the issue, as has the AMA, which has expended limited political capital. Tracking requirements vary state to state and FDA statements in 2016 provide guidance rather than enforcement.

As for Gilbert Ross MD who wrote his Op-Ed in the Wall Street Journal in 2010, he had not revealed his own “pedigree”. His license to practice medicine in New York had been revoked in 1995 for his role in his own pharmaceutical counterfeiting operation. For his part in defrauding the New York Medicaid program of $8 million dollars, he received a 46 month sentence, and lived for a time in Schuykill, Pennsylvania in a prison camp. The crime involved soliciting desperately addicted and homeless New Yorkers to provide their Medicaid numbers and undergo sham testing and treatments in return for prescriptions for drugs that had high resale value on the black and gray market. Ross and his partner received the Medicaid billings, and their “patients” profited by the street trade in diverted pharmaceuticals.

Currently PhRMA continues to expend much greater effort in blocking reimportation of drugs from Canada, a country with a much cleaner pharmaceutical distribution system than our own, than in eliminating a 2nd tier supply chain that has rewarded the likes of Martin Shkreli.

The U.S. Pharmaceutical Supply Chain – Seen and Unseen

Posted on | May 25, 2017 | No Comments

Mike Magee

Complexity is the friend of the Medical Industrial Complex. Whether hospital, insurer, organized medicine, pharmaceutical or government agency, profitability, market advantage and career advancement can be found in the cracks of the deliberately Byzantine network.

For those intent on regulating or managing the American system as it is, just understanding and unraveling the opaque morass can be a full time job. A single piece of it can occupy a career. This reality is in part why Americans grudgingly keep coming back to single payer simplicity with the promise to expose supply lines, remarkable waste and fraud, and poor performance.

Consider the case of US pharmaceuticals – at least the visible part of it.

There are roughly 4 1/2 billion prescriptions filled each year with about 90% of them supplying generic drugs. Just under 50% of American residents have filled 1 prescription in the past 30 days, and 10% of the population takes 5 or more different prescription drugs.

Many of the major multi-national pharmaceutical corporations are based in the United States. But most of the raw materials, and much of the drug construction is contracted overseas by a $46 billion dollar manufacturing conclave . Once the company produces an individual drug, it does not go to a pharmacy outlet directly. Instead it is shipped to a U.S. distributor. 85% of all drugs consumed by Americans go through one of three giant distributors – AmerisourceBergen, Cardinal Health, and McKesson. They do not provide their services for free. The bill for distribution of U.S. drugs for these three in 2015 was estimated at $378 billion (85% of $444 billion total.)

Most Americans get their prescriptions filled at one of the 60,000 pharmacies, either in person or by mail order. 38,000 (63%) of the outlets are part of retail chains, and 22,000 (37%) are independents. All told, the retail pharmacies collect about $365 billion in revenue a year.

Chains dominate with just 15 (including CVS, Walgreens, Walmart and Express Scripts) controlling 74% of all retail income. They collect 62% of this in person and 38% by mail order. Independents lag financially garnering just under $50 billion a year of the total retail revenue.

Americans pay for their drugs through a confusing partnership mix and match designed by varied insurance companies. This requires negotiating deductibles, coinsurance and copays. For the total paid out, 42% comes from private plans, 30% from Medicare (Part B and D), 10% from Medicaid, and 14% from individual themselves.

Out-of-pocket average cost for a brand name prescription in 2015 was $44, while the average payment for a generic was $8.

Insurers use a variety of strategies to limit their financial obligations. Most insurers use tiered systems, placing drugs in 3 to 5 buckets, varying the percentage of payment from bucket to bucket. They employ companies called Pharmacy Benefit Managers or PBMs to act as middle-men to negotiate prices with the pharmaceutical companies and to execute a range of strategies designed to encourage consumers to choose lowest cost options.

PBMs are big business and of the biggest three one is owned by the pharmacy chain mega-giant CVS (CVS Caremark), a second by insurer UnitedHealth Group (UnitedHealthOptum), and a third geared toward mail order (Express Scripts). Together these three control 72% of the PBM market.

The top 15 pharmaceutical companies generated more than $500 billion in U.S. sales in 2015. The top five U.S. revenue producers were Gilead Sciences ($28B), J&J ($22B), Merck ($21), Novartis ($20), and Pfizer ($19.6B).

These are the facts and figures of just what is visible. But what if I were to tell you that a Senate Investigative report in 2012 revealed a vibrant and opaque gray market, not from Canada or overseas, but inside the U.S., where trading, and selling and reselling of pharmaceuticals was commonplace, profiteering on a large scale by thousands of small business arbitrageurs, with drugs coming in and out of pharmacy back doors, and everyone taking a piece of the action?

What if I were to tell you that 15% of all the large rig heists in America involve pharmaceuticals each with an average value of $3.7 million?

More on that next week.

American Health Care’s “Original Sin”

Posted on | May 17, 2017 | 2 Comments

Mike Magee

As a young surgeon in rural New England, serving farmers and mountain people on the Massachusetts/Vermont border, my growing interest in health management was fueled by two luminaries – one 90 miles to the north and the other 90 miles to the east. One was fast at work mining Medicare databases to expose high geographic variability in diagnosis and treatment suggesting both inequality and inequity. The other was a student of all things Deming, a land where there were no bad employees, just bad processes. Both believed that the answer to healing an obviously unwell US health care system was data, analysis and systematic reform.

Jack Wennberg, a graduate of McGill who did his residency and public health training in epidemiology at Hopkins before heading north for a professional lifetime at Dartmouth, received a boost from President Lyndon Johnson in 1967 as Johnson was struggling to understand and control explosive hospital costs in the wake of his landmark Medicare legislation. Working off of a $350,000 NIH grant, Wennberg would later recall that “Our results were fascinating, because they ran completely counter to what conventional wisdom said they would be….It was immediately apparent that suppliers were more important in driving demand than had been previously realized.”

Don Berwick was a product of Boston. He graduated from Harvard College and Harvard Medical School before doing a residency at Boston Children’s and gaining a degree in Public Policy at the John F. Kennedy School of Government. One of the first proponents of quality measurement, he took a post as Vice President of Quality-of-Care Measurement at the Harvard Community Health Plan in 1983. Over the years, Berwick was fond of sharing the quote, “Every system is perfectly designed to get the results it gets.”

When the IOM landmark publication, “To Err Is Human: Building a Safer Health Care System” came out in 1999, Berwick was one of the lead contributors. The report stated, “The focus must shift from blaming individuals for past errors to a focus on preventing future errors by designing safety into the system.” But the statement that caused an uproar at the time, and an avalanche of hospital process reengineering and measurement, was the substantiated claim that some 98,000 American lives were needlessly lost each year as a result of human mistakes in hospitals.

Nearly two decades later, one would think all the data mining, process reengineering, and sincere hospital-centric collaborative efforting would wrestle the caring defects to the ground. And yet, a well respected study in the Journal of Patient Safety in 2013 placed the number of annual deaths at between 210,000 and 400,000. The offered cure? The author at the time seemed to suggest more of the same, stating  “The epidemic of patient harm in hospitals must be taken more seriously if it is to be curtailed. Fully engaging patients and their advocates during hospital care, systematically seeking the patients’ voice in identifying harms, transparent accountability for harm, and intentional correction of root causes of harm will be necessary to accomplish this goal.”

What’s the problem here? The problem is that all the reengineering in the world will never correct the American health care system unless we address the “original sin.”

In 1947, in the wake of WWII with casualties flooding the homeland and explosive chronic disease an endemic reality, Canada and the U.S. grappled with the appropriate response. Canada, first in the province of Saskatchewan, and a decade later for the entire country, chose a course whose step one was universal health coverage for all Canadian citizens. They boldly declared that Canada and its economy and culture could never be healthy and productive unless her citizens were healthy. In Canada, access to basic affordable care was declared the right of all citizens and was supported by public funding. The government became the payer, but the caring was the responsibility of the 13 provinces and territories.

Out of that decision, that Step 1, came three other derivative steps. Step 2. The government determined what basic services would be covered by all plans. Step 3. Each province or territory created a budget within their resources which effectively created priorities for funding with a heavy focus on prevention and social determinants of health over reflexive intervention and use of technologic wizardry to wage “war” on disease. Step 4. Over the years, annual budgeting has forced a reconsideration and at times a reordering of priorities, ensuring a collaborative, transparent, and thoughtful process of continuous improvement focused on improving the quality of caring while efficiently dispatching limited resources.

In America, in 1947, we chose a very different course. We rejected universality and declared health care a privilege not a right. That was our “original sin”. In its place we embraced profit-seeking free enterprise, complexity, inequality, reckless competition, and an unerring faith that American ingenuity, innovation, and scientific discovery would eventually win out. Disease would be conquered and we – at least some of us – would be healthy.

Over the decades that followed, we’ve had many opportunities to see the light, After all, when Jack Wennberg received that $350,000 grant from President Johnson, it was clear that we were off course. And over the years, our best thought leaders, almost exclusively from premier academic health systems, have sought out evidence, mined the data, and reformed the processes from the tip of the American health care iceberg. They’ve failed. And they will continue to fail unless together we accept and correct our “original sin.”

It is time now to make equal universal access to basic preventive oriented health care the law of the land. The steps this will trigger will be reparative. Without it, we will continue to decline.

U.S. Only Nation to Spend More on Health Care than on Social Spending.

Posted on | May 13, 2017 | No Comments

Strikingly, this 2015 Commonwealth Survey of 13 OECD nations reveals that the U.S. is the only nation whose spending on health care exceeds its spending on social services (housing assistance, employment programs, disability benefits, and food security).High health spending in the US appears to have crowded out other forms of social spending that contribute to health. Lower health trajectories and greater health disparities have been tied to low investment in social services.

Advice to the AMA & AAMC as Trump Becomes Unhinged.

Posted on | May 11, 2017 | 5 Comments


Mike Magee

These are troubled times for our nation. We are testing our democratic institutions, as well as the quality of our leaders. Will they stand up to a President who is unhinged and his sycophants who seek only a measure of power? With control of 1/5 of our economy, 1 in every 8 workers, and the health and welfare of 324 million Americans, health care leaders’ role is assured. But as we’ve seen with Tom Price, the possession of an M.D. does not assure wisdom, empathy, compassion, or understanding.

As I’ve said in the past, it is not easy to be the head of government relations for the AMA and the AAMC these days. Under the best conditions, the job requires unerring focus on priorities (like physician payment or funding for medical education and research), nimble short term planning, and above all covering your bases.

Their most recent calculation, to support one of their own – the ethically compromised Emory orthopedist Tom Price for HHS Secretary, who is also a card carrying member of the Association of American Physicians and Surgeons, is already in the wringer thanks to the Republican House’s push for Trumpcare. Likely both organization’s lobbyists anticipated as much, and were prepared to join a broad coalition including AARP, AHA, ANA and others “in defense of Medicaid expansion and vulnerable populations.”

The laughable contradiction of their full throated endorsement of Price, a champion of such restrictions, and their equally public opposition to legislation that originated from his lips, was executed with glib superiority. After all, at its core, government relations is an exercise in value-free pragmatics. Today’s friend is often tomorrow’s enemy. And these organizations have been fighting the good fight to protect their financial interests for many decades.

In addition to protecting their members’ interests – financial and otherwise – they must also protect corporate assets which are somewhat removed, and at times in conflict with patient care. Combined, the programs and services offered in 2014 by the two earned $475 million in revenue. Almost half of the revenue generated by the AMA came from royalties and sales associated with their exclusive control of the nation’s CPT codes and the Physician Masterfile Database that fuels physician prescription profiling. Just under 2/3 of the AAMC revenue derived from three data driven and monopolistic product sales – ERAS (Electronic Residency Application Service – The Match: $69.2M), MCAT (Medical College Admission Test: $33.2M), and AMCAS (American Medical College Application Service: $30.4M).

At times, member interests and corporate interests lack perfect alignment. For example, in late October, 2001, I was introduced to Senate Minority Leader Trent Lott (R-MS) as part of my campaign for Surgeon General. My handler, in his introduction, mentioned that I had been recommended for the job by AMA President Richard Corlin. Lott instantaneously erupted in anger and spewed the words, “You can have the AMA. I want nothing to do with them!” This confused me since I had assumed that the AMA was in good standing with President Bush and his Republican allies.

I was unaware at the time that Lott, a member of the Senate Finance Committee,  was in a pitched battle with the AMA over its exclusive ownership of CPT codes that are required for billing of physician services. His beef was twofold: 1) This “monopoly” as he called it required insurers and others to purchase CPT code books and pay royalties to the AMA which he claimed earned the AMA $71 million in 2001 (the AMA counter-claimed it was $18 million for what they defined as the “gold standard” of coding). 2) Lott felt the AMA’s control of the CPT codes and Physician Masterfile  Database was preventing the development of open source consumer health cost databases that would allow patients to compare costs of doctors and hospitals. This was part of a larger effort to address soaring Medicare and Medicaid costs.

At the time, one of Lotts countervailing medical association supporters was the Association of American Physicians and Surgeons, Tom Price’s current values home base. They weighed in at the time with this comment, “Senator Lott deserves everyone’s support in his effort to pull the rug out from under the AMA’s secret monopoly on these codes. Elimination of this AMA cartel will do more to protect patients than any patient’s bill of rights law.”

Times and circumstances change – sometimes suddenly, as we’ve seen this week. Our President is now unhinged and erratic. Our Secretary of HHS is more than a little ethically compromised and deeply connected to former AMA enemies. Our logical movement toward universality, simplicity, and continuity in health delivery is a step away from a reversal that would harm our economy and at least 24 million of our most vulnerable citizens.

So it’s not easy heading up government relations at the AMA or AAMC. There are a wide range of countervailing interests and priorities. In such complex times, it’s best to keep the advice simple. So here it is:

1. Support the good guys.

2. Protect those who can’t protect themselves – our most vulnerable.

3. Do the right thing – not for tomorrow, but for our future.

How Sick Is My County?

Posted on | May 8, 2017 | No Comments

New Interactive Maps: Check Mortality Rate in Your County Here.

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