Monday, October 11, 2004

The Vioxx Wake-Up Call

By Bob Batchelor
Mr. Batchelor is the author of THE 1900s (2002) and editor of the forthcoming book, BASKETBALL IN AMERICA: FROM THE PLAYGROUNDS TO JORDAN'S GAME AND BEYOND (Haworth, 2004).

A turning point in medical history occurred on September 30, when Merck voluntarily withdrew pain reliever Vioxx from the marketplace due to further research that revealed potential long-term dangers. The Vioxx debacle delivers a crushing financial and reputational blow to Merck, and also calls into question the role of the Food and Drug Administration (FDA) and its regulatory procedures for allowing new drugs to be released.

Already, the mother of a woman in Missouri who died of a heart attack sued Merck the day after the news broke. She claims that the company knew of the risks long before they pulled the product, a key argument for subsequent litigation.

From a popular culture perspective, the Vioxx recall marks the first time in today’s pharmaceutical-laden society that an FDA-approved popular name brand medication has been pulled from the shelves. Merck’s decision will have lasting consequences, particularly in the current era of relentless direct-to-consumer marketing via television, radio, and other forms of advertising. Much of Merck’s success with Vioxx has been attributed to its marketing efforts. In the first half of this year, the company spent about $45 million to get the product in front of consumers.

Launched in the United States in 1999, Vioxx was sold in more than 80 countries worldwide and was a major financial windfall for struggling drug manufacturer Merck. Sales of Vioxx in 2003 reached $2.5 billion and in the fourth quarter of this year were expected to be approximately $750 million.

Since Merck’s announcement, information has surfaced that reveals both Merck and the FDA may have had evidence of risks faced by those taking 25 milligrams or more daily, including increased danger for heart attacks and strokes. The logical question is why the FDA would allow Vioxx into the marketplace if the drug were harmful. The FDA’s role in accepting Vioxx should face close scrutiny by Congress and others.

The modern history of the FDA begins with the Federal Food and Drug Act of 1906. The Theodore Roosevelt administration pushed the bill based on the national outcry over tainted meat and processing facilities as described in Upton Sinclair’s powerful novel, The Jungle. The fight for safe foods and sanitary conditions in the nation’s meatpacking and food processing plants served as a main thrust of the Progressive Movement in early twentieth century America.

As the U.S. grew, the FDA transformed to meet its needs. In 1962, after use of the sedative Thalidomide caused severe deformity in newborns in Europe, Senator Estes Kefauver introduced legislation (the Kefauver-Harris Amendments) that gave the FDA increased power over drug research, testing, and introduction.

As the pharmaceutical industry has grown into a multi-trillion dollar business, the FDA faces increased pressure to approve new drugs, in part due to AIDS and cancer research that could improve the lives of those suffering from those illnesses. As a result of Merck’s Vioxx recall, the FDA could force drug companies to increase testing, ultimately causing an even larger backlog of new products.

This effort may, in fact, be too large for an agency with as many responsibilities as the FDA. The agency’s Web site points to the impossible size of these tasks, stating, “The FDA monitors the manufacture, import, transport, storage, and sale of about $1 trillion worth of products annually at a cost to taxpayers of about $3 per person.”

Rather than task the FDA with such comprehensive duties to monitor all food and drugs, Congress should establish a single regulatory agency with governance over nothing but pharmaceutical issues.

Will Vioxx sink Merck?
Merck is in a battle for its financial life and should prepare for warfare on at least two fronts, legally and financially. Unfortunately, the battles ahead do not have quick fixes and will be a drain on company resources for years to come.

Merck can expect a glut of lawsuits from families of customers who contend that Vioxx played a role in the needless deaths of their loved ones. Already, experts have estimated that legal battles will cost Merck at least $10 billion. In addition, the costs associated with future legal wrangling will be a drain the company’s executive team, pulling it from the work necessary to get it back on path.

The early financial consequences are still open to interpretation, but stockholders voted with their dollars last week by dumping the company in mass quantities. The day the news hit, Merck’s stock dropped 27 percent or $12.07 a share to close at $33, an eight-year low. Shares did gain 1 percent the following day to close at $33.31, but it could take years for Merck to get back to pre-announcement levels.

A Merck announcement also provided some insight into the financial disruption Vioxx will cause, stating, “The company currently expects earnings per share to be negatively affected by $0.50 to $0.60 as a result of today’s announcement. This estimate includes foregone sales, writeoffs of inventory held by Merck, customer returns of product previously sold and costs to undertake the pullback of the product. Included in this cost estimate is the expectation of foregone fourth quarter sales of Vioxx of $700 million to $750 million.”

The FDA, the medical and pharmaceutical industries, and the public should all learn from the Vioxx recall. Quick fixes are not always safe and even when preliminary research has been undertaken to prove safety, it may not be comprehensive enough. What begins with Vioxx could soon spread to other name brand designer drugs or even the controversial diet plans that make many promises, but haven’t been tested enough to uncover hidden dangers.

Monday, June 28, 2004

From History News Network, www.hnn.us:

The Downside of Downsizing
By Bob Batchelor

Have pity on "Ol' Lonely," he just got a whole lot lonelier. The star of countless television commercials -- known better as the Maytag repairman -- stands watch over a company that just announced that it is slashing 1,100 jobs, or about 20 percent of its workforce. According to company reports, Maytag hopes to speed decision-making and save costs by restructuring, typical corporate-speak under such circumstances.

Maytag isn't alone in using mass layoffs as an excuse to spur operations, joining the thousands around the nation that have taken similar steps. The continuous wave of corporate layoffs is not only undercutting any real economic recovery, but it is also exacting a heavy emotional toll on people forcibly put out of work.

In an election year, with all signs pointing to a close presidential race, the state of the economy will play a critical role in determining the next president. Both President Bush and Democratic challenger John Kerry are using the economy to rally voters in the so-called swing states, which makes downsizing and the psychological burden that accompanies it even more important.

Currently, the general perception is that the economy is improving, as evidenced by factors ranging from the upcoming red-hot Google IPO to rising business productivity and increased corporate spending.

In defining the state of the economy, the Bush administration places great emphasis on the national unemployment rate, which has dropped to a miniscule 5.6 percent. Some critics question the figure, derived from a monthly survey, called the Current Population Survey (CPS). The survey began as a Work Projects Administration project and has been conducted monthly since 1940.

The calculation has drawn fire because only those people "actively looked for work in the prior four weeks, and are currently available for work" are considered "unemployed." Last month, there were almost 5.4 million people in the "Persons Not in the Labor Force," but "currently want a job" category. This is a significant factor considering that the government based its percentage on 8.2 million it deemed "unemployed." Simply adding the two numbers reveals that there are actually 13.6 million people unemployed.

While the Bush administration and business pundits would like the public to believe better economic days are already upon us, the seemingly constant barrage of corporate layoff announcements undercuts this rosy outlook. According to Chicago-based outplacement firm Challenger, Gray & Christmas, companies cut more than 145,000 jobs in April and May alone and a total of 408,392 in the first five months of 2004.

Even more daunting, the Department of Labor’s Bureau of Labor Statistics (BLS) released figures revealing that from January through April 2004, the total number of "layoff events" (the catchy BLS euphemism for number of downsizing occurrences) numbered 5,747, leading to 573,523 initial unemployment insurance claims.

These figures are actually lower than in the January to April 2003 quarter (6,466 and 624,833), but hardly the earth-shattering gains that Bush alluded to recently on his visit to Rome, when he declared that the latest job figures showed the economy, "vital and growing."

The numbers speak for themselves, but obviously, the American economy is still reeling when anywhere from 80,000 to 160,000 people a month are being downsized. Yes, the economy is generating 250,000 to 350,000 jobs a month, but these figures pale in comparison to the 13.6 million people searching for work. According to economist Jared Bernstein, with the Washington-based Economic Policy Institute, there are also 1.3 million fewer Americans collecting paychecks now than in March 2001, when the recession began.

Numbers alone, however, have never been the most important factor when it comes to mass layoffs. On a deeper level, forced unemployment demoralizes individuals, families, and entire communities. In a small town, like North Canton, Ohio, that will take the brunt of Maytag's cuts, the effects can be devastating. We cannot begin to calculate the emotional toll these people endure. At the current rate, it is like wiping an entire city off the national employment sheet each month.

In a country built on rags-to-riches tales of success and filled with people constantly striving to achieve the mythical "American Dream," the cumulative effect of mass downsizing not only threatens the nation economically, but eats at the soul of those who are deemed unworthy. We are taught to consider ourselves a nation of equals, so few life events are more troubling than wearing the unemployed label.

Although the exact origins of downsizing are open to interpretation, it has been part of the American business lexicon for several decades. The practice has even become part of popular culture, showing up as a topic on the syndicated hit television show Roseanne and the ever-popular Dilbert cartoon strip, which frequently mocks the downsizing in the more than 2,000 newspapers that carry it.

When future historians look back on the late twentieth and early twenty-first centuries, they may determine that the period earns the title "the downsizing era." In 1996, when the New York Times ran a series of articles looking at the phenomenon, the paper used BLS reports to conclude that 43 million people lost their jobs through layoffs between 1979 and 1995. In comparison, from 2000 to 2003, after the dot-com bust, another 5 million workers were downsized.

As these historians reassess our era's business world from a distance, one of today's most admired corporate leaders -- former General Electric CEO Jack Welch -- is going to be exposed. Welch’s early tenure at GE in the early 1980s institutionalized downsizing. Under his direction, the company eliminated more than 100,000 jobs, thus earning Welch the nickname "Neutron Jack" -- like the bomb, turning people into dust, but leaving buildings still standing.

Single-handedly, Welch overturned GE's corporate culture and turned the business world on its ear. Wall Street rewarded Welch by pushing GE stock up, which in the elephant herd mentality of Corporate America, caused other leaders to follow his lead. Soon, the world viewed Welch as a brilliant business strategist. No one much cared about the bodies left in his wake.

Obviously, taking on Welch and his esteemed place among twentieth century business leaders will be difficult. The GE chief's supporters would argue that Welch’s moves kept the company competitive and enabled it to streamline operations to take on foreign competitors and others competing for its market share.

Welch's brand of corporate capitalism, in which shareholder return is the only measure of success, also set in motion a cruel system of constant dread -- fear about job loss and the economic and psychological destruction it causes. Such large-scale cuts always involve personalities and office politics, far from the high-minded "talent" considerations that leaders use to justify the layoffs.

Welch's sole focus on shareholder return and hitting or surpassing analyst expectations each quarter won him rave reviews as a tough-minded leader. However, when examined in the future, these pursuits may be seen as a magician's bag of tricks. An obsession with quarterly earnings ahead of long-term planning, led GE to cut corners and not think about the environmental consequences of dumping PCB (polychlorinated biphenyls) into the Hudson River.

Welch's personal aggressiveness replicated throughout GE, implementing a winner-take-all attitude that rewarded profit and nothing else. Following the Welch lead, other corporate execs began using mass layoffs as a way to cut costs, take restructuring charges against earnings, and meet quarterly earning estimates. The tick upward in stock price benefited those with the largest number of shares...almost always the current leadership team.

Welch's downsizing initiatives made GE, its stockholders, and its executives wealthy. Welch became Fortune magazine's "Manager of the Century" and a celebrity in his own right. The 100,000 downsized GE workers and the millions more that followed at other companies based on Welch's moves...let's hope they were able to pick up the pieces of their shattered dreams.

Welch opened the door for other corporate executives to follow. Mass layoffs are now routine events designed to impress Wall Street analysts and cause short-term gains in stock price. Few people ask how 1,000 or 10,000 employees suddenly become expendable. Who hired, trained, and brought these (now-worthless) employees into the company in the first place?

Perhaps the very people now responsible for the terminations?

Mr. Batchelor is the author of THE 1900s (2002) and editor of the forthcoming book, BASKETBALL IN AMERICA: FROM THE PLAYGROUNDS TO JORDAN'S GAME AND BEYOND (Haworth, 2004).

Monday, March 08, 2004

This article originally appeared at the History News Network: http://hnn.us/articles/3792.html

This Election Shouldn't Be About Vietnam
By Bob Batchelor

The 2004 election is proof that Vietnam is the war that won't go away. But it should as an issue in choosing the next president.

The spotlight on Vietnam and the actions taken during the period by President George W. Bush and challenger John F. Kerry is distracting the electorate from the real problems facing the nation.

Of course Vietnam does have a place in public discourse and this is likely the reason why we are mistakenly concentrating on it this election season. In the nearly 30 years since the conflict ended, the war and frenzied era it inspired has been used as a guide by national policymakers, particularly in military strategy. As a result, concern about involvement in another Vietnam quagmire is common when the United States sends troops abroad.

Vietnam, unlike any other conflict since the Civil War, continues to haunt us. People in the United States have a powerful sense of guilt stemming from the horrors uncovered in the jungles of Southeast Asia, as well as the brutality used to squash dissent at home. These evils raised deeply troubling questions about us as Americans and human beings. Because the public has unresolved feelings about Vietnam, it stays with us and is then passed down to successive generations.

Visions of Vietnam also remain intense because the popular culture industry has built an industry based on glorifying the era. Quite frankly, Vietnam, like other watershed moments in history, sells. These mental images enable people to feel that they have a stake in the issue, especially in ensuring that the country never gets involved in another Vietnam-like war.

The dangerous aspect of voters using Vietnam to distinguish between the candidates in 2004 is that it gives them an easy way to fall back on popular culture imagery, rather than on a reasoned set of factors. For example, the box office smash "Forrest Gump" foreshadowed Kerry's actions. Voters may subconsciously equate the candidate with Forrest -- the heroic, decorated veteran who questions the war upon returning home.

Basing a vote on Vietnam gives voters yet another one-issue rationale lumped in with other polarizing issues, such as reproductive rights, gun ownership, or religion. The last thing the country needs is a voter pulling the lever in November based on fuzzy Hollywood notions of the war.

The current Vietnam firestorm leads naturally to a discussion of the consequences of pop culture's influence. Americans are increasingly defined by the plethora of pop culture, which determines who we are, how we think, and what we value.

We get our news from the Comedy Channel and personal blogs, form our political views from movies, and pay much more attention to Britney Spears or "American Idol" than reasoned political debate. Why focus on arcane economic policies when "Survivor" is on in half an hour?

Voters who don't remember (or were too young to see) the chilling footage of the war on nightly news broadcasts have clear, full color mental images of the conflict from numerous acclaimed movies, ranging from Apocalypse Now to Full Metal Jacket . Actor Sylvester Stallone may have become famous portraying boxer Rocky Balboa, but it was his Rambo character (a persecuted Vietnam veteran who fights back) that redefined the modern action hero at the box office.

It is not much of a stretch to move from these ubiquitous pop culture influences to nightly news clips of former Democratic candidate Michael Dukakis peering out from a tank turret or Bush hitching a ride with a fighter pilot to board an aircraft carrier. Movies wrap themselves in the flag, so presidential candidates follow suit.

Ninety-nine percent of the time, pop culture's dominance really doesn't matter. Obviously, people demand that their lives be filled with entertainment, sports, celebrity, and reality television. I feel we should hold ourselves to a higher standard.

With millions of jobless workers unable to support their families and the gap between rich and poor growing at an alarming rate, how a presidential candidate spent his time during the Vietnam War doesn't really matter. It is a trivial concern compared with the real challenges that need to be solved by the country's next top executive.

Tuesday, January 20, 2004

The Royal Tenenbaums as an IQ test

After watching TRT on cable the other night, my wife and I came to the conclusion that the movie is one that you can use to instantly judge a person's intelligence.

It's an easy test. At a party or upon meeting some people for the first time, movies are an inevitable topic of conversation. By bringing up TRT, you can instantly tell a great deal about the person you're speaking with. If they like or love TRT -- thumbs up. If not, then give them the old boot.

Come to think of it, this test would work great for people on dates, assessing co-workers and work colleagues, even finding out a little something about mom and dad.

This test is on par with asking a guy 30 or older if he likes architecture. Women, if the answer is "no" or he shows little interest, run (no sprint) the other way...The guy's either looking to score or is a cement head -- someone who would show up on a reality TV show or as The Bachelor or something.

Another movie that this test works for -- Unbreakable by M. Night Shyamalan, starring Bruce Willis and Samuel L. Jackson.

Go out, test your friends and family. I'd love to share the results.

Have a great day!

Bob Batchelor
www.bobbatchelor.com