[Two new books reveal the distortion of the U.S. health care
system by financial operators.]
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THE PAIN PROFITEERS  
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Rhoda Feng
June 3, 2022
The American Prospect
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_ Two new books reveal the distortion of the U.S. health care system
by financial operators. _

Vioxx’s increased cardiovascular risk was concealed by its
manufacturer, Merck, DANIEL HULSHIZER/AP Photo

 

_SICKENING: HOW BIG PHARMA BROKE AMERICAN HEALTH CARE AND HOW WE CAN
REPAIR IT_
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By John Abramson

_Mariner_

_ETHICALLY CHALLENGED: PRIVATE EQUITY STORMS US HEALTH CARE_
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By Laura Katz Olson

_Johns Hopkins University Press_

The coronavirus pandemic has laid bare major systemic problems in the
U.S., nowhere more than in the cruelty and irrationality of our
for-profit health care system. Even though we spend 19.7 percent of
GDP each year on health care (about $4.5 trillion), 11 other wealthy
countries spend just over 10 percent and often deliver better results.
The U.S. ranks 69th in the world when judged on “healthy life
expectancy,” and for the first time in decades, American life spans
dropped from 2014 to 2018.

Two new books pry even deeper into our dysfunctional health care
system. One looks at the way that pharmaceutical companies exert
enormous influence on the design, conduct, and analysis of clinical
research. The other examines how private equity (PE) firms have lately
been acquiring and streamlining health care companies in a way that
siphons supersized profits for themselves, but undermines the right of
all other Americans to have access to affordable, timely, and
high-quality care.

In _Sickening: How Big Pharma Broke American Health Care and How We
Can Repair It_, John Abramson, a lecturer at Harvard Medical School,
points out that over the past four decades, “the pharmaceutical
industry has been able to achieve [a] ‘tail wags dog’ position”
to tilt the playing field in its favor, at great cost to patients. Its
ruses include funding studies about its own drugs; distorting clinical
trial data to increase drug sales; delaying publication of
economically inconvenient findings; buying reprints of articles in
prestigious medical journals; cultivating relationships with doctors;
running dubious ads; and more. The industry has also spent at least 50
percent more on lobbying since 1998 than any other individual sector.

Abramson draws from 22 years of experience as a family physician, a
consultant to the Department of Justice, and an expert witness in
several trials involving pharmaceutical companies. His book brims with
arcana, from the Food and Drug Administration’s flawed approval
process for drugs (and loopholes like the “501(k) pathway” for
certain medical devices), to the problem with passing off _post hoc_
findings as primary ones, to the need for an independent federal
health board, something with support from lawmakers in both parties.

One individual he writes about was prescribed Vioxx (“a safer
version of ibuprofen”) for pain relief, only to experience
debilitating headaches and eventually death from a massive stroke.
“If it weren’t for the failure of three guardians of public
safety,” Abramson writes, the death could have been prevented.
Merck, the manufacturer, had concealed Vioxx’s increased
cardiovascular risk. _The New England Journal of Medicine_ had
published an article claiming the drug was safe to use, and failed to
update readers when it learned about the risk until five years later.
And the FDA dragged its feet when it came to acting on the risks.

Each of these malefactors—the FDA, medical journals, and drug
manufacturers—come under closer scrutiny in subsequent sections.
Pfizer, which has lately benefited from a pandemic halo, is singled
out for its role in an illegal off-label-marketing scheme involving
Neurontin, a drug that had been approved by the FDA to treat epilepsy
and a specific type of nerve pain. Abramson was an expert witness in
the Neurontin case, where he explained Pfizer’s “statistical
shenanigans,” including a “continuing medical education” meeting
for doctors that presented favorable-looking results for only 15
patients, with no control group or comparison drug study.

The jury concluded that Pfizer had fraudulently marketed Neurontin to
doctors, but the penalty it paid ($142 million) amounted to “less
than half the revenues from one year of Neurontin sales.” Abramson
was personally and professionally disheartened at the modus operandi
for companies like Pfizer: “Under our current system, it is more
profitable for large pharmaceutical companies to commit crimes and pay
the fines than to obey the law.”

Abramson notes that standing up to Big Pharma and rapacious insurance
companies and hospitals will require “a coalition of health-care
professionals, purchasers (including non-health-care-related
businesses, unions, and governments), and consumers.” But his call
to “find a better balance between commercial profit and public
benefit” is too equivocal by half, stopping well short of an
overhaul of the system. One-third of the billions raised on GoFundMe
is for essential medical services. Working out the mean between profit
and the public interest would be like solving the SAT problem from
hell. Every other industrialized country has figured out that a
Medicare for All–style system allowing the government to negotiate
for more affordable drugs would prevent consumer price-gouging, which
Big Pharma has reliably done year after year despite national outcry.

However, this does not seriously mar a riveting, insider’s account
of the medical guild, with its influential medical journals, clinical
practice guidelines, and, inescapably, an avalanche of “expertly
developed commercial propaganda, and, sometimes, simply lies.”

ABRAMSON WRITES THAT, STARTING AROUND 1980, “Companies moved from
addressing the needs of a broad array of stakeholders … to focusing
narrowly on maximizing financial return to shareholders.” This is
about the same time that private equity firms began flourishing by
breaking up public companies in the pursuit of profit. Abramson
briefly gestures at the disemboweling of the welfare state and
neoliberalism’s sculpting of the U.S. political economy to favor
privatization, but he leaves out any mention of PE firms, whose
buyouts have sprouted up in several health care sectors with rank
luxuriance, valued at dozens of billions of dollars each year.

Private equity is largely responsible for the phenomenon of balance
(or surprise) billing, which can ensnare patients who have health
insurance but are treated by an out-of-network medical professional,
like a physician in an emergency room who works for a third-party
physician staffing company. Putting Americans in debt from surprise
medical bills is nearly universally despised, yet, as Laura Katz Olson
shows in her important and revealing new book _Ethically Challenged:
Private Equity Storms US Health Care_, it’s a practice that became
increasingly common after PE firms started taking over medical
companies.

At the molten core of the private equity business model is the
practice of accruing massive piles of debt to make investments, and
requiring the companies they buy to pay it off. Drawing largely from
state and local pension funds and endowments, private equity “is
neoliberalism on steroids,” writes Olson. “Supersized earnings for
PE and its shareholders are front and center, with no pretense
otherwise.” The fact that it is accountable to no one other than its
investors means that a great deal of its financial transactions are
fogged in mystery.

Private equity has begun to consolidate segments of U.S. health care,
at the expense of patients and workers.

Constantly selling off assets of a current buyout to finance future
conquests, PE firms are a bit like the mythical ship of Theseus,
forever being reconfigured with new parts—if Theseus were a
plutocrat with a passion for dividend recapitalizations. Adding to the
atmosphere of _omertà_, erstwhile founder-owners who saw their
practices acquired by PE and who were willing to be interviewed for
Olson’s book could only disclose so much without running afoul of
nondisclosure agreements. Still, there’s enough data for Olson to
make a convincing case that PE has infiltrated almost all imaginable
recesses of our lives, from the way we communicate to where we shop
for groceries to how we charge our electronic widgets to—most
worrying of all—where we get treated for medical emergencies or drug
addiction.

Specialized establishments like home care and hospice centers,
diagnostic labs and imaging centers, pharmaceutical companies, medical
device businesses, dialysis facilities, fertility clinics, urgent care
centers, and dermatologist offices have all been swallowed up by PE.
Since 2011, reports Olson, the trend in many of these health sectors
has been add-ons and mergers, with PE houses bundling acquisitions to
“achieve scale” and “expand geographic reach” rather than
selling off parts. According to Axios
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in 2018 alone, there were nearly 800 private equity health care deals,
nearly 15 percent of all PE acquisitions, yielding a total value of
more than $100 billion.

It’s not uncommon for PE-held hospitals to pressure physicians to
maximize “patient volume,” or to restrict the time they can spend
with each patient, bilking people of proper care and attention. After
Hospital Corporation of America was purchased by Bain Capital, KKR,
and Merrill Lynch Global Private Equity in 2006, for instance, HCA
engaged in a number of shady practices, including manipulating ER
billing codes and turning away patients who failed to pay in advance.
Physicians in other PE-owned firms have been found to “hard-sell
products and treatments (some of which may be unnecessary), and be
parsimonious with medical and other supplies,” writes Olson.
Managing directors are “not particularly concerned” about their
acquisition’s long-term viability or performance; what interests
them most is the quickest route to windfall profits.

PE-owned firms frequently put up a facade of catering to patients’
consumer preferences, through accoutrements like telemedicine and
remote patient monitoring. Yet they often skimp on less tangible
aspects of care, such as substituting lesser-trained practitioners for
more expensive physicians. As both Abramson and Olson point out, the
very notion of “choice” in the context of health care is
misleading: Patients rarely have a full picture of fees and are not
positioned to “shop around” for services in an emergency as if
choosing shoes. It would be more accurate to say that patients are not
so much granted unfettered access to health care options as they are
themselves instrumentalized, their health subordinated to profit
motives.

Reps. Richard Neal (D-MA) and Kevin Brady (R-TX) initially frustrated
efforts to rein in surprise medical billing.

PE has begun to consolidate segments of U.S. health care that lack
clinical standardization and government oversight, such as eating
disorder centers and autism treatment facilities. This allows owners
to impose all sorts of cost-cutting and so-called “efficiency”
standards at the expense of patients. Workers at such enterprises also
suffer under PE’s ruthless calculus: They often experience crushing
workloads, earn lower wages than at comparable non-PE outfits, and
have fewer benefits as PE focuses on retrenching operating expenses.
Olson cites a study that shows that PE-controlled shops were
responsible for over 1.3 million job losses since 2009. When
bankruptcies hit companies, workers bear the brunt of the impact,
while general partners sail off with golden parachutes.

Upton Sinclair once wrote, “It is difficult to get a man to
understand something when his salary depends upon his not
understanding it.” As recently as 2019, the leadership of the House
Ways and Means Committee, chair Rep. Richard Neal (D-MA) and ranking
member Rep. Kevin Brady (R-TX), were intent on not understanding the
need to protect unsuspecting patients from surprise medical bills.
This was no surprise: Neal and Brady were bankrolled by the Blackstone
Group and Welsh, Carson, Anderson & Stowe (WCAS), respectively, two
private equity firms that own health care staffing companies. Though
Olson declines to provide precise figures in her book, a report from
Public Citizen
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that in 2019 alone—when congressional leaders started cottoning on
to the outsized earnings flowing into PE coffers—employees or
political action committees connected to Blackstone and WCAS
contributed $63,600 to Brady and $32,700 to Neal. Private
equity–backed groups like Doctor Patient Unity also spent millions
of dollars
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on fear-mongering ad campaigns painting a dystopian future if
providers are restricted to charging market rates for their services.

The good news is that Congress did pass legislation, which
then-President Trump signed into law, protecting patients from being
socked with surprise bills from out-of-network staffing companies and
emergency air transit. The bad news—for everyone but PE’s
financial puppeteers—is that the bill does not apply to public
payers, and ground ambulances are also exempt, meaning sick and
vulnerable people can still pay punitively high fees for
out-of-network transport.

Private equity buyouts have been facing increasing scrutiny on Capitol
Hill since the bankruptcy of stores like Toys ‘R’ Us
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outcry over surprise billing. As PE scoops up more and more physician
practices, with a perennial aim of double-digit returns, their
pecuniary incentives will increasingly collide with the only thing
that should matter: the health needs of patients. Call it the
“Hypocritic Oath”: Their commitment is to making money hand over
fist.

To rein in PE’s pernicious influence on health care, Olson calls for
the removal of tax havens that enable its revenue-seeking behaviors
and investing more in social services. Like Abramson, she thinks we
currently spend too much on downstream health care costs and not
enough on upstream non-medical-care determinants of health. There is
too much at stake to stand idly by as PE titans amalgamate even more
health and medical services—the lives of disabled, sick, elderly,
and other vulnerable people depend on putting an end to the
rapaciousness of corporate medicine.

* Big Pharma; Health Care and Private Equity;
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