Apr 05

Wall Street Wins Again

Obama is expected to sign the so-called JOBS Act into law this moring in Washington D.C. In doing so, the President, in a misguided effort to obtain a “bi-partisan” win will open the door for more financial fraud and enable unscrupulous financial firms to bilk unsuspecting investors of their money. The public rationale touted by the administration is that the law will make it easier for small “emerging” companies to obtain the capital required to grow, and eventually take the company public in an IPO. The law guts the the current regulatory reporting requirements that provide transparency to both investors and regulators for companies with less than $1 billion in annual revenue. He is also making it much more likely that equity research firms will engage in behavior that creates a conflict of interest between the firms seeking capital and themselves, at the expense of investors and the public. The large banks that currently underwrite IPOs will also have an incentive to engage in perfidious behavior in an attempt to win over potential IPOs in order to generate fees.

While regulators are still examining the law, even the SEC chief, Mary Schapiro, hardly a dutiful advocate for investor rights, is dubious. She said that the law will simply “weaken investor rights,” and:

We should not walk backwards here…. Collusive behavior between analysts and bankers cost investors huge sums, shattered confidence in the integrity of research, and damaged the markets themselves.

Too often, investors are the target of fraudulent schemes disguised as investment opportunities…. As you know, if the balance is tipped to the point where investors are not confident that there are appropriate protections, investors will lose confidence in our markets, and capital formation will ultimately be made more difficult and expensive.

Eliot Spitzer, who is responsible for part of the existing rules the new law nullifies had some choice words for those in power:

It is a bad sequel to a bad movie…. It shouldn’t be called the JOBS Act, it should be called the Bring Fraud Back to Wall Street Act.

After the recent rampant fraud that led to the largest depression since the 1920′s, President Obama has made decision to further loosen the rules regulating those who caused the disaster, placing himself in the familiar position of abandoning his progressive and Democratic base in favor of Wall Street.

You can read further coverage from the New York Times here.

Mar 29

You’re Hot: You’re Hired

You may be one the of millions of Americans who periodically sit down to clear your mind and blow an hour or two watching some ridiculous reality show wherein contestants are eliminated one by one until only one narcissistic candidate remains. The next time you do so, pay attention to the “professions” of the competitors. Undoubtedly there will be more than one ridiculously attractive young man or young woman who lists their career as medical or pharmaceutical sales. Why do the drug and medical equipment manufactures recruit these young hotties? It is simple, because doctors are a cash cow, cash cows that are more easily milked by gorgeous farmhands.

The unsavory ties between manufacturers and doctors have existed for decades, but have been exacerbated by the proliferation of HMOs. If a company is able to secure a contrat with say, Kaiser Permanente, to carry it’s statin rather than a competitor’s statin, the rewards are enormous. If an equipment manufacturer can convince doctors to employ its devices, the revenues can run into the several billions of dollars. Moreover, nearly each of the medical specialties has formed a “society” wherein its members routinely gather in large conference rooms and convention facilities to hear lectures and panels on the most cutting edge treatments and procedures. Never absent from these gatherings are the medical and pharmaceutical sales teams. Sales teams set up elaborate booths and displays, sometimes running into the tens of thousands of square feet each. They will even leave you a gift on your nightstand, approved by a payment to the society’s coffers. While still other sales staff are sent to meet with doctors individually at their offices. No stone is left un-turned. There is great reward for the sales staff, many making six figure salaries and commissions.

While some universities and hospitals have banned their physicians from accepting promotional materials or speaking on behalf of specific drugs or equipment, the medical societies of the specialties have not. Surprisingly, the societies themselves sell the manufacturers direct access to their members, at a stiff cost. In some cases, more than half of a society’s revenues come directly from drug manufactures and equipment makers.

The effects of this financial influence on doctors comes at the expense of the patient. Patients may not have discounted access to a particular drug–even if the drug is more effective–under their medical plan if the plan has contracted with another manufacturer of a similar drug. Patients are prescribed drugs that they don’t need and asked to buy or are provided with equipment that they don’t require. One study from the Journal of the American Medical Association found that more than one in five patients who received cardiac defibrillators did not meet the medical criteria for receiving them. Large drug makers and equipment makers have paid millions in settlements in civil cases involving allegations of improper kickbacks to doctors and medical societies.

At this time little attention is being shown to the drug manufacturers’ and equipment makers’ magnificent minions trolling your doctor’s offices and grifting the groups he or she is a member of. It is time that more effort is spent on lobbying representatives to pass legislation ending this obvious conflict of interest for the sake of patients. No relationship is more critical than that of the doctor and patient, and there can be no space permitted for cash over competent care.