Lupe Valdez is a woman, a Hispanic, a Democrat and a lesbian. She is also the new sheriff of Dallas County. Read about here here in this Washington Post profile.
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Monthly Archives: November 2004
Paying more for pain relief than necessary
Holman W. Jenkins’ WSJ ($) Business World column this week explores how the miplaced incentives of America’s health care finance system contributed to Merck over-marketing — and doctors over-prescribing — Vioxx despite its well known side-effects:
[Vioxx was never supposed to be] a better pain reliever. Its unique selling proposition was simply a lower incidence of stomach bleeding, a real benefit but one mainly relevant to the 15% of arthritis sufferers who can’t safely take conventional pain relievers.
Merck pulled the drug two weeks ago based on a study showing that, after 18 months of daily use, Vioxx subjects began experiencing heart attacks and strokes at twice the rate of a placebo group. Yet, on balance, this might have seemed mildly less alarming than the 2000 study that kicked off the Vioxx controversy. Also done by Merck, it showed that Vioxx users, from day one, suffered two or three times as many cardiovascular “events” as a control group using naproxen (the ingredient in Aleve).
. . . [But] Merck is in hot water now not because Vioxx was excessively risky but because the wrong people were taking it — a problem for which doctors and the insurance system are also to blame.
. . . Marketing alone doesn’t cause patients to shell out $2 for a pill that doesn’t work any better than a five-cent aspirin. Bruce Stuart of the University of Maryland has showed that the biggest determinant of whether a patient takes a Cox-2 or a cheaper drug is whether an insurance company is paying.
Likewise, we’ve heard two schools of complaint from patients since Vioxx was yanked. Some patients are irate at Merck for depriving them of a drug they found genuinely useful, but others are mainly irate at their doctors for never mentioning that Advil or Tylenol work just as well.
The Vioxx debacle is symptomatic of a system that shields consumers from price signals and sometimes actually discourages them from making the right health-care choices. Forget pain relievers. In certain common breast cancers, women opt for expensive, risky, miserable chemotherapy even though it doesn’t significantly improve an already high survival rate. They have a hard time waving it off, though, precisely because an insurer is picking up the tab.
In any case, Big Pharma is well along in being corrupted by third-party payership, just like the rest of the health-care industry. Drug makers increasingly aim their development efforts at the aches, pains, insecurities, heartburn and erectile dysfunction of price-insensitive, over-insured baby boomers because that’s where the money is.
Nigerian Barge jury finds $13.7 million market loss
The jury in the Enron-related criminal trial known as the Nigerian Barge case concluded the market loss hearing by determining today that the sham barge sale that was at the center of the trial cost Enron shareholders $13.7 million.
In a case that was largely dubious from the beginning, the jury’s conclusion on the market effect of the transaction was just as questionable as many other aspects of the case. In reality, there was no market loss resulting from the sham barge transaction. The fact that Enron did not account for the Nigerian Barge transaction properly actually made Enron’s earnings look better than they really were. Thus, that accounting helped to increase Enron’s share value for the benefit of investors who were buying and selling the stock at the time. Moreover, there is no evidence that the decline in Enron’s share value during its demise into bankruptcy in 2001 had anything to do with revelations regarding the barge transaction. Indeed, the alleged faulty accounting on the barge deal was not even discovered until well over a year after Enron went into bankruptcy and its equity value had become essentially worthless.
Nevertheless, the prosecution trotted an expert on to the stand who testified — apparently with a straight face — that the market loss from the sham barge transaction was $43 million. The defense countered with its own expert who testifed that, at most, the market loss attributable to the barge transaction was $120,000. In all likelihood, the jury was hopelessly confused by the entire matter and, as juries commonly do in such situations, split the baby and arrived at the utterly baseless number of $13.7 million. At least that number bears some resemblance to the $12 million profit that Merrill made on the deal, which of course has no bearing on the market loss. Oh well.
U.S. District Judge Ewing Werlein also asked the 6-women, 6-man jury in the Enron barge case to make findings on seven aggravating factors involved in the alleged offense that the Judge can use under current federal sentencing rules to increase or decrease the range of prison time an individual might receive. Two of the defendants — ex-Enron finance executive Dan Boyle and former Merrill Lynch banker William Fuhs — waived any right to have the jury advise the judge on their sentencing and were excused from the proceedings late last week. So, the jury’s findings only apply to the three other Merrill bankers who the jury found guily earlier, Daniel Bayly, James A. Brown and Robert Furst. Based on the jury’s findings, those three Merrill defendants could be facing considerable jail time depending on how Judge Werlein interprets the sentencing guidelines. All of the defendants are scheduled to be sentenced by Judge Werlein in March 2005.
The Rocket wins No. 7
Roger Clemens has won his record seventh Cy Young Award. At age 41, he is the oldest player ever to win the award.
The Battle of Fallujah
Ray Fair assesses the election results
Yale professor Ray Fair‘s model for predicting Presidential elections were the subject of these prior posts here and here. In this new piece, Professor Fair tries to explain why his model predicted that President Bush would win 57.4% of the two-party popular vote when he actually got only 51.5% (he speculates that the war hurt Bush more than projected), and provides this early prediction regarding the 2008 race:
It is possible to use the current vote equation to make a prediction for 2008. There will be no incumbent running again (PERSON = 0), and the Republicans will have a negative duration effect (DURATION = 1). If, say, GROWTH is 3.0, INFLATION is 3.0, and GOODNEWS is 2, which is a moderately good economy, the vote prediction for the Republicans is 50.1 percent, a dead heat. So the main message for 2008 is that the election will be close if the economy is moderately good. It would take a quite strong economy for the equation to predict a comfortable Republican win, and it would take a quite weak economy for the equation to predict a comfortable Democratic win. The Democrats clearly have a much better shot in 2008 than they had in 2004 according to the equation.
Could you pass a maggot, please?
My late father — Dr. Walter M. Kirkendall — was a master internist who was a legend among his students for his diagnostic skills and conservative views toward use of many medicines. For one of the reasons supporting his skepticism regarding the use of clinically untested medicines, take a look at Alex Tabarrok’s post over at Marginal Revolutions on Jerry Avorn’s new book, Powerful Medicines.
JP Morgan Chase unit buys big stake in Texas properties
A JPMorgan Chase & Co. subsidiary is paying almost a billion dollars to buy a piece of some of the state’s biggest buildings, including three in Dallas and two in Houston.
Ft. Worth-based Crescent Real Estate Equities Co. announced Monday that it is selling a stake to JPMorgan Investment Management in the Trammell Crow Center, Fountain Place and Crescent buildings in Dallas, and the Houston Center and Post Oak Central projects in Houston. Together, the properties have 7.9 million square feet of office space.
JPMorgan will buy a 60 percent stake in the Crescent in Dallas and the Houston Center and Post Oak Central projects in Houston. Those buildings are valued at almost $900 million. JPMorgan is also buying a 76 percent share of the Trammell Crow Center and Fountain Place skyscrapers in downtown Dallas, which are valued at about $320 million. Crescent said it will generate about $316 million in cash from the sales, and disclosed that it is negotiating with another buyer to reduce its ownership in the Crescent and the two Houston properties further to 24 percent. Upon completion of the sales, Crescent will be the general partner in the ventures and will continue to manage and lease the buildings.
Crescent endeared itself to many in Houston real estate business circles several years ago for managing to put itself in the position of prosecuting a highly publicized and unpopular lawsuit against Houston-based Lakewood Church. As the owner of Greenway Plaza, Crescent objected to the church’s leasing from the City of Houston of the Houston Rockets’ former home, The Summit a/k/a Compaq Center in Greenway Plaza, which the church is turning into a mega-church facility. Crescent and the City eventually worked out a settlement, and Crescent dropped the lawsuit against Lakewood, exiting the litigation with its tail squarely between its legs.
The least surprising motion of the year
In an expected move, former Enron Corp. CEO and COO Jeffrey Skilling, former Enron Chairman Kenneth Lay and former Chief Accounting Officer Richard Causey filed a motion Monday stating that Phoenix, Denver or Atlanta would be fairer places in which to try their criminal case than Houston.
Because of the intense negative publicity and public feelings in Houston surrounding Enron, the defendants contend that they cannot receive a fair trial in Houston. The three men have been charged with leading a wide-ranging conspiracy to hide extensive financial problems at Enron.
The first criminal trial involving Enron’s business operations recently was concluded in Houston in what is commonly known as the Nigerian Barge case, where the jury found four former Merrill Lynch & Co. executives and a former Enron vice president guilty of participating in a scheme to manipulate Enron’s earnings. A sixth defendant — Sheila Kahanek, a former Enron accountant — was acquitted.
In the motion to change venue, the Skilling legal team supplied results from surveys they had commissioned of public attitudes in Houston toward the former Enron president. According to the surveys, nearly 32% of the people surveyed in Houston used negative statements to describe Skilling, which was roughly three times the number in Phoenix or Denver. The survey revealed that Houston residents used such terms as “despicable,” “deceitful,” “thief,” “weasel,” “the devil” and “guilty as sin” to describe Mr. Skilling, in particular.
A request to change venue is not uncommon in high-profile cases such as this one. However, there is substantial risk in requesting one. U.S. District Judge Sim Lake will decide the issue and, if he is inclined to grant the motion, he will choose the new location for the trial. So, for example, if Judge Lake decides to move the venue of the trial from Houston to another location within the Southern Federal District of Texas, the case could be transferred to an even more unfriendly venue for the defendants, such as the Rio Grande Valley of Texas along the U.S.-Mexico border. In the Valley, a predominantly Hispanic jury pool will likely not take kindly to a group of wealthy white executives on trial for defrauding investors. Accordingly, like almost everything associated with the case, the motion to change venue is high risk, a lesson that Mr. Lay learned recently in regard to another motion that he had filed.
On the other hand, if there was ever a case for a change of venue, it’s an Enron defendant in Houston. Inasmuch as the prosecution batted .833 on a flimsy case in the recently concluded Nigerian Barge trial, the government would be justified in concluding that they are shooting fish in a barrel by prosecuting Enron defendants in Houston.
NFL remains the most valuable Reality-based TV
The National Football League has demonstrated again that it is the most valuable reality-based programming in the television industry today.
The NFL announced on Monday that Viacom Inc.’s CBS, News Corp.’s Fox, and satellite broadcaster DirecTV Group Inc. agreed to pay the incredible total of $11.5 billion to retain television rights to NFL games for the remainder of this decade. The deals represent an overall 40% increase compared with current contracts and reflect that professional football remains America’s most popular sports league despite the overall decline of broadcast-TV viewership.
The two broadcast networks will pay $8 billion combined over six years, through the 2011 season. Fox’s payments under its $4.3 billion pact will average $712.5 million annually, a 30% increase over the current deal’s $550 million average. CBS’s $3.7 billion deal averages out to $622.5 million a year, up 25% over its current $500 million average. Each network will air two Super Bowls under the new contract.
Moreover, the satellite-TV deal was a key to the renewals. DirecTV, which News Corp. controls, will pay the NFL $3.5 billion over five years through 2010 ($700 million a year), which is a substantial increase from the $400 million a year it pays now. The “NFL Sunday Ticket” package gives subscribers access to as many as 14 games a week.
The NFL’s current deals with Fox, CBS and Walt Disney Co.’s ABC and ESPN expire after the 2005 season. The league hasn’t announced extensions with ABC, which airs “Monday Night Football,” or ESPN, which shows a game on Sunday nights. ABC and ESPN have declined to negotiate new contracts until after the season ends.
The increase for the Sunday afternoon games on CBS and Fox is less than the the 72% increase that the NFL received under the most recent renewal of the contracts in 1998. However, in the current television market, the increase is considered remarkable. Although ratings for regular-season NFL games declined 10% overall from 1999 through 2003, this decline occurred against much sharper ratings declines for other television programming. And despite that decline, the Super Bowl remains the most-watched TV show of almost any year.
In fact, the two networks are paying more money for a potentially less desirable game inventory. CBS and Fox agreed to let the NFL sell a package or packages of as many as eight games a season for Thursday and Saturday nights and to cherry-pick late-season games to showcase on “Monday Night Football.”
CBS and Fox renewed their deals despite what most analysts describe as enormous losses on current contracts. ABC’s “Monday Night Football” has been estimated to post losses of as much as $250 million a year, and Fox wrote off $397 million from its current $4.4 billion deal in 2002. Viacom executives contend that CBS has not lost money on their deal with the NFL.