How a Former Enron Exec Is Getting Between Patients and Necessary Drug Treatments

Pharmacy background on a black table. Tablets on a black background. Pills. Medicine and healthy. Close up of capsules.
Pharmacy background on a black table. Tablets on a black background. Pills. Medicine and healthy. Close up of capsules.

When someone gets sick and needs life-saving drug treatments, they might think it's as simple as their doctor prescribing the necessary medicine. Unfortunately, that is often not the case.

Before a doctor can prescribe a drug, there is a tremendous amount of bureaucracy and red tape to work through. Insurance companies and pharmacy benefit managers, like CVS and Walgreens, employ a number of opaque practices to keep their profits high at the expense of patient health. These tactics include denying patients access to new drugs simply because secretive "formulary committees" have deemed them to be too expensive.

So, how do these formulary committees justify their decisions? The short answer is: They don't. As Ken McEldowney, executive director of Consumer Action, wrote in an Op-Ed in the San Francisco Chronicle, "too little is known about the process used to set formularies."

McElDowney further explains:

Narrow, complex formularies are of particular concern to consumers who need specific medications as determined by their doctors. Yet payers can choose not to cover these medications, and insurers tend to make it extremely difficult for consumers to challenge these decisions; in some cases, they even hide the process by which to do so...

...Transparency is desperately needed to empower consumers and their physicians to hold insurance companies accountable.

In the United States, no federal agency is empowered to provide objective analysis about how cost-effective a drug treatment is. In the absence of a true neutral arbiter, insurance companies and pharmacy benefit managers funded a group called the Institute for Clinical and Economic Review (ICER) to fill that void.

Lou Garrison, a University of Washington health professor who specializes in pharmaceutical economics, pointed out , ICER is "a private organization. So what kind of accountability will it have to the public, payers, and manufacturers?"

If you take a look at who is funding ICER, you get a clearer picture of who the organization will be accountable to. Last July, ICER received a $5.2 million grant from the Laura and John Arnold Foundation. The foundation was started in 2008 by former Enron Executive John Arnold and his wife Laura.

So, who is John Arnold? As an executive at Enron, John Arnold walked away with an $8 million bonus at the same time that the company's collapse decimated the retirement savings of rank and file employees. Meanwhile, the New York Times reported that Enron's collapse sank $1.5 billion in public pension assets, negatively impacting the retirements of teachers, firefighters, and countless other public employees.

After his tenure at Enron, John Arnold amassed a fortune as a hedge fund manager on Wall Street, becoming the nation's second youngest self-made billionaire. According to his own disclosures, he has spent up to $50 million on a nationwide campaign to gut public pension benefits. Arnold's crusade against public pensions included the use of seemingly independent nonprofit think tanks to spread tainted anti-pension research.

One can't help but look at his $5.2 million grant to ICER and not get the feeling that this is history repeating itself. In the Arnold Foundation's own announcement of the grant, it bragged that its goal is "to significantly change patient care and health system budgets."

If Arnold's history at Enron and his relentless work to end public pensions are any indication, that significant change will come at the expense of consumers.

That's why it is not the least bit surprising to see the nation's largest pharmacy benefit manager contributing a quote to the Arnold Foundation's announcement.

"I believe many payers and policy makers will find this information of critical importance as they evaluate the new drugs," said Steve Miller, MD, Chief Medical Officer of Express Scripts, in the press release.

Of course pharmacy benefit managers and insurers would want the private organization they are funding to become the "neutral" arbiter of which drugs should be covered. But, their efforts to rig the game threaten to get between patients and the most effective drug treatments.

Up to this point, much of the media and many policy makers seem to be taking ICER's claim of independence at face value. That should not continue. With John Arnold bankrolling ICER, it should be viewed with healthy skepticism.

If insurance companies and pharmacy benefit managers want to justify decisions that will have potentially drastic consequences for those with serious illnesses, they need to do better than relying on an "independent" organization funded by a billionaire with a history of profiting off the misery of others.

There is no doubt that reducing the cost of health care continues to be a laudable goal. There should be more research into the cost-effectiveness of drug treatments, but not one-sided research that only seeks to advance the goal of saving insurers and pharmacy benefit managers money. After all, the number one goal of health care should always be effective treatments that make sick people better.