Medical Data Mix-up, Major System Error Down Under - But Nobody Harmed, Of Course

This from Down Under. Apparently an American IT system by Cerner was involved:

Medical data mix-up, major system error

Kate Hagan | August 5, 2011

MELBOURNE hospitals have sent incorrect patient records to GPs due to an error with Victoria's troubled health technology program over the past two months.

The discharge summaries from Eastern Health and the Royal Victorian Eye and Ear Hospital mixed patients' names with other patient data, including test results and diagnoses.

[A major patient misidentification error - ed.]

The data was faxed to GPs under the HealthSMART program, which Health Minister David Davis has described as ''the myki of health''.

[I think 'myki' refers to the contactless smartcard ticketing system being introduced on public transport in Victoria, Australia. Did I mention I despise comparisons of healthcare to public transit, having started my career in the latter industry? - ed.]

Mr Davis yesterday said: ''This latest error raises further concerns about [former health minister] Daniel Andrews's judgment when designing the HealthSMART system.''

The Health Department was alerted to the record mix-up last month after two GP clinics raised the alarm.

Department spokesman Graeme Walker yesterday confirmed the bungle and said an investigation found that 13 incorrect discharge summaries were sent out over a seven-week period.

''There was an intermittent error in terms of the sending of discharge summaries in a small number of cases to GPs,'' he said. ''It was the link up between the software and the fax which caused some incorrect collating of material attached to the discharge summaries.''

Mr Walker said no patients suffered as a result of the bungle, which had since been fixed.

AMA Victoria president Harry Hemley said the mix-ups were a major concern. ''When patients are admitted to hospital often their medication is changed and they are given a diagnosis,'' he said. ''Discharge summaries influence our ongoing treatment of the patient. If our [incorrect understanding] is that a patient is on a certain medication, that could have serious implications.''

[Well, yes. How about - injury and death? - ed.]

Mr Davis said yesterday he had been advised of a software fault that led to some patient discharge summaries being distributed to the wrong GP clinics.

''I have sought and received assurances that patient safety has not been compromised,'' he said.

[Patients are NEVER harmed by IT foulups thanks to the Lords of Kobol overseeing the universe of Cybernetica - or something like that - ed.]

Mr Davis told The Age in January that he was considering abandoning the HealthSMART program, which is five years late and has cost the state $405 million, including an $80 million cost overrun.

[He should see what the UK just did with their NPfIT here - they pulled the plug - ed.]

The program, introduced by the former Labor government in 2003, is supposed to link computer systems in hospitals and give doctors immediate access to patient records. But clinical applications are only partially running in four hospitals and doctors say they are costly, outdated and difficult to use.

[That is, they present a mission hostile user experience - ed.]

Victoria's Ombudsman and Auditor-General are currently examining a string of failed information technology projects in Victoria, including HealthSMART, which have run over budget and fall short of their goals despite repeated warnings by the watchdogs.

[Repeated warnings by watchdogs ignored - that is quite familiar to me since my writings on these issues began - in 1999 - ed.]

Dr Hemley said the government needed to take urgent action to implement a system that allowed doctors ready access to patient records, test results and medication details. ''We're sick of hearing how bad [HealthSMART] has been, we're waiting for the Ombudsman to come out with that report so we can get on with this IT business and start it happening so that we can communicate with each other,'' he said.

[I wish them luck. Einstein on insanity: doing the same thing over and over again and expecting different results. - ed.]

''We've got to look at where mistakes have been made, eradicate them and move forward.''

[Yes, it's that simple. Of course, achieving nuclear fission on your kitchen table is easy as long as you have the right components and a pamphlet by Dr. Alfred E. Neuman on the topic - ed.]

Asked whether affected patients had been notified of the error, the Health Department's Mr Walker said that would be done ''at the discretion of either the hospital or GP involved''.

The Eye and Ear Hospital did not return calls from The Age yesterday and Eastern Health referred inquiries to the Health Department.

-- SS

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Why Radiologists Should Review Reports Carefully , and Why Health IT Causes Screwups

Another way computers in medicine can lead to maimed and dead patients:

Why Radiologists Should Review Reports Carefully
Diagnostic Imaging

By Arun Krishnaraj, MD | August 2, 2011

Mrs. Anderson called her doctor and spoke with pressured speech: “I think there is a mistake. That cannot be my ultrasound. I don’t have a gallbladder.”

Mrs. Anderson was accessing our hospital’s open EHR, which allowed her to view her radiology reports, and noticed a discrepancy. An ultrasound had been performed which identified “multiple hypoechoic lesions, incompletely characterized.” Because the lesions discovered were indistinguishable from metastatic deposits by ultrasound an MRI was correctly recommended for more definitive characterization. However, the dictating radiologists overlooked a “canned” normal finding in his final report noting the presence of a normal appearing gallbladder. Mrs. Anderson’s gallbladder had been removed surgically 10 years prior.

[In other words, he ticked a "normal" box or template and out came the report of a normal gallbladder - ed.]

Mrs. Anderson’s case came to my attention when I dictated her liver MRI, comparing it to the ultrasound performed earlier in the week. The liver MRI fortunately demonstrated only multiple benign lesions. My report commented on expected post cholecystectomy changes in the right upper quadrant in the findings of the dictation but not in the impression.

I did not read the portion of the prior ultrasound report describing the gallbladder because I was only concerned with the positive finding for which the MRI had been ordered, the liver lesions.

[In other words, most doctors are too busy and distracted by their work to have to deal with computer-generated garbage - ed.]

I received an e-mail the next day from the nurse practitioner (NP) caring for Mrs. Anderson. She said that Mrs. Anderson had called her office frantic that there was some kind of mix up and that her patient wanted to know which of her reports were correct. I reviewed both reports and realized there was a proofreading error on the ultrasound report, paged the dictating radiologist to amend the error, and explained to the NP how such errors occur with our speech recognition software and macros.

[They're lucky this case was not like the infanticide by computer cases here. However, next time, luck may run out and a critical finding might be missed, or an incorrect one added that results in catastrophe - ed.]

The NP understood and said she would explain to Mrs. Anderson that both her studies were accurate except for the oversight on the ultrasound dictation which would be amended.

While the NP realized how such errors may make their way on to finalized reports, I now better understand the impact an incorrect report can have on a patient. [My mother could have told him this, but he'd need a megaphone to talk to her. Her incorrect report has caused her to change her address to a cemetery and she is now six feet under the ground - ed.]

We are entering a new era of health care that is more patient centered. Part of this new paradigm is patient access to their medical records, easily accessible from the Internet.

While physicians possess the ability to distinguish between an occasional proofing error, patients can not, nor should they be expected to.

[And when physicians fail for any reason to distinguish such errors, patients are put in harm's way - ed.]

In order to increase the efficiency of radiology reporting, most institutions have moved to speech recognition (SR) software with templated macros. The potential for typographical errors has been shown to be higher using SR software than traditional transcription services.¹

[Wait - technology is supposed to, through cybernetic magic, reduce errors - ed.]

However, there is a paucity of literature regarding how often errors occur because of the use of pre-populated macros. I learned first hand how my words can affect a patient’s mental well being by inducing unnecessary anxiety. More and more pressure is being placed on radiologists to increase their RVUs to maintain their salaries. However, patients will not and should not excuse us from errors in what we report.

In an era of more open access to all medical records, including radiology dictations, it will be critical for radiologists to take pause and examine their finalized reports carefully.

[1] J Digit Imaging. 2008 Dec;21(4):384-9. Voice recognition dictation: radiologist as transcriptionist.

That might be sage advice for all doctors using computer-based equipment.

-- SS

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Debt Ceiling deal could endanger health care law - and it would be beneficial if health IT/HITECH were part of the trimmings

A story about the recent political deal to raise the Debt Ceiling entitled "Deal could endanger health care law" appeared in the Politico (hat tip Drudge Report):

Deal could endanger health care law

By JENNIFER HABERKORN | 8/3/11 11:28 PM EDT

Politico.com

The debt ceiling agreement could jeopardize millions of dollars, and perhaps billions, in initiatives from President Barack Obama’s health care reform law if the super committee can’t come up with required spending cuts.

Many of the pots of money in the law — one of the Democrats’ most prized pieces of legislation — could get trimmed by the debt deal’s sequestration, or triggered cuts. The funds for prevention programs and community health centers, grants to help states set up insurance exchanges and co-ops, and money to help states review insurance rates could be slashed across the board if the panel can’t find enough cuts this fall.

My suggestion:

Put health IT and the HITECH Act (the health IT component that 'somehow' found its way into the fantastically-successful American Recovery and Reinvestment Act of 2009) on the table.

Health IT devices are medical devices that are dangerous, unregulated and unproven (e.g., see 'Reading List' here) in their current state of development and lawless environment.

Cutting HIT funding probably would be beneficial in avoiding waste as well.

Note what just occurred in the UK:

UK NHS pulls the plug on its £11bn IT system

-- SS

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Time For A Summer Vacation at ONC - And Ethical Education of Health IT Zealots

A Microsoft Developer's Network (MSDN) blogger "Family Health Guy" a.k.a. Sean Nolan writes in a July 31, 2011 post entitled "Time for a summer vacation at ONC" that:

I’ve spoken at some length about my enthusiasm for the current leadership at HHS and ONC. President Obama has both directly and indirectly engaged some really gifted individuals to help us address healthcare challenges through the use of information technology --- which is awesome ... I’ve had the good fortune to participate in a few of these, and it’s been some of the most rewarding work of my career.

Truth is, I’m not used to seeing such great work out of government. So I’m a bit reluctant to throw out what could be perceived as a negative message --- but after my own two-week vacation thinking about it I’m convinced the time is right to ask ONC:

PLEASE, TAKE A BREAK!
JUST STOP TALKING FOR AWHILE AND LET US IMPLEMENT STUFF.

Why stop now? I think the answer is increasingly clear. Between Meaningful Use Stage 1, the Direct Project and the Health Data Initiative, government has kicked industry out of a funk it’s been in for the previous decade, and we’re seeing a ton of really exciting and positive innovation. But nobody, and certainly not ONC, knows at a detailed level how to turn that innovation into ubiquitous market reality.

What we need now is a period of implementation, competition and iteration to figure out how to deliver on the promise.

I find this attitude to be somewhat - well, let's just say, in a somewhat negative message, psychopathic.

We're talking about real, live human patients as the subject of our "figuring."

For, during the period of implementation, competition and iteration during which "we" will be figuring out how to deliver on "the promise" of experimental health IT medical devices, we shall be putting at risk and injuring non-consenting patients with our IT lessons-learned, and burying our more serious mistakes.

A far better way to figure out "how to deliver on the promise" would be to follow the protocols and procedures used to figure out how to deliver on the promise of other medical devices. These protocols and procedures, and ethical guidelines as well (link), were developed over decades in response to abuses of the past. (The Tuskegee experiments come to mind.)

That calls for controlled clinical trials under informed consent for safety and efficacy, careful study of the results, weeding out of unproven or dangerous technologies via regulation, and all this even before wide-scale rollouts of these health IT medical devices. Even after rollout, there needs to be a robust post-marketing surveillance process.

That's how it works with other medical devices and with pharmaceuticals. HIT medical devices deserve no special accommodation for any logical or ethical reason I can think of.

A lesson here: computer people, and health IT zealots of any background, need to be kept at arm's length from clinical settings, and on very short leashes in those settings.

-- SS

Aug. 3 addendum: the "period of implementation, competition and iteration to figure out how to deliver on the promise" in the UK did not turn out very well.

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UK NHS pulls the plug on its £11bn IT system

You saw it here first. Or, at least well before the pundits admitted this.



I've been predicting this event for quite awhile at this blog (e.g., see posts about the UK NPfIT at this blog query link). From the Independent:

The Independent (UK)



NHS pulls the plug on its £11bn IT system



After nine years and with billions already spent, doomed computer system is abandoned

By Oliver Wright, Whitehall Editor



Wednesday, 3 August 2011



A plan to create the world's largest single civilian computer system linking all parts of the National Health Service is to be abandoned by the Government after running up billions of pounds in bills. Ministers are expected to announce next month that they are scrapping a central part of the much-delayed and hugely controversial 10-year National Programme for IT.



Instead, local health trusts and hospitals will be allowed to develop or buy individual computer systems to suit their needs – with a much smaller central server capable of "interrogating" them to provide centralised information on patient care. News of the Government's plans comes as a damning report from a cross-party committee of MPs concludes that the £11.4bn programme had proved "beyond the capacity of the Department of Health to deliver".



[That's a theme in my writings on this blog with respect to the IT community in general. The situation is similar here in the United States. The health IT sector and the hospitals and physician practices who would need to implement this technology do not have the expertise, wisdom and plain common sense to make good on what would be the most massive and complex IT project in the world - ed.]



The Commons Public Accounts Committee (PAC) said that, while the intention of creating a centralised database of electronic patient records was a "worthwhile aim", a huge amount of money had been wasted. [It could have been used on patient care - ed.]

Note that some of the major players are American:

"The department has been unable to demonstrate what benefits have been delivered from the £2.7bn spent on the project so far," Margaret Hodge, chair of the PAC, said. [See my 'reading list' post for more on this issue - ed.] "It should now urgently review whether it is worth continuing with the remaining elements of the care-records system. The £4.3bn which the department expects to spend might be better used to buy systems that are proven to work, that are good value for money and which deliver demonstrable benefits to the NHS." A further £4.4bn was expected to be spent on other areas of the vast IT project.

The nine-year-old NHS computer project – the biggest civilian IT scheme ever attempted – has been in disarray since it missed its first deadlines in 2007. The project has been beset by changing specifications, technical challenges and clashes with suppliers, which has left it years behind schedule and way over cost.

Accenture, the largest contractor involved, walked out on contracts worth £2bn in 2006, writing off hundreds of millions of pounds in the process. Months earlier, the US supplier IDX, contracted to provide software in and around London, had also withdrawn from the project, making a $450m (£275m) provision against future losses from the two contracts.

The PAC said part of the problem had been weak leadership in the department. "The department could have avoided some of the pitfalls and waste if they had consulted at the start of the process with health professionals," it said.

"We are concerned that, given his significant other responsibilities, [NHS chief executive] David Nicholson has not fully discharged his responsibilities as the senior responsible owner for this project. This has resulted in poor accountability for project performance."

The report also criticises the contracts between the department and suppliers – so far, £1.8bn has been paid.

"One supplier, Computer Sciences Corporation (CSC), has yet to deliver the bulk of the systems it is contracted to supply and has instead implemented a large number of interim systems as a stopgap," it said.

It should also be mentioned that US HIT supplier Cerner Corp. was a prime supplier of HIT medical device software for this failed project.



Professors at Harvard and Nottingham Medical School have warned that the US is going down the same path as the UK (link).



I predict we'll waste hundreds of billions of dollars before we learn the same lesson. National HIT is a wicked problem, not a tractable one. It is unsolvable by run-of-the-mill bureaucrats, pundits and IT ignorazzi, especially those without clinical experience.



A list of other IT disasters is at the end of the Independent article cited above. It would appear this industry and its pundits/experts are incapable of learning from mistakes, or unwilling to learn.



In the case of HIT, however, people end up being maimed and killed rather directly.



-- SS



Aug.9, 2011 addendum:



An anonymous HC Renewal commenter on August 4, 2011 9:46:00 PM EDT had written: "There are some successes being reported with Cerner: http://www.guardian.co.uk/healthcare-network/2011/aug/03/newcastle-clinical-implementation-medical-software."



In checking that Guardian.uk article "Newcastle's clinical implementation of medical software" authored by Sade Laja on Aug. 3, I find this fascinating comment from a Guardian reader (apparently an even more confrontational earlier comment from this Guardian reader had been deleted):

ExiledEurophile



9 August 2011 2:10AM



I am very concerned that you saw fit to delete my last post.



Here it is again edited for any judgements and now contains only facts and questions, my opinion derived from carefully reading your article and from my own experience as a clinician who has tried to work with UK Health IT initiatives.



Could you have asked some more penetrating questions?



Why did you not interview 'ordinary' staff about what they think of the system? Were you unable to?



Where is the verified and peer reviewed evidence of benefit of implementation of the system?



Neither the head of IT and the Director of Pharmacy (unless Mr. (?Dr.) Watson is a medically qualified clinical pharmacist) are strictly speaking clinicians. Why were you not introduced to the masses of excited and supportive senior clinicians backing Cerner at the RVI?



Have you understood the nature of a Cerner contract and the clauses relating to any responsibility the company has for medical accidents that occur when the software is used? Does the contract allow staff to communicate publicly about the performance of the system?



Reading your article carefully it is clear that RVI have implemented Cerner's Patient Administration System (PAS) and the electronic ordering of tests and drugs, but it seems fairly clear there is no electronic patient record, nor the chance of one arriving soon.



If all other methods of ordering drugs and tests have been scrapped then the RVI can easily claim ALL medical staff are using the programme, but strictly that is because they have no alternative.



A 'Big Bang' start up would imply implementing all aspects of Cerner together, but it seems all that all the RVI did initially was start the PAS followed by a 'slow down'. Let me tell you about my own experience of the 'slow down';



The Cerner Millenium interface, in my opinion, is so user unfriendly and so difficult to interrogate that when it was switched on in a District Hospital in the South West of England they has to immediately employ 24 extra clerks to manage the appointments in out patients - which brings into question whether the system automatically leads to increased efficiency and cost savings. As far as I know no Cerner based electronic patient record was ever switched on in that hospital because none available was seen to be fit for purpose. Every Department or specialty had to make its own arrangements for e-health, and there was difficulty in talking to the Cerner PAS both technically and because the UK Dept of Health forbade peripheral systems from being able to talk back to the PAS electronically. So much for avoiding 'siloing' of medical information around the hospital.



If you want to know how Cerner clinical systems perform please read this;



A Critical Essay on the Deployment of an ED Clinical Information System ‐ Systemic Failure or Bad Luck?



Not only does it state how poorly the 'First Net' emergency system from Cerner performs in New South Wales but also that majority of staff loathe it , Prof Patrick also has discovered key flaws in the underlying IT architecture of the core code of Cerner's software.



Furthermore it reports on the nature of Cerner contracts and the way the company seeks to avoid responsibility for incidents and restricts staff from talking about the product.



Two further points - look on the BBC and e-Health Insider web-sites about Cerner costs. Why does a Cerner system in Bath cost nearly three times a System C implementation in Bristol?



And as for Patient safety of e-Health intiatives; there is the ultimate irony of the following report of a failure at UPMC, Cerner's 'home' hospital;



http://m.post-gazette.com/local/region/entire-upmc-transplant-team-missed-hepatitis-alert-1159219



To be fair the problem here was one of staff failing to acknowledge a result, but it may have been exacerbated by the level of usability of the system and certainly having a full e-Health IT record did NOT stop the problem occurring.



[In that article: "But some UPMC doctors have complained that the hospital system's acclaimed electronic records system, designed in coordination with Cerner, an electronic records company, is, at best, cumbersome to use and difficult to adjust for any one doctor's particular needs." What we need to see are the actual screens and context in which these alerts appeared, as I find it hard to believe an entire transplant team could be be negligent or fools. See my 9-part series on mission hostile user interfaces for more on this issue - ed.]



By the way the tide of opinion may be turning about how much health and economic benefit e-Health initiatives are delivering around the world;



http://www.post-gazette.com/pg/11219/1165767-114-0.stm?cmpid...xml

"Electronic Records no Panacea for Health Care Industry"



The recent Public Accounts Committee report has amply demonstrated the folly of the NPfIT programme, but unless proper OBJECTIVE evidence of the direct implementation of Cerner systems is provided together with unfettered support from ordinary (ie non-Trust management) NHS staff, I hope you will adopt an approach of scepticism, rather than acceptance of the opinions & oral reports of top-end NHS Trust mangers of the RVI or NHS other hospitals, who have their CEO's, executives and their IT providers to impress.



ps I believe that most NHS Trust Boards are having the wool pulled over their eyes on this issue.

Let's hope this comment stays. I have seen grossly exaggerated PR regarding health IT "success" myself and the themes in this comment resonate with that experience.



-- SS

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What the Pfizer (II)? - Lack of Transparency About Dysfunctional Leadership

The recent in-depth investigation by Fortune reporters of 10 years of dysfunctional leadership at Pfizer, the "world's largest research-based pharmaceutical company," raises many issues about leadership and governance in health care (see our post here).  To continue what is likely to become a lengthy series, let us discuss the most obvious one, is the discrepancy between what appeared in Fortune and what Pfizer chose to make public about its leadership.

This discrepancy is most apparent when one compares official descriptions of executive performance with what the Fortune reporters found.  To illustrate, consider the official descriptions of the performance of former Pfizer CEOs Hank McKinnell and Jeffrey Kindler in the respective years in which they were forced out.

"Hank" McKinnell -2006

Mr McKinell was forced to retire in 2006.  The Fortune article described Mr McKinnell as a "desperate CEO" by 2002 because he could find no way to replenish the company's fading drug pipeline; who then became an absent CEO who "left a power vacuum" and then triggered internal political warfare by setting up a "bitter contest" over succession planning.

The 2006 Pfizer proxy statement  explained how the Board of Directors' Compensation Committee assessed Mr McKinnell's performance,

The Committee does not rely solely on predetermined formulas or a limited set of criteria when it evaluates the performance of the Chairman and CEO and the Company's other elected officers.

In 2005, the Committee considered management's continuing achievement of its short and long-term goals versus its strategic imperatives, including Dr. McKinnell's objectives which are shown below:

• Achieve specific revenue, EPS, operating cash flow per share, and merger-related synergy goals
• Effectively communicate strategy and financial results to increase shareholder value
• Deliver more new medicines more quickly to patients, through industry- leading R&D productivity and significant in-licensing activity
• Adapting to Scale
• Promote new directions in health and wellness
• Shape a positive environment for better healthcare
• Developing People, Talent, and the Organization

The Compensation Committee then assessed McKinnell's performance thus:

Financial and merger synergy goals

Overall, the financial targets, which reflected a significant stretch for the organization given the dynamic business environment and the loss of exclusivity for certain key products, were exceeded.

Communicate effectively

However, given the performance of the Company's stock price in 2005 when compared to prior years, the Committee felt that the goal of effectively communicating strategy and financial results to increase shareholder value was not met.

More medicines more quickly

All R&D productivity and licensing goals were met or exceeded, with, notably, five products under priority review at the FDA — an industry first. As the R&D organization continues to establish the industry standard in productivity, the Committee determined that performance against this objective significantly surpassed expectations.

Adapting to scale

In 2005, initiatives related to Adapting to Scale resulted in twice the cost reduction that had been estimated for the year, giving a very strong start to the Company's efforts to reduce the cost base and streamline the organization.

So,

the Committee believes that overall performance significantly surpassed the expected outcomes for this objective.

Promote new directions

In promoting new directions in health and wellness, Pfizer's newly launched Healthy Directions program for U.S. based colleagues far exceeded expectations.... the Committee determined that these goals were significantly exceeded.

Shape a positive environment

The Company is also leading efforts to rebuild trust in the industry and large companies in general.

So,

Overall, the Committee believes that the Company surpassed expectations of performance against this particularly challenging objective.

Developing people, talent, and the organization

With respect to the final objective for 2005 — Developing People, Talent, and the Organization — the Committee recognized that senior leadership of the Company has been instrumental in developing and implementing new People & Talent strategies related to long-term development planning for key talent, enhancing leadership skills for all 'people managers', and enabling Pfizer to become a global leader in attracting, developing, and engaging a diverse workforce that delivers superior business results. As a result, the Committee determined that the goals of this objective were surpassed.

So, according to the Committee, Mr McKinnell's performance was excellent in all areas but one.

Accordingly, based apparently on this stated "General Compensation Philosophy,"

The Committee believes that compensation paid to executive officers should be closely aligned with the performance of the Company on both a short-term and long-term basis....

So the present value of Mr McKinnell's total compensation was estimated to be $15,880,989.

Jeffrey Kindler - 2010

Kindler was forced to resign in 2010. The Fortune article also described Mr Kindler as "suddenly desperate" after two failures of drugs in development; someone who "just couldn't make up his mind," about acquisitions and spin-offs; "anguished" about research, leading to a "messy" overhaul; and putting "destructive" trust in a subordinate with previously described problems with "character, integrity and divisiveness" leading to loss of the loyalty of the executive team.

However, in the company's 2010 proxy statement, the Compensation Committee made this general assertion:

The Committee believes that Mr. Kindler's leadership was a significant factor in the continued progress made by Pfizer in 2009 in strengthening the foundation for future growth and long-term success.

Then, Mr Kindler, like Mr McKinnell, was assessed against specific performance standards thus:

Financial Results

Despite the unprecedented challenges in the global macroeconomic environment and other challenges, the Company exceeded the target goals for 2009 set by the Committee for annual incentive purposes

Enhancing the Product Portfolio

Under Mr. Kindler's leadership and oversight, during 2009 we improved the product portfolio (early stage through late stage),...

People Management

In 2009, we met or exceeded each of our people management goals,...

Business Model Implementation

the Company remains on track to meet the various research and development goals announced in March 2009. Mr. Kindler also further strengthened the Company's leadership team through strategic hiring and the redeployment of key senior leaders across the Company.

Wyeth Transaction

During 2009, we devoted significant attention to the acquisition of Wyeth. Under Mr. Kindler's leadership, we finalized negotiations, gained regulatory approval and closed the $68 billion acquisition of Wyeth, all in an expeditious manner. During the year, Mr. Kindler oversaw a detailed review of Wyeth and its businesses and the development of an integration plan,...

So,

With the completion of the acquisition under Mr. Kindler's leadership, Pfizer is one of the largest biopharmaceutical companies in the world, as well as a more diversified company in the health care industry.

Industry Leadership

During 2009, Mr. Kindler was actively involved, through both Pfizer and external organizations, in developing and advancing U.S. and global public policies that serve the overall interests of our Company and our shareholders

In summary,

In view of Mr. Kindler's accomplishments noted above and the fact that he achieved all of his objectives and exceeded most of them, the Committee believes that Mr. Kindler successfully led the Company toward the achievement of its strategic goals during 2009....

Based on the same general compensation philosophy noted above, Mr Kindler's total compensation in 2009 was $14,898,038.

Summary

Anyone who depended on these proxy statements to assess the performance of the Pfizer CEOs in 2006 and in 2010 would have likely concluded that both CEOs exhibited exemplary performance. These impressions would have apparently been sharply discrepant with the realities inside the company at those times.

Like the children of Lake Woebegone, we have frequently noted how almost all CEOs seem to appear "above average" or better to their boards of directors or trustees. The case of Pfizer in 2006 and in 2010 shows a board of directors which painted a grossly optimistic view of CEO performance to the public. In both years, these views would almost immediately clash with the fates of the particular CEOs. Now, based on the Fortune investigative report, these views seem even more overblown if not absurd.

This case, which again concerns the "world's biggest research driven pharmaceutical company," suggests one should be very skeptical about evaluations of executive performance in proxy reports. Proxy reports now appear to be a very cloudy window through which to view how corporations are really run. However, in the US, proxy reports have legal standing and are supposed to be sources of definitive information for stockholders and anyone else interested in the corporations that produce them.

Thus, the large organizations that dominate US health care may be even less transparent than they appear. True health care reform requires true transparency, and meaningful deterrence of propaganda disguised as fact.

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10 Years of Pfizer Leadership - "A Saga of Ambition, Intrigue, Backstabbing, and Betrayal"

A remarkable story about mismanagement of health care has appeared in the mainstream media, and most remarkable is that this article in Fortune chronicled 10 years of poor leadership by three CEOs at Pfizer Inc, the world's biggest drug company

The CEO Who Would Not Leave

In 2001, William C Steere Jr retired as CEO, but did not really leave, muddying the chain of command:

In January 2001, Steere, by then 64 and a company legend, retired as CEO. He handed the job to his handpicked No. 2, Hank McKinnell. Steere stepped aside -- but not out. He received a consulting contract, with an office and secretary at Pfizer headquarters. Most important, Steere was granted the title of chairman emeritus and retained his seat on the Pfizer board. Governance experts widely regard such lingering as a recipe for trouble. Steere would remain a potent influence for another decade, outlasting his two successors.

Waffling About How to Support the Pipeline

The next CEO was Henry "Hank" McKinnell Jr, who was faced with a declining pipeline of new drugs. His response was to go from one extreme to another:

Pfizer's pipeline simply couldn't support the growth the company had promised investors. Three of its blockbusters were about to lose patent protection and face generic competition, meaning their profits would plummet. The biggest issue, of course, was Lipitor -- by 2005, it was bringing in a staggering $12 billion a year, more than a quarter of Pfizer's revenues. The company wouldn't lose its exclusive rights to Lipitor until late 2011, but already Wall Street was wondering how Pfizer could possibly replace it.

McKinnell kept boosting R&D budgets, maintaining Pfizer's 'shots on goal' approach -- the more compounds you explored, in theory, the more drugs you'd generate. But drugs can take a full decade to be developed and approved, and nothing big would be ready for years.

So McKinnell fell back on the refuge of the desperate pharma CEO: In July 2002 he announced the acquisition of Pharmacia, the industry's seventh-largest company, for $60 billion in stock.

A Power Vacuum and the Infighting Begins

When that did not work, McKinnell made himself scarce, leading to infighting among the next level of executives:

But even as Pfizer struggled to digest this latest meal, McKinnell seemed to spend less and less time at headquarters, becoming head of industry trade groups, funding an institute in Africa to combat AIDS, even writing a book about reforming health care.

That left a power vacuum, and Bill Steere, the former CEO, seemed more than willing to fill it. He was a familiar figure at Pfizer's New York headquarters, where he worked out in the basement fitness center and ate lunch in the cafeteria. Steere was always happy to lend an ear and share his views. His retired status and public reserve concealed tremendous influence. 'He says almost nothing,' says a person familiar with Pfizer's board. 'But people look to him to see how he nods and how he moves, because he knows the company better than anyone.'

With Pfizer no longer soaring, internal squabbling intensified. Vexed by what he viewed as Steere's meddling, McKinnell even tried to terminate his consulting contract. Steere fended off that move.

Furthermore, McKinnell's ideas about succession planning led to further infighting:

By 2005, McKinnell was already making plans for his succession. He promoted three executives to vice chairman, setting off what would become a long and increasingly bitter contest to choose the next CEO.

More Waffling Over Acquisitions Versus Spin-Offs

As Pfizer's stock price continued to fall, the board pushed McKinnell into rretirement in 2006, and replaced him with Jeffrey Kindler. However, Kindler also could not make up his mind whether to grow or shrink the company:

Suddenly desperate to shrink the company -- which had just completed two giant mergers -- Kindler announced plans for brutal layoffs that included axing 20% of the vaunted U.S. sales force.

Yet even as he was making massive cuts, Kindler was also pondering acquisitions, toying with alternative strategies. The first was a 'string of pearls' approach -- a handful of smaller purchases, each aimed at filling a single strategic gap, such as biotech. The second strategy was yet another megadeal -- namely, buying Wyeth. That company had $23 billion in sales, strength in vaccines and biotech, a large over-the-counter products division, and several blockbusters of its own, including Prevnar, an antibacterial vaccine for children.

But after more than a year of on-and-off debate, Kindler just couldn't make up his mind.

Inconsistent Leadership for Research and Development

the process of overhauling R&D was a messy one. Kindler shuffled through three research chiefs during his 4 1/2 years as CEO. He closed six R&D sites, then halted research in 10 disease areas even while setting a new goal of launching four new internally developed drugs a year by 2010. He split the research operation in two -- setting up a separate unit for biologic drugs (and launching an expensive new facility in San Francisco) -- only to reverse the decision 30 months later after taking on Wyeth's big biotech operation.

Among the shuttered Pfizer sites was one at Ann Arbor, the birthplace of Lipitor. Says Bruce Roth, the scientist known as 'the father of Lipitor,' who lost his job when the Ann Arbor site closed and now works for Genentech: 'When every 18 months you throw the organization up in the air and are shifting therapeutic areas or closing sites, you have this period of turmoil when everybody in the organization is paralyzed. You need some continuity to do science.'

Kindler was struggling for answers in a complex industry where his own experience was limited. In an effort to bring in fresh thinking, Kindler spun his leadership team like a top. Company veterans Shedlarz, chief medical officer Dr. Joseph Feczko, and CFO Alan Levin departed. Frank D'Amelio, Kindler's new CFO, arrived from Lucent. Sally Susman, his new communications chief, had worked at Estée Lauder (EL). His new general counsel, Allen Waxman, resigned abruptly for "personal reasons" after just one year; replacing him was Amy Schulman, a high-profile litigator at DLA Piper.

In Thrall to a Questionable Subordinate

The Fortune article devoted considerable space to document Mr Kindler's trust in a questionable subordinate.

Perhaps the only thing as destructive to Kindler as his inability to trust his colleagues was the one Pfizer executive in whom he did place his trust: Mary McLeod. The head of human resources under Kindler, McLeod would leverage her relationship to the CEO to become both his emissary and a power in her own right. Kindler's loyalty to her would undercut him at a crucial moment.

Kindler did not seem to realize why she had lost her former position:

Her tenure at Schwab had ended disastrously, though there's no sign Kindler knew that when he brought McLeod in. As Schwab's head of HR and chief of staff to CEO David Pottruck in the early 2000s, McLeod had proved toxic, according to six members of Pottruck's executive team. They say she isolated him from other points of view and went to extraordinary lengths to remove rivals. Meanwhile she criticized him behind his back and bragged that she had the CEO under her thumb.

After an internal investigation, Pottruck fired McLeod in 2004, he confirms. In an e-mail sent to McLeod the day of her termination, read aloud to Fortune, Pottruck wrote: 'The issues are about the perceptions others have of you around character, integrity and divisiveness … There is a perception that you do not tell the truth.'

Ms McLeod's ascendancy seemed to create toxicity:

McLeod seemed uninterested in the details of how the streamlined department would actually function. Even top deputies say she was virtually unapproachable, preferring to communicate by e-mail and quarterly videocast.

McLeod's primary focus was the care and feeding of the CEO. She became Kindler's protector and surrogate, whispering in his ear, controlling access to him, delivering his blunt messages. Kindler admiringly called her 'Neutron Mary,' after his hero, Jack Welch. McLeod seemed to encourage his harshest nature, telling him, according to a person who was present, that one senior executive was 'a B player,' another too ambitious, someone else a 'crybaby.'

McLeod also publicly denigrated her employees, announcing at one town hall meeting in 2008 that two big positions would have to be filled from outside because no one inside Pfizer was capable of doing the job.

Yet Mr Kindler seemed to make sure Ms McLeod's compensation reflected his good relationship with her, not her relationship with the rest of the company:

McLeod's emoluments were so lavish they might make her one of the company's five most compensated employees, which would require Pfizer to disclose the details in its annual proxy statement. In early 2008 company governance chief Peggy Foran investigated the issue and tallied nearly $1 million in payments to McLeod, including those relating to her various houses, the helicopter use, and a large bonus to buy her out of a consulting partnership. Then there was McLeod's salary and regular bonus of $900,000 and restricted stock and options.

As Mr Kindler continued to flounder, his excess faith in Ms McLead undercut his support among other executives:

loyalty to the CEO among members of his 'executive leadership team,' or ELT, was growing tenuous. One catalyst for the disaffection was Mary McLeod. With the CEO's support, she had become feared inside Pfizer. Kindler seemed blind to her shortcomings, opening up a divide within the ELT. Says one executive: 'There was Mary and Jeff, and then there was the rest of us.'

When the board finally realized how much dysfunction Mr Kindler's trust in Ms McLead was causing, it was the beginning of the end of his CEO-ship. Her increasingly bizarre behavior lead to an inquiry:

The two-week investigation was conducted by Bart Friedman, an attorney with Cahill Gordon & Reindel who specializes in corporate governance work. After interviewing all of McLeod's direct reports, Friedman found nothing illegal. He did, however, conclude that HR was thoroughly dysfunctional, and riven by inept management. In his view, this was a simple case of incompetence.

On Wednesday, Dec. 1, Pfizer's executive team gathered for a day of meetings with the CEO. Mary McLeod was missing. After hearing Friedman's report, Kindler had finally parted ways with his controversial HR chief -- though not without a generous severance package.

Now it was Kindler whose job was threatened.

Summary: Per Fortune

Indeed, what has occurred at the company -- whose $68 billion in annual sales are built on blockbuster drugs such as Lipitor and Viagra -- is extraordinary. Once a Wall Street darling and corporate icon, Pfizer has tumbled into disarray. In the decade that ended with Kindler's departure, its stock price sagged from a high of $49 down to $17 and its drug pipeline dried up (problems the company continues to grapple with today). Pfizer lost its way, stumbling through a frantic series of zigzags in the hopes of finding new blockbusters to sustain its prodigious profits in the future.

Meanwhile, its managers descended into behavior that would do Shakespeare -- or Machiavelli -- proud. There was the ex-CEO who couldn't relinquish his power and quietly maneuvered to undercut two successors he had helped install. Then there was the human resources chief who divided the staff rather than uniting it. Most of all, there was Kindler himself, a bright man with some fresh ideas for reforming Pfizer but a person who agonized over decisions even as he second-guessed everybody else's actions. The story of Jeff Kindler's tumultuous tenure at Pfizer is a saga of ambition, intrigue, backstabbing, and betrayal -- all of it exacerbated by a board that allowed the problems to fester for years.

Health Care Dysfunction Made Visible

In "a cautionary tale: the dysfunction of American health care," published in 2003, I postulated causes of our country's health care malaise based on qualitative interviews with physicians and cases I found that instantiated their concerns. One major concern was about "ill-informed, incompetent, self-interested, or even corrupt leadership." Since then, on Health Care Renewal, we have discussed a large number of cases of such bad leadership. However, most cases have come from news reports which cover only a single incident or small slice of time. The Fortune article on Pfizer covered 10 years of leadership that at least appeared ill informed and of doubtful competence.

Given that Pfizer is the world's largest pharmaceutical company this long duration case narrative does underscore our concerns. That such an important health care organization could be so badly lead for so long suggests that our fears about the problems of leadership of large health care organizations were, if anything, understated. As the Fortune article's authors put it:

Pfizer is an enterprise with the noble calling of easing pain and curing disease. Yet its leaders spent much of their time in the tawdry business of turf wars and political scheming.

When these sorts of sentiments start appearing in business magazines, health care professionals and policy makers ought to realize how overdue are our serious efforts to improve leadership and governance in health care.

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