February 2008 Archive
The Department of Justice approved UnitedHealth’s acquisition of Nevada insurer Sierra Health Tuesday, allowing the top
The closing of the deal is contingent on UnitedHealth divesting its individual Medicare Advantage plan policies in the Las Vegas area, where it and Sierra Health together control more than 90% of the Medicare alternative plan market. The assets will go to Humana with hopes that the provider will bolster competition. Whether the divestiture will be enough for parties that avidly protested the deal and ultimately delayed its closing is yet to be seen.
UnitedHealth has been on an acquisition rampage for most of this decade, and concerned parties have worried not only over unfair market shares but also over the possibility that Nevada health care customers would suffer as a result of the merger, much as customers in California have suffered from UnitedHealth’s $9 billion acquisition of PacifiCare two years ago.
UnitedHealth effectively swallowed PacifiCare’s operations and parceled them out to various other business units, but in the process created a mountain of administrative errors. The company is facing fines from California regulators over mishandled claims (its practices are being scrutinized in other markets as well), and many fear that the latest acquisition could result in a similar customer service downfall.
This is not the only acquisition on UnitedHealth’s buffet table — it recently scarfed down Fiserv’s health businesses, and it has a deal in the works to add Midwest provider Unison Health. It would seem that perhaps the company cannot get enough of growth and has little care for customer concerns over whether it can effectively manage such a large mass of combined policies.
UnitedHealth has admitted its blunder during the PacifiCare integration, and one would hope that the health care giant has learned its lesson and will proceed with care in its present and future business combinations. A statement on the Sierra Health web site outlines that while the acquisition is a done deal, its integration will be held off until UnitedHealth divests its Las Vegas ops. I’m betting that UnitedHealth won’t be able to keep its finger out of the Sierra Health pie for long though.
“We’re dead meat.”
That’s what Anthony Magidow, general manager at the Hallmark/Westland Meat Packing Co. said last week after his company recalled some 143 million pounds of beef produced by the Chino, California meatpacker since February 2006. It is the largest beef recall in US history.
An interesting choice of words on Mr. Magidow’s part. Hallmark/Westland is the subject of a USDA investigation regarding animal-welfare and food-safety violations after an undercover video taken by The Humane Society was released showing Hallmark employees zapping downer cows — those that are too sick or injured to stand up or walk on their own — with electric prods, shooting water up their noses with high-pressure hoses, and ramming them with forklifts in order to get them up and walking.
Since downer cows can be a source of bovine spongiform encephalopathy (mad-cow disease), e. coli, or salmonella bacteria, non-ambulatory cattle have been banned from the human food chain since 2003. Mad cow can cause a rare but fatal brain disease in humans, and e. coli and salmonella can lead to food poisoning in humans. Under federal regulations, meat companies are supposed to report downer cows to a federal inspector for re-evaluation.
The Hallmark/Westland plant has been closed since February 1 due to the recall and is reportedly running low on cash. Magidow’s dead meat statement was in reference to what will mostly likely put his company out of business — the fact that the USDA will probably require the company to pay the incurred costs of destroying and replacing the meat supplied by Hallmark to the National School Lunch Program, the Emergency Food Assistance Program, and the Food Assistance Program on Indian Reservations. Hallmark, which has laid off some 200 employees as a result of the recall, is one of the largest suppliers of the school lunch program, accounting for some 20% of the its ground meat products.
It must be said that none of the meat sold by Hallmark/Westland has been found to be contaminated, nor have any illnesses been reported. The USDA has stated that the meat, some 93 million pounds of which is still unaccounted for, poses very little risk of harm.
But clearly, Hallmark, which has been on the radar of to the Inland Humane Society and the Society for the Prevention of Cruelty to Animals since 1996, has violated the regulations. Hallmark/Westland employees, two of whom have been charged by the San Bernardino County district attorney with felony counts of animal abuse, have said that they were told to, and on rare occasions did, slaughter downer cows.
Congress, always a prime shutter of the barn door after the horse is out, is holding hearings. Official letters are flying. In addition, the Government Accountability Office (or GAO), which is the investigative body of Congress, is planning to look at food safety within the federal school-lunch program.
The Humane Society has called for real-time cameras in slaughtering plants as a way to get companies to comply with the law. So has Dr. Temple Grandin, an expert in animal-handling and a professor of animal agriculture at Colorado State University, who says that until the meat industry is more open with the public about its operations, the only view the public will have is that of its adversaries.
There are two companies already using operational surveillance: Arrowsight Food and Beverage in New York, and FPL Foods in Georgia. Adam Aronson, Arrowsight’s CEO, says that since just anyone can film anything inside a meat plant, companies must think about any operations that, if exposed, might hurt their brand, their product, or people.
The meat industry, their watchdogs, the public, and the government are all in an uproar over this, as well they should be. There is a deafening silence, however. Since the recall, Hallmark/Westland’s president and owner, Steve Mendell, has refused to comment to the press and failed to show before Congress to testify.
Genentech scored a huge regulatory victory recently when the FDA approved its cancer drug Avastin as a treatment for breast cancer. The approval came as a surprise: An agency advisory committee had recommended against approval back in December.
There’s no denying this is big for Genentech, whose stock has declined over the last couple of years as its once red-hot growth has cooled. Avastin is already the company’s biggest seller; previously approved for colorectal and lung cancers, the drug brought in more than $2 billion in revenue in 2007. And adding breast cancer to the mix means another billion dollars a year. The approval is also validation of the common strategy of label expansion, in which drug companies try to get the most bang for their development buck by widening the number of diseases for which a single drug can be prescribed.
The question remains, however, whether the approval is as good for cancer patients as it is for Genentech. The FDA’s advisory panel had recommended against approval because clinical studies had shown that, while the drug slowed the progress of breast cancer (what’s referred to as “progression-free survival”), it didn’t actually lengthen patients’ lives (called “overall survival”).
The latter statistic has historically been the standard for FDA approval of cancer drugs. The Avastin approval is thus widely seen as a lowering of the regulatory bar.
There’s something to be said for easing up on drug approvals, of course.
Some patient advocates and investors have complained about the FDA’s recent aversion to risk. Getting a good sense of overall survival rates takes a long time, and in the meantime, there are women who might benefit from Avastin. (Thousands of breast cancer patients already take the drug “off-label” anyway, but insurance coverage for that kind of use is extremely limited. FDA approval makes it much more likely to get coverage.)
The Wall Street Journal made the moral case for FDA approval on Thursday, arguing that privileging overall survival over progression-free survival is an archaic standard and that the FDA shouldn’t withhold potentially helpful treatments from patients. Conversely, Niko Karvounis at Health Beat argues that the approval of Avastin encourages mediocrity in drug development: If companies can continue to milk existing drugs based on unimpressive trial data, they’ll keep putting their money into label expansion rather than looking for truly innovative treatments. Besides, Karvounis says, progression-free doesn’t necessarily equal symptom-free, especially since Avastin produces some pretty nasty side effects.
It’s quite the moral quandary. But here’s one potential parallel to consider: The FDA approved Vytorin based on data showing it lowered cholesterol. But now it seems that Vytorin’s cholesterol-lowering abilities had no effect in reducing heart attacks — which is, after all, the whole point. Seems to me there’s a similar distinction to be made between progression-free survival and overall survival: If Avastin isn’t helping people live longer, what’s the point?
Nestled in that red heart-shaped box of bon-bons you received this past Valentine’s Day is a boatload of guilt. It’s not just the calories — our waistlines and cholesterol counts having barely recovered from our Christmas/Hanukah/New Year’s eating extravaganzas — but it’s also knowing that there are people in the world, including children as young as nine, who are forced into slavery and made to pick the cocoa beans used to make those glistening chocolates you were so lovingly given. It’s enough to make your heart break. (See, for example, the BBC documentary, Slavery: A Global Investigation.)
Human rights and advocacy groups, such as Global Exchange, Stop the Traffik, and Save the Children, have been active in fighting for slave-free chocolate for some time and have campaigns to raise awareness and to urge companies to take part in fair-trade agreements whereby farmers are paid market prices for their crops. These groups state that without minimum pricing to ensure steady income, farmers are not likely to make changes to their labor practices.
Slave-free chocolate is a horrible term but it describes a horrible exploitation. Any number of food companies, including Ben and Jerry’s, Endangered Species Chocolate, Trader Joe’s, and Whole Foods, use fair-trade chocolate in some or all of their products. But what about the big candy companies?
Hershey and Mars, for instance, control some two-thirds of the U.S. chocolate market, which generated $11.3 billion in sales in 2003 (the last year for which the Chocolate Manufacturers Association posts figures). Both companies, along with other major producers like Nestlé, Archer Daniels Midland, Cadbury, Guittard and Barry Callebaut, import cocoa beans from the Ivory Coast, which, as the largest cocoa producer in the world, provides almost half the cocoa beans that end up in the US. Most of that cocoa comes from farms of 12 acres or smaller.
According to its Web site, Hershey says it works with its industry partners, governments and international agencies, and the farmers themselves to promote economic and social programs.
As the largest chocolate company in the world, Mars comes under particular international scrutiny for its cocoa-buying practices. Although Mars is privately held and therefore does not release revenue figures, Forbes estimates that the McLean, Virginia-based company’s sales hovered around the $21 billon mark for 2007. Surely, the company can pay farmers a fair wage. And according to a statement on the company Web site dated September 2007, the company is involved in programs that provide economic, educational, and environmental assistance to cocoa farms in West Africa.
These corporate statements (other companies post them as well) read all warm and fuzzy, but just where and how companies implement their fair-trade practices is hard to pin down. And in a perhaps related note, the European Commission, the Canadian Competition Bureau, and the US Department of Justice are currently looking into the possible price-fixing practices of Mars and Hershey. Pardon my skepticism, but if they’re fixing prices at the selling end of things, how honest are they at the buying end?
This is the story of an eye-opening technology that promises to revolutionize the way we watch TV, play video games, and show presentations. It is also the story of how the same technology has led to the failure of two small companies, to two others abandoning the technology, and to a venerable chip maker finding itself technologically isolated in a key consumer market.
Microdisplays are displays that require magnification to make the technology useful for products such as miniature projectors and rear-projection TVs. There are three kinds of microdisplay technology: Liquid crystal on silicon, or LCoS; organic light-emitting diodes, or OLEDs; and digital micromirror devices, or DMDs, the best-known example of which is the DLP device created by Texas Instruments.
Rear-projection TVs were the first big-screen TVs on the market, and they remain among the biggest (and cheapest) out there. Many of those rear-projection TVs are based on TI’s DLP chip.
Rear-projection TVs are increasingly being marginalized by LCD TVs and plasma TVs, which are getting bigger and cheaper by the hour, it seems. Philips and Sony have given up on the rear-projection TV market. Mitsubishi, Samsung Electronics, and Toshiba are still making rear-projection TVs built around the DLP, but TI’s sales of the innovative device are declining. TI asserts that future generations of the DLP will result in TV sets that will be not only less expensive and less power-hungry than comparable LCD and plasma TVs, but will also provide sharper images and take up less space.
Meanwhile, the LCoS microdisplay business has been punishing for companies that are not as well-capitalized as TI. MicroDisplay Corp. was a well-funded spinoff from MIT; it quietly went out of business last year as it was about to enter the rear-projection HDTV market. SpatiaLight, a developer of LCoS microdisplays, slipped into Chapter 7 liquidation this year after LG Electronics decided to stop making rear-projection TVs and cut off orders to the company in 2007. (SpatiaLight had multiple problems in addition to losing its biggest customer; it was strapped for cash and was sued by the SEC late last year for letting its former CEO sell unregistered shares among other alleged shenanigans.)
Syntax-Brillian last year decided to bail on its original line of business, LCoS microdisplays, in favor of manufacturing LCD TVs (the Olevia brand). It sold its LCoS plant and licensed its patents to Compound Photonics. Document Capture Technologies recently suspended its R&D activities in high-definition displays and is looking for investors or a buyer.
Not all is doom and gloom in the LCoS tech trenches. Displaytech was unable to go public in 2004, but it survived to produce a “pico-projector” that can throw a quality image up on a wall from a cell phone or PDA. Forth Dimension Displays is another microdisplay survivor, using a ferroelectric LCoS technology, as does Displaytech.
And then there’s the OLED frontier, which isn’t as battle-tested and hardened as LCoS microdisplays. eMagin and MicroEmissive Displays are among the startups working the OLED beat. Sony is selling a small OLED TV in Japan. OLEDs were originally developed at Eastman Kodak, and the technology (with its multiple variations) is said to be superior to LCDs, since OLEDs don’t need a backlight and use less electrical power. What’s holding back OLED products? The limited lifetime of the materials, which is much less than standard LCDs, basic LEDs, or plasma display panels.
Superior technology doesn’t always carry the day, of course. Sony lost the Betamax-vs.-VHS videocassette format war of the 1980s. Its Blu-ray high-definition DVD technology has now prevailed against Toshiba’s HD DVD format. What was true for VCRs and advanced DVD players may also be the case for microdisplays and their potential applications.