By Chad Terhune and Keith Epstein

As the health reform fight shifts this month from a vacationing Washington to congressional districts and local airwaves around the country, much more of the battle than most people realize is already over. The likely victors are insurance giants such as UnitedHealth Group, Aetna, and WellPoint. The carriers have succeeded in redefining the terms of the reform debate to such a degree that no matter what specifics emerge in the voluminous bill Congress may send to President Obama this fall, the insurance industry will emerge more profitable. Health reform could come with a $1 trillion price tag over the next decade, and it may complicate matters for some large employers. But insurance CEOs ought to be smiling.

Executives from UnitedHealth certainly showed no signs of worry on the mid-July day that Senate Democrats proposed to help pay for reform with a new tax on the insurance industry. Instead, UnitedHealth parked a shiny 18-wheeler outfitted with high-tech medical gear near the Capitol and invited members of Congress aboard. Inside the mobile diagnostic center, which enables doctors to examine distant patients via satellite television, Representative Jim Matheson didn’t disguise his wonderment. “Fascinating, fascinating,” said the Democrat from Utah. “Amazing.”

UnitedHealth on Capitol Hill

Impressing fiscally conservative Democrats like Matheson, a leader of the House of Representatives’ Blue Dog Coalition, is at the heart of UnitedHealth’s strategy. It boils down to ensuring that whatever overhaul Congress passes this year will help rather than hurt huge insurance companies.

Some Republicans have threatened to make health reform Obama’s “Waterloo,” as Senator Jim DeMint of South Carolina has put it. The President has fired back at what he considers GOP obstructionism. Meanwhile, big insurance companies have quietly focused on what they see as their central challenge: shaping the views of moderate Democrats.

The industry has already accomplished its main goal of at least curbing, and maybe blocking altogether, any new publicly administered insurance program that could grab market share from the corporations that dominate the business. UnitedHealth has distinguished itself by more deftly and aggressively feeding sophisticated pricing and actuarial data to information-starved congressional staff members. With its rivals, the carrier has also achieved a secondary aim of constraining the new benefits that will become available to tens of millions of people who are currently uninsured. That will make the new customers more lucrative to the industry.

Matheson, whose Blue Dogs command 52 votes in the House, can’t offer enough praise for UnitedHealth, the largest company of its kind. “The tried and true message of their advocacy,” he says, “is making sure the information they provide is accurate and considered.”

Representative Mike Ross, an Arkansas Democrat who leads the Blue Dogs’ negotiations on health reform, also welcomes input from UnitedHealth. “If United has something to offer on cutting costs, we should consider it,” says Ross, a former small-town pharmacy owner. “We need more examples that work, and everything should be on the table.”

DEMOCRATIC WELCOME

Fifteen years after the insurance industry helped kill then-President Bill Clinton’s health-reform initiative, Ross is frustrating the Obama White House by opposing proposals for a government-run insurance concern that would compete with private-sector companies. The President argues that without a public plan, premiums and medical bills will remain prohibitively high. Ross and Matheson have given strong voice to the industry’s contention that such a public insurer would actually reduce competition by undercutting private plans on price and driving them out of business. “We have concerns about a public option if it’s not done on a level playing field,” Ross says.

Obama launched his Administration vowing to extend coverage to all Americans and help pay for it by reining in insurance costs. Seven months later, insurers and pharmaceutical manufacturers that appeared vulnerable to a regulatory crackdown have been welcomed to the negotiating table by the President’s own party.

The several competing bills pending in Congress would guarantee all Americans access to health coverage, addressing the plight of the 47 million who are now uninsured. Congress plans to achieve that by expanding Medicaid, the government program for the poor and disabled; requiring insurers to accept all applicants regardless of their health; and mandating that everyone purchase coverage. Government subsidies would make the obligatory coverage more affordable. The legislation would do little, however, to slow spending by Medicare, the public program for senior citizens, or cut overall medical costs. Congress is considering taxes on the wealthy and on benefits now provided to many white-collar workers.

During the UnitedHealth road show in July, Democrat after Democrat clambered into the company’s promotional vehicle beneath a sign declaring: “Connecting You to a World of Care.” Judah C. Sommer, who heads the company’s Washington office, looked on with satisfaction. “This puts a halo on us,” he explained. “It humanizes us.”

And that Democratic proposal to tax insurance companies? It seems to be fading after the industry said it would raise rates for workers and their families.

UnitedHealth’s relationship with Democratic Senator Mark R. Warner of Virginia illustrates the industry’s subtle role. Elected last fall, Warner, a former governor of his state and a wealthy ex-businessman, received a choice assignment as the Senate Democrats’ liaison to business. The rookie senator landed in the center of a high-visibility political drama—and in a position to earn the gratitude of a health insurance industry that has donated more than $19 million to federal candidates since 2007, 56% of which has gone to Democrats.

UnitedHealth has periodically served as a valuable extension of Warner’s office, providing research and analysis to support his initiatives. Corporations and trade groups play this role in all kinds of contexts, but few do it with the effectiveness of the insurers. In June, Warner introduced legislation expanding government-backed Medicare and Medicaid coverage for hospice stays for the terminally ill and other treatment in life’s final stages. The issue isn’t a top UnitedHealth priority. But the corporation wanted to help Warner with his argument that in the long run, better hospice coverage would save money. UnitedHealth prepared a report for lawmakers finding that 27% of Medicare’s budget is now spent during the last year of older patients’ lives, often on questionable hospital tests and procedures. Expanded hospice coverage and other services could save $18 billion over 10 years, UnitedHealth asserted.

When Warner went to the Senate floor on June 15 to offer his bill, he cited those exact figures. He thanked the company for its support and put a letter from UnitedHealth applauding him in the Congressional Record.

Warner acknowledges in an interview that he worked on the hospice-care legislation with UnitedHealth executives. But he stresses that he has long experience with health issues and has formed his own views. The senator echoes UnitedHealth’s contention that a so-called public option could be a “Trojan horse for a single-payer system,” meaning government-run medical care. Warner has heard from some of UnitedHealth’s largest employer clients, such as Delta Air Lines. Delta CEO Richard H. Anderson, a former UnitedHealth executive, has told Warner and other lawmakers that big companies don’t want government to limit their flexibility in crafting employee health benefits.

ACTUARIAL ASSUMPTION

Obama’s promise to boost competition and lower costs by having the government play a much broader role in health coverage has been steadily compromised because of the resistance of such Democrats as Warner. “There are different ways to skin this and get competition” in the insurance market, Warner says.

Warner and other opponents of a public plan have relied on an estimate by John Sheils, an actuary who says that 88 million people, or 56% of those with employer-provided coverage, would desert private insurance for a government-run program. That would destabilize the marketplace and potentially kill the private insurance industry, according to Sheils, who works for the Lewin Group, a corporate consulting firm in Falls Church, Va.

UnitedHealth lobbyists routinely cite Lewin’s work, as do Senator Orrin G. Hatch (R-Utah), the second-ranking Republican on the Senate Finance Committee, and Eric Cantor (R-Va.), the House Republican Whip. Left out of these testimonials or buried in the fine print is that a UnitedHealth unit owns the Lewin Group and thus is ultimately responsible for Sheils’ paycheck. In an interview, Sheils says UnitedHealth gives him and the Lewin firm complete independence: “We call it like we see it,” he adds.

Some Democrats differ. Says Representative Pete Stark, the liberal California Democrat who chairs the House Ways & Means health subcommittee: “The Lewin Group’s so-called analysis is suspect.” The nonpartisan Congressional Budget Office has stated that the Sheils-Lewin figure is far too high.

UnitedHealth brings a mixed record to its role helping to guide health reform. The company has repeatedly hit smaller employers and consumers with double-digit rate hikes in recent years, far greater than the overall rate of inflation. An investigation last year by New York’s Attorney General will force the company to stop running two huge databases used widely within the insurance industry. By allegedly setting medical reimbursements too low—that is, skewing statistics in favor of insurers by understating “usual and customary” physician fees—the databases had resulted in the overcharging of consumers by billions of dollars nationwide. In January, UnitedHealth agreed to resolve the situation by paying $400 million in a pair of agreements with the New York Attorney General and the American Medical Assn., although it didn’t admit any wrongdoing.

In a separate case last year, UnitedHealth was forced to stop selling “limited benefit” plans with capped payouts under the imprimatur of the senior citizen group AARP. It turned out that the policies provided very modest coverage, catching many customers off guard, according to Senator Charles E. Grassley (R-Iowa), who helped bring the practice to light. Grassley pointed out that UnitedHealth paid as little as $5,000 toward surgery costing several times as much.

Despite such episodes, UnitedHealth is generally well received in legislative circles in Washington. In late May its in-house point man on reform, Simon Stevens, hand-delivered a report to key senators detailing ways to save an estimated $540 billion in federal spending over 10 years. A week later, on June 4, Stevens accompanied UnitedHealth’s chief executive, Stephen J. Hemsley, to a meeting with Senator Kent Conrad (D-N.D.), an influential moderate member of the Senate Finance Committee. Conrad has since led an effort to create nonprofit medical cooperatives that would operate much like utility co-ops as a substitute for a federally run plan. With less heft than a proposed national plan, the state medical cooperatives would pose a far weaker competitive threat to private insurers.

Conrad says in an interview that the co-op idea evolved independently of any industry input. Skirmishing over the public plan could jeopardize efforts at reform, he warns. Co-ops, he argues, are “the only alternative that’s got much of a shot” to gain sufficient votes in the Senate.

BRITISH EXPERIENCE

UnitedHealth followed up on June 30 with another report for lawmakers pinpointing $332 billion in savings through better use of technology and administrative simplification. If enacted, those changes would potentially benefit UnitedHealth’s Ingenix data-crunching unit. Ingenix, with annual revenue of $1.6 billion, is poised to establish a national digital clearinghouse to ensure the accuracy of medical payments and provide a centralized service for checking the credentials of physicians.

UnitedHealth's Stevens

Stevens, an Oxford-educated executive vice-president at UnitedHealth, once served as an adviser to former British Prime Minister Tony Blair. In that capacity, Stevens tried to fine-tune the U.K.’s nationally run health system. Today he tells lawmakers that the U.S. need not follow Britain’s example. Concessions already offered by the U.S. insurance industry—such as accepting all applicants, regardless of age or medical history—make a government-run competitor unnecessary, he argues. “We don’t think reform should come crashing down because of [resistance to] a public plan,” Stevens says. Many congressional Democrats have come to the same conclusion.

UnitedHealth has traveled an unlikely path to becoming a Washington powerhouse. Its last chairman and chief executive, William W. McGuire, cultivated a corporate profile as an industry insurgent little concerned with goings-on in the capital. From its Minnetonka (Minn.) headquarters, the company grew swiftly by acquisition. McGuire absorbed both rival carriers and companies that analyze data and write software. Diversification turned UnitedHealth into the largest U.S. health insurer in terms of revenue. In 2008 it reported operating profit of $5.3 billion on revenue of $81.2 billion. It employs more than 75,000 people.

In 2006, McGuire lost his job after getting caught up in the manipulation, or “backdating,” of company stock options. UnitedHealth was forced to restate earnings over a 12-year period to reflect the extra compensation it had granted McGuire and other executives. McGuire’s chief lieutenant, Stephen Hemsley, took over as CEO in December 2006. Two independent inquiries concluded that Hemsley wasn’t involved with the backdating. Nevertheless he forfeited $190 million in past stock compensation and unrealized gains to resolve the matter.

CEO Hemsley

Hemsley, a former chief financial officer of the now-defunct Arthur Andersen accounting firm, generally shuns the spotlight. But when health reform became a central issue in the runup to the last Presidential election, company executives say they realized UnitedHealth needed to go on the offensive. Hemsley met with White House officials on May 15 and May 22 to promote his company’s prescription for cutting federal health spending.

In August 2007, the company hired Sommer, who previously headed global lobbying for Goldman Sachs (GS). He quickly built a new Washington team of former congressional aides and other K Street operatives. One key acquisition: Cory Alexander, former chief of staff for House Majority Leader Steny Hoyer (D-Md.), an influential moderate Democrat. Alexander had been lobbying for the huge mortgage financier Fannie Mae (FNM). Today, Sommer directs a team of nearly 50 people from UnitedHealth’s spacious Washington office on Pennsylvania Avenue, equidistant between the Capitol and White House. The company spent more than $3.4 million on in-house and outside lobbying in the first half of 2009.

Sommer has retained such influential outsiders as Tom Daschle, the former Democratic Senate Leader who now works for the large law and lobbying firm Alston & Bird. Daschle, a liberal from South Dakota, dropped out of the running to be Obama’s Secretary of Health & Human Services after disclosures that he failed to pay taxes on perks given to him by a private client. He advised UnitedHealth in 2007 and 2008 and resumed that role this year. Daschle personally advocates a government-run competitor to private insurers. But he sells his expertise to UnitedHealth, which opposes any such public insurance plan. Among the services Daschle offers are tips on the personalities and policy proclivities of members of Congress he has known for decades.

Conceding that he doesn’t always agree with his client, Daschle says: “They just want a description of the lay of the land, an assessment of circumstances as they appear to be as health reform unfolds.” He says he leaves direct contacts with members of Congress to others at his firm.

What people in Washington tend not to discuss, at least on the record, is the open secret that insurers are minimizing their forecasts of the eventual windfall they will enjoy from expanded coverage for Americans. UnitedHealth has given certain key members of Congress details about its finances and tax liability—both historical numbers and figures projected under various cost-sharing scenarios. But some on Capitol Hill are skeptical. “The bottom line,” says an aide to the Senate Finance Committee, “is that health reform would lead to increased revenues and profits [for the insurance industry]. … There will be [added] costs [to the companies], but we’re not sure the revenues and profits will be as low as they say.”

A fundamental question about the health overhaul is what minimum standards will apply to the coverage all Americans will be required to have. UnitedHealth has been exchanging a high volume of information on the topic with members of the Senate Finance Committee and their staff. Stevens, the former British health aide, regularly scans PowerPoint presentations generated by the committee staff that attempt to calculate the actuarial value of proposed benefit packages. Senators stung by the projected $1 trillion price tag are winnowing down the required coverage levels to cut costs.

This is good news for UnitedHealth, which benefits when patients pick up more of the tab. In late spring, the Finance Committee was assuming a 76% reimbursement rate on average, meaning consumers would be responsible for paying the remaining 24% of their medical bills, in addition to their insurance premiums. Stevens and his UnitedHealth colleagues urged a more industry-friendly ratio. Subsequently the committee reduced the reimbursement figure to 65%, suggesting a 35% contribution by consumers—more in line with what the big insurer wants. The final figures are still being debated.

Stevens says UnitedHealth and its corporate clients want to steer Congress toward benefit levels and cost sharing that can help control overall health spending: “We are providing another resource of actual modeling and advice on how proposals in the committees are structured and some potential unintended consequences of going down certain routes.”

Perhaps more than any other insurer, UnitedHealth is poised to profit from health reform. Its decade-long series of acquisitions has made the company a coast-to-coast Leviathan enmeshed in the lives of 70 million Americans.

United’s AmeriChoice unit is the largest government contractor administering state Medicaid programs for the poor and federally sponsored plans for children. AmeriChoice’s revenue rose 34% last year, to $6 billion, and it has 2.7 million people enrolled. Those numbers should continue rising under reform since congressional Democrats are proposing an expansion of Medicaid to help achieve universal coverage. More of the working poor would qualify for Medicaid, and AmeriChoice can sell itself to states as the leading service provider.

HEALTH COACH AT THE OFFICE

Another of the big beneficiaries among UnitedHealth’s stable of subsidiaries is OptumHealth. It’s the company’s one-stop shop for managing the chronically ill, offering wellness programs and guiding consumers on treatment options. Even before the reform debate, these services were growing in demand as big employers, state and local governments, and others tried to curb health-care spending by supervising patients more aggressively.

OptumHealth provides a broad range of services, from a 24-hour hotline where nurses can suggest the best hospital for a transplant to “health coaches” who dole out meal plans, to-do lists, and motivational messages. Some OptumHealth clients bring coaches into the office or onto the factory floor to teach about diet and exercise. Many of the cost-containment strategies Democrats are pushing call for more of the preventive care that OptumHealth sells.

“We are extremely well positioned for a much broader adoption,” says Dawn Owens, OptumHealth’s chief executive. Her division, based in Golden Valley, Minn., already boasts $5.2 billion in annual revenue.

Stevens argues that while UnitedHealth will likely benefit financially from health reform, the company will also aid the cause of reducing costs. He cites what he says is its record of “bending the cost curve” for major employers.

During a media presentation in May in Washington, Stevens said medical costs incurred by UnitedHealth’s corporate clients were rising only 4% annually, less than the industry average of 6% to 8%. But that claim seemed to conflict with statements company executives made just a month earlier during a conference call with investors. On that quarterly earnings call, UnitedHealth CEO Hemsley conceded that medical costs on commercial plans would increase 8% this year.

Asked about the discrepancy, Stevens says the lower figure he is using in Washington represents the experience of a subset of employer clients who fully deployed UnitedHealth’s cost-saving techniques, including oversight of the chronically ill. “These employers stuck at it for several years,” he says. “We are putting forward positive ideas based on our experience of what works.”

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Questions About Golden Rule

A UnitedHealth subsidiary draws heat on the Hill

By Chad Terhune and Keith Epstein

Even as UnitedHealth Group has helped shape the reform debate, some lawmakers have accused it of harming consumers. Several members of the House Energy & Commerce Committee chastised UnitedHealth during hearings on June 16 and July 27 for the conduct of its Golden Rule Insurance subsidiary.

Acquired by UnitedHealth in 2003, Golden Rule has sold individual and family policies for more than 60 years. State regulators have repeatedly fined and disciplined Golden Rule for allegedly deceptive practices. In 2002 it resolved a nine-state investigation by paying $660,000, but it denied wrongdoing. Since taking over, UnitedHealth has let Golden Rule continue one of its most controversial methods: selling individual policies through a nonprofit group. This gives some buyers the misimpression they are getting group coverage and better value, regulators allege. But states have only rarely taken formal action.

House members scolded Golden Rule and other insurers for allegedly rescinding coverage entirely after sick policyholders make credible claims. Richard Collins, Golden Rule’s CEO, defended such cancellations, prompting Representative John Dingell (D-Mich.) to say: “This is precisely why we need a public option [to compete with private insurers].”

Collins responded that rescissions, used sparingly, root out fraud by dishonest consumers. That’s only fair, he added, to families who play by the rules.

Presidential brother makes hay from education reform

BusinessWeek – October 16, 2006

By Keith Epstein

Across the country, some teachers complain that President George W. Bush’s makeover of public education promotes “teaching to the test.” The President’s younger brother Neil takes a different tack: He’s selling to the test.

The No Child Left Behind Act compels schools to prove students’ mastery of certain facts by means of standardized exams. Pressure to perform has energized the $1.9 billion-a-year instructional software industry.

Now, after five years of development and backing by investors like Saudi Prince Alwaleed Bin Talal and onetime junk-bond king Michael R. Milken, Neil Bush aims to roll his high-tech teacher’s helpers into classrooms nationwide. He calls them “curriculum on wheels,” or COWs. The $3,800 purple plug-and-play computer/projectors display lively videos and cartoons: the XYZ Affair of the late 1790s as operetta, the 1828 Tariff of Abominations as horror flick. The device plays songs that are supposed to aid the memorization of the 22 rivers of Texas or other facts that might crop up in state tests of “essential knowledge.”

Bush’s Ignite! Inc. has sold 1,700 COWs since 2005, mainly in Texas, where Bush lives and his brother was once governor. In August, Houston’s school board authorized expenditures of up to $200,000 for COWs. The company expects 2006 revenue of $5 million. Says Bush about the impact of his name: “I’m not saying it hasn’t opened any doors. It may have helped with some sales.” (In September, the U.S. Education Dept.’s inspector general accused the agency of improperly favoring at least five publishers, including The McGraw-Hill Companies, which owns BusinessWeek. A company spokesman says: “Our reading programs have been successful in advancing student achievement for decades; that’s why educators hold them in such high regard.”)

The stars haven’t always aligned for Bush, but at times financial support has. A foundation linked to the controversial Reverend Sun Myung Moon has donated $1 million for a COWs research project in Washington (D.C.)-area schools. In 2004 a Shanghai chip company agreed to give Bush stock then valued at $2 million for showing up at board meetings. (Bush says he received one-fifth of the shares.) In 1988 a Colorado savings and loan failed while he served on its board, making him a prominent symbol of the S&L scandal. Neil calls himself “the most politically damaged of the [Bush] brothers.”

While hardly the first brother to embarrass a President — remember Billy Carter’s Billy Beer or Roger Clinton’s cocaine? — Neil could be the first to seek profit from a hallmark Presidential crusade. And also that of a governor: Jeb makes school standards a centerpiece in Florida, too.

Neil says he never talks shop with his brothers. He attributes his interest in education to his struggles with dyslexia. His son, Pierce, also had difficulties in school, he says. “Not one of our investors has ever asked for any kind of special access — a visa, a trip to the Lincoln Bedroom, an autographed picture, or anything.”

Stanford University – Summer 2005

How corporate donors use their gifts to help the bottom line

By Keith Epstein

For decades, the first stop for anyone in southern Arizona who wanted to raise funds for almost any good cause was the Hughes missile factory in Tucson. Since its founding by billionaire Howard Hughes in 1951, the place had always been associated with big money – both profits and a sweeping civic generosity. The company funded everything from the local symphony to the children’s museum, from the preservation of tribal lands to disaster relief.

Today the weapons complex is part of Raytheon, the fifth-largest defense contractor in the land, and Tucson’s largest employer. It also is still the area’s preeminent philanthropist, but the nature of its giving has undergone a profound transformation. That’s because about seven years ago Raytheon executives acted to realign their philanthropy more closely with the company’s commercial and strategic needs.

Why the change? “We were unfocused. We used to do a shotgun approach,” explains Diane H. Bissell, Raytheon’s community relations manager in Tucson. “It made a great number of people happy. But it didn’t force systemic changes in community programs or organizations important to us. We wanted to effect some change.” Specifically, the company decided to concentrate on efforts to improve math and science education throughout the region. Its reasoning was simple: Most of the people who work for Raytheon are engineers and scientists, and most of the people hired in the future will need these skills as well. “We’re building the workforce pipeline that will ultimately provide the whole region with economic stability and jobs,” adds Bissell. “It just makes good business sense.”

Today, Raytheon’s Tucson division gives away more money than ever, about $13 million each year, but not much of it goes to traditional causes like healthcare, social services, the arts, or the search for cures. While the children’s museum still gets some support, now it is for a hands-on exhibit on math and science. “We have engineers and scientists, and we need engineers and scientists,” explains Carol Ramsey, Raytheon’s corporate contributions director. “Why would we fund a program for nurses aides?” Adds Bissell just as bluntly, “We don’t do funding for the arts.”

Tying Community Gifts to the Corporate Bottom Line

According to industry experts and the best available statistics, what’s happening at Raytheon in Tucson is one facet of a broad, historic shift in the nature of corporate philanthropy nationwide – and beyond. Although it goes by a variety of names – strategic philanthropy, cause marketing, values-led marketing, or just plain corporate citizenship, what is happening here is clear: In an attempt to become more strategic in their philanthropy, corporate donors are tying their gifts more closely to their company’s business objectives, short-, medium-, and long-term. “Where ten years ago a corporation might fund just about anything the office felt was a good cause, now they tie the giving directly to the bottom line,” observes John Harvey, executive director of Grantmakers Without Borders, a global network of donors and foundations.

Tucson's symphony: No longer such a beneficiary

Recently the pace of change has become quite dramatic, according to the Committee to Encourage Corporate Philanthropy (CECP), whose 100 CEO and chairperson membership represents companies that account for about 45 percent of reported corporate giving.¹ Between 2002 and 2003, for example, “traditional” charitable philanthropy by CECP members declined from nearly 60 percent to the low forties; “strategic” giving rose 15 percent, and “commercial” – strictly sponsorship – doubled, from less than 10 percent to nearly 20 percent.

Many reasons are cited for this trend: At a time of heightened competition, economic downturn, corporate scandals, and belt-tightening that reduces money for advertising, companies are seeking to differentiate themselves as they woo customers and attract and retain employees. In addition, corporations that until a decade or so ago still considered themselves to have a local base somewhere, increasingly are seeing themselves as global entities with global audiences. Since social needs, and the nonprofit organizations set up to meet them, are local by nature, it can be harder to make their case to a corporation that no longer considers itself so much a member of the local community as a citizen of the world.

In addition, corporate philanthropists, like many other types of donors, are becoming more focused on having a measurable impact with their gifts. In a recent roundtable with SSIR, several corporate CEOs pointed to the importance of having a focus to their company’s philanthropy in order to achieve results. Not surprisingly, this broad change in corporate giving patterns is starting to ring alarm bells throughout the nonprofit world. “Companies are giving money for sexy cause-marketing on the issues of the day, and to that end are very savvy about publicity,” says Steven A. Rochlin, director of research and policy development at Boston College’s Center for Corporate Citizenship. “Meanwhile, they are leaving out groups that are doing critical work but are not grabbing the headlines.”

Mary Biasotti, economic development director for Harbor House Ministries Inc., a small Oakland, Calif., nonprofit that offers English classes to immigrants and emergency food to the hungry, agrees. “Corporations want to attach themselves to an entity that is regionally or nationally known,” laments Biasotti, leaving organizations such as hers to fend for themselves.

“It’s like it’s got to be Mom or apple pie – cancer research, the homeless, or food for the hungry,” complains David A. Nuttle, president of Needful Provision Inc., a small nonprofit in northeastern Oklahoma engaged in a variety of local projects such as supporting Laotian refugees. “We’re trying to do niche areas, but it’s tough. Smaller causes like ours just can’t get that corporate support. I sometimes worry the steamroller will just run over us.”

Even though corporate foundations account directly for only about 6 percent of overall philanthropy in the United States, the disruption for community groups who depend on it is real. “Even people in corporations who we know well and are devoted to the orchestra are telling us quite honestly, ‘I have to listen to my marketing director,’” laments Susan Franano, executive director of the Tucson Symphony Orchestra, which formerly benefited from Raytheon’s largesse. “Nowadays if you don’t – or can’t – offer concrete ways for businesses to connect with your audience or your cause, your chances of funding from corporations are probably not really very good anymore.”

For Some Execs, Philanthropy Is Just Another Word for PR

The changes in giving patterns are engendering controversy inside the corporations as well as the nonprofits. “There is a large, extended community of people within the world of corporate philanthropy who are absolutely fed up and have had it with this,” said the director of philanthropy for a major technology corporation. “Does it actually help anyone but the corporation? How many times does it even cover the cost of sponsorship, when you take out base pay and other costs? Do corporations support groups that are part of the solution – or Band-Aids?”

Indeed, not all corporate philanthropists are joining the trend – several high-profile firms such as Goldman Sachs and eBay continue to make a broad array of donations to groups unrelated to their specific business objectives.

Nevertheless, the overall trend line seems well established. Doug Guthrie, an economic sociologist at New York University who specializes in organizational theory and corporate giving, says: “Philanthropy is increasingly related to the bottom line. There’s a market logic that has really won the day. The fact that corporations define whether or not they should be positively engaged with communities as being a business issue is very problematic for the whole field.”

The many quiet contributions by corporate foundations in years past to a variety of deserving comers have, in many instances, given way to the publicized marathon, glitzy charity ball, the star-studded golf tournament, and even, in one instance, a national bake sale designed to promote products and brands on network TV and in national magazines.

The chosen ones – causes and organizations selected by corporate foundations in longer-term marketing relationships – sometimes reap huge rewards, and still more support, from their participation and increased visibility. The companies, meanwhile, believe these gifts enhance revenues and reputations, distinguish themselves from competitors while building customer and employee loyalty, solidifying relationships with business partners, selling more goods, and spreading goodwill.

Corporate executives realize, of course, that this approach overlooks many worthy causes. “There are some incredible needs out there,” acknowledges Anita Wheeler, president of the ConAgra Foods Foundation: “Physical suffering, human disease, social services, domestic violence, research needs – so much.” But she concedes that her company’s donations do not directly address those needs. Rather, ConAgra, which is among North America’s largest packaged foods manufacturers with annual revenues of $14 billion² (and brands like Butterball turkeys, Orville Redenbacher popcorn, and Chef Boyardee), devotes the majority of its philanthropy to one cause – albeit an important one – combating childhood hunger.

ConAgra underwrites 130 after school “cafés” in 37 states that serve hungry children hot meals,³ and a program that contributes hundreds of thousands of pounds of food to America’s Second Harvest, the nation’s largest hunger-relief organization, through a network of over 200 regional food banks.⁴ The company’s name is prominently displayed in the cafés and in media coverage of its efforts.

“What do we hope? That over time consumers will think: ‘Oh! ConAgra Foods! I really like their products and they are doing some good things and that makes me feel good about their company and want to buy their products,’” explains Wheeler. “It’s about reputation.” It’s also about sales: Just one cause-and-marketing promotion involving ConAgra’s County Line cheese in the fall of 2000, in which customers who bought cheese were told they were also helping feed hungry children, exceeded sales expectations by 16 percent.⁵

Critics of tying philanthropy too closely to short-term objectives such as sales increases include Michael E. Porter, a Harvard Business School specialist in competitive strategy, and Mark R. Kramer, managing director of the Foundation Strategy Group, who are also co-founders of the Center for Effective Philanthropy in Cambridge. “What passes for strategic philanthropy is almost never truly strategic, and often isn’t particularly effective as philanthropy,” they wrote in the Harvard Business Review. “Increasingly, philanthropy is used as a form of public relations or advertising.”⁶

Blending Philanthropy With Core Business Strategies

One promoter of the changing emphasis in corporate giving believes that nonprofits will eventually benefit from greater corporate investment in what she calls “cause branding.” “It’s not about pure philanthropy anymore, quietly giving,” says Carol Cone of marketing consultant Cone, Inc. “It’s about business strategy, attracting the best employees, earning the license to operate, differentiating your brand in a competitive environment, deepening relationships with core stakeholders. It’s no longer a ‘nice-to-do.’ It’s a ‘have-to-do.’”

A November 2004 analysis in Business Week cited evidence in support of this view: “Supporting a popular cause is no longer optional. It’s what you have to do just to get to the starting line with the newest generation of customers.”⁷ Spending on cause marketing has risen from $835 million in 2002 to perhaps $1.08 billion this year, up 58 percent from 1999, according to estimates by the IEG Sponsorship Report, a Chicago trade publication.⁸ Back in 1990, IEG tallied cause sponsorship spending at only around $120 million.⁹

There is some evidence that the strategy works to build brand loyalty among consumers. In a 2003 survey of teens by Alloy Inc., a youth marketing firm, 60 percent said they were more likely to buy from brands that support charitable causes they care about.¹⁰ When price and quality are equal, 86 percent of Americans would actually switch brands to help support a cause, according to a December 2004 Cone study.¹¹ A 2001 study estimated that 88 percent of employees aware of cause-related programs at their companies feel a “strong sense of loyalty” to their employers, while 53 percent chose to work there because of the programs.¹²

This modern marriage between marketing and social beneficence involves longer-term alliances that reinforce business relationships, enhance sales, and draw new customers using a wide range of integrated tactics, from enlisting business partners and employees as volunteers to major media campaigns.

Each year, a group called Share Our Strength organizes a “Great American Bake Sale” involving PARADE Magazine, ABC News, and the Betty Crocker division of General Mills. Stars from shows like “George Lopez,” “Hope & Faith,” “Married to the Kellys,” and “Life With Bonnie” participate on the shows.¹³ For its part, Betty Crocker wants to drive sales. ABC wants more people watching its network. The magazine, meanwhile, seeks to reinforce advertising relationships. Ordinary people do a lot of the heavy lifting, or baking – Girl Scout troops, college students, and others. Proceeds from their bake sales since 2003, sent to Share Our Strength, have amounted to $2.7 million.¹⁴

“In many cases today, the business objective is the primary motivation and the philanthropy is secondary,” explains Howard Byck, Share Our Strength’s chief director of creative enterprise and marketing. Byck says that means that many companies will no longer contribute or enter into partnerships without being convinced that four conditions can be met: The cause must be relevant to the company’s services and products; there must be a good fit with the company’s brand; the partnership must align well with the corporate mission; and finally, a specific business objective must be achievable through the partnership.

“You can’t just be a worthy cause anymore,” observes Byck. “You’ve got to be a really worthwhile cause – and there have got to be some marketable assets.”

Not every cause, of course, can make the cut. “A corporation that wants a national reach is looking for a national organization,” explains Byck. “If they want to market to your database, you’d better have a database. [The large senior citizens organization] AARP has a huge asset. Our big asset at Share Our Strength is this network of chefs and restaurateurs people want to gain access to. So by the nature of that, some nonprofits are disqualified – the smaller ones, the less sophisticated ones. Even those who have the sophistication but not the assets won’t make it.”

Ask Not: ‘What Can the Corporate Sector Do for Me…’

Hessekiel

Many practitioners of strategic philanthropy say they have no qualms about the changing relationship between corporate donors and nonprofit organizations. “I do not think there is anything shameful about a corporation thinking about business objectives,” says David Hessekiel, whose Cause Marketing Forum, Inc. develops what he terms “mutually beneficial commercial relationships” between companies and causes. The best nonprofit players in cause marketing, he says, are groups such as First Book, experts at generating publicity around book donations. One of the key questions from a corporation’s point of view, he says: “Does the nonprofit bring something to the party?”

People who complain about important causes left behind are “purists,” says Byck. “We aim to make that pie bigger. Some people still want to go the traditional philanthropic route, but it’s better, I think, to help companies achieve business objectives while doing good. The reality is they are rewarded by Wall Street. So if we can help them, and show that, and also help our cause, it’s all to the good.”

Advocates of cause marketing like Carol Cone argue that it provides the kind of boost the Third Sector and society need, especially when government-funded human services are declining and nonprofits are feeling squeezed for dollars. A case in point is the “Grow Up Great” program of Pennsylvania-based PNC Financial Services Group, which supports early childhood education. That focus arose because other banks were “gobbling up market share” and threatening to capture the attention of consumers. The chief executive wanted something to “wrap the brand around.” Cone came up with what she calls “a signature cause program” that would enhance the PNC brand and set it apart from the growing competition.

“Everybody says, ‘Why is a bank doing this?’” Cone acknowledges. “Well, if a bank doesn’t have a strong presence in its communities it won’t have a good business.” PNC garners, in effect, free advertising noticed by an estimated 564 million readers or viewers.¹⁵ Instead of having to buy expensive airtime, TV stations report vignettes on newscasts about early childhood, and offer time for free public service announcements, known as PSAs, explains Cone, so that “throughout the footprint you hear about all these great things PNC is doing. Does it help the business? Of course.”

There’s another advantage for companies, too – the one many nonprofits fear. “When you do a signature cause program, you can do an exit strategy from other causes and business objectives,” explains Cone. Having a set of factors on which to guide decisions about causes to keep and causes that are a bad match for strategic objectives “allows a company over time to get out of other causes. Over time, they will have a filter for all their philanthropy. In the case of PNC, it must be child-focused or it will not be supported. This can be immensely helpful in making decisions.”

The “filters” will separate the winners from the losers of corporate largesse. Who are the losers in PNC’s case? Like other corporations contacted for this article, the company declined to say, though it did confirm some are important institutions such as community hospitals.

Their flaw: They have nothing to do with the education of young people. “Yes, there are some causes and nonprofits in the communities where we do business where it won’t be a fit anymore,” acknowledges Patrick McMahon, PNC’s vice president for media relations. “Quite frankly, there are other, usually smaller local grants and sponsorships that we simply will no longer do. They don’t fit into the focus.”

What’s a charity to do? “Nonprofits are going to have to be more strategic,” warns Cone, noting that over the long term a “rising tide raises all ships.” She explains: “They’re going to have to offer more. They can’t just be doing good. Smaller nonprofits will have to be more sophisticated about what they deliver, if they want to partner with someone. The whole game has changed.”

1 CECP Web site: http://www.corphilanthropy.org/cdoc/cecp.html.

2 Omaha World-Herald: “ConAgra Foods, Inc.” March 27, 2005.

3 http://www.feedingchildrenbetter.org/pages/ourmission/kidscafe/map/index.jsp.

4 http://www.feedingchildrenbetter.org/pages/ourmission/kidscafe/map/index.jsp, http://www.conagrafoods.com/leadership/community_children.jsp.

5 ConAgra press release: Nov. 14, 2001. “Country Line Promotion Helps Feed Hungry Kids.”

6 “The Competitive Advantage of Corporate Philanthropy,” Harvard Business Review, December 2002.

7 Lauren Grad, “We’re Good Guys, Buy From Us,” Business Week, Nov. 22, 2004.

8 IEG Sponsorship Report: April 11, 2005. Vol. 24, No. 6. http://www.iegsr.com.

9 Cause Marketing Forum: http://www.causemarketingforum.com/page.asp?ID=188.

10 Grad, “We’re Good Guys, Buy From Us.”

11 Cone, Inc. press release. “Multi-year study finds 21% Increase in Americans’ Support of Social Issues,” Dec. 8, 2004.

12 Carol L. Cone, Mark A. Feldman, and Alison T. DaSilva, “Causes and Effects,” Harvard Business Review, July 2003.

13 http://www.greatamericanbakesale.org/site/PageServer?pagename=meet_abc, http://www.strength.org/what/greatamericanbakesale/, http://www.greatamericanbakesale.org/site/PageServer?pagename=meet_home

14 http://www.strength .org/what/greatamericanbakesale/.

15 PRWeek Press Release: March 8, 2005 “PRWeek Awards 2005, Social Education & Philanthropy.”

An investigation of medical research records shows the U.S. government is still in the business of conducting and paying for tests on unsuspecting Americans

DRUG TRIALS:
Do People Know the Truth About Experiments?

December 16, 1996

Day 2 of 4

By KEITH EPSTEIN and BILL SLOAT

Not long after school started in the fall of 1991, Sacheen White Tail came home with a note from her teacher.

It was addressed to her parents, and no, the sixth-grader wasn’t in any kind of trouble.

Her classwork was fine. She was still winning ribbons at swimming meets.

The note was an invitation almost too good to pass up: If her mother approved, Sacheen was eligible for a free hepatitis vaccination.

Two shots, a month apart, would “provide lifelong immunity.”

Something called the “Hepatitis A Vaccine Prevention Program” was behind the offer, sent to hundreds of parents on the Standing Rock Sioux Reservation that spreads across the grasslands of the Dakotas.

Without hesitating, Ella-Mae White Tail returned the accompanying form. Her 11-year-old would get the shots at school.

“I was interested in protecting my daughter,” she said.

Sacheen also wanted the gift researchers were offering. “It was an expensive mousse gel for my hair, good stuff,” she said.

What Sacheen’s mother didn’t realize then was that the “Hepatitis A Vaccine Prevention Program” wasn’t just a prevention program. It was a research project sponsored by the Centers for Disease Control and the Indian Health Service. The vaccine was being tested for a British pharmaceutical company.

“They were using our kids as guinea pigs,” White Tail said. “In the beginning, I thought it was approved by the ^Food and Drug Administration]. And then, I found out it wasn’t.”

Among other things, the government wanted to evaluate the vaccine’s “safety,” before allowing its use on all American children – a purpose that never appeared on the consent form distributed to the Sioux parents.

Neither did the word “experimental.” Or “research.”

“When you say “experimental,’ it scares off a lot of people,” said Tim Yellow, the tribe’s health director in Fort Yates, N.D., where a boulder marks the burial site of Sitting Bull.

Yellow had welcomed the researchers. His own daughter, Lisa, got the shot. Hepatitis A was endemic on the reservation. The contagious disease could be thwarted by better sewage and plumbing systems and more careful handwashing – and now, it seemed, also with the vaccine.

That the parents felt misled would be putting it mildly, said Yellow. His friendships grew strained. Traditional drummers at the Bear Soldier Hall appealed to the spirits to heal hard feelings and protect the children.

While the vaccine was eventually determined to be safe, Yellow said, the uproar has barely subsided on the reservation, where many raise buffalo and cattle a few miles south of Gen. George Custer’s old 7th Cavalry headquarters.

What happened at Standing Rock is not an isolated incident.

Decades after notorious syphilis experiments on blacks at Tuskegee, Ala., and radiation studies on civilians during the Cold War, the government is still in the business of conducting and paying for medical tests on unwary Americans.

In fact, a computer analysis shows that in medical research, the pharmaceutical industry is not the most likely abuser of basic human rights.

It is the U.S. government.

Researchers working for the government have camouflaged the truth. They have omitted vital information about risks. They have failed to properly obtain permission before testing unapproved drugs with uncertain effects.

Even with prescription drugs, whose effects are largely known, doctors are expected to disclose the pros and cons and allow patients a free choice. For experimental drugs and vaccines, federal law and professional medical ethics compel doctors to disclose what they know – and don’t know.

“Because the patient may not benefit. Because you may be doing harm; you don’t know what the risks might be. Because this is not veterinary medicine, this is another human being,” said Dr. Bernadine Healy, dean of the Ohio State University medical school and former director of the National Institutes of Health.

“In an experimental trial, you don’t have the answers; that’s why you’re doing an experiment. So you have the heightened obligation to tell the patient – someone who trusts you with their most precious possession, their life and well-being – you don’t know the answers.”

Yet American test subjects have been kept in the dark or only partially informed in 63 percent of all medical research that The Plain Dealer could identify as government-sponsored from 1977 through 1995. The newspaper’s analysis was based on internal FDA inspection records obtained under the federal Freedom of Information Act.

Consent forms were unclear; sometimes they were missing altogether. Such forms are like signed receipts, crucial evidence that patients were given all the information to which they were entitled.

Some forms described experimental drugs as “new therapies” or “treatments.”

FDA records show that consent forms were adequate in 37 percent of clinical trials at federal research sites, such as veterans hospitals and the National Institutes of Health. Others, such as private research contractors who test drugs for the pharmaceutical industry, gave full disclosure in 50 percent of their experiments. University and hospital researchers were only slightly better than the government: They disclosed complete information to their subjects 42 percent of the time.

“If there’s one principle firmly established,” said Case Western Reserve University bioethicist Thomas Murray, “it’s that you do not trim the truth or deceive people just because a research project is important. Some ethics questions are tough. That one’s a slam-dunk. It’s a short step from withholding information from subjects to what happened at Tuskegee.”

The Plain Dealer’s analysis parallels barely noted discoveries by a 1994 presidential advisory committee. That committee’s central focus was the Cold War era, a 30-year period from the mid-1940s when federal agencies sponsored 4,000 radiation experiments involving tens of thousands of subjects, many of whom had no knowledge they were test cases.

Yet President Clinton’s Advisory Committee on Human Radiation Experiments also uncovered more contemporary examples of research on unwitting Americans. “The most serious concerns focus on informed consent,” the committee reported 700 pages deep within an imposing volume, thick as a Sears, Roebuck & Co. catalog.

On page 717, the committee said, “Human subject protections may be more effective in radiation research than elsewhere” – in other words, patients could be more at risk nowadays in nonradiation experiments than in the kind that triggered the committee’s inquiry.

It was the radiation experiments that Clinton apologized for, agreeing to compensate some of the patients who had been exposed.

“Informed consent means your doctor tells you the risk of the treatment you are about to undergo. In too many cases, informed consent was withheld,” the president declared. “The deception extended beyond the test subjects themselves to encompass their families and the American people as a whole.”

Just last month, the government paid $4.8 million to 12 victims injected with uranium and plutonium without their consent. “When the government does wrong,” Clinton said, “we have a moral responsibility to admit it.”

Although the committee said its other discoveries involving nonradiation research were “findings that cannot be ignored,” the written evidence – disclosing locations of experiments, researchers’ names and the agencies involved – was boxed and shipped to a warehouse in Maryland, filed and forgotten. Some records were opened by National Archives lawyers at The Plain Dealer’s request.

“Human subjects,” as scientists refer to them, include the poor, the vulnerable, the medically dependent. They include former soldiers at hospitals of the Department of Veterans Affairs.

They include women with breast cancer at the National Cancer Institute. Alcoholics with hepatitis at the National Institutes of Health.

They include the Lakota people in the Dakotas, where parents like Ella-Mae White Tail effectively shut down the Centers for Disease Control’s hepatitis A experiment in 1992.

Although the vaccine, Havrix, was approved by the FDA in 1995 (based on tests involving 40,000 people elsewhere) the Pine Ridge Sioux sued the government.

A federal court in January 1993 tossed out the lawsuit by the parents as moot – the clinical trial had already been halted – but not before expressing “grave doubts” about the government’s conduct.

The court said the government failed to give parents “an adequate basis for informed consent.”

And the court added that it expected the government to be “less cavalier . . . on Indian reservations or anywhere else.”

Around then, far from the prairies, J. Thomas Puglisi had heard of a different Centers for Disease Control vaccine experiment on children, although in the barrios of inner-city Los Angeles, the CDC’s preferred word was “project.” As chief of the NIH’s compliance oversight branch of the division of human subject protection, Puglisi monitors government-sponsored clinical trials. In this instance, the CDC was the sole sponsor.

To the mothers in Los Angeles, it all seemed routine, just another trip to the neighborhood health clinic. Their babies, 24 to 45 weeks old, were weighed and measured. Nurses collected blood samples, administered free shots, filled out charts.

Where was the infant born? the nurses would ask the mothers, many of them immigrants. Date of birth? Race? Esta de Mexico? Esta de El Salvador? De donde esta?

There were at least 302 Hispanic babies, 245 black babies, 58 white babies.

Mothers signed forms that mentioned something about a “project” in which “public health policy-makers” wanted to “determine the best measles vaccine strain” and “the best schedule for age of measles vaccination.”

With the “E-Z vaccine,” the form assured the mothers, “your child may be protected earlier against measles.”

The mothers didn’t see the Centers for Disease Control documents that spelled out a reason the agency started inoculating infants with E-Z during May 1990: to test the vaccine’s “immunogenicity and safety.”

An FDA document the mothers never saw stressed that the mothers should be warned that the outcome was uncertain.

Paul D. Parkman, an FDA official, had cautioned the CDC well before the experiment began, in October 1989, that because unpublished data suggested effects on babies’ immune systems and “since the use of the E-Z measles vaccine is unlicensed in the United States and therefore experimental. . . it seems imperative that there be a strong warning on the consent form to the mothers . . . that their infants may not be protected.”

Specific neighborhoods were targeted: East Los Angeles, West Los Angeles and Inglewood – communities that had experienced measles outbreaks.

To combat this resurgence, government scientists confidently turned to E-Z in a dose up to 100 times more potent and administered much earlier than Moraten, the only measles vaccine approved for American children.

“It certainly was a good potential weapon,” said Stephen Hadler, director of the epidemiology and surveillance division of the national immunization program at the centers’ Atlanta headquarters.

But in their enthusiasm, government scientists seized upon a vaccine that backfired.

In Africa, children were dying.

Months before the first California baby got a shot, immunologists were making frightful discoveries in the former French, British and Portuguese colonies near Cape Verde: Some inoculated children were dying within three years.

A French researcher saw it in Dakar, Senegal, in 1989. A Danish immunologist in January 1990 pleaded with the World Health Organization to look at his numbers from Guinea-Bissau and Senegal. It did, and so did the Centers for Disease Control.

Scientists suspected the vaccine somehow weakened the immune system, making children more susceptible to a variety of ailments. Diarrhea and pneumonia were leading causes of death in Africa.

Researchers doubted children in relatively healthy U.S. environments would be harmed, although with weaker immunity they might still become sick.

By April 1990, the news out of Africa was even grimmer. As part of a data-monitoring safety team, the Centers for Disease Control knew that the “excess mortality” had become statistically significant.

But one month later, in May 1990, its Los Angeles test went forward.

In early November, the government quietly participated in a decision, with the European researchers, to stop giving high-dose E-Z to African infants.

Among those present: the CDC’s leading scientist overseeing the U.S. trial.

That same CDC scientist informed the FDA of the African deaths on March 6, 1991.

An FDA official’s notes said the CDC scientist reported “a large number of children who got hi-dose EZ died” in Africa. The notes indicate that about 52 out of 300 children died, compared with 32 out of 300 who got a placebo or another vaccine.

In Los Angeles, the experiment continued.

The evidence out of Africa, explains Hadler, was just “not compelling.”

Wasn’t compelling until Neal Halsey came along.

A Johns Hopkins University researcher under contract to the State Department’s Agency for International Development, Halsey had during the 1980s inoculated babies with E-Z in a Haitian shantytown. Doubting the findings in Africa, he went back to the shantytown, expecting to show the Haitian babies were better off.

“We actually set out to demonstrate there wasn’t an effect,” he said. “We found there was.” High doses of E-Z were associated with increased mortality.

Halsey dialed the CDC. The Los Angeles test was stopped.

By then, it was October 1991, and the mothers of 1,192 children had allowed their children to randomly receive two vaccines, one of which was E-Z. Four hundred and eighty-five babies had received the highest dose. Another 217 had been inoculated with a less-intense form of E-Z.

“So far, there’s no evidence of any untoward effects,” says Hadler. “In the U.S., there’s no evidence this vaccine causes a problem in healthy children.”

CDC internal data obtained by The Plain Dealer do show some changes in the immune systems of some vaccinated children, but the significance remains under study.

Then there was Ricardo Munoz, the son of a 21-year-old Mexican immigrant, Rafaela Lopez Barajas.

Ricardo, nearly 23 months old, died on July 14, 1992, of “clostridium dificile enteritis” and “probable viral gastroenteritis,” according to the coronor’s report.

The CDC has not publicly identified the boy it acknowledges died 15 months after receiving a standard dose of E-Z. CDC documents show the death occurred when the child was 23 months old in July 1992. A document states “causes of death per death certificate” were: “clostridum dificile enteritis” and “probable viral gastroenteritis.”

A search of California records showed no other death of a boy that age from those causes in July 1992.

“It came all of a sudden,” said Maria Socorro, Ricardo’s comadre, or godmother. She lived with the boy and his mother in a cramped, yellow stucco walkup in the largely Hispanic enclave of Bell Gardens, Calif.

“The little boy was nice and healthy, sweet fat cheeks. He was a happy child. And then all of a sudden . . . two days of vomiting, diarrhea and coughing, and this illness took him.”

On the evening of the second day, he was found unconscious, vomit like coffee grounds around his head. “Natural causes,” concluded the coroner.

The CDC, in public descriptions of the death, acknowledged only that a child vaccinated with a less intense dose of E-Z died of acute dehydration and shock following several days of diarrhea; bacteria were found in his stool. It also said the death was unrelated to the vaccine.

A month after The Plain Dealer interviewed CDC officials about the vaccine research, the agency issued a press release that for the first time publicly disclosed the measles study.

Once more, the agency stated categorically that “no problem is expected” among the children in Los Angeles.

“Disingenuous,” was how Brian Ward reacted to the government’s statements, after The Plain Dealer provided him with a copy of Ricardo’s autopsy report and the immunologic data on the Los Angeles children from the CDC’s internal files. Ward, in Montreal at McGill University’s Center for Tropical Diseases, is a leading expert in infectious diseases.

He theorizes that E-Z might rev up the immune system against certain ailments, while weakening it against others.

Ricardo’s death seems “compatible with the deaths that occurred” in Africa and Haiti, Ward said.

Yet neither is there proof the vaccine was to blame for Ricardo’s death; E-Z may have had nothing to do with it.

“Based on what I’ve seen, you can’t prove it either way. It’s an open, legitimate question,” said Ward.

And while the CDC points to research in other developed countries as evidence of safety, Ward cautions that too few children were involved to draw a firm conclusion.

Despite its pronouncements of certainty, the government is still collecting blood samples to learn whether the vaccine harmed or only insignificantly altered the children’s immune systems. Results are due in July.

“We fully acknowledge that it was a mistake” not to tell the families the vaccine was experimental, said Dixie E. Snider Jr., associate director of the Centers for Disease Control. “The major problem is that the consent form did not specifically identify the E-Z vaccine as being an unlicensed vaccine. Some people would call that experimental.”

Last summer, the government finally notified the parents in Los Angeles that the E-Z shots were experimental, thanking them for helping “benefit medical science by increasing our knowledge.”

In Atlanta, the CDC research staff was ordered to undergo training in “human subject protection.”

BusinessWeek – June 11, 2007

How Iran and other nations routinely obtain restricted military technology from the U.S. Department of Defense

TO FRIENDS AND FAMILY, Reza Tabib had seemed an inspiration, proof an immigrant could launch life anew. The son of an Iranian judge, Tabib was a flight instructor at John Wayne Airport in Orange County, Calif. He spoke four languages and could be counted on for level-headed advice, and a laugh.

Agents with the Pentagon’s Defense Criminal Investigative Service discovered Tabib had another talent: procuring restricted aircraft and missile parts for the Iranian military. On May 7, a federal judge in Santa Ana, Calif., sentenced Tabib, 52, to two years in prison for trying to help Iran acquire components for the F-14 Tomcat fighter jet, the swept-wing plane once used by the U.S. and flown by Tom Cruise’s character in Top Gun. The pro-Western Shah of Iran, before his fall in 1979, had acquired 80 of the jets. Today Iran is the only country flying the aging planes, and the U.S. forbids anyone from shipping F-14 hardware to the Middle Eastern nation.

Law enforcement officials say Tabib and an associate easily obtained thousands of Tomcat components that originated from a surprising source: the online company that works with the U.S. government to auction off surplus military equipment to the public.

Defense and homeland Security Dept. investigators say they are pursuing dozens of similar cases in which restricted equipment has slipped through the military’s system of selling surplus equipment. Investigations of F-14 parts bound for Iran led law enforcement agents in March to four entire Tomcats housed at two California airfields. A nearby Navy installation had improperly sold three planes to a scrap dealer. Small museums eventually bought them. The fourth plane was sold for $4,000 to Paramount Pictures for use on the TV drama JAG. In case after case, investigators have found sensitive military equipment and parts in warehouses of front companies or the homes and briefcases of middlemen striving to make deliveries to potential adversaries. Despite precautions contained in policy and law, carelessness, antiquated record-keeping, and failures to confirm the identities and intentions of buyers have contributed to a glut of made-in-the-USA military goods on the global black market. Authorities say many parts have made it to Iran, as well as China and Syria.

One current investigation, triggered by a search in 2005 of a suspect building in California, casts an even more disturbing light on the Pentagon’s permeability. When Defense investigators moved in on their target, they found the expected cache of F-14 parts, apparently bound for Iran. But they were astounded to discover the components were the very ones intercepted during another investigation two years earlier. The parts even had evidence tags still attached to them from the previous case, in which three people were convicted of shipping aircraft and missile parts to Iran. Returned to the Pentagon, the F-14 hardware had been resold and once again was headed for Iran, says Rick Gwin, the Pentagon special agent heading the continuing investigation. “My reaction,” he says, “was extreme, to say the least.”

Each year, the U.S. military disposes of millions of excess items: boots, boats, computers, and plane parts among them. Those that aren’t destroyed because they’re too sensitive, or given away to other government agencies, are typically sold in eBay-like online auctions run by private contractor Government Liquidation. The Pentagon assigns each surplus item a unique 13-digit number and a code indicating whether it should be destroyed or sold. Some sensitive items can still be auctioned, but only to buyers willing to sign paperwork restricting how the purchase can be used and by whom.

The sorting, scrapping, and selling is handled by Government Liquidation and another unit of publicly traded Liquidity Services Inc., based in Washington, D.C. Since 2001, Government Liquidation has had the exclusive contract to sell military equipment the Defense Dept. no longer wants. Last year, the company auctioned off about 19 million items. Some 613,000 registered users, mostly small businesses, can bid on them at the Web site govliquidation.com. The company keeps up to 30.5% of the proceeds, which often amount to only pennies to the dollar of the military’s original cost. In the second quarter of 2007, sales and disposal of military surplus accounted for 58% of the parent company Liquidity Services’ revenue of $49.3 million. (Sales of surplus equipment from 350 corporate clients account for the remainder.)

Government Liquidation says that it scrupulously follows Pentagon regulations. But undercover investigators from a special unit of the Government Accountability Office, the investigative arm of Congress, have recently demonstrated just how easily a person can obtain sensitive parts from the Defense Dept.

In a report published last July, the GAO said its investigators made multiple purchases on Government Liquidation’s site that shouldn’t have been possible. They acquired body armor enhancements currently used by American troops, test equipment for guided missiles, and electronic components for the F-14. All told, the investigators identified thousands of instances in which restricted items that should have been retained by the military or destroyed had instead been sold to the public online. In other cases, GAO investigators posing as military contractors made purchases in person, walking out of the Defense Dept.’s surplus-property warehouses with metal mounts for shoulder-fired guided missiles and other sensitive equipment.

2,669 ‘SENSITIVE MILITARY ITEMS’

The GAO blamed both the Pentagon and its contractor. “Sensitive military equipment items are still being improperly released by the Defense Dept. and sold to the public, thus posing a national security risk,” the GAO report concluded. Government Liquidation, the GAO said, fails to verify the classifications of sensitive equipment and has sold items that should have been returned to the military or destroyed. The combined effect is that the government sometimes doesn’t know to whom it’s selling or what buyers intend to do with military technology.

Liquidity Services hinted at the extent of its potential liability in a 10-K filing with the Securities & Exchange Commission on Dec. 22, 2006. The company noted law enforcement investigations that could involve 79 buyers who purchased 2,669 items between November, 2005, and June, 2006. “These buyers may have acquired these sensitive military items from us,” the company stated. “If an investigation alleges that we engaged in improper or illegal activities, we could be subject to civil and criminal penalties.” The company nevertheless has denied any wrongdoing.

Responding to revelations about black market F-14 parts sales, the House of Representatives on May 17 passed legislation that would bar the Pentagon from selling any F-14 components. The Senate is expected to take up the measure in June. In an Apr. 9 letter to Senator Ron Wyden (D-Ore.), a co-sponsor of the legislation, Government Liquidation says it has decided to stop selling F-14 parts to “ensure that Iran does not receive such parts through any avenues, including the Defense Dept. surplus sales.” The letter adds that the company “always has sought to put national security ahead of commercial profit.”

The Pentagon, for its part, has asked Government Liquidation to develop better ways of tracking inventory. “They came to us and said, can you help us fix this?” says Government Liquidation spokeswoman Julie Davis. Bar code guns have replaced hand transcription of long classification numbers and paper records. New computer databases and centralized warehouses will help ensure more consistency, Davis says. “The systems in place are far superior to anything that’s been in place before,” she adds. Spokeswoman Dawn Dearden of the Pentagon’s Defense Logistics Agency agrees, saying safeguards are now adequate. The Pentagon has “significantly reduced the availability” of sensitive items and has tightened restrictions on who can walk away with parts, she says.

Representative Christopher Shays (R-Conn.), another supporter of the F-14 parts legislation, isn’t convinced. “They’ve got a long way to go,” he says. John P. Ryan, a former U.S. Secret Service agent who has overseen the GAO’s investigation of the Pentagon and Government Liquidation for four years, notices some improvement in surplus military sales. But sensitive goods can still fall too easily into the wrong hands, he says. “The system is vulnerable.”

♦  ♦  ♦

Also from Congressional Quarterly Researcher – June 14, 2002:

Universal Health Insurance: Not a Cure-All

Recurring Quest for Health Reform: First Enthusiasm, Then Failure

Local Health Reform: How Tampa Does It?

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It did not seem like a big thing. On the swing set at his rural North Carolina preschool three years ago, 5-year-old Dalton Dawes and a classmate bumped into each other. Then began his parents’ worst nightmare.

Dalton is a hemophiliac, and he began to bleed internally. Dalton had been receiving twice-weekly injections of a blood-clotting agent almost since birth. Now he would need them more often.

The drug would do more than simply allow him to live a normal child’s life, playing soccer and roaming the nearby woods. It would keep him from bleeding to death. Yet the family’s health insurer would not provide coverage. Nor could his parents, despite their good jobs, afford the $2,000 weekly expense — for years to come.

So Leonard Poe, a lawyer, and Heather Dawes, a paralegal, impoverished themselves. They sold off land and built a home from logs. They dispensed with the dishwasher and TV. By reducing their earnings to less than $23,000 a year, they qualified for Medicaid, the government health-insurance program for the poor.

After Dalton’s seventh birthday, his parents had to cut their income even further — to $15,492 — in order to remain eligible for Medicaid. Instead, they tried to enroll him in the Children’s Health Insurance Initiative (CHIP).

Congress passed CHIP in 1997 to tackle a worrisome statistic: the roughly 10 million American children whose families lacked health insurance. The largest single expansion of public health coverage in three decades, CHIP took direct aim at families too well off for Medicaid but too poor to afford private insurance.

Expensive medication makes a normal life possible for Dalton Dawes, a hemophiliac in rural North Carolina, but thecost forced his parents to impoverish themselves to qualify for Medicaid coverage.

Unfortunately, North Carolina’s CHIP program had run out of money by March 2001. And there were more than 23,000 other children besides Dalton waiting to join the program.

To keep up Dalton’s medication, his parents relied on drug-company charity and considered moving to a state with a CHIP program that was taking new clients.

By last September, when the North Carolina legislature restarted the program, Dalton had only three weeks’ worth of the life-preserving injections left. [1]

“It’s incredibly depressing,” Heather Dawes says. “The worst thing is, I wasn’t just fighting my own battle. There are millions of people in this county who are cut off from good medical care. They don’t deserve this. It’s awful.”

The United States spends $1.3 trillion on health care each year, more than any other industrialized nation, but it is the only developed country that does not assure universal access to basic health care. Unlike the British or Canadians, for instance, all Americans are not entitled to affordable medicine or treatment — or to keeping their existing coverage if their financial circumstances change. Partly as a result, the United States ranks 37th in the World Health Organization’s ranking of the world’s healthiest countries. [2]

Nearly one in seven Americans — 38.7 million people — lacks insurance, more than the combined populations of Texas, Florida and Connecticut. [3]Eight in 10 of the uninsured are members of working families — too well off for Medicaid and other public programs but too poor to pay private health insurance premiums.

The lack of universal coverage, some critics say, stems from the government’s historically piecemeal approach to health insurance — a complicated patchwork of private and government-subsidized coverage more like a sieve than a shield. And while there has been some progress in recent years — establishing the CHIP program and allowing workers to change or lose a job without losing insurance — many people still fall through the cracks in coverage. [4]For example, only 6 percent of the children eligible for CHIP benefits are enrolled in the program. [5]

The absence of universal health coverage has been called “one of the great, unsolved problems facing the United States at the onset of the 21st century.” [6]

The problem affects Americans regardless of their age, education or place of residence. More than half the uninsured are full-time workers or their dependents. Nearly 20 million are white, 11 million are Hispanic and 7 million are black, according to the Census Bureau. [7] Only Americans over 65 are theoretically assured of health security, through Medicare. But Medicare doesn’t cover the cost of most drugs, and critics say rising drug prices mean seniors are not really protected if they can see doctors but can’t afford the drugs they prescribe.

And the ranks of the uninsured have been rising for most of the last 15 years — even during recent periods of record-breaking economic prosperity. [8]Seven of every 10 American workers depend on their employers for health insurance, but as health-care costs have skyrocketed in recent years, companies have begun asking employees to pay a greater share of the cost, or eliminating coverage entirely. [9]

In Florida, a Chamber of Commerce survey found that only 77 percent of businesses offered health insurance to employees in late 2001, down sharply from 91 percent in 1999. [10]Nationwide, another survey found that 44 percent of U.S. employers were “very” or “somewhat” likely to increase workers’ out-of-pocket premiums during 2002. [11]

Others have solved the problem by downsizing their staffs and outsourcing work to contractors, who by definition do not qualify for medical benefits. During last year’s recession and layoffs, 2.2 million Americans lost their insurance, and a third of them probably lost their health coverage at the same time. [12]

“We face a crisis, and we need to act,” said Yank D. Coble Jr., president of the American Medical Association (AMA). “The good health of our patients — and our security as a nation — depends on it.” [13]

Even before the recession, real income and purchasing power were lagging behind the double-digit rates of inflation for drugs, health services and insurance, which are expected to rise 13 to 16 percent this year. “If we have more years of double-digit increases, people will be priced out of the market,” said Paul B. Ginsburg, president of the Center for Studying Health System Change.

And the situation is likely to get worse. According to the Centers for Medicare and Medicaid Services, health spending will reach $2.8 trillion by 2011 — a staggering 17 percent of the gross domestic product. [14]

Cash-strapped state governments — which pay for the bulk of Medicaid — can’t keep up with spiraling health costs. “Our challenge is to find a way to not cut services when we have less money than we had the year before,” said Gov. Paul E. Patton, D-Ky., vice chairman of the National Governors’ Association (NGA). [15]

State governments, collectively billions of dollars in the red, have begun trimming Medicaid benefits, sparking protests from Hawaii to Arkansas. [16]Dozens of states are trying to force drug manufacturers to provide discounts for the poor. [17]In Mississippi, the Medicaid program ran out of money in March. At least 14 states are considering increasing the eligibility requirements for Medicaid and CHIP, thus reducing the number of people who qualify for those safety-net services.

The health implications of inadequate insurance are stark. The Institute of Medicine estimates that 18,000 Americans die prematurely each year as a result of not having health insurance — usually because they discover too late that they have a treatable disease. [18] Others never receive timely treatment for diabetes, mental illness and other conditions and eventually must be hospitalized, a far more costly solution than early care in a doctor’s office. [19]

“The hard truth is that Americans without health-care coverage live sicker and die younger,” Coble said. “It’s bad fiscal policy. It’s bad public policy. And it’s bad medicine.” [20]

“Charitable physicians and the safety net of community clinics and public hospitals do not substitute for real health coverage,” said Adam Searing, project director of the North Carolina Health Access Coalition. “Need a concrete example? Look no farther than Dalton Dawes.” [21]

The issue brought together two Washington lobbying groups usually on opposite sides of the health-policy debate: the U.S. Chamber of Commerce and the AFL-CIO. In February, they helped create the Covering the Uninsured coalition — along with business groups, consumer and family advocates and health-care providers — dedicated to solving the problem. [22]

Nearly a third of voters want the health-care system “radically changed,” according to Republican pollster Bill McInturff. [23]President Bush has proposed new tax credits to help the uninsured pay for health coverage, a change he said would “reform health care in America.” [24]And both political parties have suggested prescription-drug subsidies for the elderly. [25]

Across the country this year, people are peppering campaigners for Congress with questions about health care. A Colorado candidate for the U.S. Senate expected a coal company executive to quiz him on energy issues — only to have him complain about the company’s $10 million annual bill for retired workers’ prescription drugs. [26]

The problem is hardly new. In 1912, presidential candidate Theodore Roosevelt pledged to make employees, employers and “the people at large” pay for insurance against the “hazards of sickness, accident, invalidism, involuntary unemployment and old age.” His proposal — often repeated by other politicians over the years — was most recently squelched in 1994, when President Bill Clinton’s call for universal coverage foundered spectacularly.

The failure of Clinton’s health-care reform “still hangs like a dark cloud over contemporary health-care debates,” writes Harvard political scientist Jacob Hacker. [27]And this year Washington again shows every sign of deferring the issue. “We’re not going to deal with it in an election year, that’s for sure,” said a key health-policy player, Sen. John B. Breaux, D-La. [28]People of both parties are “scared of being labeled Clintonites,” explained Robert Reischauer, who ran the Congressional Budget Office in 1993. [29]

Thus, while employers, hospitals, doctors and governors clamor for help, health-care proposals now pending in Congress would offer only limited benefits. Lawmakers believe — despite the opinion surveys — that Americans prefer their health-care progress in small doses and do not think a large federal bureaucracy can solve the problem.

Yet, if the situation isn’t remedied, the coming convergence over the next decade of escalating costs, budget shortfalls and vastly increased needs could overwhelm the health-care system and increase the ranks of the uninsured to as many as 61 million. “We are heading for a social and health-care debacle of gigantic proportions,” warned Harold G. Koenig, a professor of medicine at Duke University. [30]

As Congress, the White House and local leaders grapple with the nation’s uninsured, these are some of the questions being debated:

Can America afford health insurance for all?

On the surface, the nation shows every sign of not being able to afford caring for the uninsured and disenfranchised. Community and public health centers, hospital clinics, inpatient facilities and emergency rooms all are showing stresses from government cutbacks. As spending spirals to new levels, states, Congress, employers and insurers all are in the mood to cut and constrain — not add to financial obligations.

The Balanced Budget Act of 1997, for instance, reduced payments to federally licensed community health centers, cut Medicare reimbursement rates to hospitals and prevented hospitals from challenging the adequacy of Medicaid payments. Since then, states have cut back on Medicaid payments, and some large health plans have pulled out of the Medicaid market altogether. Communities are seeking creative solutions, but few at any level of government or industry are saying they can afford more. [31]

But Don Young, president of the Health Insurance Association of America, believes they can. “It’s more of a willingness to pay — and that willingness will have to come from a number of places,” he says. The task could be accomplished with expansions in Medicaid, CHIP, tax credits and tax incentives. “If the American public wants to do it, it is certainly affordable.”

Ron Pollack, executive director of the national consumer organization Families USA, agrees. “Covering the uninsured has never truly been a question of cost,” he says. “We’re the richest nation in the history of the planet. The question is whether we have the political will for it.”

But Kenneth S. Abramowitz, a managing director of the influential Carlyle Group investment firm and a longtime health-industry analyst, says Americans already pay for universal coverage — through higher health-care costs for everyone else.

“When you or I buy insurance — or the company we work for does — we’re paying for the uninsured,” says Abramowitz. Most insurance premiums are inflated by about 12.5 percent, he says, to compensate for non-payment or underpayment by others — a system called “cost shifting.”

The uninsured are “freeloaders,” he says bluntly. “When someone shoplifts a sweater, the rest of us have to pay for the sweater because it costs us more. The [uninsured] are shoplifters.”

Young admits that hospital revenues run at about 114 percent of costs — so the excess can subsidize the uninsured. Also, Medicare and Medicaid compensate hospitals that serve predominantly poor populations at a higher rate than other hospitals. “Those hidden costs are there,” Young says. “The uninsured are being covered — they’re getting services, paid for by the government through tax dollars and subsidies from private insurers.”

Abramowitz estimates that half the cost of any hypothetical government program to cover the uninsured is already being spent on the uninsured. It would cost less, he says, to compel every citizen to buy health insurance, with the poor receiving government vouchers for part of the cost and the poorest receiving certificates covering the entire amount. Others would receive tax credits, and employers would receive tax deductions.

“It would be cheaper — and everybody would be covered,” he says, estimating a total cost of between $11 billion and $86 billion a year. [32]

Under the current system, the uninsured end up using emergency rooms for most of their care because they tend to wait until their condition is critical before seeking care at hospitals, which must treat them. Research for the National Health Policy Forum shows that about three-fourths of all emergency room (ER) visits in which patients are not admitted should have been treated elsewhere.

Because ER care is one of the costliest forms of treatment, the current system helps drive up health-care costs, critics say. The lack of universal coverage prevents the poor from getting treatment more cheaply — in a primary physician’s office when their ailments are in their infancy — thus fueling the increase in health-care costs.

When the uninsured cannot afford emergency care, hospitals, businesses, insurers and taxpayers pick up the tab. Hospitals alone absorb an estimated $19 billion per year in uncompensated care for the uninsured. [33]

Such uncovered care amounts to “an unlegislated tax,” says Peter Schonfeld, senior vice president for policy of the Michigan Health and Hospital Association. Because legislators don’t want to raise taxes, he says, “They shift the cost elsewhere, hiding it from the public.”

And the hidden “tax” is going up. The number of emergency room visits increased 15 percent nationally between 1990 and 1999, according to the American Hospital Association, largely due to a surge in uninsured visits. In California, 82 percent of the more than 9.2 million patients who are treated in emergency rooms each year cost the hospitals money — up to $48 in uncompensated care per visit. [34]

Because of the overuse of emergency rooms and state and federal cutbacks in hospital reimbursements for Medicaid and Medicare patients, hospitals nationwide have begun diverting patients to other facilities. A survey by the Democratic staff of the House Government Reform Committee found that overcrowded ERs are causing “substantial problems accessing emergency services” in 22 states — especially in cities with large numbers of uninsured residents. Some hospitals simply close their doors to those unable to pay and for whom the hospital could collect no compensation elsewhere. [35]

More than 90 percent of large hospitals with 300 beds or more report emergency rooms at — or “over” — capacity. Hospitals over capacity place patients in other areas, such as hallways. [36]

“Unless the problem is solved in the near future,” cautioned the Annals of Emergency Medicine, “the general public may no longer be able to rely on emergency departments for quality and timely emergency care, placing the people of this country at risk.” [37]

An unprecedented alliance of normally adversarial business and consumer groups known as the Covering the Uninsured coalition has launched a nationwide publicity campaign to raise awareness about the 39 million Americans who lack health insurance. Covering the Uninsured Coalition

Should Medicare cover prescription drugs for the poorest seniors?

If Congress does anything on health care this year, it most likely will involve a distinct population already receiving huge publicly financed benefits — seniors and disabled persons enrolled in Medicare. Currently, Medicare covers only a few drugs, such as certain cancer medications. Some seniors purchase supplemental coverage — such as Medigap or Medicare + Choice, and some states provide additional coverage for services or prescriptions.

President Bush, members of both parties in Congress and a wide range of interest groups want the government to subsidize the skyrocketing cost of pharmaceuticals for Medicare recipients. Their interest in the issue is not only a sign of the problem — but also of politics: The more than 10 million seniors and persons with disabilities who lack prescription-drug coverage could be critical to the outcome of midterm congressional elections this year, which could alter the balance of power in Washington.

Seniors and the disabled — among the nation’s most dependent users of medications — often must pay full price for drugs, while those with private group insurance plans often pay less because of their company’s purchasing power. For instance, a cholesterol-lowering medication can cost a senior more than $300 for three months, compared with only about $50 for someone with private insurance.

The big question for lawmakers is not whether to add prescription benefits to Medicare but how many seniors to give it to — in other words, how to pay for it. Facing a budget deficit, even the smallest new benefit would hit taxpayers hard.

The president wants to spend $190 billion over the next 10 years to provide free prescriptions to any Medicare recipient with an annual income under $11,610, or couples earning up to $17,415. The proposal is especially controversial because Medicare has never had salary caps before. Opponents say providing benefits only to the lowest-income seniors undermines Medicare’s original covenant with the elderly — to provide coverage to every person over 65, regardless of income. Otherwise, they argue, Medicare becomes a welfare program.

Nevertheless, House Republicans propose covering only the poorest seniors: The plan calls for the government covering part of the first $5,000 a year in drug expenses, and everything above $5,000. Seniors would pay $37 in monthly premiums. The plan would cost the government $350 billion and benefit only half the nation’s Medicare recipients. Couples with incomes over $18,000, or individuals earning above $13,000, would not be covered.

Republicans argue that in belt-tightening times — and when so much money is being diverted to fight terrorism — benefits should go to those who need them most. They point out that Medicare beneficiaries who can afford it already pay for supplemental coverage, some of which covers prescriptions. Providing free drugs for all seniors could “bankrupt the program,” hurting all Medicare beneficiaries, according to a GOP “Talking Points” memo prepared for House members. Instead, it suggested, any solution should focus on the 35 percent of Medicare recipients “who truly need a prescription-drug benefit.”

In the Senate, Democrats propose spending up to $500 billion, arguing that Bush’s plan only covers 3 million seniors — a third of those needing help. “The best way to help low-income seniors is to help all seniors,” says Rep. John D. Dingell, D-Mich. The president’s proposals are “temporary solutions” that “ignore the larger task at hand” — creating a universal Medicare drug benefit.

AARP, the influential seniors’ lobby, estimates it would cost around $750 million to cover prescription-drug benefits to every American over 65. Without it, the group says, millions of elderly Americans will continue the dangerous practices they now use to stretch their medicine budgets: skipping doses, splitting pills and sharing medications with friends.

Some seniors go without pills entirely. In a 1995 survey, Medicare beneficiaries lacking drug coverage were less likely than those with drug coverage to fill prescriptions for anti-hypertensive medications needed to lower the risk of heart attack, heart failure, stroke and kidney failure. [38]

The average Medicare beneficiary with drug coverage fills 22 prescriptions per year, while those without it fill just 14. The ramifications are clear: Those in poor health take far fewer medications than their healthy counterparts. [39]

Price discrimination is not unique to the drug industry. Business travelers, for example, pay much higher airline fares than leisure travelers. In the pharmaceutical world, health maintenance organizations (HMOs) and benefits plan administrators negotiate price breaks.

HMOs and other “third-party” buyers account for more than 90 percent of all pharmaceutical sales. By purchasing large volumes of drugs, they can negotiate steep discounts, sometimes shaving 25 percent or more off the price of a drug. In addition, state prescription-drug assistance plans, programs sponsored by pharmaceutical companies and organizations like AARP offer discounts and other benefits to distinct populations. But uninsured consumers enjoy no such clout.

Meanwhile, average prescription-drug prices have doubled in the past decade. [40]Drug companies have resisted lowering prices, arguing that research, development and testing represent a huge investment, not to mention a high risk.

Clinical trials are more complex and costs have increased, noted an August 2001 Ernst & Young analysis for the Pharmaceutical Research and Manufacturers of America. One successful pill can represent 10-15 years and $802 million of research and development, as the medicine moves from the laboratory bench to the pharmacy shelf, says the analysis. Only three of 10 marketed drugs produce revenues that match or exceed average development costs.

However, rising drug prices could drive up the cost of an eventual Medicare drug benefit, making it impossible to calculate the long-term price tag for a new Medicare benefit. And once in place, such a benefit — despite its high cost or federal budget shortfalls — would be difficult to withdraw. Programs with such a large and influential constituency are not easily eliminated.

Thus, some policymakers have suggested imposing price controls on prescription drugs. The pharmaceutical industry opposes price controls, arguing they would have a chilling effect on the quest for cures and would impede free-market forces.

Adding a prescription-drug benefit to Medicare is widely viewed as in keeping with Medicare’s original intent of lessening the burden of health care for all seniors. Nevertheless, both supporters and opponents of Medicare benefits for prescription drugs lament that the nation’s biggest health problem — uninsured Americans — remains unaddressed.

“It’s really a shame the focus is so much on drugs for seniors,” says Chip Kahn, president of the Federation of American Hospitals, “when most of the uninsured are low-income working families. They’re the ones who are totally exposed.”

Should small businesses be allowed to band together to buy health insurance for their employees?

Ninety-nine percent of the nation’s big companies (those with more than 200 employees) offer tax-subsidized health benefits, which cost the average worker about $2,426 a year. Because large employers enjoy greater economies of scale and can pool their risk, their employees pay considerably less than if they purchased health insurance individually.

But small-business owners like John Nicholson, who operates a flower shop in Arlington, Va., have no such purchasing clout. Nicholson could not afford coverage for his 10 employees, and most insurers offered no policies appropriate for a small work force. Eventually, he signed up with a local HMO, paying $3,300 per worker. [41]

Soaring health-care costs hit small businesses harder than larger companies, and their premium rates are rising faster. But it’s not just a problem for employers. Since a large percentage of all employees work for small businesses, the lack of affordable health insurance among small businesses dramatically impacts the nation’s overall health-care costs. [42]In fact, a third of uninsured Americans work for employers that do not offer any health coverage, and 82 percent of the uninsured are members of families in which at least one person works part or full time. [43]

And the situation is getting worse: Small businesses’ cost of insuring employees is expected to jump as much as 20 percent this year — on top of a 10-12 percent increase over the last three years. In some parts of the country, the situation is even more severe. Annual premium increases for small-business owners in Florida were expected to go up 20-30 percent this year, according to the National Federation of Independent Businesses of Florida. [44]

After at least four years of aggressive lobbying for a change, small businesses and their employees may finally be close to having an alternative. Proposed patients’-rights legislation allows small employers to band together across state lines to buy health insurance, giving them greater power to bargain for prices and coverage. The legislation passed the House last August and is awaiting Senate action.

The proposed law would permit trade and professional organizations like the National Restaurant Association or the U.S. Chamber of Commerce to sponsor and negotiate not-for-profit health-care plans known as association health plans. In theory, efficiencies and savings would be passed along to employers and employees through lower premiums.

The measure faces formidable opposition in the Senate, which agreed to a patients’-rights bill — giving patients more of a voice in their treatment by HMOs — but excluded any provision for association health plans. Similar bills passed the House four times in recent years, only to languish in the Senate, where they couldn’t garner sufficient support because of pressure from the insurance industry.

This year, with intensifying pressure to tackle health costs, the tide finally may turn in the Senate. Association health plans are attractive to many, including President Bush, because — at least in theory — they promise to add working Americans to the ranks of the privately insured without spending a dime of public money.

“Before adding millions in new federal spending and more mandates, shouldn’t we look for free-market solutions that empower individuals?” Dan Danner, senior vice president of the National Federation of Small Business, asked the House in a letter a year ago. [45]

The Blue Cross and Blue Shield Association, the dominant small-business health insurer in at least half the states, opposes the measure. Danner told the House the group opposes it because “they’re against anything that forces them to compete for business.”

But Mary Nell Lehnhard, a Blue Cross senior vice president, called the current proposal for association plans “a shell game rather than a serious proposal for the uninsured.”

Because the House stipulated that the new plans should not be regulated by the states, they would provide only temporary savings and trigger a collapse of the state-regulated market, Lehnhard said, leading to a return to higher premiums and undoing years of reforms.

Pollack of Families USA said that without being subject to state rules, association plans could exclude mental health services or home health care and might engage in discriminatory underwriting. For example, he said, benefit packages could be designed to attract healthy people, while discouraging sick people from joining. As a result, Pollack says that while he supports businesses banding together to buy insurance, “the measure approved by the House could make the problems existing today even worse.”

The NGA supports the idea, but not the bill. State oversight is necessary, the governors say, “to protect consumers and small businesses from fraud and abuse and underinsurance.” [46]

But Kahn of the hospital federation counters, “Nothing that expands health coverage to more people will be ideal,” he says. “We’re not talking about Cadillacs here; we’re talking about Chevys, at best. But at least we’re talking about Chevys for people who now have no car at all.”

Just how many people would be newly insured? The Congressional Budget Office (CBO) foresees the innovation worsening conditions for four in five workers. It says 20 million employees would face increases in premiums, while insurance would be less expensive for 4.6 million. Meanwhile, only 330,000 of the uninsured would gain coverage, the CBO said.

But a public-policy research firm, CONSAD, estimates that the measure would extend benefits to 4.5 million workers at affordable rates. According to former Rep. Jim Talent, R-Mo., small businesses could save 10-20 percent in health-care costs.

The key, Talent said, lies in breaking the grip of the Blue Cross monopolies — and conventional wisdom. “Nobody questions that big businesses can offer comprehensive plans,” Talent said. “But for some reason, they seem to distrust small businesses.”

♦  ♦  ♦

Also in this issue of Congressional Quarterly Researcher:

Universal Health Insurance: Not a Cure-All

Recurring Quest for Health Reform: First Enthusiasm, Then Failure

Local Health Reform: How Tampa Does It?

♦  ♦  ♦

[1] Dawes’ plight is described in Trish Wilson, “Kids’ Insurance Needs CPR,” News and Observer, March 9, 2001, and Karen Tumulty, “Health Care Has a Relapse,” Time, March 11, 2002, p. 42.

[2] World Health Organization, “World Health Report,” 2000.

[3] “Health Insurance Coverage 2000,” U.S. Census Bureau, Sept. 28, 2001.

[4] Terminated workers can continue the same health coverage for 18 months under COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1995, which became law in 1996.

[5] See Elizabeth Simpson, “State Reaches Out to Uninsured,” Virginian-Pilot/Ledger Star, March 7, 2002.

[6] Karen Davis, “Universal Coverage in the United States: Lessons from Experience of the 20th Century,” Journal of Urban Health: Bulletin of the New York Academy of Medicine 78 (March 2001), p. 46-58.

[7] Census Bureau, op. cit.

[8] John Holahan and Johnny Kim, “Why Does the Number of Uninsured Americans Continue to Grow?” Health Affairs, July/August 2000, pp. 188-196.

[9] Census Bureau, op. cit.

[10] Florida Chamber of Commerce Federation, Jan. 24, 2002.

[11] “Employer Health Benefits: 2001 Annual Survey,” Kaiser Family Foundation and Health Research and Educational Trust, September 2001.

[12] Jeanne Lambrew, “How the Slowing Economy Threatens Employer-Based Health Insurance,” Commonwealth Fund, November 2001. Paul Fronstin, “Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2000 Current Population Survey,” Issue Brief No. 228, Employee Benefit Research Institute, 2000.

[13] Press conference, Coalition to Cover the Uninsured, Washington, D.C., Feb. 12, 2002.

[14] Mary Agnes Carey, “Analysts See a Seismic Shift in Health Policy Debate,” CQ Weekly, March 23, 2002.

[15] Ibid.

[16] In their biennial reports, the National Governors’ Association and National Association of State Budget Officers blamed the recession, fallout from the Sept. 11 terrorist attacks and Medicaid cost increases for creating a record $40 billion to $50 billion budget shortfall in more than 40 states in fiscal 2002. Meanwhile, 28 states had combined deficits of $7.1 billion in their Medicaid budgets.

[17] A federal judge in March 2002 allowed Maine to force pharmaceutical makers to provide discounts of up to 25 percent for those with incomes 300 percent of the poverty level. Under Maine’s law, the state would leverage its buying clout — $210 million in Medicaid drug purchases — to negotiate discounted prices for the 325,000 residents who lack health insurance and are not covered by Medicaid. If the drug makers refuse, the state could impose price caps in 2003. The industry is appealing the decision in Pharmaceutical Research and Manufacturers of America v. Commissioner, Maine Department of Human Services. The 1st U.S. Circuit Court of Appeals in Boston is considering the earlier ruling by U.S. District Judge D. Brock Hornby.

[18] “Care Without Coverage: Too Little Too Late,” Institute of Medicine, National Academy of Sciences, May 2002.

[19] Paul W. Newacheck, “Health Insurance Access to Primary Care for Children,” The New England Journal of Medicine, May 15, 2000, pp. 513-519.

[20] Quoted in Vicki Kemper, “Unlikely Coalition Declares Health Care Crisis,” Los Angeles Times, Feb. 13, 2002, p. A30.

[21] North Carolina Health Access Coalition newsletter, op. cit.

[22] The coalition also includes the American Medical Association, Service Employees International Union, Business Roundtable, American Nurses Association, Health Insurance Association of America, Families USA, American Hospital Association, Federation of American Hospitals, Catholic Health Association, AARP and the Robert Wood Johnson Foundation.

[23] From a September 2001 survey for the Institute for Legal Reform and the U.S. Chamber of Commerce.

[24] Speech at the Medical College of Wisconsin in Milwaukee, Feb. 25, 2002.

[25] For background, see Adriel Bettelheim, “Drugmakers Under Siege,” The CQ Researcher, Sept. 3, 1999, pp. 753-776, and Julie Rovner, “Prescription Drug Prices,” The CQ Researcher, July 17, 1992, pp. 597-620.

[26] Tumulty, op. cit.

[27] Jacob Hacker, “Health Care Reform: A Century of Defeat,” Harvard Health Policy Review, fall 2000.

[28] Carey, op. cit.

[29] Quoted in David Wessel, “After a Few Years of Relaxation, Health-Care Costs Rise Again,” The Wall Street Journal, May 9, 2002.

[30] Quoted in Bob Condor, “Look Beyond Politics Before Writing Off the Faith-Based Initiative,” Chicago Tribune, March 18, 2001, p. C3.

[31] For background, see Adriel Bettelheim, “Hospitals’ Financial Woes,” The CQ Researcher, Aug. 13, 1999, pp. 689-704.

[32] The amount depends largely on the breadth of benefits that would be offered, he says.

[33] Cited in testimony by Mary R. Grealy, president, Healthcare Leadership Council, House Energy and Commerce Subcommittee on Health, Feb. 28, 2002. HLC members include CEOs of pharmaceutical companies and major hospitals and clinics.

[34] California Medical Association figures, as of November 2001, cited by Norman Label, president, Emergency Physicians Medical Group, writing in the Sacramento, Calif., Business Journal, Feb. 1, 2002.

[35] “Emergency Crews Worry as Hospitals Say ‘No Vacancy,’ ” The New York Times, Dec. 17, 2000. See also “Trouble in the ER,” National Journal, May 19, 2001.

[36] “Emergency Department Overload: A Growing Crisis,” The Lewin Group for the American Hospital Association, April 2002.

[37] Robert W. Derlet and John R. Richards, “Overcrowding in the nation’s emergency departments: Complex causes and disturbing effects,” Annals of Emergency Medicine, January 2000, pp. 63-68.

[38] Jan Blustein, “Drug Coverage and Drug Purchases by Medicare Beneficiaries with Hypertension,” Health Affairs, March/April 2000, pp. 219-230.

[39] J.A. Poisal and L. Murray, “Growing Differences Between Medicare Beneficiaries With and Without Drug Coverage,” Health Affairs, March/April 2001, pp. 74-85.

[40] AARP Bulletin, March 2002.

[41] See J. Gabel et al, “Class and Benefits at the Workplace,” Health Affairs, May/June 1999, pp. 144-150.

[42] Small Business Administration, www.sba.gov/ advo/stats/sbfaq.txt

[43] Catherine Hoffman and Mary Pohl, Health Insurance Coverage in America: 1999 Data Update, Kaiser Commission on Medicaid and the Uninsured, 2000.

[44] National Federation of Independent Business (nationwide data); for Florida, “Florida’s Small Businesses Struggle with Rapidly Rising Health Insurance Costs,” Florida Times-Union, April 8, 2002.

[45] Letter to House of Representatives, March 2001.

[46] National Governors’ Association, position paper. www.nga.org.

The CQ Researcher • June 14, 2002 • VOLUME 12, No. 23
© 2002 Congressional Quarterly, Inc. All rights reserved.

By Keith Epstein Special to The Washington Post / October 9, 2000

Michael J. Burch, a Washington consultant, had just returned from a visit to his son, a Peace Corps volunteer working in Ghana, and was having dinner at a Capitol Hill restaurant last March. Burch had been feeling dizzy, his legs rubbery. He’d been battling sleeplessness. Now, during dinner, a sudden surge rose in his chest. He feared a heart attack. It was, he recalls, as if “something were taking over my body.”

Elisa von Joeden-Forgey, an experienced traveler with no history of psychiatric problems, had trouble sleeping within days of her arrival in Cameroon, where she was to conduct postgraduate research. She had vivid nightmares. She grew terrified that if she dozed off she would disappear. Later, after she returned to the United States, she was too frightened to leave the house. She couldn’t concentrate or even carry on a conversation very well. Her dissertation stalled. Her marriage faltered.

Not even Hope Trachtenberg-Fifer, a Virginia registered nurse and marathon runner who teaches others to recognize symptoms of medical conditions, had any idea what was going on. While serving on a volunteer medical mission to Kenya in 1997, she dreaded the night, sensed doom and thought she’d never see her family again. Though she’d never had mental problems or trouble sleeping back home in Roanoke, she lay balled up in bed, sobbing. She slept only for brief periods and would wake up gasping and sweating. She wouldn’t eat or drink. She wouldn’t leave her room. Her heart rate soared, her legs wobbled. She was convinced she would die.

“I was a nut. I was psychotic,” she says. “And I was clueless. There I was, a nurse and a health educator,and I had no idea what was happening to me.”

All of these people say they were suffering side effects of mefloquine, sold in the U.S. under the brand name Lariam. It is the antimalaria medication recommended as the “drug of choice” by the federal Centers for Disease Control and Prevention (CDC) in 79 countries where malaria is resistant to other drugs. Travel clinics and private physicians in the Washington area, including those serving the State Department, the Peace Corps and many public and private groups whose personnel travel between here and Third World locations, prescribe it routinely. American travelers headed for business or pleasure to India, Thailand and Vietnam, on African safaris or on tours of the Amazon basin typically are given prescriptions for Lariam.

Mefloquine is used to prevent (and sometimes treat) malaria, a devastating disease that kills more than 1 million people worldwide each year, and is the second-most deadly communicable disease in the world, after tuberculosis. Mefloquine is over 90 percent effective when used in prevention, and saves many thousands of lives annually. It is taken by 90 percent of Peace Corps volunteers in Africa and has reduced their infections dramatically since it was introduced. Last year it was prescribed at least half a million times. Most who take it for prevention have only mild side effects or none at all.

But there is convincing evidence that the drug exposes a small number of otherwise healthy travelers to traumatic and sometimes bizarre neuropsychiatric reactions — and that they are often unaware of the risk of such reactions. Reports of side effects from mefloquine exposure include hallucinations, sleeplessness, paranoia, psychotic episodes and suicide attempts. Some users complain of effects persisting for weeks or months, even years.

These reactions are documented in scientific studies, surveys and in thousands of case reports in the files of Lariam’s manufacturer, the Swiss firm Hoffmann-LaRoche, and the U.S. Food and Drug Administration (FDA), the agency that regulates pharmaceuticals. Adverse reactions were noticed by the manufacturer and public health officials soon after the drug was approved 11 years ago. The manufacturer twice agreed to revise the label to list more, and more serious, side effects, including psychiatric ones. Regulators in the United Kingdom had already required explicit consumer warnings, and in 1997 the U.K.’s Malaria Advisory Committee stopped recommending mefloquine for travelers headed to malarial regions for two weeks or less.

Even so, U.S. travelers are often unaware of the potential for disturbing effects. Because pharmacies are not required to distribute the complete product label with most drugs, the government-mandated warnings are not routinely circulated to patients. And many physicians, following the advice of the CDC and drawing on their experience prescribing the drug to patients with few serious problems either downplay or are unaware of the symptoms a minority of people taking mefloquine report. Despite the accumulating facts about side effects, the CDC has continued to support mefloquine as the “drug of choice.”

As a consequence, many who take the drug and suffer side effects are less likely to recognize them until considerable mental anguish or physical injury has occurred. Many people continue taking the medication because they do not realize that the puzzling, even debilitating symptoms are associated with the drug they are taking to prevent malaria. Patients often report being treated by doctors who discount the possibility that their problems are related to the drug.

People who have called the CDC to report or gather information about the side effects of Lariam, including several people whose cases were researched for this story, were told by agency staff that their reactions were unlikely to be the result of the drug and were advised to consider other causes, including stress.

While few agree on the number of people who suffer side effects from mefloquine, there is little question that some of them do.

Andrea Meyerhoff, an FDA medical officer with responsibility for drugs for tropical diseases and a travel medicine clinician at Georgetown University, says that while cause and effect between mefloquine and these symptoms may never be conclusively proven, neuropsychiatric effects are clearly “associated” with the drug.

Raymond Woosley, chairman of the pharmacology department at Georgetown University and an authority on drug side effects, says the reports on mefloquine are sufficiently widespread to eliminate any doubt about the drug’s ability to produce these effects at the preventive doses given travelers. “Mefloquine is one of the more troublesome drugs people use, and causes a lot of side effects,” he said. “Some of them are quite serious.”

Though Lariam can treat a deadly disease, he continued, its use for prevention needs to be carefully considered. Unlike drugs used to treat a patient who has already contracted a serious disease, where even powerful side effects are tolerated in service of the greater good of fighting a life-threatening condition, Lariam is used to prevent a disease in otherwise healthy people who are usually choosing to travel to infected areas.

Says University of Toronto professor Jay Keystone, a leading authority on antimalarials who has served as a consultant to the CDC and to the drug’s manufacturer: “I’m not questioning [the CDC's] intentions or integrity, and for most people the drug is safe and effective. But they are trivializing very real and disabling side effects.”

Officials at Hoffmann-LaRoche take the position that Lariam has been proven safe and effective, and that labeling changes approved by the FDA provide adequate notice of the side effects.

“Lariam has been used since 1985 by more than 12 million people worldwide for prevention of malaria,” said Charles Alfaro, a spokesman for Roche (as Hoffmann-LaRoche is widely known). “The numbers [of side effects] are extremely low. There’s a lot of data out there, but if you look at the experts writing about Lariam, the causal association between mefloquine and serious adverse health events is unlikely.”

“The pill is well-tolerated by most people, and the drug’s really a good drug,” said Celia Maxwell, who as an FDA medical officer in 1987 recommended the drug’s approval, and who as a travel medicine clinician now frequently prescribes it. Disabling side effects are “very, very rare.”

But when they do occur, she adds, “it’s 100 percent real, no doubt about it.”

The precise odds of having a bad reaction to Lariam are the subject of intense debate, at least partly due to disagreement over what is meant by “bad.” Some scientists tally only the most severe reactions requiring hospitalization, while others count users who are unable to continue their daily activities. Others include only those who stop taking the pill due to the side effects, thus exposing themselves to the risk of malaria.

A Roche-sponsored study of 145,000 travelers in 1993 estimated the rate of “serious” side effects identified in this study as those causing death or hospitalization at one in 10,000; this figure is often cited by the CDC and those who support wide use of the drug. In a 1996 English survey of 2,395 users, one in 140 reported problems severe enough to stop them from carrying out their daily activities.

The latest studies, presented last year at a tropical medicine conference but not yet published, suggest that somewhere between 10 and 20 percent of those who take mefloquine suffer side effects ranging from mild to severe. One of these surveys, conducted by the Scripps Travel Clinic of La Jolla, Calif., estimates the ratio of people suffering some side effects at one in five.

Just who is likely to suffer these side effects? One-third of all patients with problems have a history of hypersensitivity to mefloquine or other quinine-related compounds; had been taking beta blockers (a common class of drugs prescribed for hypertension or heart problems); or had been prone to seizure disorders.

The other two-thirds of patients who experience neuropsychiatric and other moderate to severe reactions? They have seemingly solid mental and physical health histories. Medical experts say there is no way of predicting who they will be, and virtually no research is being done to find out.

Beyond the statistics from surveys and studies, there are reports by patients and doctors to various government agencies.

In the United Kingdom, Lariam was suspected of causing 1,505 adverse reactions between 1990 and 1998, according to doctors’ reports compiled by health officials there. The government subsequently expanded the drug’s warning label. The British press has reported more on Lariam problems than the U.S. press, sometimes sensationally, adding to arguments that fear itself contributes to reports of reactions. Letters to the British Medical Journal have aired disagreements over the proper role of Lariam. Just last week, the New England Journal of Medicine published a similar exchange between doctors about the drug’s side effect profile.

In the United States, more than 2,070 reports of adverse reactions have been filed with the FDA in the last 11 years. More than half of those reports — 1,288 — involved complaints of “neurological events.” The Washington Post obtained 130 pages of the reports, covering the period 1997 to 1999, under the federal Freedom of Information Act.

Such data are anecdotally suggestive but statistically unreliable – unreliable because multiple reports may have been filed by a doctor, patient and drug company for the same patient’s experience, and because filing a report doesn’t prove reactions were linked to mefloquine. In addition, nobody knows how many other people may have experienced problems they did not report. However, the data do illustrate what some practitioners and patients believe to be happening.

The reports have few details and consist mostly of the date, the source of the report (medical professional or patient), a tally of symptoms, the outcome, a list of drugs reportedly taken and the “primary suspect” of the reaction’s cause. Page after page, the list of symptoms repeats: psychosis, anxiety, panic attack, thoughts of suicide, hallucinations.

Report number 3057866-X, filed with the FDA on March 19, 1998, lists the unidentified patient’s reactions: “Abnormal behavior, chest pain, hallucinations, hyperventilation, insomnia, suicidal ideation.” Outcome: “Required intervention to prevent permanent impairment/damage.” Primary suspect: Lariam.

Report 330063-5, filed July 9, 1999. Reactions: “Anxiety, asthma, chest tightness, cough, dehydration, nausea, panic attack.” Outcome: Prolonged hospitalization. Primary suspect: Lariam.

Report 3413545-8, filed Dec. 3, 1999. Reactions: “Mental disorder. Paranoia. Suicide attempt.” Primary suspect: Lariam.

Report 3074393-4, filed April 30, 1998. Reactions: “Aortic injury. Facial bone fractures. Successful suicide.” Outcome: Death. Primary suspect: Lariam.

During the Vietnam War, the number of malaria infections among American military personnel sometimes exceeded battlefield casualties, and U.S. officials knew something had to be done. Chloroquine, then the drug of choice, wasn’t working as well as it once had, and neither were two alternatives. The Walter Reed Army Institute of Research screened a quarter of a million compounds in a quest for a preventive drug.

Army researchers didn’t know how mefloquine worked, but it did. Army experiments in the early 1970s on nearly 400 male subjects, mostly hardy men, showed high effectiveness and few symptoms besides dizziness, headaches and insomnia. Hoffmann-LaRoche acquired the rights to develop the drug commercially and submitted the results of the Army’s human experiments to the FDA.

Medical officer Celia Maxwell of the FDA, one of many officials involved with the approval process, predicted few adverse reactions other than dizziness, vomiting and nausea. Mefloquine, she concluded in 1987, “appears to be effective and safe.” In 1989 the FDA licensed the drug. A year later it was licensed by the United Kingdom. It was immediately popular because malaria was becoming resistant to chloroquine and air travel to the Third World was growing fast.

Around the time the FDA approved Lariam, troubling reports began to appear. In 1989, “serious neurological and psychiatric adverse events attributed to the drug were brought to the attention of the pharmaceutical company and of WHO,” the World Health Organization stated in a 1991 report.

A notation on the report states that it was “not issued to the general public” at the time; it was intended only to guide discussions of scientists and policymakers. A copy was obtained by The Washington Post.

“We knew” about adverse reactions, said Maxwell. “That’s why we included some language about potential effects in the [original] labeling. But at that time, we just didn’t have the numbers of reports” of ill effects that have emerged since.

The list grew. But Maxwell, now a professor of infectious diseases at Howard University and a physician at the university’s travel clinic, still favors Lariam, except for use by surgeons or other people engaged in technical work overseas. (The drug’s label suggests caution, due to side effects, by those who drive vehicles, pilot planes and operate machinery. Some airlines, hospitals and other companies employing travelers in sensitive, high-risk jobs restrict use of the drug.) She says that, over 16 years of practicing medicine, only one patient reported to her a neuropsychiatric side effect from the drug — psychotic episodes in which the woman heard voices and suspected a plot to murder her.

Even so, the woman instrumental in approving Lariam for the American public never uses it herself – though, she says, not for reasons unique to mefloquine. She opts for doxycycline. Explains Maxwell: “I have a sensitivity to a lot of drugs.”

While the number of people who suffer serious side effects from mefloquine is unclear, and while it’s difficult to predict who will be affected – it is clear that many people traveling to malarial areas, particularly for the first time, are not well-informed about possible risks.

At Washington-area CVS and Rite-Aid pharmacies, customers do not routinely receive the drug’s FDA-approved and twice-revised label — a folded package insert of almost 50 paragraphs of small print that lay out the adverse reactions and contraindications. Instead, customers receive a one-page printout credited to an independent publisher listing milder effects such as lightheadedness and insomnia, and advising patients to “call your doctor if you develop unexplained anxiety, mood changes, depression, restlessness or confusion.” It adds: “If you notice other effects not listed above, contact your doctor or pharmacist.”

To get the full package insert, customers must ask the pharmacist or look up the drug in the Physicians’ Desk Reference, which compiles information on drugs from all manufacturers.

A sampling in August of Washington-area travel clinics resulted in echoes of assertions by CDC officials and the pharmaceutical manufacturer that severe side effects are very rare. And some clinical professionals in the area have little personal experience with travelers’ problems with mefloquine.

Imtiaz Choudhary, director of Howard University’s travel clinic and an infectious disease specialist, offered a common response when asked what drug he prescribes for patients traveling to most malarial regions.

“Mefloquine is the only one we have available,” he said. “I strongly suggest people take this because its [side] effects are minimal.”

Said Samuel Scott, senior clinical associate of Washington Occupational Health Associates, which functions as a clinic for business travelers and tourists: “[The CDC's] drug of choice is mefloquine, and so that’s generally what we use.” He added that “I’ve not found it to be a problem. Bad dreams is the worst of it, and so we warn them about that.”

Martin Wolfe, a veteran tropical medicine consultant who advises the State Department, said a few federal employees have had problems with mefloquine, but he continues to urge its use as the primary defense against malaria. Ill effects are “not unheard of” in his practice, but “we generally follow what the Public Health Service [CDC] recommends.”

Meanwhile, other practitioners of travel medicine take a more cautious approach.

“I don’t like using mefloquine [on patients] if I can avoid it. I’m not happy with the side effects,” said Robert Edelman, director of the travelers’ health clinic at the University of Maryland Hospital in Baltimore. He estimates as many as one in four of his patients have a reaction – insomnia, dizziness, feeling lightheaded or nauseated, if not something worse.

“The patients are not happy — and that’s bad, because they’re going on these trips to get something accomplished or for a good time. They’re on business and they need to be alert and quick, and they have enough problems sleeping because of time zones. People on vacation spend thousands of dollars on a trip and suddenly find it ruined. They feel anxious and nervous and have headaches.”

Edelman, who is also associate director of the University of Maryland’s center for vaccine development, is critical of the CDC’s Web site for failing to spell out percentages of patients who have experienced specific categories of symptoms, including the more moderate ones. The Web site says neuropsychiatric events “very rarely” occur, and that statement is deep in the product information. “If it’s one in four,” Edelman said, “they should put it in there and let the patient decide whether that’s too high or not. The problem is, most patients aren’t even aware of these side effects unless you tell them.”

For those seeking protection from malaria, there are several other options. In areas where malaria is not resistant to it, chloroquine is the best choice. In areas where malaria is resistant to chloroquine, the antibiotic doxycycline is cheaper and has milder side effects; indeed, it’s the antimalarial favored by President Clinton on foreign forays. (Asked why, former presidential spokesman Joe Lockhart said, “the usual reasons.” Lockhart also chose doxycycline, he said, because of “the dreams.”)

Doxycycline must be taken daily, which is one argument against it: Patients skipping a single dose can expose themselves to malaria. It’s also not safe for pregnant women or children, and creates acute sensitivity to the sun — a tendency to burn faster, a considerable difficulty for many travelers. Like most antibiotics, it can also cause yeast infections.

Malarone (See “Malarone: A New Alternative to Lariam”) was approved in July and so far shows effectiveness similar to Lariam’s but with fewer side effects.

The CDC’s preference for Lariam, despite the availability of such options and reports of problems for some users, puzzles some patients and doctors. Hans Lobel, for years the CDC’s chief of malaria surveillance, published many articles supporting the drug’s use, dismissing reports of side effects as the result of “travel-related stress” or underlying health problems. He encouraged use of the drug for pregnant women and children, despite the fact that the drug’s label says sufficient research has not been done on those groups.

In an interview before he retired last fall, Lobel told The Washington Post, “The scientific data showed us there are no side effects that can be attributed to mefloquine. . .‚. The long and the short of it is that scientific studies have not shown any difference between mefloquine and a placebo.”

The CDC’s current Yellow Book, a biennial compilation of information on diseases and treatments that is used by doctors, travelers and the media, describes mefloquine as the “drug of choice” and says it is “very rarely” associated with neuropsychiatric reactions.

Jay Keystone, the Canadian authority on antimalarials who has consulted to both the CDC and Roche, calls the language in the Yellow Book “unacceptable and incomplete.” The information, he says, should include a range of estimates for people who are expected to experience symptoms such as anxiety, irritability, nightmares and other disturbances that cause them to stop taking the drug.

As this story was being reported, CDC officials repeated the agency’s long-standing assertion that the best scientific evidence shows no difference in tolerance between those taking mefloquine and those taking a placebo. Officials also said mefloquine will remain the agency’s “drug of choice.”

But late last week CDC officials indicated they may review new data on Malarone and suggest its use in cases where mefloquine or doxycycline cannot be used. Monica Parise, a medical epidemiologist of the CDC’s infectious disease unit, said it’s now possible that the next edition of the Yellow Book, to be published in 2001, will acknowledge that patients and doctors have three options for malaria prevention in chloroquine-resistant areas — creating not a single drug of choice, but three choices.

In January 1999, Charles Perry, a $160,000-a-year hospital administrator with seven children, had gone downstairs in his Cincinnati home to retrieve a gallon of milk. Instead he got a shotgun, angled the barrel against the base of his skull and pulled the trigger.

He had told his wife, Linda, many times that that was where it hurt the most. The pain at the base of his cranium, the nightmares and the hallucinations — they all had started six months earlier, during a safari trip to Zimbabwe to celebrate their 30th wedding anniversary.

Because of their public health backgrounds, both Perrys had asked about Lariam’s safety at the pharmacy and at the local health department. They were told it was fine, in fact, the “drug of choice.”

After a week canoeing the Zambezi River, Charles Perry began imagining there were monkeys in their room.

“I was in bed and Chuck was sitting there just kind of enjoying himself,” Linda Perry recalls, “and he jumps up out of the chair and says, ‘Hey, there’s a monkey under the bed!’‚” Then he chased “the monkey” into the bathroom.

Back home a few weeks later, he couldn’t sleep. He had vivid dreams. He heard voices.

“Chuck went absolutely mad,” she says. “He couldn’t remember anything. He couldn’t write his name. His eyes were just nuts.” He called meetings at work, then forgot why he called them. One night, he called 911 – to report that his wife was going crazy. Finally, he checked himself into the psychiatric ward.

Then Linda Perry remembered what an African guide had said about how Lariam can make some people “crazy.” The guide said that those who live in Africa know better than to take it.

“Oh God,” she remembers thinking. “It’s the Lariam.”

That may or may not be true; doctors originally were unwilling to blame Lariam for Charles Perry’s mental problems, though one physician wrote a letter doing so. And the timing of the suicide, six months after exposure to the drug, is a complicating factor. In many ways, the Perrys’ tale is a classic Lariam parable — a dramatic story of personal suffering and tragedy, but one that is very hard to prove, either legally or scientifically, was caused by the drug.

Like many people whose lives have been shattered by what they believe are side effects of Lariam, Linda Perry has become an activist for the cause. She filed a lawsuit in federal court in June charging that the drug was responsible for her husband’s suicide. In August, Roche filed a response, denying the allegations, stating it had taken “reasonable care” in making and distributing Lariam, and “any such injuries and/or damages alleged by plaintiff were the result of superseding or intervening causes . . . or caused by the negligence and/or fault of others.” No trial date has been set.

A number of such lawsuits have been filed charging the manufacturer with “failure to warn,” but none has been successful. An attempt to gather plaintiffs in England for a class action fell apart as legal bills mounted. Similar efforts have stalled in Canada and the United States. One case in New Jersey was settled out of court by Hoffmann-LaRoche, but the case was sealed and the evidence and terms of the settlement remain secret. An Indiana woman received a $10,000 out-of-court settlement from a pharmacy after suing for “failure to warn” about Lariam’s dangers.

Perry is doing her best to provoke government action, so far with only modest results. Ohio senators George Voinovich and Michael DeWine have arranged a conference call for Perry and her husband’s doctor with the FDA. The House Commerce Committee is “actively engaged in conversations with the FDA over concerns about the drug,” said committee spokesman Pete Sheffield, and is exploring the possibility of holding hearings.

Meanwhile, individuals who believe they are victims of the drug’s side effects hope their stories can help the public understand the possible risks of taking the drug.

Michael Burch, whose son contracted malaria while in the Peace Corps and who appreciates the role mefloquine plays in preventing and treating the disease – says he wishes he had known more before taking the pills.

“I wish I’d known what was happening to me” when he experienced the cardiac and psychiatric symptoms in the restaurant and thereafter. “I know we have the best medical system in the world, and I still believe that. But the system really let me down.”

Hope Trachtenberg-Fifer, the nurse and health educator who says she became “psychotic” after taking Lariam, feels “so used and abused.” Before taking Lariam, she had consulted solid information sources she often turned to for professional decision-making: the Physicians’ Desk Reference and the CDC’s Web site.

“I trusted what I’d been told by my government as an American that this was the thing to do to protect me. I’d done my research!” she said. “But the warnings are very minor.”

“They only said to be cautious if you have psychiatric problems. I didn’t have any until I took Lariam.”

Keith Epstein, a former investigative reporter with the Washington bureau of the Cleveland Plain Dealer, is a frequent contributor to the Health and Travel sections of The Washington Post.

A Boom for Tax Prep

New tax breaks will drive fresh customers to H&R Block, Liberty Tax, and others. But the IRS fears increased fraud in the unregulated industry

BusinessWeek – April 2, 2009

By Ben Elgin, Keith Epstein and Brian Grow

As federal stimulus dollars begin to flow, one unlikely beneficiary is the $30 billion tax-preparation industry. Prep specialists from top dog H&R Block on down are celebrating as the Apr. 15 deadline approaches. The fresh treat: billions of dollars in new and expanded tax credits for individuals and small companies.

The good news for tax preparers could turn into bad news for the IRS, however, as well as an early illustration of what might be many unintended consequences stemming from the stimulus.

Tax-prep pioneer John Hewitt calls the huge federal spending package “the H&R Block and Liberty Tax Stimulus Plan.” Twenty-seven years ago, Hewitt founded Jackson Hewitt Tax Service, the second-largest chain in the business. He now runs No. 3 Liberty Tax Service.

Hewitt has instructed his staff to explore leasing additional stores being vacated by Starbucks and other victims of the recession. “I love it whenever [lawmakers] pass tax changes,” he says. “This one helps us because there are more tax changes that affect more people than any bill I’ve ever seen.”

Tax advocate Nina E. Olson

The mood is less cheerful at the IRS. Officials there are girding for a wave of questionable credit claims and outright fraud. A major problem, explains Nina E. Olson, the IRS taxpayer advocate (or ombudsman), is that most tax preparers are unregulated. The vast majority aren’t licensed accountants or lawyers. Only three states—California, Maryland, and Oregon—certify tax preparers. In an industry of more than 1 million service providers, the IRS imposes fewer than 300 penalties a year, most quite modest.

“There are too many areas of this country where you have to go through more work to be licensed as a beautician than to do someone’s taxes,” says Representative Xavier Becerra of California. A senior Democrat on the House Ways & Means Committee, he plans to introduce legislation this year to require that all preparers register with the IRS.

Olson fears that preparers will exploit the stimulus initiative’s multibillion-dollar expansion of the Earned Income Tax Credit, which last year transferred $47 billion to low-income families. The inspector general of the Treasury Dept. estimates that, even before the stimulus, the EITC was resulting in $10 billion to $13 billion a year in improper claims, many of which the agency contends are encouraged by unscrupulous preparers. While prep companies aren’t supposed to charge fees based on how much money they obtain from the IRS, in practice many set higher prices for customers seeking refunds.

The stimulus package also includes new or enlarged tax benefits for small businesses, first-time home buyers, certain parents and retirees, and people who improve the energy efficiency of their dwellings—all of which are susceptible to abuse in the hands of dishonest or incompetent tax preparers, says Olson. “Some of the provisions in the economic stimulus legislation will dwarf the EITC in terms of rate of fraud,” she predicts.

An estimated 60% of all tax returns are handled by paid preparers, up from 48% in 1990. The preparers have plenty to dig their teeth into: The stimulus legislation enacted in February provides for $154 billion in additional refundable tax credits to families and small businesses over the next three years. Using proprietary software, prep companies charge $200 to $450 for a basic return, with the fees often set toward the high end of the range if the taxpayer receives a credit-related refund. This creates a strong incentive to encourage customers to seek credits based on their income, number of children, willingness to insulate their homes, or a purchase of real estate.

Even when done properly, the tax-prep business can yield impressive profits. “We were charging people $300 to $400 for 10 minutes of work,” says Greg Gillihan, who ran a franchise in Kansas City in 2007 for the fourth-largest chain, Dayton-based Instant Tax Service, which has 1,200 offices.

Industry executives say that only a tiny handful of prep offices engage in fraud. “People trying to play by the rules are disadvantaged competitively and dismayed by some of what goes on,” says Robert A. Weinberger, H&R Block’s top lobbyist in Washington. John G. Ams, executive vice-president of the National Society of Accountants, agrees: “My members are tired of having to fix errors they find on someone else’s work product.” The group has pushed for self-regulation overseen by the IRS.

As for the industry’s rates, executives and their advocates point out that no one is forced to hire a preparer. “If you don’t like the price charged, go to somebody who does it cheaper,” says Mark Steber, Jackson Hewitt’s vice-president for tax resources. “It’s the free-market economy model.”

Unfortunately, the free market’s invisible hand sometimes has its thumb on the scale, to the detriment of the U.S. Treasury. In January, volunteers for Impact Alabama, a nonprofit activist group, secretly recorded meetings with employees at 13 outlets in that state, including one Jackson Hewitt franchise. Transcripts provided to BusinessWeek show that the volunteers posed as taxpayers seeking EITC refunds for which they were not eligible. Most of the tax preparers appeared willing to file false returns.

UNDERCOVER WORK

On Jan. 12, an Impact Alabama volunteer visited a Jackson Hewitt outlet in Montgomery, the state’s capital. Situated in a strip mall between a liquor store and swimming pool supply business, the Jackson Hewitt office has a sign in the window stating: “Confused about changing tax laws? We’re not.”

According to the transcript, a Jackson Hewitt employee told the undercover volunteer that she qualified for the EITC based on her occasional custody of two children. In fact, the supposed taxpayer should not have received a refund under the EITC because, as the volunteer made clear, neither child lived with her for the six months out of the year that the law requires.

The Jackson Hewitt employee prepared documents seeking what appears to have been an invalid $5,639 refund and charged a fee of $402, according to Impact Alabama. The nonprofit never filed for the refund.

When a BusinessWeek reporter visited the Jackson Hewitt office in early March, employees declined to comment. The owner of the franchise, Charlie West, said in a subsequent interview that the fee charged was “higher than usual” because of the complexity of the return in question. He said initially that he would look into the EITC fraud allegation but then failed to respond to follow-up calls. (On Mar. 31, Liberty Tax’s John Hewitt confirmed he is exploring a possible acquisition of his former company, Jackson Hewitt.)

Impact Alabama’s research is part of a campaign by its founder, Stephen Foster Black, director of the University of Alabama’s Center for Ethics & Social Responsibility, to persuade the state’s legislature to require licensing of all tax preparers. H&R Block has supported that effort. But 300 other individual tax-prep outlets and franchisees in Alabama and elsewhere have started a group called the National Independent Tax Preparers Assn., based in Montgomery, to oppose the bill that Black supports. Similar standoffs have kept preparers from facing meaningful policing in a number of states.

J.C. Snowden, who heads the tax preparers’ association, says the Impact Alabama investigation was sneaky and unfair. He favors a fine on preparers of up to $100 per tax-return violation. The legislation supported by Black would impose fines of $500 to $2,500 per violation. “We’re firmly behind regulating this industry,” Snowden says. For now, though, his lobbying is slowing down any changes.

In Washington, the IRS can’t track complaints against tax preparers because the agency has no central database to store the information, according to a Feb. 24 report by the Treasury Dept.’s inspector general. A Dec. 31, 2008, IG report found that the IRS generally doesn’t follow up on hundreds of thousands of questionable EITC returns, as identified by its own computerized filters.

FALSE INFORMATION

Even when the IRS does step in, the results are often uncertain. In 2007 the agency became suspicious of an eight-store Instant Tax franchise in Missouri. The agency received information from a former employee that Instant Tax was selling bogus personal information about made-up family members so that clients could apply for EITC refunds, according to an April 2007 affidavit for a search warrant filed by an IRS agent in federal court in Springfield, Mo. Another former employee complained to the IRS that the franchise owner, Kevin Edmonds, and his manager, Josh Lenz, were “taking advantage of mentally disabled and poor people” by adding false information “that resulted in fraudulent returns and fraudulent increases in earned income tax credit[s],” the affidavit said.

The IRS also found that the Instant Tax franchise was generating refunds on 99.3% of the returns it handled, according to the affidavit. “The entire business…is permeated [by] fraud,” the agent stated. The IRS searched the eight Instant Tax locations in October 2007, but it since has taken no further public action. An agency spokesman declined to comment.

Instant Tax issued a press release in August 2008 acknowledging that it had “allowed the franchisee [in Missouri] to expand too quickly” and had terminated its contract with the owner, Edmonds. But Instant Tax didn’t mention in the press release that it had sold two Florida locations to Lenz shortly after the October 2007 IRS raid. Edmonds, meanwhile, became an Instant Tax “area developer” in Oklahoma, a job he holds today. Edmonds and his attorney declined to comment. Lenz didn’t return calls seeking comment.

Fesum Ogbazion, Instant Tax’s CEO, says that Edmonds sells franchises in his current role and doesn’t prepare any returns. The company is concerned about the IRS investigation, says Ogbazion, but still sold franchises to Lenz because the probe hasn’t led to any charges.

The Tampa Tribune/Media General
November 23, 2003

By Keith Epstein

WASHINGTON – For a guy nearly given up for dead twice, James Sides has had an amazing recovery. Six months ago, he lay trapped underwater in a Black Hawk helicopter. Struck by enemy fire, the chopper had plunged into the Tigris River. He was found many minutes after, still buckled in. Later, at a military hospital in Germany, he seemed hopelessly comatose. Doctors, doubting his chances, nearly yanked him off life support.

These days he has only a few obvious signs of his ordeal – some scars, numbness from damaged nerves and four marks from pins that held a stabilizing titanium rod over his shattered right arm. He takes classes and plays football with his young sons, throwing with his right. “He’s like one of these miracles,” says one of his doctors, Steven G. Scott, chief of rehabilitative medicine at the James A. Haley Veterans’ Hospital in Tampa.

“To be able to play with my kids is everything,” says Sides, his voice quivering. “They could have had no father. They could have had a father who couldn’t play with them. I know there’s a higher power up there taking care of me. Got to be, for me to be doing so well.”

But inside his head, all is not well. The 30-year-old Army sergeant remembers virtually nothing of his time in Iraq. He remembers none of his rescue missions as a busy medic. He doesn’t even remember what he was doing before the May 9 crash – struggling to save an 11-year-old Iraqi boy struck by a land mine. Nor does Sides remember the attack, or nearly drowning. Defense Secretary Donald Rumsfeld visited him at Walter Reed Army Medical Center; he doesn’t remember that either.

In those first days of consciousness, he couldn’t even remember his wife’s name.

He also recalls little of his slow, two-month rehabilitation at the veterans hospital in Tampa, among a handful of centers in the United States where specialists try to remedy the many tricky troubles of the brain and now are grappling with an unexpected surge of U.S. soldiers with head injuries. Soldiers with brain injuries who live throughout the eastern and southern United States are sent to Tampa and to the McGuire VA Medical Center in Richmond, Va. In the West, brain specialists at VA hospitals in Minneapolis and Palo Alto, Calif., are coping with the surge.

Military brain specialists are busy because of the relatively low death toll in Iraq. Advances that are saving American lives in Iraq, it turns out, also are complicating them when the wounded come home. The military has improved at protecting troops from injury, evacuating the wounded quickly and treating them effectively.

Since President Bush declared an end to major combat operations in Iraq on May 1, such efforts have helped to save the lives of all but 286 U.S. personnel. About 1 in 8 American wounded has died, a much lower rate than in Korea and Vietnam, where more than 1 in 4 died, or World War II, where more than 1 in 3 died. Less noticed, however, are the other casualties of this war – at least 2,401 Americans wounded , many with some of the most confounding and life-altering injuries known to medical science.

Although the U.S. military anticipated increased numbers of amputations in Iraq – due to blasts from rocket-propelled grenades and homemade munitions made to maim – nobody predicted the other consequence of this enemy’s improvised style of warfare: A large tide of soldiers with serious brain injuries.

“Who knew? I don’t think any of us expected the nature of warfare as it is now – this is so different from the [1991 Persian] Gulf War,” said Laurie Ryan, assistant director for research at the Defense and Veterans Brain Injury Center at Walter Reed. “We once thought 20 percent of all injuries involved head injuries, but now we suspect it is way, way higher.”

An alarming sign of the emerging trend first surfaced this month, when the brain injury centers identified 105 patients who between June and October had been struck by land mines, rocket-propelled grenades or other blasts. Of the 105, 41 had probable injuries to the brain. Some had concussions. Some had been comatose. Some died. “It’s not always life-threatening, but it can affect the rest of their lives,” Ryan said. “The medical system is really having to gear up for this – so we can make sure patients with brain injuries aren’t overlooked, that they won’t be debilitated, or have far-reaching impacts on their lives beyond amputations or whatever else they’ve sustained.”

Quick Response Can Save

Generally, the wounded are flown to a military hospital in Germany and then to Walter Reed, admitting them lately at a rate of 10 a day. Patients with brain injuries are then airlifted to the specialists at the VA hospitals in Tampa and Richmond who seek to remedy impairments causing behavioral, learning, memory or other problems while rehabilitating soldiers with physical injuries.

Instead of being buried, over the course of weeks and months, they are given new chances at life – although a very different life “In the past, someone like Sergeant Sides would never have made it. But quick response kept him alive and better treatment gave us more to work with – and now he’s on his way to recovery,” said Scott, of the Tampa veterans hospital.

Sides’ memory has improved with treatment and training, but he still can’t even recall the long road trip home from Tampa to Wynne, the small town in Arkansas where he grew up a high school football star and has been welcomed home as a war hero.

“It’s so weird. How do you forget a drive that long?” he asks. “I remember stopping for lunch somewhere. My wife was driving – a little too fast. I remember joking, “Becky, are you trying to kill me again?’ ”

The same upbeat personality that helped his team to a state championship seems intact. But in algebra class, he writes down the rules, only to forget them a moment later. At the store, he buys Dr Pepper – though Rebecca wanted Coke. The other day, Rebecca told him she was going to get the truck fixed. He wondered why, even though she had described problems with the brakes a day earlier – reminding him from the day before that, when he also forgot.

Some memories return, hazily. A guy in his unit sent photos of them wrestling, to relieve war zone stress. This was before the crash. “It’s a little blurry, but I remembered,” he says. “It’s all so weird, like “The Twilight Zone.’”

Brain As Command Center

The human brain – with 1,000 trillion connections and more neurons in its small shell than stars in the Milky Way – is a stunningly complex organ of command and control. It is the Central Command of emotion, the seat of memory and learning, the headquarters that run the muscles, the senses of hearing, smell, taste, touch and sight, and the system ferrying blood and the body’s many chemicals. Thus the slightest disturbance can have all kinds of consequences. A blow or jolt can result in a traumatic injury disrupting normal functions.

When the Black Hawk plunged into the Tigris River, Sides was injured more than was apparent to those who dived into the water from another helicopter to save him. His left leg and right arm were shattered – that was clear. The impact also damaged nerves in his limbs. Only after weeks with physical therapists in Tampa was he able to walk. Walking again is something he remembers. “I went from riding in a wheelchair every day to jogging around the clinic with my occupational therapist,” he says giddily.

But lasting damage lurked within the confines of his brain. The impact of the crash gave him a concussion, and a contusion on the right side. Then, as he was submerged and unable to breathe for more than five minutes, the cellular die-off began. Deprived of oxygen, his brain cells stopped functioning. Many died. Within the brain’s intricate byways of nerves and neurons, he suffered multiple strokes.

His wife reminded him of this the other day – after he said he wanted to return to military service. He felt fine, normal. But he had forgotten the damage. “If all that is wrong, how can I still be, in my eyes, basically OK? Why don’t I have more problems than I’ve got?” he says. “Spots in the brain like that – it can make you a vegetable. But I can walk and think.”

Identifying The Invisible

Among those who have demonstrated seemingly improbable recoveries from damage to the brain and central nervous system is actor Christopher Reeve, paralyzed from the neck down in a horse riding accident in 1995. This month, the quadriplegic star of “Superman” is breathing without a ventilator for hours at a time – and predicting some day he will walk. “

As Christopher Reeve shows, the central nervous system can recover from these traumatic events. We gear our rehabilitation to that new mode of thinking,” Scott said.

The military hospitals actively try to identify soldiers with brain injuries – in contrast to traditional practices, which neglected the brain for attention to other injuries. The difficulty, military doctors say, is that brain injuries are not always readily apparent.

Even before the war, Gretchen C. Stephens, the VA’s Richmond-based national traumatic brain injury coordinator, regularly cautioned nurses to be on the lookout for signs of a brain damage, often referred to as a “hidden disability.” “Persons sustaining a brain injury are often described as the “walking wounded ,’ ” she said. “Many of their challenges are invisible to the average person. While someone with a brain injury may “look normal,’ this individual may have difficulty with routine daily tasks due to damage to the brain in areas that control memory, concentration, communication and emotions.”

Many veterans have sought medical attention months or years after the initial injury. These days, doctors, nurses and therapists are on the lookout for telltale signs of brain injury among the wounded – memory loss, slowness in processing information, attention deficits, altered vision, loss of smell or taste, changes in sleep, difficulty with balance, agitation, impulsive behavior, and a host of other symptoms.

Each list of fresh casualties in Iraq is combed by brain injury specialists for signs of those who have fallen, been in vehicle accidents, been struck by explosive weapons or been in a helicopter crash.

Working Hard To Help

In Sides’ case, the experts in Tampa designed a rehabilitation program for him, which continues. Specialists still keep tabs on changes in his brain through MRI scans. “He’s made great improvements, but we’re still trying to train him, memory-wise,” Scott said. “The sad part is these problems can persist. “We have some people with no memories except for the distant past. We have some people who are very impulsive or depressed. They’re young, and they have families, and so it’s awfully hard on everybody. These are about as complex a rehab as you can have.”

Some patients need modifications at home, such as a ramp or a wider doorway. Others need intensive therapy and training sessions to improve retaining what they learn. Scott tells patients: “You fought for our freedom, so now we’re here to give you your freedom back.”

At home these days, Sides plays memory games with sons 6-year-old James Jr. and 7-year-old Devin. They line up playing cards, face down, trying to find matches. They play “Simon Says.” They play anything Sides can think of that helps him improve his memory. “The 7-year-old beats me at memory games, to be honest,” he says. “But in Tampa they said anything I can do for my memory would help it a little.”

Giving up just isn’t on his agenda. He sounds as if he is still preparing for a big high school game. “My goal is to be 110 percent. I don’t want to be back to as good as I was. I want to be better than I was. I want to go back in the military. Not that I’d jump in a helicopter, but to contribute and to get a degree to work as a nurse.”
His doctors, for all their knowledge, are unsure whether that can happen. “He’s really improving, but we don’t know how far he’ll go,” Scott says. “Only the big guy in the sky knows that.”

“The way I look at it,” Sides says, “anything I can’t do, maybe I wasn’t supposed to do. Things happen for a reason, even these things. The best explanation I have for it now is, I’m home with my boys. To me, that alone is enough of a reason for this to have happened. I was thousands of miles away and might not have come home. This is great! How can I complain?”

First it was pills.

Then rape.

Now, a stay in a psychiatric ward.

“My whole life is like a novel,” says Connie Francis

The Miami Herald

September 11, 1983

By Keith Epstein Herald Staff Writer

In Where the Boys Are, the 1960 beach movie for which she is remembered around these parts, a college-age Connie Francis embarks on a Fort Lauderdale boy-shopping spree and lives happily ever after. For a while, it seemed her life was going that way, too. Hit songs like Who’s Sorry Now? earned the young singer the statistics of stardom. By 26, she had set records for records — 42 million sold, more than any other woman at that time. She commanded $12,000 a week performing in hotels and clubs; she made more than $500,000 a year.

But beneath the veneer of stardom were the ugly rumors and the unfortunate circumstances. She spoke of her reliance on pills. Marriages failed. And in 1974 there was the rape, at knifepoint, for 2 1/2 hours, by a burglar in her suite at a Howard Johnson’s in Westbury on Long Island. When police found her in the morning, the diminutive singer was still naked, gagged and tied to a chair. The widely publicized tragedy left Francis so traumatized she quit her singing career. Later, after nose surgery, she lost her ability to sing. In 1980, the voice returned and so did she, starting her comeback tour in the town where she was raped. Profiles have chronicled the rebuilding of her career.

But the storm clouds over Francis are gathering anew: In Broward County, a former Playboy Bunny is suing Francis for failing to pay for clothing the woman designed for her. In Dallas a little more than a month ago, sheriff’s deputies entered her home, found her at her swimming pool, handcuffed her and took her in her swimsuit to the psychiatric ward of a nearby hospital. She had been seized at her father’s request. While she was gone, her belongings were packed up and hauled off from the house. In New York, she split with her manager of 30 years because, she says, he wanted her to sing at the Madison Square Garden wedding of 4,000 Moonies on July 1.

Despite her troubles in Texas, Francis, now 44, still lives there. Her father says she’s just running away from the traumas that once engulfed her in the Northeast. She says she loves Dallas. She’s working on her autobiography. She’s been working on it for two years.Barbara and Jules Rusoff came into Francis’ life by way of her fingernails. Jules is the manager of a Plantation beauty salon for nails. One day, he heard Connie Francis needed her nails done. So he sent his best “nail technician” to Francis’ Hallandale condo. Jules, 73, had Vicki Blickley bring with her some photos of his wife, Barbara, a 33-year-old former Playboy Bunny who once had a role playing an Indian in the movie High Chapparal. In the photos, Barbara was modeling some clothing she designs.

Francis liked what she saw. “She was very gung-ho,” the nail technician recalls. So were Barbara and Jules. In two years, they had only lost money on Barbara’s fledgling line of clothing. They frequently went to the fashionable Turnberry Isle Yacht and Racquet Club to peddle her wares. They thought having a celebrity flashing Barbara’s expensive one-of-a-kind fashions among other stars could be the break needed to make a part-time interest a full- time business.

Their biggest celebrity customer before Francis was somewhat less visible: a local radio talk show host. ” ‘Oh, Barbie, I love you. I’m going to make you a star, introduce you to people,’ ” Barbara says Francis told her. “She promised Barb she’d … put her on ‘P.M. Magazine,’ ” says Jules. “She wanted Barb to be her private and only designer.” The relationship between the Rusoffs and their star lasted just a few months. Now they agree only on this: Francis did buy some of the Rusoffs’ clothes. Some she paid for. Some she didn’t. Francis says it’s hard to tell how much she might have paid the Rusoffs. After all, she says, she makes out $40,000 in checks each week.

The Rusoffs sued Francis in small claims court, alleging in legal documents that look more like a Worth Avenue shopping list that Francis owes $2,992 for a red sequin dress, jacket and hat; a satin caftan and belt; a blue suede Indian fringe coat; and a purple Oriental quilted coat and jumpsuit. Plus alterations. Then there’s the $102.50 for Barbara’s “shopping services” — a trip she made to the store, Barbara says, to buy Francis earrings, panty hose and a wig. Francis says she has “filed the Rusoffs away, under ‘nuisance,’ with a capital ‘N.’ ”

“She made clothes for me which were inferior,” she says. “The sequins fell off.”

“What?” responds Barbara. “There’s not one sequin dress living in this country where a sequin isn’t going to drop off.”

Francis also says some of the garments already had been worn by other people. Rusoff denies this, too. In any case, Francis refused to defend herself in court; she ordered her Miami attorneys off the case. The Rusoffs won by default Thursday when Broward County Judge Steven Shutter did not hear from Francis or new lawyers. “I told my attorneys not to blow a lot of money on idiots like this,” explains Francis.

“It happens all across the country,” she snaps. “I’ve got $20,000 bills for accountants and $20,000 bills for lawyers. When people hear I’m Connie Francis, they go outside and count the stars. I’ve spent my entire life surrounded by shysters and crooks and people like this who ripped me off.”

The list of combatants recently has been expanded to include her father. Francis says she wants him arrested. “He had me committed under an insane persons warrant,” she says, “and then took all my belongings out of my house.” According to Capt. Charles McKinney of the Dallas Sheriff’s Department, Francis was swimming in the pool in her Dallas home July 25 when three plainclothes sheriff’s deputies flashed their badges and, with a psychiatrist at their side, rather unceremoniously carted her off to nearby Baylor Hospital.

McKinney said Francis first put on a terrycloth robe, then resisted leaving. The deputies seized her and slapped handcuffs over her wrists. “She tried to run off,” McKinney says. Francis was taken to the hospital for psychiatric tests, says Galen Samford, administrator of Dallas County’s Mental Health Department, the agency involved in such cases. It turns out she was admitted under a protective custody order sought by her father, George Franconero. Under Texas law, getting a person involuntarily admitted to a hospital is easy, said probate Judge Joe Ashmore. “It has to be easy,” says the judge. “All we can do is put stiff penalties in there if you do it maliciously.”

Francis’ case followed standard operating procedure. Ashmore issued the protective custody order based on an affidavit signed by Franconero that said he believed his daughter was mentally ill and needed to be examined. Such affidavits state “the patient is mentally ill” and “for the patient’s welfare or the protection of others … requires observation or treatment in a mental hospital.” It wasn’t necessary for Franconero to spell out any specific disturbances in the affidavit. Now, he says, his concern was that his daughter had, in his opinion, spent money “foolishly” and that an “irrational” fear of crime had caused her to flee the Northeast and settle in Dallas.

Among other expenditures, Franconero didn’t like Francis’ recent purchase of a limousine or her recent investment in a Dallas record company. “She’s invested money down there foolishly,” Franconero says from his Parsippany, N.J., home. “She rented a home for $5,000 a month and put new rugs and sofas in. That’s not rational. She’s just throwing her money away.” Also “irrational,” Franconero says, is his daughter’s flight to Texas. “A person has to be psycho to move to Dallas only because of the tragedy she had here. She’s very irrational,” he says. “When somebody says all the crime is here in New Jersey and not in Dallas, I know they’re not making sense.” And, Franconero says, Connie has been “shooting her mouth off all over Dallas about the Mafia, and communists in government.”

Once Francis was in the hospital, all that was needed to keep her there, says Samford, was one doctor’s signature, after examining her, on a “Certificate of Mental Illness.” With this, a person can be kept under observation for up to 72 hours. Ashmore says the signature on Francis’ certificate looked like a Dr. “J-U-D-something Cook” — he couldn’t make out the rest. There is a psychiatrist he knows of named Judith Cook on the staff at Baylor. That Dr. Cook has declined to confirm or deny any invovlement in the case. The physician who examined Francis concluded she was suffering from “manic depressive illness.”

To keep a person, involuntarily, beyond 72 hours, a second physician’s signature is required. But the second doctor who examined Francis, Dr. Mary Cannon, testified at a hearing that Francis should be let free. A judge then granted Francis’ attorney’s “writ” to release her from “illegal imprisonment.” The writ said Francis wasn’t even aware that any psychological evaluation of her was taking place and that she had been “illegally restrained of her liberties.”

“She may need help, but she doesn’t need to be institutionalized,” said Samford. If he were her, he said, “I’d be upset about it, too.” William Geyer, the lawyer who defended Francis, refused comment. Ashmore said Francis’ file indicated that she was released in Geyer’s custody and would seek professional help outside the court system.

On July 29, four days after Francis was taken to Baylor, she was back home. That morning, police say, she filed a burglary report. Her home had been emptied. By the afternoon, Dallas police investigator Ken Coop had pieced it together: Francis’ father and several of her employes, he said, had packed up the furniture and clothes and hauled them away. Coop says Franconero told him “he was trying to protect her furniture and get her home where he wanted her.” He dropped the case. At first it looked like a burglary, he says, “but it turned out to be a thing between father and daughter.”

When Francis’ employes found out a police report had been filed on the belongings’ disappearance, Coop said, they had them back in the house within 12 hours. Franconero has since denied being involved in packing up his daughter’s belongings. He says the staff did it — except for some of his daughter’s jewelry he took back to New Jersey for safekeeping. But staff members say Franconero was the one who gave the orders to pack things up. When Francis discovered her six employes had taken part in the move, they were fired, said Jay Beckum, one of the six.

Francis’ possessions were never removed from the truck they were loaded into, he said. Beckum had only been with Francis for six weeks. He was her appointments secretary. “She felt we’d betrayed her,” he said. “This case’ll end up just kind of dying on the vine,” said Dallas mental health official Samford. “But, Lord o’mercy, I’m not sure what the hell kicked it off.” So what did happen?’ Investigator Coop’s theory: “Everybody I talked to mentioned money, that she was haphazardly … taking care of the financial end of things. Her father> was concerned that she’d be left with nothing one of these days.” “If your brother was murdered, and you were raped, would your head be straight?” asks Franconero.

Connie Francis’ own theory: “My father wants me under his thumb.”

Connie Francis in a 1965 promotional photo

Connie Francis was first thrust in the limelight at the age of 3, playing an accordian almost bigger than her. By the time she was 11, she had appeared on Arthur Godfrey’s “Talent Scouts” television show, singing Daddy’s Little Girl to her father. After her first hit song, Who’s Sorry Now?, Francis grew to depend on her father’s judgment. He picked her songs. George Franconero, a roofing contractor who once had had no ambition beyond making a comfortable living for his family, suddenly found himself in charge of a celebrity. A rich one. And, it turned out, a troubled one. At 21, Connie wrote in Parade magazine that she had decided to throw away her pills — often mentioned in interviews — after Perry Como had advised her to “slow down and win.”

About the same time, in 1959, in a profile done during a family visit to Miami, a Miami Herald reporter observed that Connie was still asking her father for spending money and bickering with her mother about playing with her food. Her first marriage, at age 27, lasted five months. The second one, to a hair stylist once charged with extortion in credit transactions, lasted nine. In 1974, came the rape. In its aftermath, she was unable to let her husband anywhere near her, thought she saw her attacker’s face everywhere, was too terrified to go back on stage and spent most of her time in bed, sedated, watching television.

Along the way, husband No. 3 left her, calling her “a loser.” Francis sued Howard Johnson’s and eventually collected a $1.5 million out-of-court settlement. Then in 1981, her brother was gunned down in front of his house. Police believe the mob was responsible. The younger George Franconero was a government witness when he was killed. “All she had,” says Jay Beckum, “was her family and career. Now she has neither. That can be tough.”

Francis names a marketing manager at the InterFirst Bank of Dallas, and Dallas District Attorney Henry Wade as her two closest friends today.

“I’ve never met her,” says Wade, “though she’s talked to me by phone about our rape procedures and about lots of national issues.”

My whole life is like a novel,” Connie Francis says. She is still in Dallas and she is still writing her life story. The manuscript is overdue, even with several extensions, and at least two ghostwriters have been fired, says George Scheck, who was her manager for 30 years. Until nine months ago. Scheck and Francis split because, he says, “she didn’t like a theater I booked her into.” The theater, says Francis, was Madison Square Garden. “He offered me a $40,000 appearance at Madison Square Garden … for the Moonies.” She thought that was un-American.

“We broke up before that,” Scheck says. “It was over some theater in Albany.”

Francis says she’s doing well without Scheck and the rest of her former employes who had short-lived careers because they “can’t take the pressure.” At least two of those former employes now are eager to sell their story of “life with Connie” to the highest bidder — hinting at “sordid, nasty and ugly things,” in the words of one, Beckum. But they’ll only sing for money. Francis, meanwhile, goes on, talking of many projects, many plans, an ever-busy lifestyle. “I love life, and I love Dallas,” she says.

One of Francis’ projects — the autobiography — “has been postponed indefinitely,” says Cindy Hyber, publicity assistant at St. Martins Press. “I don’t know when the book will be available, if it will be available at all.” Joseph Bellino, Francis’ latest lawyer — for two days — quit, he said, after Francis stormed out of a meeting with Dallas bank executives on Aug. 24. “She wanted a loan and wouldn’t accept anything under $1 million” to lease an office building in North Dallas and launch several project ideas, Bellino said. He said the bank offered only $30,000 because Francis had few liquid assets. A spokesman for InterFirst Bank would neither confirm nor deny Francis’ visit.

Francis, meanwhile, forges ahead with a new staff. On the phone from Dallas, she says she plans two movies and a discotheque called Connie’s. She’s exuberant about spending time with a National Enquirer reporter who wants to know what’s become of her. “I promised him a byline,” she says, “but not an exclusive.” Then comes a playful invitation to Dallas. “Want to come? I’ll take you dancing. Put on your dancing shoes. I’m going to Switzerland for a few days, but I’ll be back on Friday. Maybe.” And with a click, Connie Francis is gone again.