If someone wanted to use a Venn diagram to illustrate what is wrong with the U.S. health care system, picking the different sets would be easy: Price gouging, abuse of loopholes, hidden risks to patients, baffling regulatory decisions, marginal efficacies and the use of doctor payments to stimulate drug sales would be some logical choices. And a case in point would be Corcept Therapeutics, a specialty pharmaceutical company based in Menlo Park, California, and the apparent union of all things expensive and opaque. So how did Corcept, a small company with just one drug aimed at treating a tiny population of patients with a rare pituitary disorder, wind up there? Corcept has managed to make handsome profits by quietly yet efficiently exploiting gaps in the nation’s health care regulatory framework. And its sole drug is none other than the storied mifepristone, better known as the abortion pill.
In early May several hundred investors, doctors and brokerage research analysts attended a dinner presentation after cocktails offered by the leadership of Myriad Genetics in Manhattan’s midtown. Salt Lake City–based Myriad, best known for its hereditary cancer tests, was in New York to tout new research on its increasingly popular GeneSight product during the American Psychiatric Association’s annual conference. The APA conference is an important event for Wall Street as well as pharmaceutical companies because of the massive amount of money Americans spend each year on drugs and therapy for treating depression. A March 2017 American Psychological Association article estimated the annual cost of treating depressive disorders at $71 billion and rising; in May Myriad said the total cost of major depressive disorder was $100 billion a year. Thus, taking notice of the latest drug development news could potentially be very lucrative for companies and investors alike.
To understand what Myriad is today, it’s important to understand what happened on June 13, 2013. The day began with Myriad having a patent-protected monopoly — its 2013 income statement is a testimony to the benefits of having no rivals — and a fearsome reputation for ruthlessly enforcing its patents. Myriad had been awarded patents in 1994 and 1995 for two genes associated with a risk for breast cancer. But by 2009 the American Civil Liberties Union and the Public Patent Foundation legally challenged this, claiming genes are naturally occurring and thus not subject to patenting and that breast cancer research was being curtailed because of Myriad’s patents. (ACLU lawyer Tania Simoncelli subsequently discussed the suit in a November 2014 TED talk.)
Late that June 2013 afternoon, the Supreme Court ruled 9-0 in the plaintiffs’ favor, with Justice Clarence Thomas writing that the act of “separating [a] gene from its surrounding genetic material is not an act of invention.” He bluntly added, “Myriad did not create anything.”
By the time Myriad’s executives arrived home that evening, the company’s entire business model had been upended, with three companies announcing their entrance into the hereditary breast cancer screening business; more followed.
Work life balance, an ever elusive goal for many American corporate executives, has been given a fresh new meaning at fast-growing Teladoc Health, a provider of on-demand medical videoconferencing. But don’t expect to hear about generous paternity leave or a slick new gym at headquarters; this is one benefit that Teladoc Health definitely isn’t advertising. In a nutshell, for a little over two years Teladoc Health’s chief financial officer Mark Hirschhorn, 54, was in an affair with Charece Griffin, now 30, and an employee many levels below him on the company’s organizational chart. At the end of it, the powerful, high-profile executive stayed with nearly nary a consequence, while his girlfriend — and her boss — hit the road. ———-
Let’s start with this relationship’s unique optics, which appear designed to give a corporate lawyer a heart attack: While Griffin was not initially a direct subordinate of Hirschhorn, when he was given the additional title of chief operating officer in September 2016, that distinction was all but erased.
Things are not going well for Newton Glassman. Southern Investigative Reporting Foundation readers will recall Glassman was the subject of a lengthy exposé in April, detailing the many ways his direction of Catalyst Capital Group Inc., a Toronto-based private equity fund with $4.3 billion in capital commitments, and its sister company, Callidus Capital Corp., should alarm both investors and regulators. Specifically, the reporting illuminated the risk Catalyst’s limited partners face because of the fund’s continually growing exposure to Callidus — a lender to distressed companies the fund bought in 2007 and took public in 2014 — whose performance has been disastrous. If that wasn’t bad enough, Glassman directed the fund’s plunge into a series of costly and reputation-threatening lawsuits against a host of purported enemies. On both fronts, incredibly, things have gotten worse.
Frequently sporting a $2 billion plus market capitalization, Acadia Pharmaceuticals brings to mind the work of Belgian surrealist Rene Magritte. His 1929 painting “The Treachery of Images” depicts a pipe with the inscription “This is not a pipe,” suggesting that an image and its meaning don’t necessarily correspond with each other. In that vein, San-Diego-based Acadia portrays itself as a pharmaceutical company but a Southern Investigative Reporting Foundation investigation has revealed that this is merely a clever facade. What lies below is a ruthless marketing entity whose pursuit of regulatory approval is best described as “loophole-centric.”
Nonetheless, in little more than two years, Acadia has gained a remarkable foothold in the pharmaceutical marketplace. The company generated $124.9 million in sales last year — a steep increase from its $17.3 million in 2016 — and its management has told brokerage research analysts to expect its revenue to more than double this year.
It was corporate skulduggery at its most audacious. Last September Frank Newbould dined at Scaramouche, a swanky downtown Toronto restaurant, with a businessman who said he would like to hire Newbould as an arbitrator. In reality, this was a ruse to engineer an attempted sting on Newbould, a retired Ontario judge, as the National Post reported. Newbould’s would-be client worked for Black Cube, a Tel Aviv-based business intelligence firm, staffed with former Israeli intelligence agents, that has attracted notoriety for its work for disgraced Hollywood producer Harvey Weinstein, among others. As Newbould and the man conversed, another Black Cube operative was secretly photographing them.
For eight years, Craig Boyer was a senior executive at Callidus Capital, and by the time he quit in 2016 he was its chief underwriter and vice president. But last year Boyer sued Callidus for CA$100,000 in damages, claiming the company had denied him health and other benefits and seeking the return of his stock options. It’s safe to say that when Boyer left Callidus, he was clearly an unhappy man. In his claim, he said he had been subjected to “abusive management conduct” in the form of “abusive email and verbal treatment” from Callidus CEO Newton Glassman, including “on occasion, physical abuse.” Boyer even mentioned how in 2016 he was “participating in a meeting where a senior officer of the defendant’s parent [company] physically attacked the plaintiff’s immediate superior.”
Boyer’s portrait of Callidus as a “poisoned” workplace, whose management style focuses on the “berating and belittling” of employees, is not an isolated one: Two former employees of Callidus’ parent company, Catalyst, have alleged in court filings that they had witnessed numerous instances of Glassman being emotionally or verbally abusive to his colleagues. Yet Callidus, in a statement of defense and counterclaim, has denied Boyer’s allegations of a poisoned work environment, saying he never raised such issues while working at the company.
Editor’s note: Wirecard has replied to questions posed several weeks ago, and their answers are found throughout the text and at the bottom of this story. Wirecard AG is the luckiest company you’ve never heard of. It has the good luck of a boxer who’s a master of bobbing and weaving in the ring, making it difficult for an opponent to land a punch. Prizefights, though, typically go for all of 10 or 12 three-minute rounds. Yet for 10 years a combination of short sellers, journalists and forensic research consultancies (whose clients often include short sellers) have publicized a long list of concerns about Wirecard’s operations, to little avail.
Editor’s Note: In the original version of this story, the number given for DaVita’s U.S. patients was incorrect. According to the company’s third-quarter 10-Q, it is 194,600, not 214,700. Additionally, a reference to a published report that provided an inaccurate estimate of the combined Fresenius and DaVita market share was deleted. Veteran card players pride themselves on the ability to discern what’s known as “the tell,” the series of involuntary mannerisms that can betray a rival’s strategic deceptions and even suggest a possible next move. Then there are those rare occasions when a tell metastasizes into a red flag, a clear indication that something is terribly wrong.