Brooks and Nocera

Bobo has decided to deal in an oxymoron today, with an emphasis on “moron.”  In “A Sensible Version of Donald Trump” [snort] he gurgles that a superior outsider — not just from outside the political system, like Trump, but outside partisan thinking — could offer a great deal to America.  In the comments “Expat Annie” had this to say:  “The problem — and you know it, Mr. Brooks — is that there is no such fantasy candidate waiting in the wings. And even if there were, that person would not have a chance, nor would any of the programs you have suggested, for the simple reason that they all cost money — and the Republicans have shown quite clearly over the past years that they are not interested in investing in society or improving anyone’s lot (except for that of their wealthy benefactors). Their specialty, in the meantime, is tearing things down. No way would they agree to invest a dime in any of the things outlined here.”  Mr. Nocera has a question:  “Is Valeant Pharmaceuticals the Next Enron?”  He says allegations about Valeant’s practices and its own disclosures while under pressure cause one to wonder.  Here’s Bobo:

The voters, especially on the Republican side, seem to be despising experience this year and are looking for outsiders. Hence we have the rise of Donald Trump and Ben Carson. People like me keep predicting that these implausibles will collapse, but so far, as someone tweeted, they keep collapsing upward.

But imagine if we had a sensible Trump in the race. Suppose there was some former general or business leader with impeccable outsider status but also a steady temperament, deep knowledge and good sense.

What would that person sound like? Maybe something like this:

Ladies and gentlemen, I’m no politician. I’m just a boring guy who knows how to run things. But I’ve been paying close attention and it seems to me that of all the problems that face the nation, two stand out. The first is that we have a polarized, dysfunctional, semi-corrupt political culture that prevents us from getting anything done. To reverse that gridlock we’ve got to find some policy area where there’s a basis for bipartisan action.

The second big problem is that things are going badly for those in the lower half of the income distribution. People with less education are seeing their wages fall, their men drop out of the labor force, their marriage rates plummet and their social networks dissolve.

The first piece of good news is that conservative and progressive writers see this reality similarly, which is a rare thing these days. The second piece of good news is that we have new research that suggests fresh ways to address this problem, ways that may appeal to both Democrats and Republicans.

The studies I’m talking about were done at Harvard by Raj Chetty, Nathaniel Hendren and Lawrence Katz. They looked at the results of a Clinton-era program called Moving to Opportunity, which took poor families and moved them to middle-class neighborhoods. At first the results were disappointing. The families who moved didn’t see their earnings rise. Their kids didn’t do much better in school.

But as years went by and newer data accumulated, different and more promising results came in. Children who were raised in better environments had remarkable earnings gains. The girls raised in the better neighborhoods were more likely to marry and raise their own children in two-parent homes.

The first implication of this research is that neighborhood matters a lot. When we think about ways to improve the lot of the working class, it’s insufficient to just help individuals and families. We have to improve entire neighborhoods.

Second, the research reminds us that to improve conditions for the working class it’s necessary to both create jobs and improve culture. Every time conservatives say culture plays a large role in limiting mobility, progressives accuse them of blaming the victim.

But this research shows the importance of environment. The younger the children were when they moved to these middle-class environments, the more their outcomes improved. It’s likely they benefited from being in environments with different norms, with more information about how to thrive, with few traumatic events down the block.

I know the professional politicians are going to want to continue their wars, but I see an opportunity: We launch a series of initiatives to create environments of opportunity in middle-, working- and lower-class neighborhoods.

 

This will mean doing some things Republicans like. We’ve got to devolve a lot of power from Washington back to local communities. These neighborhoods can’t thrive if they are not responsible for themselves. Then we’ve got to expand charter schools. The best charter schools radiate diverse but strong cultures of achievement. Locally administered social entrepreneurship funds could help churches and other groups expand their influence.

This will mean doing some things Democrats like. We’ve got to reform and expand early childhood education programs, complete with wraparound programs for parents. They would turn into community hubs. Infrastructure programs could increase employment.

Basically we’ve got to get socialist. No, I don’t mean the way Bernie Sanders is a socialist. He’s a statist, not a socialist. I mean we have to put the quality of the social fabric at the center of our politics. And we’ve got to get personalist: to treat people as full human beings, not just economic units you fix by writing checks.

Then we’ve got to get integrationist, to integrate different races and classes through national service and school and relocation vouchers. And finally, we have to get a little moralistic. There are certain patterns of behavior, like marrying before you have kids and sticking around to parent the kids you conceive, that contribute to better communities.

Look, I don’t know if I’m red or blue. If you want a true outsider, don’t just pick someone outside the political system. Pick someone outside the rigid partisan mentalities that are the real problem here.

Bobo doesn’t know if he’s red or blue?  I had no idea the poor bastard was color blind…  Here’s Mr. Nocera:

Valeant Pharmaceuticals is a sleazy company.

Although it existed as a relatively small company before 2010, it did a deal that year that put it on the map. The deal was with Biovail, one of Canada’s largest drugmakers — and a company that had run afoul of the Securities and Exchange Commission.

In 2008, the S.E.C. sued Biovail for “repeatedly” overstating earnings and “actively” misleading investors. Biovail settled the case for $10 million.

As it happens, 2008 was the same year that a management consultant named J. Michael Pearson became Valeant’s chief executive. Pearson had an unusual idea about how to grow a modern pharmaceutical company. The pharma business model has long called for a hefty percentage of revenue to be spent on company scientists who try to develop new drugs. The failure rate is high — but a successful new drug can generate over $1 billion in annual revenue, which makes up for a lot of failures.

Pearson didn’t have much patience for research and development. And while he certainly wanted moneymaking drugs, he didn’t really need blockbusters to make his business model work. His plan was to acquire pharmaceutical companies, fire most of their scientists and jack up the price of their drugs. Biovail gave him the heft to put his plan in action.

And so he has done, to the delight of Valeant’s shareholders, and the dismay of most everyone else.

Before Pearson took control of Valeant, it spent 14 percent of its revenue developing new drugs. Last year, that number was under 3 percent. Meanwhile, Pearson has been ruthless about price hikes; in February, according to The Wall Street Journal, the company raised the price of one heart drug by 525 and another by 212 percent — on the very day it acquired the rights to the drugs. Complaints from patients, doctors and insurance companies have prompted investigations by federal prosecutors in Massachusetts and New York.

In the seven years Pearson has run the company, Valeant has done more than 100 deals. Its growth has been supercharged, and so has its stock price. Pearson has become a billionaire.

Fast forward to Oct. 19. During a conference call with investors, Valeant disclosed a relationship with a specialty pharmacy called Philidor RX Services, a relationship in which Philidor seemingly does business with no one besides Valeant, and that is so close that Valeant consolidates Philidor’s financials while holding Philidor’s inventory on its books. During the call, Valeant also disclosed that it had paid for an option to buy Philidor, though it had not actually made the purchase — a very strange deal indeed.

It made these disclosures because Roddy Boyd, a former New York Post reporter who now runs the Southern Investigative Reporting Foundation, had found out about the Philidor relationship and begun asking questions. So had several Wall Street critics of the company, including John Hemptonof Bronte Capital.

Valeant’s disclosures last week — along with subsequent allegations by Citron Research that Valeant was cooking the books — as well as stories by Boyd and several others have caused the stock to tank.

On Monday, Pearson and his executive team held a lengthy conference call with investors in which they insisted Valeant had complied with “applicable law.” But Valeant also announced that a committee of the board would investigate the ties with Philidor. And it urged the S.E.C. to investigate Citron. This was also a tactic Biovail once used to silence its critics; it backfired spectacularly when the S.E.C. concluded that the critics were the ones who had it right.

It is difficult, if not impossible, to understand all the implications of the Philidor-Valeant relationship, or whether anything genuinely illegal has taken place. But the whole thing looks pretty, well, sleazy.

As The Times’s Andrew Pollack pointed out last week, Valeant uses Philidor to keep patients from getting generics instead of its high-priced drugs. Philidor negotiates directly with the insurance companies, saving patients from feeling the sticker shock their price hikes would otherwise cause. The co-pay is often waived, which only adds to the allure of using Philidor.

The evidence strongly suggests that Philidor is controlled by Valeant, even though it is supposed to be an independent company. The Wall Street Journal reported that certain Valeant employees work at Philidor using fake names.

But why? And why did Valeant fail to disclose the relationship for so long? If there was really nothing wrong, why did Valeant keep it a secret? Why, even now, are there more questions than answers?

Maybe it will all turn out to be innocent. But I remember another company that Wall Street once swooned over, a company that had eye-popping growth, but also had secrets, which eventually destroyed it.

You probably remember that company, too. Its name was Enron.

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