What has so scared the Pharmaceutical Research and Manufacturers of America (PhRMA) that Ken Johnson, its most senior communications executive has taken to calling Valerie Volpe, its deputy vice president a "yo-yo?" When is a cover up worse than the original crime (and when isn’t it)? What did the higher-ups at PhRMA know and when did they know it? And, finally, what lobbying group thinks giving “low-level” employees discretionary authority over $1 million is nothing more than a rounding error? All this and more has been illuminated by the literary and political missteps of what is probably the most reviled corporate lobbying organization in Washington.
Americans pay the highest prices in the world for prescription drugs. Job One for the pharmaceutical industry’s lobbying organization, PhRMA, is to keep Canadian drugs out of America. If those levees break, the pharmaceutical industry faces the financial equivalent of Hurricane Katrina. To secure the ramparts, PhRMA’s lobbyists hammer away at the theme that imported drugs pose an unbearable threat to the safety of U.S. citizens.
But a potential Armageddon isn’t defense enough for PhRMA. There’s a lot of money at stake. The five leading pharmaceutical companies alone reported revenues last year of $650 billion and cash flow exceeding $90 billion. The industry is so afraid of Canadian web sites that PhRMA claims it created pots of money for its employees to spend at their own discretion on projects to keep those levies strong. At least, that’s what PhRMA’s Ken Johnson has repeatedly asserted to defend the lobbying group’s involvement in The Karasik Conspiracy, a thriller about terrorist attacks via Canadian web sites published this week.
When the press became critical of PhRMA’s role as the financier of the original iteration of The Karasik Conspiracy, PhRMA hid behind its supposedly decentralized structure and Johnson took to publicly disavowing Volpe, the deputy vice president who commissioned The Karasik Conspiracy, as a “yo-yo,” a “renegade” and a “rogue employee.” Perhaps a few condescending smears in The Washington Post, Los Angeles Times, Slate and dozens of other newspapers and blogs are just part of the job at PhRMA.
Self-flagellation apparently is also a job requirement. Perhaps that’s why after failing to silence the authors with money and the most oppressive contract known to lawyer-kind, PhRMA’s long-time consultant, Washington heavyweight Mark Barondess repeatedly fell on his sword, taking full responsibility for the very acts that led Johnson to first castigate and then suspend Volpe. Barondess even tried to claim that he alone paid for the book. That effort fell flat when Johnson first admitted to The Washington Post that PhRMA had fronted some of the money, and then finally came clean to Toronto’s Globe and Mail that PhRMA had fully reimbursed Barondess. Eventually, Johnson came to tout the circuitous funding mechanism as a badge of honor. More on that later.
The story begins in late March 2005 when Barondess, who is also Larry King’s lawyer, approached Michael Viner, president of Beverly Hills-based Phoenix Books with a plan for PhRMA to fund the creation and publication of a novel about a terrorist attack against the United States utilizing counterfeit pharmaceuticals distributed via on-line Canadian pharmacies. They agreed on a $300,000 budget to cover ghostwriter Julie Chrystyn and promotion costs and PhRMA talked about buying at least 40,000 books. Johnson told The Washington Post that the money was just a small sum for research costs. If a PhRMA deputy vice president can commit to $300,000 and 40,000 books, a total of about $1 million, what can a full vice president commit? Or Johnson? Or PhRMA’s CEO Billy Tauzin? With PhRMA’s dismissive view of $1 million is it any surprise drug prices are so high?
Chrystyn was given just 45 days in which to complete the assignment so the book could be published before hearings on legislation that would weaken the Medicine Equity and Drug Safety Act of 2000 by eliminating the requirement that the Secretary of Health and Human Services certify the safety of drugs imported from Canada. Weakening the Medicine Equity and Drug Safety Act is the equivalent of three back-to-back Katrinas for the pharmaceuticals industry.
The literary whizzes at PhRMA decided that the book should view the pharmaceuticals industry as heroic, avoid any complicated themes so it could appeal to women (Volpe explained that women couldn’t understand complicated plots), make fundamentalist Muslims the terrorists (Volpe said terrorists are “born” that way and don’t evolve) and greed their motive. Frequent gratuitous speeches about the evils of drug importation were also welcome. When I observed that PhRMA’s premise and story ideas were trite and incorrect and could lead to a backlash I was basically told to shut up.
I worked with Chrystyn to create the non-existent genre sought by PhRMA (a dumbed-down, simplistic thriller with ranting Muslims and preachy speeches about drug importation that would appeal to women). After the book was delivered, Barondess told Phoenix that PhRMA was pulling out. He blamed the decision on our alleged failure to create the next best-seller (surprise, surprise, given our marching orders) and denied – in writing – that the decision was a change of heart by PhRMA. Yet, in nearly a dozen interviews since then, both PhRMA’s Ken Johnson and Barondess himself have contended the plug was pulled because PhRMA thought it was a bad idea for PhRMA to fund any novel, let alone this one. Johnson has gone so far as to call the idea “underhanded,” “sneaky” and “looney tunes.”
On the pretext that the book failed to meet PhRMA’s objectives, PhRMA refused to honor Phoenix’s invoices. In my opinion as former chairman of a publishing company and former COO of MGM/UA, that sounds “underhanded,” “sneaky” and “looney tunes.”
Having thereby avoided its obligations, the intimidation and cover-up began.
After PhRMA’s withdrawal, rights in the book reverted to Chrystyn and then to Spivak Management Inc. It was rewritten into a much more complex thriller without the polemics, cliché fundamentalist Muslims or fluffy “women’s” content required by PhRMA. The new book has been called “riveting” and “refreshing.”
When Viner advised Barondess that Phoenix intended to publish The Karasik Conspiracy, Barondess demanded that it not include any mention of what had transpired, or any criticism of the pharmaceuticals industry or PhRMA. According to Viner, Barondess threatened to bring down Phoenix if Viner proceeded. When that didn’t work, Barondess sent Viner a “non-negotiable” agreement. He not only insisted that Viner sign the agreement, but that Chrystyn and I do so, as well.
The agreement offered Phoenix $100,000 and in return granted Barondess the right to read and approve (or disapprove) the manuscript, and with extraordinary arrogance, required that forever, none of Phoenix, Viner or the authors could “in any of their public, private, or promotional statements or writings…in any manner disparage, denigrate, demean, criticize, malign or cast in an unlawful or unethical light Barondess, the pharmaceutical industry, or PhRMA.”
Chrystyn, Viner and I immediately rejected the contract.
PhRMA’s next effort to stop the book was a smear campaign in which Johnson and Barondess – neither of whom had ever read the book being published, nor any draft of the book since PhRMA’s withdrawal – derisively castigated the book and urged consumers not to buy it. Barondess also stopped promotion on another Phoenix book in which he was involved and got CNN to require Phoenix to remove a Larry King quote from The Karasik Conspiracy’s cover.
Before Barondess’ change-of-heart, as Larry King’s lawyer, Barondess had worked with Viner on a quote from King for the book’s cover. But, a PhRMA consultant scorned is fearsome indeed. Barondess got CNN to instruct King and Phoenix that the quote be removed from the book. He alleged that King had never approved of the quote, conveniently ignoring that the quote had appeared on numerous versions of the cover vetted by Barondess. It is unclear why Barondess didn’t simply ask his client to remove the quote and instead got CNN to do his dirty work for him.
Larry King’s quote is not the only apparent inconsistency in PhRMA’s version of events.
Barondess told NPR’s On the Media that he personally funded the book. He apparently told Fortune and Slate that he did so using a personal discretionary account. Johnson told Slate that Barondess had no discretionary account at PhRMA and insisted it was Volpe who had discretion. Johnson explained to Crain’s leading trade journal, Modern Healthcare, that while PhRMA had originally funded the book, it wasn’t really involved. Johnson’s convoluted logic: “We had an employee [deputy vice president Volpe] who paid a consultant [Barondess] who then passed on money to a publisher [Phoenix].” When his explanation wasn’t working, Johnson tried a second time. “We made a payment to a consultant who made a payment from his own account to the publisher,” Johnson explained.
I get it. Because the money was laundered through a paid consultant, PhRMA didn’t actually make the payment.
On the other hand, whether PhRMA knew it, or not, it appears that not all of the money reached Phoenix. Slate reported that after receiving the money from PhRMA, Barondess admitted first pocketing a 25% cut for himself before remitting the balance to Phoenix. Barondess is also paid a retainer by PhRMA and unlike the hapless Volpe, he told On the Media that he remains actively engaged by PhRMA. Actually, we don’t know whether Volpe is on or off the payroll. We only know she has been “suspended.”
But for what? Johnson admits Volpe had a discretionary budget. He has never claimed she exceeded the budget. And, while Barondess and Johnson persist in claiming that Barondess, er, Volpe, acted alone, an e-mail from Volpe to Barondess makes clear that the payments to Barondess for Phoenix were approved by PhRMA’s legal department. Barondess has even admitted to at least one reporter that he received approval for his idea from someone at PhRMA. It begins to appear that Volpe is being made the scapegoat. While her literary judgments and knowledge of history in the Balkans are, in my opinion, quite weak, it is difficult to see the offense that got her suspended, other than being a convenient target. Perhaps she needs to learn Barondess’ skills at self-immolation (even Johnson ate just a wee bit of crow when he admitted to The Los Angeles Times that PhRMA’s reputation suffered from “a lot of baggage”).
In the remote event that Barondess, Volpe and the PhRMA lawyers entered into the deal with Phoenix and paid Phoenix without informing higher-ups at PhRMA, that would seem to have been the purpose of the decentralized authority granted to Volpe and presumably others. If things went well, Johnson and PhRMA CEO Billy Tauzin could claim the credit and if things went poorly, as they did in this instance, they could hide behind the deniability of their decentralized structure. The President should have it so good.
Candor doesn’t seem to be on the top of the list at PhRMA. When I told On the Media that Barondess had tried to silence the authors and publisher for the rest of our lives, Barondess denied it. Yet, the contract written by Barondess clearly prohibits the authors and publisher forever from “criticizing” Barondess, the pharmaceutical industry, or PhRMA in any "public, private, or promotional statements or writings."
What is really at stake here? The profits of one of America’s largest global businesses and the veracity of its lobby.
As rewritten, The Karasik Conspiracy is a well-received thriller about two terrorist attacks on the United States, one organized by the Karasik Commission, a terrorist cell originally from the Balkans, and the other by PharmCorp, one of the world’s largest pharmaceutical companies. Tainted drugs are unleashed via Internet sales in a terrifying attack on those most in need of help.
It is ironic that the book PhRMA has done so much to stop still tells a story about a terrorist attack using Canadian web pharmacies. It is also ironic that the hearings targeted by the book have been delayed by the events in Iraq and at home. It is almost unimaginable what PhRMA must do when its interests are really threatened.
The book includes an afterword that explains what really happened and includes excerpts from Barondess’ emails and the contract Barondess prepared to silence the authors and publisher. The book’s web site, www.karasikconspiracy.com, will include more than 100 emails among Barondess, Volpe, Viner, Spivak and Chrystyn. The emails are a chilling reminder that without written proof, too many Washington lobbyists might be able to rewrite reality and that given self-interest to do so, they will.