Sunday, September 15, 2013

Fire Derica Rice

Derica Rice, the Chief Financial Officer of Eli Lilly should be fired. He's doing a lousy job and he is certainly not worth anywhere near what he is paid. The reason why he keeps his job is because institutional shareholders don't do their homework. I worked at Eli Lilly in 2007-2008. Eli Lilly has a deeply entrenched cultural problem: a lack of political will for solving long-term cost-efficiency problems. Eli Lilly has a lot of structural cost-efficiency problems and worker productivity problems that have remained unsolved for decades. These problems, since they are cultural, cut across all operations and departments (my particular expertise is computer programming services, where pharmaceutical shareholders consistently get ripped off). Derica Rice has done almost nothing to deal with these long-term cost-efficiency problems. He is not competent, he is not really trying, he should be fired.

The pharmaceutical industry has a deep cultural problem: a total lack of political will to solve long-term cost-efficiency problems and worker productivity problems. To understand this cultural problem, consider this example: the worker productivity problem for providing diverse and complex statistical tables to statisticians and medical researchers. (The SAS programming language has serious worker productivity problems for several areas, including tables.) Each statistical table request typically requires over 400 lines of code (hours of work), but an outsider with common sense would see that most requests should not require more than 20 lines of code (20 minutes of work). This is a waste of pharmaceutical shareholder's money. This problem has been around since the 1980s, maybe earlier. This is a problem that could have and should have been solved by 1995. Why wasn't it? Because IT'S NOT A COMPUTER SCIENCE PROBLEM - IT IS A CULTURAL PROBLEM. First, pharmaceutical SAS programmers have an economic incentive to NOT solve worker productivity problems. Second, the pharmaceutical industry is deeply hostile to innovators and to new ideas in general. Both pharmaceutical SAS programmers and pharmaceutical CFOs prefer to keep innovators locked out of the building, but for different reasons. Pharmaceutical SAS programmers (especially senior SAS managers at CROs) want to protect their economic status by stopping worker productivity growth. Pharmaceutical CFOs have a different reason.

CFOs only want solutions and innovations that come from people like them, other members of the corporate elite. [ This is called SOCIOECONOMIC-DISCRIMINATION, and I'll write in other economic posts how it damages the American economy.] In general, corporate executives have deep contempt for the poor and middle class, a problem that is becoming worse as the American economy becomes more ossified. In this context, it means they find it hard to believe that worthy solutions come from an innovator who is not like them. So when corporate executives receive letters from innovators from a much lower economic class, they instinctively toss such letters in the trash.
In a nutshell:
Pharmaceutical SAS programmers are protecting their own economic interests.
Pharmaceutical Chief Financial Officers are shallow people.

So that is why this worker productivity problem remained unsolved for decades - because it's not actually a computer science problem, it's a cultural problem. [And as I'll argue in later posts, it's a cultural problem not only across the pharmaceutical industry, but in the broader healthcare industry - and this damages a lot of people's lives.]
What happens when an innovator announces a solution? You still have the same cultural problem. Pharmaceutical SAS programmers (and especially CROs) will do everything in their power to keep the innovator locked out of the building. And pharmaceutical executives continue to toss letters from the poor and middle class in the trash.

I sent Rice, and the CFOs of Biogen and Pfizer, at least two letters each explaining the situation. I called Rice twice, but of course the receptionist's job is to protect the corporate executives from the scumbags of the lower economic classes. [Disclosure: I have not worked at Pfizer or Biogen, but this is a problem in the entire drug industry.] I sent letters to other pharmaceutical executives as well, all letters have been ignored.
Obviously, with the announcement of this breakthrough, pharmaceutical SAS programmers were not happy about it ( using SAS, each table typically needs over 400 lines of code (hours of work), using the new syntax the same table can be done in under 20 lines of code (perhaps 20 minutes of work)). So for obvious reasons, pharmaceutical SAS programmers do not want me allowed in the building. (And oh, the pharmaceutical industry continues to pour millions of dollars into one SAS macro library after another, even though CFOs should have known by 1995 that macro libraries do not solve the productivity problem. It was worth trying 25 years ago, but today selling a macro library is like selling a bridge from Brooklyn. CFOs put money into technology projects based upon political reasons, not merit.)

To understand the mistakes that Rice and other pharmaceutical CFOs are making, institutional shareholders and economics columnists in the media need to understand the difference between short-term cost cutting techniques and solving long-term cost-efficiency problems. They are different methods for solving different problems. So long as institutional shareholders and the mainstream media continue to ignore the difference between short-term cost cutting and long-term cost-efficiencies, the cost-efficiency problems in the healthcare industry shall never be solved, because health-care executives are not motivated to solve them.

Short-term cost cutting is easy for the CFO to do. It does not require examination or restructuring of the underlying operations. Typically, it's a layoff announcement. It can also involve shuffling work back and forth between in-house and CROs, or other ways of shuffling costs around. The problem for long-term shareholders (and customers who pay high drug prices) is : short-term cost cutting methods do not raise long-term worker productivity (I'll explain why in a later post). Solving long-term cost-efficiency problems is much harder work, it requires deeper examination of the operations. It is work that pharmaceutical CFOs do not wish to do. When you solve long-term cost-efficiency problems, the benefits for long-term shareholders and/or people buying medicine can be dramatic. But the pharmaceutical industry does not solve long-term cost-efficiency problems, and has not been for decades.

Derica Rice made about five million dollars last year. Other pharmaceutical CFOs made similar multi-million dollar salaries in one year. They do short-term cost cutting, which provides little benefit to long-term shareholders and customers. They do not solve long-term cost-efficiency problems. They also don't talk to most innovators (because most corporate executives are stuck up). Do these people deserve an annual salary of say, $500,000 per year (about a tenth of what many of them make)? They most certainly do not. They should be fired.

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