National Corporate Greed Going Local for the Holidays

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This should be the story of a win-win situation. In the middle of the  Great Recession, a nationally prominent mega-corporation manages to  achieve phenomenal profitability and decides to share its good fortune  with the wage workers who helped make that profit possible. All of that  happens to be true about Express Scripts (Nasdaq: ESRX), the nation's second-largest pharmacy benefits  manager–all except for the decision about how to thank its workers. To  show their gratitude, Express Scripts managers went in a different  direction. First, they publicly lauded union workers at their most  efficient processing plant. Then they told them they were losing their jobs. And they're poised to do the same thing to workers at their plants in thirteen other states. Sometimes corporate America's capacity to stick it to the little guy is  so astounding, you can't help but feel impressed by the chutzpah.The plant in question is an Express Scripts processing facility in Bensalem, Pennsylvania, employing 365 workers represented by SEIU Healthcare PA.  In 2009, Express Scripts thanked those workers for setting a nationwide  one-day efficiency record in processing prescriptions. This summer,  however, as the expiration of the workers' current union contract  approached, Express Scripts unilaterally demanded wage and benefits  cuts– not as the price of securing a new contract, but in order to keep  the plant open at all. The company told its most efficient workers,  essentially, work for less money and worse healthcare options, or we're  closing the plant and laying you off. Workers countered with their own give-back package and local officials promised to help  the company secure public funds for plant improvements, but to no avail.  On October 6, Express Scripts posted a WARN notice announcing the  mid-December closure of the Bensalem plant, as well as a sister facility  employing an additional approximately 650 workers.

Union  bullying like that is nothing new, and certainly comes as a surprise to  no one in a deadened economy like the one we're still trying to climb  out of. (Not that that makes such tactics fair.) The real surprise is  Express Scripts' justification for its demands. The company says without  steep worker givebacks, it just can't afford to keep the Bensalem  plants open. Why might that be?

It isn't because Express Scripts  is hurting financially. According to figures supplied by SEIU Healthcare  PA, the company is currently worth about $26.5 billion. In 2009 Express  Scripts made a $1.7 billion profit that represented (astoundingly for  the middle of the Great Recession) a 23 percent increase over 2008. In  the first six months of this year, the company earned another $555  million, a 35 percent increase over 2009 figures, and expects that trend  to continue into 2011.  Management certainly was lauded for such great success. In 2009,  Express Scripts' top five executives earned a combined compensation in  excess of $21 million, including $10.6 million in compensation for  company CEO George Paz, alone. (For some perspective, that's about 313  times the annual salary for the average American wage earner.)

It also isn't because Express Scripts is wanting for clients. In addition to the $2.8 billion TRICARE contract to serve as the pharmacy benefits manager for all U.S.  military families, the company holds multi-year contracts with numerous  public, academic, and faith-based organizations in several states, among  which the Ohio Public Employee Retirement System, the Ohio State  Teachers Retirement System, Ohio State University, the Pennsylvania  School Employees Retirement System, Farifax County (VA) Public Schools,  the Evangelical Church of America, the Lutheran Church Missouri Synod,  the Board of Pennsylvania Presbyterian Church, and the Philadelphia  Federation of Teachers. (Or translated, millions of current and former  wage earners and social-justice minded Americans who themselves would  likely question Express Scripts' actions if they knew about them.)

Maybe  the answer's in the rapid national growth Express Scripts has  experienced in the past decade? Now we're getting somewhere. Since 2002,  the benefits-manager giant has acquired five other pharmacy fulfillment providers in five states and made a failed bit to acquire Caremark (that honor eventually going to CVS.) In the process, Express Scripts  grew to become the nation's second-largest pharmacy benefits manager,  fulfilling the prescription needs of 25 million Americans.

But a  more interesting figure is the $4.7 billion Express Scripts paid to make  its most recent acquisition, the Indianapolis-based WellPoint. The  deal, which closed last December, saw Express Scripts take on $2.5  billion in debt which, if you're still paying attention, is an amount  greater than the company's entire 2009 profit. That debt was  underwritten by major banks including Wells Fargo, Citigroup, Credit  Suisse, and J.P. Morgan Securities, who collectively probably thought it  was a good idea when the deal first started to come together in 2008.  Could it be that, given the recession, Express Scripts' creditors now  want a quick return on their investment?

It very well could. And  what better way for Express Scripts to free up funds than by paring down  its greatest area of expenditure– labor? Especially if the company  wanted to keep investors happy enough to underwrite yet another major  acquisition– say, for example the pharmacy benefits management division  that Walgreens put up for sale this fall– a division which the New York Times just reported that Express Scripts has expressed an interest in acquiring?

If  the company had a history of fair dealing, there might be more room for  doubt about how these dots may all connect together. Yet in 2008,  alone, Express Scripts settled an action brought by the attorneys general of 28 states alleging deceptive business practices that financially benefited the company at the expense of consumers, as well as a suit brought by New York State alleging inflated prescription drug costs (in collusion with CIGNA Corp.)

Express  Scripts has also consistently lobbied for large government contracts  but against federal oversight of its actions. In the early 2000s, board member Samuel K. Skinner pledged to contribute or raise $100,000 for George W. Bush's  re-election campaign at the very same time the Bush administration was  selecting pharmacy benefit management firms to participate in the  Medicare “discount card”  program. Skinner's previous claim to fame? Serving as Bush's  chief-of-staff and transportation secretary. Last year, the company  joined drug-industry lobbyists in railing hard against President Obama's healthcare reform plan, including a 2009 letter to employees from CEO George Paz warning that supporting healthcare reform would  hurt the industry (read: slow our juggernaut, highly profitable growth?)  and, as a result, consumers and employees.

The amazing thing  about Express Scripts is that, despite the sheer lack of focus the  company consistently affords to consumers, good business practices, and  employees– and the staggering unfairness wrapped up in that– it still  manages to turn a profit. That could be why instead of attempting to  turn the community against the Bensalem workers by blaming them for the  impending loss of local jobs (the much-ballyhooed divide-and-conquer strategy made famous by Caterpillar during its mid-90s union busting campaign in Peoria, Illinois), Express Scripts has opted for a more direct  obey-or-else approach. After all, beyond a few million dollars in  payouts to angry attorneys general, so far what has Express Scripts had  to fear?

That could be changing. In early October, Bensalem  workers and SEIU Healthcare PA officials went to Washington to meet with  members of Congress and White House and Department of Defense officials  to try and put a spotlight on Express Script's activities. Since then, four members of Congress (Robert Andrews [D-New Jersey], Patrick Murphy [D-Pennsylvania], Joe  Sestak [D-Pennsylvania], and Allyson Schwartz [D-Pennsylvania]) have called for a federal investigation into Express Scripts' ability to meet its obligations to TRICARE families if the Bensalem plants close.

But  since we've seen this all before, let's assume that the protestations  of four member of Congress aren't enough to block a mega-corporation  from closing a couple of plants. What then? Hardship for hundreds of  families in a bad economy at a tender time of year? The deadening of an  already precarious suburban Philadelphia local economy? Sadly, yes, but  the story doesn't end there. If Express Scripts is squeezing it's  one-thousand Bensalem workers to make good with creditors in order to  set itself up for future major acquisitions, as they may very well be  doing, the company's 13,000 other employees have no reason not to expect  the same treatment next.

Where are those 13,000 other workers?  They're working at Express Scripts facilities in no fewer than 13 states including Arizona, California, Delaware, Florida, Georgia, Ohio, Indiana, Michigan, Maine, New Mexico, New Jersey, and New York. So if  Express Scripts has its way in Bensalem, the company's war on wage  workers could quickly become a national one. Worse, with little to stop  Express Scripts or its corporate peers from continuing to put the needs  of shareholders ahead of the needs of workers and consumers–and (Facebook campaign notwithstanding) so far  there's still very little regulation to stop them from doing so–other large, multi-state employers may feel free to try and throw their  unionized workers under the financial bus, too. There is scant doubt  that what happens in the next few weeks in Bensalem won't be taken to  heart in board rooms across America.

In the end, it seems to me  the real reason for Express Scripts sticking it to wage earners in a  time of such economic uncertainty comes down to one horrifyingly simple  thing. It's a thing I'm sure sure George Paz's parents warned him  against in his formative years, much as I'm sure the children of  Bensalem workers will be warned against it when all is said and done.  That thing is greed. The age-old syndrome of  I-want-more-and-I-don't-care-what-happens-to-you. No pain, no WellPoint  and, potentially, Walgreens gain. Except in this case, the price of my  gain is your and your family's pain.

As always, that's a tough pill to swallow.

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  1. Excellent.
    Outstanding research and expository writing.

    Please contribute more, and find ways to disseminate stories like this beyond this corner.  

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