Corporate Greed as a Family Value? Express Scripts' New War on Union Workers
by Mike Doyle, Wed Nov 03, 2010 at 05:16:17 PM EDT
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. 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 (Facebook campaign page notwithstanding.) 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 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.