SMART Policy Podcast
Podcast by the UT SMART Initiative. Host Jeremy Kourvelas speaks with experts from across the recovery ecosystem - representing healthcare, prevention, law enforcement and more - about local, state and federal drug policy to find out what is and isn't working to make this fight against addiction a little easier.
SMART Policy Podcast
Organizational Failure: How Bad Business Created the Opioid Epidemic
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
You're listening to the Smart Policy Podcast, a production of the University of Tennessee's Institute for Public Service. Purdue Pharma, Johnson Johnson, CVS, Walgreens, Tava, Allergen, I could keep going. Drug manufacturers and distributors have rightly come under scrutiny in light of the opioid abatement settlements. As these companies start paying out hundreds of millions of dollars across the country in an effort to make up for the damage they cause by ignoring the warning signs of opioids, it is easy to sit back and blame the whole thing on corporate greed. And no doubt, corporate greed played a big role. But the pharmaceutical industry is a complex web that extends far out from just the drug makers and pharmacies. It involves doctors, providers, pharmacists, governmental agencies, insurance companies, law enforcement, and of course, the patients themselves. So what happened to cause such a huge and complex supply chain with built-in checks and balances to fail? Imagine a stack of Swiss cheese slices stacked on top of each other. As long as the holes don't line up, nothing can pass through.
SPEAKER_01When those holes line up, watch out because you're gonna have some failure. It's gonna happen.
SPEAKER_00My guest this month is Professor Anne Smith from UT College of Business. She specializes in organizational failure in the context of disasters and catastrophes.
SPEAKER_01When an organization is formed, the values of the CEO, early actions are imprinted on the front.
SPEAKER_00As Professor Smith discusses in this episode, the opioid crisis unfolded not unlike the Challenger explosion or the Black Hawk helicopter incident in northern Iraq during the Persian Gulf War. Poor company leadership, market manipulation, regulatory failure, and other factors all happen to line up perfectly to create this disaster. In this episode, we dive into all these different parts of the supply chain, as well as discussing how policymakers in the private sector can learn from this colossal mistake and hopefully prevent another pharmaceutical catastrophe in the future.
SPEAKER_01I'm Professor Ann Smith. I'm in the Haslem College of Business. I'm a strategy scholar, so I the bottom line is we study why firms succeed or fail. And I'll maybe it's a personal flaw, but I like to study why organizations fail. And so something I've been very interested in is uh what are causes for um like catastrophes like Challenger, Columbia, friendly fire over Iraq, a northern Iraq in 1994, Everest in 96. I study these, um they make for really interesting conversations when you're teaching students about how organizations, um, how they're structured, how they operate their culture, how that can lead to failure.
SPEAKER_00Okay, that's interesting. I organizational failures, it's uh how is that different than say an economic failure, a market failure?
SPEAKER_01So when I I mostly have looked at incidences, like what led to Challenger, how they didn't fix the problems in NASA, which led to the second to Columbia space shuttle disaster. So I mostly studied these disasters, um, you know, even Gatlinburg 2016, the fire that roared through Gatlinburg. Um there is a there are frameworks out there to understand it. So that's one reason I've stumbled into the opioid interest in the opioid crisis, is because when I've read it and become immersed in it, I've become more and more aware how it fits and lines up with the frameworks in which we use to understand why disasters unfold. So that's been my interest in this. I don't, I'm not a medical, I don't have a medical background. Um, I'm just interested in why organizations fail. Now, the opioid crisis was uh a level above that, it was more industry level. So I don't study market failures like you know what the 2008 financial meltdown. That that that, although there was an organizational component, it's sort of beyond my my wheelhouse. Um I study more units of organizations, how they how the ethical breaches happen and how they unfold. And then so the opio crisis has broadened my interest to looking at how an industry or how industries, how an entire supply chain ended up exacerbating what we're dealing with today, or were the primary causes of. So that's why when I'm the more I'm reading about it, the more I'm understanding that how it fits with a lot of what we know about why, why we have disasters, why we have organization failures or events like Challenger, a space shuttle explosion and such.
SPEAKER_00That's I I really think that's an extremely fascinating way of looking at this. Because we talk about the business side of how this crisis started, and is usually the narrative is corporate greed, and I'm sure that played a role. But to look at the entire supply chain, uh every single factor here, I'd be how is it exactly that this came about? What failures did take place?
SPEAKER_01Well, there are two frameworks out there to understand disasters or two ways to think about it, the way I think about why things unfold the way they do. And one comes from James Reason. He has talked about the holes of the Swiss cheese lineup. And in this case, they did. They lined up from the poppy fields in Tasmania all the way through to doctors' offices and every part of the supply chain. So if you think about what was going on with uh Tasmanian, the new pop, the super poppies that were created. Then we talk about the manufacturers. Manufacturers were in Purdue Pharma because they're the taproot, as Beth Macy says, they were the instigator of this, followed by other pharma companies, pharmaceutical manufacturers as well, Malincrot, Teva, and then uh Jansen, which was a subsidiary of Johnson Johnson. Then we moved to the next grouping, which are the distributors. When you think about the distributors, three of them controlled 90% of the opioid distribution in the United States. We knew that. And I do believe that if one or two of them had said, no, we're not going to do this anymore, we're not going to flood these rural communities with pills, the crisis perhaps could have been reduced. I don't know if it would have, I don't think it would have ever uh abated, but I think it would have been reduced. So we moved through from poppy fields to manufacturers to this very much of bottleneck, these three major distributors through to pharmacies, CVS, Walgreens, Walmart, grocery stores, Bright Aid, all of those. They're more fragmented industry. Um, and again, they had responsibilities. And then we have the doctors who initially we you know, I I grew up my generation, you didn't touch narcotics, and a lot of the doctors had this viewpoint. Um so we we look across this, but of course they were they were changed in their mindset by the serious marketing and sales efforts that took place by the manufacturers. Uh, and then you have the patients. And the interesting thing about the patients is many of them had, you know, many of them would never have had narcotics for toothaches and uh sprained ankle and such, but they were so ubiquitous that people have that tendency. I think that that was the final hole in the Swiss cheese. When those when those holes line up, watch out because you're gonna have some failure. It's gonna happen. But the other thing to think about is is, and I think this is the way the world works, this is the way I look at organizations today, is through a complexity lens. Look at those initial conditions, what is happening there? And I think that's where Purdue Pharma, they they lay the groundwork for the for the foundation, if you would, for the emergence of the opioid crisis. When I think about initiating conditions, you think about Purdue Pharma putting a lot of money and time and thought into how to widen the market for this product. Now, it's interesting to look at Purdue Pharma for marketing and says what they did with the OxyContin. Because if you go back in the history, and this is an empire of pain, but we have theories for this, and the theory is imprinting. When an organization is formed, the values of the CEO, early actions are imprinted on a firm. And when the imprinting takes place, it sort of gets into the corporate DNA. It's the way you act. Always tell students if you're going to go interview with a company, go read the biography or autobiography of who founded the firm, and it will tell you why the company behaves in the way in which it does, or a lot, you know, a large portion of it. But in this case, when you think about Purdue Pharma, it's like the same playbook and elements of what they were doing back with uh Arthur Sadler and the initial beginnings of this company before it was called Purdue Pharma. They were part of the creation of Thorazine to help people with psychiatric uh illnesses. But what they did is they broadened it and then they created a more mass-marketed pharmaceutical product, which was Valium, uh Mother's Little Helper. And um we know what happened with Valium, it ended up being um brought in under narcotics control in 1965. Arthur Sadler was one of the initial people who had developed a huge marketing arm. Actually, he owned two marketing companies, as her as but in either case was he very visible. He under he was one of the first to send sales representatives out to doctors' offices. That was novel back in the 50s. So he was really had this very, very entrepreneurial, hardworking, marketing-oriented, sometimes it was a little bit deceptive, um, co-opted the FDA. This is way back when. So you take that DNA, you move it forward in time to Richard Sackler. And Richard Sackler, um, they saw that MS Continent, which was a morphine pill that was a time-release morphine pill, was coming off patent. And they had bought a company uh named Purdue Frederick, but they made these very kind of unsexy products called, you know, for earwax and constipation. So um, so they ended up using the the Contin system with Oxycodone, creating OxyContin. But then they just took a they took a leaf from the playbill previously as part of their DNA. And so the FDA played a role in this. And this has been highly documented. Any everything I'm saying today, it's because I've read it and and I it's all documented. But the FDA, Curtis Wright, uh helped them to get a warning onto their black box label, um, their warning label for the drug that stated, and all the sales reps knew this, but they got this into the warning working with the FDA. And this warning was delayed absorption of oxycontin is believed to reduce the uh abuse potential. That line was known by all the sales rep. So, how do you convince doctors who are very nervous about prescribing narcotics? Um, how do you get them to change their mind? Well, you show them the FDA, you talk about there's only a 1% chance now that of becoming addicted. The 1% chance was based on a letter like in the early 90s.
SPEAKER_00Yeah, a letter to the editor to the New England Journal of Medicine. Jick and Porter.
SPEAKER_01Yeah. Yes. And again, that was a non-peer referee, which if anybody's like an academic researcher, they'll know what we mean by that was a letter to the editor.
unknownYeah.
SPEAKER_01So not a rigorous study at home. That combined with the FDA, combined with getting it in into the black box warning or the warning uh label, then using that to market, um, to market the product and convince doctors that you know it wasn't addictive. And so they saw results too. So again, that that black box warning was something I think was the initiating conditions. The third uh part of the initiating conditions was this uh focus and refocus on pain, pain as the fifth vital element.
SPEAKER_00So if for the for the average person here, I guess what you're saying is that not only were they experts in their market already, they then got the regulatory authority of that market to condone their product uh and and describe it as safe. And the third was that they knew how to expand their market in the first place into untapped areas.
SPEAKER_01Yeah, yes. And I would say the FDA, I mean, it wasn't that they were safe or unsafe, it was just the the issue of addiction. So most most people, most everyone kind of knew that narcotics were were very addictive. Right. They all read to kill a mocking bird, and we remember.
SPEAKER_00Tony Roosevelt had a heroin's ar, yeah.
SPEAKER_01So so we we yeah, we it's kind of known, but this was the issue is don't worry about addiction because this cotton system, this time release system is not going to allow people to become addicted to this. That was the that was the the the the warning. The warning said you have what reduced the abuse potential. Well, yeah, makes you feel kind of warm and fuzzy. Um so so those three conditions, the company that knows what what they were doing, this this drug, their um, and the um uh the FDA, and then finally the whole pain. The pain, the pain was reconstructed to be a fifth vital sign. And you put those three together, you've got okay, you've got the the stage is set. So once the stage is set, how do you what's what's amplifying this? And what's amplifying it is just the marketing dollars. It's other competitors moving in because you see how much money is involved in Purdue. Um certainly they they they they grew on the coattails of that. Um the distributors, the what they were really good at was lobbying. Oh my goodness. I mean, the so Purdue Pharma had the marketing, but the distributors knew how to m lobby. Uh, they created something called the Alliance, and many of the larger um pharmaceutic uh pharmacy chains joined in. But it was very similar to big tobacco. Well, let's blame the people. Um, let's change the narrative about opioids. We don't want to be seen as the bad guys. And let's try to get in some legislation and and let's not let them take this um this this, let's not take let things go to trial because the discovery will be, people will be pretty shocked what they find in discoveries. In some documents, they uh they found you know this this absolute disdain for um Appalachian um addiction. They were, you know, pill pillbillies and uh eating them like Doritos and sugar smack, just the absolute disdain for human life, in which they had a responsibility to protect American people.
SPEAKER_00So uh in the attempts to fix it, uh a lot of prescribing regulations were put into place. The CDC has released several guidelines over time, uh or two at least. Um this has led to some potentially unforeseen consequences, just rapidly filling one of the Swiss cheese holes. Maybe it didn't they didn't account for some other unintended consequences.
SPEAKER_01When I study disasters, one of the things I've learned, and it's been stated, what you don't want to do after a disaster is create more and more rules. You need to, it's it's a little bit counterintuitive. It's you need to figure out what are those simple rules and reinforce them. So an academic who used to be a colonel in the air army, Scott Snook, wrote an entire account of what happened when we shot down two of our own Black Hawk helicopters in 1996 over northern Iraq. And he talked about the issue of practical drift. And when you read that study and you read his book, it's it's it shows you that if the rules that had not, they hadn't drifted away from the rules, and the rules had worked at a time when they needed to, they wouldn't have had the disaster. And then after this, there was a big call for um you know more regulation. And and that's what we normally see as a knee-jerk reaction is well, we didn't have enough rules. Well, I think the issue is that many times you just drifted away, you allowed rules to be broken, um, you have over time um not trained on them. Um people get complacent. The the the holes of the Swiss cheese have been growing because they've been breaking rules, they have been drift. So yeah, it's it's not never, I don't think it's ever like one person's fault. I think we like to, you know, say it's Richard Sackler's fault. Certainly there's blame. Right. But but there we don't learn when we when we pin it on one person or we flood it with there weren't enough rules. We don't learn. And I'm I'm just I'm haunted. This one um quote from American Cartel very much haunts me. It's right in the middle of the book, and it's a statement by Jim Geldoff, supervisor of uh Detroit Field Office of the DEA. His son asked him what was uh the most disappointing thing that happened in your career. And he said, That's an easy one. That the American people will never know what these companies did to our country. They'll never know. So I I find that just haunting because it is a it is a business story. I mean, there's more to, but but I look at it through the business lens. There's a a story of breakdowns, um, there's a story of unethical behaviors, um, and you know, where were the board of directors? Were they asleep at the the switch? What was uh what was happening um to allow this to happen?
SPEAKER_00The pain as a fifth final sign, I I think probably played uh a really overwhelming portion of this. Why the medical community to this day largely remains uh very skeptical of that is because the other uh vital signs, blood pressure, respiratory rate, uh oxygen saturation, these are objective, measurable phenomena. Uh a pain scale is subjective. Your 10 out of 10 is not my 10 out of 10. So it it it uh you start getting more and more conditions, there's that market expansion you mentioned.
SPEAKER_01Well, they were um also uh the manufacturers, Purdue Pharma in particular, were funding a lot of these pain associations and creating some as well. So so that that's that's that's part of the issue. Um that and and also on the flip side you look at uh hospitals and doctors, many times they're rewarded on how well do they treat the pain. So you have these incentive structures. You had incentive structures for pharmacists on they got bonus of bonuses for the number of pills that they um filled.
SPEAKER_00This was right around the time that quality metrics became a measure of physician reimbursement. In the late 90s, early 2000s, they they there's all these attempts, I uh uh uh accountable care organizations, managed care organizations, they were trying to figure out how to stem ballooning hospital care costs. And so these quality metrics were an attempt that sort of, okay, well, did you check, did you uh uh talk about diet with your diabetes patient? And did you assess a blood pressure uh uh on a patient there for a toothache because he had a history of a heart, something or other? These some plenty of these quality measures are excellent, but once you have pain as a vital sign, absolutely I see how that can play a stimulative factor.
SPEAKER_01There's a very famous Harvard Business Review article call called Rewarding A while hoping for B. And it's so timely. And it we we I mean, I I read it when I was uh MBA student, and um uh we have our students read some version of this, but it's you know, we create these incentives structures hoping that our pharmacists perhaps become more efficient because we're incentivizing them for how many pills they fill, as opposed to how many times they stop and say, This looks suspicious, I'm gonna call the doctor um to make sure this is right. Instead, what they do is they fill as many as they can.
SPEAKER_00With all these incentives, with all the similarities to how tobacco handled things, do you think perhaps we should have seen this coming? Uh we we operate in a for-profit healthcare system, and now you're talking about multiple layers, not just manufacturers, but in the distributors, the pharmacies, kickbacks to physicians, quality metrics to hospitals, bonuses and the like. I mean pills are extremely cheap to produce, but if you charge a lot for them, you can make an absurd amount of return. Should we have seen this coming?
SPEAKER_01Um I think some people saw it as it was unfolding. There was a customer service rep inside one of the distributors who raised a red flag that this looks suspicious. Now, according to the 1970 Controlled Substance Act, any suspicious distribution should be flag halted until and made sense of. The DEA tried to shut down these distributors and they they did. They had uh immediate stop suspension orders for um McKisson and um night in 2005, and then the same behavior scene in 2015-17, right around there. Um and again, it it they they were getting signals. So so I've told you about the Swiss cheese, I've told you about complexity theory. The final kind of framework I use is there is always a recovery window. So even if you didn't see it at the beginning, as this thing was unfolding. There were lots of weak signals that things weren't right. People were abusing these pills. People, it was not lasting 12 hours for relief, and people were having to have higher and higher doses and were getting addicted. Not pseudo-addicted, it's a word that was created to make people feel good. But and we see that in any disaster, these words come out like in in the space shuttle. We see words like in Colombia, the foam was always shredding off Columbia, and it was called an in, they knew it was a problem. It was an exception that became accepted. And it became, it was called in family. That made you feel pretty good. But but similarly, we had this this similar pseudo-addiction take, you know, breakthrough pain.
SPEAKER_00Breakthrough.
SPEAKER_01Yeah, breakthrough pain and all of this that would kind of suppress the weak signals. But in any disaster, we don't, and we don't hear about a lot of these because um high reliability organizations seek out the weak signals. They want to know, like for instance, on a flight carrier deck, why is that screw on our landing deck? They'll stop the lowest person in the organization has the authority to stop off all flights from taking off and landing until they know why that screw is there, because it could end up leading to disasters. So there's been a lot of research done about high reliability organizations, but it's not what these companies were doing. These companies were suppressing weak signals. If you amplify the weak signals and you ask, well, how could this rattle through and cause us tremendous troubles? Those are the organizations that they weren't doing this. And that's um part part of the problem. There was a window in there from 98 to about 2002 that they could there that that if these companies had sort of um seen the weak signals and maybe played out a pre-mortem, if you will, of what's the worst thing that can happen that may have I don't I would may have curtailed the the impact that it's had on our our society today.
SPEAKER_00This reminds me also of the Kaizen uh model, which came from Japan, I think Toyota perhaps. I might be wrong. Yeah. Uh but uh the the idea that you review every process and just seek to at make at least one improvement, make it more cost-effective, in better safety, things like that. Do you think that's a type of model that might prevent further organizational disasters?
SPEAKER_01Maybe. I mean, I'm a big fan of dimming. Uh I used to work in manufacturing. Uh, and I think one of the main things is that the lowest person in the organization can stop. They have that and on core, they can stop the assembly line because something doesn't look right. I think it's giving and respecting people low in the organization that are seeing things, that have a feel about things, that are hearing complaints if you're a customer service rep, or you're it's it's it's being highly attuned to the small signals and giving those lower in the organizations the responsibility and the um discretion to act accordingly.
SPEAKER_00How might we stimulate that type of culture to be more commonplace? I mean, certainly there's an inherent market factor. If you have a uh a more robust, high reliability organization that's going to perform better in the market. Uh is there any other way we might look at stimulating that?
SPEAKER_01Yeah, well, I think there's been some good research on this out of Harvard, Amy Edmondson's work about psychological safety. If people low in the organization know what's going on, and you take that as an assumption, if they know what's going on, do they feel safe to speak up? And if you don't have what we call psychological safety in teams or in organizations, units, reporting structures, you're not going to hear what's going on until it's too late.
SPEAKER_00So fear of retaliation is what you're talking about.
SPEAKER_01Humiliation, retaliation. We see that and when we look at disasters. Uh we see this uh that, for instance, if you look at Everest and Into Thin Air, the people, the clients on the mountain would not speak up when the leaders clearly were in distress because they've been told that you're to keep your mouth shut up there. You know, I've gotten as pathetic bloats as you up the mountain, so why don't you just, you know, you just they knew their place. So I think probably one of the great theoretical contributions from um management literature has been this idea of psychological safety. We see it throughout all these disasters. People, if they don't believe they can speak up, they're not going to. It's just like um I I didn't expect to talk about this here, but I used to have my students watch this PBS documentary called The Man Who Knew. It's a very moving account of John O'Neill. And John O'Neill was in the FBI and he knew there was going to be another attack. And he he knew that that those trade centers were gonna be attacked again. He just that was and he ended up leaving the FBI, a long and sort of sorted story. Um, but he died in 9-11 because he was head of security for the uh the Trade Center. Um, but he knew, and it's very well documented. There are people that know whose voices either because they um are iconoclast or they are um don't have power, um they're not listened to. So that that that is something I think makes a big difference. So it's not just it's not just knowing, you have to know, you got to know that if you speak up, there will be uh will not be humiliation or repercussions because it could be a false alarm. And that's one of the things you worry about if you have too many, too much of this noise. But um, but again, I think that's that's something that can be incorporated in in our thinking. A lot of what we're talking about here is like management stuff. Yeah and so I mean that's what I am. I'm a management professor, so that's why I've gravitated to this, is there's so many interesting, I wouldn't say interesting, there's so many lessons that we can learn by studying what happened to be more tuned going forward. There are lessons that we can take away. Um, and I think the main thing is to get this out in front of the next generation so that they see what happened and they can perhaps have sensitivity to it, not only in the way they manage, but in the way they see unfolding of events that maybe they can do something about it.
SPEAKER_00So usually I the last question I ask my guests is what policies would you like to see put in place? And of course, obviously I know this this is this is uh probably not so public policy is not so much what you do as you as you look at the private sector, but it sounds like you kind of already answered my question, and I I would love to to hear you uh expand on it, but it sounds like uh an increased adoption of the concept of psychological safety, uh especially in business schools.
SPEAKER_01Yeah, that and um good leadership from the top, setting good more good values for the company, not um but I I think you know on a very on a practical scale um is the need for more beds for uninsured to get recovery. I'm just I just I think there are people that want recovery that aren't able to get it. If they're ready and able and wanting to get clean and move forward with their life, gosh, I mean I think that's something that that would be fantastic. The other is not to forget this. Um high reliability organizations they revisit tragedies from time to time. How do we get to where we are now? We don't want to sweep this under the rug. We don't want to we want people to learn from it so that it never happens again. That's the point. We don't want to blame one person. We we don't want to um say, oh, that was a one-off. No, it can happen again. It's the same dynamics. We see them over. This is a scale uh which I'd never seen before, but um but but but we could see it again. It won't be opioids, it'll be something different. So we all need to be aware of that. And and also I think you're right, going back inside of companies, the lowest in the organization, speaking up when something doesn't feel right in terms that could cause a loss of life, um, or you know, the company going bankrupt, that is critical. But it comes from the top. It's the leadership, it's it's understanding that this is important. So, yeah, I'll leave it at that. It's been a lot of fun talking to you. Thanks so much, Jeremy.
SPEAKER_00Thank you so very much for joining me. It was a pleasure.
SPEAKER_01Yeah, this is great.
SPEAKER_00For more episodes on in-depth discussions on Tennessee policies related to substance use disorder by a range of local experts. Please subscribe to us wherever you get podcasts and visit our website at smart.tennessee.edu. I'm Jeremy Corvellis. Thank you for listening and see you next month.