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The Week That Was: Crises in Communications

The Week That Was: Crises in Communications

September 23, 2016 0 Comments

Last week, we reported Wells Fargo faced fines for record-breaking, illegal consumer banking practices. Now we ask whether Wells’ CEO John Stumpf’s efforts to renounce certain selling targets will be enough to keep his job as he gears up to testify at a Senate Banking Committee hearing on Tuesday, and more revelations unfold about the bank’s multi-year, cross-selling practices.

We’ll take a closer look at employer health coverage that is shifting increasingly to high-deductible plans and what it means for medicine makers. And, in news that may be too hot to handle, Samsung is having problems recalling its new Galaxy Note 7 smartphones, which have been spontaneously combusting.

Buckle up for The Week That Was.


The Kaiser Family Foundation along with the Health Research & Educational Trust released a report on Wednesday showing that insurance premiums rose a very slight 3.4% this year for employer-based health coverage. In real numbers, that means that employers paid, on average, $18,142 (up from $17,545 last year) for a family and $6,435 for individuals covered on a health plan. Of that, employees covered 30% for the family and individuals were responsible for 18%. The real news, though, is that Kaiser identified the move to high deductible plans as the reason for that slow growth in premiums.


Of course employers and insurers want to maintain lower monthly health insurance premiums to offer attractive benefits. And certainly, stable premiums are preferred over escalating monthly costs. BUT, Kaiser’s report signals a continued trend of increased patient cost sharing. This weekend, Kaiser’s President Drew Altman cautioned that deductibles rose 12% in 2016, while for the same time period, Americans’ wages grew around 2%. What does this mean for biopharmaceuticals? It means that in the current environment when the cost of drugs is already a politicized issue, 150 million American consumers with employee-based plans will be feeling the cost of drugs. In essence, they are paying multiple times: in their premiums, drug copayments, and increasing rates of co-insurance. Yowsers!


No readers, we’re not obsessed with the banking industry, but we are speculating on whether Wells Fargo’s CEO John Stumpf will keep his job steering the ship of the San Francisco-based bank. This week, Stumpf will testify before the Senate Banking Committee about how 2 million accounts were opened without consumers’ knowledge or consent. While we previously reported that the bank was fined $185 million, Stumpf’s woes have worsened over the weekend with a series of investigative and whistle blower articles. Reports revealed Wells was struggling with employees committing fraudulent practices as early as 2012, as a result of the company’s aggressive “cross-selling” sales targets. While Wells seemingly took action to investigate and fire overtly guilty employees, there were years of “unofficial” communications by mid-level managers at the bank encouraging poor practices. Now, there is discussion some of the company’s senior-most executives will have their salaries clawed back.


Stumpf said he feels accountable for the situation, but blames employees for “misinterpreting” sales goals. But the phrase, “too little, too late” exists for a reason. Warning signs have been flashing for years that the bank’s sales incentives were encouraging bad behavior. While business was good, Wells’ leadership seemingly issued admonishments, yet failed to correct the problematic underlying policies. Time will tell, but once hearings and national scrutiny commence, there usually follows a cascade of additional investigations, lawsuits, fines, and downward stock pressure which almost always forces the removal of top brass.


No, that’s not the name of the latest in The Hunger Games series – it’s what’s happening to the newest Samsung smartphone, literally. Days after customers reported their new Galaxy Note 7 phones had caught fire, the company recalled 2.5 million – making this the largest recall in smartphone history. Although Samsung was initially praised for their speed in deciding to issue the recall, nothing has been smooth about the way the recall has played out according to The New York Times. The company decided to issue the recall without government regulatory involvement, and importantly without a clear message. Some customers continued to use their phones after the recall, and many stores still sold them. Now safety regulators in the US and abroad have stepped in to issue warnings cautioning consumers not to turn on their Note 7 on airplanes – or at all.


While Samsung didn’t waste any time dealing with the issue, their haste is now costing them. The constant reminders of potential combustibility are destroying their reputation and their market value, just as they were gaining ground on Apple. In an initial statement that had unclear and inconsistent messaging, Samsung said they would “replace” the phones, rather than use the word “recall,” which they thought had too much of a negative bent… leading to widespread confusion. But their speed did not equal success. As an official with the US Consumer Product Safety Commission (which requires notification of recalls in this country) noted, companies that think they can successfully carry out a recall without coordinating with the government “need to have more than their phone checked.”

Until next week,

 The Issues Management Practice @inVentiv Health PR

If you missed us last week, find The Week That Was by clicking here.

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