The Los Angeles Times from Los Angeles, California • Page 146

1 0 TUESDAY. JULY 12. 1994 LOS ANGELES TIMES HEALTH CARE INDUSTRY MARKETING: All-Star Game slJnderaCloud NME to Slash Employment in Santa Monica primarily involving activities at its psychiatric hospitals, said it expects to save $32 million a year after making the cuts. The company has already paid more than $200 million to settle lawsuits brought by insurers and patients. The suits allege misdeeds such as false imprisonment, billing fraud and conspiracy.

The government charged that NME paid kickbacks and bribes to doctors, referral services and others so patients would be referred to NME's psychiatric and substance-abuse hospitals in 30 states, then fraudulently billed Medicare and other federal "a more nimble, cost effective corporate structure with which to compete in today's extremely competitive health care indus-. try," said Jeffrey C. Barbakow, the chairman and chief executive who was hired last year to clean up the company. NME is still studying the ques-; tion of whether it will move to a new headquarters. It expects to have an answer by August, a company spokeswoman said.

NME's current home base has. 300,000 square feet of space, arid; the company no longer needs such a large headquarters, said. The restructuring announced Monday comes after a three-month study by the McKinsey Co. consulting firm. It is part of a corporate plan to focus on its 35 general acute-care hospitals, which are the source of most of NME's profits.

In addition, the government settlement requires NME to sell its psychiatric and substance-abuse hospitals; the company recently agreed to sell 47 psychiatric hospitals to Charter Medical Corp. for $200 million. So far, NME has agreed to sell 85 of the 135 hospitals and clinics it once owned. NME's overhaul gives the firm By NANCY RIVERA BROOKS TIMES STAFF WRITER National Medical Enterprises said Monday that it will eliminate a quarter of the jobs at its Santa Monica headquarters to simplify operations and reduce costs. NME, which employs 900 people, said it will lay off 200 of them and eliminate 40 jobs that currently are unfilled.

Most of those laid off will be corporate personnel in Santa Monica. The hospital operator, which last month pleaded guilty to eight criminal counts and agreed to pay a record $379 million to settle a government fraud investigation pair of shoes from Reebok's upcoming shoe line, dubbed in honor of Thomas' many nicknames: "The Big Hurt" Although the shoe line won't be available until next spring, Reebok hopes this can help it build early interest in the line. "Maybe he'll foul a ball off his foot and the camera will show a close-up," joked Reebok spokesman Dave Fogelsoa But above all, it is Griffey who may seem as visible off the field as on during tonight's game. The Seattle Mariner outfielder will appear in new ads for Nike, Nintendo and a tear-jerker ad for Major League Baseball. The baseball spot features the superstar spending a day at Seattle's Kingdome with a 12-year-old cancer patient whose longtime wish to meet Griffey was granted through the Make-A-Wish Foundation.

"It's an attempt to make people realize that some of these guys-even though they're making tons of money are real people," said Jeff Goodby, chairman of Goodby, Silverstein Partners. The agency also created a spot airing tonight that features Dodger star Mike Piazza visiting a cancer ward at Childrens Hospital Los Angeles. The slogan of the ads attempts to make ballplayers seem more accessible: "Real-life heroes." During the game, Nintendo will twice air an ad featuring Griffey and his father, Ken Griffey who was a star with the Cincinnati Reds in the mid-1970s. Since April, Nintendo has sold nearly 750,000 "Ken Griffey Jr. Presents Major League Baseball" computer software games, said George Harrison, director of marketing.

"We see a bump in sales every time he hits a home run," Harrison said. i Continued from Dl cut costs next season by enforc-ing a salary cap. Other fans are turned off by visions of another American League blowout (The ''-American League has won the past six contests.) And baseball's mid-season classic as American as Dodger Dogs finds itself compet- "fog for media coverage against "soccer's World Cup. "There's a real cloud hanging over this year's All-Star Game," said Brandon Steiner, president of New York-based Steiner Sports Marketing. "The karma is pretty 1 Jad." i Still, officials at NBC say all 60 of the 30-second commercial units have been sold, for up to $300,000 each.

Sponsors, who are generally to put the best possible face on the event, point out that many fans are especially eager to see several sluggers who are making serious bids at baseball's single -season Rome run record of 61, set by i Roger Maris in 1961. Going into the I All-Star break, Seattle's Ken Grif-l fey Jr. and San Francisco's Matt Williams each has 33 home runs, and Chicago's Frank Thomas has No matter what happens, execu-plJves at Texaco figure they've cov- wed their bases. Almost all of our participation leading up to the All-Star Game," said Tom Matthews, presi-i dent of Texaco Refinine Market LILLY: Drug Giant WU1 Acquire PCS in a $4-Billion Deal proached by other drug makers interested in buying PCS, including British-based Glaxo Holdings. "There's a real sense of concern among the drug companies of missing the boat, and McKesson was willing to use its position as the last unaffiliated drug benefit firm to strike an impressive deal for shareholders," Marsh said.

Alan Seelenfreund, McKes-son's chairman and chief executive, suggested that recent moves by "companies with substantially greater" clinical resources, physician relationships and research and development budgets were making it tougher for PCS to compete. "In light of this changed environment and the offer from Lilly this transaction represents the best opportunity to maximize shareholder value," he said. Under terms of the deal, Lilly would pay McKesson stockholders $76 in cash for each outstanding share. a prescription benefits manager and mail-order drug firm. And British-owned drug maker SmithKline Beecham in May said it would pay $2.3 billion for Diversified Pharmaceutical Services of Bloomington, Minn.

Both those deals would have inhibited Lilly's access to patients in the Medco and Diversified Pharmaceutical benefits programs, analysts said. For its $4 billion, Lilly would gain access to PCS' 50 million members and more control over ensuring that PCS members use Lilly drugs whenever possible. Analysts noted that Lilly is paying a far heftier price some 75 times operating earnings than Merck or SmithKline paid to gain entry into the managed-care field. Merck paid roughly 30 times earnings for Medco, while SmithKline paid 55 times earnings for Diversified Pharmaceuticals, according to Lawrence Marsh, analyst at Wheat First Butcher Singer in Richmond, Va. But analysts also said Lilly's Continued from Dl major customers include the three big U.S.

auto makers and some federal agencies. Employers contract with companies such as PCS to process prescription claims, negotiate discounts with drug makers and monitor doctors' drug-prescribing activities. Such companies, for example, will encourage doctors to prescribe less costly generic versions of brand-name drugs when they are available. Lilly's acquisition price about 23 times PCS' annual sales of $180 million, as estimated by analysts reflects the critical importance the drug maker places on gaining a foothold in the drug benefit management field. Lilly was one of several big drug makers scrambling to respond to earlier moves by rival firms and PCS was the last of the big drug benefits firms available.

Merck the world's largest drug maker, in November signaled the changes to come when it paid more than $6 billion for Medco Containment Services, higher price is justified, in part because PCS has more members than either Medco or Diversified and is considered by analysts to be the most profitable and fastest-growing of the firms. "I think Lilly is paying what they need to pay to get the business," said Jack Lamberton, an analyst with County Nat West USA in New York. However, many Lilly investors apparently weren't happy with the $4-billion price tag, which the drug maker plans to finance mostly through borrowing. Lilly shares dropped $7,375 to $50 on the New York Stock Exchange, as the company lost about $2 billion in market value. But McKesson shares soared on the news, gaining $24.75 to close at $98 on the Big Board.

For McKesson, a giant drug wholesaler whose relatively tiny PCS unit was considered the company's crown jewel, the Lilly deal reflects an offer that was evidently too good to refuse. McKesson was reportedly ap ing. "So if a strike does occur, it has a very minimal effect on us." More than 6 million of the record million Ail-star Daiiots com-j pleted this year were picked up at Texaco service stations. Matthews said. The rest were obtained at the ballparks.

And Texaco's name ap- i pearea on every one of the ballots. The Los Angeles agency Men-delsohnZien Advertising has picked up two new clients: the $5-million Clothestime of Anaheim account, formerly handled by KresserCraig, and the $2-million account for Garden Fresh Restaurant Corp. of San Diego. Two Southern California ad legends have left the ad business to pursue favorite hobbies: Phillip Joanou has stepped down as chairman of Dailey Associates to study painting at the graduate school of the New York Academy of Art, and Jean Craig has retired as president of KresserCraig Advertising to work on several books, including one about the 1993 Malibu fire that destroyed her home. Ad whiz Sakol Mongkolkasetarin, the 27-year-old who won a handful of prestigious Belding Awards earlier this year, has left the agency dGWB Advertising with two partners to form Newport Beach-based Acme Advertising.

Most other sponsors, however, are in it for the long haul. Ji Gatorade has its name and logo etched into the on-deck circles, j-where players stand before they jlbat. Each time the camera shows batter waiting on deck, the Gatorade logo will be seen in up to 1 40 million American households. I reminds the public that we're U))e sports beverage used by the jbest athletes in the world," said jll Daily, director of sports mar-t 1 keting for Gatorade. i Reebok hopes TV camera operators will find reason to show a lrtao-iin nf tha eVirvoc nf to Inner- Tball-hitting spokesman, Frank Thomas.

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