FOUNDATION HEALTH: Calls Off Drug Deal With Bristol-Myers

      Foundation Health Systems Inc. and Bristol-Myers Squibb have "scrapped a controversial plan" that would have paid Foundation's Health Net HMO $1 million per month in return for giving preference to Bristol-Myers drugs on the HMO's formulary. Bristol-Myers spokesperson Robert Laverty said yesterday that negotiations are no longer underway, "nor are any planned between (the drugmaker) and Foundation Health." Health Net spokesperson Ron Yukelson concurred, saying, "There is no longer anything to discuss." While the proposed arrangement generated widespread criticism from lawmakers and HMO watchdog groups, Yukelson said the deal was scuttled for business reasons, not public scrutiny. "The two companies just couldn't reach an agreement," he said, adding that company executives still thought the proposed deal would have benefited Health Net members. Consumer advocates were pleased by the news. Jamie Court of Consumers for Quality Care said, "There was nothing to justify this deal. I think this will spark legislation to prohibit this type of unseemly kickback that benefits neither the patient, the doctor or the health care system." Dr. Stephen Mitnick of the Modesto-based Gould Medical Group "said he was pleased to hear the deal was off," and called for increased scrutiny of the "whole issue of rebates."

Heading To Red
      In related news, the San Francisco Chronicle reports that Foundation's shares lost 21% of their value last Thursday "after company executives announced that earnings will fall below analysts' expectations." Overall, the stock has fallen 78% since May (Russell, 10/13).