More Impertinent Questions on Hearst shenanigans on the drug pricing scandal (part 5) Why did Hearst censor an AP story on McKesson profits?

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By Bruce B. Brugmann

Let me cite yet another example of the dangers of the Hearst/Singleton move to destroy daily competition and impose regional monopoly in the Bay Area.

As attentive Bruce blog readers know, I always turn to the second page of the Chroncie/Hearst business section called "Daily Digest" to pick up the news that Hearst is censoring. Yesterday, I spotted yet another nugget
that demonstrated how Hearst was censoring a major scandal story involving its own subsidiary in San Bruno and McKesson Corp., one of the nation's largest drug wholesalers.

The story looked harmless enough, a six paragraph Associated Press story headlined "McKesson soars above expectations," with a lead that said that the company's "quarterly profit climbed 37 per cent to soar past analyst expectations, prompting the nation's largest prescription-drug distributor to brighten its financial outlook." Another five paragraphs provided the details of this seemingly rosy McKesson story.

So, knowing there was much more to this story and getting my blogging genes at the ready, I checked the online version of the story. Imagine my surprise when I found that the guts of the Chronicle story had been cut out of the paper and the juicy stuff was tucked away in the online version. A full seven paragraphs had been chopped from the print version of a l6 paragraph story by Michael Liedtke from the San Francisco AP bureau.

Let me quote the key chopped out paragraphs to make my point: "McKesson released its results and bullish outlook after the stock market closed Tuesday. The company's shares fell 60 cents to finish at $50.09 on the New York Stock Exchange. After an early rebound in after-hours trading, the shares shed 5 cents.

"The downturn extended a recent slump triggered nearly four weeks ago by news of a tentative legal settlement that could depress prescription drug prices. (b3: a dreadful thing.)

"The settlement covers a class-action complaint alleging that drug price publisher First DataBank Inc. (B3: a Hearst subsidiary in San Bruno) had conspired with McKesson between 2002 and 2005 to boost the wholesale cost of most prescription medicines by 5 per cent. (B3: a tidy newsworthy sum).

"Although McKesson has denied any wrongdoing and isn't joining the settlement, investors are worried the agreement will force the company to lower its prices (b3: another dreadful thing). Consumer advocates have estimated the settlement will save health insurance plans about $4 billion (b3: a nice newsworthy figure). The settlement still needs approval by a Massachusets federal court, something unlikely to happen before April..."

Note my previous blogs to get the scope of the Hearst shenanigans at work here. AP doesn't put Hearst into the story where it belongs and doesn't even identify FirstDateBank as a local subsidiary owned by Hearst, the biggest daily in Northern California and a big bankroller and participant in the Singleton move to monopolize the Bay Area. Hearst doesn't properly edit the AP story and put Hearst high up where it belongs. And Hearst actually cut the print version of the story and put the guts of it up online at SF Gate so it will be hard to spot. And of course Hearst never ran the original story of the scandal (reported first in a lead story in the Oct. 6 Wall Street Journal, with versions by the AP, the Guardian, and even the Hearst-owned Houston Chronicle, see my previous blogs.)

The hinge point: Hearst went to these embarrassing lengths to censor a major scandal story involving Hearst, and three local companies, to protect its corporate interests and refuses to explain this professionally glaring omission in the stories, or to its readers. It also refuses to answer my questions directed to Hearst corporate in New York City via Hearst San Francisco and publisher Frank Vega, Executive Editor Phil Bronstein, Managing Editor Robert Rosenthal, and Business Editor Ken Howe. And the "competitive" Singleton papers haven't done the story either to my knowledge and won't explain why.

Impertinent Questions: If Hearst and Singleton won't compete on a major scandal story like this, where will they compete and when do they start? How can they censor and cover up a major story like this in the midst of investigations by Justice and the AG?

This sorry episode illustrates a key issue for the current Justice and AG investigations into whether the Hearst/Singleton deal violates U.S.and state antitrust laws. It also illustrates a key issue for the highly important Clint Reilly/Joe Alioto antitrust suit seeking to blast apart the Hearst/Singleton financial relationship. I refer again to Brugmann's Law: Where there is no economic competition, there is no news and editorial competition. So the thrust of any real antitrust investigation ought to be to stop monopoly moves like this and insure real newspaper and media competition.

We hear that Justice is at least doing lots of interviewing. God knows what Lockyer and his antitrust crew are doing as he heads into the sunset to be state treasurer. His probable successor, Oakland Mayor Jerry Brown, operating under the thumb of the Oakland Tribune/Singleton, has refused to comment or answer questions as to whether he will continue Lockyer's purported investigation. Reilly and Alioto are hard into discovery, working with the media documents they obtained from Justice and the AG as a result of their suit. The documents were filed by the principals in the original merger (McClatchy, Hearst, Singleton, Gannett, Stephens) to get preliminary Justice and AG approval. They are certain to be illuminating. Impertinent Question: Why is it that, once again, Relly and Alioto must do the heavy lifting in a private suit because Justice and the AG have so far knuckled under to the chains and refused to do their job.

Repeating the Impertinent Questions to Hearst and Singleton editors and publishers: Why haven't you done this major scandal story? When will you do it? If you won't do the stories, please explain. Until then, let's have no more macho talk about competition between Hearst and Singleton papers. B3

P.S. Let me quote the third paragraph from the WSJ to dramatize the heft of this story: "A 2002 email by a manager of (McKesson) describes how pharmacies would be able to more than doiuble their profit for dispensing the cholestrol drug Lipitor and adds, 'that is awesome.'" The article quoted an economist hired by the plaintiffs who estimated that savings in 2007 alone at $4 billion. There is much, much more. The Hearst and Singleton papers would cover this national scandal in a flash if it involved any other big company in their territory. Hopefully.

A tough pill to swallow by G.W. Schulz

McKesson's fiscal 2Q profit rises 37 percent to top analyst views by MICHAEL LIEDTKE, AP Business Writer