Bartley J. Madden
bartmadden@yahoo.com

My current research focuses on FDA reform, the interdependence between knowledge building and wealth creation, and corporate governance.

Since retiring as a Managing Director at Credit Suisse in 2003, I have written a dozen articles about a Dual Track system to achieve freedom of choice for late stage, not-yet-FDA-approved drugs. In 2007, the Heartland Institute published More Choices, Better Health: Free to Choose Experimental Drugs, a booklet that summarized my work and was distributed with foreign translations. Subsequent and more comprehensive work on this topic is presented in my latest book, Free To Choose Medicine: How Faster Access to New Drugs Would Save Countless Lives and End Needless Suffering, to be published in June 2010.

Of course, there are formidable political obstacles to passing a Free To Choose Medicine Act that would fundamentally break the FDA's monopoly on access to drugs. Yet, voters may become energized to support politicians who believe that control of medical decisions belongs, first and foremost, with patients and doctors and not the government. Key points are as follows:

• The primary purpose of the FDA's regulatory process should be to deliver better drugs, sooner, at lower cost.

• Under the current FDA monopolistic regime, the FDA demands more and more extensive and ever more expensive clinical testing. This is accompanied by an out-of-balance, too extreme focus on safety in order to minimize any negative publicity from occurrences of adverse side effects after drugs have been approved. The goals of “sooner, at lower cost” have been pushed aside.

• As it presently functions, the FDA is a bottleneck in the drugs-to-patients system—unnecessarily delaying the approval of new drugs by many years as well as stunting innovation. People are suffering and dying because they are denied timely access to new drugs stuck in the FDA pipeline and because excessively expensive testing requirements reduce drug development firms' research budgets. Although not reported on the nightly news, the result is an enormous invisible graveyard of those who were, and are, and will be, denied access.

• Instead of the current one-size-fits-all regulatory straightjacket that assumes everyone is equally risk-adverse, people should be able to express their own unique preferences for risk, guided by their doctors' and their own judgments about pain, the limited ability to work or perform daily chores, and the opportunity for health improvement decisions that only they can make.

• With the proposed Dual Track system, on one track drug developers proceed with the conventional FDA clinical trials and approval process. On a separate, free to choose track, drug developers whose drugs have successfully passed their safety trials and generated preliminary efficacy data can elect to sell their drugs to patients and their doctors who would be equipped to make informed decisions.

After receiving a mechanical engineering degree, working as an engineer, and being in the Army during the Vietnam War, I shifted gears and earned an MBA at the University of California at Berkeley . After graduation, my first job was with a Chicago bank.

In 1969 I co-founded Callard, Madden & Associates, and spent the next 14 years doing consulting work and developing the CFROI (cash-flow-return-on-investment) valuation model which is widely used by large money management firms today. Our firm consulted with portfolio managers and corporate managers so they could better understand how firms' financial performance connects to levels and changes in stock prices over time, thereby improving their decision making process. I then spent the next eight years managing portfolios for Harbor Capital Advisors and continued my empirical research on the CFROI life cycle framework.

I joined HOLT Value Associates in the early 1990s. HOLT commercialized the CFROI framework worldwide and was acquired by Credit Suisse in 2002. I began writing corporate finance articles which were published in the Journal of Applied Corporate Finance, Journal of Portfolio Management, Journal of Applied Finance, Wall Street Journal, Journal of Investing, and other business publications. In 1999, my book CFROI Valuation: A Total System Approach to Valuing the Firm was published by Butterworth-Heinemann.

In 2010, Wiley published my book Wealth Creation: A Systems Mindset for Building and Investing in Businesses for the Long Term. In this book, I describe three central ideas about a comprehensive wealth creation framework and primarily focus on the first idea—the interplay between competition and managerial skill that drives business firms' stock prices over the long term within the context of a free market system that works to the benefit of consumers.

The second big idea is the application of systems thinking so that wealth can be created at a more rapid pace in any society. To apply systems thinking, we need to be conscious of how we go about perceiving what we think to be reality, acting to achieve the purpose we chose, and knowing what the consequences of our actions are most likely to be. This knowing process is illustrated in the loop diagram at the bottom of the home page on this website.

The third big idea can be summarized as knowledge building and wealth creation are opposite sides of the same coin, which is the subject of a multi-year book project currently occupying a lot of my time.

In Chapter 7 of my Wealth Creation book I discuss a new proposal—grounded in sound, long-term wealth creation practices—to improve corporate governance, while requiring no new legislation. The proposed Shareholder Value Review (SVR) would compel boards of directors to better meet their responsibilities to shareholders.

Briefly, an SVR, voluntarily included in a firm's annual report, would have three major components:

• a description of the valuation framework used for corporate decision making

• consistent with such a framework, the display of value-relevant track records for each of the firm's major business units

• consistent with such track records, board discussion about management's strategy and reinvestment plans

Over time, the board's knowledge about wealth creation/dissipation would improve, leading to better decisions about executive compensation and about acquisitions and divestitures. Resource allocation decisions involving intangible assets would improve as managements and boards necessarily deal with producing more informative track record displays for the firm's business units. Finally, the SVR process would expedite needed change for businesses that have steadfastly been dissipating wealth due to generating below-cost-of-capital returns.

In summary, SVRs represent an evolutionary approach to improve both corporate decision making and corporate governance. Their implementation would result in a common language for investors, managements, and boards that would bring a much needed transparency to the corporate sector. In turn, this would go a long way towards restoring the public's trust in free-market capitalism.