The 10 Dumbest Things in Health Care This Year

Editor's Note: This year was a particularly absurd one for the health care industry. In light of that, we've expanded on our popular "Five Dumbest Things on Wall Street" to offer our "10 Dumbest Things in Health Care This Year." Part one examines the blunders of five big-cap names. Stay tuned for part two, which looks at the missteps of smaller companies.

1. Caremark's Comedy of Errors

Caremark (CVS) spent the first half of the year with egg on its face.

This February, in fact, Delaware Chancellor William Chandler -- charged with overseeing the controversial CVS-Caremark merger -- actually compared Caremark's board to Humpty Dumpty. Curiously, Chandler noted, the board had fashioned the deal as a merger of equals while including the lucrative change-of-control payments that are normally triggered by an actual buyout.

Stated Chandler: "As Alice's cantankerous egg puts it, 'When I make a word do a lot of work like that ... I always pay it extra.'"

Too bad Caremark's board wasn't working overtime, too. Instead, Chandler observed, lead director Roger Headrick dashed off to New Zealand "during an especially critical period" in Caremark's history.

"That does not suffice as a reason to require a flock of lawyers to travel to a location convenient to a single director of a public company," Chandler decided, "especially when the inconveniences of a directorship are part of the job."

Headrick probably could have blamed Caremark for his hectic schedule. From the start, the company seemed bent on completing its unpopular merger in record time.

For starters, Caremark chose the Martin Luther King Jr. holiday -- when the markets are closed -- as the official "record date" for the deal. It then relied on the New York Stock Exchange to announce the record date through its password-protected Web site. As a result, investors had just one day after the record date to buy Caremark's stock if they wished to provide any input on the deal.

Still, thanks to a rival buyout offer from Express Scripts (ESRX) -- which forced CVS to keep sweetening its bid -- Caremark won approval of the deal and managed to write a happy ending to the tale.

Dumb-O-Meter Score: 95. "The CVS-Caremark deal contained a 'full complement' of deal-protection devices," The National Law Journal noted when reviewing the landmark case. But "having roundly rebuked the Caremark and CVS boards, in the end, the chancellor left the fate of Caremark not to its interested directors but to those the directors are obligated to serve: the shareholders."