Part IThe Story
Sixty Percent of a Nation's Veins
In September 2024, the floodwater that Hurricane Helene drove across western North Carolina got inside a building in the town of Marion. Few Americans had heard of it. Within weeks, hospitals across the country were rationing salt water.
The facility belonged to Baxter International, and it produced roughly 60 percent of the intravenous fluids used in the United States. That figure deserves a second reading: sixty percent, one building, one river's worth of bad luck. When the plant stopped, the supply stopped. Hospitals rationed bags. Clinicians started asking, in public and with real irritation, why so much of the country's IV capacity had been allowed to pool in a single place. Some drugs that used to drip were pushed by syringe, and patients who could drink were handed cups of water. On November 7 the plant resumed producing some of its fluids. Flu season was arriving, and hospitals kept conserving anyway. On November 19, NPR ran a story with the flat title "Nationwide IV fluid shortage changing how hospitals manage patient hydration", which is the kind of headline that means people have been suffering for a while.
What went missing that autumn was mostly an object: the clear, soft bag that hangs from a hook beside nearly every hospital bed in the developed world. It is so ordinary that it has stopped looking like an invention. It was one, though. The flexible intravenous container became, in the words of the Chicago Tribune, "the world standard for IVs." It was developed and brought to market at Baxter during the long tenure of a chief executive who had trained as a chemist, practiced as a patent lawyer, and ran the company for twenty-seven years.
His name is not on the bag. It is not on the building in Marion, and it is not on the company.
Search Wikipedia for "William Graham" and you get a disambiguation page that runs through Scottish earls of Montrose and Menteith, a North Carolina governor who became Secretary of the Navy, a NASA administrator, a California oil king, a jazz saxophonist, a 1959 New Zealand football player, an evangelist's son and grandson, and a fictional FBI profiler from Thomas Harris's Red Dragon. William B. Graham of Baxter, who died in his home in Kenilworth, Illinois, on January 24, 2006, at the age of ninety-four, is not on the list. His name survives on a prize for health services researchers and on an adult-education school at the University of Chicago, and on very little else that a stranger would come across.
The record wobbles even on basic facts. The University of Chicago's photographic archive gives his dates as 1911–2006. One online compendium says he was born in 1912 and handed off the chief executive's title in 1977, not 1980. A man who spent his life making containers turns out to be hard to contain in the record.
By the Numbers
The Graham Years at Baxter
$1.5MBaxter's annual sales in 1945, the year Graham joined as vice president
27Years as chief executive officer, 1953–1980
25Consecutive years of 20%+ annual earnings growth, beginning in 1953
30,000Employees at Baxter when Graham handed the CEO role to Vernon Loucks in 1980
51Years in Baxter's formal leadership, from vice president (1945) to senior chairman (1996)
40+Years on the board of the Lyric Opera of Chicago
$10MGift to the University of Chicago in 1997, then the 10th largest in its history
A Chemist Who Learned to Read Claims
He was an only child, born in Chicago. Nearly everything that followed happened within a few miles of that fact.
He went to the University of Chicago and finished first in his class in chemistry in 1932, which was not a promising year to be finishing anything. He was elected to Phi Beta Kappa and to Sigma Xi, the scientific research society. He was also, improbably, an athlete of a specific and solitary kind. In 1931 he won the university's handball championship in doubles and in singles, and in 1932 he won the singles title again. Handball is a game of walls and angles, played with the bare hand against whatever the hard surface sends back. Those who knew him later as a man of boardrooms and opera boxes may not have pictured him slapping a rubber ball in a Hyde Park court, but the newspapers did record it.
He stayed at the university after graduating. For two years he did what Baxter's obituary called "honor fellowship work" in chemistry under Harold Urey, the Nobel laureate. Then he made a turn that looks, from a distance, like a defection: he entered the University of Chicago Law School. There he studied with Edward Levi, who would later serve as Attorney General of the United States and as president of the university. Graham received his J.D. cum laude in 1936. Counting it up, he had spent nine years at the university. Hugo Sonnenschein, its president, said so in 1997, half fondly: "We were fortunate to have William Graham as a student at the University for nine years."
At some point in those years he went to a party and met Margaret Edna Kanaley. He took her to the Drake Hotel for their first date. They married in 1940, and she was known as Edna for the rest of her life, which ended in 1981.
Then came patent law. He practiced it for nine more years, from his graduation in 1936 until 1945. That nine-year symmetry is accidental and still worth noticing. A patent lawyer's job is to read and write claims: the precise sentences that mark where an invention ends and the rest of the world begins. It is a discipline of boundaries. The practitioner has to understand the chemistry well enough to see what is new, and understand the law well enough to fence the new thing in. Graham's two degrees were not a contradiction. Together they made an instrument suited to a particular kind of company: one that turned laboratory chemistry into products that could be owned, standardized, and sold to every hospital in the country.
Late in life he more or less said this himself, in the formal, modest way of men of his generation and class:
— William B. Graham, to the Chicago Tribune, March 1997At Baxter, I am able to work in a field where I have made a contribution not only to Baxter but also to the health care of the country. I owe this partly to the training I received at the university.
The key word is partly. It is the only qualifier in a sentence otherwise built entirely of credit, and it is the most revealing thing in it.
The Company Named for Someone Else
Graham did not found Baxter, and the man whose name it carries barely ran it.
The business started in 1931 as the Don Baxter Intravenous Products Company. Its purpose was narrow and, for the time, slightly radical: to manufacture intravenous solutions commercially and ship them to hospitals. Before then, only large research and teaching hospitals could make IV solutions, and the quality varied from batch to batch. Donald Baxter, a doctor, had been a medical missionary in China and was based in Los Angeles, where another company he owned manufactured the solutions that the new enterprise distributed during its first two years. Ralph Falk was an Iowa doctor. (Accounts differ on whether both founders were Iowans. The Gale history says two Iowa doctors launched the company, and other accounts place Baxter in Los Angeles. The disagreement is small and also typical of the record around this company.) The two physicians bet that hospitals would buy controlled, uniform solutions packed in evacuated containers if someone would make them reliably at scale.
In 1933 the company opened its first plant in Glenview, Illinois, a Chicago suburb, in a renovated automobile showroom. Six employees made the entire product line, which consisted of five solutions, all in glass bottles. Distribution went through another Chicago company, the American Hospital Supply Corporation. That detail returns fifty-two years later, when the distributor and the manufacturer merged in one of the largest health-care deals of its era.
In 1935 Falk bought out Baxter's interest. Donald Baxter left after four years, and his name stayed on the company for the next ninety. Falk built a research and development function, opened a second plant in Canada two years later, and renamed the company Baxter Laboratories. In 1939 it introduced the Transfuso-Vac, a sterile, vacuum-type container for collecting and storing blood. Before it, donated blood lasted a few hours. With it, blood could be kept for twenty-one days, and blood banking became practical. In 1941 the Plasma-Vac container allowed plasma to be separated from whole blood and stored for later use.
Then came the war. According to the company's own history, many of Baxter's blood-collection devices and twenty-five of its solutions were the only ones meeting the specifications of the U.S. Armed Forces. The company opened temporary plants to meet military demand and consolidated them back into Glenview when the fighting ended.
This was the company Graham walked into in 1945. It had just come through a war that had made its products essential. Its sales that year exceeded $1.5 million, a modest figure and a respectable one. He came in as vice president and manager. He was thirty-three or thirty-four, depending on which birth year you accept. He was a patent lawyer who had once been the best chemistry student in his class. He was not a doctor, and he was not a founder.
Eight years later, in 1953, he succeeded Falk as chief executive.
What happened in those eight years is the hardest part of the story to see. The record gives titles and dates and almost nothing about the texture of the work. Some of the company's outward history can be read as his doing, or at least as having happened while he was second in command. In 1947 Baxter moved from the Glenview showroom to a larger base in Morton Grove. In 1949 it formed a pharmaceutical specialties division, Travenol Laboratories, whose name would eventually join the corporate one. In 1950 it opened a second American plant in Cleveland, Mississippi, which grew into a large producer of intravenous and irrigating solutions, needles, dialysis solutions, and disposable devices. In 1952 it acquired Hyland Laboratories, the first American company to make human plasma commercially available.
Whose idea was each of these? Nobody wrote it down in a form that survived. What survives is the pattern: a man arrives in a company named after someone who has already left, works under the man who bought the founder out, and inherits the top job without any change to the name on the door. Graham's name was never on that door.
Glass, Then Plastic
The bottles in the Glenview showroom were glass, and that detail runs through the whole story.
Glass is clear, inert, and easy to sterilize. It is also heavy, and it breaks. In 1948 Carl Walter, a Boston surgeon who had co-founded a company called Fenwal Laboratories, invented the Blood-Pack: a plastic container for storing blood that would not shatter. That word, non-breakable, appears in the company's own chronologies like a small boast. Walter belonged to a familiar type in American medicine, the clinician frustrated enough with his tools to redesign them himself. The Blood-Pack became part of Baxter's product line.
From it came the plastic blood-collection system that Baxter's materials list among the Graham-era firsts, which made it possible to separate blood into its components. Its successor was the Viaflex plastic IV bag, the flexible intravenous container that became the world standard. The bag that went missing from American hospitals in the autumn of 2024 is a descendant of a Boston surgeon's unbreakable blood pouch, commercialized by a Chicago company under a patent lawyer's leadership.
This is the industrial core of the Graham years, and it repays slow attention. The breakthrough was not mainly in the fluid. Saline is saline. The breakthrough was in the container: the vessel, the system around the vessel, and the standard that made it interchangeable from one hospital to the next. A company that owns the container shapes how clinicians work. Nurses hang it, pharmacists stock it, and procedures assume it. Once the flexible bag became the world standard, Baxter was no longer just a supplier. It was part of the architecture of the hospital.
A patent lawyer would understand that better than most. Claims are written around systems as well as substances, and the most valuable ones describe something an industry cannot work around.
The same reasoning carried over to dialysis. The plastic blood container had led to the IV bag, and according to Baxter's history the IV bag in turn became the basis for a plastic delivery system for dialysis solutions. That path led, eventually, to continuous ambulatory peritoneal dialysis, introduced under Graham. The name is clinical jargon for something humane: patients with failed kidneys could do their dialysis while moving through ordinary life, instead of being tied for hours to a machine in a clinic. A bag is portable. A bottle is not.
Twenty-Five Years of Twenty Percent
The company's own chronology contains one line about 1953 that carries most of the weight of the next quarter century: William B. Graham becomes president and chief executive officer, and Baxter begins 25 consecutive years of more than 20-percent annual earnings growth.
It is easy to read past that, so it is worth spelling out. Compounding at 20 percent a year roughly doubles earnings every four years. Over twenty-five years that is six doublings, and then some. Plenty of companies have one great decade. Very few manage a run of 20 percent annual earnings growth that lasts through Eisenhower, Kennedy, Johnson, Nixon, Ford, and much of Carter, through the dollar shocks and oil shocks and the stagflation of the seventies. Baxter's later corporate obituary for Graham chose its words with institutional care: during his tenure, it said, the company "established one of the most outstanding growth records in American industry." The University of Chicago's announcement of his 1997 gift used the same phrase almost word for word, which suggests both texts drew on one approved sentence. Even so, the figures underneath it are not public relations.
The products came steadily. In 1954, one year into his tenure, Baxter opened an office in Belgium, its first operation outside North America, and it went abroad at a time when much of American industry still treated Europe as an export market rather than a home. In 1956 it introduced what its histories call the first functioning artificial kidney. The underlying work belonged to Willem Kolff, a Dutch physician who had applied dialysis to kidney failure during the 1940s, and Baxter commercialized his methods in the United States. Kolff represents a recurring figure in this story: the inventor whose breakthrough reached patients through a company that did not employ him at the start. Fenwal's Carl Walter was another. Hyland's plasma operation was a third. Graham's Baxter repeatedly acted as the vehicle through which other people's inventions reached the bedside.
That is not a complaint, just a description of a business model. The frontier of clinical medicine was full of brilliant prototypes that never left the room where they were built. Baxter's advantage was the factory in Cleveland, Mississippi, the sales force, the regulatory experience, and the patent lawyer's sense of what could be owned and defended. The company's list of Graham-era firsts covers the flexible IV container, the artificial kidney, the plastic blood-collection system, the first clotting factor for people with hemophilia, and CAPD. That list reads like an index of postwar American medicine.
In 1971 Baxter entered the Fortune 500. The same year Graham added the title of chairman, and the company built a major manufacturing plant in Ashdod, Israel. That decision would come back as trouble a decade later, after Graham had given up the chief executive's office. In 1976 the company became Baxter Travenol Laboratories, finally joining the 1949 division's name to the founder's.
When Graham handed the CEO role to Vernon Loucks in 1980, Baxter had about 30,000 employees, up from six in a car showroom. Revenue figures for 1980 vary by source, and some are not reliable enough to repeat. What can be confirmed is that the company Loucks inherited would more than quadruple its sales to $5.7 billion over the next eighteen years, so the base he started from was large enough to quadruple into a major corporation.
The Plasma Ledger
Any honest account of the Graham years has to deal with blood.
The 1952 acquisition of Hyland Laboratories brought Baxter into commercial human plasma, and plasma is where the company's greatest therapeutic achievement and its worst disaster share an origin. On the triumphant side of the ledger is the clotting factor. For people with hemophilia, whose blood does not clot properly, concentrated clotting factor made from pooled human plasma was transformative. It meant fewer days lost to internal bleeding, fewer crippled joints, and lives that could be planned. Baxter's materials and Graham's obituaries list "the first clotting factor for people with hemophilia" among the achievements of his tenure, and it belongs there.
On the other side is the matter of pooling. Concentrate made from the plasma of many donors carries the risks of all of them.
In August 1975, five years before Graham gave up the chief executive's title, Baxter's Travenol unit withdrew a clotting factor product called Hemofil after it was linked to an outbreak of hepatitis B. That is in the record. The prior warning, in other words, arrived during his watch.
The catastrophe came later, and the record of it belongs mostly to the years after he stepped down as CEO, though not after he left the building, since he remained chairman until 1985. An Irish tribunal later found that Baxter kept using plasma from American prisons in factor concentrate production until October 1983. It had agreed with the FDA eleven months earlier to stop using U.S. prison plasma, which carried a high risk of viral transmission, and the FDA did not know the practice had continued. The concentrates of that era carried HIV into hemophilia patients around the world. In 1996 Baxter joined a four-way, $640 million settlement with American hemophiliacs over HIV-infected clotting concentrates. The same year it agreed to settle a lawsuit brought by 200 Japanese hemophilia patients infected through unheated products. The Japanese courts ordered that each victim receive $411,460 by March 29.
The story is documented at length in Eric Feldman and Ronald Bayer's Blood Feuds: AIDS, Blood, and the Politics of Medical Disaster. It is not a story about one executive, and attributing the infections to Graham would be as wrong as leaving them out. The causal chain ran through donors, regulators, fractionation methods, the slow science of an unknown virus, and decisions made by people whose names do not appear in these sources. Still, the plasma business he helped build was a single structure with two consequences. The capability that let a hemophiliac live like everyone else depended on pooling plasma, and pooling plasma is also how the virus spread.
Two dates, three months apart, mark the edges of this. He was born the year after one pandemic-era generation, and he died in the January before Baxter renamed its health services prize after him. Neither the obituaries nor the prize mentions blood. Baxter's own statement on his death credited him with helping "save, extend and improve the lives of hundreds of thousands of people all over the world." That is true. The other half of the account was settled in court, at $411,460 a patient.
The Successor's Inheritance
Vernon R. Loucks Jr. became president and chief executive of Baxter in 1980 and held the CEO title until 1998. He chaired the board from 1987 to 1999. He was the opposite of Graham in temperament and era: a dealmaker suited to the eighties, a builder of executive talent, and a collector of acquisitions. He hired and trained people who went on to run other companies. Mike Mussallem went to Edwards Lifesciences, Lance Piccolo to Caremark, Terry Mulligan to MedAssets, and other alumni went on to lead Boston Scientific and Cardinal Health. Modern Healthcare later profiled him under the headline "Spinning off success."
On July 15, 1985, Loucks and Karl D. Bays, chief executive of the American Hospital Supply Corporation, signed the agreement merging their two companies. In 1933, American Hospital Supply had distributed the five glass-bottled solutions from the Glenview showroom. Fifty-two years later it was absorbed into the manufacturer it once served as a middleman. The combined company pursued what insiders called the "one-Baxter approach," providing "70% to 80% of what a hospital needed." In 1987 the company took the name Baxter International.
Graham was chairman when the merger was signed. In 1985 his title changed to senior chairman, which he held until 1996.
The Loucks era is where the company's record darkens. In 1982 Baxter acquired Medcom, a New York firm founded by Richard Fuisz and his brother, which had large markets in the United States and Saudi Arabia. Fuisz was a physician turned entrepreneur, and he took being fired badly. Loucks dismissed him, and Fuisz took anti-boycott charges to the Commerce Department. He alleged that Baxter had sold its profitable plant in Ashdod, the one built in Graham's chairmanship year of 1971, to Teva in 1988, while at the same time negotiating to build a similar plant in Syria, in partnership with the Syrian military, in order to be removed from the Arab League's blacklist. In 1993 Baxter pleaded guilty to a felony under American anti-boycott law.
There was more. In 1991 the government accused Baxter's home-infusion subsidiary, Caremark, of paying doctors to steer patients to its intravenous drug service. These were weekly payments averaging about $75 per referred patient, and according to government documents some doctors earned as much as $80,000 a year. Caremark was spun off in 1992 and later fined $160 million for the four-year mail-fraud and kickback scheme. The product line that had made Baxter great, intravenous therapy, ended up at the center of a scheme of paid referrals.
Loucks was eventually pushed out under shareholder pressure over poor performance and a failed merger. Henry Mintzberg cites the episode in Managers Not MBAs. The departure was cushioned. In January 1999, as Loucks gave up his CEO duties, the board granted him a special option on 950,000 shares, "for the specific purposes of motivating" him "to implement a smooth transition of his responsibilities." The Wall Street Journal reported it on April 29, 1999, in a story whose headline did all the editorializing it needed: "To a Pile of CEO Perks, Add the 'Special' Bonus."
What was the senior chairman doing during all this? The record does not say. That may be the most important thing to report about this part of his life. Between 1985 and 1996, the years of the Medcom fight, the boycott plea, the Caremark kickbacks, and the HIV settlements, William B. Graham held a title at the top of Baxter's governance, and none of the sources available here give any sign of what he thought about any of it. He might have objected in private, or approved, or simply been seventy-four and then eighty-four years old, with his attention on an opera house. Silence in the record is not evidence. But the silence covers eleven years of senior chairmanship at a company pleading guilty to felonies.
— Chuck Lauer, editorial director of Modern Healthcare, to the Chicago Tribune, January 2006He'll go down in history as one of the major players in the [health care] industry.
An Opera in the Red
By then his attention, as far as the record shows, had partly moved to the Lyric Opera of Chicago.
He sat on its board for more than forty years, which makes his tenure there longer than his tenure as Baxter's chief executive. In the early 1980s, according to Allan Muchin, who later became the Lyric's board president, the company was an artistic success and a financial mess, the most familiar crisis in American nonprofit culture. In 1984, three years after Edna died and four years after he left the chief executive's office, Graham became the Lyric's president. He held the post until 1992, served as co-chairman until 2002, and was named chairman emeritus in 2003.
What he did there was, in Muchin's account, straightforward management. He appointed a new general director. He put in new operating systems. He brought in board members who could raise money. That is how a manufacturing CEO fixes a manufacturing company: change the leadership, impose process, recapitalize. The difference is that the product was Puccini.
— Allan Muchin, board president of the Lyric Opera of Chicago, to the Chicago Tribune, January 2006Without Bill Graham, there may not be a Lyric Opera in Chicago today.
Muchin added that Graham "put the opera back on its feet in a very quick and impressive way." Quick is notable for a man otherwise identified with twenty-five years of compounding.
The Lyric was the centerpiece of a civic life that had the density of an old-style Chicago establishment career. Graham was a founder of Millennium Park. He was a trustee of the Orchestral Association and of the University of Chicago, and a director of the Chicago Horticultural Society, Evanston Northwestern Healthcare, and the Big Shoulders Fund. At various times he sat on the boards of the First Chicago Corporation and the First National Bank of Chicago, Deere & Company, Bell & Howell, Borg Warner, Culligan, and Northwest Industries. He chaired the Grace Commission's work on agriculture and was vice chairman of the National Park Foundation. He was president of The Chicago Club when women were first admitted as members. The sources record the coincidence of his presidency and that change. They do not say whether he pushed for it, permitted it, or simply happened to hold the gavel, and they leave you to wonder.
His second wife, Catherine V. Graham, came from a very different world. She was born in Argentina, the daughter of the former vice president of International Harvester in South America, so she grew up in the overseas outpost of a Chicago farm-machinery firm. She spoke French, Spanish, Portuguese, and English fluently, and she supported the University of Chicago's Center on Modern France and sat on the board of the Alliance Française. Her father had sold Chicago-made tractors in South America. Her husband sat on the board of Deere. Both families' Chicago reached a long way abroad.
Their daughter Elizabeth Montgomery, speaking after his death, summed up her father's civic passion in one plain sentence: "He was very big on promoting cultural institutions in Chicago." He spent his old age pouring time into an art form built on spectacle and emotion, as if making up for decades spent on things designed to go unnoticed.
Ten Thousand Adults After Work
In March 1997 the University of Chicago announced that William and Catherine Graham had given it $10 million, then the tenth-largest gift in the institution's history. They had already endowed professorships in the Biological Sciences Division and the Law School, the two disciplines Graham had combined in his own career. This time the money went somewhere less prestigious. The Center for Continuing Studies became the William B. and Catherine V. Graham School of General Studies.
Continuing education is the university's night shift. William Rainey Harper, the university's founding president, set up the program in 1892 to bring a University of Chicago education to the city's working citizens. By 1997 it enrolled more than 10,000 adult students a year, people from business, government, the professions, and the arts who came to campus after their days were over. It was, in the university's phrase, one of its "most visible public outreach programs in the city of Chicago."
Graham chose to put his name on the part of the university that serves people who did not get the nine uninterrupted years he had. He said it with characteristic formality:
— William B. Graham, University of Chicago Chronicle, March 20, 1997I have always felt it important to contribute to civic life as well as to the university I love.
He also had history there as a teacher. In 1981, the year his first wife died, he was a lecturer at the university. A man whose formal education had been continuous became, in his seventies, a patron of education that resumes after interruption. Whether he made that connection himself is unknown. In 1992 the university gave him its Medal, the highest honor conferred by its Board of Trustees.
The Prize for the Other Side of the Ledger
He died of heart failure on Tuesday, January 24, 2006, at home in Kenilworth, on Chicago's North Shore. He was ninety-four. He was survived by Catherine, two daughters, two sons, eleven grandchildren (one of them, Kelley Graham, a 2000 graduate of the university's business school), and eleven great-grandchildren. His successor's successor's successor, Robert L. Parkinson Jr., issued the corporate statement: "Bill Graham has made an impact on healthcare throughout the world that will last far beyond his lifetime."
Within months, the Baxter International Foundation renamed its prize.
Since 1986 the foundation had given an annual award, administered by the Association of University Programs in Health Administration, for health services research. The field is not concerned with making products. It studies how care is organized, financed, and delivered: why identical procedures cost different amounts in different towns, why hospitals with more nurses lose fewer patients, how doctors are paid and what that payment does to their decisions. The first recipient, in 1986, was Avedis Donabedian, whose work on measuring the quality of medical care shaped the whole field. Later winners included John Wennberg, who documented geographic variation in American medicine, and Alain Enthoven, an architect of managed competition. The prize paid $25,000 to the winner and another $25,000 to a nonprofit of the winner's choosing.
In 2006 it became the William B. Graham Prize for Health Services Research. The first winner under the new name was Linda Aiken of the University of Pennsylvania, whose research linked nurse staffing to patient outcomes. "It's an honor to have been selected by my research colleagues," she said, "and very gratifying to have validation that our research is making a difference in health care." Donald Berwick followed in 2007. William Hsiao, who led the team that developed the scale used to set Medicare's physician payments, won in 2020. David Cutler won in 2024, honored for his work on medical care use, spending, and outcomes. In April 2026 the prize went to Michael Chernew of Harvard for work, in his department's words, on "the complex drivers of healthcare spending in the U.S."
The irony is hard to miss. Graham's company manufactured the physical substance of modern medicine: the bags, the blood packs, the dialysis systems. Health services research is the field that examines what the system does with all that substance, who pays for it, and who gets cheated. In 2009, three years after the prize took his name, Kentucky's attorney general announced a $2 million settlement with Baxter Healthcare over intravenous drugs billed to the state's Medicaid program at prices inflated by as much as 1,300 percent. The scholars the prize honors are the people who build the tools to catch exactly that kind of thing.
So the company's highest honor now goes, every year, to the critics of the system it supplies, under the name of the man who built most of the supply. Whether that is atonement, irony, or simply good corporate citizenship is beyond what these sources can settle.
On November 7, 2024, the plant in Marion began making intravenous fluids again. Somewhere that day, in some hospital still conserving supplies for flu season, a nurse took a clear, soft bag from a newly restocked shelf, checked the label, and hung it on a hook beside a bed. The name on the company that made it belonged to a medical missionary who sold his share in 1935.
Part IIThe Playbook
The usual lessons drawn from long-tenured chief executives (patience, vision, culture) are true of almost everyone who lasts and specific to almost no one. What follows is narrower. Each principle is taken from the documented record of Graham's career: the double training, the eight years as second in command, the bet on the container rather than its contents, the compounding, the plasma, the succession, the opera house, and the prize. Some of these principles are warnings. Graham's record includes both the twenty-five-year growth streak and the eleven unexplained years as senior chairman, and an honest playbook has to use both.
The Graham Principles
- 1.Build a two-language mind.
- 2.Earn the chair from the second seat.
- 3.Own the vessel, not the fluid.
- 4.Be the vehicle for other people's inventions.
- 5.Prefer twenty-five good years to five great ones.
- 6.Go abroad before you feel ready.
- 7.Treat your raw material as your moral surface.
- 8.Remember that scale concentrates fragility.
- 9.Leave when you leave.
- 10.Run a turnaround as a governance problem.
- 11.Sit in the rooms where the industry writes its rules.
- 12.Endow your critics.
B
The Graham Arc at Baxter
Fifty-one years inside one company's leadership, from a $1.5 million business to a Fortune 500 manufacturer.
1932
Finishes first in his chemistry class at the University of Chicago; wins handball singles title for the second year.
1936
Receives J.D. cum laude after studying under Edward Levi; begins nine years of patent law practice.
1945
Joins Baxter as vice president and manager. Company sales exceed $1.5 million.
1952
Baxter acquires Hyland Laboratories, first U.S. company to make human plasma commercially available.
1953
Succeeds Ralph Falk as CEO; start of 25 consecutive years of 20%+ earnings growth.
1954
First office outside North America opens in Belgium.
1956
Introduces first functioning artificial kidney, built on Willem Kolff's methods.
1971
Adds chairman title; Baxter enters the Fortune 500; Ashdod plant built.
1975
Hemofil clotting factor withdrawn after hepatitis B outbreak.
1980
Hands CEO role to Vernon Loucks; company has about 30,000 employees.
1985
Becomes senior chairman as Baxter merges with American Hospital Supply.
1996
Senior chairmanship ends; same year as $640 million HIV settlement.
Principle 1
Build a two-language mind
Graham's training read like indecision: an undergraduate chemist, then two years of graduate chemistry under a Nobel laureate, then a turn to law school, a J.D., and nine years of patent work. Yet the combination was more valuable than either half. A chemist alone could see what was new about a plastic blood container but not how to protect it. A lawyer alone could draft a claim without knowing which claims mattered. A patent lawyer with real laboratory training could do something neither specialist could: judge which inventions were defensible platforms and which were just clever.
That skill matched what postwar Baxter needed. The company's growth came from turning other people's technical breakthroughs (Walter's Blood-Pack, Kolff's dialysis methods, Hyland's plasma operations) into products the company could own and standardize. Graham's own explanation of his success pointed back to "the training I received at the university," and that training was dual.
The general lesson is not to collect degrees. It is that the most useful leaders in technical industries often stand where two vocabularies meet, and they can translate between the lab and the institution in both directions.
Tactic: Identify the second discipline that governs how your industry's technology turns into value (law, regulation, finance, manufacturing) and get serious about it before you need it.
Principle 2
Earn the chair from the second seat
Graham came in at thirty-three or thirty-four as vice president and manager of a company whose founder had already left and whose owner was still running it. He waited eight years. In that span the company moved its base to Morton Grove, formed Travenol, opened the Mississippi plant, and bought Hyland. When he became CEO in 1953, he was not an outsider learning the business. He knew where the plants were, which products carried the margins, and which acquisitions had been worth making.
Arriving early as a deputy has advantages the celebrated outside hire does not. The successor who has served as second in command can start compounding on the first day instead of spending the first two years learning. The growth streak that began in 1953 did not come from nowhere. It came from a leader who had spent eight years quietly building a deep understanding of the operation.
Tactic: If you want to run a company eventually, consider joining one small enough that the number-two role carries real operating responsibility, and treat those years as the foundation for everything after.
Principle 3
Own the vessel, not the fluid
Saline is a commodity, and anyone with a clean room can make it. The flexible intravenous container is something else: "the world standard for IVs." Graham's Baxter grasped early that durable value in hospital supply came from the system the product travels in, the container and its connections, more than from the product itself. Nurses' routines, pharmacy stocking, and clinical procedures were all built around the bag. Once it was standard, displacing it meant retraining an entire profession.
The same reasoning moved from blood packs to IV bags to plastic dialysis delivery to CAPD. Each step reused the container know-how in a new clinical setting. The fluid changed and the vessel carried over.
V
Contents vs. Container
Where the value accumulated in Baxter's core lines.
| Product line | The contents | The container / system | Moat type |
|---|---|---|---|
| Blood banking | Donated whole blood | Transfuso-Vac, then plastic collection systems allowing component separation | Workflow standard |
| IV therapy | Saline and solutions | Viaflex flexible IV container | Workflow standard |
| Renal | Dialysis solution | Plastic delivery system enabling CAPD | Patient lifestyle |
| Plasma products | Pooled human plasma | Fractionation into clotting factor | Supply-chain risk |
Tactic: Ask what the "bag" is in your market, meaning the format or system everyone else's routine depends on, and put your investment there instead of in the contents.
Principle 4
Be the vehicle for other people's inventions
Many of Baxter's landmark products did not originate inside Baxter. Carl Walter, a Boston surgeon, invented the Blood-Pack at Fenwal. Willem Kolff, a Dutch physician, pioneered the dialysis methods behind the artificial kidney. Hyland Laboratories had already built the commercial plasma operation before Baxter bought it in 1952.
Graham's Baxter was not mainly an invention company. It was an industrialization company. Medical breakthroughs often sit in a hospital basement or a small lab for years because the inventor lacks plants, distribution, regulatory experience, and the patience to standardize. Baxter supplied all of those. Being the dependable vehicle, the partner that turns a prototype into a supply line, is a strategy in its own right, and an underrated one in industries that worship originators.
Tactic: Build capabilities (manufacturing, distribution, regulatory, legal) that make you the obvious home for inventors who have breakthroughs but no way to scale them.
Principle 5
Prefer twenty-five good years to five great ones
More than 20 percent annual earnings growth for twenty-five consecutive years is a better record than almost any five-year sprint, because it requires something sprints never test: the ability to keep going through changes in administration, in technology, and in the economy. Graham's run began in 1953 and lasted through the inflation and stagnation of the 1970s.
It contrasts with what followed. Under Loucks, sales more than quadrupled to $5.7 billion, an impressive number, but they came with acquisitions, a mega-merger, and eventually shareholder revolt over poor performance. Growth by accumulation and growth by compounding can show similar top lines and very different underlying health.
C
Two Eras, Two Growth Models
Graham's compounding versus Loucks's accumulation.
| Dimension | Graham (CEO 1953–1980) | Loucks (CEO 1980–1998) |
|---|---|---|
| Growth signature | 25 straight years of 20%+ earnings growth | Sales more than quadrupled to $5.7B |
| Primary engine | Platform products: IV bag, artificial kidney, CAPD, clotting factor | Acquisitions, including American Hospital Supply (1985) |
| Workforce | Grew to roughly 30,000 | 30,000 to 42,000 |
| Legal record | Hemofil withdrawal (1975) | Felony anti-boycott plea; Caremark kickbacks; HIV settlements |
| Exit | Moved to chairman, then senior chairman | Forced out by shareholders; 950,000-share special option grant |
Tactic: Measure yourself against the longest stretch of compounding you can sustain, not the most dramatic year you can report, and be skeptical of growth that depends on ever-larger deals.
Principle 6
Go abroad before you feel ready
Baxter opened its Belgian office in 1954, one year into Graham's tenure as CEO. That was early. American industry was dominant enough then to treat Europe as somewhere to ship surplus. Setting up in Europe in the mid-fifties meant learning foreign health systems, regulators, and hospital customs while competitors were still enjoying a captive home market.
Early internationalization is cheap when the company is small and expensive when it is large. By the time Baxter's later CEOs were reporting heavy international revenue, the groundwork had been laid decades before by a CEO who moved when it seemed premature.
Tactic: Establish a real operating presence in at least one foreign market while the cost of failing there is still small enough to absorb.
Principle 7
Treat your raw material as your moral surface
The plasma business shows that in some industries the supply chain is where the company's moral exposure lies. A clotting factor made from pooled human plasma carries whatever its donors carry. The 1975 withdrawal of Hemofil after a hepatitis B outbreak was a warning from within Graham's own tenure. The disaster that followed involved HIV-infected concentrates, the use of prison plasma until October 1983 despite an agreement with the FDA, and settlements of $640 million in the United States and $411,460 per patient in Japan. Every component of that story traced back to a raw material.
The pattern repeated in 2008, decades after Graham, when contaminated heparin from a Chinese subcontractor whose facilities had never been inspected by the FDA was linked to 81 deaths in the United States. Companies that turn biological or sourced inputs into medicine do not just carry supply-chain risk. They carry supply-chain liability, and it falls on patients first.
Tactic: For every input that goes into a patient, customer, or critical system, name an executive personally responsible for its provenance, and treat any early warning (like a 1975 recall) as a structural signal, not a one-time event.
Principle 8
Remember that scale concentrates fragility
The efficiencies that made Baxter great, centralized manufacturing and standardized products, also created the Marion problem. When about 60 percent of a country's IV fluid comes out of one facility, one flood becomes a national shortage. In 2024, medical professionals asked openly why so much capacity had been allowed to concentrate in one place.
This principle is drawn from Graham's legacy more than his decisions; the sources do not credit him with the Marion plant. But the logic of industrial scale he championed, building big plants like the one in Cleveland, Mississippi, and standardizing the product, contains this risk. Concentration lowers unit cost and raises tail risk, and a CEO judged on quarterly margins sees the first much more clearly than the second.
Tactic: For each product where you hold a dominant share, model the complete loss of your largest facility and pay for redundancy before a storm makes the decision for you.
Principle 9
Leave when you leave
Graham gave up the CEO title in 1980 but stayed chairman until 1985 and senior chairman until 1996, sixteen years on the board after his operating tenure ended. Those years overlapped with nearly every scandal in the company's history: the Medcom firing and the boycott felony plea, the Caremark kickbacks, the HIV settlements, and the weak performance that eventually brought down his successor.
The sources say nothing about what Graham did or said during that time, so nothing should be invented. But the structural lesson stands without speculation. A founder-era leader who stays in a senior governance role confuses accountability. Either the honorary chair has real authority, in which case some of the blame is theirs, or they do not, in which case the title gives the appearance of oversight without the substance. Neither is good governance.
G
The Long Exit
Graham's titles against the company's legal record.
| Period | Graham's role | Company event | Signal |
|---|---|---|---|
| 1980–1985 | Chairman | Medcom acquired (1982); prison plasma use continues to Oct. 1983 | Risk |
| 1985 | Chairman, then senior chairman | American Hospital Supply merger signed July 15 | Scale bet |
| 1991–1992 | Senior chairman | Caremark kickback allegations; spinoff | Risk |
| 1993 | Senior chairman | Felony anti-boycott guilty plea | Risk |
| 1996 | Senior chairman (final year) | $640M HIV settlement; Japan settlement | Risk |
Tactic: When you step down from operating leadership, either take a governance role with explicit, documented responsibilities or leave the board entirely. Do not hold an honorific that implies oversight you are not exercising.
Principle 10
Run a turnaround as a governance problem
When Graham became president of the Lyric Opera in 1984, the institution was succeeding artistically and failing financially. Allan Muchin's account of the fix has no artistic element. Graham appointed a new general director, put in new operating systems, and recruited board members who could raise money. That is three moves: leadership, process, and capital.
The approach works because most institutions in crisis do not lack talent or mission. The Lyric had both. They lack the governance machinery to turn talent into a sustainable organization. Muchin's judgment, "quick and impressive," fits a manager who saw an opera company as a control system first and a stage second.
Tactic: In any turnaround, deal with leadership, operating systems, and board capital in the first months, before touching the product the institution is known for.
Principle 11
Sit in the rooms where the industry writes its rules
Graham was president of the American Pharmaceutical Manufacturers Association, chairman of the Pharmaceutical Manufacturers Association, and a PMA director for more than a quarter century. He sat on the boards of a major Chicago bank, Deere, Bell & Howell, Borg Warner, and others. He chaired the Grace Commission's work on agriculture. This was not decoration. In a regulated industry, the people who shape association positions, regulatory relationships, and standards have a structural edge over those who only respond to them.
The patent lawyer in him would have recognized this as claim-drafting at the scale of an industry. Whoever helps write the rules helps decide where everyone's boundaries fall.
Tactic: Commit years, not months, to the trade, standards, or regulatory body that most shapes your market, and aim for a leadership role there rather than membership.
Principle 12
Endow your critics
The award that carries Graham's name does not honor product designers. It honors health services researchers, the scholars who examine how care is organized, financed, and delivered, and who build the evidence that exposes waste, inflated billing, and poor outcomes. Its winners include Avedis Donabedian on quality, William Hsiao on physician payment, David Cutler on spending and outcomes, and Michael Chernew on the drivers of American health-care costs. Baxter's own history, from Caremark's kickbacks to the 2009 Kentucky Medicaid settlement over markups of up to 1,300 percent, is exactly the kind of thing their methods are built to find.
Funding your industry's most rigorous critics can look like reputation management. It may also be the healthiest long-term choice a company can make, because it keeps evidence flowing that the company's incentives would otherwise suppress. A prize running since 1986, now called "the highest distinction that researchers in the health services field can achieve," is a strong institutional counterweight. Whether it makes up for anything is a separate question.
Tactic: Put permanent, arm's-length money behind independent research into your industry's costs and failures, and make sure the selection committee is not yours to influence.
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Part IIIQuotes and Maxims
In their words
— William B. Graham, on his $10 million gift, University of Chicago Chronicle, March 20, 1997My wife, Catherine, and I are proud to have our names associated with one of the University's most visible public outreach programs in the city of Chicago.
— Hugo Sonnenschein, president of the University of Chicago, March 1997We were fortunate to have William Graham as a student at the University for nine years, but we are even more fortunate that he has continued to strengthen his ties with us, remaining a devoted friend of the University ever since.
— Allan Muchin, board president of the Lyric Opera of Chicago, January 2006He put the opera back on its feet in a very quick and impressive way.
— Robert L. Parkinson Jr., Baxter chairman and CEO, January 25, 2006His visionary leadership and never-ending pursuit of innovation for the good of the patient changed the course of modern healthcare and helped save, extend and improve the lives of hundreds of thousands of people all over the world.
Maxims
- Stand where two vocabularies meet. The chemist who can read a patent claim sees value that neither the chemist nor the lawyer sees alone.
- The second seat is a school. Eight years as deputy prepared Graham to compound from his first day as chief.
- Own the vessel. The fluid is a commodity, and the container everyone's routine depends on is the moat.
- Industrialize other people's breakthroughs. Being the reliable vehicle for inventors is a strategy, not a concession.
- Compounding beats spectacle. Twenty-five years of 20 percent growth outlasts any merger-fueled top line.
- Your inputs are your conscience. In biological industries, the supply chain is where the moral risk lives.
- Scale saves money until it fails all at once. One plant making 60 percent of a nation's supply is an efficiency right up until the flood.
- Leave cleanly or govern explicitly. An honorific chairmanship implies oversight that may not exist.
- Fix the machinery before the art. Turnarounds start with leadership, systems, and board capital.
- Pay for the scrutiny you would otherwise avoid. A company that funds its critics keeps the evidence coming.
