Some readers have wondered why this blog from time to time runs posts on the US health care system. Aside from the fact that it’s a major public policy problem in America, it is also a prime example of bad incentives, information asymmetry, and corporate predatory behavior. It thus makes for an important object lesson.
Reader Francois T pointed to an example, a commentary on a paper presented by Donald Light at the annual meeting of the American Sociological Association, “Pharmaceuticals: A Two-Tiered Market for Producing ‘Lemons’ and Serious Harm.” It still appears to be embargoed, but Howard Brody provides an extensive summary on his blog.
Light uses George Akerlof “market for lemons” as a point of departure. For those not familiar with the famed Akerlof paper, a “market for lemons” can occur when consumers are unable to distinguish product quality. The used car market is the paradigm, since the dealer has a much better idea than the buyer of whether a particular car is any good. Unscrupulous operators can stick a lot of hapless chump customers with overpriced clunkers. However, as crooked vendors become more common, buyers wise up a tad and are not longer to pay as much for cars they cannot evaluate. So while the prices buyers are now willing to pay are probably still too high for rattletraps, they are too low for decent cars. People with good merchandise start to look for other channels. Akerlof posits that the market eventually falls apart.
Note that used cars dealers did not set out to create lemons; the cars were bad deals by being overpriced (presumably, if they had been presented, warts and all, they still would have found purchasers, presumably people who thought they could repair them and those who wanted them for parts and scrap). Light contends, by contrast, that major pharmaceutical companies create bad products:
[T]he pharmaceutical market for ‘lemons,’ differs from other markets for lemons in that companies develop and produce the lemons. Evidence in this paper indicates that the production of lemon-drugs with hidden dangers is widespread and results from the systematic exploitation of monopoly rights and the production of partial, biased information about the efficacy and safety of new drugs…Companies will design and run their clinical
Five days before a 2007 article in the New England Journal of Medicine showed that the diabetes drug Avandia was linked to a 43% increase in heart attacks compared with other medications or placebos, a group of scientists and executives from the drug’s maker, GlaxoSmithKline (GSK), gathered in a conference room at the offices of the Food and Drug Administration in White Oak, Md. The GSK goal: to convince regulators that the evidence that the company’s $3 billion-a-year blockbuster drug caused heart problems was inconclusive. To do that, the GSK officials focused not on heart-attack data but on a broader, less well defined category of heart problems called myocardial ischemia. The most recent studies of Avandia, the GSK officials told the FDA, had "yielded information that is inconsistent with an increased risk of myocardial ischemic events," according to sealed court proceedings obtained by TIME.
What GSK didn’t tell the FDA was that on May 14, 2007, two days before the White Oak meeting, GSK’s Global Safety Board had noted that a new assessment of Avandia studies "strengthens the [cardiac-risk] signal observed in the [previous] analysis." Or that eight days earlier, the company’s head of research and development, Moncef Slaoui, had sent an e-mail to its chief medical officer saying Avandia patients showed an "increased risk of ischemic event ranging from 30% to 43%!" Or that the day before the meeting, the company had produced a preliminary draft report that showed patients on Avandia had a 46% greater likelihood of heart attack than those in a control group.
But the mixed-evidence argument GSK presented to the FDA worked. After months of deliberation, the agency decided to keep the drug on the market — a move worth billions of dollars to GSK but that also may have put millions of patients at risk.
Such examples of the drug industry’s outmaneuvering FDA regulators are disturbingly common, say both scientists and policymakers who follow drug approval and safety monitoring. More than 140 million Americans take at least one prescription drug in any given month, and they rely on the FDA to ensure those drugs are safe. That trust, the story of Avandia illustrates, is…
More twilight zone material: progress from the Pinto case stalled at the mercy of the "Too Big To Fail" doctrine. Undoubtedly backed by the misguided "rational human economic model." In the Pinto case, punitive damages were awarded to prevent future corporate decisions to measure cost/benefits by putting a price tag on tag on human life…. Ilene
Before the Ford experts left Washington to return to drafting tables in Dearborn they did one other thing. They managed to informally reach an agreement with the major public servants who would be making auto safety decisions. This agreement was that "cost-benefit" would be an acceptable mode of analysis by Detroit and its new regulators. And, as we shall see, cost-benefit analysis quickly became the basis of Ford’s argument against safer car design.
Cost-benefit analysis was used only occasionally in government until President Kennedy appointed Ford Motor Company president Robert McNamara to be Secretary of Defense. McNamara, originally an accountant, preached cost-benefit with all the force of a Biblical zealot. Stated in its simplest terms, cost-benefit analysis says that if the cost is greater than the benefit, the project is not worth it—no matter what the benefit. Examine the cost of every action, decision, contract part or change, the doctrine says, then carefully evaluate the benefits (in dollars) to be certain that they exceed the cost before you begin a program or—and this is the crucial part for our story—pass a regulation.
As a management tool in a business in which profits matter over everything else, cost-benefit analysis makes a certain amount of sense. Serious problems come, however, when public officials who ought to have more than corporate profits at heart apply cost-benefit analysis to every conceivable decision. The inevitable result is that they must place a dollar value on human life.
A rare disease, sometimes known as an orphan disease, is any disease that is not common. Typically, a rare disease has such a low prevalence in a population that a physician in a busy general practice would not expect to see more than one case a year. Most rare diseases are genetic--present throughout the person’s entire life, even if symptoms do not appear immediately. However, many rare diseases appear early in life, and about 30% of children with rare diseases die before reaching their fifth birthdays.
No single cutoff number has been agreed upon for which a disease is considered rare. A disease may be considered rare in one part of the world, or in a particular group of people, but still be common in another. In the United States of America, the Rare Disease Act of 2002 defines rare disease strictly according to prevalence, as any disease or condition that affects less than 200,000 persons in the United States, or about 1 in 1,500 people.
BioMarin’s(BMRN) core business and research is in enzyme replacement therapies for orphan diseases. They are the first company to provide therapeutics for mucopolysaccharidosis type I (MPS I), by manufacturing Aldurazyme (commercialized by Genzyme Corporation). BioMarin is also the first company to provide therapeutics for Phenylketonuria (PKU)
As of 2005, BioMarin commercialized arylsulfatase B (Naglazyme) as an enzyme replacement therapy for the treatment of mucopolysaccharidosis VI (MPS VI), and in 2007 a drug version of tetrahydrobiopterin (Kuvan), the first medication-based intervention to treat phenylketonuria.
On 11/30/09, BioMarin announced that the FDA has granted orphan drug designation for 3,4-diaminopyridine (3,4-DAP), amifampridine phosphate, for the rare autoimmune disease Lambert Eaton Myasthenic Syndrome (LEMS). 3,4-DAP has previously received orphan drug designation in the E.U. Also, in October 2009, the Committee for Medicinal Products for Human Use of the European Medicines Evaluations Agency adopted a positive opinion recommending approval of amifampridine phosphate for LEMS. If approved by the European Commission, amifampridine phosphate will be the first approved treatment for LEMS, thereby conferring orphan drug protection and providing ten years of market exclusivity in Europe. BMRN expects to meet with the FDA in early 2010 to determine the necessary regulatory path for…
Presented here is a simple framework that can help us analyze the impact of certain policies in our companies and economies. This is Part 1, in the forthcoming Part 2, perhaps the most interesting one, this framework will be used to show why the Keynesian approach will deliver very little results in western economies
Optimizing Economic Performance – Part 1
Squeezing the Lemon
We began our professional career at General Electric when it was stil...
Albert Freeman Effect of gasoline shortage in Washington, DC 1942
Nicole Foss recently participated in a live Skype ‘forum’ discussion at the Doomstead Diner site that also included among others, Gail Tverberg and Ugo Bardi. I declined to participate, too many cooks and all that, and seeing how long this thing went on, I have no doubt that was a good decision. Even if my absence obviously reduced the potential charm and entertainment value considerably.
I’ll run this in episodes. Today’s post contains the first.
Anyone noticed its been a wild week? Has anything been proven with all the volatility the past 5-days?
What happens at (1) below, could tell us a good deal about what type of damage did or didn’t take place this week!
CLICK ON CHART TO ENLARGE
The large decline on Monday cause the S&P 500 to break support of this rising channel.
The mid-week rally pushed the S&P higher and as of this morning it is kissing the underside of old support as resistance now, near the 50% retracement level of the large decline over the past few weeks.
The dark veil around China is creating a little too much uncertainty for investors, with the usual fear mongers piling on and sending the vast buy-the-dip crowd running for the sidelines until the smoke clears. Furthermore, Sabrient’s fundamentals-based SectorCast rankings have been flashing near-term defensive signals. The end result is a long overdue capitulation event that has left no market segment unscathed in its mass carnage. The historically long technical consolidation finally came to the point of having to break one way or the other, and it decided to break hard to the downside, actually testing the lows from last ...
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With the VIX index jumping 120 percent on a weekly basis, the most in its history, and with the index measuring volatility or "fear" up near 47 percent on the day, one might think professional investors might be concerned. While the sell off did surprise some, certain hedge fund managers have started to dip their toes in the water to buy stocks they have on their accumulation list, while other algorithmic strategies are actually prospering in this volatile but generally consistently trending market.
Stock market sell off surprises some while others were prepared and are hedged prospering
Naysyers are warning that the recent plunge in Bitcoin prices - from almost $318 at its peak during the Greek crisis, to $221 yesterday - is due to growing power struggle over the future of the cryptocurrency that is dividing its lead developers. On Saturday, a rival version of the current software was released by two bitcoin big guns. As Reuters reports, Bitcoin XT would increase the block size to 8 megabytes enabling more transactions to be processed every second. Those who oppose Bitcoin XT say the bigger block size jeopardizes the vision of a decentralized payments system that bitcoin is built on with some believing ...
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Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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