July 29, 2011

Cutting CO2 Emissions Brings Savings in Health-Care Costs

Or What I Call Global Carbon Flows BC  (Before Coal)

By Melvin J. Howard


Environmentalists are in favor of cutting the emissions of greenhouse gas, claiming that investing in this cause further would ensure an increase in health-care savings of around thirty billion euros annually. Cutting the CO2 emissions by 30 percent, instead of just 20 percent that have been settled upon currently, with 2020 set as a deadline, would be to Europe’s benefit. The estimation was made by two campaign groups, “Health Care Without Harm Europe” and “Health and Environment Alliance”, who published the study. The two anticipate that less time would be taken off work as a consequence of suffering from illnesses, less consultations and medicines would be needed and improvements in life expectancy would be registered due to the heightened cut into greenhouse gas emissions. These are the factors that would generate savings in health-care for Europe. According to the researchers, people’s well-being would be increased as a result of the rise in the quality of air. Europe would agree to cut into the emissions further so long as other polluting countries such as China and U.S. would make the same commitment. Discussions on whether to rise the percent have already started. 

Most developed nations have ratified the Kyoto Protocol of the United Nations Framework Convention on Climate Change, including all 25member states of the European Union, as well as Canada and Japan. By ratifying the Kyoto Protocol on climate change, these countries have pledged to reduce their greenhouse gas emissions by a significant amount over the next decade. The U.S. refused to ratify the Protocol. In anticipation, this pro-Kyoto world is gearing up for compliance and is implementing new regulations, markets and market mechanisms - indeed a whole new way of doing business globally. Will the U.S. now be left out of the developments in the global carbon markets that have taken place mostly outside of the United States, and get very little attention in this country. These developments include the world's first international market in carbon-based financial instruments, national taxes and levies on corporate energy use, and even a tax on cow farts yes that’s right I said cow farts and even burps in New Zealand!

But first, let’s start with a refresher on the cycle we can't afford to ignore anymore the global carbon cycle. Just like with the water cycle in the carbon cycle, only a tiny fraction of carbon on earth actually participates in the carbon cycle relevant to us earthly creatures. And just like the water cycle, any carbon we have in our bodies today has certainly done the rounds over thousands or millions of years: through plants, soils, other animals, the ocean and the atmosphere. And you can forget property rights when it comes to carbon! When the carbon in us is ready to depart, it will just go off and be somewhere else. Before the industrial revolution got underway, global carbon flows ran as follows:

ü      Carbon in the air, stored as carbon dioxide (amongst other gases), is used by plants in photosynthesis and becomes part of the plant. Some of these plants get eaten by animals and the carbon in them is then used in various molecules to make body tissue and to burn up energy. Other plants, or parts of them, like leaves, just get old and die. This decomposition releases some carbon back to the atmosphere, as does the process of respiration by animals. The other 99.9 Before fossil fuel use by humans entered the scene, losses of carbon from the earth and into the air from decaying vegetation and animal respiration, in the form of various gases such as carbon dioxide and methane, were pretty much balanced by carbon storage or "sequestration" by plants during photosynthesis. The carbon cycle chugged along in this balance between about 1000 AD and the early 1800s, and so the amount of carbon in the air stayed pretty constant over this time period since the middle ages. To give you an idea of magnitude, this annual exchange was about 100 million gigatons of carbon (where a gigaton is a billion tons), from the earth into the atmosphere, balanced by an equal exchange from the atmosphere back to the earth.

How Carbon Accounts become Unbalanced

ü      But then came the industrial revolution, powered by the burning of carbon rich fossil fuels, and accompanied by massive clearing of forest land for agricultural and other purposes. These two activities have extracted another 7-8 gigatons of carbon out of the earth's sources per year, of which the oceans and the world's forests have decided to absorb just over half of this release. So the remaining 3-4 gigatons of carbon has nowhere to go but into the air. Over the past 250 years, the level of carbon dioxide in the atmosphere has risen by 30. An excess of carbon gases, like carbon dioxide and methane, are known to trap heat in the biosphere, making things toastier for all of us. This so-called "global warming" has many known and unknown impacts on climate. That humans have significantly increased the amount of carbon gases in the atmosphere, and that these gases do contribute to temperature increases is generally not in dispute between the two main parties on either side of the Kyoto Protocol. What is under debate is the degree to which global warming is caused by natural versus man-made factors. The fairly recently discovered indications that the middle ages may have been warmer than the current ages, has the leadership in the US scrambling to promote studies to show that natural causes are a primary contributor to climate change. Satisfied that human activities are contributing to climate change, the countries that have now ratified the Kyoto Protocol on global warming are trying to do what they can to get as much as possible of this excess carbon out of the atmosphere by implementing mechanisms designed to reduce overall carbon emissions.

The naysayers team, reluctant to give up their high carbon diets, led by the United States and Australia, are diverting significant resources into figuring out how carbon wastes can be buried underground or in the sea in a process known as artificial carbon sequestration. The U.S. has also developed a interest in the climate in medieval age when temperatures were much warmer than they are today. If only they can understand why we were so toasty, they can cast doubt on the idea that human induced greenhouse gases are largely responsible for climate change.

The carbon market.

In this new carbon market a monetary value is assigned to a carbon gas emission allowance. Such an allowance could only have a monetary value if there are a finite number of such emission allowances and the total amount allowed in the market is close to, or even below, the total amount that is currently being emitted. For this market to exist in the first place there must be someone or some body, most likely a government body, that sets the total number of allowances for the market. This is exactly what the European Union has done. It has used the "cap and trade" approach to moving towards Kyoto targets. Under the EU emissions trading scheme the EU member states will set limits on carbon dioxide emissions from energy intensive companies by issuing allowances for the amount of gas each is allowed to emit. The total number of allowances will reduce each year until the final target is reached. This list of companies includes approximately 10,000 companies accounting for about half of the EU's cabon dioxide emissions and encompasses the following industries: steel, power generation, oil, paper, glass and cement. A company that is able to lower its emissions at relatively low cost, may sell its excess allowances and hence, the argument goes, the emissions market will act as a catalyst towards finding lowest cost emissions reduction solutions. Other companies that have difficulty meeting their targets inexpensively can buy these excess credits in the market, at whatever the prevailing market price is. In effect then, they are providing the financing to the seller of the credits for the seller's emissions reductions efforts, since this was cheaper than reducing emissions in their own operations. And, if companies decide to neither meet their targets nor buy credits in the market to offset their excess, they will have to pay large fines to the government, well in excess of the market price of credits. Hence the incentives are there for companies to either comply or buy credits, thus ensuring that the total amount of emissions will remain below the target.

This method of allowing the market to cut emissions quickly where it is cheapest and easiest to do will presumably have the least detrimental effect on the health of the economy, an issue largely driving the non-believers" approach to man-made climate change.

It’s a miracle that a bunch of 25 countries as diverse as the European Union and who were at war with each other not so long ago, could unite over a proposal that is bound to bring some shocks to their local economies. Even the European environmental community seems fairly pleased with the EU's approach to global warming.  But, like all such complex agreements involving so many and varied parties and lots of different political interests, this one is not without controversy or room for abuse. During the discussions leading up to the 1997 Kyoto Protocol, some of the most controversial provisions had to do with the ways in which companies and/or countries could accumulate excess greenhouse gas credits other than by cutting emissions below their target level. Some of these so-called "Kyoto Mechanisms" included:

  1. Creating "Carbon Sinks": Such as planting new forests, or even certain types of timber farming; 
  2. Joint Implementation Projects: Which means funding emission reductions projects in other industrialized nations;
  3. Clean Development Mechanisms: Which means funding "clean energy" projects in developing nations.

Many people fear that credit accumulation or emissions offsets gained under these methods may be the most wide open for abuse and therefore may not bring about real change in the battle to stem the release of greenhouse gases into the atmosphere. The original EU Emissions Trading Scheme, that began trading in 2005 did not provide for these Kyoto Mechanisms. But a Directive proposes an amendment allowing two of these mechanisms - Joint Implementation and Clean Development Mechanism Projects in other countries as methods to accumulate carbon emissions credits. Climate Action Network in Brussels discussed their concerns about these mechanisms. Nevertheless, these developments in Europe have really made the EU the world leader in trying to stem man-made contributions to climate change, and without these efforts it is possible that the Kyoto process would have collapsed after the U.S. pulled out.

The United Kingdom set up the first national emissions market of its own, similar to the EU "cap and trade" mechanism. The UK actually plans to significantly exceed, or do better than, its Kyoto targets and they have gone further than just capping, trading and fining violators.The British government imposed a Climate Change Levy in the form of a tax on business use of fossil fuel based energy sources. Relief on this tax can be gained by meeting certain targets in the emissions trading program.

Different countries face very different challenges in meeting their Kyoto targets. For less populated and more agricultural-dependent countries like Australia and New Zealand, carbon dioxide emissions from fossil fuel use are not the main problem areas.Though one doesn't like to talk about these things in polite company, believe it or not, cow and sheep burps and farts are a much bigger problem! Cattle and sheep grazing and their subsequent emissions of smelly gases as by-products of the digestive process, contribute an abundance of the most potent of the greenhouse gases methane. In fact, farm animal farts and burps account for about one half of all greenhouse gas emissions in New Zealand.

Unlike its neighbor Australia, the country of New Zealand has ratified the Kyoto Protocol and had to do something about these smelly air bubbles. In a move that was far less socially acceptable than either the pops themselves or Britain's Climate Change Levy, the New Zealand government took the drastic step of taxing farmers for the natural bodily functions of their farm stock they introduced the world's first tax on farting that’s right farting! Needless to say a farmer's rebellion got underway. Across the Tasman pond, Australia has some similar problems, but more broadly faces the reality that greenhouse emissions have increased over the last decade primarily due to land use changes, including deforestation and agricultural practices. As forest land is cleared and burned to make way for agricultural and other uses, and under certain types of agricultural practices, much carbon that was stored in plants and soils is released back into the atmosphere.

As carbon markets emerge in other countries, you can expect to see the U.S.-based investment banks and brokers getting involved, despite the fact that the U.S. is not a signatory to the Kyoto Protocol. You can also expect some rumbles from multi-national companies based in Europe that also do a lot of business in the U.S. Furthermore, the companies that have start complying with the European rules and who are spending money to comply, will be able to green-wash or brag about their image with some legitimacy. This, in conjunction with growing shareholder activism on climate change in the U.S. will apply significant pressure for change in this country.
It is likely that even U.S. based companies across the financial, energy, and other sectors will be significantly impacted by the Kyoto Protocol, even without ratification by the U.S. There may also be a concern from many companies that they are missing out on opportunities in new markets, such as the carbon markets and new energy markets, because the U.S. is not a party to the agreement.
It's time we move out of the Dark Ages after all, there is green in going green!

July 18, 2011

The world has more then enough resources to provide global health care and education to everyone.

One Remedy to save the Capitalists Global Health Care Market

By Melvin J. Howard

The world has more then enough resources to provide global health care and education to everyone. In the year 2000 for example a Human Development report sited for just 80 billion a year, the entire world could have basic health and nutrition, basic education, reproductive health and family planning services, and water sanitation. Now 80 billion might seem like a lot but that figure is equivalent to roughly 15% of the annual Pentagon budget and totals less the 1/5 of 1% of  the world’s income. According to the United Nations, Americans spent more on cosmetics ($8 billion) in the year of 1998 than it would have cost to provide basic education for all the people in the world who did not have it. Extending access to basic health care and nutrition to those who don’t have it would cost $13 billion annually that’s $4 billion less than the U.S. and European pet owners spend on pet food. For starters I would like to ask the branded drug industry for help. But will they budge without a monopoly and a profit stream, neither of which is a suitable incentive model for this global crisis. But compared to the many tens of billions spent by the pharmaceutical giants on advertising nonsense pills to us daily and suing the generics at every turn and developing medicines that aren't really necessary. We end up footing the bill for all this, be it in the form of taxes, higher health premiums or direct prescription purchases. If global capitalism wants to save itself from its own worst enemy - which is itself - it better act quick and smart. Here is an idea and a prescription for us capitalists to save our global markets just follow along with me please:

1.      Since the branded drug industry is wasting our time and money on advertising instead of helping to solve the really big and important health problems, we can conclude they are a big  inefficient sector of the markets due to too many years of monopolies and taxpayer subsidies. To borrow a line from Donald Trump they are fired! That should make the markets more efficient. We will keep the generics, though.
2.      The generics can keep producing all existing FDA approved drugs in a patent free environment. This should lower our total annual drug costs to  about $80 billion a year.
3.     We will use about $15 billion of this for a prescription drug benefit for seniors (whose costs are now much lower because all drugs are generics) and put some $15 billion towards insuring the uninsured.
4.       We will set aside $30 billion for drug research and development in the public sector, to replace what the private sector used to do, except with a more needs oriented approach. All the scientists, researchers and administrative workers from the now fired brand name companies get new jobs at the new publicly funded research centers. Realizing that the biggest needs are in the developing world and that our own economy is intimately tied to their well being in this globalized world, we set the first $15 billion aside exclusively for HIV/AIDS vaccines and treatments. The next $5 billion goes on tropical diseases, tuberculosis and so forth. Then the other $10 billion will go into the most important things at home.
5.      We still have $20 billion left. Of the people that used to work for the branded drug companies, we still have the marketing people and lawyers sitting around idle, we can’t have that can we? Since the marketing people are always telling us that they are not annoying and that they are instead providing the social service of distributing important information, i.e.advertisements  we have just the job for them! First they will be put in decompression chambers and then some training will take place to retool them for a more wholesome career. They will each be provided with 10,000 packets of condoms and sent all over the world from India to the Congo to Russia to China to Brazil. Their job will be to sell the use and advantages of condoms and safe sex to as many people in the developing world as possible. This should be right up their ally. For years they have been walking into doctors offices with free samples to give away and stories to tell. They will get compensated based on the preventative practices adopted in their region. The total cost of the global prevention plan will be about $10 billion.
6.      The lawyers will be fine. They are inventive enough to find other ways to occupy their time.
7.      Well, there's lots that can be done with the remaining $10 billion and I'll just leave that up to your creative imaginations e-mail me when you do!

July 15, 2011

The Trade Impact of HIV/AIDS in China, RU.S.S.I.A And South-East Asia

The Market failure of the Patented Medicine Model Maybe It's Time To Test The Creative Capitalism Model

By Melvin J. Howard

The following, seemingly prophetic, quote from an 1851 edition of the The Economist describes perfectly the degenerative phase the patented medicine model has reached by the start of the 21st century."The public will learn that patents are artificial stimuli to improvident exertions; that they cheat people by promising what they cannot perform; that they rarely give security to really good inventions, and elevate into importance a number of trifles...no possible good can ever come of a Patent Law, however admirably it may be framed." This 1851 quote gives a good description of what has become of today's pharmaceutical sector when viewed from a global perspective. Patents have certainly provided "artificial stimuli to improvident exertions" or, put another way, wasteful spending. And there is no question that we have seen the elevation "into importance a number of trifles", namely blockbuster lifestyle drugs such as Viagra, Rogaine, and various anti-depressants, as well as unnecessary drugs that are virtually the same as a host of other drugs already on the market. All this takes places against the backdrop of a developing world HIV/AIDS crisis that has resulted into overwhelming death in some African counties, and is now starting its exponential growth throughout Eastern Europe, the former Soviet states, China and the rest of South-East Asia.

The West has remained largely unconcerned with the HIV/AIDS crisis in Africa. There have been some nice efforts from various quarters but so far the response has been woefully inadequate from those that can most afford to help. To put it bluntly, this is because the "self-interest" component just isn't there. Africa is only a minor trading partner with the West, and the West has relatively little economic interest in Africa. So far, all the help adds up to not enough, and the disease continues to outpace efforts to stop it. Out of a $13 billion-a-year request from the UN, the West can only bare to part with $2 billion to assist in dealing with the problem of HIV/AIDS in the developing world. And, compared to other drug investment, relatively little goes into finding a vaccine. If and when a vaccine is available, distribution of it will pose the next major hurdle.

But now, there are increasing reports detailing the spread of HIV/AIDS throughout the former or semi-communist, now market-directed, nuclear powered giants - RU.S.S.I.A and China. China's Titanic Peril" reveals the state of the problem of HIV/AIDS in China. With 1-3 million people infected today, infection rates have been increasing at more in than range between 10 and 20 million. The former Soviet states have seen a five-fold increase in infections in the past three years, have more than 1 million people infected, and the fastest spreading epidemic of all, according to a past UN Report. A survey from British scientists predicts that within 5 years, 1 in every 20 Russian adults will be infected.

Both China and RU.S.S.I.A are rapidly developing market economies. One is a major trading partner of the United States, the other has become one of the European Union. Lest you think this development will help, think about the African nation of Botswana. Botswana was the golden child of economic development of sub-Saharan Africa, financed largely by its mining industry after it gained independence. Its first AIDS case was detected in 1985, then HIV/AIDS built slowly for several years. By the 1990s it was spreading furiously throughout the general population so that by 2002 it affects almost 40 % of the population. Why so much worse than the less developed sub-Saharan region, you might be wondering? Largely because of the rapid economic development itself. The road networks that come with development, the mobility of labor away from home and families that comes with globalization, and men leaving wives to get work, all sped up the spread.
Now, many people in Africa think China and RU.S.S.I.A look a bit like their countries did five to ten years ago. But there's more. With Western style development comes rapid growth in drug use, teenage sex, commercial sex and poverty. These increases are being observed across China, Eastern Europe and RU.S.S.I.A and the relevant populations are showing huge increases in infection. In addition, the old social safety nets and health care systems have largely collapsed. In rural China, the poverty of farmers has forced them to sell their blood for trade on the lucrative national and international plasma markets. Millions of rural people participated in these plasmapheresis programs in return for cash payments to supplement their ever-dwindling incomes. In this process their blood was taken, pooled with that of lots of other people, and the plasma separated from the red blood cells. The plasma is sold on the plasma market and the now pooled red blood cells are then re-infused back into the pool of donors so that they can keep giving blood at a high frequency. In such a process, all it takes is for 1 person in a pool of 100 to have HIV and all 100 get it. This has greatly increased China's HIV problem. Add this to the fact that population pressures and the preference for male children has created a dangerously high and unnatural male to female ratio, plus the big taboo on discussion about sex in eastern cultures, and you see a growing number of catalysts for disease spread.

China is currently the second-largest trading partner of the U.S., likely to be the number 1 before too long, and with a strong chance of becoming number 1. With China joining the World Trade Organization there's tons of capital wanting to invest in China. As residents and consumers in the U.S., our lives are undeniably intertwined with those of the Chinese. So much of our own purchasing power and hence, quality of life, is a direct result of the relatively low cost of labor in China. As our population ages, more and more of the productive labor force we depend on will be in countries like China. In this case, the economic interests of the U.S. are very much tied up with the well being of the labor force of China. If the U.S. does for China's emerging epidemic what it did for Africa, which was not very much, the consequences on the U.S. economy could be quite severe. Maybe this self-interest component is the only thing that can get the U.S. to do what it can well afford to do about this crisis in the developing world. Then, I am sure, a vaccine could be found and distributed in no time at all. Similar arguments apply about the relationship between Western and Eastern Europe. The European Union has an added incentive. Since this is all happening right next door, the epidemic may very well stretch into Western Europe if they don't help do something about it in a hurry.

U.S. trading partners ($ in billions)

U.S. exports this much
U.S. imports this much
Total Trade
United Kingdom
South Korea
Saudi Arabia

Total, Top 15 Countries

Total, All Countries

July 10, 2011


Attack of the Generics and Counter-Sex Attack from Big Pharma

By Melvin J. Howard

The heartburn drug Nexium gave many people their first good look at what’s haunting the pharmaceutical industry. You must know the Nexium ads, with a bunch of middle aged folks standing around in some canyons that presumably represent an eroded esophagus, all mumbling "I didn't know, I didn't know, I didn't know". Well, I bet they didn't know this the only reason Nexium exists is that its predecessor, Prilosec, which is almost exactly the same was coming off patent. This eroded esophagus business is all about making the new patented drug Nexium seem different to the one that will now be copied by the generics.

Sales versus time graph of a patented drug. It looks like an upside-down "V". As soon as a patented drug is launched, revenues generated by it shoot up over time like the rising edge of a shark fin. But the minute it comes off patent they plunge just as quickly as they rose, as the generic companies come in, copy the drug, steel market share and force prices to drop. During the roaring 90s the pharmaceutical industry always seemed to be topping the charts as the most profitable. We are all familiar with the Blockbuster Drugs who made this dream a reality and have become celebrities in their own right there's Viagra, Vioxx, Celebrex, Claritin, Nexium, Prilosec, Lipitor, Rogaine, Zocor, Zoloft, Prozac, Paxil and Lamisil  to name few.

Some will be on patent for many more years but others are soon scheduled to come off patent. Many patented drugs are simply 'me-too' drugs, designed to achieve the same effect as other patented drugs, but really add little value to society as a whole. To overcome lost revenues from patent expiries and the me-too drugs, each drug giant needs a certain number of new blockbuster drugs emerging from the R&D pipeline every year. Massive advertising campaigns are then designed to sell enough of the drug at a high enough price to recoup the R&D and advertising costs plus a target profit level.
But big pharmaceuticals, much to their dismay, are finding that the blockbuster drug cabinet is bare, even after throwing piles of dough into the R&D bucket. Despite the extensive range of illnesses for which blockbusters can be made to remedy, big pharma is still finding that it can't find enough new drugs to bring to market. This makes them more desperate to maintain high revenues on existing patented products, so they pour more and more funds into advertising and into fighting the generic companies in court. End Result: Profits are down in the pharmaceutical industry and the near future looks glum. And we get to see even more drug ads in America!

Add to all this the following pressures on the drug giants. European governments regulate prices of their Blockbusters, U.S. State Governments are now cracking down on some of Big Pharma's desperate practices to shut out the generics. Drug companies use to get pressure from managed-care companies to lower prices. Drug companies also face a whole set of giants a coalition of corporate giants called "Business for Affordable Medicine" - whose healthcare expenses have been shooting up with the cost of prescription drugs. This coalition includes such behemoths as General Motors and Wal-mart (for example General Motors pays over $70 million a year just to buy the heartburn drug Prilosec for its employees and they are not happy). True to form, however, the pharmaceutical industry is not one to take all this lying down. It's fighting back on all fronts, in a series of vicious attacks, coupled with some say consumer manipulation.

Before we study the attack strategy of big pharma, lets get to know the industry a little better and the regulation that defines its operating parameters. Nowadays, barely an hour can go by on the TV without us hearing from Big Pharma. Meanwhile, in other industrialized nations, the provision of universal healthcare means that drug prices are largely controlled by governments. Drug companies have not been allowed such freedom to either set prices for patented drugs or to advertise directly to the consumer. Consequently the US consumer ends up not only paying for the privilege of being propagandized by the drug companies at home, they also subsidize lower drug costs abroad where prices are regulated by the government. Put all these factors together and there's little mystery as to why prescription drug costs are spiralling out of control in this country.

To understand where some of this  behaviors of the branded drug companies come from, it is instructive to look at several case studies. Case Study #1 Blockbuster Nexium: The marketing of the heartburn drug Nexium by AstraZeneca to counter the expiry of its patent on the similar drug Prilosec. Schering-Plough currently used similar tactics to convert people from the allergy drug Claritin coming off patent, to the almost identical branded drug Clarinex. Case Study# 2 - Blockbuster Taxol: The tactics of Bristol-Myers Squibb to keep its monopoly on the cancer drug Taxol, originally a  from the taxpayer funded National Institutes of Health.

Case Study #1: Blockbuster Nexium, by AstraZeneca Thanks toour bad eating habits, American are notorious for stomach related problems, and this has proved to be a gold mine for the drug industry. Stomach ulcer and heartburn drugs like Prilosec, and Zantac before it, were the largest selling blockbusters of their time. In 1995 AstraZeneca drew up a battle plan as its 6 billion-dollar-a-year heartburn drug, Prilosec, was going to lose its patent in April 2001. After years of work, the attack team came up with a solution of launching a successor drug that was basically the same as Prilosec, but would be under patent when Prilosec lost its patent. They also used every loophole available in the Hatch-Waxman Act to construct a legal minefield for would-be copy-cats, to extend the Prilosec patent as long as possible, and give AstraZeneca more time to convert Prilosec users over to Nexium. The related legal battles over the Prilosec patents continue to this day and are closely watched by those that follow drug prices.

To convert post-patent Prilosec users to its patented sibling Nexium, AstraZeneca spent about $0.5 billion a year in adverting of this single drug, making it at the time the most advertised drug in the US (taking over from Prilosec). And, so far that's paid off handsomely, as 60Nexium. Nexium is one-half the Prilosec molecule and works pretty much the same, but it is just chemically different enough to win a patent of its own. The marketing spin that Nexium is better at dealing with eroded esophagus is good for converting Prilosec users that watch prime time TV over to Nexium but, according to the an article in the Wall Street Journal, is built on very shaky scientific foundations. According to the article, four studies were commissioned to see if Nexium was better at healing eroded esophagus. Two studies found it wasn't any better at all and the other two found it was better only by a little. Based on that little bit of evidence we all got to hear about eroded esophagi and purple pills on a daily basis! Such tactics form a common strategy for maintaining revenue as drugs come off patent. A similar strategy was being employed to convert users of the allergy drug Claritin to the new patented Clarinex.

Case Study #2: Blockbuster Taxol, by Bristol Myers Squibb Bristol-Myers Squibb was  being sued by 29 states for illegally delaying generic competition of its blockbuster cancer drug Taxol and costing governments and consumers billions of dollars, as well as costing lives. The basis of the suit is the claim that Bristol-Myers Squibb misled the U.S. Patent Office to delay generic competition on Taxol. But there is more! You see, Taxol is derived from the bark of the Pacific Yew tree and its pharmaceutical benefits were discovered not by Bristol-Myers but by the taxpayer-funded National Institutes of Health. The NIH handed Taxol over to Bristol-Myers in 1991 as a big gift. In return Bristol-Myers, who charges a hefty price for Taxol, has acted like a badly spoiled child not wanting to share this gift with anyone, even ten years later. Bristol-Myers Squibb, similar to what AstraZeneca did in setting up its minefield around Prilosec, has used the trick of staggered patents of every technique and methodology used to serve up Taxol to maintain its monopoly on the taxpayers' gift to them. That’s like your stockbroker taking your watch to tell you what time it is.

This is such a common strategy of counter-attack by the brand name companies against the generics that state governments, consumers, companies and health insurers that end up footing the bill for prescription drugs are themselves challenging it at every turn. In addition to these lawsuits and angry governments, the planned heir to the cancer drug throne, a drug known as Erbitrix, developed in a joint venture with ImClone Systems, was rejected by the FDA and wound up in that scandal with Martha Stewart. These case studies were selected to give an idea of the  tactics used by the drug industry to boost sales revenues. But, of course, the tactics dont stop there. Following is a small sampling of other techniques employed to keep sales revenues and drug prices high. Marketing to the medical profession. Drug companies spend the vast majority of their direct marketing budgets (about 85% of them) not on marketing directly to the public, but on marketing directly to doctors. This consists mostly of giving doctors buckets full of free samples by very attractive female reps (HEY SEX SELLS) about $9 billion worth noting that patients who start on free samples often convert to paying customers. It also includes giving doctors free dinners, sports tickets and other gifts, sponsoring conventions for them, and advertising in medical journals. In all, marketing to the medical profession costs the drug industry about $16 billion a year. Advertising to consumers through pharmacies. This newest form of direct-to-consumer advertising comes in the form of what looks like an educational booklet from the pharmacy about various treatments for your particular condition. It's provided for free when you purchase your prescription drugs, and looks like a public service provided by your trusted pharmacy. The targeted consumer would have to get their magnifying glasses out to see that these are actually advertisements from the branded drug companies. The trusted pharmacies are, of course, amply compensated for their distribution efforts and access to their databases for target marketing purposes. Advertising Agencies Participating in Clinical Trials. Believe it or not, those same drug agencies that bring us the subliminal messages of eroded esophagi using big canyons, are entering the business of performing clinical trials for their clients. This should lower both advertising costs and expenses of clinical trials, for there is every incentive for the advertising agency to find that their tested drug is just fantastic. After all, they will have an exclusive on the advertising account once the product is launched. As noted, these case studies and other techniques are just a small sampling of the techniques the branded drug companies use to stay alive and profitable in the face of competition, decreased innovation and increasing opposition from many quarters. It is remarkable that the granting of 20-year monopolies and the gifts of publicly funded research can't help this industry solve its profitability problems, let alone that it increasingly fails to provide value-added service to the public. Surely it is time to re-think the viability and sustainability of the branded drug sector in its current form. 

July 06, 2011

How money influences politics and the health of a nation

Can You Be President, Senator Or A House Representative?

By Melvin J. Howard

Of course, you can! But under the current system, the way it is organized, even if you were the best person for the job you would, statistically speaking, not usually stand a chance unless you could raise at least $900,000 in campaign cash to spend in a house election, $5,000,000 for a senate election, and about $100 to $200 million for presidency adjust for inflation (that is the same as raising $270,000 to $540,000 per day, everyday, for one year). To get a sense of how much money is involved consider the fact that in 1976 the candidates and parties spent $160 million on the presidential elections, $1.2 billion in the 2000 elections, and $4 billion in the 2004 elections. The only way you can come up with $300 million, better yet $500 million to assure presidency, would be to have the support of wealthy interest groups. Public finance limits you by law, to $45 million if you choose to accept public finance help. So the question then remains what is to happen to the best person for the job if they have no money and don’t see things the way the big corporations, wealthy business owners and lobby groups see them. The current system has proven that the rule of the game, rather than the exception, is that if you don’t have the support of corporations, wealthy business owners and certain lobby groups, you will not even have a chance of holding major public offices. In 2002, 98% of House incumbents (those already holding a seat) and 85% of Senate incumbent were re-elected. Through the connections and loyalties that they have formed while in office, the incumbents are also able to raise far more in campaign funds than the challengers (a major reason for the re-election rates). The U.S. House re-election rate has been at over 90% for the last two decades. In the last 20 years, it was at its lowest point in 1970, when, if you were a House member already, you would have had an 85% chance of being re-elected. Odds of beating a US House incumbent based on spending by the challenger in 2000 elections:

Spending by Challenger 
Odds of Winning

$500,000-$1 million
$1 million - $1.5 million
Over $1.5 million
Under $500,000
Money raised in 2002 election cycle: Senate:

Type of Candidate
Total Raised
of Candidates
Average Raised
$71, 945, 307
Open Seat

Type of Candidate
Total Raised
of Candidates
Average Raised
Open Seat

Spending vs. Winning stats for 2000 election cycle:

Average Winner Spent
Average Loser Spent
Number of Incumbents Seeking Reelection
Number of Incumbents Reelected
Incumbents Reelection Rate


Average Winner Spent
Average Loser Spent
Number of Incumbents Seeking Reelection
Number of Incumbents Reelected
Incumbents Reelection Rate

Biggest Contributions in the 2002 Elections for Senate candidates (notice the composition of the contributors in this list):
Goldman Sachs
Jon S. Corzine (D-NJ)

Emily's List
       Deborah Ann Stabenow (D                                            Mich)
Emily's List
Jean Carnahan (D-Mo)
Emily's List
Jeanne Shaheen (D-NH)
Goldman Sachs
Charles E. Schumer (D-NY)
Emily's List
Barbara Boxer (D-Calif)
Citigroup Inc
Charles E. Schumer (D-NY)
William V. Roth Jr. (R-Del)
Olympia J. Snowe (R­Maine)
Robins, Kaplan et Al
Michael V. Ciresi (D-Minn)
Bear Stearns
Charles E. Schumer (D-NY)
Morgan Stanley
Dean Witter & Co
Charles E. Schumer (D-NY)
Microsoft Corp
Slade Gorton (R-Wash)
Credit Suisse First
Charles E. Schumer (D-NY)
Emily's List
Rebecca Yanisch (D-Minn)
Credit Suisse First Boston
Rudolph W. Giuliani (R-NY)
Alfonse M. D'Amato (R-NY)
Bear Stearns
Chris Dodd (D-Conn)
Merrill Lynch
Charles E. Schumer (D-NY)
Kushner Companies
Frank R. Lautenberg (D-NJ)
Walter F. Mondale (D-Minn)

Arlen Specter (R-Pa)
Mandalay Resort Group
John Ensign (R-Nev)
Fidelity National Financial
Matt Fong (R-Calif)
Blank, Rome et al
Arlen Specter (R-Pa)
Citigroup Inc
Alfonse M. D'Amato (R-NY)
Altheimer & Gray
Gery J. Chico (D-Ill)
Lehman Brothers
Charles E. Schumer (D-NY)
Equitable Companies
Alfonse M. D'Amato (R-NY)
Citigroup Inc
Hillary Rodham Clinton (DNY)

General public contributions for 2002 election cycle:

The big corporations and the wealthy throw in large sums of money towards their candidate’s election. It actually becomes a race of who has the most money, in a sense. Interestingly, however, the general U.S. population is very non-participative. First, often only about 12% of Americans, on average, vote. The percentage that contributes any money to the proposed candidates (notice the use of the word ‘proposed’ instead of chosen, because the public often have nothing to do with choosing the proposed candidates) is even smaller, as this data shows:
Total US Population (Nov 13, 2002)
Total US adult population (age 18+)
% of US population giving $200+
% of US population giving $1,000+
% of US adult population giving $200+

 % of US adult population giving $1,000+ 0.12%


Political parties: How much they collect every election:

It is not only candidates that can collect donations for elections. Political parties also collect money every election cycle - from individuals, lobby groups and corporations. Here are the amounts collected for the 2001-2002 period for the parties only (without counting the presidential candidates amounts):
Democratic Party
Republican Party

This is over $1 billion in total.

When a congressman or woman retires, their political campaign funds are not taxed.

The Network:

An examination of past U.S. president’s election funding reveals how the system works from a certain perspective. George Bush raised $191 million in campaign funds in his last election in 2000, followed by Al Gore with $133 million, with the remaining candidates trailing far behind. Bush was the major recipient of all campaign funds from the oil and gas industry, receiving more money from that industry in that year alone than any other federal candidate in the last decade. The biggest companies in that industries to contribute in terms of dollar value were Texas-based, the biggest being, Enron. Interestingly, other energy industries also spent heavily on Bush, beating all their election-spending records by huge leaps. The electric and coal industries all spent heavily on the elections and on Bush in particular (the coal  industry spent 3 times what it spent the last elections before that). Bush was also the top recipient of the nuclear power industry’s generous contributions. In this same election, as you may expect, the alternative energy industry (wind, geothermal and solar energy) backed Al Gore, although their funds were dwarfed by those of the oil, coal and electricity industries. Now let us see what Bush’s administration looked like. One would expect that in a democracy, you would tend to find the most suitable people, from all walks of life, leading a country. You would expect to find teachers, doctors, artists, musicians – and so on. After all, each major group would tend to elect its representatives. So you would expect to find representatives from various groups (not just business groups). Let’s see how Bush’s administration measured up. As you will see, by some ‘coincidence’, there is little randomness in it. Most of Bush’s past administrations, the people who ran America, have three things in common: (1) almost all of them have extensive corporate connections; (2) some are the exact same ones that were there when his father was president (3) most of them have been friends for a very long time and done business together. Completely lacking representatives of other occupations and lifestyles that normally compose the public of America). Out of a population of almost 300 million Americans, in a democratic society where you might expect some randomness is the backgrounds of the top leadership, how ‘coincidental’ is it that only a group of old friends who happen to be well connected in big business and intelligence/military (and hardly from any of the other thousands of lifestyles) has been ‘elected and appointed to represent the people’?

President George Bush's Incoming Cabinet:
Cabinet Position
Cabinet Official
Corporate Connections
Agriculture Secretary
Ann Veneman
Monsanto, Pharmacia, Calgene
Attorney General
John Ashcroft
AT&T, Monsanto, Microsoft, Enterprise
Rent-A-Car, Schering-Plough
Commerce Secretary
Don Evans
Tom Brown Inc. (oil & gas),
TMBR/Sharp Drilling
Defense Secretary
Donald Rumsfeld
Pharmacia, Motorola, Sears, G.D.
Searle, newspaper giant Tribune Company
(L.A. Times and Chicago Tribune), Amylin
Pharmaceuticals, Kellogg, Asea Borwn
Boveri, Allstate, Gulfstream Aerospace

Energy Secretary
 Spencer Abraham
GM, Ford, Lear
Health and Human Services

Tommy Thompson
Amtrak, Philip Morris, GE, Merck, Abbott
Interior Secretary
Gale Norton
Brownstein Hyatt & Farber, Delta
Petroleum, NL Industries, BP Amoco, Ford
Motor Company
Labor Secretary
Elaine Chao
Northwest Airlines, Clorox, C.R. Bard,
HCA-The Healthcare Company, Dole Food,
Bank of America
Secretary of State
Transportation Secretary
Colin Powell
Gulfstream, America Online
Lockheed Martin; Northwest Airlines;
Greyhound; United Airlines; Union Pacific;
Treasury Secretary
Paul O'Neill
Alcoa, International Paper, Lucent
Anthony Principi
Federal Network, QTC Medical
Affairs Secretary

Services, Lockheed Martin, Microsoft,

Schering-Plough Corp., Ford Motor
Company, Qualcomm Inc.

It is interesting to see how many conflicts of interest existed in these cabinet posts. Normally, you would expect that the best person for agriculture would run agriculture; the best for commerce would get that job, and so on. But it is nothing like that. For example, the Health and Human Services Secretary is meant to represent the people’s health for betterment, yet he has a vested interest in Philip Morris, a company that profits hugely from making and selling products that reduce health. The Agriculture Secretary is meant to look after the well-being of American agriculture and the food of the people, yet she has a vested interest in Monsanto and Pharmacia. Monsanto was one of the most controversial multinational, in Europe and Japan for its forceful attempt to bring in genetically modified foods that aren’t fully tested and causing U.S. grain to be rejected from those continents. The Commerce Secretary, was Don Evans, is also in charge of the National Oceanic and Atmospheric Administration, which puts him in direct control over the country’s oceans areas, where 25% of U.S. domestic oil and 26% of its natural gas come from. Don Evans actually ran his campaign-funding vehicle. His connection with Texas oil businesses is substantial. The Energy Secretary, Spencer Abraham, was the single biggest recipient of campaign funds from the automotive industry (received over $700,000) and the lobby group that opposes setting fuel economy regulations. Colin Powell served on the boards of Gulfstream (Kuwait and Saudi Arabia are major markets for this company) and AOL. His AOL shares rose $4 million on its merger with Time Warner. Interestingly, his son Michael Powell was the only FCC commissioner who voted to have the AOL-Time Warner merger go through without review. Michael Power was  appointed by George Bush as the FCC chairperson. The Treasury Secretary was heavily funded and worked in the largest transport companies. I like to point out there is nothing wrong with corporations, but keeping in mind that corporations are always trying to maximize shareholder value, control more market share and make more money, it is hard to see sometimes how the interests of the public would be considered paramount and transparently with the way current government elections are structured. Paul O'Neill, the Treasury Secretary, was Alcoa’s CEO and Chairman. Alcoa’s lobbyist, the Texas law firm Vinson & Elkins, was George Bush’s number 3 contributor. While Bush was Texas’ governor, Alcoa secured a legal loophole that allowed it to dump 60,000 tons of sulfur dioxide into the air annually, making it one of the state’s top polluters.
President Bush's Advisors:

Corporate Connections
White House 
Chief of Staff
Andrew Card

Director of the Office of Management and Budget     
Mitch Daniels
Eli Lilly, Citigroup, General Electric, Merck

National Security Advisor
Condoleezza Rice
Chevron (Chevron

 actually named a 130,000­
ton oil tanker after her),
Charles Schwab,

Was oil and finance companies influencing national security policies? The point of this is not to say that all corporations are ‘bad’. (Not at all) They have an interest in expansion and profit. But the point here is that it is, in many people’s opinions, not a good idea to have corporations and only corporations be the main controllers of government ideas with such powerful force. The people are so supposed to be represented at all levels in government, but they cannot because of the way things have been set up.

(The best positions, for years, have not gone to who is best for the job, but to who gave money during the campaign – hardly a model for efficiency and transparent functionality. Notice that the list hardly has positions filled by people who didn’t contribute. Instead of ambassadorial jobs going to people who have proven their diplomacy and world cooperativeness, the best ones of them go to whoever gave money.) Lets take a look at President Bush’s past ambassadorships.

To All
To All
Only to Bush
J. Thomas Schieffer

W.L. Lyons Brown

Richard Blankenship

Stephen Brauer

Russell Freeman

Clark Randt, Jr.

John Danilovich

Craig Stapleton

Stuart Bernstein

Hans Hertell

Bonnie McElveen-Hunter

Howard Leach

Daniel Coats

Nancy Brinker

Robert Blackwill

Richard J. Egan

Melvin Sembler

Sue Cobb

Howard Baker

Peter Terpeluk

Anthony Gioia

John Price

Margaret Tutwiler

Clifford Sobel

Charles J. Swindells

John Ong

John Palmer

Robert W. Jordan

Frank Lavin

Ronald Weiser

George Argyros

Charles Heimbold

Mercer Reynolds

Robert Royall

William S. Farish


By December 2003, President Bush had raised over $100 million, a few times more than his closest rival had, and all from just over 300 individuals bundling contributions together for him. These individuals include people such as Thomas Nassif of the Western Growers Association, lobbyists Charles and Judy Black, William McGuire who is CEO of United Health Care Group, and Warren Staley who is CEO of the agribusiness giant Cargill Inc.. Bush was able to raise such record-braking amounts from a small group of people because it was shown that he was willing to get their needs taken care of. Because the elections have become almost entirely won based on money expenditure (statistically speaking), these people insured by their dollars that he was elected. The industries that benefited most from Bush’s re-election, due to changes in the law that he proposed, was the pharmaceutical industry (no limits on drug costs for the Medicare system so the companies can charge as they wish), agribusiness (genetically-modified foods, subsidies, etc), and energy industries (repeal or lessen pollution restrictions). In this system, you have a government we have now seen how it becomes elected, and how the results are shaped. This is not an attempt to point to any one conspiracy or anything like that. This is not I repeat a conspiracy theory far from. And it certainly not condemnation of any one political party. But the facts as they are show us that there are people who are aware and those who are not. And those who are aware have goals, some with very large global goals, which they pursue. Some goals may be noble and some not. And nothing is impossible. What is amazing about the education system is that everybody knows that it trains people to know certain facts but leaves them wholly unprepared for the world as it functions today. It has always been one thing that differentiated the masses under control with the controllers and that was a lack of awareness and a withholding of knowledge.