I recommend responding in a 275 word response. You can use your own experience to reflect how the articles relate to
Do you agree with the decision made by the President of Brazil to bypass Merck’s patent?
How does it relate to monopolies and price discrimination?
The economics behind why toilet paper is sold out (Chapter 8)
David Brancaccio (Links to an external site.) and Rose Conlon (Links to an external site.) Mar 19, 2020. Raising prices might curb panic-buying, but it’s also price gouging.
Price discrimination is baked into a lot of mundane daily transactions. “If we see a sale; if we see coupons; if the price is different for seniors or students at a movie theater than it is for adults — all of that counts as price discrimination,” said Homa Zarghamee, an economics professor at Barnard College who advises Core Econ (Links to an external site.), the publisher of the open-source economics textbook Marketplace’s David Brancaccio is reading with listeners (Links to an external site.). We’re perhaps most accustomed to it when we’re buying airfare, knowing that purchasing a ticket months in advance will likely be cheaper than buying it the night before.
Price discrimination looks a little different in this era of novel coronavirus, however. On eBay, right now, people are still selling packs of toilet paper at inflated prices given the bare shelves in some stores. Many sellers are presumably profit-seeking scalpers, who grabbed the TP early. When stores can’t use dynamic pricing when demand surges — because in an emergency, we call that “price gouging” — one consequence is the scalping, a so-called “secondary market.” Some see “efficiency” in letting stores or scalpers jack up prices to what ever people are willing to pay.
But, Zarghamee says, you have to account for income inequality. “Of course, that’s revealing something that’s already true in markets, which is that your willingness to pay determines whether you’re going to get the good to begin with,” she said. “But what gets lost in a lot of this talk is that the term ‘willingness to pay’ makes it in some sense sound like we’re all starting with the same amount of money. And so our willingness to pay is a good indication of how much we actually want something. And that gets very distorted when you have inequality because, really, what willingness to pay is, is your willingness and ability to pay. And so somebody with much higher income will always be willing to pay more because they’re able to pay more.”
Sears CEO Lashes Out at Suppliers Trying to ‘Take Advantage’
By Nick Turner, May 15, 2017
Sears Holdings Corp. (Links to an external site.) Chief Executive Officer Eddie Lampert (Links to an external site.) vowed to fight back against suppliers trying to take advantage of his company, saying that “dire predictions” about the retailer’s future have hurt its position with vendors. The department-store chain has been working with suppliers to ensure that their level of credit risk is “both affordable and appropriate,” but some vendors have tried to capitalize on its situation, Lampert said in a blog post (Links to an external site.). “There have been examples of parties we do business with trying to take advantage of negative rumors about Sears to make themselves a better deal,” he said. “In such a case, we will not simply roll over and be taken advantage of — we will do what’s right to protect the interests of our company and the millions of stakeholders we serve.”
Lampert pointed to one supplier in particular, One World, which makes power tools under the Craftsman brand. The business, part of Hong Kong-based Techtronic Industries (Links to an external site.), has threatened to file a lawsuit against Sears as it attempts to get out of a contract, Lampert said. “We will take the appropriate legal action to protect our rights and ensure that One World honors their contract,” he said. On Monday, Sears sued One World in state court in Chicago, claiming the supplier is refusing to provide power tools so that One World can sell them to other retailers at a higher price. According to the complaint, One World wants to end a supply agreement by claiming that Sears may soon stop purchasing power tools. Sears is seeking a judge’s order that it hasn’t breached the supply agreement.
A representative for Techtronic in Hong Kong didn’t immediately respond to requests for comment after business hours. Sears’s shares fell as much as 12 percent to $8.36 in the wake of the comments, marking the worst intraday decline since March 22. The stock had been up 2.2 percent this year through the end of last week.
Red Ink
Once the world’s largest retailer, Sears has racked up more than $10 billion in losses since 2012. Lampert, also the chain’s biggest investor, has helped keep it afloat by injecting more than $1 billion in financing into the operations. The company also has sold or spun off assets to raise cash, including its Craftsman tool brand, Lands’ End clothing business and hundreds of stores.
Sears added so-called going-concern language (Links to an external site.) to its annual report filing in March, acknowledging there was “substantial doubt” about its future. The move sent the stock on its biggest decline in more than two years. But Lampert indicated on Monday that the pessimism has been overblown — hurting the company in the process. “While we are not asking to be spared from informed opinions about our business performance, the recent wave of dire predictions about our company’s future have done harm to our business,” he said.
https://www.bloomberg.com/news/articles/2017-05-15/sears-ceo-lashes-out-at-suppliers-trying-to-take-advantage (Links to an external site.)
Brazil to break Aids drug patent
Brazil’s president has authorized the country to bypass the patent on an Aids drug manufactured by Merck, a US pharmaceutical giant.
The country will import a cheaper, generic Indian-made version of the patented Efavirenz drug. The decision came after talks between Brazil and the US company broke down. Merck had offered Brazil a 30% discount on the cost of the drugs but the country wanted to pay the same price as Thailand, which gets a larger discount.
Small royalty
Merck offered Brazil almost a third off the cost – pricing the pills at $1.10 (£0.55) instead of $1.59. But Brazil wanted its discount pegged at same level as Thailand, which pays just $0.65 per pill. Now, though, it will source Indian-made versions of Efavirenz for just $0.45 each. “From an ethical point of view the price difference is grotesque,” said President Luiz Inacio Lula da Silva. “And from a political point of view, it represents a lack of respect, as though a sick Brazilian is inferior,” he added.
He said that the compulsory licensing of Efavirenz was a legitimate and necessary measure to guarantee that all patients had access to the drug.
Brazil’s decision means that Merck, which holds the patent for the drugs, will only get a small royalty for the generic versions of the drugs purchased. Under Brazilian law and rules established by the World Health Organization, such a license can be granted in a health emergency or if the pharmaceutical industry abuses its pricing.
‘Advancing access’
Some 75,000 Brazilians use Efavirenz, out of a total of 180,000 people who receive free antiretroviral drugs from the government. Aids activists in the country welcomed the decision. “This is certainly an important advance in terms of widening access. We are very happy that Brazil is moving in the right direction,” said Michel Lotrowska of NGO Medecins Sans Frontieres. Thailand’s decision to break Merck’s Efavirenz patent, as well as drugs produced by two other firms, led to the country being placed on a US list of copyright violators.
The company said that Brazil’s decision could discourage pharmaceutical firms from investing in treatments for illnesses prevalent in the developing world. Brazil’s move, Merck said, sent “a chilling signal to research-based companies about the attractiveness of undertaking risky research on diseases that affect the developing world.” Published: 05/04/2007
US bans key Indian drug imports
The United States Food and Drug Administration (FDA) says it has banned the import of more than 30 generic drugs made by Indian drug firm Ranbaxy.
The FDA said the decision was made after it found manufacturing quality problems at two of Ranbaxy’s factories in India. The import ban affects some popular generic versions of antibiotics and cholesterol medicines. Ranbaxy says it is “disappointed” with the decision of US drug authorities. The FDA said the move would not create any shortages of drugs in the United States, which could be obtained from other sources. In July, US prosecutors had alleged that Ranbaxy, India’s largest pharmaceutical company, deliberately lied about the quality of its low-cost drugs, including those for HIV. The US Department of Justice wanted the firm to hand over key documents relating to drug testing procedures.
‘Baseless’ Ranbaxy said it was “very disappointed” with the FDA action. “The company has responded to each concern FDA has raised during the past two years and had thought progress was being made,” the firm said in a statement issued on Wednesday.
The firm was paid millions of dollars by the US government to provide low-cost HIV drugs for President Bush’s emergency plan for AIDS relief, which was set up to help AIDS patients in 120 countries around the globe. Defending the reliability of its drugs, Ranbaxy had said the US Food and Drugs Administration had tested over 200 random samples of its products and found them “complying with all the specifications”. In June the Japanese pharmaceutical company Daiichi Sankyo agreed to pay more than $4bn (£2bn) for a controlling stake in the firm.
The US government has been investigating Ranbaxy since February 2006 when the FDA issued a warning letter over what it said were manufacturing violations found at a Ranbaxy factory in India. Since then Ranbaxy has been trying to resolve the issue with US regulators. Last year, US officials seized documents from Ranbaxy’s US headquarters in New Jersey. In July, Justice Department prosecutors alleged that the company had systematically lied about the makeup of its generic drugs, which include a cheaper version of US drug maker Merck’s cholesterol pill Zocor. Ranbaxy has denied any wrongdoing, saying the allegations were baseless.
The FDA will only approve cheaper generic drugs if they can be shown to be equivalent to the original drug. US investigators had also alleged that Ranbaxy has used unapproved ingredients in its drugs.
Published: 09/17/2008
India’s Solution to Drug Costs: Ignore Patents And Control Prices –
Except For Home Grown Drugs
Drug pricing is a major issue in India (Links to an external site.). The Indian government believes that the prices of lifesaving drugs shouldn’t be set by market forces. In a country where very few people have health insurance, 70% of Indians pay for healthcare expenses out of their own pockets. (Links to an external site.)When it comes to cancer drugs, the problem is even more acute. There is no way that people in India can pay even a fraction of the cost for drugs that can be priced at $50,000/year in the West.
This issue was again in the news last week when the Indian Supreme Court denied a patent application for Glivec (also known as Gleevec), an important treatment for leukemia made by Novartis (Links to an external site.). (Derek Lowe has done a great job in explaining the nuances of this patent decision, which won’t be repeated here.) (Links to an external site.) Given that there is no patent for Glivec in India, any generic drug manufacturer in India can now make and sell this drug, which will be priced at a fraction of what Novartis charges in the rest of the world. This is good for the company that will profit from usurping all of the R&D that Novartis put into the discovery and development of Glivec. It is also good for patients who couldn’t afford Glivec. However, it must be noted that Novartis provides Glivec free of charge to 16,000 patients in India, roughly 95% of those who need it via the Novartis “Glivec International Patient Assistance Program”. (Links to an external site.) The remaining 5% are either reimbursed, insured, or participate in a very generous co-pay program. Thus, not granting a patent for Glivec really hasn’t prevented patients from getting this life-saving medication.
The Glivec situation is not unique. India has granted compulsory licenses to other cancer drugs, including Bayer’s Nexavar, Roche’s Tarceva, and Pfizer (Links to an external site.)’s Sutent. These licenses allow India generic drug manufacturers to make these drugs with impunity. These actions have been justified by the secretary of India’s Pharmaceuticals department in the following way: “We need to ensure that expensive drugs are available at affordable rates to the poor.” (Links to an external site.) It is hard to argue with that philosophy. However, India is expanding this policy beyond expensive cancer drugs. Again, just this past week, the Indian Supreme Court refused to prevent an Indian generic manufacturer, Glenmark Pharmaceuticals, from manufacturing and selling Merck (Links to an external site.)’s diabetes drug, Januvia, in India. Merck will likely appeal this decision. While it is an important drug, Januvia does not carry an expensive price tag. In fact, when it was launched in India, Merck charged $0.86/tablet, one-fifth the US cost. (Links to an external site.) Nevertheless, despite recognizing the need to make Januvia affordable in India, Merck’s intellectual property for this drug will be ignored in this country for the foreseeable future.
In addition to not granting patents for new drugs, the Indian government sets prices for drugs that are patented, but this is not just for expensive medications. There are now 348 drugs that have price caps. However, India has now introduced a new element to this policy. Drugs that have some form of innovation that can be attributed to Indian researchers can be IMMUNE from price controls for five years. (Links to an external site.) Three types of innovation can qualify for this benefit:
1) drugs that arise from indigenous R&D;
2) improvements by an Indian company on a process for making an existing drug;
3) development of a new drug delivery system by Indian R&D.
The rationale for this policy was explained by a government official: “This would spur innovation and make sure price-control regime doesn’t dissuade pharma firms from research and development”. You can also envision that these new rules could be used by Indian generic companies to circumvent pharmaceutical company patents. For example, what is to stop an Indian company from developing a new process for making an important new drug developed by a non-Indian pharma company? It would not be surprising for the Indian government to allow a patent on this process and again the innovative company would be out of luck in protecting their commercial rights for this medicine in India.
If all of this wasn’t galling enough, a New York Times editorial came out in support of the Indian decision on Glivec: (Links to an external site.)
“(This decision) could help poor patients get drugs at prices they can afford while preserving an incentive for true innovation.”
I don’t think that India is preserving an incentive for innovation. If anything, recent Indian policies are sending a signal that intellectual property is tenuous in this country and will be granted only in those cases where it can benefit India. Thomas Friedman has taught us that the world is flat. It may well be. But, when it comes to drug pricing and intellectual property, the plane is severely tilted in India’s favor.
Supreme Court protects US copyrights:
Supreme Court rules 7-2 in favour of protecting copyright
The threat of cartoon characters such as Mickey Mouse losing their copyright has been lifted by a Supreme Court ruling in the United States. The decision is a victory for Hollywood and companies such as Disney and AOL Time Warner who stood to lose millions of dollars worth of archives to the public domain.
Internet publisher Eric Eldred had argued that a recent change to the law – extending the copyright ownership of old songs, books and cartoon characters – was unconstitutional. But the court’s 7-2 ruling gives Congress permission to repeatedly extend copyright protection. It means internet publishers and others will not be able to make old books available online and use the likenesses of Mickey Mouse and other old creations without paying royalties.
Justice Ruth Bader Ginsburg said: “History reveals an unbroken congressional practice of granting to authors of works with existing copyrights the benefit of term extensions so that all under copyright protection will be governed evenhandedly under the same regime.”
Public harm Justices said the copyright extension, named after the late Congressman Sonny Bono of California, was neither unconstitutional overreaching by Congress nor a violation of free-speech rights. In 1998, Congress extended by 20 years copyright protection, which until then had been granted for 70 years after the death of the author.
For anonymous works or those owned by companies, the law made the new limit 95 years. Justices John Paul Stevens and Stephen Breyer opposed the ruling, saying the court was making a mistake. Justice Breyer said:“The serious public harm and the virtually non existent public benefit could not be more clear. “Copyright holders stand to collect about $400m more a year from older creations under the extension.”
Good incentive Justice Stevens said the court was “failing to protect the public interest in free access to the products of inventive and artistic genius”. Had the ruling gone the other way copyrights for movies such as Casablanca, The Wizard of Oz and Gone With the Wind could have been threatened. Protection for the version of Mickey Mouse portrayed in Disney’s earliest films, such as 1928’s Steamboat Willie was also due to expire. The ruling affect small music publishers, orchestras and church choirs who must pay royalties to perform some pieces. A Disney spokeswoman Michele Bergman said the ruling “ensures copyright owners the proper incentive to originate creative works for the public to enjoy”. Published:January 16, 2003
Pfizer Races to Reinvent Itself
By Katie Thomas May 1, 2012
For years, drug companies have known that their days of plenty were numbered, that the moment would arrive when the best-selling drugs that had driven two decades’ worth of profits would lose their patent protection and succumb to competition from generic alternatives. Without new blockbusters to replace them, profits would tumble.
For Pfizer (Links to an external site.), that day has arrived. Pfizer profited from hits like Lipitor (Links to an external site.) and Viagra (Links to an external site.), and swallowed up smaller companies from the 1990s onward. But it has no immediate successor to Lipitor, the best-selling drug in history, which lost patent protection last fall. The problem was punctuated on Tuesday when the company said that profit declined 19 percent last quarter, largely because of declines in Lipitor sales.
Pfizer — once the Big in Big Pharma — is making a radical shift, one being watched closely by the rest of the industry. It is getting smaller. Last week the company announced it was selling its infant nutrition business (Links to an external site.) to Nestlé for $11.85 billion, and it is expected to divest its profitable animal health business by next year. At the same time, the company is slashing as much as 30 percent (Links to an external site.) of its research budget as part of a plan to focus on only the most promising areas, like cancer and Alzheimer’s disease. “It’s not necessarily smaller per se, it’s focused,” Ian C. Read, Pfizer’s chief executive, said in an interview Tuesday. “We are at our heart a biopharmaceutical company focused on applying science to improving people’s quality of life. That is what our core is. That is what will determine our success.”
Pfizer is one of many pharmaceutical companies racing to reinvent itself. This year alone, at least 19 drugs — including the antistroke drug Plavix — are scheduled to lose patent protection, a potential $38.5 billion in lost sales, according to an analysis by Barclays.
Drug executives are asking themselves: “What is it that we now face, given that in the past decade — when everything was going right — we didn’t build with this future in mind?” said Jeremy Levin, who oversaw a similar reorganization of Bristol-Myers Squibb and is about to take over as chief executive at Teva Pharmaceuticals.
At Pfizer, skeptics have questioned the decision to shed some of its most profitable units in favor of doubling down on the risky pharmaceutical business. Pfizer’s nutrition unit grew by 15 percent and animal health by 17 percent in 2011 (Links to an external site.), while its pharmaceutical sales dipped by 1 percent. And Pfizer has suffered some notable flops over the last several years, including the failure of an experimental cholesterol treatment (Links to an external site.) that was seen as a potential successor to Lipitor and poor sales of an inhaled insulin drug (Links to an external site.) that the company eventually abandoned. “It’s a high-risk plan,” said Erik M. Gordon, who teaches business at the University of Michigan. “They’re focusing on what they don’t have the best track record in and they’re spinning off things that are doing pretty well.”
Pfizer spent the last decade buying other big companies. In 2000, it acquired Warner Lambert and with it the rights to Lipitor, which Pfizer had been co-marketing with the company. In 2003, it merged with Pharmacia and added the painkiller Celebrex (Links to an external site.) to its lineup. It acquired Wyeth in 2009 in a $68 billion deal that brought a portfolio of biologic drugs. Last year, Pfizer bought King Pharmaceuticals, a maker of pain drugs. The acquisitions, some said, turned Pfizer into a Frankenstein’s monster — a giant stitched together from the scraps of smaller companies that lurched forward with little purpose. “I think the company sort of lost their way in the years before the Wyeth acquisition,” said Catherine J. Arnold, an analyst for Credit Suisse. Mr. Read said he agreed. “I think it was broken — I think we were spending huge amounts of money,” said Mr. Read, who took over as chief executive in late 2010 after Jeffrey B. Kindler resigned abruptly (Links to an external site.). “We weren’t producing the drugs we needed and frankly that was seen in the marketplace.”
Analysts said Pfizer’s nutrition deal and the divestiture of the animal health business is a way to tide over shareholders while it undertakes more substantial changes to its business model. The company has said it plans to use most of the cash from the deals to buy back stock, though studies have repeatedly cast doubt on the efficacy of such moves by corporations. Pfizer said Tuesday that it had repurchased $1.7 billion in stock in the first quarter, and expects to buy back about $5 billion by the end of the year. The company reported earnings of $1.79 billion last quarter, or 24 cents a share, compared to $2.22 billion, or 28 cents a share over the same period last year.
Investors seem to be buying into the company’s strategy so far: Pfizer stock has risen nearly 8 percent over the last year. Pfizer’s stock closed at $22.78 on Tuesday, down 12 cents, or less than 1 percent. Even so, the company’s decision to cut research budgets as it is planning to recommit to its pharmaceutical core struck some as risky. Mr. Gordon, the Michigan business professor, called it a “magic trick.” It’s a magic trick, however, that most major pharmaceutical companies are also trying. “The question is how do you remain successful and sustain your operations if you’re investing less and less in R&D?” said Kenneth I. Kaitin, a professor and director of Tufts University’s Center for the Study of Drug Development. “The answer to that is to try to find a new way and a more efficient mechanism for discovering and developing drugs.”
Pfizer plans to reduce its research budget from $9.4 billion in 2010 to $6.5 billion to $7 billion this year. It closed a research center in Britain and has been trimming its facility in Groton, Conn., and moving resources to areas closer to universities in Boston and Cambridge, England. In 2011, the company ended 91 projects, canceling programs aimed at treating bladder infection, for example, as well as one to treat nasal symptoms from allergies. Company executives have also said they will be on the lookout for smaller acquisitions to fill gaps in their portfolio, and will expand partnerships with academic institutions. Mr. Read said the cuts would not affect the areas that the company has prioritized. “Most of what I cut had a low probability of success,” he said.
While Pfizer does not have another Lipitor, analysts say several drugs seem promising. On May 9, a Food and Drug Administration advisory panel is to consider recommending approval of an oral pill for rheumatoid arthritis. In June, the agency is expected to weigh approval of Eliquis, an antistroke drug that Pfizer is developing with Bristol-Myers Squibb. In corporate strategy, Pfizer is following the path of Bristol-Myers, which in 2009 announced plans to spin off the nutrition company Mead Johnson to focus on acquiring small biotech companies (Links to an external site.). The company has since fared well despite the loss of patent protection for Plavix on May 17. “So long as the blockbuster game was working, people kept playing it,” Mr. Gordon said.
