Enclosing The Ocean Commons

from the insult-to-humanity dept

Cross posted from Open....

The oceans belong to everyone - well, more or less. That is, they form a classic commons. But of course, that fact doesn't stop people from claiming that they own stuff even here:

Molecules derived from marine resources and used for medical applications were worth over $1 billion in 2005, and heat-stable enzymes obtained at undersea vents were worth $150 million. Not surprisingly, the business community has responded by patenting genes derived from marine organisms; the authors were able to identify over 8,500 sequences derived from a total of 520 species in a US gene patent database.

This is a double insult to humanity. Genes are part of the DNA commons and "belong" to everyone or to no one, but certainly not to any one entity. Those genes were extracted from marine animals, which form part of another commons, the oceans' ecosystems, that also belong to everyone or to no one.

But instead of simply recognising those commons, and letting everyone benefit from them directly, the best the patent maximalists can come up with is a cartel, a.k.a. patent pool:

they also suggest that, in the case of marine materials, a patent pool organized within this framework might improve access to genetic information and distribute the risk and profits broadly among far more nations, rather than limiting it to the few countries that can afford high-throughput DNA sequencing.

The logic here seems to be that, of course we need patents, otherwise nobody will go to the trouble of sequencing all of these interesting organisms. What this overlooks is that the cost of sequencing genomes has come down from a billion dollars (for the first human genome) to a few thousand. Next year it will probably be under $1000, and the year after that a few hundred. In a decade, sequencing will cost almost nothing.

What this means is that, once more, intellectual monopolies are being given away needlessly - no quid pro quo is in fact necessary because practically anyone will be able to do this for very low cost. And, once again, it's you and me who lose out, as knowledge is sent to the intellectual equivalent of Davey Jones' Locker....

Filed Under: commons, dna, monopolies, oceans, patents

FDA Suddenly Bans Drugs That Have Been On The Market For Decades

from the perfect-gin-and-tonic-for-fun-and-profit dept

As Techdirt recently discussed, the drug pipeline is running dry, as Big Pharma's patents are beginning to expire, and the drug companies are freaking out. For years they have been spending more money on research and testing and getting fewer results. This year alone they are going to have 11 patents expire on drugs that bring in approximately $50 billion in revenue to the big pharma firms. Of course, the flip side to this is that consumers can start saving about 95% on the price of those drugs, as generics hit the market. The drug companies have gotten to a point where the incremental increases in efficiencies are so small as to be meaningless. What is coming is more personalized and targeted treatments for diseases -- treatments that do not require bulk production of a specific chemical, but individual testing and personalized care, and not lifetime treatments and repeat sales, but cures. The treatments will be expensive to begin with, but they will become less expensive over time. The business model of healthcare is about to change dramatically, and Big Pharma needs to do something to maintain their profits. Unfortunately, they seem to have chosen the path of regulating the competition out of existence, rather than competing and innovating.

One way the drug companies have been coping is to repackage and rebrand health food supplements. Drugs like Lovaza, which is nothing more than the fish oil you can get in health food stores, and lovastatin which has been in use for roughly a thousand years (800 AD) in the form of red yeast rice. In the case of lovastatin, the FDA banned the supplements because they are "identical to a drug and, thus, subject to regulation as a drug." That is very convenient for the drug company, which now charges monopoly rents on the product -- which can increase prices at ridiculous levels.

More recently, the FDA banned 500 prescription drugs that had been on the market and working for years. To be fair, it was really 50-100 drugs (pdf), made by different companies, but that just highlights how there was actual competition in the marketplace for these drugs, which has now been removed. For all of the drugs, there is either a high-priced prescription version, or all the small manufacturers have been removed, leaving a virtual monopoly for one or more larger companies. This process began in 2006 when the FDA decided to remove marketed unapproved drugs (pdf).

The reasoning is that these drugs weren't ever technically "approved" by the FDA. While the FDA has been around for about a century, the business of having the FDA first approve drugs before they could go on the market came about closer to fifty years ago, and a bunch of "unapproved drugs" that were in common usage before that never got approved. The FDA is targeting many of those, even if they have a long history in the marketplace. Conveniently, of course, there always seems to be a pharma company with a monopolized substitute ready.

In 2006 the first "new" monopoly that was created by this FDA process was for the malaria drug quinine sulfate. This left only Mutual Pharmaceutical Company to manufacture quinine in the US (pdf). While malaria is not a disease that affects many people in the US, it is big business worldwide. Malaria causes 300 to 500 million infections and over 1 million deaths each year. Treating this disease with quinine used to cost pennies a day. In fact, the British turned this treatment into a cocktail, the gin and tonic (quinine water).

Another drug removed was the antihistamine carbinoxamine, which was created prior to needing FDA approval, in the early 1950s. It was approved by the FDA in a slightly modified form in 2006. It is now sold exclusively by Mikart, Inc and Pamlab, LLC with no future competition because the FDA has banned all 120 other versions of carbinoxamine. You can imagine just how much that must increase the profits for Mikart and Pamlab on carbinoxamine, though that seems to come at the expense of consumers.

It's really nice being granted a government monopoly.

As for the drugs now being banned in this latest purge, you can argue that it's not really 500 drugs, because many are different combinations of the same 50 to 100 drugs. To be sold, these disapproved drugs will require drug trials and certification -- a massive and expensive process. Under current law, after successful completion of FDA trials these drugs will be granted approval. But in every case these trials are almost certainly not necessary. And, "coincidentally" in almost every case, there is a chemically similar patented version ready to go. This is a pure money grab: replacing old tried and true drugs, with monopoly priced prescription drugs. It just requires removing competing drugs from the market to increase profits.

And with that, I'm off to go have a gin and tonic, while it's still legal...

Filed Under: drugs, fda, health care, monopolies

Senators Want Investigation On Massive Increase In Drug Prices... But Will They Really Seek A Solution?

from the monopolies-are-bad dept

We recently covered the news that the FDA had retroactively granted a monopoly to KV Pharmaceutical on the widely used drug Makena (which is used to prevent premature births). The drug had been sold at $10 per dose, but the second KV got the monopoly, it pushed the price up to $1,500 per dose -- or around $30,000 vs. $200 for a full treatment. The news of this massive price hike certainly got a lot of attention, and now two Senators are asking the FTC to investigate KV Pharmaceutical to see if this is legit. It's nice to see the Senators, Sherrod Brown and Amy Klobuchar, stepping up to express their concern about this, but if they really wanted to make a difference, they shouldn't just be investigating KV. After all, KV is playing by the rules that the US government set up. What they should really be exploring is why we give monopolies on important life saving drugs that create problems like this in the first place?

Filed Under: amy klobuchar, drugs, makena, monopolies, patents, sherrod brown
Companies: kv pharmaceutical

Retroactive Drug Monopoly Raises Rates From $10... To $1,500

from the the-high-price-of-monopolies dept

A bunch of you have been sending in the somewhat horrifying story of how KV Pharmaceutical has been retroactively granted a monopoly on the drug Makena, which is use to prevent premature births. The product has been on the market for years, and normally costs about $10 per dose... but thanks to the new monopoly, the price is immediately jumping up to an astounding $1,500 per dose -- and this is something that many pregnant women need around 20 doses of during their pregnancy. That increases the overall price from about $200 to $30,000. For something that's been on the market for years. I'm reminded of Thomas Macaulay's famous statement:

"the effect of monopoly generally is to make articles scarce, to make them dear, and to make them bad."

Tragically, many obstetricians and the March of Dimes had vociferously supported this move, without understanding the basic economics of monopoly pricing. They thought that granting a monopoly to one company would mean that it would make the drug "more available." Joke's on them, and now they're upset:

"That's a huge increase for something that can't be costing them that much to make. For crying out loud, this is about making money," said Dr. Roger Snow, deputy medical director for Massachusetts' Medicaid program.

"I've never seen anything as outrageous as this," said Dr. Arnold Cohen, an obstetrician at Albert Einstein Medical Center in Philadelphia.

"I'm breathless," said Dr. Joanne Armstrong, the head of women's health for Aetna, the Hartford-based national health insurer.

Doctors say the price hike may deter low-income women from getting the drug, leading to more premature births. And it will certainly be a huge financial burden for health insurance companies and government programs that have been paying for it.

It's really amazing that people don't understand the basics of monopoly pricing and how drastically it has distorted the market for drugs. Hopefully this story of Makena will get some people to wake up as to why this is a massive problem.

Filed Under: drugs, economics, makena, monopolies, prices
Companies: kv pharmaceutical

Chinese Researcher Points Out How Patents Can Hinder Innovation

from the surprising dept

I have no doubt that many Chinese officials understand quite clearly how the patent system is really a protectionist system and are fully intending to use it as an economic weapon against foreign competitors to Chinese companies. It's really kind of brilliant when you think about it. The US has been pressuring China on patent laws for decades, and this way China gets to say it's following exactly what the US has demanded of it, and "respecting" intellectual property, while, at the very same time and using the very same system, basically using it to harm the very American companies who for years have complained about Chinese companies infringing on patents. Live by the patent, die by the patent.

Still, it's quite surprising to see (via Glyn Moody) an opinion piece at China Daily by Mei Xinyu, a research scholar at the Chinese Academy of International Trade and Economic Cooperation, so accurately laying out the problem with patents. Here are just a few snippets, but the whole thing is worth a read:

The fundamental driving force of innovation is competition, while IPR protection in substance is a kind of monopoly. Monopoly can provide incentives for innovation, but it can also prompt former innovators to gain high return by relying on the products they have already innovated, rather than pushing them toward further innovation. Such a situation will ultimately weaken the power of technological innovation.

Moreover, a stringent IPR protection system will encourage enterprises to take moral risks. To maintain their competitive edge, some enterprises can use a strict IPR system to set up barriers for their competitors.

Some scholars describe the IPR disputes raised by developed countries against developing countries as "removing the ladder of development of developing countries". Enterprises in developed countries often erect trade barriers against their foreign competitors, especially those from developing countries, in the name of "infringement of intellectual property".

Very stringent IPR protection laws can worsen the conditions needed for innovation. They can force innovators to focus less on further innovation, and more on "infringement".

It's really one of the most accurate explanations of the problems with patents today that I've seen in a while.

Filed Under: china, innovation, monopolies, patents

Tim Wu Insists That Market Domination Is A Monopoly

from the um,-no dept

So we recently posted about Tim Wu's claims that the internet is filled with "monopolies," by noting that just being successful and dominating a market does not, in fact, create a monopoly on that market. Wu himself appears to have stopped by and made the following comment, which he asks us to "post... somewhere visible." Hopefully a new post will do the trick:

A firm that dominates a market is a monopoly. End of story. That is the definition of a monopoly. It is not necessarily an illegal monopoly, or a problem, but that's a different issue. It is, however, clearly a monopoly by any standard definition.

Now, I like Tim and agree with a lot of the stuff he says. But sometimes he goes out on a limb, and this is one time where I think he's just wrong. If we look at the basic definition of monopoly, you see that it's about having an exclusive situation -- being the only seller in the market, or having exclusive control. If that's the definition of monopoly, then Wu's claims that Google and Facebook are monopolies is clearly wrong. Neither company is the exclusive seller or has exclusive control over the markets they're in. And yet, I think most people agree that both companies "dominate" their markets.

In looking through some other definitions of monopoly as well, I only found one that included the word "dominate" and it's from Wiktionary, stating: " To dominate something by excluding everyone else." So that's a case where dominate is in the definition of monopoly, but it's conditional. It's not saying all domination of a market is a monopoly, but if you dominate by excluding everyone else. Again, I don't see how Google and Facebook are excluding anyone.

There are plenty of "monopolies" to be concerned about these days. But I think Wu is making a mistake in claiming that these services are monopolies.

Filed Under: competition, information, monopolies, tim wu

Success, By Itself, Is Not A Monopoly

from the don't-make-this-mistake dept

Lots of folks have been sending in Tim Wu's Wall Street Journal opinion piece about the rise of "internet monopolies." As with many of Wu's works, it's a worthwhile read, that I think gets some things quite right -- and others quite wrong. For example, Adam Thierer correctly notes that Wu is redefining "monopoly," in a way that does not make much sense. Basically, Wu is pointing out that certain firms seem to dominate certain markets: Google for search, Facebook for social networking, Amazon for shopping, etc. But (and while folks in Europe would likely disagree), domination of a market, by itself, does not create a monopoly, nor does it necessarily create a problem.

The problem with monopolies is when they limit the ability of others to compete overall. But there is little to stop serious competition from entering most of the spaces that Wu talks about. Yes, Google dominates search, but just a decade ago, people talked about how Google was ridiculous for entering a market so dominated by Alta Vista and Lycos. For years, Yahoo and Microsoft dominated webmail, until Google introduced Gmail. And Wu plays down just how dominant Friendster was in the early days. He claims there were lots of other social networks at the time -- but there are lots of other social networks today too. When Friendster was on top it was totally dominant. The fact is these markets change and most of the services that Wu talks about involve situations where the cost for users to move elsewhere is not that high. Yes, inertia keeps many people still, but if things really got that bad, it would just open up an opportunity for others to jump in.

Wu's larger concerns are that, in the long run, those dominant in these spaces today will then seek to hinder competition. They'll run to the government and seek to pass regulations favorable to them:

Declining information monopolists often find a lifeline of last resort in the form of Uncle Sam. The government has conferred its blessing on monopolies in information industries with unusual frequency. Sometimes this protection has yielded reciprocal benefits, with the owner of an information network offering the state something valuable in return, like warrantless wiretaps.

And, indeed, that could be a potential problem, if the government gives in to them. Certainly, watching the telcos and the entertainment industry embrace regulatory capture and abuse the regulatory process to protect their own businesses suggests this does happen. But the answer isn't to condemn the mis-identified concept of "information monopolies," but to increase openness and diligence against such abuses of the regulatory process.

The downsides to market domination are when those who are dominant abuse their position. We shouldn't condemn dominance for the sake of dominance, and we shouldn't automatically assume that dominance must equal abuse. Conflating the two makes it more difficult to detail actual abuse. When there is abuse -- it should absolutely be called out, but we need to be careful to focus on actual abuse, rather than pretending that success automatically means abuse.

Filed Under: information, monopolies, regulatory capture, tim wu
Companies: facebook, google

Google Is Destroying The Economy Because It Believes In Efficiency?

from the at&t-deserves-more-for-their-money dept

Ron Rezendes was the first of a whole bunch of you to send over PC World's coverage of Scott Cleland's latest attack on Google, though, bizarrely, Tony Bradley at PC World, fails to (a) fill in the details on Cleland's history and current job or (b) challenge any of the many false assumptions Cleland makes. He does question the overall conclusions, noting (accurately) that the tech world is littered with "monopolies" that were killed off by upstarts, but there's a lot more worth questioning in Cleland's piece. Cleland, as we've discussed in the past, is known throughout DC policy circles as the official attack dog of every anti-Google company out there. He's literally paid to make up attacks on Google, no matter how ridiculous. Now, I'll be the first to admit that there are many things Google does that deserve further scrutiny or complaints. The company has been getting especially sloppy when it comes to privacy lately, and that's a huge concern. However, if the companies paying Cleland actually want bang for their buck, you'd think that they'd hire someone who actually makes credible claims -- rather than the easily debunked claims and notoriously laughable math that Cleland is famous for.

So what's this new report that Bradley insists is "seemingly well-researched"? It's one of the most laughable reports I've seen to date, claiming that Google isn't just a monopoly, but that it's destroying jobs and the economy (pdf). Get ready for Cleland's brand of ridiculously factless assertions combined with his notoriously bad math.

The report starts out by blaming the Justice Department for not blocking various Google acquisitions or filing antitrust charges against the company. Cleland seems to not realize that the purpose behind antitrust actions is to protect consumers, not just break up big companies for the hell of it (that's what Europe is for). The presentation then goes into all sorts of consultant-speak charts that don't say anything actually significant but scream "oh no, Google is evil," without actually providing anything to back that up.

There's an amusing slide where Cleland then takes a bunch of quotes out of context to actually suggest that efforts to make the web surfing experience better for users is somehow evil because it also benefits Google. In Cleland's world, apparently, all things are a zero sum game, and there's no way that something could be both good for users and Google at the same time. In fact, that seems to be the key to the entire presentation: what's good for Google must be bad for the world... because it's also good for Google. How else can you explain why Cleland highlights Hal Varian's comments about how a "fanatical" focus on customer service (along with scale, speed and data analysis) is somehow a bad thing?

Amusingly, Cleland then goes back to the debunked well by suggesting nefarious Google "human raters" push down links to competitors. This is one of Cleland's pet theories that he just discovered a couple months ago, and thought he was brilliant for it. The only problems is that it wasn't (as he claimed) a new admission from Google, nor was it what Cleland claimed it was. As Danny Sullivan pointed out all the way back in 2007, Google has been public about its "human raters" since 2004, and it's a standard QA job -- not some nefarious job of someone quashing the competition. If you run a search engine, wouldn't you have people on staff whose job it was to look at results and make sure they were actually good for users?

On the areas where Cleland is accurate -- that Google's real customers are advertisers and that the current workings of Google are something of a "black box," that just seems to me to be a huge opportunity for other companies to step in, rather than some dangerous situation that requires government intervention.

But where Cleland really goes off the deep end is his "economic" analysis of the situation, where he claims that Google is creating a deflationary spiral. It kicks off with an almost amusing font-based attack on the concept of "free" (highlighting each time the word is mentioned) as being some evil concept made up by those who seek to destroy the world. It's as if we're back in the ancient Greek civilization and Cleland has just come across the concept of "zero" and declared it to be heresy. And then there's this:

There's no net economic growth, job creation or property value creation in a "free" Internet sector model, only a deflationary price spiral; net negative growth, property devaluation, job losses, and monopolization.

No, really. Stop laughing. The above statement is about as economically clueless as they come. It suggests absolutely no knowledge of basic economics, the economics of growth, the economics of innovation, the basic concepts of complementary goods and market equilibrium. It assumes, like many in the entertainment industry -- despite massive evidence to the contrary -- that when the price of an information good is pushed to zero, that it somehow leads to less overall economic output, rather than more. Tragically for those who believe this, there is no evidence to support such a claim. That's because they never seem to take into account the ancillary markets that are aided by information reaching its equilibrium point.

Cleland then goes on to claim that Google "reduces employment." How?

"because Google views people as inherently inefficient relative to Internet automation, and because Google views customer service personnel as unnecessary, and most sales and marketing personnel as redundant."

Where to start? I think pretty much any company views automation as more efficient than people when that's the case. But, unlike what the Luddites predicted, automation actually resulted in more jobs. Perhaps Cleland should ask the telcos who pay him his salary about their views on automation. After all, AT&T used to employ tens of thousands of operators to physically connect lines when anyone wanted to make a phone call. And they automated that away -- obviously killing off so many jobs. Oh wait... actually, automated switching was so much more efficient that it created millions of new jobs, and entire new industries... including the internet.

As for Google's dislike of customer service, I've hit Google hard on that point multiple times, because I believe that it's a big Achilles' heel for Google, and a huge opportunity for others to woo folks away from Google. But just because Google doesn't like to hire customer service people, it seems like a massive stretch to suggest that this automatically means Google reduces employment. Furthermore, last I checked, Google's sales and marketing force is ridiculously large. It's hardly "redundant." In fact, I've often wondered why Google needed as large a sales force as it has. A year or so ago, I was on a panel discussion with some other bloggers in front of Google's sales and marketing team, and I'm pretty sure it's the largest audience I've spoken to -- and I've spoken to some pretty big audiences. Honestly, it feels like they could make a few more people "redundant."

And, um, why does Cleland ignore the tons of jobs that now exist in the world because of Google who are not actually employed by Google? There are entire industries who exist in large part because of Google. Cleland then accuses Google of "double and triple counting" its own economic impact, but this is especially laughable from the same guy who tried to count internet connections multiple times in one of his attacks on Google.

All in all, this "report" given away for free (oh wait, did Scott Cleland just devalue research and kill off jobs?!?) is just the latest in Cleland's self-debunking charade of ridiculous arguments. The thing is, there are plenty of legitimate complaints about Google, but wrapping them all up in such a ridiculous and easily debunked report actually does significantly more favors for Google than anything else. It suggests that the companies who pay Cleland can't come up with any serious arguments, so they have him come up with such laughable ones. This is really unfortunate. It would be good if more people actually held Google to account for its mistakes and problems with the way it's done business at times. But these exaggerations hide those real issues. Unfortunately, for whatever bizarre reason, Congress keeps calling on Cleland to present at various hearings -- and today, Cleland will be pitching this garbage to the House Judiciary Subcommittee on Courts and Competition Policy. DC politics as usual. You don't need facts, you just need to smear others louder and more ridiculously than anyone else.

Filed Under: economics, jobs, monopolies, scott cleland
Companies: google

Quarterback Drew Brees Explains Why Supreme Court Should Block NFL From Having Exclusive Licensing Deals

from the worth-reading dept

We were recently discussing how the idea of "officially licensed" gear for professional sports teams is a relatively new phenomenon. In the past, anyone could produce gear for fans. However, there's a Supreme Court case looking at this issue, involving the NFL's exclusive license deal with Reebok, and reader Fitz points us to a quite well argued op-ed by New Orleans Saints quarterback Drew Brees explaining the harm that such exclusive deals do, noting that it seems like a clear violation of antitrust rules, in that all of the different NFL teams are effectively teaming up to exclude competition:

The NFL originally won the case because the lower courts decided that, when it comes to marketing hats and gear, the 32 teams in the league act like one big company, a "single entity," and such an entity can't illegally conspire with itself to restrain trade. The NFL-Reebok deal is worth a lot of money, and fans pay for it: If you want to show support for your team by buying an official hat, it now costs $10 more than before the exclusive arrangement.

Amazingly, after the NFL won the case, it asked the Supreme Court to dramatically expand the ruling and determine that the teams act as a single entity not only for marketing hats and gear, but for pretty much everything the league does. It was an odd request -- as if I asked an official to review an 80-yard pass of mine that had already been ruled a touchdown. The notion that the teams function as a single entity is absurd; the 32 organizations composing the NFL and the business people who run them compete with unrelenting intensity for players, coaches and, most of all, the loyalty of fans.

Brees rips apart that argument by noting the competition he, himself, faced as a free agent -- a right that players only got after a series of court battles. This isn't a huge surprise. Like plenty of other businesses, sports leagues have a keen understanding of what monopoly rents are, and do everything possible to profit from them.

Filed Under: competition, drew brees, football, licensing, monopolies
Companies: nfl

Copyright Monopolies In The Middle Of Health Care Reform Debate As Well

from the all-about-the-monopoly-money dept

An anonymous reader sent over yet another example of copyright being abused for monopolist reasons that have absolutely nothing to do with "promoting the progress," and actually represent a serious healthcare issue. I had no idea, but apparently the various "codes" used by doctors to classify every visit are actually covered by a copyright held by the American Medical Association, which refuses to allow any free or open distribution of the codes (known as Current Procedural Terminology (CPT)). That's because the AMA makes about $70 million per year "licensing" the codes.

I'm having serious trouble figuring out what about the codes could actually be covered by copyright, however. They're numbers corresponding to a particular medical service. As the post above notes, it's things like "90801 Psychiatric Diagnostic Interview." It's difficult to see what the creative component of such a listing is that would allow it to be granted any sort of copyright protection. A simple database of codes by itself shouldn't really qualify, should it? However, the real issue seems to be that Medicare and Medicaid have required the use of these codes, meaning that pretty much everyone needs to use them... and then has to pay up for them. While a court did find that this arrangement clearly involved the AMA misusing its copyright and noted that "the adverse effects of the licensing agreement are apparent," the AMA did some legal tap dancing to get around the issue and keep things effectively the same.

So why is this bad for pretty much everyone outside of the AMA? It makes it that much more difficult to comparison shop between doctor's services, since publishing such info can run afoul of the copyrights. One of the biggest problems in healthcare today is the fact that the true costs of pretty much everything are hidden from the consumer through a convoluted insurance system. The end result of any economic situation where the true costs are hidden from the buyers is that the market is woefully inefficient. But, so long as that inefficiency lets the AMA collect $70 million per year (double what the AMA makes from membership dues), it doesn't seem to care.

Filed Under: codes, copyright, healthcare, monopolies
Companies: ama