Drug Companies as Feeding Machines: Don't Feed the Sharks

In 2008, drug companies raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. That added more than $10 billion to the nation’s drug bill, which was on track to exceed $300 billion in 2009. By at least one analysis, this was the highest annual rate of inflation for drug prices since 1992. “When we have major legislation anticipated, we see a run-up in price increases,” says Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota.  A Harvard health economist, Joseph P. Newhouse, said he found a similar pattern of unusual price increases after Congress added drug benefits to Medicare a few years ago, giving tens of millions of older Americans federally subsidized drug insurance. Just as the program was taking effect in 2006, the drug industry raised prices by the widest margin in a half-dozen years.  “They try to maximize their profits,” Mr. Newhouse said. However, the drug companies claimed they were having to raise prices to maintain the profits necessary to invest in research and development of new drugs as the patents on many of their most popular drugs were set to expire in a few years. The drug makers were proudly citing the agreement they had reached with the White House and the Senate Finance Committee chairman to trim $8 billion a year — $80 billion over 10 years — from the nation’s drug bill by giving rebates to older Americans and the government. However, if realized, the price increases in 2009 would effectively cancel out the savings from at least the first year of the Senate Finance agreement. Moreover, some of the critics claimed that the surge in drug prices could change the dynamics of the entire 10-year deal. “It makes it much easier for the drug companies to pony up the $80 billion because they’ll be making more money,” said Steven D. Findlay, senior health care analyst with the advocacy group Consumers Union.

The full essay is at "Drug Companies as Feeding Machines."

Source:

Duff Wilson, "Drug Makers Raise Prices in Face of Health Care Reform," The New York Times, November 15, 2009.

Van Rompuy as the European Council's First Extended-Term President

“In a sense, Europe seemed to be living down to expectations. Earlier, the foreign minister of Sweden, Carl Bildt, warned against a 'minimalist solution' that would reduce the European Union’s 'opportunity to have a clear voice in the world.'"  Olivier Ferrand, president of Terra Nova, a center-left research institute in France, said, “It is quite astounding. . . . It is jaw-dropping. It is the end of ambition for the E.U. — really disappointing.”

The full essay is at "Van Rompuy as the First President."

Source:

Stephen Castle and Steven Erlanger, "Low-Profile Leaders Chosen for Top European Posts," The New York Times, November 19, 2009.

Goldman Sachs: Working It

Goldman Sachs’ (GS) board considered buying AIG in late June, 2008, so GS could use AIG’s premium float for capital (rather than becoming a bank holding company and using deposits to fund trades or as collatoral for leveraged trading).  Strangely, GS’s board didn’t realize that another part of GS was questioning the “mark to market” valuations that AIG was making on its swaps.  Also, AIG had revised its November and December 2007 losses from $1 billion to $5 billion.  GS and AIG had the same public accountant (Price), which GS was using to get AIG to down-value the value of its assets. On that week in September, 2008, when Lehman went under, JP Morgan and GS were working to put together a loan of $50 billion to cover AIG’s deepening hole  At the same time, the two banks were demanding new collateral payments from AIG, pushing the insurance giant deeper into its hole.  The Fed and AIG wondered if the fees and interest rate being set by the two banks for themselves and other contributing banks wasn’t essentially stealing the company.

The full essay is at "Goldman Sachs."

Problems in American Executive Compensation: The Ethical Dimension

According to The New York Post, 66% of the income growth in the United States between 2001 and 2007 went to the top 1% of all Americans. In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1. By the year 2000, that ratio had exploded to between 300 to 500 to one. Because American executives tend to be paid more in total compensation than do their European colleagues, the ratios are lower in in the E.U. Hence one might ask what is behind the trajectory in the United States. 

The full essay is at "Ethics of American Executive Compensation."

Democratic Protests in the Middle East: A Conflagration of Historic Proportions amid a Constancy in Human Nature?

Perhaps by looking back on one's own time as though it were already historical, it is possible to assess whether what one is witnessing on the global stage is truly significant from the standpoint of human history or merely of that which history is replete. In the context of the popular protests in the Middle East in early 2011, the question is perhaps whether the world was witnessing a Hegelian burst of freedom or merely more of the same in terms of political revolutions.

The full essay is at "Democratic Protests in the Middle East."

Does Opportunity Justify Economic Inequality?

From 1993 to 2010, the incomes of the richest 1 percent of Americans grew 58 percent while the rest had a 6.4 percent increase.  In 2010, the first year of an economic recovery, the top 1 percent of Americans captured 93% of the income gains. Beyond the danger to the American republics in there being an economic elite so far removed from the vast majority of the population is the question of whether the trend is baleful, economically speaking. It is not clear that even such an income gain being snagged by so few registered in the minds of the general populous as a problem. The key to any concern would seem to be whether opportunity for the many is compromised as a result of extreme economic inequality.

The full essay is at "Economic Inequality."

Source:

Eduardo Porter, “Inequality Undermines Democracy,” The New York Times, March 21, 2012. 

Christianity and “Social Capitalism”

The SEC charged Ephren Taylor with a fraudulent $11 million Ponzi scheme in April 2012. According to Reuters, “Taylor fraudulently sold $7 million of notes said to bear 12 percent to 20 percent annual interest rates, to fund small businesses such as laundries, juice bars and gas stations.” He “had conducted a multi-city ‘Building Wealth Tour’ in which he spoke to congregations” on the importance of “giving back.” He called himself a “social capitalist.” In actuality, he used the money on himself and his wife’s attempt to become a singer.

The full essay is at "Christianity and 'Social Capitalism'."

Source:

Jonathan Stempel, “SEC Charges Ephren Taylor II ForAllegedly Bilking Churchgoers In $11 Million Ponzi Scheme,” The Huffington Post, April 12, 2012.

Partisan Bishops Castigated Poverty Nuns

In April 2012, the Vatican’s Congregation for the Doctrine of the Faith accused the Leadership Conference of Women Religious, an umbrella organization of women’s religious communities, of having members with “serious doctrinal problems.” Specifically, the Congregation alleged that members of the group had challenged church teaching on homosexuality and the male-only priesthood, and promoted “radical feminist themes incompatible with the Catholic faith.” The Vatican’s use of “radical” to describe the “feminist themes” belies the neutrality of the Holy See on the matter (for the adjective is both unnecessary and pejorative). In other words, if you want to discredit someone’s point of view with which you disagree, simply label it as radical. The labeling says more about the labeler than the actual target. Specifically, the labeling indicates anger and resentment as well as prejudice. The white supremacists in Alabama in the 1960s, for example, labeled the Freedom Riders as radicals. In going after the group of nuns, the Vatican too was being partisan.

The full essay is at "Partisan Bishops Castigated Poverty Nuns."

Source:

Laurie Goodstein, “Vatican Reprimands a Group of U.S. Nuns and Plans Changes,” The New York Times, April 19, 2012.

The U.S. Goes after Executives at Volkswagen: A Deterrent?

Oliver Schmidt, a Volkswagen executive who had been head of the company’s environmental and engineering center in Michigan, pleaded guilty on August 4, 2017 to two federal charges in the United States: conspiracy to defraud the federal government and violating the Clean Air Act. He “admitted conspiring with other Volkswagen employees to mislead and defraud the United States in 2015 by failing to disclose that thousands of diesel cars were rigged to evade detection of excess emissions levels. He also admitted filing fraudulent emissions reports to regulators.”[1] He faced possible fines and time in prison. James Liang, another of the company’s executives who had been charged, had already pleaded guilty to charges of conspiracy and violating the Clean Air Act. The other executives charged were in the E.U. state of Germany, which does not extradite its residents. Given the power of the auto industry in that state, such accountability applied to executives for the same fraud in the E.U. may have been too difficult to achieve. Nevertheless, for the sake of business ethics alone, prosecuting executives personally rather than just companies is in general important as a deterrent.

The full essay is at "Executives at Volkswagen."

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[1] Bill Vlasic, “Volkswagen Executive Pleads Guilty in Diesel Emissions Case,” The New York Times, August 4, 2017.

When 4.3% Is below Full Employment

CNN reported that the U.S. economy added “a strong 209,000 jobs” in July of 2017, with the unemployment rate falling to 4.3% to match a 16-year low. Unemployment had peaked at 10% in 2010, after the financial crisis of 2008. CNN cited many economists as saying that the 4.3% rate was “at or near” full employment, meaning that the rate would not go down to a significant degree.[1] Yet even within CNN’s own reporting, we can find reason to doubt this claim.

The full essay is at "When 4.3% Is below Full Employment."

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[1] Patrick Gillespie, “Milestone for Trump: 1 Million New Jobs in Six Months,” CNN, August 4, 2017.