“Pay-For-Delay”: Ending Drug Companies’ Deals
An upcoming report by the Federal Trade Commission shows that brand-name pharmaceutical makers continue to cut questionable deals with generic manufacturers that delay the introduction of cheaper drugs onto the market.
Such pay-for-delay arrangements hurt consumers and increase costs for federal programs such as Medicare and Medicaid, according to the report, a copy of which was obtained by the editorial board. These deals are not illegal, but they should be.
Pharmaceutical companies rightly enjoy strong protections for products that often take years and billions of dollars to develop. These protections were so strong at one point that they discouraged would-be competitors from jumping in. The Hatch-Waxman Act of 1984 meant to address this problem by allowing generics to market “bio-equivalent” drugs as long as they did not infringe on the brand-name drug’s patent; the generic could also proceed if it proved the brand-name patent was invalid. The goal was to enhance competition and lower drug prices. That goal is thwarted when brand-name manufacturers engage in the popular practice of paying generic-drug makers to keep their products off the market.
In 2004, the FTC did not identify a single settlement in a patent litigation matter involving drug makers that raised pay-for-delay concerns. In its new report, the agency points to 28 cases that bear the telltale signs of pay-for-delay, including “compensation to the generic manufacturer and a restriction on the generic manufacturer’s ability to market its product.”
Sens. Charles E. Grassley (R-Iowa) and Herb Kohl (D-Wis.) have introduced the Preserve Access to Affordable Generics Act to close the pay-for-delay loophole. The bill would make such schemes presumptively illegal and empower the FTC to challenge suspicious arrangements in federal court. The most recent version gives companies a chance to preserve certain deals if “clear and convincing evidence” proves that their “pro-competitive benefits outweigh the anti-competitive harms.” The Obama administration estimates that eliminating pay-for-delay could save the government $8.8 billion over 10 years; the Congressional Budget Office offers a dramatically more conservative savings estimate of roughly $3 billion over the same period.
The legislation should appeal to the deficit-reduction “supercommittee,” which has been tasked with identifying ways to cut the federal deficit.
By: Editorial Board Opinion, The Washington Post, October 24, 2011
Non-Equivalence: The Continuing Curse Of “On The One-Handism”
In Time magazine’s recent profile of Herman Cain, author Michael Crowley writes of Cain’s now famous “9-9-9” plan, “Conservative economists applaud the idea, but many others say it dramatically favors the rich and would actually raise taxes on the poor and require huge spending cuts.”
Sentences like these in magazines like this one tell us a great deal about what’s wrong with political coverage in the United States. In the first place, the sentence treats America as if it is made up of only two groups of people: “the rich” and “the poor.” It does not even allow for the existence of the vast majority of Americans who exist somewhere in-between (generally referred to—and exalted as—“the middle class”). Most egregious of all, however, is the implied equivalence between the alleged approval by “conservative economists” on the one hand and what “others” say on the other.
Now, a few questions. Who are these “others?” Are they also economists or are they, say, garbage men? And do these unnamed conservative economists applaud the idea because it “would actually raise taxes on the poor and require huge spending cuts” or in spite of it? And finally, what, Mr. Time Magazine, would the plan actually do? What is the point, Time, if not to offer readers some guidance on competing claims by “conservative economists” and “others” when it comes to the proposals of leading presidential candidates?
It’s not like it would have been so hard. The Tax Policy Center broke down the numbers behind Cain’s 9-9-9 tax plan, and Neil Klopfenstein even offered a visualization of the plan based on the Tax Policy Center’s analysis.
What we have here is a prime example of what I have called “on the one-handism,” what Paul Krugman calls “the cult of balance” and what James Fallows calls the problem of “false equivalence.” The phenomenon derives from a multiplicity of causes but rests on two essential insights.
First, conservatives have figured out that even the most high-minded members of the media will publish their claims without prejudice, even if they lack any credible supporting evidence. They will do this because they consider it both “unfair” and nonobjective to take a position between the two parties even when it involves passing along a falsehood.
Second, because of the relentless effectiveness of the right’s effort to “work the refs,” reporters and editors are particularly reluctant to invite the hassles and angry accusations certain to arrive whenever anyone prints an unfavorable truth about anyone associated with the right. Conservatives have gotten so good at this, as a matter of fact, that they even get reporters to thank them for it—as well as to misidentify their complaints with those of average everyday American citizens.
Just one case in point: In his profile of Jill Abramson, the recently named New York Times executive editor, Ken Auletta quotes her discussing her time as the paper’s Washington bureau chief, confusing the two: “All my years in Washington, and in some ways being attacked by conservatives, made me more conscious of how a story might be seen in the rest of America,” Abramson explained.
Fallows has done the world a favor in this respect by risking his reputation for moderation and overall reasonableness by getting a metaphorical bit in his mouth on the topic of false equivalence. In doing so, he demonstrates one of the blogosphere’s key blessings: the ability to return to a topic over and over for the purposes of clarification and intensification. In his discussion of a story by The Washington Post’s Aaron Blake entitled “Democrats thwart Obama’s bipartisan goals again,” Fallows notes that the story in question “manages not to use the word “filibuster” while describing why the administration’s programs have not gotten through a Senate that the Democrats ‘control.’”
This is a shame. For as I noted in Kabuki Democracy, “Accurate numbers can be difficult to discern because in most cases the mere threat is enough to win the battle at hand.” But if we examine a close corollary—cloture votes—these rose from fewer than 10 per two-year congressional session during the 1970s to more than 100 in both the 2006–2008 and 2009–2010 sessions. Political scientist Barbara Sinclair estimates that these threats have affected 70 percent of all Senate bills since 2000, nearly 10 times the average in the previous century.
The same numbers suggest that Democrats, who were no paragons of virtue on cloture votes when they were in the minority under President George W. Bush, are still no match for their opponents when it comes to using and deploying the body’s tactical weaponry of obstruction. Since the Democratic takeover of both houses of Congress in 2006, Republicans have more than doubled the 130 cloture motions Democrats had managed to force during the four previous years under George W. Bush.
Fallows reprints one of journalist Ezra Klein’s charts demonstrating the degree to which Senate Republicans have abused the filibuster relative to its use in the past. As Fallows notes, the “blue line shows just some of the filibuster threats that McConnell’s minority has used to block consideration of even routine legislation and appointments.”
Fallows also notes, “[The Post story] reflects so thorough an absorption of the idea that the filibuster-threat is normal business that it describes the latest cloture vote as a vote on the bill itself … [and] Republicans end up voting against the bill, because that is the Republican strategy.” Fallows devotes most of his attention to The Post’s coverage but he actually began with a dissection of a Times version of the same story, demonstrating how widespread the problem is at the highest reaches of mainstream media.
Of course the issue goes well beyond mere politics. Because so much mainstream media misinformation is perpetuated based on the manipulation of data by conservatives unconcerned with evidence—and often even with reality—in the service of both ideology as well as their funders’ fortunes, Americans are actually worse informed about the reality of global warming than they were years ago, and hence the threat is going unmet.
Global warming misinformation is perhaps the most dramatic case, but almost everywhere, the refusal of so many in the media to even bother with the question of truth and falsehood is at the root of the problem. Boring as it may be to hear and see and read over and over, it bears repeating until it stops.
By; Eric Alterman, Senior Fellow, Center for American Progress, October 20, 2011
Partisanship: Blame Grover Norquist, Not The Founders
Everyone recognizes that Washington is not working the way it should. This has led some on the left, like Harold Meyerson, to question whether the Founders “screwed up.”
Many on the right, meanwhile, are promoting radical changes to our constitutional system. They talk about a version of a Balanced Budget Amendment, which would require a super-majority for most changes in financial policy. This would enshrine in our Constitution the right’s do-little government philosophy.
But the Constitution is not the problem. If we want to get Washington working again, we should listen to the Founders — not blame them for problems of our own making or change the ground rules of the system of government they bequeathed to us.
True, the Founders established a deliberative democracy, with a series of checks and balances designed to prevent the majority from running roughshod over the rights of political minorities. But these checks and balances have served our nation well.
The problem is not the democratic system bestowed upon us by George Washington, Alexander Hamilton and James Madison. The problem is the additional obstacles to action – the filibuster, hyper-partisanship, and special interest pledges – that our Founders would have found abhorrent.
Our Founders struck a delicate balance between the promotion of majority rule – the essential predicate for a democratic government of “We the People” – and the desire to protect minority rights and prevent the “tyranny of the majority.” The Constitution is designed to delay and temper majority rule while allowing a long-standing majority to get its way.
So, for example, the Constitution staggers the election of senators so that only one third of the Senate can change hands in any one election. As a result, it usually takes more than one election for any one party to gain a governing majority.
Modern politicians have placed layer after layer of lard on this deliberative system of government, ultimately producing the gridlock now plaguing Washington. The Senate Republicans now use the filibuster rule as a virtual requirement. Every piece of legislation must enjoy a super-majority of 60 votes in the Senate — meaning a determined minority can permanently stop the majority from getting its way.
President George Washington, in his farewell address to the nation, warned about just such “alterations” to our constitutional system. He said this would “impair the energy of the system.”
Washington also decried political parties. He passionately warned the nation against any effort “to put in the place of the delegated will of the nation the will of a party.”
While political parties were forming and solidifying even as Washington uttered these words, our modern politicians have enshrined hyper-partisanship through tricks like the “majority of the majority” rule, whereby the House speaker will only bring to the House floor legislation that has the support of the majority of his political party.
It is hard to imagine a more powerful example of the precise party-over-country danger Washington warned us about.
Washington may have had the likes of Grover Norquist in mind when he warned that some men “will be enabled to subvert the power of the people and to usurp for themselves the reins of government.”
Even anti-tax Republicans, like Sen. Tom Coburn (R-Okla.) and Rep, Frank Wolf, have now decried the oversized role Norquist’s no new taxes pledge played in forcing the debt ceiling showdown and helping to prevent any solution that would have included new revenues. Coburn and others have warned their colleagues against putting Norquist’s “no–tax” pledge over their oath to support the Constitution and to serve “we the people” – not Norquist or any other special interests.
Washington today has serious problems, but we should not blame the city’s namesake for them. Rather, politicians of both parties should support a reform agenda designed to remove from our political system the modern procedural obstacles that have produced our current gridlock.
Maybe even in these divided political times we can all agree that when casting blame for what ails Washington, the fault it not with George Washington and our other Founding Fathers. It’s with the causes of our current gridlock – including figures like Norquist and his no-tax pledge.
By: Doug Kendall, Opinion Contributor, Politico, October 22, 2011
The GOP’s Latest Tax Gimmickry: Soak The Poor
It’s one of the strangest things in our politics: The only “big” ideas Republicans and conservatives seem to offer these days revolve around novel and sometimes bizarre ways of cutting taxes on rich people.
Given all the attention that Herman Cain’s nonsensical and regressive 9-9-9 tax plan has received, the Republican debates should have as their soundtrack that old Beatles song that droned on about the number nine.
Now, Texas Gov. Rick Perry hopes to pump up his campaign with a supposedly bold proposal to institute a flat tax, which would also deliver more money to the well-off. Perry plans to outline his proposal this week, but he has already touted it as a sure-fire way of “scrapping the 3 million words of the current tax code.”
There is absolutely nothing new about this idea, and candidates who pushed flat taxes in the past saw their campaigns flat-line, most prominently businessman Steve Forbes in 1996 and again in 2000. Politically, the idea falls apart rather quickly when middle-income voters realize that its main effect is to cut taxes on the financially privileged while usually raising them on Americans who have more modest incomes.
Note to Perry: Voters are shrewd in figuring out whether tax proposals really benefit them. That’s why raising taxes on millionaires — the exact opposite of what Cain and Perry want to do — wins support from a broad majority.
But the more interesting question is: Why are today’s Republicans so enthralled by tax gimmicks? Their party, after all, was once innovative in thinking about affirmative uses of government. The Grand Old Party instituted the Homestead Act and created land-grant colleges, the interstate highway system, student loans, the Pure Food and Drug Act and even a prescription drug benefit under Medicare.
It was Richard Nixon who supported laws establishing the Environmental Protection Agency and the Occupational Safety and Health Administration. In signing the OSHA bill, Nixon called it “one of the most important pieces of legislation, from the standpoint of 55 million people who will be covered by it, ever passed by the Congress of the United States, because it involves their lives.” Yes, government regulations save lives, a view now heretical in the GOP.
Republicans have boxed themselves into a rejection of both their own traditions and the idea that government can do any good. Thus they have confined themselves to endless fiddling with the tax code. Almost everything conservatives suggest these days is built around the single idea that if only government took less money away from the wealthy, all our problems would magically disappear.
There is a history to this. The Republican fixation on taxes dates to the mid-1970s, when supply-side economics began taking hold. The late Jude Wanniski, an editorial writer for the Wall Street Journal who campaigned indefatigably on behalf of lower marginal tax rates, came up with the “Two Santa Clauses” theory. He argued that if Democrats earned support by giving voters benefits through government programs, Republicans should play Santa by giving people tax cuts.
Wanniski sold his tax ideas to Jack Kemp, one of the most ebullient political figures of his generation, who in turn sold them to Ronald Reagan. Reagan made Kemp’s 30 percent tax cut (co-sponsored with Sen. Bill Roth) a centerpiece of his 1980 campaign. The political scientist Wilson Carey McWilliams perfectly described the result in a 1981 essay. “After years of learning that ‘you don’t shoot Santa Claus,’ ” he wrote, “the Republicans decided to nominate him.”
But Republicans have a problem now. In the Kemp-Reagan days, they were selling across-the-board tax cuts. Most of their benefits flowed to the rich, but almost everyone got a piece. Today, many Republicans complain resentfully that less prosperous Americans don’t pay enough in taxes — overlooking the fact that citizens who don’t pay income taxes still shell out a significant share of their earnings in payroll, sales and (directly or through their rents) property taxes.
Reagan’s optimism has thus been replaced by crabby put-downs of the less affluent. Perry said it directly in his announcement speech: “We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax.” Considering the other injustices in our society, this seems an odd and mean-spirited obsession.
“Tax the poor” is a lousy political slogan. That’s why Cain’s 9-9-9 plan and Perry’s flat tax are doomed to fail. Among conservatives, Santa Claus has given way to Scrooge.
By: E. J. Dionne, Opinion Writer, The Washington Post, October 21, 2011
Job Creation: Small Isn’t Always Beautiful
I challenge you to find a stump speech by a politician running for any office from dog catcher to president that doesn’t invoke the importance of small businesses.
That’s not necessarily a bad thing. It’s a hat tip to American entrepreneurialism, evoking images like that of Steve Jobs planting a seed in his garage that grew into an amazing Apple orchard. Besides, don’t most people work for small businesses, and aren’t such businesses the engine of job growth?
Actually, no. In what may be the most misunderstood fact about the job market, although most companies are small — according to 2008 census data, 61 percent are small businesses with fewer than four workers — more than two-thirds of the American work force is employed by companies with more than 100 workers. You can tweak the definitions, but even if you define “small” as fewer than 500 people (as the federal government does, basically), you still find that half the work force is employed by large businesses.
It’s even more stunning when it comes to payrolls: 57 percent of total compensation is paid out by companies of 500 or more employees, with most of that coming from the largest, those with at least 10,000 employees. And new research by the Treasury Department finds that small businesses — defined as those with income between $10,000 and $10 million, or about 99 percent of all businesses — account for just 17 percent of business income, and only 23 percent of them pay any wages at all.
But don’t small businesses at least fuel job growth? Sort of. It’s not small businesses that matter, but new businesses, which by definition create new jobs. Real job creation, though, doesn’t kick in until those small businesses survive and grow into larger operations. In fact, according to path-breaking work by the economist John C. Haltiwanger and his colleagues, once they accounted for the outsize contributions by new and young companies, they found “no systematic relationship” between net job growth and company size.
It’s unlikely such findings will change politicians’ speeches trumpeting small businesses. But if we want to get our job market back on track, they should inform our policy thinking. For example, it’s not only the case that start-ups are of particular importance to robust job growth. They’ve been creating fewer jobs over the last decade. Employment at start-ups fell by almost half, and those losses predated the “Great Recession” — probably one reason job growth was so lackluster over the last decade’s expansion.
Economists do not yet have a good answer as to why start-ups and surviving young companies are creating fewer jobs, but it may have something to do with “allocative inefficiency.” Too many resources flowed to financial engineering in the last decade, and too few went to R & D and innovation outside of the financial sector. The decline of American manufacturing plays a role here as well, as the sector has historically accounted for 70 percent of job-creating private-sector R & D, often in partnership with start-ups and small suppliers.
This isn’t to say that public policy should abandon small businesses. Many face distinctive hurdles compared with large businesses: they have tighter profit margins and thus less room for mistakes, they have diminished access to credit markets and, even with creditworthy borrowing records, many say they’re not getting the loans they need. Small manufacturers often have less access to export markets, and, with emerging economies growing a lot faster than advanced economies, that’s a big disadvantage.
Yet the sector’s primary lobbying group — the National Federation of Independent Business — tends to fight less for these pragmatic policies and more for the standard conservative agenda of lower taxes and deregulation. Indeed, the group has become a purely partisan operation, fighting more for Republican electoral victory than small-business growth. For example, it opposed the president’s jobs bill, even though independent analysts estimated it would significantly increase economic demand, and the federation’s own survey shows that “poor sales” — a k a weak demand — is a much bigger problem for its members than taxes or regulations.
The next time a politician tells you how he or she is for small business (which will likely be the next time you hear a politician say anything), be mindful that to the extent that size matters at all for job growth, it’s really about new companies that will start small and, if they survive, perhaps grow large. Everything else is largely noise — and too often, noise that has little to do with what this economy really needs.
By: Jared Bernstein, Op-Ed Contributor, The New York Times, October 23, 2011
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