Category: Wasting your time

Earlier today, we learned that when faced with a regulatory deadline to test your products for lead, a good course of action is to lobby to delay or reverse the requirement. This afternoon, we learn the best course of action when your highly-profitable drug is about to lose patent protection. We’re all familiar with the tactic of simply making little changes to a drug and declaring the new version marginally better. Jonathan Rockoff explains that the minor improvement strategy can be combined with pricing tactic to steer consumers and insurers away from generics:

Twice this year, Cephalon Inc. has sharply raised the price of its narcolepsy drug Provigil. The drug is now 28% more expensive than it was in March and 74% more expensive than four years ago, according to DestinationRx, a pharmaceutical software and data provider. The Frazer, Pa., company has said in investor presentations that it plans to continue to raise the price.

The Provigil price increases — the drug’s average wholesale price is now $8.71 a tablet — are an extreme example of a common tactic pharmaceutical companies employ in the U.S. to boost profits and steer patients away from cheaper generics.

It works like this: Knowing that Provigil will face generic competition in 2012 as its patent nears expiration, Cephalon is planning to launch a longer-acting version of the drug called Nuvigil next year. To convert patients from Provigil to Nuvigil, Cephalon has suggested in investor presentations it will price Nuvigil lower than the sharply increased price of Provigil.

By the time copycat versions of Provigil hit the market the company is banking that most Provigil users will have switched to the less-expensive Nuvigil, which is patent-protected until 2023. In the meantime, Cephalon will have maximized its Provigil revenue with the repeated price hikes.

“You should expect that we will likely raise Provigil prices to try to create an incentive for the reimbursers to preferentially move to Nuvigil,” Chip Merritt, Cephalon’s vice president of investor relations, told a Sept. 5 health-care conference, according to a transcript of the meeting.

[…]

During his campaign, Mr. Obama promised to lower drug costs by, among other things, allowing the importation of cheaper medicines from other developed countries and increasing the use of generic drugs in public programs like Medicare.

One approach often threatened by Democrats — allowing Medicare to negotiate prices with drug makers — would help control rising costs, drug-pricing specialists said. But fully preventing tactics like Cephalon’s would be difficult short of outright regulation of drug prices. Many other countries control drug prices, but most U.S. regulators and legislators have opposed such moves.

On Nov. 16th at 9:50 Pacific, the answer remains no, but this site will help us keep track of this important issue after Jan. 20.

I have a love-hate relationship with credit and charge cards. They’re incredibly convenient, but my few puritan instincts tell me that they’re the spawn of satan.

And the fees! The fees! No, not the ones for paying your bill late, or for paying your bill on time over the phone, balance transfer fees, application fees, balance transfer fees, overlimit fees, or even annual fees. (Did you know that banks make more money from fees now than from investments?) I’m talking about the fees that the card networks charge to merchants. Jane Birnbaum explains in Thursday’s Times:

A typical merchant card payment has two parts: an “interchange fee,” which includes an average 1.7 percent of the sale price and a flat per-transaction fee, and a separate fee that goes to the merchant’s bank. Take, for example, a driver who pays for a $1,000 car repair with a credit card. The bank that issued the consumer’s card receives an interchange fee of $17.10 (including a 10-cent flat fee), while the repair shop’s bank gets $4, or four-tenths of 1 percent of the total sale. The repair shop pockets $978.90.

On a large, $1,000 sale, one could just consider this a cost of doing business. Who is going to walk around with $1,000 in cash in their pocket anyway? Checks are dowdy and raise unmanageable fraud risks (a subject for another post). So, the card is most excellent in that situation.

On small transactions, these fees can have a large impact; they cause merchants to lose money on a sale. Because credit cards are used more than cash now in the US, the fees add up to an enormous tax on consumers. Birnbaum continues:

In 2007, merchants paid $61.56 billion in electronic payment fees, up from $48.58 billion in 2005, according to the Nilson Report, a payment systems industry newsletter…

Obviously, this is passed onto the consumer. But instead of passing it onto just the plastics, merchants spread the costs among all customers, even those who use cash or checks. This is because under the guise of consumer protection, California and other states have laws that prohibit businesses from charging customers more when they use plastic (however, merchants can advertise “cash discounts”). Agreements between credit card networks and merchants prohibit policies setting a minimum amount for credit transactions.

Straight outta Locash!

So, next time you’re in line at the 7-11 behind the 18 year old using plastic for a $2.32 purchase, remember that you are paying for it with both your wasted time and money!

The Journal reports the obvious under the headlines “Tainting of Milk Is Open Secret in China” and “Milk Routinely Spiked in China:”

Before melamine-laced milk killed and sickened Chinese babies and led to recalls around the world, the routine spiking of milk with illicit substances was an open secret in China’s dairy regions, according to the accounts of farmers and others with knowledge of the industry.

Farmers here in Hebei province say in interviews that “protein powder” of often-uncertain origin has been employed for years as a cheap way to help the milk of undernourished cows fool dairy companies’ quality checks. When the big companies caught on, some additive makers switched to toxic melamine — which mimics protein in lab tests and can cause severe kidney damage — to evade detection.

[…]

China’s biggest local seller of liquid milk, Mengniu Dairy Co., and multinational food company Nestlé SA both say they were aware that Chinese farmers and traders added unauthorized substances to raw milk, but that they didn’t know melamine was among them. “We knew there was adulteration” going on for many years, says Zhao Yuanhua, Mengniu’s spokeswoman. Among other common milk additives: a viscous yellow liquid containing fat and a combination of preservatives and antibiotics, known as “fresh-keeping liquid.”

If you’re buying pet food made in China or anything else for that matter, it’s time to pay more for a product manufactured in a country like America, where we have had oversight and controls on food production for over a century.

Libertarians hold dear the idea of the uberman consumer, the hyperrational, fully formed autonomous being that springs from the womb to take good decisions in the marketplace. But when one reads marketing literature, a different consumer is encountered. Often this consumer is an object to be manipulated; one who holds totally irrational ideas that must be shaped or corrected; one that has to be acclimated to changes, and managed to prevent revolt.

One also encounters shockingly frank discussions of consumers’ lack of sophistication in the literature. This brings me to an article in Monday’s Wall Street Journal Report on marketing. It was written by Madhubalan Viswanathan, Jose Rosa, and Julie Ruth, marketing professors at University of Illinois at Urbana-Champaign, the University of Wyoming, and Rutgers (respectively).

This article discusses the problem of selling to indigent, low-literacy consumers in third world countries. The authors explain that 14% of the American public is functionally illiterate, thus, a major segment of US consumers is also described. How can retailers put this vulnerable group of consumers at ease, help them process product prices and discounts, and help them understand value? This group faces challenges unimaginable in our lives. I would love to paste the entire article. Here are some highlights:

CONCRETE THINKING

One of the key observations we made is that low-literacy consumers have difficulty with abstract thinking. These individuals tend to group objects by visualizing concrete and practical situations they have experienced. They exhibited what science would call a low grasp of abstract categories — tools, cooking utensils or protein-rich foods, for example — which suggests low-literacy consumers may have difficulty understanding advertising and store signs that position products that way…

Scientists, what is a low grasp of abstract categories? Aren’t these categories socially constructed? (The authors do hint at this.)

It continues!

One of the most potentially detrimental results of concrete thinking, however, is the difficulty that low-literacy consumers have with performing price/volume calculations. They tend to choose products based solely on the lowest posted price or smallest package size, even when they have sufficient resources for a larger purchase, because they have difficulty estimating the longevity and savings that come from buying in larger volumes. Some base purchase decisions on physical package size, instead of reported volume content, or on the quantity of a particular ingredient — such as fat, sodium or sugar — but without allowing for the fact that acceptable levels of an ingredient can vary across product categories or package size.

This observation presents major public policy implications. If a large segment of consumers are challenged by basic price/volume calculations, evaluating secondary characteristics of products would be next to impossible for them. How can one obtain informed consent with these populations on any number of transactions–from computer licenses to privacy policies and credit card agreements?

MISSPENT ENERGY

We found that low-literacy consumers spend so much time and mental energy on what many of us can do quickly and with little thought that they have little time to base purchase decisions on anything other than surface attributes such as size, color or weight.

[…]

When shopping in unfamiliar stores, some low-literacy consumers will choose products at random, buying the first brand they see once they locate a desired product category or aisle. Others simply walk through the store, choosing items that look attractive based on factors such as packaging colors or label illustrations, without regard to whether they even need the product.

The article concludes with a series of recommendations on how to reduce unease among this population, and help them better understand discounts and what they are purchasing. If you have a subscription to the Journal, it’s worth a read. I’m fascinated by it, both as someone trying to understand consumer challenges, but also because of its description of the unuberman consumer.

So, here it is. Titled “Berkeley’s Big People,” it is installed along I-80, so those of you driving north of San Francisco will probably see it, as it is 30 feet tall and visible from a mile away.

Given the landscape of “free speech,” it would have been much more appropriate to have erected a large Don Quixote, fending off autism-causing vaccines, and tilting at a windmill atop a stolen shopping basket full of junk but missing it because he was high. And then declaring victory.

Updates: my Berkeley friends respond! All of these responses are incredibly valuable, so you are to be subjected to them now!

AC asks: “‘lower sproul plaza drumming circle’ is listed as a cultural contribution?”

and then remarks: “mmm … i think you should round up some little people and protest the name. it’s offensive.”

BG remarks that after victory is declared, the statute should depict: “…pooping on the street!”

It seems as though officials have been arguing forever about whether to erect an anti-suicide net along the Golden Gate Bridge. On Friday, the bridge directors voted 14-1 in favor of creating such a net:

…the stainless-steel net system, which would be placed 20 feet below the deck, and would collapse around anyone who jumped into it, making it difficult, if not impossible, for anyone to leap to their death…

This has been a fairly divisive issue in San Francisco. Anti-netters argue that that the net will just cause people to kill themselves elsewhere (perhaps by jumping from a building in a business district), that the net will uglify the bridge, and that it will be expensive. They’re probably right on the last two arguments.

Pro-netters probably have the better public health argument. Among them are people who jumped from the bridge during a bout of depression and lived to regret it. The New Yorker ran an awesome story about the history of Golden Gate Bridge jumpers several years ago, which included anecdotes about those who jumped and survived:

Survivors often regret their decision in midair, if not before. Ken Baldwin and Kevin Hines both say they hurdled over the railing, afraid that if they stood on the chord they might lose their courage. Baldwin was twenty-eight and severely depressed on the August day in 1985 when he told his wife not to expect him home till late. “I wanted to disappear,” he said. “So the Golden Gate was the spot. I’d heard that the water just sweeps you under.” On the bridge, Baldwin counted to ten and stayed frozen. He counted to ten again, then vaulted over. “I still see my hands coming off the railing,” he said. As he crossed the chord in flight, Baldwin recalls, “I instantly realized that everything in my life that I’d thought was unfixable was totally fixable–except for having just jumped.”

It still will be years before this net is complete. It will be interesting to see, if this intervention is effective, who the last to jump will be. The Golden Gate has inspired some very weird culture, and I’m willing to bet that there will be a group of people attempting to jump in the last days that it is possible.

UPDATED

I just went for a run which takes me to a view of the GG Bridge. The warships are in the Bay this weekend for Fleet Week, which is exciting.

The Chemist, in comments below, remarks about how callous we are as a society to know about this suicide problem for so long, and to do nothing about it.

But I’d argue doing nothing about it is very San Francisco, and as a non-native, I don’t share this feeling, but there is a feeling here that if people decide to off themselves, it’s their business. There’s a documentary about GGB suicides called The Bridge where they interview friends of people who jumped, and I was struck by how people just kind of accepted others’ decisions to die. It was strange for me, but there is a spirit of individualism here that just does not know boundaries…

Just check out this excerpt from the New Yorker story linked to above. There is a different mentality here, to say the least:

The [suicide] coverage intensified in 1973, when the Chronicle and the Examiner initiated countdowns to the five-hundredth recorded jumper. Bridge officials turned back fourteen aspirants to the title, including one man who had “500” chalked on a cardboard sign pinned to his T-shirt. The eventual “winner,” who eluded both bridge personnel and local-television crews, was a commune-dweller tripping on LSD.

In 1995, as No. 1,000 approached, the frenzy was even greater. A local disk jockey went so far as to promise a case of Snapple to the family of the victim. That June, trying to stop the countdown fever, the California Highway Patrol halted its official count at 997. In early July, Eric Atkinson, age twenty-five, became the unofficial thousandth; he was seen jumping, but his body was never found.

Ken Holmes, the Marin County coroner, told me, “When the number got to around eight hundred and fifty, we went to the local papers and said, ‘You’ve got to stop reporting numbers.’ ” Within the last decade, the Centers for Disease Control and Prevention and the American Association of Suicidology have also issued guidelines urging the media to downplay the suicides. The Bay Area media now usually report bridge jumps only if they involve a celebrity or tie up traffic. “We weaned them,” Holmes said. But, he added, “the lack of publicity hasn’t reduced the number of suicides at all.”

Why? Well, among other things, for hating billboards. Max Colchester of the Wall Street Journal reports:

On Friday, Alex Baret plans to board a train to central Paris, pull out a can of spray paint and deface a billboard, as he has done every last Friday of the month for more than two years. The slogan he prefers to leave scrawled on his targets: Harcèlement Publicitaire, or Harassment by Advertising.

How did this hate for billboards come about, you ask?

Mr. Baret says the seeds for his campaign were sewn in the spring of 1997, when he was riding the Paris subway and he looked up at an ad. “I suddenly thought: ‘I am in a prison,’ ” he says. “I saw the slogan, the lies, and it disgusted me.”

The average guy on the Paris subway is a critical theorist! Awesome!

Just imagine how Clear Channel would respond to this…they’d probably release the hounds! And what is the French industry’s response? Well, it’s French!

The industry is remaining stoic. “There is no point rolling around on the floor crying,” says Stephané Dottelonde, president of the French Union for Outdoor Advertising. “You have to respect that these groups exist.”

The Journal reports this morning that:

The U.S. Food and Drug Administration banned imports of more than 30 generic drugs made by India’s Ranbaxy Laboratories Ltd., citing concerns about the safety of the company’s production practices.

The ban affects low-cost versions of popular medicines such as the anticholesterol drug Zocor; Acyclovir, which treats herpes; the heartburn pill Zantac; and AIDS drugs. Consumers shouldn’t be affected by a medicine shortage because the drugs can be supplied by other generics makers, the agency said.

The agency said it acted because of concerns about the “seriousness and extent” of violations of manufacturing standards at two Ranbaxy plants in India. The agency said it hasn’t found safety problems in drugs in the U.S.

There are a number of aspects of this story that are scary. First, I’m involved peripherally in the issues surrounding offshoring personal data to countries like India. The complexities of that should be reserved for another post, but a basic problem involves supervision and accountability. How can you tell that data has been misused or stolen? The complexities must be more severe in ensuring that drug makers have sound practices. I would imagine that US regulators cannot detect most violations of the rules.

Second, for our government to take action against a drug maker means that things were really screwed up. And if things were really screwed up, why should we believe that Ranbaxy-made drugs in the US are unaffected?

More broadly, is there any way for consumers to ensure that their generic or branded drugs are made in the US? I read every day about the Chinese Poison Train (next stop, you), and would like to limit my exposure to leaded or otherwise tainted foreign products.

Here is the FDA’s release on the Ranbaxy action, and the list of affected drugs.