Why sign up generics manufacturers for a drug you've only just got patent and approval for?

More importantly, why would you sign up generics manufacturers to make a drug that you can charge $84,000 a course of treatment for? Which is exactly what Gilead, the makers of Sovaldi, the $84,000 a course treatment for Hepatitis C have just done:

Multinational American drug maker Gilead Sciences was set to join hands with at least five Indian generic pharmaceutical companies and allow them to manufacture and sell cheaper versions of its new hepatitis C medicines - sofosbuvir and ledipasvir - in 90 countries, four people in the know told Business Standard.

Clearly, someone is being either terribly clever here or terribly stupid. So which is it?

It is, of course, being clever. NICE has approved Sovaldi for use in the UK, the FDA has in the US. Gilead has some short number of years (usually, about ten) to squeeze that drug for the billion dollars or so it cost to develop. So, obviously, they're going to charge what the market will bear. $84,000 looks like a lot, is a lot, but it's about the same price as other current treatments and is markedly more effective. So, that's the price they set.

But to then go and licence to generics manufacturers to sell in 90 odd countries looks most odd: won't this undercut sales? No, no, it won't: for the generics manufacturers only get the rights to sell in countries where there's no way at all that anyone would pay $84,000 for a course of treatment. For yes, there are poor countries out there and poor countries, rightly, don't try to spend that sort of money on treating one patient. They can save tens, hundreds, thousands of lives by spending the same amount on, say, a vaccination campaign.

Thus, at full market price there would be no sales: at generics prices there will be some and thus some revenue to Gilead.

But that then leads to, well, isn't it unfair on us? We've got to stump up $84,000 a treatment and poor people pay a groat a pill. True, but why is this unfair? Aren't we rich people supposed to be tendering to the ill and sick of the world?

Further, this isn't particularly to do with the way that the patent system works. Imagine that all health care research was done by the state instead. It would still be us rich world people paying for all of that research from our taxes, wouldn't it? On the simple grounds that poor people don't have incomes to pay tax upon to fund medical research. So whatever the structure is the end result will be the same. We rich people will pay to get the drugs designed and through the approval process. The poor will then get them. Whether we pay in advance in taxation or later through the price of the patented drug doesn't make much difference, does it?

And yes, for all that the NHS is The Wonder of the World and all the rest, we in the UK are indeed rich world people and that's why we're being charged this arm and a leg for this drug. And, given that we pay for the NHS through taxation it really makes absolutely no damn difference at all, what the patent or research structure is?

Dear Dr. Sarah Wollaston MP

I write this open letter to you in the hope that you have been grievously misquoted by the Daily Mail. For it would be painful to have to believe that a sitting MP, and a qualified doctor to boot, could be quite so ill-informed about food, prices and obesity. It is thus my hope that your words have been manipulated by the newspaper rather than that you actually believe any of this tosh. For example, you are quoted as saying that:

'There is a huge amount of personal responsibility. But it is now so serious we need to state to step in and take some measures.

'The choice is you either do nothing and carry on saying it's all down to personal choice and you continue to pick up a huge bill through the NHS.

'We have to take out junk food calories and help to get people moving and more active.'

The problem there is that obesity does not cost the NHS anything at all. Indeed, the price to the NHS of obesity is negative. The reason being that the NHS is a system of lifetime health care and those who are obese die earlier. Yes it is true that they incur healthcare costs while alive and fat: but these are more than outweighed by the savings to the NHS when they are dead and buried and not requiring those longer years of health care.

This means that there are substantial private costs to people of being lardbuckets, entirely true, but it is not true to then say that there are public costs to their being so, as you well know.

'One of the reasons why the most disadvantaged people are running into difficulties is partly because the healthy food is more expensive.

'If you are struggling on a budget, you are much more likely to pick food on special offers. But all of the special offers tend to be on crisps, sweets and junk food.

That is also not true. Rice, beans, onions and tomatoes may not be a very interesting diet but it is still both healthier and vastly cheaper than any form of junk food calorie for calorie, whatever the BOGOF or discount that is being offered. This is something that we both know and so for the Mail to be quoting you as it did is obviously something you'll want to correct.

And finally the paper seems to be making a good attempt at making you look like an idiot:

She warned voluntary agreements with big chains had not worked and regulation was now needed to force stores to offer discounts on fruit and vegetables.

This is price fixing and price fixing does not work. By definition price fixing does not work: clearly a Tory MP is well aware of this fact for the following obvious reason. If we fix prices below the market clearing price then we will have fewer suppliers willing to produce at that price. We will also have more people desiring to consume that good or service at that price: the result is instant shortages of those goods and or services. We need only to look at the provision of toilet paper in Venezuela, well reported recently, to see that. Similarly, if we fix prices above the market clearing price then we find that consumers desire to purchase less of these goods and services while producers will be squeezing every extra unit out they can. Leading, as the European Union showed us when they did it, to vast gluts in the form of butter mountains and wine lakes.

Price fixing thus leads to either dearth or glut unless we fix those prices at the market clearing price itself. In itself that has a problem for as you well know we don't in fact have any other mechanism than the market itself to work out what that market clearing price is. But even if we did, again as is obvious to both of us, what's the damn point of fixing prices where they would be anyway?

Quite clearly you'll want to make sure that the Daily Mail corrects this terrible misrepresentation of what any sane or sensible person could possibly believe on this subject. My suggestion is that you start by calling 020 7938 6000 and ask for a certain Mr. Paul Dacre. He should be able to sort out matters for you.

Yours etc

Tim Worstall

It's our dreadful colonialism that caused the South Sea Islanders to get fat

This just in: that appalling colonial thing we white folks did is what made the people of the South Pacific so dreadfully fat today:

Anthropologists Dr Amy McLennan and Professor Stanley Ulijaszek found that islanders lost many of their traditional food cultivation, preparation and preserving skills after settlers insisted that they learn western ways of eating.

They taught the locals to fry fish rather than eat it raw, and forced them to import unhealthy produce after co-opting farmland for mining.

“Under colonial rule, much changed in how food was sourced, grown and prepared and the social change was swift,” said lead author Dr McLennan

“What happened to the land also changed as colonial agriculture and mining industries expanded. There was an increase in family size meaning food was increasingly imported.”

It's that last sentence that should have been a clue to our intrepid scientists. A change in diet, a change in the amount of food available (for that's what imports manage) leads to a removal of the Malthusian limits on family size. They couldn't have large families before because there wasn't enough food to feed them. After that dreadful, hateful, arrival of the colonialists food supplies increased and it was possible to raise larger families.

Or to make the same statement another way: the colonialists improved the diets of those who lived on such islands. It might not be an improvement by the standards of the modern prodnoses but population does respond quite well to food availability in a subsistence economy. That population and family size did increase is proof perfect that the diet was "better".

From the Annals of Rampant Stupidity

The latest bright idea is that apparently granny would like to scrabble in the dirt for a few potatoes the day after her hip replacement:

Even if hospital patients have always hated their food, whether it’s microwaved meals, over salted vegetables, or fresh fruit, there are still things we can learn from the past. One obvious change in food provision is the loss of the hospital garden. Until the nineteenth century many hospitals had outdoor space, part of the therapy for recuperating patients, a place for Apothecaries to grow healing herbs, and a site for kitchen gardens to feed the staff and patients. Outdoor space was lost in the nineteenth century as giant hospitals were built in crowded urban areas, and as convalescent and elderly patients were moved to homes and hospices elsewhere. There’s quite a trend for ‘urban farming’ in the twenty first century – perhaps that could extend to give hospitals back their gardens too?

The idea of a little herb garden where patients can convalesce in the sun amid the mint, rosemary and the butterflies they attract is obviously wonderful. The idea that anyone should be trying to grow bulk foods in an urban environment is simply ludicrous.

For we've invented this thing called "transport" as well as "economy of scale".

Hospitals are, as they note, in urban settings. Because that's where all the people are and it's sensible to treat people near where they live, near where their families live so they can visit them. Excellent: but that means that land is expensive where hospitals are because that's where all the people are. A few acres of urban land can be worth millions upon millions of pounds: using that to grow £50's worth of vegetables is simply not sensible. What is sensible to to use that agricultural land 50 miles away, worth perhaps £5,000 an acre, to grow the same vegetables and then splash a fiver or so per tonne of food on the petrol to transport them. We thus use fewer resources to get to the same goal, feeding the sick, and this is a process that makes us richer as a whole.

It's also true that agriculture is subject to the most enormous economies of scale. We can tell this: food grown in those 50 acre monocrops is markedly cheaper than food used to be when we all had our little 15 acres of the country to cultivate. This is true even if we don't include the labour we used to perform "for free". The urban poor would spend 80% of their income on food and rent in centuries gone by. Today the average is 10-15% on food.

The idea of feeding the sick from hospital gardens is simply bonkers: guess that's why it's being suggested in The Guardian.

The reason we're all such fat lardbuckets

A number of reasons are put forward as to why the nation has, in its entirety, become a population of fat lardbuckets. Big Food pushes ever more unhealthy comestibles upon us, advertising to children is for some reasons still allowed, there's no tax on sugar, or fat, we've even got those who insist that inequality causes obesity. Of course, all these reasons come with their own solutions: we should ban advertising to children, or of "unhealthy" food, or reduce inequality or something. As Chris Snowden shows in his latest little report (The Fat Lie)all of those reasoned proffered are simply wrong:

If we look at the average body mass of English adults since 1993, we see a steady increase from 72.4 kg to 77.4 kg (Figure 7). This seven per cent increase contrasts sharply with the data from DEFRA which shows a decline in domestic calorie consumption of nine per cent in the same period (Figure 8). If we confine ourselves to the period 2002-12, for which we have solid data for food consumed inside and outside the home, we see the same ‘paradox’: an increase in average body weight of two kilograms coinciding with a decline in calorie consumption of 4.1 per cent and a decline in sugar consumption of 7.4 per cent.

Britons are eating fewer calories than we all used to. What is causing the increase in weight is that we're all also doing less physical labour than we used to. The imbalance between calories consumption and expenditure is growing but not the total amount of calorie consumption. We've thus got under-expenditure of calories, not over-consumption of them.

Note that if we are all consuming fewer calories this does then mean that if Big Food has been trying to get us to eat more they've failed and failed dismally.

It's also worth noting one more thing, that inequality argument. This should really be turned on its head: it is greater equality that is to blame here. There's always been a certain calorie richness, calorie density, to the British working class diet as compared to its middle class (or even upper) equivalent. This made perfect sense back in the days of heavy manual labour. We now have much greater equality in the workplace, there's very few of us making a living from the exercise of our muscles rather than what's between our ears. And that greater equality has had a larger effect on those still eating that culturally calorie dense diet than it has on those whose diet adapted to less physical labour earlier.

It is still possible to point out that it's the poorer among us who are the lardbuckets. But this isn't the result of ineq1uality at all, it's the result of greater equality in the workplace, in all of us now expending fewer calories in pursuit of our daily bread.

Actually, people aren't willing to pay more tax for the NHS

There's a report out announcing that loads of people would be entirely happy to pay more tax if that extra cash was allocated to the NHS. Two important things #to say about this. The first being that it's untrue and the second being that if it is then that's just great:

Almost half of voters say they would be happy to pay more income tax as long as the money went directly to the NHS, which is facing a £30bn gap in its finances by 2020.

Polling firm ComRes found that 49% of people would be prepared to pay more tax to help fund the health service, one in three (33%) people said they would not be ready to do so, and 18% did not know either way.

However, if only the views of those who expressed an opinion are considered, as many as 60% of people are willing to pay more tax to help the NHS providing its wide range of services; 40% are not.

The reason it's not true is our old friend revealed preferences. We should never try to divine what people really want from what they say: we should instead look at what they do. And we do have a method of being able to pay extra tax: simply send the cheque to "The Accountant, 2 Horse Guards Road, London SW1" and they're absolutely delighted to apply it to whatever area of public spending you wish to inform them you favour. Admittedly it's a few years since I looked into this but in that year an entire 5 people had actually done so and four of them were dead, leaving bequests.

So revealed preferences tells us that exactly one live person was actually willing to pay higher taxes for any reason at all, not just for the NHS.

But let's assume for a moment that this is in fact true. That the reason, perhaps, that more people don't pay is because they don't know where Mr. Accountant resides? All we have to do is tell everyone where he does and that's the problem solved, isn't it? A few people to open the flood of envelopes that will no doubt overwhelm the office and we're done. Everyone who wants to pay more tax for the NHS may do so and no one who does not needs to.

If only all public policy questions were as simple to solve as this one.

The remarkable logic of the minimum booze price people

This is an interesting example of the logic of the anti-booze prodnoses. They tell us that a minimum price for alcohol will affect really heavy drinkers almost exclusively because really heavy drinkers drink cheap alcohol:

A new study of liver patients shows that a Minimum Unit Price policy for alcohol is exquisitely targeted towards the heaviest drinkers with cirrhosis. Researchers studied the amount and type of alcohol drunk by 404 liver patients, and also asked patients how much they paid for alcohol. They found that patients with alcohol related cirrhosis were drinking on average the equivalent of four bottles of vodka each week, and were buying the cheapest booze they could find.

No, really, that's it, that's their argument.

Published today in Clinical Medicine, the peer review journal for the Royal College of Physicians, the researchers studied the amount and type of alcohol drunk by 404 liver patients, and also asked patients how much they paid for alcohol. They found that patients with alcohol related cirrhosis were drinking on average the equivalent of four bottles of vodka each week, and were buying the cheapest booze they could find, paying around 33p per unit, irrespective of their income. In contrast, low risk moderate drinkers were paying on average £1.10 per unit.

If the government set a MUP at 50p, it wouldn't affect pubs or bars and would have no impact on moderate drinkers; the average cost would be £4 per year and 90 per cent would not be affected at all, the research shows. The impact on heavy drinking liver patients would be at least 200 times higher.

They've not even attempted to work out what the actual effect of an MUP would be. No discussion at all of whether people would in fact drink less. Or even whether people are in fact budget constrained and if they are whether it would be other things (oooh, I dunno, food maybe?) that would get dropped from their budget in the face of such price increases. They've just said that alcoholics drink cheap booze so we're right!

And they're still not attempting to answer the point we've been making here for so long. Which is that an MUP is still a ludicrous way of dealing with this. Even if it's true that higher booze prices would reduce the amount alcoholics glug, even if they're correct on that point, it's still a ludicrous solution. If you want more expensive booze then raise the alcohol tax: at least that way there'll be a bit of revenue and we can cut other taxes to boot. Why on earth you would try to raise prices and then insist that the extra margin stays with the manufacturer or retailer is very hard to fathom.

The problem with price fixing NHS drugs

Markets have a funny way of getting around behind the rational planner and biting him in the buttocks. And so it is with price controls on NHS drugs. Sure, it sounds great that we use the power and majesty of the law to keep taxpayers' money out of the hands of those rapacious Big Pharma companies. But the problem is that this is leading to there being no drugs for people to take:

Patients are being harmed and put at risk because of national shortages of some prescription drugs, doctors have warned.

Medicines currently subject to shortages include Tamoxifen for breast cancer, Naproxen for arthritis and Amiloride, used to treat heart failure and high blood pressure.

A poll of GPs has revealed that more than nine in 10 family doctors have been forced to write prescriptions for “second choice” medicines because the drug they wished to provide was out of stock.

In recent years, scores of medicines, including those for breast cancer, arthritis and schizophrenia have run low because drugs intended for British use are being diverted abroad for profit, while others have been subject to production problems.

The survey of more than 600 family doctors by GP magazine found that one in three said their patients had suffered harm as a result, or faced a longer recovery.

The background to this is that there is an absolute freedom of trade across the EU. This is what the Single Market means. And we also have the NHS insisting that it will only pay certain prices for certain drugs. Fine, volume discounts aren't a problem and, if we're to be honest about it, nor is the use of countervailing economic power as a near monopsonist argues with the monopolies that pharma companies have over their still in patent drugs. But we do get to the standard problem with price fixing. Set the price too low and you'll get a shortage of whatever it is you've set the price of. Too high and you get a glut, fix prices at what the market price would be anyway and what's the point?

Here what's happening is that the freedom of trade is bringing that iron law of one price into play. Different EU countries fix (or don't even try to fix) drug prices at different levels. So there are arbitrage opportunities to buy pharmaceuticals in one country, at that country's controlled price, and move them to another EU country where the price is higher. It is this that is causing the shortages here in the UK.

Of course, people are trying to deal with this:

Because of the shortages, the Department of Health has introduced a system of rationing, which is supposed to mean the right number of drugs are held in stock. However, the system often means particular parts of the country run low on stocks, because they are not allowed to have more than their quota of medicines.

Facepalm. If the problem is initially caused by having fixed prices too low then the solution is to raise prices, isn't it? Remove the arbitrage opportunity and there won't be any arbitrage.

At some point we really do need to tell certain politicians to just toddle off

And that point may have been reached for one of them:

“Supersized” food and drinks should be banned by law in a bid to combat Britain’s obesity epidemic, the new head of the Commons health select committee has said.

What? We're going to have a law now where a willing purchaser cannot negotiate with a willing supplier to gain 600 calories in return for folding money instead of 400 calories for a smaller amount?

What?

Dr Sarah Wollaston, a Conservative MP and former GP, said the state had a “duty to intervene” to protect current and future generations from unhealthy habits threatening to shorten their lives.

This sort of proposed lawmaking does not bode well for the efficacy of open primaries, does it?

The former GP called for a direct ban on “supersized” foods and drinks, so that manufacturers would be restricted to producing chocolate bars, junk food meals and fizzy drinks in standard sizes.

She said: “Why aren’t we taking more direct steps around supersizing? You go into the cinema and someone will ask if you want to supersize for an extra 20p - we don’t need that.”

Here's how things work in a free and liberal society: you don't get to decide what we would like to have. We get to decide what we would like to have. And if we want more chopped gristle for a paltry extra sum of money then we are and should be perfectly at liberty to have that. As are people to be allowed to sell that to us.

That moral point being entirely aside from the practical issues of course. For we're not all entirely stupid and if we want more than the Wollaston Burger we'll order two.

And there's an interesting legal point here as well. Clearly she thinks that we're all too damn stupid to be allowed to decide what to put into our own bodies. Despite their being, you know, ours? OK, so she obviously does think that. But she's an elected politician: one, clearly, elected by people too stupid to know what they'd like to eat. At which point she's not really got all that much authority, does she?

Either she's right and we're all morons and thus she should have no power having been elected by said morons or we're not morons and so she has a moral claim to power. But if we're not morons then banning us from eating a handful of extra french fries isn't necessary, is it?

Perhaps the best we can hope for is that Dr. Wollaston disappears in a puff of of her own self-contradictory logic as with some of Oolon Colluphid's philosophical creations. but lord forbid that she ever gets to write the law for this country.

A masterly piece of political game theory

This is a subject of some controversy so please, put aside your thoughts, passions and logic on the subject itself, abortion, and instead just think about the political tactic being employed here. In general in the US it is the left that is strongly in favour of the right to abort. In general again, it's generally the conservative right that is against. Also, again in general, it is the left that is in favour of detailed and sometimes expensive regulation of activity and it's the right which is against. So, what would be a useful political tactic if you were against the general availability of abortion? Quite, regulate it:

The last restriction under the law goes into effect Sept. 1. All abortion clinics at that point must have upgraded their facilities to ambulatory surgery centers. Busby says many can’t afford it and more will close.

“This would basically force all the clinics to become mini-hospitals,” Busby said. “They have to have hallway widths a certain length, and a janitor’s closet, male and female locker rooms, which is completely unnecessary – and a bunch of other regulations that are really not appropriate or do anything to increase the safety of one of the safest procedures in the country.”

Pro-life groups supported the law, saying it would protect women by making abortion safer. At the time of the passage of the law, The Texas Tribune quoted Republican state Sen. Donna Campbell saying: “There’s nothing in this legislation that will close a clinic. … That’s up to the clinic. If they want to put profit over a person, that’s up to them.”

The right has been saying for years that regulations can be expensive and those who would regulate have been shouting that that's nonsense for the same amount of time. Rather a case of the biter bit.

Sadly, of course, no one is going to learn anything from this. Certainly not those who generally propose regulation: for do note that while they argue that clinics should not be subject to this level of regulation they're not, not at all, arguing that mini-hospitals can be trusted to work out whether they need a janitor's closet for themselves. Still regulation for thee even if not for me.