New Public Institutions

Table of Contents

Why We Should Have a Publicly Produced E-Commerce Platform

Among the unfortunate characteristics of capitalism and free markets are they generate monopolies, which concentrate wealth and power in small segments of society. Economies of scale and network effects (where the value or usefulness of a service increases with its number of users) provide competitive advantages proportional to size, so big businesses destroy or gobble up the small.

But what allowed these effects to operate in creating Bezos’s monopoly and immense wealth was far from free markets. In Amazon as Metaphor, I provide evidence that without tax advantages over competitors that included tax avoidance and evasion and public subsidies in Amazon’s early years, 2019’s highest valued company’s value would instead have been zero—Amazon would not exist. As a result of public polices that advantaged Amazon, we have tens of billions of dollars less for public purposes, and tens of thousands of local businesses were destroyed.

Just Amazon’s sales tax advantage totaled $21.4 billion through 2015 [total through 2014, and 2015]. This $21.4 billion gift to Amazon came in the form of up to a 10 percent discount to its customers that customers of businesses in our communities competing with Amazon had to pay. This disadvantage alone destroyed tens of thousands of local businesses. Amazon’s sales in just 2016 destroyed over 40,000 local businesses.

The resulting social harm is highly significant. Communities where locally owned businesses have a smaller share of total commerce have a smaller middle class, less civic participation and social ties, and more inequality with its many other destructive consequences. 

It was not necessary to empower a monopolist to support the development of e-commerce. In Amazon as Metaphor, I detail a system where local retailers receive revenues from all e-commerce, and there is no e-retailer monopolist.

Amazon: Extraordinary Power Abused

For 5 million product sellers, Amazon provides the markets’ underlying infrastructure—the online shopping platform and the cloud computing backbone that competing firms depend on to transact business. Instead of a free market governed by democratic rules that facilitate competition and fair play, Amazon dictates the terms by which these sellers operate and where it is the dominant and advantaged participant.

Amazon levies a “tax” on its competitors’ and all other sellers’ revenues on the Amazon Marketplace. And it is advantaged by privileged knowledge of the success of sellers, which it has abused by offering competing products under its own label. Amazon as Metaphor details various other ways Amazon’s abuse of power has harmed product sellers, authors, and publishers. Its large and growing shipping business will further advantage it over other sellers.

Amazon can pick which companies, authors, and innovators will succeed and which will fail. As Amazon’s dominance advances, our markets will further descend from fair, open, and free.

More Abuses of Power on the Road to Monopoly Power

Central to Amazon’s gaining monopoly power were labor market conditions that allowed it to subject hundreds of thousands of workers to atrocious working conditions. And for most of its history, Amazon paid its warehouse workers below a living wage and the average in the industry. November 2018, after achieving monopoly power partly based on substandard wages, Amazon raised its minimum wage to $15 per hour. The new minimum does not apply to its many contract workers who commonly receive much less.

Amazon will further entrench and grow its dominance as an e-retailer with its always-listening Echo devices, which it sells below their costs to make them central to our lives.  The company uses this destructive tactic for wresting market share from, and destroying, competitors, although it violates federal and state antitrust laws.  At the end of 2018, Echo devices captured 65% of the digital assistant market. 

Amazon’s Influence on our National Marketplace for Books

Amazon sells 42% of all new print books, far more than any bookseller ever. It sells 89% of eBooks[1] and, after its acquisition of Audible, distributes 99%+ of digital audiobooks, the fastest-growing segment of the book market. (Audible.com is also the exclusive audiobook provider for Apple iTunes.)[2] Through its dominance of the book business, Amazon has gained more control over the exchange of ideas than any company in U.S. history. (Bezos’s and Amazon’s media influence is also huge through other formats.)

In the 1970s, the four largest chains together accounted for less than 12% of book sales. So no possibility existed that any one retailer could significantly alter the percentage of Americans exposed to a book, influence what books would be published, or intimidate authors and damage their careers.[3] Amazon has exerted its monopoly power in these ways. And the full extent to which Amazon’s managers have used their ability to alter the fate of books in our national marketplace only they can know. What is certain is that Amazon has abused its monopoly power in the past, and this power is growing.

 

[1] https://www.bloomberg.com/graphics/2019-amazon-reach-across-markets/

[2] http://authorearnings.com/report/dbw2017/

[3] U.S. Congress, Senate, Committee on the Judiciary, Subcommittee on Antitrust, Monopoly and Business Rights, Concentration in the Book-Publishing and Bookselling Industry: Hearings on Monopolization of the Publishing Industry, 96th Cong., March 13, 1980 (Serial No. 95-56), Washington: Government Printing Office, 1980. As referenced in The New America Foundation and the Authors United letter to William J. Baer, Assistant Attorney General for the Antitrust Division

Publishers Are Bezos’s Targets

In the early 2000s, Bezos initiated the “Gazelle Project,” a campaign for higher fees from small publishers, with the intent to destroy them. Bezos said Amazon “should approach small publishers the way a cheetah would pursue a sickly gazelle.” One target was Melville House. Their distributor described negotiations with Amazon as being “like dinner with the Godfather.”[1] Amazon wanted additional fees, and the publisher refused and reported the company’s demands to Publishers Weekly. A Publishers Weekly story soon appeared, and the following day Amazon removed the buy-buttons from every Melville House title on its site. Not long afterward, at a major book industry conference (the “Book Expo”), two men in suits wearing Amazon nametags approached Melville House’s booth, pointed fingers at the CEO, and said, “When are you going to get with the program?” To survive, Melville House “paid that bribe,” as the CEO put it, and the books reappeared.[2]

To pressure Hachette Book Group, one of the largest publishing houses in America, for higher fees and to allow Amazon to set Hachette’s eBook prices, Amazon interfered with the sale of millions of their books. Amazon stopped taking pre-orders, delayed shipping, eliminated discounts, and used search engine modifications and pop-up windows to redirect readers to non-Hachette books. Because of Amazon’s market dominance, including its proprietary e-book platform, other retailers could not make up for the over 50% loss of Hachette books sales on Amazon.com in all formats. By the time Amazon and Hachette settled their dispute eight months later, tens of millions of books that would have otherwise been sold were not.[3]

Another example of Amazon abusing its extraordinary market power to get more money out of publishers: While negotiating with the publisher Macmillan, it removed the “buy buttons” from their books.[4] 

 

[1] https://www.newyorker.com/magazine/2014/02/17/cheap-words

[2] https://www.newyorker.com/magazine/2014/02/17/cheap-words

[3] Amazon’s suppression of Hachette titles affected about seven percent of all books sold in the United States by sales volume. Nielsen BookScan Marketing Report, Market Share By Subject Group Summary, Week Ending,12/28/2014, as referenced in Authors United letter to William J. Baer, Assistant Attorney General for the Antitrust Division, United States Department of Justice

[4] World Without Mind, Franklin Foer, pg. 105

Did Paul Ryan Sell Many More Books Because Bezos Liked it?

Amazon’s abuse of its power over Hachette significantly disrupted the free flow of ideas in our society—with one Hachette book as a notable exception: The Republican Congressman Paul Ryan’s book, The Way Forward, which Hatchett published at the time of their Amazon conflict. Initially, Ryan’s book was part of the blanket targeting of Hachette books, but after Ryan complained, Amazon advantaged The Way Forward, offering discounts and providing immediate shipment. Was the reason solely to appease a powerful politician?

People who know Bezos describe him as a “libertarian,” and Ryan’s philosophy is similar—anti-tax and anti-government. Whatever their motive, Amazon’s executives demonstrated that they had the power to pick which books to advantage or disadvantage, even those involved in America’s vital political debate.

Amazon Competes with Publishers from an Advantaged Position

Since Amazon is now a major publisher itself, it has additional leverage to hike fees. Any publisher that refuses could see Amazon favor its books over the publishers. However, regardless of publishers’ fees, Amazon will likely favor the books it publishes, so grow its market share as a publisher. In 2017, Amazon had 15 imprints under the Amazon Publishing banner, which published 1,231 titles in the U.S., up from 373 in 2009, the year it entered the $16 billion-a-year consumer book publishing business. In 2018, 16 of the top 20 books on Amazon’s best-seller list in romance novels—one of the most lucrative genres—were titles from its book-publishing arm or were self-published on Amazon’s platform.[i]

[i] https://www.wsj.com/articles/they-own-the-system-amazon-rewrites-book-industry-by-turning-into-a-publisher-11547655267

More on Our Need to Remove Amazon from its Chokehold Position on the Flow of Books

Both overtly and covertly, Amazon can direct the attention away from and toward the books they choose of a far larger percentage of Americans than any other bookseller in history for any purpose.

Amazon’s search engine results, rankings, recommendations, bestseller lists, and “Customers who bought this book also bought…” statements, website placement, and discounts are determined by data Amazon selects for the algorithms it creates. The algorithms’ results significantly influence how many of a book are sold. Their manipulation and the removal of the “buy button” from publishers’ books have forced them to comply with demands for increasingly large fees. Considering Amazon’s market share, these can also be significant political manipulation tools. Abusive practices to serve its economic interests suggest it would use such practices in the political domain since the political system largely determines economic system outcomes, and this relationship Amazon has aggressively and very effectively abused.

Monopolies are always dangerous because they concentrate economic power and so political power, but in the book business, they are especially perilous. A free and open market for books is of fundamental importance to our society. Books are the most important media for detailing societal dysfunctions and injustices and ways to correct them because they are the most extensive media for the necessary details.

Besides Amazon’s potential for intentional political information flow manipulation, algorithms like Amazon’s that mainly expose consumers to information that confirm their beliefs and biases suppress contrary information or viewpoints create socially harmful “filter bubbles.” Reinforcing biases advances our destructive trends establishing disparate, often hostile political camps unable to sustain a civil conversation based on commonly held facts. When shoppers browse bookstore sections with books on social issues, they are much more likely to be exposed to a wide variety of perspectives than when they shop on Amazon.

[1] https://www.wsj.com/articles/amazon-changed-search-algorithm-in-ways-that-boost-its-own-products-11568645345

Fear of a Monopoly Bookseller

At the opening of a New America Foundation conference on Amazon’s book monopoly, the moderator announced that many people invited declined out of fear. They feared Amazon would retaliate by damaging their book sales or those of the people they care about.[1]  One of them, an attorney who often played an adversarial role to big companies in court, wrote in response to the invitation, “I’m going to pass for personal reasons. My daughter has been working on a book that her agent will send out to publishers shortly. So, the manuscript will be under consideration at about the same time as your program. The publishers are so paranoid about what Amazon could do that I think it might affect their behavior. So, I think that I need to keep a lower profile on this one at this stage.”[2]

A previously fearless adversary of large corporations feared that if he criticized Amazon, Bezos and his team would retaliate by suppressing his daughter’s book sales. And he knew publishers were aware of Amazon’s history of retaliation using the tools they have to suppress sales. So to avoid being another victim of Amazon’s power to harm a critic, publishers may reject his daughter’s book. Publishers knew of overt Amazon tactics to suppress book sales, but they were also aware that Amazon can damage sales covertly, and they are powerless regarding it.

Dozens of bestselling authors declined to sign an open letter in The New York Times by Authors United condemning Amazon’s suppression of books by Hachette authors—not because they disagreed with it, but because they were afraid of retaliation by Amazon. They feared Amazon would target them and their publisher. Of the 17 authors who contributed between $1,000 and $20,000 each to pay for The Times advertisement, ten did so on the condition that their names were kept confidential. Several prominent authors who helped draft The Times letter also asked Authors United to keep their names private, citing Amazon’s history of retaliation.[3]

[1] Amazon’s Bool Monopoly: A Threat to Freedom of Expression? New America Foundation conference, Opening remarks by Barry Lynn, 1/27/16

[2] World Without Mind, Franklin Foer, pg. 122

[3] http://www.authorsunited.net/july/longdocument.html


Bezos Built His Empire on a Mountain of Social Resources

Amazon’s business would not exist without decades of the discoveries and innovations of publicly supported researchers. These researchers played an essential role in creating the internet, computers, microelectronics, and other technological capacities on which Bezos built his business. Like all the tech billionaires, Bezos perceived an important commercial application of their work and then raced to be the first to enter the market with a well-designed one to capture monopoly power through network affects and economies of scale. Instead of the benefits of an advancement going to people in proportion to the degree they are responsible for it, they mainly go to the monopolist who makes a relatively minor adaptation of their work. Besides publicly funded R&D, in Amazon as Metaphor I describe more fundamental reasons wealth is mainly the result of socially created resources, which justifies the policies I detail for its more equitable distribution.

One Policy in an Agenda for a Just and Well-Functioning Society

Amazon as Metaphor details how we can and why we should replace Amazon’s e-commerce platform with a publicly produced one and replace the current book distribution system with one that distributes book files to book printing equipment in bookstores and libraries. We will thereby eliminate the warehousing, shipping, and other costs of the middlemen and eliminate publishers’ substantial “remainder” and return costs. (My proposal solves the problems of a prior attempt for widespread local on-demand book printing.) Ordered books will be available in minutes; the financial costs of supplying printed books will be lower (a benefit that could be shared by authors, bookstores, consumers, publishers, and libraries); and my policy will eliminate the environmental costs of wasted paper and shipping. Bookstores returned over 410 million pounds of books in 2018, which involved at least 20% of bookstore labor costs. 

E-commerce platforms are infrastructure over which we transact commerce; like roads, they are best publicly supported and available to any product seller with no or low user fees. A publicly produced online sales platform and one Regional Buyers Cooperative established in each of the 384 metropolitan statistical areas and their region when these areas do not adjoin will support a local retail store renaissance.

In one of four major parts of Amazon as Metaphor, I detail the characteristics of the public e-commerce platform and its integration with the book and merchandise sales system. Below is a summary of the 9% book price reduction estimate that I detail in Amazon as Metaphor resulting from my proposed book distribution system advancements.

The 9% Reduction in Print Book Prices Estimate

14,250 bookstores sold 385 million books in 2021, an average per bookstore of 2,250 books per month.[1] For a rough estimate of bookstores’ additional profit at current prices and sales per bookstore, let’s assume that all these books were $20, 350-page, softcover, black print books. Under the proposed system, the publisher/author will receive $8 and the bookstore $12. Under the current system, bookstores receive $8 (40% of $20). The additional $4 covers the $1.60 printing costs, leaving $2.40. The average book sales per month times the $2.40 additional profit per book yields $5,400 to cover the cost of equipment and the energy to operate it. I estimate the average energy cost to operate the book printing equipment to be $320/month. The $5,400 in excess profit is $4,060 more than the $1,340 total of the $1,020 monthly equipment loan payment and $320 energy cost.

To encourage more people and organizations to open a bookstore—an important goal of my proposed policy—it is not necessary to increase bookstore net profits by $4,060 per month. Making the profit increase more excessive if book prices remain the same will be the sales transferred to bookstores from Amazon and other online sellers.

The $4,060 profit increase for the average sales volume bookstore is $1.80 additional profit per book. For bookstores that sell less than the 2021 average number of books, profits will be lower. However, due to the enormous sales transfer from Amazon and other online sellers to local bookstores, the great majority of bookstores will have more than the 2021 sales average. So prices can drop by at least $1.80 or 9% on a $20 book.

 

[1] Total number of employer and nonemployer bookstores, and percent of books sold from bookstores: https://www.census.gov/library/stories/2021/12/do-not-turn-the-page-on-bookstores.html ,  Number of books sold 2021: https://www.statista.com/statistics/422595/print-book-sales-usa/

Content on pharma industry is excerpted from Amazon as Metaphor manuscript (slightly modified), 4,740 words, to be included on ten pages of the 427-page 6 X 9 inch book)

We Need Fundamental Pharmaceutical R & D, Production, and Supply Systems Reforms

As I detailed in Part 3, our pharmaceutical patent system results in high out-of-pocket costs for patients that leave millions unable to fill prescriptions or cause them to cut their pills, many patients driven into bankruptcy,  massive industry profits, and marketing expenditures far exceeding investments in R & D.[1] Even though the Affordable Care Act was fully implemented, in November 2019, 58 million adults could not pay for needed drugs in the prior 12 months.[2] Our patent system with the profit maximization imperative of drug companies distorts research priorities, drug trials, drug marketing, and drug regulation against the public interest.

Ending drug patents and publicly funding drug R & D can dramatically reduce costs because drugs are inexpensive to manufacture. For example, as I noted in Part 3, Sovaldi costs patients $84,000 for a three-month treatment course. Many of the 3 million Americans with Hepatitis C cannot afford this price even if they have insurance because they can’t afford the copayments. Almost all, though, could afford the cost to manufacture it, which is about $102.[3] Let’s assume all 3 million Hepatitis C patients are treated at the current retail price, so ignore the possibility of low-income patient discounts—this would require $252 billion. The manufacturing cost of Sovaldi to treat them is $306 million, $251.7 billion less than the retail price. $251.7 billion is 3.5 times all U.S. pharmaceutical research and development expenditures in 2018 and 839 times the $300 million private investors spent on Sovaldi and Harvoni R & D combined.[4]

Cancer drugs are among the other examples showing monopoly pricing power harming patients and society. The total spent on research and development by ten firms that recently introduced cancer drugs was $9 billion, while those drugs generated $67 billion in revenues just over a median of 4.0 years.[5] And drug firms continue to sharply increase prices decades after recouping development costs. As I noted in Part 3, between 1988 and 2009, pharmaceutical firms profits were 3 to 37 times the average of all industries, depending on the years.[6]

Our patent system does motivate drug companies to spend tens of billions of dollars on developing new drugs each year. But only about 10% of them have been superior to the existing best alternative. Most of their R & D expenditures are on patentable tweaks of existing drugs because this investment gives the highest return.[7]

Resources should be focused on therapeutic advances, and they do not require the monopoly pricing power of patents. Throughout history, curiosity and the intrinsic rewards of discovery have driven scientific breakthroughs, not financial incentives. This remains true today; most basic research underlying drug innovation is carried out in public or non-profit institutions funded by the National Institutes of Health (NIH).[8] All 210 medicines approved for market from 2010 to 2016 came out of research supported by the NIH.

Pharmaceutical companies are increasingly outsourcing their research activities to academic research organizations for basic research and translating research into new drugs. Corporations rarely have all the required expertise and infrastructure in-house to take advantage of cutting-edge technologies’ potential to create more effective drugs. Advances in genomics, combinatorial chemistry, high-throughput screening, cheminformatics, and artificial intelligence have contributed to an explosion in the number of new promising biological targets and molecules discovered in academic research organizations.[9]

Drug development in academic settings is the most effective and efficient way for society to do it. Academic centers focused on a particular area of knowledge can provide state-of-the-art expertise and expensive specialized equipment, whose value is enhanced by making it widely available to researchers rather than sequestering it in a private company lab.[10] Furthermore, interdisciplinary collaboration within and among academic centers facilitates and enhances the R & D process. When knowledge seeds are freely and widely dispersed, more bloom, and the academic environment is designed to disperse knowledge. This is contrary to the private company environment where knowledge is hoarded to maintain monopoly pricing power.

Another reason we should end the patent system to motivate drug companies to fund R & D is that even with monopoly pricing power, insufficient investment in R & D on medicines with the greatest curative potential is likely. Quickly curing diseases may not be a sustainable business model. For example, Gilead’s Sovaldi and Harvoni achieved cure rates for hepatitis C of over 90%. The company’s U.S. sales for these hepatitis C treatments peaked at $12.5 billion in 2015 but have been falling ever since. A Goldman Sacks analyst estimates the U.S. sales for these treatments will be less than $4 billion this year because they have gradually exhausted the available pool of treatable patients.[11]

Although Gilead made massive amounts of money on Sovaldi and Harvoni, it is possible to develop drugs for more rapid cures and declines in revenue. Genomic medicines have the potential for “one-shot” cures of enormous value to patients and society, but private funding for genomic medicine R & D is not likely to be adequate because recovering R & D costs will be difficult.[12] Long-term high profits cannot be achieved when you quickly cure the patients who would buy your treatment.

[1] https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-pharmaceutical-companies-are-spending-far-more-on-marketing-than-research/

[2] http://pnhp.org/system/assets/drupal/Pharma_Table1.pdf

[3] The Value of Everything, Mariana Mazzucato, pgs 208-9

[4] Total R & D spending 2018, $71.4 billion, https://www.rdmag.com/article/2019/03/pharmaceutical-r-d-expenditure-shows-significant-growth, The Value of Everything, Mariana Mazzucato, pg. 209

[5] https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2653012

[6] Pharmaceutical High Profits: The Value of R & D, or Oligopolistic Rents? Janet Spitz, Mark Wickham

The American Journal of Economics and Sociology Vol. 71, No. 1 (1/12), pp. 1-36

[7] https://www.bmj.com/bmj/section-pdf/187604?path=/bmj/345/7869/Analysis.full.pdf

[8] https://www.newscientist.com/article/mg21929310-200-state-of-innovation-busting-the-private-sector-myth/

[9] https://www.biopharmatrend.com/post/30-pharma-rd-outsourcing-is-on-the-rise/

[10] Ibid.

[11] https://www.cnbc.com/2018/04/11/goldman-asks-is-curing-patients-a-sustainable-business-model.html

[12] Ibid.

How To Accelerate Advancements In Pharmaceuticals And Eliminate Most Of Their Costs

The following policy, if instituted, will end the destructive pharmaceutical industry practices I detailed in Part 3, accelerate the development of effective and safe medicines, and provide prescription pharmaceuticals to patients for no charge. It will accomplish all this while reducing current government expenditures.

I propose we end the use of drug patents to incentivize R & D and institute a  public funding system for drug discovery and trials.[1] We will also end the patentability of “discoveries” or knowledge useful to medicine or health. The reduced drug costs resulting from my proposal will create net financial gains for the government more than needed for the public R & D funding increase and for paying 100% of patients’ costs for prescribed drugs.  

To advance our prescription drug development system, I propose we create two institutes within the NIH, one for drug innovation the other for clinical trials. The drug development division’s Board of Trustees will evaluate funding proposals from academic research organizations for their drug development work . These proposals could include those for their expanded research capacities. The Board will also fund NIH R & D and R & D infrastructure expansions.

Drug companies will be eligible for NIH R & D funding if they share their research findings with the academic community as soon as practical; in other words, if they have environments like academic research institutions. However, their public funding will be limited to supporting research projects they can perform with their existing infrastructure. We will focus infrastructure improvement funding on multidisciplinary  academic research institutions and the NIH. (Of course, drug companies will be free to develop drugs independent of the publicly funded system.)

The Board shall be composed of 7 members, including:

  1. The Administrator of the Centers for Medicare & Medicaid Services
  2. The Commissioner of Food and Drugs
  3. The Director of the National Institutes of Health
  4. The Director of the Centers for Disease Control and Prevention
  5. The Director of the Health Resources and Services Administration
  6. The president of the American Medical Association
  7. The president of the National Academy of Medicine
  8. The president and director of the Academic Drug Discovery Consortium (ADDC)

The ADDC is a non-profit organization supporting the interactive and growing network of university centers engaged in drug discovery that has emerged in response to recent drug discovery ecosystem changes. As of August 2019, 150 ADDC Center members are in 17 countries. We will include the dozens in the U.S. in this funding system.

To assist the Board in carrying out its responsibilities, it will:

  • Hold hearings, take testimony, and receive evidence as the Board considers appropriate. Among the hearings’ participants will be representatives of consumer and patient interest groups.
  • Establish independent committees on the following:
  1. Research and development priorities.
  2. Economic evaluation of therapeutic benefits.
  3. Financial control and auditing.

The Institute for Clinical Trials will:

  • Establish and enforce clinical trial standards. It is particularly important to extend trial durations for drugs intended to be taken long-term.
  • Ensure that all trials submit their detailed anonymized trial data monthly to clinicalstrial.gov, and within three months of trial completion, their summary and formal report of results. 
  • Ensure robust analytical tools are available for trial data.
  • Establish and maintain a partnership with the open-source biomedical science journal PLOS, the world’s largest multidisciplinary peer-reviewed journal. (In the unlikely event a partnership is not possible, the institute will oversee the NIH’s work on establishing an independent open source peer-reviewed journal of all research articles.) All peer-reviewed research reports will be accessible for no fee through PLOS and PubMed Central (an existing full-text archive that includes some articles from journals).

Prizes will be part of the funding system, which the Board will award to research organizations based on their success in creating significant advancements in drugs or the tools needed for drug developments. These organizations could distribute some of their prize amount to the persons most responsible for the advancement within their research center based on their published guidelines.

The selection process for the research organization recipients of the prizes and the amounts awarded will include consideration of:

  • The number of patients who would benefit from the drug, biological product, or manufacturing process involved. In cases of global neglected diseases, global infectious diseases, and other global public health priorities, the number of non-United States patients will also be considered.
  • The incremental therapeutic benefit of the drug, biological product, or manufacturing process involved as compared to existing drugs, biological products, and manufacturing processes available to treat the same disease or condition.
  • The degree to which the drug, biological product, or manufacturing process involved addresses current, emerging, and potential future global infectious diseases (such as those that may be caused by variations of existing corona or flu viruses).[2]

The prize amounts will be distributed over three years.

Enormous competitive forces to excel exist within academic research institutions, and intrinsic rewards are researchers’ main motivating factors. However, the prize will also be a beneficial motivator, possibly also for some drug companies whose R&D was not initially funded in the system.

In addition to new standards for trial duration will be those for participant numbers and demographics.[3] One demographic poorly represented in industry-sponsored trials now are people over 65 years old. For example, in NSAID trials, only 2% of participants were 65 years or older, despite this group being most likely to be harmed by the drugs—or because of this, from the profit-maximizing perspective of drug corporation managers.[4]

The clinicaltrials.gov database, launched in September 2008, is the most comprehensive resource for patients to enlist for future trials. Under my proposed system, all system-funded drug trials will recruit on the site. The Food and Drug Administration Amendments Act of 2007 requires the submission of “basic results” for clinical trials to the site no later than one year after their completion date; however, compliance has been poor.[5] We will modify the requirement (and enforce it) as described above.

Researchers’ formal reports will undergo a peer review. Those that meet or can be improved to meet PLOS standards with edits for clarity will be included in its comprehensive database of high-quality journal articles. These articles will also be included in PubMed Central. We will include reports that do not meet PLOS standards in a separate section of the PubMed database with explanations of their defects.

PLOS currently is funded by article authors, who pay for each published article between $1,595 and $3,000 based on the subject. In 2018, PLOS expenses totaled $38 million and total revenue of $32 million, resulting in a $6 million loss.[6] We will publicly support the $38 million in expenses and increase support each year in proportion to the number of articles it has peer-reviewed, not published, to avoid incentivizing publishing articles that do not meet the highest standards. In my proposed system, authors will no longer have any expense to publish their articles.

The publication of pharmaceutical research results in the many expensive medical journals now existing limits vital information flow. Under my proposed system, anyone can access research results for no charge from comprehensive databases of PLOS journal articles. The free article database will also help support libraries by eliminating medical journal costs.

Unlike under the current system, clinical trials will always determine the safest and most effective option to treat a disease by comparing the current standard of care (if one exists) with the tested drug that researchers judge may be superior. Currently, clinical trials often compare drugs to placebos, even though a drug treatment standard exists. It is unethical for researchers to give some patients an inert substance while deceiving them it could be beneficial when a treatment exists, as it is to knowingly give them an inferior comparator drug or drug dosage.

As I noted in Part 3, drug company researchers sometimes intentionally select too high or low a comparator drug dosage for favorable results on the tested drug. So, many drugs are approved for the market despite a superior alternative being available.  And placebos in trials are almost always inactive, which biases trial results in favor of the tested drug.[7] 

People risk their health when participating in a drug trial not to make some people rich but to help discover a drug that will benefit humanity. Drug company managers have a different primary purpose: profit maximization. Trial participants are tools for a big boost in income and wealth of relatively few people, and participants are rarely among them (even more rarely or never are any major owners).

Although people risk their health voluntarily when they participate in trials, if they had a choice, almost all would do so in a system where their sacrifice would not make a tiny percentage of our population rich off people that are ill. But if they want to participate in the drug development process to benefit humanity, they don’t have a choice.

Human rights include the rights to be treated with dignity, fairness, and respect. Since the current drug trial process ignores fairness considerations and treats the participants’ fundamental desires with disrespect, it is designed for human rights violations even when a beneficial drug is discovered.

Human rights violations also occur through trial designs biased for favorable outcomes on the tested drug. And many trial results are never published because they reveal the tested drug is either ineffective or has side effects severe enough to jeopardize the drug’s approval for the market based on the results of other trials. For example, reports on 74 antidepressant trials on drugs approved by the FDA from 1987 to 2004, 31% were not published, mostly those with negative or equivocal results.[8]

Biased designs of trials, and not disclosing the results of some, wastes trial participants’ sacrifice to benefit profiteers. And as a result, hundreds of thousands of people have taken a dangerous or ineffective drug. Removing windfall monopoly profits will end all their perverse consequences, including drug trial participants’ abuse.

Besides the best-known drug for treating a disease, clinical trials will also include the most promising herbal alternative. For many diseases, dietary and specific nutrient interventions and exercise are therapeutic; where any might be, we will include it in clinical trials as well. Not only will we sometimes discover these interventions to be as good or superior to pharmacological ones, they commonly have beneficial “side effects.” For example, based on a review of the research literature comparing exercise to antidepressants, they were equally effective. So exercise, with only positive side effects, unlike antidepressants, is generally the superior option by far.[9]

Exercise results in many health benefits. It protects against heart disease and diabetes, improves sleep, and lowers blood pressure. High-intensity exercise releases the body’s feel-good chemicals called endorphins. Low-intensity exercise sustained over time releases proteins that cause nerve cells to grow and make new connections. The improvement in brain function improves mood. In depressed people, neuroscientists have found that the hippocampus in the brain, which helps regulate mood, is smaller. Exercise supports nerve cell growth and connections in the hippocampus, which helps relieve depression. No drug can match all these benefits.[10]

Studies have shown that lifestyle changes that include a plant-based whole food diet reverse heart disease.[11] More studies on the effect of lifestyle in disease reversal and prevention are warranted, as is doctor education on these outcomes. Doctors are now mainly trained in the use of pharmaceuticals or surgery to treat disease. Our health care system irrationally and harmfully ignores treatment and prevention options far less costly and more beneficial. Herbal and lifestyle treatments are mostly ignored because they don’t involve the monopoly profits of drug companies.

As I described in Part 3, many patients prefer marijuana over pharmaceutical alternatives, and it is not the only good herbal substitute for pharmaceuticals, which often have serious side effects. Although herbs can be harmful, most reported harm resulted from contaminants, including pharmaceuticals, in the herbal medicines.[12] Trials that include herbs will reveal some as good as pharmaceuticals or nearly so and that are safer and less expensive.

Herbs have a complex combination of compounds, some of which may act synergistically, enabling them to have superior clinical value to drugs dependent on the action of an isolated molecule. And drugs isolated molecules are often derived from plants.

Of the top 150 prescription drugs in the United States, at least 118 are based on natural sources. A child who had leukemia in 1960 faced a 10% chance of remission; by 1997, the likelihood of remission increased to 95% thanks to two drugs derived from a wild plant native to Madagascar.[13] When a good herbal alternative is discovered, its analysis may reveal a component that could be developed into a more effective drug that would otherwise not have been created.

We will select the comparator herb in each drug trial by a vote of ethnobotanists and herbalists teaching at accredited institutions. Of course, they could collaborate prior to their vote. Prominent examples of institutions with qualified staff for the purpose include the University of California, Berkeley, Medical and Nutritional Ethnobotany department; the University of Arizona, Andrew Weil Center for Integrative Medicine; the University of Illinois at Chicago, Department of Medicinal Chemistry and Pharmacognosy; and the University of Hawaii, Ethnobotany department. Among the tools these herbal medicine experts will likely use to select herbs is the massive phytochemical and ethnobotanical database produced by Dr. James Duke, former Chief of USDA’s Economic Botany Laboratory in the Agricultural Research Service.[14]

To produce all covered drugs in the system, we will establish long-term contracts with drug manufacturing facilities organized as domestic non-profit businesses. As noted in Part 3, low manufacturing standards and poor regulatory oversight of overseas production facilities, which are far more difficult for the FDA to inspect, have created a hazardous drug supply. And relying on getting over 80% of our active pharmaceutical ingredients from overseas manufacturers is a significant national security risk.

The pandemic made other reasons clear that relying on profit-maximizing enterprises for our drugs can result in devastating consequences:

During the SARS outbreak in 2002-04, caused by a coronavirus similar to one involved in the Covid-19 pandemic (SARS-CoV-2), several vaccine candidates were identified, but the research petered out when the epidemic died down because drug companies no longer saw prospects for short-term profits. If research had continued, we might have been better prepared to control the related Covid-19 before it became a pandemic.[15] Also, if research continued in reliable low-cost home testing methods for coronaviruses to track infections in the community to enable isolating and treating infected people, we could have stopped the widespread infection.

During a pandemic, the world urgently needs to disperse the knowledge and technology to end it. Profit maximizing patent holders want just the opposite; the longer they can exclusively sell their massively profitable ways to prevent and treat a disease, the better. If patents did not exist on the vaccines, and we had systems to facilitate the transfer of relevant knowledge and technology, we could have more effectively controlled the spread of SARS-CoV-2 with better vaccines, and superior treatments would likely also have been available. When knowledge is widely dispersed, advancements in it occur more rapidly. Also, PMPDs capture of public health organizations and their media influence suppressed knowledge on effective but inexpensive existing treatments or ways to prevent serious illness from SARS-CoV-2 infection.

An FDA-approved drug for parasitic infections, ivermectin, has robust anti-viral action towards many viruses; dozens of randomized and observational controlled trials have demonstrated this.[16] This inexpensive drug has proven effective in preventing and treating SARS-CoV-2 infection. The Front Line COVID-19 Critical Care Alliance (FLCCC), a group of highly published, world-renowned critical care physicians and scholars, have accumulated substantial evidence in support of ivermectin’s use in the treating and preventing Covid-19 on their website, https://covid19criticalcare.com/ Despite this evidence and an excellent safety record after four billion doses of ivermectin administered since 1998, the FDA recommended against its use.[17]

Besides the clinical trial evidence, substantial epidemiological evidence exists on ivermectin’s effectiveness. All countries that have promoted its widespread use as an early treatment for Covid-19 have seen large drops in Covid deaths and even cases. The most dramatic successes have occurred in India.  A house-to-house test, treat, and prevention program with medicine kits that included ivermectin, vitamin C, zinc, and vitamin D3 in  India’s state, Uttar Pradesh, resulted in the 7-day moving average of the number of cases dropping from 35,000 to near zero.[18] Uttar Pradesh has a high population density, 204 million people, and only 5% were fully vaccinated.[19]

As noted earlier, Vitamin D deficiency is strongly correlated with poor Covid outcomes.[20] It also makes it more likely to contract the disease.[21] Oddly, our public health officials did not mention or emphasize this fact. That they didn’t is consistent with some people’s view that an information blackout on inexpensive, effective treatment and preventive measures was intentional to create panic from people getting severe disease to motivate everyone to get vaccinated. This is unlikely; incompetence at the top of our public health system and a kind of groupthink established based on it is the more likely cause of our public health system’s massive pandemic response failure. But if the information blackout were intentional, considering the resulting number of unnecessary deaths, it would be an atrocity of historic proportions.  

If the FDA solely acted on the evidence, it would have given ivermectin emergency-use authorization for Covid-19. Our public health officials only advocated for the use of highly profitable vaccines for Big Pharma despite their failure in stopping Covid transmission. August 2021, Israel had one of the world’s highest vaccination rates with the Pfizer vaccine and had one of the world’s highest daily COVID-19 infection rates.[22]

Pfizer is projected to earn $36 billion from vaccine sales in 2021.[23] However, like with almost all major drug advances, government funding is mainly responsible for Pfizer’s and Moderna’s mRNA vaccines.[24] Like with all major drug companies, though, Pfizer is skilled and dedicated to avoiding appropriately compensating our government. Pfizer, Merck, Johnson & Johnson and Abbott dodge $2.3 billion in U.S. taxes per year by shifting profits to tax havens, where subsidiaries pay a lower rate.[25]

Another promising treatment that received too little attention was studied in a randomized controlled clinical trial in Pakistan.[26] The study found that the combination of honey and Nigella sativa seeds (black cumin) significantly hastens recovery, decreases viral shedding, and reduces mortality in patients with both moderate and severe COVID-19 infection. Both honey and Nigella Sativa have anti-viral, anti-microbial, anti-inflammatory, and immune-modulatory effects and are safe.

The policies of the FDA, the NIH, the CDC, the World Health Organization, and other public health agencies worldwide have been influenced by Big Pharma dedicated to protecting their profits even if it jeopardizes the health and lives of many millions of people. And mass media parrots officials’ statements rather than play their intended investigative and adversarial role, also due to Big Pharma money’s influence. As a result, the pandemic was more widespread and destructive than necessary. The vaccines reduce disease severity, but this benefit comes with significant risks.[27] The near-exclusive focus on the novel and inadequately tested vaccines by top public health officials in response to the pandemic was inappropriate.

In the United States, Big Pharma’s capture of our regulatory agencies, public health system, and mass media has resulted in 18.52% of the world’s Covid-19 cases and 15.02% of the deaths though we have only 4.3% of the world’s population. The pandemic provided another alarming demonstration that we must radically reform our pharmaceutical industry.

[1] The Value of Everything: Making and Taking in the Global Economy, Mazzucato, M., 2018, pg. 204

[2] Some Board members and prize criteria in my lists come from Medical Innovation Prize Fund Act, S.495

115th Congress (2017-2018) Sponsor: Sen. Sanders, Bernard [I-VT] (Introduced 03/02/2017)

[3] For details on why we need new standards see Deadly Medicines and Organized Crime, Peter Gotzsche, pg. 270

[4] Deadly Medicines and Organized Crime, Peter Gotzsche, pg. 269

[5] https://www.bmj.com/content/344/bmj.d7373

[6] https://www.plos.org/financial-overview

[7] https://www.clinicaltherapeutics.com/article/S0149-2918(17)30116-9/fulltext

[8] http://pnhp.org/system/assets/drupal/Pharma_Table3.pdf

[9] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5430071/

[10] https://www.health.harvard.edu/mind-and-mood/exercise-is-an-all-natural-treatment-to-fight-depression

[11] https://pubmed.ncbi.nlm.nih.gov/9863851/

[12] https://www.technology.org/2018/10/26/herbal-medicine-may-be-causing-more-deaths-than-we-know/   

[13] https://www.biologicaldiversity.org/publications/papers/Medicinal_Plants_042008_lores.pdf

[14] https://data.nal.usda.gov/dataset/dr-dukes-phytochemical-and-ethnobotanical-databases

[15] https://www.immunology.org/sites/default/files/BSI_Celebrate_vaccines_report_2020_FINAL_0.pdf

[16] https://covid19criticalcare.com/wp-content/uploads/2021/08/SUMMARY-OF-THE-EVIDENCE-BASE-FINAL.pdf

https://www.wsj.com/articles/fda-ivermectin-covid-19-coronavirus-masks-anti-science-11627482393

[17] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8088823/

[18] https://covid19criticalcare.com/ivermectin-in-covid-19/epidemiologic-analyses-on-covid19-and-ivermectin/

[19] https://www.thedesertreview.com/opinion/columnists/indias-ivermectin-blackout—part-v-the-secret-revealed/article_9a37d9a8-1fb2-11ec-a94b-47343582647b.html

[20] https://pubmed.ncbi.nlm.nih.gov/34684596/

[21] https://pubmed.ncbi.nlm.nih.gov/33512007/

[22] https://www.businessinsider.com/israels-covid-19-infection-rate-is-rising-despite-vaccine-uptake-2021-8

[23] https://www.amnesty.org/en/latest/news/2021/11/covid-19-pfizer-reports-massive-revenues-while-hurting-the-chances-of-millions-to-get-vaccinated/

[24] https://www.scientificamerican.com/article/for-billion-dollar-covid-vaccines-basic-government-funded-science-laid-the-groundwork/

[25] https://www.fiercepharma.com/pharma/pfizer-merck-and-j-j-shifting-profits-to-avoid-billions-tax-payments-each-year-report

[26] Honey and Nigella sativa against COVID-19 in Pakistan (HNS-COVID-PK): A multi-center placebo-controlled randomized clinical trial

[27] https://assets-global.website-files.com/606d3dece4ec3c3866cc798a/60a5ff1fd9f50f42f696aec6_23%20Fifty%20Seven%20Top%20Scientists%20and%20Doctors.pdf

Large Economic Benefits Accompany My Proposal’s Large Health Care Benefits

Economist Dean Baker, co-founder of the Center for Economic and Policy Research, estimated that eliminating drug patents would reduce prices between 80% and 90%.[1] Assuming an 85% price decline, our nation will save $448.8 billion per year in drug costs if the $528 billion spent on drugs in 2018 continue into subsequent years.[2]

I assume an 85% price decline in the following analysis, which is likely conservative: The FDA found that when a single generic manufacturer produced a drug, the price dropped, on average, to 65% of the brand price before generic competition. But when six or more generic drug manufacturers competed in producing a drug, on average, prices dropped to 5% of the brand price.[3] In other words, with six or more generic drug manufacturers, prices dropped 95% relative to brand drug prices and 92% relative to prices with one generic drug manufacturers. Prices fell to a level that included a profit margin or the companies involved would not be in the market.

The $448.8 billion savings estimate does not account for the additional prescription drug spending for newly covered persons and for currently insured persons who will increase drug utilization due to the elimination of cost-sharing. The total for this additional drug spending would be about $76 billion at current prices,[4] but $11.4 billion if my policy proposal were instituted, saving $64.6 billion per year.

In 2018, government expenditures on Medicare and Medicaid totaled $126.5 billion. Our federal government also had a tax loss cost of about $80 billion from the tax deductions on $401.5 billion in private-sector drug spending.[5] These government costs total $206.5 billion. If my proposal were in effect, government costs would have been 15% of the $528 billion in drug expenditures or $79.2 billion, plus the additional $11.4 billion, which is $90.6 billion. So, the government would have had a net gain of $115.9 billion, far more than sufficient to cover a public R & D funding increase.

Moreover, cost savings will result from millions of patients with serious illnesses taking medications who  have not in the past due to high cost. Instead, many have had to be hospitalized because their disease was not controlled. These savings will likely be in the many billions of dollars per year, but since we lack data to estimate the savings, I do not account for them.

If my proposal were in effect in 2018 and we devoted an additional $85 billion above existing public R & D support, this would have significantly increased the level of support for drug R & D that the drug companies provided. In 2018, U.S. pharmaceutical R & D expenditures totaled $71.4 billion.[6] The proposed annual $85 billion budgeted for R & D is 19% higher. Since most of the drug companies’ $71.4 billion in R & D expenditures were on “me too” drugs, likely we will not need to spend the $85 billion I am budgeting, even though improved standards would increase the costs per trial.

In total, if my proposal were in effect in 2018 to provide free prescription drugs and $85 billion of additional public R & D support, government expenditures would have been at least $30.9 billion lower than they were. Assuming the 2018 savings continue in subsequent years, we will devote some of the $30.9 billion to studies on disease prevention.[7]

 

[1] Drugs are Cheap: Why Do We Let Governments Make Them Expensive?, Dean Baker, 2/13/17 (Baker is the co-director of the Center for Economic and Policy Research)

[2] Average of estimates of Altarum Institute and ASPE retail and non-retail expenditures,  https://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2018/02/a-look-at-drug-spending-in-the-us

[3] https://www.fda.gov/about-fda/center-drug-evaluation-and-research-cder/generic-competition-and-drug-prices

[4] http://www.pnhp.org/sites/default/files/Pharma_Table7.pdf

[5] Roughly 20% of the $402 billion would have been collected in tax without the deduction.

[6] https://www.rdmag.com/article/2019/03/pharmaceutical-r-d-expenditure-shows-significant-growth,

[7] Out of the first year’s savings, we will compensate drug companies for some of their R&D expenditures that were based on the expectation of patent monopoly future profits which will not be realized.

My policy proposals to transform or economy over a 20-year period to one where most businesses are worker-owned and democratically controlled and for “Deliberative Democracy” also detail new public institutions.