The Mere Threat of “Hillary-Care” Reduced Investment in Drug R&D

TaurelSidneyCEOEliLilly.jpg   CEO of drug company Eli Lilly.  Source of image:  online version of WSJ artcle cited below.


NEW YORK — Is the future of your health riding on what happens in Washington?  Sidney Taurel thinks it might be.  The Eli Lilly CEO ticks off a list of former "death sentences" being cured or turned into chronic conditions — "AIDS, leukemia, Hodgkins, hopefully solid tumors within the next few years.  The potential for medical research is unlimited.  We just need to make sure we don’t interdict it by the wrong policies."

And what might those "wrong policies" be?  Anything, it would appear, that reduces the financial incentives for drug companies to invest in research and development.  Mr. Taurel points without hesitation to the mere threat of HillaryCare in the early 1990s as an episode that reduced investment in R&D, as drug makers, including his own, redirected money toward the purchase of pharmacy benefit management companies.  As another example, he offers the anti-drug industry crusade of Sen. Estes Kefauver in the late 1950s and early ’60s:

"At that point companies started to diversify.  We bought Elizabeth Arden, we went into animal health and agricultural chemical products, later on in medical instruments and so forth.  All other companies did similar things.  And for a while after that we saw fewer new products.  When this threat subsided the companies focused again on R&D and we saw a golden era in the ’80s and ’90s with a lot of new products and breakthroughs."


For the full interview, see:

ROBERT L. POLLOCK.  "THE WEEKEND INTERVIEW with Sidney Taurel; Of Politics and Pills."  The Wall Street Journal  (Sat., December 2, 2006):  A8. 

Hugely Wasteful Health-Care Spending

CureBK.jpg   Source of book image:


Milton Friedman is gone now, but the new book reviewed below, includes a forward written by him.  Friedman can be praised for many reasons; a minor one is that he was tireless and generous in offering praise and support for others who were seeking to better understand free markets. 


About 10 years ago, I broke my leg playing basketball.  After I came out of surgery, with a cast stretching from my ankle to the top of my leg, an orderly asked me whether I had ever used crutches before.  I hadn’t, so he showed me what to do, swinging through them from one end of the room to the other.  The whole lesson lasted about 90 seconds.  When I got my hospital bill, I saw that I had been charged $150 for "gait training on crutches."  I did what all insured Americans do:  I forwarded the bill to my insurance company.  Why should I care?  I wasn’t paying for it.

One of the problems with American health care, as David Gratzer notes in "The Cure," is precisely a payment system that takes the patient out of the equation.  In the early 1960s, the average American paid out of pocket one of every two dollars that he spent on health care; today the figure is one dollar in seven.  The inevitable effect is hugely wasteful spending (and inflated hospital bills like mine).  In fact, per-patient costs have gone up almost exactly in inverse proportion to the share of spending borne by the consumer.

Dr. Gratzer cites a remarkable Rand Corp. study that tracked health-care spending by 2,000 families over eight years.  The families who got free health care spent 40% more than the families with cost-sharing arrangements.  And yet the health outcomes for the two groups were the same.  The lesson:  Market-based health insurance systems, such as health savings accounts, cut out inefficiencies and lower costs without compromising quality.

. . .

. . . :   America is clearly at a crossroads in medical care.  Within the next decade we will get either some version of Hillary-care or more free-market medicine, starting with universally available health savings accounts.  Let’s hope that our nation’s policy makers read "The Cure" before they decide.  They will learn that the government route flattens costs only by holding back the pace of technology, artificially controlling its price and rationing its use.  That is not a prescription for better health.


For the full review, see: 

STEPHEN MOORE.  "BOOKS; The Market and Its Medicine."  The Wall Street Journal  (Tues.,  By  December 5, 2006; Page D6. 


The reference to the book under review, is: 

Dr. David Gratzer.  The Cure: How Capitalism Can Save American Health Care.  Encounter Books, 2006.  (233 pages, $25.94)


“Drawing the Best Minds into a Whirlpool of Mathematical Solipsism”

TroubleWithPhysicsBK.gif   Source of book image:


Physicists rightly feel uneasy about descriptions of the physical world that divide it into discrete clusters of equations and axioms, each cluster explaining one part of existence but not another.  Better would be finding a Theory of Everything capable of conjoining, in a few equations, planet-pulling gravitation and the microcosmic weirdness that goes on in the quantum world of atoms and particles.  Physicists would like to stitch time and space together as well.

Einstein tried and failed.  In recent years, "string theory" has been the favored means of attempting to tie everything together, but it has unraveled into mathematical frippery, positing ever more intricate elaborations extending into anywhere from 10 to 26 dimensions, some arising from themselves, some hidden in ways so baroquely scrolled that you can get a migraine just thinking about thinking about them.  Little wonder that, as an experimental science, string theory seems to have nowhere to go.

That is the problem that Lee Smolin identifies in "The Trouble With Physics."  He laments a kind of sociological imperative drawing the best minds into a whirlpool of mathematical solipsism.


For the full review, see:

RUSSELL SEITZ.  "BOOKS; Untangling the Knots in String Theory."  The Wall Street Journal  (Sat., December 2, 2006):  P9.


The reference to the book under review, is: 

Lee Smolin.  The Trouble With Physics: The Rise of String Theory, the Fall of a Science, and What Comes Next.  Houghton Mifflin, 2006.  (392 pages, $26)


Gates Foundation Will Not “Rule With a Dead Hand”

MelindaAndBillGates.gif  Source of image:  online version of WSJ article cited below. 


When he was discussing with Pierre Goodrich the rules for Goodrich’s Liberty Fund, my late-lamented mentor Ben Rogge tried to convince Goodrich to set some date by which the foundation would be required to spend all of its funds.  Rogge would quote Smith against the practice sometimes called ‘ruling with a dead hand’ by which the dead try to put restrictions on the living.  Rogge thought the dead had a right to restrict the future use of their money; its just that he thought it would become increasingly hard for them to do so effectively, the further out into the future you go.

There were at least a couple of reasons.  One of them was that as you go out into the future, it is increasingly hard to make sure that those supervising the money will remain true to the donor’s intent.  Another reason was that as you go further out, and conditions change, it becomes increasingly hard to know what the donor would have wanted done.  (Rogge used to jest that probably, evenually Liberty Fund would end up spending libertarian Goodrich’s money on making films promoting the beliefs of communist Anna Rosenberg.)

On this issue, it appears that Bill and Melinda find Adam Smith more persuasive, than did Pierre:


The Bill & Melinda Gates Foundation said it will spend all its assets within 50 years of the death of its last trustee, a decisive move in a continuing debate in philanthropy about whether such groups should live on forever.

. . .

The decision is expected to influence other charities to consider following suit.  . . .

. . .

The Gates decision will add fuel to a debate about whether foundations should live in perpetuity, a longtime model used by the Ford and Rockefeller foundations and Carnegie Corp.


For the full story, see: 

SALLY BEATTY.  "Gates Foundation Sets Its Lifespan; All Assets Are to Be Spent Within 50 Years of Death of the Remaining Trustee."  Wall Street Journal  (Fri., December 1, 2006):  A10.


Coolidge: A Popular Pro-Business, Small Government, President

  Source of book image:


"Silent Cal" was a pro-business, small-government president to a degree beyond the wildest dreams of today’s conservatives.  The tax cuts effected by Coolidge and by his Treasury secretary, Andrew Mellon ("under whom three presidents served," goes the old quip), were so effective that, as Mr. Greenberg reports, "by the end of Coolidge’s second term most Americans paid no federal income taxes at all."  William Humphrey, who was Coolidge’s appointee to the Federal Trade Commission, described the FTC as "an instrument of oppression and disturbance and injury" to U.S. industry.  Americans liked Coolidge’s policies because of the great prosperity that resulted.  Inflation-adjusted GNP grew 49% during the Harding and Coolidge presidencies, the highest growth on record.  Inflation and unemployment statistics were just as impressive.

. . .

In 1994 John Coolidge, the president’s older son, told me:  "My father could not possibly be elected to anything today."  That is surely true.  Looking at the people who do get elected to our republic’s highest offices today, it is also regrettable.


For the full review, see: 

JOHN DERBYSHIRE.  "BOOKS; A Quiet Man in a Roaring Time."  Wall Street Journal  (Tues., December 12, 2006):  D8.

(Note:  ellipsis added.)


Toyota Turns from Incremental Change to Revolutionary Change


ToyotaEfficiencyGraph.gif   Source of graph:  online version of WSJ article cited below.


(p. A1)  TOYOTA CITY, Japan — The world sees Toyota Motor Corp. as an unstoppable profit juggernaut, overtaking rivals one by one as it rolls toward replacing General Motors Corp. as the world’s largest auto maker.

Not Katsuaki Watanabe.  Toyota’s chief executive officer is a worried man.  He thinks Toyota is losing its competitive edge as it expands around the world.  He frets that quality, the foundation of its U.S. success, is slipping.  He grouses that Toyota’s factories and engineering practices aren’t efficient enough.  Within the company, he has even questioned a core tenet of Toyota’s corporate culture — kaizen, the relentless focus on incremental improvement.

U.S. and European car makers have spent years struggling to overhaul outdated operations and work practices to better compete with Toyota.  By some measures, some of those companies are catching up.  Now, driven by a severe dose of institutional paranoia, Mr. Watanabe is trying to move the target.

Mr. Watanabe, 64 years old, wants kakushin, or revolutionary change in how Toyota designs cars and factories.  He is pushing Toyota to reduce the number of components it uses in a typical vehicle by half — a radical idea that would usher in a new chapter in car design.  He also wants to create new fast and flexible plants to assemble these simplified cars.


For the full story, see:

NORIHIKO SHIROUZU.  "Paranoid Tendency As Rivals Catch Up,Toyota CEO Spurs Big Efficiency Drive Culture of Institutional Worry Drives Mr. Watanabe; How Paint Is Like ‘Fondue’ Finding Limits to Improvement."  Wall Street Journal   (Sat., December 9, 2006):  A1 & A6.

(I thank Aaron Brown for bringing this article to my attention.)


Risk Diversification Only Works If Risks are Random

RiskIntelligenceBK.jpg   Source of book image:


According to Mr. Apgar, managing director of the Corporate Executive Board and a former McKinsey consultant, the problem is that our traditional tool set deals only with random risk.  Equity prices, interest rates, natural catastrophes — all operate, more or less, as perfect markets, distributing risk with equal probability among all the players.  No one consistently knows more about what drives these phenomena than anyone else.  We can bear or hedge these risks in the secure sense that competitors don’t have an inside lead on the future.

. . .

In real business, though, many of the risks that can potentially wipe us out are non-random — what Mr. Apgar calls "learnable risks" — involving customers, technologies, marketing strategies, supplier relationships and so on.  The challenge is not just to learn, quickly, enough about them to survive but to determine whether someone else can learn about them even faster and thus put us out of business.

. . .

. . .   Mr. Apgar also explains how to perform a "risk audit," judging a company’s current projects by how they diversify total risk or demonstrate risk intelligence.  Here is where his program differs most widely from conventional wisdom — because, as he notes, risk diversification is no virtue if the risks are non-random and we have little intelligence of any of them.  If you don’t know much about poisonous snakes, keeping several different species won’t make you any safer.

Like liberty, risk intelligence demands eternal vigilance — and for the same reason:  threats evolve.  Mr. Apgar’s analysis of the life cycle of a business risk is particularly fruitful.  He notes that a successful company needs to maintain a risk pipeline, constantly probing into areas where it has higher risk intelligence and opportunities for real diversification — just as technology and pharmaceutical companies need a proportion of blue-sky research to innovate into the future.


For the full review, see: 

MICHAEL KAPLAN.  "BOOKS; The Hazards of Fortune."  Wall Street Journal  (Fri., December 8, 2006):  W6.

(Note:  ellipses added.) 


Standard Heart Therapies Do Little to Fight “Vulnerable” Plaque

Most people have of a clear image of how atherosclerosis, popularly known as hardening of the arteries, causes a heart attack — fatty deposits called plaque build up in a coronary artery until the day the blood flow that sustains the heart is blocked.

If only they were right.  In reality, severe coronary artery blockages almost always cause chest pain known as angina and other symptoms as they form.  But among those who suffer heart attacks, half of the men and two-thirds of the women report never experiencing a warning symptom.  And autopsies of such victims frequently show blood clots jammed into arteries that have been only modestly narrowed.

Standard atherosclerosis therapies include bypass surgery to route blood around blockages, angioplasty and stenting to clear blockages from inside the artery, and drugs like statins that reduce cholesterol levels to slow the formation of plaque.  But they have not been enough to prevent 200,000 to 500,000 American deaths annually from what doctors refer to as coronary artery disease.

As a result, many researchers have turned their attention from atherosclerosis in general to the tendency of some patients to develop a form of plaque prone to inflammation and rupture, which can spill a stew of cells into the bloodstream that can incite rapid clotting.  Such plaques have been called ”vulnerable” plaque. 


For the full story, see:

BARNABY J. FEDER.  "In Quest to Improve Heart Therapies, Plaque Gets a Fresh Look."  The New York Times  (Mon., November 27, 2006):  C1 & C3.


University Chancellor in Iran Bulldozes Office of Student Reform Group

According to the article excerpted below, Iranian tyrant Mahmoud Ahmadinejad appointed Alireza Rahai to be chancellor of Amirkabir University.  Apparently Mr. Ahmadinejad supports discussions of his doubts about the holocaust, but is not so fond of discussions of his own activities as an enemy of the open society.


Since Mr. Ahmadinejad took office, government pressure has increased on Iranians who have actively promoted changes to create a more open society.  As part of the crackdown, dozens of university students around the country have been barred from taking classes this year, and a substantial number of professors have been demoted or forced to resign.

A major reformist newspaper, Shargh, was shut down in September and several of its veteran journalists were barred from working.  The government has blocked thousands of news Web sites and blogs in an effort to limit the access of Internet users to independent news outlets.

Over the summer, Mr. Rahai, the university chancellor, had the office of a reformist student group, the Islamic Association, leveled by a bulldozer.


For the full story, see: 

NAZILA FATHI.  "Students Cry ‘Death to the Dictator’ as Iranian Leader Speaks."  The New York Times  (Tues., December 12, 2006):  A3.


See also, an article on the same page:

NAZILA FATHI.  "Iran Opens Conference on Holocaust."  The New York Times  (Tues., December 12, 2006):  A3. 

Doctors Earn More When They Rush Colonoscopies

ColonoscopyGraph.gif   Source of graph:  online version of the NYT article cited below.


For years, patients and many doctors assumed that a colonoscopy was a colonoscopy.  Patients who had one seldom questioned how well it was done.  The expectation was that the doctor conducting the exam would find and cut out any polyps, which are the source of most colon cancer.

But a new study, published today in The New England Journal of Medicine, provides a graphic illustration of how wrong that assumption can be, gastroenterologists say.  The study, of 12 highly experienced board-certified gastroenterologists in private practice, found some were 10 times better than others at finding adenomas, the polyps that can turn into cancer.

One factor distinguishing the physicians who found many adenomas from those who found few was the amount of time spent examining the colon, according to the study, in which the gastroenterologists kept track of the time for each exam and how many polyps they found.

They discovered that those who slowed down and took their time found more polyps.

. . .

The Rockford study was preceded by other signs that colonoscopies are by no means foolproof.   But as problems have been pointed out, they have all too often been met with disbelief among doctors, Dr. Rex said.

The first indication that colonoscopies were not as effective as widely believed came with two studies, one in 1991 and a larger one, in 1997, in which patients had two colonoscopies on the same day.  Those studies showed that doctors were missing 15 to 27 percent of adenomas, including 6 percent of large adenomas.

Then, in the last few years, two studies of so-called virtual colonoscopies, which use a CT scan to view the colon, found that the rate of overlooked adenomas in traditional colonoscopies was even higher.  Patients in those studies had traditional and virtual colonoscopy on the same day.   Traditional colonoscopies missed 12 to 17 percent of the large adenomas detected in the virtual colonoscopies.  But many doctors dismissed those findings, saying — if they believed them at all — that they applied to other doctors, not to themselves, Dr. Rex said.

Dr. Schoen, for one, said he was a believer.  The conclusions of the adenoma detection studies were reinforced, he said, by studies finding that colonoscopies missed not just polyps but actual cancers.

That finding emerged from studies testing ideas about how to prevent polyps, like taking beta carotene or calcium pills or sticking to a low fat, high-fiber diet.

The patients in all the studies had at least one adenoma detected on colonoscopy but did not have cancer.  They developed cancer in the next few years, however, at the same rate as would be expected in the general population without screening.

. . .

The study by the group in Rockford suggests a way to improve colonoscopy:  by slowing down.  “If you rush things, you miss things,” Dr. Schoen said.

That happens in part because reimbursement rates for colonoscopies have fallen in recent years, and some doctors are doing the exams faster than ever, Dr. Schoen and others say.

“I have heard of people who do it in 30 seconds,” Dr. Schoen said.  “Whoosh, and it’s out.”


For the full story, see: 

GINA KOLATA.  "Study Questions Colonoscopy Effectiveness."  The New York Times  (Thurs., December 14, 2006):  A23.