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Showing posts with label drugs. Show all posts
Showing posts with label drugs. Show all posts

Monday 18 January 2010

Pills get smart


 

Potential encapsulated
Jan 14th 2010 | NEW YORK
From The Economist print edition


Medicines that can talk to doctors herald a new direction for drugs firms
Proteus Biomed
Proteus Biomed
Take it or it will call your mother
NOVARTIS, a Swiss pharmaceuticals giant, is involved in two deals at the moment. Its $50 billion takeover of Alcon, an American eye-care firm, unveiled early this month, has been hogging the headlines. But its decision on January 12th to spend $24m to secure exclusive licences and options on drug-delivery technologies developed by Proteus Biomedical, a Californian start-up, may be just as important in the long run. It makes Novartis the biggest pharmaceuticals firm to embrace "smart-pill" technology.
Despite its trifling size, the deal hints at a promising new strategy for a troubled industry. Patents on many lucrative drugs are on the verge of expiry. Most firms have not come up with enough treatments to replace them. In an effort to diversify and stabilise their revenue, some drugmakers are beginning to sell ancillary services tied to their wares. Proteus's technology, which enables pills to relay data about a patient back to doctors after they have been swallowed, is a prime example.
When one of Proteus's pills is taken, stomach fluids activate the edible communications device it contains, which sends wireless signals through the body to another chip worn as a skin patch or embedded just under the skin. That, in turn, can upload data to a smart-phone or send it to a doctor via the internet. Thus it is easy to make sure a patient is taking his pills at the right time, to spot adverse reactions with other drugs and so on.
"This technology has tremendous utility," declares Trevor Mundel of Novartis. Various studies have estimated that a third to half of prescription drugs are not taken as prescribed—or at all. This leads to poor health: one study estimates needless hospitalisations as a result of such failings cost $100 billion a year in America alone.
Though Proteus is in the vanguard, it has rivals. Philips, a big Dutch electronics company, has just set up a commercial group to promote its "intelligent pill", which is able to deliver drugs at precisely the right spot in the digestive tract. MicroCHIPS, an American start-up, is developing smart, implantable microchips which have reservoirs to hold drugs or tiny monitoring devices. John Santini, its boss, says his company is working on drug delivery with a big pharmaceuticals firm, and that his laboratory curiosity will be a commercial reality within three to five years.
Terry Hisey of Deloitte, a consultancy, argues that the coupling of smart pills with wireless networks and mobile phones, allowing the information the pills capture to be beamed to doctors, patients and relatives, turns the technology into "a disruptive innovation about to happen". Vitality, an American firm, has come up with a cap for pill bottles that telephones hapless patients if they fail to take their medicine on time. Vodafone, a mobile-phone operator, has just set up a mobile health unit in Britain. Orange, a French rival, already offers a service that records measurements from implanted heart monitors and transmits them to doctors via the internet. In Mexico, TelCel, the country's biggest mobile operator, plans this month to launch a service that allows customers to determine whether they have flu using their mobile phones. Kalorama, a research group, estimates that sales of such services will leap from perhaps $4.3 billion last year to $9.6 billion by 2012.
There are some potential pitfalls, however. Stephen Oesterle of Medtronic, a devices firm involved in remote patient monitoring, thinks it a bit Orwellian for drugmakers to keep such intimate tabs on their customers. He wonders whether spooked patients might disable all this clever kit. Tim van Biesen of Bain, a consultancy, believes that patients will need some kind of financial incentive to use smart pills.
But Leslie Saxon, chief of cardiology at the University of Southern California, argues the reverse. She believes patients will clamour for more data about their health, much as banks' customers embraced the internet as a means of keeping better track of their accounts. Moreover, many governments that provide medical care for their citizens (including America, if Barack Obama's health proposals become law) are beginning to demand that drugs firms prove the effectiveness of expensive new pills in practice as well as in theory. Peter Lawyer of the Boston Consulting Group reckons such policies could push pharmaceuticals companies to embrace innovations that ensure pills are properly used.
Furthermore, the technology should be lucrative for all concerned. Drugs firms currently lose billions of dollars in sales from patients on long-term prescriptions who do not take their pills. And features that encourage patients to take their medicine and ensure it is working well should make a pill more valuable to insurers and national health systems, and thus justify higher prices.


Copyright © 2010 The Economist Newspaper and The Economist Group. All rights reserved.




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Monday 2 November 2009

A viewpoint on legalising drugs - What do you think?


 

It appears to be impossible to have a rational debate about drugs. David Nutt, the head of the government's advisory council on drugs, argued that alcohol and tobacco

Bruce Anderson: Let's be honest... legalise drugs and society would benefit

This is a war that cannot be won. And the suppression of David Nutt won't help  were more dangerous than some drugs which are currently illegal. That point seems so obvious as to be barely worth stating. Prof Nutt also said that it was silly to upgrade cannabis, from class C on the illegal drugs register to class B. The maximum penalty for using a class B substance is five years in prison. Does anyone believe that any judge would ever pass such a sentence for smoking marijuana? So what is the point of pretending to buttress a law that is already widely flouted with even more pains and penalties which will never be enforced?

Before taking such an absurd decision, ministers might have considered the experience of the Black Code in the early 19th century. By mandating ferocious penalties for trivial offences, it brought the law into disrepute and undermined the penal justice system, until Sir Robert Peel - no softie - replaced the savage and inspissated nonsense with a sensible criminal code. But an examination of precedents would require thought, reading and a knowledge of history. Under this government, those are class A crimes.
Instead, the Professor was sacked, which has annoyed some of his colleagues, who see no point in continuing to assist a government which has no interest in reasoned debate. This does not mean that politicians must always accept expert advice. Sir Christopher Kelly and Sir Thomas Legg should be treated with much more scepticism than they are likely to receive. A minister is perfectly entitled to say that he had received some advice from Professor so-and-so, for whom he had considerable respect - and that on this occasion, he respectfully disagreed. But there is no point in asking academics to serve on a committee if their intellects are to be subjected to a three-line whip.
 
Moreover, drugs policy is in urgent need of hard thinking. Our present arrangements are a mess. So let us start with fundamentals. Until the 1960s, our legal system was overshadowed by pre-libertarian theories of the state, which criminalised breaches of Christian morality and started from the assumption that governments were entitled to regulate the private behaviour of adults. As that has all gone over the past few decades, what theory of the state now permits governments to prohibit adults from taking drugs? There is only one intellectually respectable answer to that question: none.
 
This does not mean that those who wish to retain prohibition are bereft of arguments. Their counterblast might run along the following lines. "Intellectual respectability be damned. You are talking as if the drugs question could be resolved in an academic seminar. Go a few miles from intellectually respectable London to disintegrating London, where the wreckage of David Cameron's broken society is outward and visible, where so many forces are already at work to accelerate social breakdown - and then tell me that you would like to add to the problem by legalising drugs".
 
That is what many judges and policemen believe, based on their experience of trying to hold society together, and it is a powerful case. It is also a pragmatic one - none the worse for that - and as such, open to challenge on evidential grounds. The evidence does seem to suggest that the present policy is failing. Drugs are readily available, while drug-users mug and burgle to sustain their habit. In her forthcoming study of underclass youth, Harriet Sergeant depicts the allure of drug dealing: its corrupting effect on the de-socialised young. If no one who wants drugs has to go without them, while the illicit trade is worth hundreds of millions of pounds, it is hard to see why legalisation would make things worse.
 
There is a further point. The drug menace is not only impairing the quality of life in British cities. It is wrecking countries. Trinidad, Guyana, Jamaica: those really are broken societies. Colombia and Mexico have had dreadful difficulties. Admittedly, this arises far more from the lucrative American market than from the much smaller British one. But if we British concluded that the current war on drugs could not be won, we would be doing the world a favour.
 
This is how legalisation could work. Allow adults (photo ID necessary) to buy limited supplies of their chosen poison from licensed and regulated outlets. Ban all advertising. Tax the stuff as highly as is possible without creating a black market. Announce an amnesty for all drug crimes, in the hope that the skilled operators would take the chance to go legit.
 
Increase the penalties for illicit drug-trafficking, to include impoverishment. Anyone involved in selling drugs to children would lose all his assets, however acquired, and would not leave prison if there was any suggestion that he had some cash stashed away. Step up police operations, hoping to catch new dealers while they were still inexperienced. Employ the SAS to eliminate foreign traffickers who were trying to supply the British criminals who remained in business.
 
The aim of these measures would not be the promotion of universal hippydom: still less, to bring the decadence of the late Roman Empire to the streets of South London. The intention is to reduce drug-related crime and to make it easier to deal with the criminal underclass. There might also be a fall in drug consumption, especially among children, whose supplies would be significantly interrupted. That said, there would be a price.
 
We can surely assume that there are some young adults who might be curious about drugs, but who do not like the idea of searching out dealers in insalubrious parts of town. They are also reluctant to run the risk of being arrested. There may not be many such persons: there must be some. After legalisation, the restraints are removed. So they try the stuff, and one or two of them turn out to have addictive personalities and turn into druggies.
 
Although there are those who insist that anyone who might become a druggie already has, legalisation is bound to create some new addicts, whose lives might be wrecked. This is not a pleasant thought. Then again, the individuals concerned would be adults, unlike many of those who are destroyed under the current arrangements. Adults are entitled to make their own choices.
One hundred and fifty years ago, John Stuart Mill published On Liberty. The passage of time has not diminished its radicalism. Mill realised that the desire to interfere with others' freedoms has deep roots in the human psyche. If it is denied one outlet, it will find another. Fifty years ago, homosexuals were persecuted. Recently, some half-witted police force wanted to persecute a woman who complained about the excesses of homosexual demonstrators. The rights to free speech and free expression can never be taken for granted, especially under this government. It might seem absurd to cite drug-taking in the same context as those dignified, noble freedoms. But freedom is freedom.
 
Mill could also remind us that you do not arrive at truth by suppressing opinions, even if they are unpopular. Admittedly, this government has hardly been successful in suppressing Prof Nutt, but it is now time for the opposite approach: a Royal Commission on drugs, to review all aspects of current policy, from philosophy to policing. David Nutt should certainly be a member.



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Sunday 11 October 2009

Obama, man of peace? No, just a Nobel prize of a mistake


 
October 11, 2009

Robert Fisk: 

The US president received an award in the faint hope that he will succeed in the future. That's how desperate the Middle East situation has become

His Middle East policy is collapsing. The Israelis have taunted him by ignoring his demand for an end to settlement-building and by continuing to build their colonies on Arab land. His special envoy is bluntly told by the Israelis that an Arab-Israel peace will take "many years". Now he wants the Palestinians to talk peace to Israel without conditions. He put pressure on the Palestinian leader to throw away the opportunity of international scrutiny of UN Judge Goldstone's damning indictment of Israeli war crimes in Gaza while his Assistant Secretary of State said that the Goldstone report was "seriously flawed". After breaking his pre-election promise to call the 1915 Armenian massacres by Ottoman Turkey a genocide, he has urged the Armenians to sign a treaty with Turkey, again "without pre-conditions". His army is still facing an insurgency in Iraq. He cannot decide how to win "his" war in Afghanistan. I shall not mention Iran.
 
And now President Barack Obama has just won the Nobel Peace Prize. After only eight months in office. Not bad. No wonder he said he was "humbled" when told the news. He should have felt humiliated. But perhaps weakness becomes a Nobel Peace Prize winner. Shimon Peres won it, too, and he never won an Israeli election. Yasser Arafat won it. And look what happened to him. For the first time in history, the Norwegian Nobel committee awarded its peace prize to a man who has achieved nothing - in the faint hope that he will do something good in the future. That's how bad things are. That's how explosive the Middle East has become.
 
Isn't there anyone in the White House to remind Mr Obama that the Israelis have never obliged a US president who asked for an end to the building of colonies for Jews - and Jews only - on Arab land? Bill Clinton demanded this - it was written into the Oslo accords - and the Israelis ignored him. George W Bush demanded an end to the fighting in Jenin nine years ago. The Israelis ignored him. Mr Obama demands a total end to all settlement construction. "They just don't get it, do they?" an Israeli minister - apparently Prime Minister Benjamin Netanyahu - was reported to have said when the US Secretary of State, Hillary Clinton, reiterated her president's words. That's what Avigdor Lieberman, Israel's crackpot foreign minister - he's not as much a crackpot as Mahmoud Ahmadinejad, but he's getting close - said again on Thursday. "Whoever says it's possible to reach in the coming years a comprehensive agreement," he announced before meeting Mr Obama's benighted and elderly envoy George Mitchell, "... simply doesn't understand the reality."
 
Across Arabia, needless to say, the Arab potentates continue to shake with fear in their golden minarets. That great Lebanese journalist Samir Kassir - murdered in 2005, quite possibly by Mr Obama's new-found Syrian chums - put it well in one of his last essays. "Undeterred by Egypt since Sadat's peace," he wrote, "convinced of America's unfailing support, guaranteed moral impunity by Europe's bad conscience, and backed by a nuclear arsenal that was acquired with the help of Western powers, and that keeps growing without exciting any comment from the international community, Israel can literally do anything it wants, or is prompted to do by its leaders' fantasies of domination."
 
So Israel is getting away with it as usual, abusing the distinguished (and Jewish) head of the UN inquiry into Gaza war crimes - which also blamed Hamas - while joining the Americans in further disgracing the craven Palestinian Authority "President" Mahmoud Abbas, who is more interested in maintaining his relations with Washington than with his own Palestinian people. He's even gone back on his word to refuse peace talks until Israel's colonial expansion comes to an end. In a single devastating sentence, that usually mild Jordanian commentator Rami Khouri noted last week that Mr Abbas is "a tragic shell of a man, hollow, politically impotent, backed and respected by nobody". I put "President" Abbas into quotation marks since he now has Mr Ahmadinejad's status in the eyes of his people. Hamas is delighted. Thanks to President Obama.
 
Oddly, Mr Obama is also humiliating the Armenian president, Serg Sarkisian, by insisting that he talks to his Turkish adversaries without conditions. In the West Bank, you have to forget the Jewish colonies. In Armenia, you have to forget the Turkish murder of one and a half million Armenians in 1915. Mr Obama refused to honour his pre-election promise to recognise the 20th century's first holocaust as a genocide. But if he can't handle the First World War, how can he handle World War Three?
 
Mr Obama advertised the Afghanistan conflict as the war America had to fight - not that anarchic land of Mesopotamia which Mr Bush rashly invaded. He'd forgotten that Afghanistan was another Bush war; and he even announced that Pakistan was now America's war, too. The White House produced its "Afpak" soundbite. And the drones came in droves over the old Durand Line, to kill the Taliban and a host of innocent civilians. Should Mr Obama concentrate on al-Qa'ida? Or yield to General Stanley McChrystal's Vietnam-style demand for 40,000 more troops? The White House shows the two of them sitting opposite each other, Mr Obama in the smoothie suite, McChrystal in his battledress. The rabbit and the hare.
 
No way are they going to win. The neocons say that "the graveyard of empire" is a cliché. It is. But it's also true. The Afghan government is totally corrupted; its paid warlords - paid by Karzai and the Americans - ramp up the drugs trade and the fear of Afghan civilians. But it's much bigger than this.
 
The Indian embassy was bombed again last week. Has Mr Obama any idea why? Does he realise that Washington's decision to support India against Pakistan over Kashmir - symbolised by his appointment of Richard Holbrooke as envoy to Afghanistan and Pakistan but with no remit to discuss divided Kashmir - enraged Pakistan. He may want India to balance the power of China (some hope!) but Pakistan's military intelligence realises that the only way of persuading Mr Obama to act fairly over Kashmir - recognising Pakistan's claims as well as India's - is to increase their support for the Taliban. No justice in Kashmir, no security for US troops - or the Indian embassy - in Afghanistan.
 
Then, after stroking the Iranian pussycat at the Geneva nuclear talks, the US president discovered that the feline was showing its claws again at the end of last week. A Revolutionary Guard commander, an adviser to Supreme Leader Khamenei, warned that Iran would "blow up the heart" of Israel if Israel or the US attacked the Islamic Republic. I doubt it. Blow up Israel and you blow up "Palestine". Iranians - who understand the West much better than we understand them - have another policy in the case of the apocalypse. If the Israelis attack, they may leave Israel alone. They have a plan, I'm told, to target instead only US troops in Iraq and Afghanistan, and their bases in the Gulf and their warships cruising through Hormuz. They would leave Israel alone. Americans would then learn the price of kneeling before their Israeli masters.
 
For the Iranians know that the US has no stomach for a third war in the Middle East. Which is why Mr Obama has been sending his generals thick and fast to the defence ministry in Tel Aviv to tell the Israelis not to strike at Iran. And why Israel's leaders - including Mr Netanyahu - were blowing the peace pipe all week about the need for international negotiations with Iran. But it raises an interesting question. Is Mr Obama more frightened of Iran's retaliation? Or of its nuclear capabilities? Or more terrified of Israel's possible aggression against Iran?
 
But, please, no attacks on 10 December. That's when Barack Obama turns up in Oslo to pocket his peace prize - for achievements he has not yet achieved and for dreams that will turn into nightmares.



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Sunday 20 September 2009

Moral hazard is back

 By Chan Akya

"Spare the rod, and spoil the child." - Anon

In a controversial case a good 16 years ago this month, Singapore's much-vaunted legal system ruled on administering a punishment of caning for a 18-year old American student by the name Michael Fay. After much protests from United States president Bill Clinton and 24 assorted Senators among a series of legal and government nominees, Singapore agreed to reduce the sentence from six lashes to four. Fay's Asian compatriots in the crimes of vandalism were less lucky, each getting a few months in prison and more lashes of the cane.

Four years later, in 1998, Michael Fay shot back to prominence, accused of possessing drugs in Florida; he was set free on a technicality involving arrest procedures. No further crime reports  were ever received for the Asian compatriots of Michael Fay who didn't receive the leniency that he did.

The above isn't to suggest that this author supports corporal punishment; rather that the idea of people receiving the full penalty of applicable laws is the functioning basis for any society. Whenever that aspect of implementing laws breaks down; or where special favors are granted for any number of reasons, it is likely that results prove counter-productive.

In the above example, the US government intervened in the laws of a democracy that had a history of applying its stern disciplinarian measures on all of its citizens; in an attempt to protect the narrow interests of one individual. It is possible that the individual felt "good" enough about his government's intervention to feel special; which then translated into behavioral problems later on. In contrast, the boys who got the full punishment under Singapore law never did return to the world of crime, petty or otherwise.

We can see the same examples everywhere. In both of the world's largest countries, China and India, there is clearly a class of people who do not face the full force of the law because of who they happen to be. In other words, political or economic superiority protects some people from laws designed to be applied across society. The net result is stunning levels of corruption (see my article "The wages of corruption, Asia Times Online, August 19, 2006) as well as, perhaps more importantly, rising criminality. China's ruling classes are the very epitome of corruption and petty theft from government coffers; while in India the selective application of laws has resulted in politics becoming the archetypal dirty profession.

When looking at the political classes of both China and India today, I am reminded of Mark Twain's eternal quote, "There is no native criminal class in America, except Congress". Interestingly, almost 100 years after he made the statement, events of the last year have contrived to create a new criminal class across Western society, and that is the world's bankers.

It wouldn't be an idle speculation in my mind at least to compare the politicians of India and China today to the bankers of America and Europe tomorrow.

How did we get to this point? What can be done about it?

The Lehman boondoggle
Over the past few days, newspapers around the world have dredged up their one-year calendar observance special - ie on the aftermath of Lehman Brothers and what it meant for the global financial system. Comments have veered around the following poles:

  • Groups of inevitably "liberal" commentators whose refrain has been a steady "Lehman should have never been allowed to fail" which then explains their follow-up assessment of how the right-wing views on financial system integrity were reversed and therefore benefited the world. This group has an altogether rosy view of the world economy, certifying that bailouts have worked and so on.
  • The conservative, right-wing view is of course the opposite, namely that the failure of Lehman Brothers was a good thing for the world economy and the wider financial system; this group also holds that bailouts of the financial system that followed would create resource misallocation, inflationary panic and the like.

    No prizes for guessing which group I belong to.

    This article isn't about the merits and otherwise of the Lehman rescue; but rather about the moral hazard construct that is integral to these situations. In particular, I will seek to examine the behavioral aspects of the past year's government efforts on a new generation of bankers and financiers, broadly continuing the themes first suggested in past articles such as The New Brahmins [Asia Times Online, March 29, 2008] and Easy bets with other people's money [Asia Times Online, May 23, 2009].

    In previous articles, I have pointed out time and again that creative destruction is an integral part of capitalism much as bureaucratic sloth is integral to communism; disallowing failures of private companies while also preventing necessary reforms will essentially create the worst of both worlds.

    This is broadly where we are today:

    1. Governments have spent hundreds of billions of dollars and euros on the rescue of banks around the world, guaranteeing all manner of senior and junior debt obligations in addition to deposits at the banks (actually, according to the International Monetary Fund the total bill thus far is a staggering US$12 trillion; as in $12,000 billion or $12 million million).

    2. Governments' slivers of equity, instead of giving them management control, have provided adverse incentives to pushing through real (structural) reforms. Politicians have spent inordinate amounts of time discussing what to do with their shares in the banking system, rather than what to do with the banking system itself.

    3. All manners of public securities have been purchased directly under the programs initiated by the European Central Bank (ECB), the Federal Reserve (Fed) and US Treasury. Further in this article, I will specifically discuss the game theory aspects of the US mortgage market securities (RMBS); resulting from the fact that governments are the largest owners of privately issued securities.

    4. Bank balance sheets have actually expanded because of the adverse incentives pushed through by the largest shareholder (governments) and easy refinancing available at the "discount" window.
     
    I am no mastermind like Federal Reserve Chairman Ben Bernanke, but it does appear to me that the simple implications for each of the above can be or more importantly, should be the following:

    1. The wide use of monetary stimulus in dealing with the current crisis is roughly equivalent to 40% of the combined GDP of the United States and Europe, this means that today's asset values are vastly inflated. In addition, the apparent illusion of wealth so created by seemingly higher stock and property values also engenders inflationary trends on key commodities (why oil prices have risen), over-optimism on the part of suppliers (emerging market countries have seen stunning rebounds) and a failure to reduce leverage (while savings rates are up in the US and Europe, these are more than dwarfed by rising government debt). None of this though is nearly as important as the increase in volatility implied for the future: at some point, all this money has to be removed from the system one way or another (ie, either through withdrawal of quantitative easing or through inflation of asset and retail prices). Oh and did I mention - in conjunction with all that, governments around the world but particularly in the US and Europe will need to raise taxes or cut public services?

    2. Controlling the banks hasn't made governments in the US and Europe any smarter. If anything, incentives to restrain the financial system and put institutions on a self-sustaining course have actually gone in the opposite direction, with a new generation of "value maximize initiatives" in each government being tasked with making sure that banks produce more profits. That has immediately led banks to increase their balance sheets, which given poor economic data, also means that the quality of balance sheets has become worse not better under government tutelage. You don't hear much about banks being forced to become smaller, because they aren't being told to become smaller. So let's see now: we have financial institutions with significant exposure to high-risk assets. Gee, what a refreshing change from 2007.

    3. The US government, through the Treasury and the Fed holds hundreds of billions of securities in basically, itself. Let me explain: the Treasury bought some $700 billion of "troubled assets" from US and European banks. In addition, the Fed is authorized to purchase $1.25 Trillion (that's $1.25 million million) of conforming mortgages that are backed by Federal agencies (Fannie Mae, Ginnie Mae, and Freddie Mac), $300 billion of long-term US Treasury bonds and $200 billion of the debt issued by (the now nationalized) Federal agencies.

    4. This self-ownership of debt raises important questions on the market reaction: Chinese government sources have released details of the country's concerns at the Fed essentially printing money to purchase US debt, but it doesn't appear that a wider acceptance of this position has been found with other Asian central banks or indeed, global bond investors. As with the stunning rise of the stock market, I am left dumbfounded by the complete avoidance of risk discussions in the middle of this mess by the investors most exposed to downside risks of the strategy: namely Asian investors.

    5. Then again perhaps I have been blindsided in the past, too: the part of the program detailing the purchases from US Federal agencies was clearly an attempt to mollify the Chinese government which had the biggest exposure to such MBS and Federal agency debt. In other words, the US government may have bailed out the Chinese government directly, in return for the latter to continue buying other US government debt. Indeed, there have been a number of articles on the Internet suggesting that Fed purchases have been directly linked to asset disposals by Chinese government entities. This raises a very interesting game theory argument, which I explore later in the article.

    6. Amid all this liquidity sloshing around, the world's bankers have been quietly having a nice party in the back. Banks still making markets in securities - a fancy way of saying that they can both buy and sell these securities - have reaped the benefits of extremely wide spreads between the buying and selling prices ('bid-ask spreads' in the jargon). Additionally, they have managed to refinance the most illiquid stuff on their balance sheets with the respective central banks, and used the borrowed money to buy very toxic assets (As I wrote in previous articles including Easy bets with other people's money, Asia Times Online, May 23).

    7. Then there is the whole mark-to-myth malarkey that has been egged on by central bankers and regulators - thanks to their ownership of the banks as highlighted two points above - which means there is no longer any reason to take accounting losses on problem assets. Let me be clear - banks haven't stopped having loan losses; they have simply stopped accounting for them. Lastly, with low deposit rates and high lending rates, their basic businesses have made substantial profits this year. Out of all this, readers should expect that banks will set aside bumper bonuses for their executives, and do these out of stock grants to mollify critics; but don't for a moment forget where the money for those equity gains comes from.
  •  
  • Game theory: Why Americans should default on mortgages
  • There is also an interesting point about the circularity of US mortgages that bears close monitoring. At a very simplistic level, Americans borrow money from their banks, which sell (conforming) mortgages to Federal agencies, which then issue securities that are bought by Chinese banks that are then repurchased by the US Fed. What happens when some people start repaying their mortgages? The ultimate losers would be the US Fed in the above scheme. This is handled either through money made available by the US Congress (new taxes) or interest rates being raised (more expensive mortgages). Either way, the average US homeowner will find his costs of living going up.

    If you were an American taxpayer and homeowner, what would be the most optimal course of action? Think of it this way - if the government owns all the housing debt effectively, and there are a number of defaults every year, everyone who defaults will be better off (financially) than those that continue to pay. If you were one of a 1,000 people getting a mortgage and say 100 people defaulted, then you would in effect (one way or another) be paying for those 100 people who default. As the number rises, you would be pushed towards greater financial pressure as both taxes and mortgage servicing costs rise. Meanwhile, for the people who default, the scheme of arrangement for their debts will mean lower fixed mortgaging costs and other benefits such as tax holidays. For self-employed people who tend to receive cash for their work, defaulting on mortgages could easily become the route to prosperity with low taxes and little debt repayment.

    So the logical course of action for a hardworking taxpayer holding a mortgage would be to default right away. This becomes more compelling when you consider the general tightening of credit across the US and Europe, where other forms of credit that used to be easily available previously (credit cards, personal loans) are more difficult to come by now. In typical game theory perspective that means the "penalty" of defaulting on mortgages in the form of reduced credit availability isn't really applicable because that is the case for everyone now.

    Add the bit about all that money basically enabling the Chinese to sell their risky assets to the US government in return for US government liabilities, then something far worse looms. At best, this means China executed a perfect portfolio switch, going to better quality assets with lower durations; at worst it means that their direct leverage over the US government has increased substantially. This means that a "buyers' strike" from China will inevitably lead to higher interest rates; which could further increase the pain for US mortgage borrowers. The persistence of that risk on the horizon simply makes the need for Americans to default on their mortgages that much more likely.

    Learning from hedge funds
  • The performance and risks of the banking system wouldn't be so bad if we didn't have anything to compare them with. Unfortunately for the banks, that isn't the case really. Look at hedge funds, those much derided vehicles of capitalists that had been billed as the most destructive forces in the world barely a year ago:

    1. A vast number of hedge funds have closed down since the middle of 2008, a trend that continues till today. This bout of creative destruction has meant that strategies that were wrong have been shut down; only hedge fund strategies (and managers) that worked well through the volatile period of 2008 and the more benign conditions of 2009 have survived. Contrast this to the banks, where good and the bad bankers not only co-exist, but bad bankers actually appear to be thriving.

    2. While some smaller hedge funds have opened shop, by and large capital hasn't been made available; and certainly nowhere to the degree of stating 'business as usual'. Contrast this with the hundreds of billions in largely public funds that have been pumped into the banking system, as previously highlighted.

    3. Consolidation has increased, with the largest hedge funds attracting a greater amount of new capital than smaller entities. This effectively means that the average risk of hedge funds as a financial asset group has declined in the past year; again to be contrasted with the rising risks of the banking system.

    4. Overall leverage in the sector has declined, as hedge funds trimmed their overall asset size relative to their capital bases. For example, credit hedge funds have on average cut their leverage by over 25% with the median around 50%; these are interesting statistics because credit hedge funds approximate the basic qualities of banks (that have certainly not cut leverage and indeed may have increased the same).

    5. So far, there has been one major scandal involving a hedge fund (Bernie Madoff's $50 billion caper). Compare that to the multiple number of scandals plaguing banks across the world, that are virtually too numerous to highlight.
    In effect, hedge funds prove that capitalism does work. By imposing significant penalties on failures combined with rewards for success, it has been relatively easy to align the interests of all parties concerned. Risks have declined for investors, and returns have increased.

    Over the horizon
    The inevitable conclusion from all this is that capitalism provides a readymade whipping tool, ie bankruptcy, that keeps errant capitalists in check. Confuse that picture, be it for a delinquent teenager or an overextended banker, and the results are fairly predictable: ie a repeat of previous behavior. This then is the true legacy of Lehman Brothers: the aftermath that virtually ensures that eventually there will have to be more such bankruptcies




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    Thursday 3 September 2009

    Prada to Pravda

     Prada to Pravda
    By Chan Akya

    "Do we have to suffer through this transparently manipulative pseudo-reality again?" - Dr Sheldon Cooper, Big Bang Theory, Series 2. [1]

    Yes Dr Cooper, apparently we do.

    As we approach the 20th anniversary of the fall of the Berlin Wall, the decline of the Soviet Union is being mirrored by a parallel decline of the United States. What passes as reality on the pages and screens of the financial media today is so far removed from ground realities as to suggest a renewed version of the Pravda economy that the Soviet Union tried to build and failed. A "then and now" comparison isn't just stark but also quite scary for anyone with common sense (that excludes today's stock market investors right away).

    Then (or, a long time ago in the Soviet Union):

     
  • The Soviet Union controlled a vast array of vassal states using far-flung military bases that were all steadily declining.
  • The army was mired in Afghanistan, 10 years after the beginning of a "just" liberation that proved anything but.
  • The government owned car companies that made sub-standard products no one really wanted.
  • There were long queues for bread and vodka across the nation.
  • A deep recession was in place, caused by the decline in demand from poorer countries and falling oil prices.
  • The actions of president Mikhail Gorbachev, a political reformer, were characteristic of those of a person who wanted change to ensure his place in history.
  • The fall of the Berlin Wall fatally weakened Soviet authority across the satellites.
  • Poor distribution led to massive food waste.
  • The rouble became worthless after the pseudo-reality holding it up (namely parity with the US dollar) was exposed as a cruel hoax.

    Now (or, as things stand in the new Soviet Union):
  • America's allies are in dangerous decline - be it Turkey, Egypt or worst of all, Pakistan.
  • The military is mired in Afghanistan - almost eight years of incessant activity haven't yielded the simple result of finding Osama Bin Laden or Taliban leader Mullah Omar. (For good measure, America is also mired in another Islamic country, Iraq ... just in case the challenge of getting one's behind spanked in one country wasn't enough).
  • The American government is the proud owner of General Motors, a car company that apparently doesn't know how to make cars and, even less, profitable cars; Citibank, a bank that apparently doesn't know how to make loans and, even less, profitable loans; Fannie Mae ... okay, you get the picture.
  • The US economy is in recession, and will permanently remain in this state.
  • There are long queues for dole payments, food stamps and the like. Prescription drugs, mainly antidepressants, are the new normal for the country.
  • President Barack Obama is increasingly being seen as a politician who would do pretty much anything - ranging from limitless economic intervention to throwing Israel to the Arab wolves - to ensure his place in history.
  • Mainly thanks to the continued American fascination with burgers and other fast food - that deliver calories without the nutrients - the level of food waste in the US today exceeds the total food production of many European countries.
  • The US dollar is, well, worth less (that's two words - for now at least) with respect to its purchasing power; and is being held up by the pseudo-reality of a consumer economy.

    Creating the pseudo-reality: Ignore the important and the obvious

  • Ignoring abject reality is the key process of governance. In the Soviet Union, this was achieved through the simple medium of a complete news blackout for citizens, other than state-sponsored propaganda through various channels. In the case of the US, much the same has been achieved, but by using the opposite tactic of selective reinterpretation of news that helps cast it in much better light.

    For example, consider what is going on in Afghanistan. The Soviet Union denied to its citizens that the occupation was going badly, and indeed did not publish any figures for personnel losses. Right up to the day that Soviet troops pulled out of the country, bled dry by the insurgents who had been sponsored by the Americans, citizens of the USSR did not even know how bad the situation was.

    When the then-Afghan president Mohammad Najibullah was stripped and hanged in public by the Taliban in 1996, the news media finally should have taken cognizance of the monster that had been unleashed in the form of militants whose answer to a "higher calling" was to do some pretty awful things in their temporal existence. Instead, the American and European media extolled the "freedom fighters" while quietly praying that the chaps would turn in their unused Stinger missiles. Well, we all know how that went.

    Fast forward to now, and the steady erosion of North Atlantic Treaty Organization (NATO) authority across Afghanistan isn't fully understood by viewers of American television, nor perhaps by the average newspaper reader. To wit, the rapid increase in the deaths of British soldiers that could well spiral into their complete withdrawal from the country at the drop of a terrorist hat (the British will only be following the course of the Spanish, who left Iraq in response to the terrorist bombing of trains in Madrid in 2004), a course of action that will soon be adopted by all other components of NATO in Afghanistan.

    Where that will leave the US, I do not know. However, the trend is quite clear and Obama's addition of a few thousand troops will prove about as significant as throwing a water balloon at a California wildfire.

    Now, most readers of this publication will already be familiar with all of this. The point to note is that the Afghan situation hasn't been seriously discussed on US networks because of fear of where the conversation will lead. The point isn't so much whether the country is Obama's Vietnam (technically speaking, it will have to be characterized as that of president George W Bush), but what the actual end game is that's being played out here.

    Does the US think that staying in the country for the next 20 years is feasible? Would Americans expect a reduction or an increase in the production of opium? Is there an ethnic allocation plan in place (think Iraq, but with real bloodthirst and guns) - because the notion of a single country is quite laughable? How are the terrorists and the Taliban to be dealt with - through education and modernization as per the NATO dream or through continued bombings as per the current plan?

    Most of all, what is the actual definition of success in Afghanistan for NATO and the US?

    For the Soviet Union, there were no real answers to the questions I pose above. It actually wouldn't really have known even if victory had passed it on the high road to Kabul a couple of times, mainly because there was no actual definition of victory. It was basically occupation for its own sake.

    You might ask why any of this is relevant to the broader issues raised at the beginning of the article. From my viewpoint, Afghanistan is an important issue because understanding the end game may well offer a vignette of the thinking on all other radical measures being planned and executed by the US government - ranging from the Keynesian economy of zombie companies and individuals to the next steps on medical services reform.

    Drugs and reality

    In the Soviet Union, there was an appropriate saying, "The government pretends to pay the workers, and workers pretend to work." The downside of that trade-off was that Russians (and other nationalities contained within the Soviet Union) did not believe in the possibility of any improvements in their life quality and behaved with the nihilism appropriate to that observation.

    This seemingly harsh statement has within it the notion of truth wrought by the idea of what separated a successful Russia from an unsuccessful one in that era: getting ahead in the ration queue, or getting to drive the plush version of the Lada. Gee, what an improvement over being a few places behind in the same queue for stale bread and spoilt meat; or driving a smaller Lada.

    No surprise then that Russians took to vodka. As a society, Russians looked at the queues as unfairness of the system towards them as individuals (because some people were able to leapfrog the system), rather than recognize that they were victims of an unsustainable economic system.

    Being unable to distinguish between secular and cyclical decline is the actual problem for developed nations today - Americans and Europeans think of equity market declines and the house-price falls of 2006-08 as the key issue, rather than as a necessary correction after years of excess. So now traditions and social mores are sacrificed at the altar of recovering wealth lost over the past two years.

    How intelligent people reconcile the obvious areas of cognitive dissonance - many people you know are not only bankrupt but also unemployed and unlikely to rebound any time soon, yet you are asked to believe that the "economy is growing again" - is a matter not so much of anthropological interest but one that determines the course of global developments.

    It's interesting to me then that pretty much no one appears bothered that the rising scourge of prescription drugs, particularly antidepressants, could well prove to be the key problem for these societies down the road; if anything, some in the media appear to believe that drugs are helping to "contain" social problems. Much like alcoholism cured Russian violence, I'm sure.

    History may choose not to repeat itself. But if it does, watch for results that aren't vastly dissimilar to the declines that we saw in the case of the Soviet Union. In the interim, the number of people who do not want to hear the truth will likely rise, as denial becomes one of the cornerstones of happiness.

    Eat a burger, drink some beer and pop some pills, dude. Then switch on the telly and have the cable news ladies tell you how good things are going to be.




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    Thursday 6 August 2009

    To unlock millions of children's lives, Britain must look to the Harlem miracle.


     

    A piecemeal approach will never deliver change for those at the bottom. We can learn from a bold, radical US experiment.

     

    Jenni Russell

     

    Here we are, still stuck. A fifth of Britain's 11-year-olds, children not born when Blair was elected, can't read well enough to cope with school. Statistically, they're set for failure now. Only 5% will catch up enough to get five worthwhile GCSEs. Ministers confess themselves puzzled by the continued failure of those at the bottom to learn. Whatever we're doing in schools to give all children a chance, it isn't working. So what can we try next?
     
    This is the holy grail of centre-left politics. How do you prevent poor children from being fatally handicapped by their backgrounds? Across the ocean, President Obama thinks he's found the answer. He plans to reproduce it in 20 US cities – and it comes from a unique project in Harlem.
     
    The Harlem Children's Zone (HCZ) is a fiercely ambitious programme to change the achievements and expectations of every one of the 10,000 children living in 97 blocks of one of the most devastated communities in America. An eight-year-old boy from Harlem has a 33% chance of ending up in prison. Three-quarters of Harlem schoolchildren can't pass the grade exams for their age. A third of students drop out of high school. Unemployment is double the average. The hundreds of millions in community support and educational initiatives tried in Harlem over the past decades have effectively achieved almost nothing. Some lives have been turned around, but the grim backdrop of most people's existence has remained stubbornly unchanged.
     
    That realisation drove the HCZ founder, Geoffrey Canada, to revolutionise the way he worked. Canada had been a community organiser in Harlem since 1990, and he was fed up with rescuing one drug addict, or criminal, or failing schoolchild, only to watch another dozen slip away. A radical change of approach was needed, and he thought two bold ideas could form the basis for it.
    The first was the concept of the tipping point. In Harlem, poverty was so great, and crime and drugs so prevalent, that only the exceptionally lucky or driven child could avoid joining in. Canada wanted to raise the expectations of the whole community simultaneously, so that going to college or avoiding teenage pregnancy would become normal behaviour. Focusing on a minority of talented children wasn't enough. But if 60% of the peer group were ambitious, hardworking and supported by adult, all those antisocial pressures would alter too.
     
    This wasn't just some utopian fantasy. Canada had a theory for how it could be done. All the latest research on the brain showed that much of a child's capacity to think and to learn was set in the first three years of life. Middle-class families were spending those years talking, singing and reading to their children. Poor children weren't getting any of that. They were arriving at school with an average of 25 hours of one-to-one reading behind them. Middle-class children had had 1,700 hours, and their vocabulary was twice as large. They had learned to argue and discuss, and had been introduced to conceptual thinking. Above all, the middle-class children arrived with confidence. They had been encouraged. By the age of three they had heard six times as many encouraging words as discouraging ones. Poor children had been reprimanded two and a half times more than they had been praised. Meanwhile, James Heckman, a Nobel prize-winning economist, showed that by the late teenage years, deprived children were very hard to help or teach new skills.
     
    Canada's plan was simple, and staggering. Forget the dozens of small, uncoordinated interventions, many aimed at helping adults. If he could only change the way Harlem's children were raised, he could end the cycle of despair, and transform their future. He wanted to create a pipeline for achievement that would start before birth, with parenting classes that revolutionised adults' approach to their babies, and continued until after college. It would be a tight safety net, involving pre-kindergartens, academies, tutoring, dance and sport classes, food co-ops, social service, and help with housing and health. Every child in the zone would be offered support, and school admission would be done by lottery. It would engage the whole community in a project to transform the lives of the next generation. It was too late for Harlem's adults to expect radical change for themselves, but it could be done for their children.
     
    On the strength of his vision, Canada raised millions of dollars – one-third from the government, two-thirds from philanthropists and charities. The total cost would by $5,000 per child per year.
     
    Five years after Canada opened the first of his Promise academy schools, initially with kindergarten and sixth-grade (for 12-year-olds) classes, a Harvard University study has just evaluated what it calls "one of the most ambitious social-service experiments of our time". The schools' intake is random, and very deprived: 10% of the children live in homeless shelters or foster care. Yet Harvard concludes that even in a few short years, the combination of community transformation, high-quality teaching and parental support has been "enormously effective at raising the achievement level of the poorest minority children". Whereas the American pattern is for the black/white achievement gap to start wide and become a gulf, so that only 7% of black 14-year-olds pass their grade in maths, the Promise academies are reversing that. Some 97% of their eighth-graders are performing at or above grade level. The elementary school has closed the racial gap in language and in maths, and the pre-kindergarten children are outperforming their white counterparts.

     
    The effects of the HCZ are, says Harvard, much greater than all other initiatives tried across the country – whether it's lowering class size, giving bonuses to teachers in tough schools, or running the classic early-childhood programmes like Head Start. Studying the HCZ offers "many opportunities to answer the important questions that have evaded social scientists for decades".
    What the Harlem experiment tells us is that our own piecemeal approaches are never going to deliver real change for those at the bottom. The HCZ is starting where it matters, with the plasticity of babies' brains, and it's trying to recreate, in homes and in the community, what prosperous children already get – sustained care and concern over a lifetime. We, by contrast, keep trying little interventions – like Sure Start – where we engage with families for a couple of years and then retreat, hoping they've learned what they needed. It doesn't work. Without continuity, the effects don't last.
     
    The other lesson of Harlem is that no change comes cheap. Quality is everything. The kindergartens have one teacher for every four children. In the academies half the teachers left – they were not suited to the job – at the end of the first year. Rolling this out to other poor neighbourhoods will cost America billions. But the potential prize is astonishing – the raising of many children's achievement beyond what we ever thought possible. Officially, British ministers like Liam Byrne and John Denham are said to be waiting to see what we can learn from Harlem. This is not a good time to be suggesting radical spending plans. But if we're not prepared to take ambitious action like this, we can't claim to be surprised that the poorest children just don't achieve.


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    Wednesday 5 August 2009

    The hidden truth behind drug company profits


     

    Johann Hari:

     

    Ring-fencing medical knowledge is one of the great grotesqueries of our age.

     

    Wednesday, 5 August 2009

     

    This is the story of one of the great unspoken scandals of our times. Today, the people across the world who most need life-saving medicine are being prevented from producing it. Here's the latest example: factories across the poor world are desperate to start producing their own cheaper Tamiflu to protect their populations – but they are being sternly told not to. Why? So rich drug companies can protect their patents – and profits. There is an alternative to this sick system, but we are choosing to ignore it.

    To understand this tale, we have to start with an apparent mystery. The World Health Organisation (WHO) has been correctly warning for months that if swine flu spreads to the poorest parts of the world, it could cull hundreds of thousands of people – or more. Yet they have also been telling the governments of the poor world not to go ahead and produce as much Tamiflu – the only drug we have to reduce the symptoms, and potentially save lives – as they possibly can.

     

    In the answer to this whodunnit, there lies a much bigger story about how our world works today.

    Our governments have chosen, over decades, to allow a strange system for developing medicines to build up. Most of the work carried out by scientists to bring a drug to your local pharmacist – and into your lungs, or stomach, or bowels – is done in government-funded university labs, paid for by your taxes.

     

    Drug companies usually come in late in the process of development, and pay for part of the expensive, but largely uncreative final stages, like buying some of the chemicals and trials that are needed. In return, then they own the exclusive rights to manufacture and profit from the resulting medicine for years. Nobody else can make it.

     

    Although it's not the goal of the individuals working within the system, the outcome is often deadly. The drug companies who owned the patent for Aids drugs went to court to stop the post-Apartheid government of South Africa producing generic copies of it – which are just as effective – for $100 a year to save their dying citizens. They wanted them to pay the full $10,000 a year to buy the branded version – or nothing. In the poor world, the patenting system every day puts medicines beyond the reach of sick people.

     

    This is where the solution to the swine flu mystery comes in. Ordinary democratic citizens were so disgusted by the attempt to deprive South Africa of life-saving medicine that public pressure won a small concession in the global trading rules. It was agreed that, in an overwhelming public health emergency, poor countries would be allowed to produce generic drugs. They are the exact same product, but without the brand name – or the fat patent payments to drug companies in Switzerland or the Cayman Islands.

    So under the new rules, the countries of the poor world should be entitled to start making as much generic Tamiflu as they want. There are companies across India and China who say they are raring to go. But Roche – the drug company that owns the patent – doesn't want the poor world making cheaper copies for themselves. They want people to buy the branded version, from which they receive profits. Although not obliged to, they have licensed a handful of companies in the developing world to make the treatment – but they have to pay for license, and they can't possibly meet the demand.

     

    And the WHO seems to be backing Roche – against the rest of us. They are the ones best qualified to judge what constitutes an overwhelming emergency, justifying a breaching of the patent rules. And their message is: Don't use the loophole.

    Professor Brook Baker, an expert on drug patenting, says: "Why do they behave like this? Because of direct or indirect pressure from the pharmaceutical companies. It's shocking."

     

    What will be the end-result? James Love, director of Knowledge Economy International, which campaigns against the current patenting system, says: "Poor countries are not as prepared as they could have been. If there's a pandemic, the number of people who die will be much greater than it had to be. Much greater. It's horrible."

     

    The argument in defence of this system offered by Big Pharma is simple, and sounds reasonable at first: we need to charge large sums for "our" drugs so we can develop more life-saving medicines. We want to develop as many treatments as we can, and we can only do that if we have revenue. A lot of the research we back doesn't result in a marketable drug, so it's an expensive process.

    But a detailed study by Dr Marcia Angell, the former editor of the prestigious New England Journal of Medicine, says that only 14 per cent of their budgets go on developing drugs – usually at the uncreative final part of the drug-trail. The rest goes on marketing and profits. And even with that puny 14 per cent, drug companies squander a fortune developing "me-too" drugs – medicines that do exactly the same job as a drug that already exists, but has one molecule different, so they can take out a new patent, and receive another avalanche of profits.

     

    As a result, the US Government Accountability Office says that far from being a font of innovation, the drug market has become "stagnant". They spend virtually nothing on the diseases that kill the most human beings, like malaria, because the victims are poor, so there's hardly any profit to be sucked out.

     

    We all suffer as a result of this patent dysfunction. The European Union's competition commissioner, Neelie Kroes, recently concluded that Europeans pay 40 per cent more for their medicines than they should because of this "rotten" system – money that could be saving many lives if it was redirected towards real health care.

     

    Why would we keep this system, if it is so bad? The drug companies have spent more than $3bn on lobbyists and political "contributions" over the past decade in the US alone. They have paid politicians to make the system work in their interests. If you doubt how deeply this influence goes, listen to a Republican congressman, Walter Burton, who admitted of the last big health care legislation passed in the US in 2003: "The pharmaceutical lobbyists wrote the bill."

     

    There is a far better way to develop medicines, if only we will take it. It was first proposed by Joseph Stiglitz, the recent Nobel Prize winner for economics. He says: "Research needs money, but the current system results in limited funds being spent in the wrong way."

     

    Stiglitz's plan is simple. The governments of the Western world should establish a multi-billion dollar prize fund that will give payments to scientists who develop cures or vaccines for diseases. The highest prizes would go to cures for diseases that kill millions of people, like malaria. Once the pay-out is made, the rights to use the treatment will be in the public domain. Anybody, anywhere in the world, could manufacture the drug and use it to save lives.

     

    The financial incentive in this system for scientists remains exactly the same – but all humanity reaps the benefits, not a tiny private monopoly and those lucky few who can afford to pay their bloated prices. The irrationalities of the current system – spending a fortune on me-too drugs, and preventing sick people from making the medicines that would save them – would end.

    It isn't cheap – it would cost 0.6 per cent of GDP – but in the medium-term it would save us all a fortune because our health care systems would no longer have to pay huge premiums to drug companies. Meanwhile, the cost of medicine would come crashing down for the poor – and tens of millions would be able to afford it for the first time.

     

    Yet moves to change the current system are blocked by the drug companies and their armies of lobbyists. That's why the way we regulate the production of medicines across the world is still designed to serve the interests of the shareholders of the drug companies – not the health of humanity.

     

    The idea of ring-fencing life-saving medical knowledge so a few people can profit from it is one of the great grotesqueries of our age. We have to tear down this sick system – so the sick can live. Only then we can globalise the spirit of Jonas Salk, the great scientist who invented the polio vaccine, but refused to patent it, saying simply: "It would be like patenting the sun."



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    Tuesday 30 June 2009

    Yes, addicts need help. But all you casual cocaine users want locking up

     

     

    I know people who drink fair-trade tea and coffee, shop locally and snort drugs at parties. They are disgusting hypocrite

     

    George Monbiot

    guardian.co.uk, Monday 29 June 2009 20.00 BST 

     

    It looked like the first drop of rain in the desert of drugs policy. Last week Antonio Maria Costa, the executive director of the UN office on drugs and crime, said what millions of liberal-minded people have been waiting to hear. "Law enforcement should shift its focus from drug users to drug traffickers … people who take drugs need medical help, not criminal retribution." Drug production should remain illegal, possession and use should be decriminalised. Guardian readers toasted him with bumpers of peppermint tea, and, perhaps, a celebratory spliff. I didn't.

     
    I believe that informed adults should be allowed to inflict whatever suffering they wish – on themselves. But we are not entitled to harm other people. I know people who drink fair-trade tea and coffee, shop locally and take cocaine at parties. They are revolting hypocrites.
     
    Every year cocaine causes some 20,000 deaths in Colombia and displaces several hundred thousand people  from their homes. Children are blown up by landmines; indigenous people are enslaved; villagers are tortured and killed; rainforests are razed. You'd cause less human suffering if instead of discreetly retiring to the toilet at a media drinks party, you went into the street and mugged someone. But the counter-cultural association appears to insulate people from ethical questions. If commissioning murder, torture, slavery, civil war, corruption and deforestation is not a crime, what is?
     
    I am talking about elective drug use, not addiction. I cannot find comparative figures for the United Kingdom, but in the United States casual users of cocaine outnumber addicts by about 12 to one. I agree that addicts should be helped, not prosecuted. I would like to see a revival of the British programme that was killed by a tabloid witch-hunt in 1971: until then all heroin addicts were entitled to clean, legal supplies administered by doctors. Cocaine addicts should be offered residential detox. But, at the risk of alienating most of the readership of this newspaper, I maintain that while cocaine remains illegal, casual users should remain subject to criminal law. Decriminalisation of the products of crime expands the market for this criminal trade.
     
    We have a choice of two consistent policies. The first is to sustain global prohibition, while helping addicts and prosecuting casual users. This means that the drugs trade will remain the preserve of criminal gangs. It will keep spreading crime and instability around the world, and ensure that narcotics are still cut with contaminants. As Nick Davies argued during his investigation of drugs policy for the Guardian, major seizures raise the price of drugs. Demand among addicts is inelastic, so higher prices mean that they must find more money to buy them. The more drugs the police capture and destroy, the more robberies and muggings addicts will commit.
    The other possible policy is to legalise and regulate the global trade. This would undercut the criminal networks and guarantee unadulterated supplies to consumers. There might even be a market for certified fair-trade cocaine.
     
    Costa's new report begins by rejecting this option. If it did otherwise, he would no longer be executive director of the UN office on drugs and crime. The report argues that "any reduction in the cost of drug control … will be offset by much higher expenditure on public health (due to the surge of drug consumption)". It admits that tobacco and alcohol kill more people than illegal drugs, but claims that this is only because fewer illegal drugs are consumed. Strangely however, it fails to supply any evidence to support the claim that narcotics are dangerous. Nor does it distinguish between the effects of drugs themselves and the effects of the adulteration and disease caused by their prohibition.
     
    Why not? Perhaps because the evidence would torpedo the rest of the report. A couple of weeks ago, Ben Goldacre drew attention to the largest study on cocaine ever undertaken, completed by the World Health Organisation in 1995. I've just read it, and this is what it says. "Health problems from the use of legal substances, particularly alcohol and tobacco, are greater than health problems from cocaine use. Few experts describe cocaine as invariably harmful to health. Cocaine-related problems are widely perceived to be more common and more severe for intensive, high-dosage users and very rare and much less severe for occasional, low-dosage users … occasional cocaine use does not typically lead to severe or even minor physical or social problems." This study was suppressed by the WHO after threats of an economic embargo by the Clinton government. Drugs policy in most nations is a matter of religion, not science.
     
    The same goes for heroin. The biggest study of opiate use ever conducted (at Philadelphia general hospital) found that addicts suffered no physical harm, even though some of them had been taking heroin for 20 years. The devastating health effects of heroin use are caused by adulterants and the lifestyles of people forced to live outside the law. Like cocaine, heroin is addictive; but unlike cocaine, the only consequence of its addiction appears to be … addiction. 
     
    Costa's half-measure, in other words, gives us the worst of both worlds: more murder, more destruction, more muggings, more adulteration. Another way of putting it is this: you will, if Costa's proposal is adopted, be permitted without fear of prosecution to inject yourself with heroin cut with drain cleaner and brick dust, sold illegally and soaked in blood; but not with clean and legal supplies.

     
    His report does raise one good argument, however. At present the trade in class A drugs is concentrated in the rich nations. If it were legalised, we could cope. The use of drugs is likely to rise, but governments could use the extra taxes to help people tackle addiction. But because the wholesale price would collapse with legalisation, these drugs would for the first time become widely available in poorer nations, which are easier for companies to exploit (as tobacco and alcohol firms have found) and which are less able to regulate, raise taxes or pick up the pieces. The widespread use of cocaine or heroin in the poor world could cause serious social problems: I've seen, for example, how a weaker drug – khat – seems to dominate life in Somali-speaking regions of Africa. "The universal ban on illicit drugs," the UN argues, "provides a great deal of protection to developing countries".
     
    So Costa's office has produced a study comparing the global costs of prohibition with the global costs of legalisation, allowing us to see whether the current policy (murder, corruption, war, adulteration) causes less misery than the alternative (widespread addiction in poorer nations)? The hell it has. Even to raise the possibility of such research would be to invite the testerics in Congress to shut off the UN's funding. The drug charity Transform has addressed this question, but only for the UK, where the results are clear-cut: prohibition is the worse option. As far as I can discover, no one has attempted a global study. Until that happens, Costa's opinions on this issue are worth as much as mine or anyone else's: nothing at all.
     


     


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    Tuesday 16 June 2009

    Glaxo in generic drug alliance


     

    Glaxo in generic drug alliance

    By Gill Plimmer in London
    Published: June 15 2009 22:05 | Last updated: June 15 2009 22:05
    GlaxoSmithKline on Monday stepped up its expansion into emerging markets, striking an alliance to sell more than 100 drugs of Dr Reddy's, the Indian generic pharmaceuticals maker, in Africa, the Middle East, the Asia Pacific and Latin America.
    The move marks intensifying interest by pharmaceutical companies in expanding into generics as their medicines go off patent. With sales growth in the US and Europe flagging, drugs companies are competing to expand in emerging markets where selling large volumes at lower prices is more important.
    The GSK deal, effective immediately, gives the company access to Dr Reddy's portfolio and future pipeline of more than 100 branded pharmaceuticals in areas such as cardiovascular, diabetes, oncology, gastroenterology and pain management.
    Navid Malik, analyst at Matrix Corp, said the deal was likely to signal a wave of further deals. "This gives Glaxo instant gratification," he said. "It generates sales immediately and allows GSK to expand in emerging markets with a ready made mix of products."
    Seven emerging nations – Brazil, Russia, India, China, Korea, Mexico and Turkey – could account for 70 per cent of pharma sales growth by 2020, according to a study by UBS. Rising incomes and ageing populations in poorer countries also mean more people are suffering from rich country diseases such as cancer.
    Last month, GSK struck a similar $389m deal to acquire a 16 per cent stake in South Africa's Aspen Pharmacare.
    Last week it also agreed to create a joint venture flu vaccine business in China. It will combine forces with Shenzhen Neptunus, which is quoted in Hong Kong, taking an initial 40 per cent stake for £21m ($34m) with the prospect of increasing to majority control within two years.
    Pfizer, the world's largest pharmaceuticals company, has also stepped up its presence in generics, agreeing licensing deals with India's Auro-bindo and Claris Lifesciences.
    The latest GSK agreement does not involve any cash payment or equity stake. Revenues will be reported by Glaxo and shared with Dr Reddy's under terms that the companies are not disclosing. In some undisclosed markets, Dr Reddy's and GSK will co-market drugs.
    Abbas Hussain, president of emerging markets at GlaxoSmithKline, said: "This is another significant step forward in our strategy to grow and diversify GSK's business in emerging markets. Growth in both population and economic prosperity is leading to increased demand for branded pharmaceuticals."


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    Sunday 19 April 2009

    £1-a-day diet drug promises weight loss


     

    £1-a-day diet drug promises weight loss

    But doctors warn that eating healthily and exercising is the only surefire way to stay slim

    Swapping an ice cream for an apple would save you 100kcal a day - the same effect as taking Alli, according to Gareth Williams of Bristol University. Photograph: Glow Images/Getty Images/Glowimages

     

     
    Over-the-counter diet pills will go on sale in UK chemists for the first time this week amid warnings from experts that the cure for being overweight "will never be found in a wonder drug".
     
    GlaxoSmithKline has produced one of two pills to go on sale. It claims that Alli, a half-strength version of the prescription-only Xenical - which has been granted a licence by the European commission - can cause safe weight loss of 3lb a week. The £1-a-day drug promises to cut the weight of men and women by between 5 and 10% in four months. For an 11-stone woman, this would mean shedding more than a stone - or a dress size.
     
    Having promised to market the drug responsibly in the UK, Glaxo is emphasising it is intended to be a supplement to a healthy diet and regular exercise. It maintains, however, that taking an Alli tablet with every meal can cause 50% more weight loss than willpower alone.
     
    The primary ingredient of Alli is orlistat, which diminishes the body's capacity to process fat by about 25%. Undigested, this fat passes through the body causing what Glaxo describes as "an urgent need to go to the bathroom". The drug can also interfere with the absorption of some vitamins.
     
    But in an editorial in the British Medical Journal, Gareth Williams, professor of medicine at Bristol University who carried out a trial of Alli, warned: "Possibly [because of side effects] few users will even finish their first pack of Alli, let alone buy a second, and the drug may cause only a small and transient downward blip in the otherwise inexorable climb in weight.
     
    "Selling anti-obesity drugs over the counter will perpetuate the myth that obesity can be fixed simply by popping a pill and could further undermine efforts to promote healthy living, which is the only long-term escape from obesity."
     
    Williams warned that weight loss achieved in clinical trials was rarely replicated outside the laboratory.
     
    "Dieters in these trials are highly motivated and under medical supervision," he said. "People tempted to try Alli might be advised that taking it without medical supervision may achieve an average daily energy deficit of only 100kcal - equivalent to leaving a few French fries on a plate, eating an apple instead of ice cream, or (depending on enthusiasm and fitness) having 10 to 20 minutes of sex."
     
    The second diet pill going on sale this week is Appesat, which claims to achieve weight loss of just under 2lb a week. The seaweed extract, which costs £29.95 for 50 capsules, swells up and tricks the brain into thinking the stomach is full. The pills are broken down by acid in the stomach after a few hours and are flushed out of the body as waste.
     
    Because Appesat does not enter the bloodstream, the company claims it should carry no side-effects worse than an "upset tummy".
    Appesat has been approved by the Medicines and Healthcare Products Regulatory Authority, the government body that vets new treatments. But even Appesat's own consultants are cautious about the efficacy of over-the-counter weight-control drugs.
     
    Dr Jason Halford is director of the Kissileff Laboratory for the Study of Human Ingestive Behaviour at the University of Liverpool, which receives payment from Appesat for his advice. He said: "The cure for obesity and being overweight will never be found in a pill, packet or a wonder drug." Halford, who is also deputy chair of the Association for the Study of Obesity, said: "That can only come from enormous changes to our food and physical environment, which are going to take a long time to achieve.
     
    "Drugs don't necessarily deal with reasons why people become obese, which are largely psychological," he said, pointing to Appesat research that found more than a third of those surveyed admitted thoughts of their next meal were the only thing that got them through their day at work. A fifth said they were addicted to overeating, while 44% regularly ate even when they were not hungry.
    "Drugs that increase feelings of satiety and control hunger will not help these people," he said.
     
    According to Mintel, the market for diet plans and products is slowing. The growth rate of products with reduced fat, calories or sugar slowed dramatically last year. Sales remain in excess of £2bn.
     
    According to the Health Survey for England, approximately two-thirds of adults are overweight or obese, as are around a third of children.



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