Competition actually *increases* healthcare costs

As some of you know, my cat has been diagnosed as diabetic and requires insulin injection. He was prescribed Lantus, which is a long-acting insulin called “glargine insulin” that slowly infiltrates the body from the injection site during the course of the day rather than hitting in one big insulin hit. This is sort of the Gold Standard of insulin, controlling blood sugar far better than anything other than an insulin pump. Sometimes you can bring a cat with Type 2 diabetes back to non-insulin-dependent status by using this stuff to regulate his blood sugar until his body readjusts to operating with normal level blood sugar. Tapering off then lets his pancreas take over insulin production again and you have your cat back, albeit with severe dietary restrictions to keep his weight and blood sugar down. Yeah, that doesn’t really happen with people, but cats are weird.

TMF probably isn’t going to be in that cat-egory because his blood sugar was so high, but my vet said it was worth trying. my vet said “Okay, it’s expensive, but this is the gold standard and a $180 vial will last you several months.”

Well, it was a $180 vial in 2014, the year before its patent expired. Today it’s a $290 vial.

What happened? Competition happened. Two competitors entered the market, releasing two competing products, Basaglar and Toujeo. So, what happened? Why did prices go up rather than down the way the free market maniacs are always claiming competition will do in healthcare?!

Well: The maker of Lantus has a fixed amount of profit they want to make from Lantus. If volume goes down — which happened with competition — then they raise the price to make that amount of profit. And the competitors have similar price desires, so try to compete based on something other than price –Toujeo is more concentrated than Lantus (more doses per milliliter). Or if they’re wanting to compete on price, they price 10% below the market leader, because that’s what maximizes their profit (see: Basaglar). Every time Lantus raises their price to meet their profit goals, the other two raise their prices in lockstep to maximize their *own* profits.

So competition nearly doubled the price of my cat’s insulin within three years.

So much for that healthcare “reform” nonsense about “competition reduces prices!”. It just doesn’t seem to work that way in the real world, at least not for healthcare.

– Badtux the “Free Market Orthodoxy is religion, not fact” Penguin

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Capitalism isn’t about morality, and markets aren’t about moral decisions

Those things have to arise elsewhere, because they are not natural attributes of capitalism or markets. As the following example makes clear.

So, you’re a retailer. A hurricane has hit your city and the city water plant was wiped out. The water won’t be back on for weeks at the earliest.

You have four cases of water in your store. Four people come into your store:

Person A: A wealthy banker with $250,000 in the bank and $500 cash in hand who wants to buy all four cases of water at $80 apiece.
Persons B,C,D: Three single mothers with two kids making $400/month at a minimum wage job while living in subsidized housing. Most of her money goes to food, utilities, or the car that is all that allows her to get to her job, and she has a total of $20 cash left over from paying that month’s bills. She wants to buy a case of water at the normal $4.95 price in order to keep her family alive until FEMA water deliveries start.

What do you do?

If you’re a follower of Ayn Rand, a worshipper of capitalism, you say “Sell the water to the wealthy banker.” It’s what gets you the most money. Which is the whole point of capitalism, right?

If you’re a worshipper of the Free Market Fairy, you’ll say “well, I’m sure those mothers will find some resources *somewhere* to buy water if they really need it,” and shrug your shoulders. If they don’t find water elsewhere, or can’t raise the money in any way, well, they must not have tried hard enough, right?

If you’re a typical economist, you say “well, there’s not enough water to fulfill demand, so high prices ration it amongst the multiple parties.” Ignoring the fact that the rich person can buy more water than he needs because he has money coming out of his ears, while the single mothers even combining all their resources can’t even afford $80 for the single case of water that one of their families needs to stay alive. But dead single mothers aren’t a concern of economists, they’re all about abstractions. Ignoring the fact that their rationing abstraction ends up with 75% more people dead than if the rationing was done according to need rather than according to wealth.

If you’re a Republican sociopathic lizard person (but I repeat myself), you say “those poor people don’t contribute anything to the economy, while the rich man does, so I’ll sell it to the rich man because he’s the only one who deserves to live.” Ignoring the fact that the average rich person would starve to death if it wasn’t for all those poors stocking shelves and cashing out people at supermarkets, and waiting tables and cooking the food at restaurants.

If you’re a moral person, you ration the water — you give each person who comes through a fixed amount that they need to get through the next couple of days, and that’s that. So you sell one case of water to each single mother at the regular price, and one case of water to the rich banker at the regular price, and four people survive to live to see FEMA come in, rather just one. Four people surviving is more moral than only one person surviving, right?

But there seems to be fewer and fewer moral people each year. Perhaps what we need to be selling are moral compasses. Sadly, the vast majority of them seem to be defective right out of the box. Maybe because we outsourced production to China. In the absence of a moral compass, we rely on government to impose morality on the market via, e.g., anti-profiteering laws. When government doesn’t do that… we get dead bodies.

And nobody seems to care.

– Badtux the Morality Penguin

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We don’t care, we don’t have to

This could well be the motto of Google. Eight years ago, Google Voice was introduced. For eight years, people have been asking for a “mark all as read” option for their Google Voice inbox. For eight years, Google just replies with stone silence. Because they’re Google. They don’t care, they don’t have to. When you have 85% market share in the search engine and related market, well.

I’ve been playing with Amazon’s Postgres RDS. Access to Postgres servers is dictated by a file called pg_hba.conf. It turns out that Amazon’s default settings don’t work with pgpool-II, the main way to scale across Postgres clusters. People have been asking for access to pg_hba.conf ever since Postgres RDS was introduced three years ago. The response from Amazon has been… [crickets]. Because they’re Amazon. They don’t care. They don’t have to. When you have 85% market share in the cloud services market, well.

This is the problem with building these gigantic “too big to fail” companies. They lose touch with their customers, and competitors get stomped flat by their sheer scale so there’s no real competition. This despite the fact that they’re in unregulated sectors of the economy and thus Libertopians whine, “if people don’t like them, they can just go to the competition!” I’ve looked at the competition to AWS. The only one that is competitive on price is Microsoft Azure, and Microsoft isn’t finished building out Azure yet (it’s still missing some critical services that I need, the most important being DNS and auto-registration of instances with DNS when they’re spawned). Where is this mysterious competition that the Libertopians cry will arise, arise I say, at any moment? Could it be that very few companies have a spare $5 billion to spend on creating a large scale cloud service, and nobody in their right mind wants to go up against Amazon while Amazon has a 50% gross margin on their cloud products yet still can sell cloud for less than anybody who has to amortize that $5 billion that Amazon amortized long ago?

Goddamn it, where the fuck did that free market fairy go, anyhow? Oh wait, yeah, I remember, here he is….

Yeah, looks like the Free Market Fairy is a bit… hairy. And not very pretty. And not very effective once someone gets 85% of a market. Libertopians may suck the free market fairy’s little hairy, but that ain’t producing a competitor to AWS. Funny, huh? Yeah, funny like a goddamn broken leg, if ya ask me…

– Badtux the Reality Based Penguin

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So the magic Free Market Fairy will keep our food and drugs safe

So clearly Frances Kelsey’s job was not necessary.

She’s the FDA employee who stopped thalidomide from being sold in the United States, and thereby saved thousands of American babies from dying in the womb and tens of thousands from being born with flippers for limbs. When the application to sell the drug in the US hit her desk as a new hire at the FDA, she was inclined to rubber stamp it, but looked at the studies that had been submitted on toxicity and absorption and thought, “this can’t be right.” She passed it by her chemist and pharmacologist and they agreed — the data was rubbish. It in no way proved that the drug was safe. So she asked the drug company, the William S. Merrell Company of Cincinnati, for more information. They resisted. They complained to Congress. They painted her as a petty bureaucrat who was making the magic Free Market Fairy cry.

Then reports came that the drug could possibly cause numbing. The drug company rolled their eyes and said no, it was perfectly safe, the best sleeping pill on the market, millions of Europeans had used it without a problem. But numbing, Frances said. What about numbing? The drug company grumbled and went to investigate.

Then came the first reports of fetal deaths and deformed fetuses from Europe. The drug company *still* complained repeatedly to Congress that their almighty Profit was being interfered with by some petty bureaucrat, if the drug wasn’t safe then the magic Free Market Fairy would have already destroyed European sales, right? But her chemist and pharmacologist both agreed that the chemical structure of the drug might make it pass through the placental barrier and do something to the fetus, what, they didn’t know. But maybe something not good. Where were the fetal studies? The drug company grumbled and did some fetal studies with mice and rabbits that they claimed showed it was safe, despite at least one deformed bunny.

Then, 18 months after the process started, incontrovertible proof arrived that thalidomide was causing thousands of fetal deaths and tens of thousands of deformed infants in Europe. Suddenly there was silence. The magical Free Market Fairy did eventually remove thalidomide from the market in the hundreds of markets that merely rubber-stamped the application, but only after thousands of dead fetuses and tens of thousands of deformed ones. The drug that the drug company had insisted for eighteen months was perfectly safe, turned out to be a nightmare — all because the drug company was more concerned about profit than safety, and hadn’t taken the time to do the kind of thorough studies that would have divulged that the drug was toxic to the developing fetus.

Frances Kelsey died a few days ago at age 101. She saved thousands of American lives by doing her job, and was well awarded for that effort, being promoted eventually to head the FDA’s drug safety program. Sadly, I doubt that there will be another Frances Kelsey, because since then our government has become a bought and sold subsidiary of Wall Street, where Profit is king and nothing is allowed to interfere. Today, she would have been ostracized, and eventually removed from the thalidomide case and sent to an empty office with only a chair until she resigned in frustration. She could afford to do what she did because she had the full backing of her President and besides, she didn’t really need the job — that was an era where a single income could support a household, and her husband had a well-paying job. Today, we’ve been whipped so badly by the 1% that it’s all we can do to barely keep our heads above water with two wage earners in the family, nevermind sticking our neck out like Frances Kelsey did. There has been a class war, and we lost, and the 1% won. There will never be another Frances Kelsey in the FDA. Not until we destroy the power the 1% hold over our government, anyhow.

Which will happen… when?

If the past is any key, we’ll need another Great Depression. And my suspicion is that this time we’ll go Fascist, not Socialist, and put a strong man in office to rule with an iron fist. I wish I was wrong, but …. I suspect not. It’s more a question of when, not if… I just hope I manage to die first, because that’s going to be a bad, bad time.

– Badtux the Gloomy Penguin

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Bitcoin is Darwin’s way to make Libertarians poor

The Free Market Fairy preparing to wave his/her magic wand of Free Market Fairy Dust

Oh wait, let me retract that. I want every Libertarian to invest all their dollars in bitcoins and store them somewhere like Mt. Gox or Bitstamp. Then they can come to me and whine about how government regulations are evil, especially those government regulations about things like financial institutions, and unnecessary in Libertopia because the Magic of the Market(tm) a.k.a. the Free Market Fairy will automatically wave his/her magic wand and make institutions like Mt. Gox and, now, Bitstamp, be careful with people’s money. Snerk. Bwahahaha!

Meanwhile, those of us who realized that the American dollar will never become worthless because both your taxes and your oil require dollars in payment for them, not turnips, not seashells, not bitcoins, are laughing all the way to the (FDIC-insured government-regulated) bank as bitcoins that people thought they owned are plundered left and right. See, that’s the downside of an anonymous currency, compared to a very-much-not-anonymous bank account. You have no way of proving that you own the money, so if it gets stolen from the bitcoin banks, that’s that. Meanwhile, if your money gets stolen from a FDIC-insured government-regulated dollar bank, well. No big deal. You’ll get your money. It might be a few months, but you’ll get it.

See the difference?

– Badtux the Libertopian-poking Penguin

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The ruining of America for corporate profit

Once upon a time, Pizza Hut made edible pizzas, pizzas that didn’t taste like supermarket frozen pizzas.

This is a tale of that time, from before 1997, when PepsiCo divested itself of Pizza Hut in a leveraged buyout that left the resulting Yum! Brands with over $4.7Billion in debt to pay off. I delivered Pizza Hut pizzas in the late 80’s and early 90’s when I was in college. On class days I worked evenings, on days I had no classes scheduled I was an opener working from 8AM to 4PM when the evening crew started coming in. So I got to see the full gamut of operations.

When I started, we made our pizza dough fresh every morning. There were mixers and dough rollers and measuring scales. We sold three types of pizza: Pan pizza, hand tossed pizza, and thin-n-crispy pizza. There were two kinds of flour in the back, with different amounts of rising agent pre-mixed. The pan pizza and hand tossed pizza were actually the same dough, but the hand tossed were pressed thinner and then spun by hand and stretched onto a pan in order to activate the glutens, resulting in a thinner crust that still had more loft than the thin-n-crispy crust. Then once the dough was all pressed and in its pans (stretched into them in the case of the thin crust pizzas, just laid in the middle of the thick crust pans), the pans were placed in a proofer and left to rise. Once they had risen, they were moved into the refrigerator, with some going to the refrigerated racks under the make table.

By the time the restaurant opened for business at 11AM, the fresh vegetable delivery had already happened and the veggies washed and chopped into their containers, and the tomato sauce had been pre-mixed with spices and left to proof. Meats were pre-sliced/pre-mixed already and were in bins. When orders came in, they were marked by hand on tickets, and the tickets were slid onto the rack over the make table. A selection of pizza crusts were kept in refrigerated racks under the make table and were pre-sauced and pre-cheesed by the opening crew, as orders came in they were pulled out and toppings placed on them. Once the pre-sauced and pre-cheesed crusts ran out, they were sauced and cheesed as orders came in and crusts moved from the walk-in as needed.

Once the toppings were on the crust, they went into the conveyer belt oven. We had a single belt oven, but later we got a double-decker oven due to the large numbers of people who ordered our pizzas. As for the cost of the pizzas themselves, they were pretty expensive, but if you were ordering two pizzas and had a coupon the per-pie price wasn’t bad, something around $12 apiece in today’s dollars for a hand-made pizza with fresh ingredients (well, other than the meats, but there’s only so much you can do there if you don’t have your own packing plants like In’N’Out does).

Then the buyout/spinoff happened in 1997. I had long since moved on, of course but had some interest in what happened. The new Yum! Brands had massive debts. Those debts had to be paid off. They couldn’t raise prices because of competition. Instead, they cut costs. They cut the number of drivers, which caused pizzas to get to people late. They cut the quality and quantity of ingredients put onto the pizzas. And finally, in the coup de grace, they quit making dough fresh at the stores every morning. Instead, they send flat frozen disks of pizza dough. The end result of all this cost-cutting is that the cost of making a pie dropped from around $4.97 to around $1.87.

And, of course, the pizza became inedible, no better than a supermarket frozen pizza. But hey, people keep buying it, right? Well, in places where they have no real pizza choices, that is.

Now, multiply this story by hundreds of times for hundreds of brands that we once loved for their quality and taste, and you will understand the wasteland that is the American chain restaurant industry today. Our overlords have cashed out their chips in leveraged buyouts to other overlords, who then take their own profit by cutting quality and taste. And you and I? Well. We look for local home-grown restaurants to go to, or one of the few restaurant chains that haven’t sold out to the sociopathic lizard people. But then, we’re more intelligent than most Americans. Otherwise we wouldn’t be reading (and writing) blogs, right?

– Badtux the Food Penguin

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Hilarity for the day

Apparently the National Review, which is always scolding us unrepentant lefties that we aren’t sufficiently capitalist and that the magic of the marketplace should always rule, is soliciting donations to fight a lawsuit levied by a climate scientist they libeled because — get this — “National Review is not a non-profit — we are just not profitable.”

Uhm, yeah. Where’s that magic of the marketplace, already? Someone running a failing business dares tell me how to run a business? Man. Those guys at National Reviews got stones that clang. As well as no sense of irony.

Meanwhile, here’s a clue to douchebags like National Review Editor Rich Lowry who think you can lie about anybody and anything: Nope. No can do. You can tell the truth about anybody and anything, but lying is a different story, and “I didn’t know I was lying!” is only a defense if the person you’re libeling is a public person (i.e., a celebrity or politician). If it’s a climate scientist that has never been in the public eye before, you better damn well do your research and make sure you’re telling the truth before you print something potentially libelous about him — or suffer the consequences. Because neither I, God, or the law likes liars. And before you say “well who decides if it’s a lie or not?”, well, you’re about to find out, Mr. Lowry (hint: a jury of your peers. Better hope they are, anyhow).

– Badtux the Snarky Penguin

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Free Market Fairy strikes again!

The Free Market Fairy and his… her… magic wand of Free Market Magic Dust

So we don’t need things like the FDA because the magical Free Market Fairy will sprinkle his… her… magic Free Market Fairy Dust on everything and all will be well, right? For proof of that, look at Specialty Compounding of Cedar Park, TX, whose products are perfectly safe thanks to all that magical free market fairy dust that makes, like, everything turn out okay.

Just ignore the Rhodococcus equi bacteria. I see nothing, nothing I say! Nobody ever got harmed by a little bacteria in their bloodstream anyhow, right? I mean, other than the ones who got sick and died, but sheesh. They were just ninnies anyhow, it’s evolution in action!

– Badtux the Snarky Penguin

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The Free Market Fairy is on vacation?!

The Free Market Fairy and his… her… magic wand of Free Market Magic Dust

So the Right Wingosphere is all atwitter about the Federal Government buying lots of bullets. So upset are they that they’ve introduced a bill to reduce the number of bullets that the Federal Government can buy, introduced, appropriately enough, by Senator Jim “Dumbest Man Whose Name Isn’t King In Congress” Inhofe.

So the question that I and a lot of other folks have is this: If the Magical Free Market Fairy solves all economic problems, whether it’s unemployment, the high cost of healthcare, building safety, whatever… why isn’t Free Magic Fairy Dust solving *this* problem? I mean, if there’s more demand for bullets than there is supply, why aren’t ammunition manufacturers simply manufacturing more ammunition? I mean, there’s a *lot* of demand out there. Surely some venture capitalist would be drooling over the possible profits from building new ammunition factories to meet all this demand, right?

Sadly, the Free Market Fairy’s magic wand seems to be stuck in a place the sun don’t shine right now, because ammunition manufacturers see more profit by driving up prices versus making more ammunition, and if a new player came into the market they have the ability to ramp up production and drive down prices for long enough to drive the new competitor out of business. Seems that the Free Market Fairy is a bitch… err… bastard?… after all, and is more interested in applying said wand to nether regions than in waving it to create more bullets via the magic of the Free Market. Funny how that works, huh?

Now the question is this: if the righties’ free market ideology is such fail when it comes to ammunition production, why do they think it’ll work for other economic problems? Oh wait, I forgot, righties are experts in double-think — the art of holding two contradictory ideas in their head at the same time, as depicted in George Orwell’s 1984. Alrighty, then!

– Badtux the Snarky Penguin

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Legalized theft and the oligarchs who rule America

“How did the Rich get their Wealth? By stealing the Labor and Wealth of the Poor.”

I’ve repeatedly noted that Richard Branson, billionaire owner of Virgin Airlines, would have nothing if not for the pilots, mechanics, flight attendants, and myriad other people who actually make the planes fly. So why is he the billionaire and they are not, when every single dime made by Virgin Airlines is due to the labor of these pilots, mechanics, flight attendants and so forth? Well that’s simple. He’s a billionaire because he has laws that say he can take the product of their labor for himself and leave them pennies. And if they object and take for themselves the wealth that they’re currently producing for Mr. Branson, he can call out government guns to enforce his edicts at gunpoint and put them in prison for theft of “his” property — even though he created not a single bit of it with his own two hands.

Capitalism is, at its core, legalized theft of the product of the labor of the workers who actually creates wealth. Steve Jobs did not create a single iPhone. He instead took ownership of the designs created by other people inside Apple and reaped the profits for himself, meaning he died a billionaire while most of Apple’s engineers can’t even afford to buy a house (I estimate that over 75% of Apple’s engineers do not make the median income needed to afford a home here in the Silicon Valley).

Does this mean that I’m a Communist? No. Communism has its own issues, in particular it is very inefficient in matching supply and demand (that and the word “communism” got a bad rap because of the tyrants who used the word to seize absolute power for themselves, but that’s a different issue). What it *does* mean is that I have little patience for those who say that the government (a.k.a. We The People) should not be involved in redistributing wealth from the rich to the poor. The government is already involved in redistributing wealth from the poor to the rich — using government guns to enforce little pieces of paper claiming ownership by the rich of the wealth produced by workers– so why *not* balance that out by using those same government guns to move money the opposite way also?

But hey, that makes Ayn Rand’s Corpse cry, so it’s bad. Because stealing wealth is only okay if it’s the rich stealing from workers. If it’s workers getting back some of the wealth they created… why, how horrible! Why do eeevil lie-berals wanna make Baby Jesus cry by mentioning such a thing?!

– Badtux the Snarky Penguin

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