Archive for the ‘intellectual property’ Category

Pharma and the Spirit of Competition

Once again, the pharmaceutical industry is under attack, and once again it is for all the wrong reasons.

The problem this time is this: many of the new generation of blockbuster drugs are jaw-droppingly expensive, costing tens of thousands of dollars per patient per year or even per treatment. Part of the reason is that many of them are from a category of drugs known as “biologics.” Such drugs aren’t made with old-fashioned chemistry, but are instead produced inside living cells, typically genetically modified ones, inside giant vats known as bio-reactors. It’s an expensive new technology. And the big biotech firms that make these drugs are not fond of competition.

According to the New York Times, “Two companies, Amgen and Genentech, are proposing bills that would restrict the ability of pharmacists to substitute generic versions of biological drugs for brand name products.”

The companies claim they’re just trying to protect consumers. The generic versions, they argue, are typically similar, but not identical, to the originals. These aren’t simple drugs like Aspirin or the blood thinner, Coumadin. These are highly complex molecules, and the worry is that even slight differences in the manufacturing process could lead to problematic differences in form and function.

The makers of generics, for their part, acknowledge that worry, and say they’re fine with pharmacists limiting substitution to cases in which the Food and Drug Administration has declared two drugs to be interchangeable. But they oppose any further restrictions, including ones that might be imposed at the state level and for which the name-brand manufacturers are lobbying mightily.

What are we to say, ethically, about efforts by name-brand manufacturers to limit competition and thereby keep prices and profits high? Is it wrong of them to do this in a context in which health spending is out of control, and in which patients can die from being unable to afford a life-saving drug?

But as strange as this may seem, there is arguably nothing wrong with pharma behaviour that harms patients and strains private and public healthcare budgets. They aren’t responsible for the fact that people get sick, and they’re not (usually!) responsible for the decisions made by governments or by insurance companies. A lot of the behaviour on the part of pharma that people complain about is no more wrongful than the behaviour of the woman who invents a better mousetrap, thereby putting employees of the less-good mousetrap maker out of business. Innovative, competitive behaviour is good in the long run, but net social benefit is consistent with less-good outcomes for some.

The real sin, here, isn’t against consumers or governments, but against the market itself.

Markets, and the businesses that populate them, can only promise to be socially beneficial when there is competition. When governments move to foster competition, businesses that profess to believe in free markets cannot rightly cajole governments to do otherwise. The same goes for using lobbyists to encourage government to make a market less competitive. After all, playing by the rules of the game is the fundamental obligation of business. But when it comes to changing the rules of the game, we have to look to the limits implied by the spirit of the game. That’s where pharma is going astray here. Using government to limit competition isn’t just bad ethics; it’s bad capitalism.

Opus Dei Sues Game Publisher

As you may have heard, Opus Dei, a branch of the Catholic church, is suing a Danish game publisher, Dema Games, for alleged infringement of its trademark. The game is called “Opus Dei: Existence After Religion.”

The case is pretty much entirely without moral merit. Never mind the David-vs-Goliath image raised by the thought of the powerful Catholic prelature focusing its lawyers’ energies on a tiny Danish publisher. Beyond that, there’s no indication that Opus Dei, the organization itself, is portrayed in any way in the game. So this is unlike the dispute that went on back in 2006, when Opus Dei tried to get Sony to remove references to the organization from the movie version of The DaVinci Code. The issue in the present case is simply whether the organization has the right to control how its name is used.

Trademark protection is effectively a limit on free speech. You can say whatever you want, generally, but you can’t help yourself to words or phrases that are specifically used by other people for commercial purposes. Opus Dei isn’t what we would normally think of as a “commercial” organization, but close enough: its name is the “mark” under which it carries out its “trade.” So it has some claim to a trademark. On the other hand, the words “opus Dei” are just a phrase with multiple uses. As those of you who remember your high school Latin will recall, “opus dei” is translated “work of God.”

This case might best be thought of a question of free speech versus respect for religion. The organization can’t rightly expect to exert worldwide control the use of the two words “opus” and “dei,” words that have many uses in conjunction beyond describing the Catholic group. But on the other hand, should the game publishers relent and remove those words from the title of their game? Opus Dei does have an interest at stake, here, even if it’s not clearly an overriding one embodied in a right. A sufficient degree of respect for the organization and its interests might lead a company to adopt a hands-off policy, regardless of whether the trademark claim is legally enforceable.

All indications are that Dema has no intention of manifesting that level of respect, and I suspect many people — including those who are dismissive or even critical of the Catholic church — will applaud the company in this regard. But what is the unbiased observer to think, from an ethical point of view, about cases of this sort? Here, it is important to recognize the crucial ethical difference between a value, on one hand, and a principle, on the other.

Respect — including respect for other people’s religions — is a value. As such, it is something we generally want to promote. It is good, other things being equal, to demonstrate a degree of respect for other people, and arguably for their religions and the organizations that promote them. Even when we do not support or encourage other people’s beliefs, it is generally a good thing, socially, if we respect them.

Free speech, on the other hand, is a right, and respect for it is a moral duty. And rights and duties tend to be moral absolutes, rather than merely things we want to promote. As a right, free speech is something that is to be breached only under very limited and carefully prescribed circumstances. A right is a line drawn in the sand, and across which we step only when absolutely necessary. When a right (like free speech) and a value (like respect) come into conflict, generally the right has got to win.

Hopefully the Danish court will agree.

Insider Trading at the FDA

A scientist employed by the US Food and Drug Administration has been arrested and charged with insider trading.

Here’s the story, from Diana B. Henriques at the New York Times: U.S. Chemist Is Charged With Insider Stock Trades

A 15-year veteran of the federal Food and Drug Administration and his 25-year-old son were arrested on Tuesday and charged with systematically using confidential information about pending drug applications to reap millions in illegal trading profits since 2007.

As part of its drug-approval process, the FDA is given sensitive information by companies seeking such approval. And the status of a company’s application within the FDA’s own decision-making is itself sensitive information. Since FDA approval is essential to getting a drug to market, the announcement that a company’s drug has been granted, or denied, approval by the FDA can have a huge impact on the value of a company’s stock. And what FDA chemist Cheng Yi Liang did is to use information available only to FDA insiders to make profitable trades on the stock of companies then seeking FDA approval.

Just what was so wrong with what went on here?

In a statement announcing the case, Lanny A. Breuer, the assistant attorney general for the criminal division, said: “Cheng Yi Liang was entrusted with privileged information to perform his job of ensuring the health and safety of his fellow citizens. According to the complaint, he and his son repeatedly violated that trust to line their own pockets.”

Now Mr Breuer is clearly engaging in a bit of prosecutorial rhetoric. He’s right of course that Cheng Yi Liang was entrusted with privileged information, but there’s no obvious reason to think that his use of that information for personal gain jeopardized anyone’s health or safety. But fair enough: Mr Breuer is playing his role in an adversarial system, and that licenses a certain amount of hyperbole.

But what really is wrong with the kind of insider trading that Cheng Yi Liang engaged in? The precise worry about insider trading is the subject of some debate, and I’ve blogged about that before. (See: Ethics of Insider Trading.)

There are several ways we could get at just what was unethical about what Cheng Yi Liang did. One worry is that he profited unjustly, gaining money that he didn’t earn and had no right to. Also, in engaging in insider trading, he traded on information not accessible to others. That means that the people he traded with were at an unfair advantage, and likely lost money as a result. It also means that, subject as it was to significant information asymmetries, the market in which he traded was rendered slightly less efficient, as a whole.

There is of course another ethical worry: if chemists working for the FDA take a personal financial interest in the fate of various approvals, that could quite easily corrupt the work they do. In other words, it puts such a chemist into a conflict of interest. In a conflict of interest, what is fundamentally at stake is our trust in an individual’s judgment. If FDA scientists have a personal stake in their scientific work, then we have reason to doubt their judgment. And, worse, if the judgment of FDA scientists becomes subject to doubt, then the public ends up having a reason (though perhaps not a sufficient reason) to doubt the work of the FDA as a whole.

HuffPo, AOL and the Ethics of Unpaid Labour

AOL bought the Huffington Post this week. Now, many of HuffPo’s volunteer bloggers are up in arms, accusing the left-leaning news-and-aggregation site of two related crimes: selling out to a (presumably) evil corporate media giant, and failing to share the wealth with thousands of volunteer bloggers who, over the years, have contributed probably millions of words to HuffPo’s archive of content.

But criticism was not limited to the volunteer bloggers themselves. Tim Rutton, of the LA Times, wrote:

To grasp its business model, though, you need to picture a galley rowed by slaves and commanded by pirates….

Adbusters — the slightly-past-its-best-before-date organization whose sole purpose is to bash capitalism and consumerism — put it this way:

Socialite Arianna Huffington built a blog-empire on the backs of thousands of citizen journalists. She exploited our idealism and let us labor under the illusion that the Huffington Post was different, independent and leftist. Now she’s cashed in and three thousand indie bloggers find themselves working for a megacorp….

On the face of it, this sounds like a strong criticism. Use unpaid labour to build a truly massive (and profitable) online presence. Keep that unpaid labour in the fold by espousing values they believe in. And then sell out for hundreds of millions to a corporation that almost certainly could not care less about the aforementioned values. It really does sound tantamount to slavery, with a touch of ideological treason thrown in for good measure. But to understand this better, we need to know a little more about the economics of blogging. As a good starting point, see this piece by stats guru Nate Silver: The Economics of Blogging and The Huffington Post

The fact is, however, that sentiments like [the LA Times's] Mr. Rutten’s reflect a misunderstanding of The Huffington Post’s business model. Although The Huffington Post does not pay those who volunteer to write blogs for it, this content represents only a small share of its traffic. And, to put it bluntly, many of those blog posts aren’t worth very much….

Silver goes on to be much more specific, calculating the likely dollar value of the contribution of the average volunteer HuffPo Blogger.

The point is that for something over 99% of bloggers, blogging is a hobby. The contribution of most HuffPo bloggers to the website’s success is minimal. Those thousands of volunteer bloggers on whose “backs” HuffPo was supposedly built were likely more important as audience than as generators of content. Should the volunteer bloggers feel jilted? I’m reminded of a commercial from a few years back, in which a mom consoles her 8-year-old boy whose team just lost a game of soccer or hockey or something. “Did you try your hardest?”, asks the mom. “And did you have a good time? That’s all that really matters.”

Of course, if the volunteer bloggers are worried about the integrity of HuffPo’s editorial voice, you would think they would be somewhat consoled by the fact that Arianna Huffington is retaining the reins in that regard, and in fact will be gaining the key editorial role at AOL as a whole. But then, that’s reason why the rest of us should be deeply concerned, given Huffington’s penchant for featuring dangerously bad pieces related to things like healthcare, including some that are the intellectual equivalent of evolution denial.

Intellectual Property and the Chilean Miners

Last month I posted about some Ethical Issues for the Chilean Miners. There, I pondered the moral force of the contract that the 33 trapped miners signed while still underground, promising each other to share equally the eventual profits of any future publicity. This month, I’m quoted in an article on that same topic, in Canadian Business. Here’s the online version: Intellectual property: Underground dealing in Chile, by Angelina Chapin

The story of “los 33,” the Chilean miners stuck underground for 69 days has all the makings of a good narrative: complication, action, mystery and a happy ending. Presciently, the miners made a pact while they were underground to share whatever profits come from telling their story and are rumoured to have decided to collectively author a book. According to The Guardian, they even had a lawyer send down a contract to make the “blood pact” legal, meaning when Hollywood producers come knocking, they’ll have a whole group to bargain with.

Not much is known about its content, but the circumstances under which the contract was signed have experts wondering about its validity and whether the specifics should be abided by now that they’ve survived the rescue….

The article gives the last word to Toronto-based lawyer Calin Lawrynowicz, who makes a simple, practical suggestion: rather than wonder about the force of the subterranean contract, the miners ought to sit down to talk about it:

Lawrynowicz says, since the miners don’t have 33 lawyers explaining their individual rights, the group should reconvene with an arbitrator to make amendments to the contract, allowing for reductions and benefits in terms of the wealth distribution.

“It’s like a shotgun wedding in Vegas,” he says. “You may be able to have a great relationship after the fact, but have to reconfirm why you got together in the first place.”

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