The Corner Newsletter: September 29 , 2023
Welcome to The Corner. In this issue, we look at how the FCC’s new Democratic majority could act to rein in Big Tech, and at Musk’s misuse of Starlink.
California Joins Forces With Nonprofit to Produce Cheap Insulin
Audrey Stienon
The price of insulin, a life-saving drug for people with diabetes, has tripled in the last decade, making it a potent symbol of persistently high prescription drug costs. With insulin vials selling for hundreds of dollars apiece, desperate people are increasingly risking their health by rationing their medication.
The Biden Administration has responded by introducing a $35 cap on Medicare recipients’ monthly insulin expenses. Although laudable, this benefits only the fraction of insulin users covered by Medicare and does not address the anticompetitive market structures driving up insulin and other generic drug prices.
A potentially more pragmatic solution is emerging as states get more creative in challenging Big Pharma’s power. Most notably, California’s CalRx initiative recently partnered with nonprofit generic drug producer Civica Rx to develop and manufacture insulin that will be available to anyone in the country, including those without insurance, at $30 a vial.
This innovative partnership leverages the unique ability of governments and nonprofits to compete with concentrated corporate power. This model could also grow if California and other states want to produce other essential drugs or boost supply chain resilience for key drug inputs.
It may seem baffling that insulin remains priced so high even though patents for the three most common forms of the drug have expired. But it turns out that new competitors can struggle to enter markets for insulin and other generic and biosimilar drugs because they must still invest millions to develop their own version of the drug, gain regulatory approval, develop manufacturing capabilities, negotiate with pharmacy networks, and market their product to customers. Civica estimates it will take over $200 million to release three critical insulin varieties next year.
For-profit companies can be unwilling to risk this investment since incumbent producers, who have recouped their R&D investment through their patent-protected monopoly, may at any point drop their price to drive out a newcomer.
This market barrier does not apply to the CalRx-Civica partnership since neither entity is beholden to shareholders demanding investment returns. Civica operates as a “healthcare utility,” raising its R&D funding from mission-aligned organizations like health plans and philanthropies, who value lowering drug prices. “Our goal is to have market impact, not market share,” explains Civica’s Senior Vice President for Public Policy, Allan Coukell.
CalRx is contributing $50 million to Civica’s pre-existing insulin program; philanthropies will make up the shortfall. With R&D costs paid for, Civica can set prices that simply cover production, distribution, and operations without adding a significant mark-up. The project is expected to swiftly help diabetics across the U.S., given prices for brand-name insulin are likely to decline as incumbent producers face new competition.
California expects to more than break even from this arrangement. After all, the state, through its Medi-Cal and CalPERS programs, covers the medical costs of over 15 million people—including their insulin. Whether Californians buy CalRx insulin, or whether brand-name insulin becomes cheaper, the state benefits. Other states’ coffers will similarly gain, since CalRx insulin, under the Civica brand, will be sold across the country.
CalRx’s investment garners California a seat on Civica’s board, introducing more public accountability to the nonprofit’s work and differentiating this partnership from traditional government procurement arrangements.
Another distinction is that the state has made no commitments to buy CalRx insulin, which will instead have to compete on price and quality with private providers, setting up perhaps the greatest challenge facing this initiative. To be effective, Californians will need to trust CalRx as an alternative to familiar brands backed by formidable marketing campaigns, and pharmacies will need to willingly stock the public brand.
Beyond its partnership with Civica, CalRx plans to partially fund the construction of an insulin manufacturing facility in California to create jobs. This facility could have the added benefit addressing another growing risk within the pharmaceutical industry—that of concentrated production for active pharmaceutical ingredients (APIs), the basic building blocks of prescription drugs. Most domestic manufacturing facilities assemble final drugs, but API production is heavily concentrated in China and India, whose recent factory closures from quality-control violations provoked shortages of critical cancer medications. Ideally the new facility would manufacture APIs, increasing the resiliency of the larger world system.
CalRx’s partnership with Civica is a return to traditional state-centric approaches to drug development and manufacturing, including Operation Warp Speed to address the Covid pandemic. None of these programs can solve the full range of market failures in the industry—but as CalRx insulin rolls off the production line, other state governments are likely to take note of this promising model.
Sen. Klobuchar and Canadian Minister Denounce Facebook’s Attacks on Free Press, at OMI/CJL Event
This week, the Center for Journalism & Liberty at the Open Markets Institute convened leading policymakers from the U.S. and Canada, experts, and press freedom advocates for “Protecting News to Preserve Democracy.” The discussion focused on Facebook’s recent suppression of news sharing in Canada and threats to do so in California.
Senator Amy Klobuchar, gave a keynote address in which she condemned Facebook’s actions, while also expressing optimism that policymakers from across the political spectrum are more resolved than ever to regulate Big Tech, both in the United States and in close allies such as Canada.
Pascale St-Onge, Minister of Canadian Heritage, explained Canada’s groundbreaking news media compensation law, the Online News Act, and detailed reactions against the law by Facebook and Google. Minister St-Onge stressed that the Big Tech giants must “contribute their fair share and support democracy... We know they won’t regulate themselves.” Her presence at the CJL event was covered by several Canadian outlets, including Financial Post, The Globe and Mail, and The Hamilton Spectator. California Assemblymember Buffy Wicks, who is helping to lead California’s pioneering effort to pass a state-level news bargaining law, delivered remarks via video.
During the event, the Center for Journalism & Liberty at Open Markets also announced the publication of its report, “Democracy, Journalism, and Monopoly: How to Fund New Independent News Media in the 21st Century.” This new report provides the most comprehensive description of Big Tech’s war on the free press and how to use traditional U.S. competition policy to restructure media and communications markets for the 21st century.
FTC Presents Historic Lawsuit Against Amazon’s Online Monopoly.
The Federal Trade Commission’s and 17 states this week filed a lawsuit against Amazon for abusing its monopoly power. The suit accuses the e-commerce giant of using its dominant position to force merchants selling on its platform to buy its warehousing and delivery services, inflating costs for consumers. Open Markets strongly applauded the action. “Freedom of commerce is a fundamental liberty of American democracy,” executive director Barry Lynn said. “Today the FTC took a first step to restoring the liberty of every individual and business who relies on essential internet platforms to exchange goods, services, and ideas with one another.”
The Open Markets Institute has strongly advocated for antitrust action against Amazon for more than a decade. FTC Chair Lina Khan began investigating Amazon’s monopoly power while on staff at Open Markets, work that led to her viral 2017 article on Amazon’s monopoly power for the Yale Law Journal. The Washington Post quoted Lynn as saying, “[The FTC is] going at the heart of Amazon’s defense.” Truthout and Marketplace picked up Lynn’s official statement on the Amazon suit.
Open Markets and Partners Urge DOJ and FTC to Strengthen Merger Guidelines
The Open Markets Institute, joined by SEIU, Public Citizen, and other partners, recently submitted a comment urging the Department of Justice (DOJ) and the FTC to strengthen and clarify their draft merger guidelines. The groups commended the agencies for rejecting the 40-year focus on consumer welfare, which led to promoting narrow and economically dubious notions of “efficiency.” But OMI and its partners called on the agencies to go further, including by lowering thresholds for action and completely eliminating the efficiencies defense for presumptively illegal mergers. Read the full comment here.
📝 WHAT WE'VE BEEN UP TO:
OMI’s strategic councilor on democracy and power, Caroline Fredrickson, wrote an article for The Atlantic entitled “What I Most Regret About My Decades of Legal Activism,” which recounts her long career as a judicial advocating for social issues at the expense of economic ones. “By focusing on civil liberties but ignoring economic issues, liberals like me got defeated on both,” she writes. The article was cited in The American Prospect as well as The National Review.
Dr. Courtney Radsch, director of the Center for Journalism and Liberty, coauthored an op-ed in Chronicle of Philanthropy arguing that the philanthropy sector needs to pursue a proactive, rather than reactive, approach to fighting misinformation. “Grant makers should focus on creating a healthy information ecosystem that doesn’t exacerbate lies and falsehoods, limits their proliferation in the first place, and ensures a steady supply of quality information,” the authors write.
Open Markets Institute’s Europe director, Max von Thun, published a piece in The Guardian, urging Britain’s Liberal Democrats to put forth a bold political and economic vision to secure the party’s future. “To regain relevance, the party needs to be more ambitious,” von Thun writes, calling for a three-pronged agenda that includes reintegration with Europe, redistribution of economic power, and a comprehensive green industrial strategy.
Von Thun also wrote an op-ed in Tech Policy Press noting the omission of cloud computing, email platforms, and virtual assistants from the European Commission’s long-awaited list of tech giants and services designated as gatekeepers under the flagship Digital Markets Act. “Given the growing evidence of anti-competitive practices in both the cloud and internet of things, including numerous complaints received by the Commission, the case for [adding them] is strong,” he wrote.
In an article on criticism by small farmers of the U.S. Department of Agriculture, Politico cited the “C” given to USDA in an annual report card issued by Open Market Institute and Farm Action to measure the agency’s progress on injecting competition into the concentrated agricultural sector.
In a story on the current antitrust trial against Google, The Washington Post quoted OMI executive director Barry Lynn on the reception of his advocacy of antitrust enforcement against Google in the 2000s. “People just thought we were insane,” he said. “Google was the best thing since sliced bread.”
Wired quoted Max von Thun on the European Commission’s crackdown on European tech companies — and not just U.S. tech giants — as exemplified by its recent blocking of Amsterdam-based Booking.com’s purchase of a Swedish travel company. “What it does show — in my view positively — is that [the EU department responsible for competition] is not being swayed by calls for it to enable the creation of ‘European champions’ through a relaxed approach to European mergers,” von Thun said.
Open Market’s Institute’s editorial director Anita Jain wrote a book review for the Washington Monthly on the unexpected embrace by conservative idealogue Sohrab Ahmari of progressive policies that support workers and rein in unfettered capitalism. “Describing himself in Newsweek last month as ‘ferociously conservative on cultural issues,’ Ahmari endorses the ideas of his brethren but adds a union-loving twist that frets over the income inequality perverting our social compact,” she writes.
🔊 ANTI-MONOPOLY RISING:
The Federal Trade Commission sued U.S. Anesthesia Partners and its private equity partner Welsh Carson Anderson & Stowe for buying up every major anesthesiologist practice in Texas, indicating the agency is taking a closer look at roll-up tactics used by private equity firms. (Bloomberg)
The Justice Department filed a civil antitrust lawsuit against Agri Stats, a statistical service used by the poultry and meat industries, for running anticompetitive information exchanges among broiler chicken, pork and turkey processors. The complaint alleges that Agri Stats violated Section 1 of the Sherman Act by collecting, integrating, and distributing competitively sensitive information related to price, cost, and output among competing meat processors. (DOJ)
The European Union’s competition authority blocked online travel agency Booking.com from acquiring the Swedish firm Etraveli Group. (Barrons)
The European Commission issued a $400 million fine to Intel for abusing its dominance in the microprocessor market. (Associated Press)
Japanese antitrust regulators accused Google and Yahoo Japan Corp. of violating antitrust laws by using news content without remunerating publishers. (United Press International)
Italian antitrust regulators opened an investigation into budget airline Ryanair for preventing third-party travel agencies from accessing tickets on its site. (Reuters)
📈 VITAL STAT:
$300 Million
The amount paid by Edwards Lifesciences to cardiac rival Medtronic for a 15-year promise to not sue each other over patents related to structural heart devices. Such schemes, like pay-for-delay which stalls the market release of generics, are commonly used tactics by pharma companies to game the patent system. (Fierce Biotech)
📚 WHAT WE'RE READING:
Blood in the Machine – Los Angeles Times technology columnist Brian Merchant recasts the history of the Luddite movement. In his gripping new account, Merchant reveals that the Luddites were not simpletons or anti-technology zealots, as implied by the term’s modern usage, but a revolutionary organized movement that sought to ensure machines served the needs of factory workers, instead of factory owners. Merchant connects their plight and successful tactics to the battles raging over the modern world’s technology monopolies and the anxieties raised by the rapid adoption of artificial intelligence across broad swaths of the economy.
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