Antitrust Antitrust Antitrust Bring Back Antitrust

November 29, 2015 8:07 AM

After 18 years in operation, after a federal law mandating that hospitals work to prevent needle-stick, and after two successful lawsuits resulting in BD paying more than $400 million for violating anti-monopoly statutes, Retractable Technologies made only $34 million in global sales last year. BD, with an inferior, more expensive product, sold $8.4 billion, the payouts to its competitor serving only as the cost of doing business. In 2000, the Centers for Disease Control estimated 380,000 needle-sticks at hospitals every year. Today, they estimate 385,000. “You turn on the TV and watch politicians talk about unleashing the power of the free market, that’s absurd,” Shaw says. “The American public is being denied a free market, being denied competition.”

We need a new antitrust for a new predatory era.
posted by ennui.bz (27 comments total)

The vendors actually pay all the GPO’s administrative costs, as long as the hospitals buy entirely from the narrow group of vendors. Shaw discovered that BD had contracts through GPOs with a “90/10” requirement. If a hospital bought 100 syringes from BD last year, they had to buy 90 the next year to qualify for the discount. If the hospital failed to purchase 90 percent, they would lose the discounts and pay a penalty, a cost of millions of dollars. This contractual obligation fortified the monopoly.

BD paying the hospital's administrative costs is equivalent to charging less for their needles. Shaw's VanishPoint does not beat BD's product on a typical metric—they're not cheaper to manufacture or longer-lasting or easier to use or anything like that—but they do help reduce needle-stick incidents. But needle-sticks, like long-term effects of pollution or addiction, are an externality that the price does not account for.

Before using the hammer of anti-trust law to break BD apart, I wonder what a more focused regulation could achieve: tax non-vanishing needles enough to pay for health care for the statistical X% of people who are harmed by them. That way VanishPoint's safety will make it cheaper and lead to more sales.

(But if someone designs a super-expensive platinum-and-diamond needle that somehow doesn't stick people, it won't have a market, because its cost outweighs its benefit even after the tax. Which is the whole point of taxing bad things at a certain rate, instead of banning them entirely.)
posted by Rangi at 8:40 AM on November 29, 2015 [11 favorites]

Freedom is slavery, war is peace, monopolies are free-market solutions.
posted by entropicamericana at 8:47 AM on November 29, 2015 [11 favorites]

This sounds plausible. It's especially plausible that competition enforcement in the US has gotten too weak. It certainly seems to have gotten weaker.

But any time I see an article that's clearly in the tank for some private company, and taking shots at the competition, I become suspicious.

I actually initially thought the Prospect was the publishing arm of a DC think tank, which made me extra suspicious -- those outfits don't always separate editorial from political directives, and a company that is shamed could be one that didn't pay protection money this cycle.

But the magazine is in fact independent as far as I can tell. Having confirmed that I was wrong about the thinktank affiliation, I am more sanguine about the article overall. I guess I'll just leave this comment in case anyone has a similar line of reasoning.
posted by grobstein at 8:48 AM on November 29, 2015 [3 favorites]

I was skeptical of the utility of this retractable syringe needle, having worked with several awful "safety" needle models in the hospital as a nurse. But I just watched the "very short animated video" on VanishPoint's website and the product looks fantastic. Loads better than anything BD has come up with.

As the article states, the various safeguards that BD has added to their syringes only increase the risk of needle-stick injury by requiring more messing around with the used needle. And it's true, BD has absolutely managed to build skepticism around safe needle technology by distributing these counterproductive "safety" syringes.

After reading the article, and knowing what a mess our intellectual property law is in this country, I'm surprised BD hasn't just infringed on VanishPoint's patent and assumed the fines as a cost of doing business. But I guess they don't need to offer the best or the safest syringe to keep their stranglehold on the market.

As someone who has been through a needlestick injury, this is really upsetting.
posted by vytae at 8:55 AM on November 29, 2015 [10 favorites]

Part of the problem is that people see the word "efficient" and assume out equates with "good." They don't ask the follow up question, efficient for what purpose?

Having two companies rather than one may be less efficient in the sense that there are two people doing equivalent jobs where there could be one, but it also means that there are two people employed, where there also might only be one.

As has been frequently shown, monopolies have no incentive to innovate. Contrast that with the extremely inefficient process of evolution, which has been incredibly innovative in creating and adapting new forms.
posted by CheeseDigestsAll at 9:28 AM on November 29, 2015 [4 favorites]

I'd say the main issue with using regulation and taxes to shape the market rather than forcing greater competition into the market is one of those strategies is very susceptible to lobbying.
posted by Mr.Encyclopedia at 9:37 AM on November 29, 2015 [3 favorites]

US antitrust law is Borked.
posted by grumpybear69 at 9:55 AM on November 29, 2015 [6 favorites]

I'm surprised BD hasn't just infringed on VanishPoint's patent and assumed the fines as a cost of doing business.

Willful infringement can bring enhanced damages of up to 3x a reasonable royalty or the patentee's lost profits. That makes it much harder to justify as the cost of doing business. Or the court might even grant an injunction, although BD could try to make the argument that having two manufacturers of safer needles was in the public interest.
posted by jedicus at 10:03 AM on November 29, 2015 [1 favorite]

The point in time at which enough data has emerged to show that "deregulation" and unfettered "free" markets cause substantial problems has loooooong since passed. And not by way of oversight or more pressing problems. The FTC was made to stand down, and standing up isn't nearly enough to be offset remedy.

So now the fat-cat cash cows, faced with re-regulation (at long last) will begin the process of stalling for another decade or so to continue gathering every last drop of ill gotten gains, and the law firms will get rich stalling and their fees will get passed on to the consumer.

You're expecting relief from the FTC, the agency that can't even enforce the agreed upon provisions in their pricey white-shoe-litigated orders agreements and settlements.
(e.g. cart cable channel selection/no cost unscrambled basic channels)

It will take nothing less than corporate reparations to undo the damage from the last 30 years of looting if not outright economic pillaging.

And how likely is that?
posted by Fupped Duck at 10:11 AM on November 29, 2015 [3 favorites]

Anti-trust is yet another of Obama's failures to regulate the financial industry. He can't blame this on Congress. Obama runs the Justice Department and the SEC.
posted by JackFlash at 10:40 AM on November 29, 2015 [7 favorites]

Needlestick injury primarily affects the health care workers. So, hospitals putting costs before worker safety is a huge part of the problem. Don't the workers have unions to take this up on their behalf?
posted by asra at 10:44 AM on November 29, 2015

> Don't the workers have unions to take this up on their behalf?

In 2015, unions are a pale shadow of their former selves. While they are still surprisingly useful for individual disputes, they simply have no power to effect or even push towards change on that sort of scale.
posted by lupus_yonderboy at 10:48 AM on November 29, 2015 [7 favorites]

BD paying the hospital's administrative costs is equivalent to charging less for their needles.

I can't believe you're rationalizing this. The administrative operations of a procurement organization should be firewalled away from vendors as much as possible. The situation described is corrupt.
posted by sevenyearlurk at 11:35 AM on November 29, 2015 [6 favorites]

Anti-trust is yet another of Obama's failures to regulate the financial industry. He can't blame this on Congress. Obama runs the Justice Department and the SEC.

It's only a failure if you try.... His presidential library, charitable foundation donations, and paid-speech-circuit fees will be tremendous though.

But there is a real failure to make technical issues like "antitrust" part of public politics. And the thing about it is that the issues really don't break down right/left, but corrupt/not corrupt.
posted by ennui.bz at 11:47 AM on November 29, 2015 [11 favorites]

I actually work in the contracts department of a large medical device manufacturing company. Dealing with the GPO's and their contracts is my job, it's basically the only thing I do. The amount of things wrong with this article is staggering. I'm not even sure how much I can say though, would it make sense? Would it jeopardize my job? ......f**k it.....

The GPOs don't have as much power (currently) as the article seems to state. Sure, there are contracts. But suppliers want to sell their products more than anything else. Have a huge multi-hospital system come to you and say "We're releasing an RFP on products X, Y, and Z. If you want to be able to continue selling to us, you'll have to bid in that process."

Attempting to point out to this system that they're already members of GPO BlahTrust, they honestly don't give a crap. We've had hospital purchasing directors tell us to the effect "We just use those prices as starting points."

And good luck actually getting anyone to stick to those compliance numbers. Supposed to purchase 90% of your product, but only purchased 50% last year? Go ahead, try to knock them off the best tier of pricing they were getting, I dare you. Wait for the shitstorm to follow from the Hospital, and our sales force cave and give them the best pricing with no guarantee of commitment.

The GPO's aren't the problem. The Hospital systems buying each other up are the problem. I keep joking with my coworkers that within a decade or so there will only be 4-6 actual Medical Systems left, each with their own part of the country staked out: Kaiser on the West Coast, Banner or perhaps Tenet in the lower middle, GNYHA or Yankee Alliance in the upper East Coast....it's insane.

Oh god, I could keep going and going, but I have a Team meeting for school I have to log into now, and this is actually making me upset.
posted by sharp pointy objects at 11:58 AM on November 29, 2015 [17 favorites]

well, when you have a duopoly of political organizations, is it any surprise that real choice is one of the things our government is not going to enforce?
posted by pyramid termite at 12:38 PM on November 29, 2015 [1 favorite]

Speaking as a guy with many relatives in healthcare, I can attest that employee safety is close to the very bottom of any health provider's priority queue.

rangi, could you explain why you see using antitrust law to break up big companies as a bad thing to be avoided? Because to me it seems like a positive benefit and the only reason I can imagine that the government isnt aggressively looking for companies to break up is pure corruption. From my POV money and power tend to congregate, so one of the prime jobs of government should be to break up such conglomerations of money and power just to keep society and the economy from getting clogged up.

Clearly you see it differently and I wonder if you'd be willing to explain why?
posted by sotonohito at 1:20 PM on November 29, 2015 [1 favorite]

There is a nice Krugman essay about monopoly in the context of inequality that explains some of the theoretical issues.
posted by grobstein at 1:39 PM on November 29, 2015 [3 favorites]

But how much does that matter? Milton Friedman, in a deeply influential 1953 essay, argued that monopoly mattered only to the extent that actual market behavior differed from the predictions of simple supply-and-demand analysis—and that in fact there was little evidence that monopoly had important effects.3 Friedman’s view largely prevailed within the economics profession, and de facto in the wider political discussion. While monopoly never vanished from the textbooks, and antitrust laws remained part of the policy arsenal, both have faded in influence since the 1950s.

It’s increasingly clear, however, that this was both an intellectual and a policy error. There’s growing evidence that market power does indeed have large implications for economic behavior—and that the failure to pursue antitrust regulation vigorously has been a major reason for the disturbing trends in the economy.

posted by grobstein at 1:41 PM on November 29, 2015 [5 favorites]

Wow. I remember going to a walk-in clinic, and when I told the Dr I worked in "safety, sort of" he gave me a 30-minute presentation about his new self-securing needle thingy, including a rant about how there's a huge market out there but NOBODY WILL LISTEN TO ME!!

I guess he was right.
posted by sneebler at 7:13 PM on November 29, 2015 [2 favorites]

Seconding item- BD syringes suck. Terumo FTW! I ummm know this because.. reasons.
posted by Philby at 10:38 PM on November 29, 2015

The administrative operations of a procurement organization should be firewalled away from vendors as much as possible. The situation described is corrupt.

I agree with you, but I also think it is routine. The Procurement department at the University of Toronto had a big push about 10 years ago, the goal was to have the department fully funded by rebates from preferred vendors.
posted by Chuckles at 12:41 AM on November 30, 2015 [2 favorites]

That's interesting -- I wonder if it still operates the same way. Ten years ago was still kind of the 'wild west' for public sector procurement in Ontario; controls got a lot tighter after the 'ehealth scandal' in 2009. The implementation guidelines [PDF] for the resulting public sector procurement directive note that "When not properly managed, requesting and/or evaluating value-add incentives may increase the level of risk within the procurement process and result in bid disputes."
posted by sevenyearlurk at 7:33 AM on November 30, 2015

“There are a lot of invisible hands, most of them are in our pockets,” Shaw says.

Great quote; applies to many libertarian ideas. Interesting to see Robert Bork brought up in the article. It seems there is a relatively small group of conservatives whose demonstrably bad ideas end up shaping our government policy over and over again, no matter how "liberal" the politicians running the show are.
posted by TedW at 9:38 AM on November 30, 2015 [1 favorite]

As I spent months inspecting many thousands of BD-manufactured needles through lighted magnifying lenses, I never learned why my employer wasn't using a different needle supplier with a lower defect rate. Now I know.
posted by asperity at 10:09 AM on November 30, 2015 [2 favorites]

Thank you Item and Philby for bringing up non-clinic/hospital based syringe use. This is a vital public and individual heath issue as well, and another argument for why a safer syringe needs to be in wider circulation.
posted by latkes at 11:38 AM on November 30, 2015

I'm surprised BD hasn't just infringed on VanishPoint's patent and assumed the fines as a cost of doing business.

They probably would have if it wasn't for the fact that VPs needles require a different manufacturing process that would end up costing them more. If they were doing that, at least the free market wouldn't be failing to put a better product in the hands of consumers.
posted by Edgewise at 1:48 PM on November 30, 2015