Archive for the ‘Ethics’ Category

Wall Street getting its way in Washington, D.C.  That’s been the theme of a series of financial disasters, including the $5 billion-plus trading loss disclosed by JPMorgan Chase in May. After that “embarrassing” episode (so described by "Lisa Gilbert"the company’s CEO Jamie Dimon when he testified before the Senate), the JPMorgan political action committee (PAC) suspended its political spending.

We wondered how long their embarrassment would last. Now we know: not long.

The JPMorgan PAC is once again writing checks – writing them to, among others, the same old cast of House Financial Services Committee members who have done their persistent best to both undermine the Volcker rule and block tighter derivatives regulation that would bring more transparency and accountability to the kind of deal-making that triggered the financial crisis. Of course, in strong form, the Volcker rule might have prevented the JPMorgan trading debacle.

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It will take some time to digest the Supreme Court’s decision today, but it appears to have averted some terrible jurisprudence that might have very seriously restricted the government’s overall ability to regulate the economy and protect citizens.

In upholding most of the Affordable Care Act, the Supreme Court lets stand legislation that offers some important benefits, but only to a portion of those who are uninsured, and will predictably fail to solve our nation’s health care crisis.

However the health reform law ultimately plays out, we know two things for certain: Tens of millions of Americans will remain uncovered as will tens of millions of under-insured who will remain at risk of financial ruin if a major illness strikes and it will leave the private health insurance and pharmaceutical industries in charge of prices and life-and-death treatment decisions.

There is a single solution to the challenges of providing coverage to the 50 million who are uninsured that would curb out-of-control health care costs and provide a humane standard of care to all who enter the medical system. That solution is an improved Medicare-for-All, single-payer system.

The improved Medicare-for-All approach starts with the premise that health care is a critically-needed right that must be afforded to all, irrespective of any individual’s ability to pay for care. It solves the problems of 50 million uninsured Americans simply and directly by establishing that everyone is covered by the improved Medicare-for-All system. Everybody in, nobody out.

Improved Medicare-for-All would prevent the deaths of the 45,000 Americans who die every year from lack of health insurance. It would eliminate the hundreds of thousands of medical bankruptcies — affecting millions of Americans every year — that occur because people can’t pay their medical bills. These deaths and economic tragedies are entirely preventable; a system that permits them to continue is morally repugnant and must be replaced.

The improved Medicare-for-All approach would eliminate the greatest waste in the health care system: the needless costs imposed by the private health insurers. These firms impose hundreds of billions of dollars of excess cost on us via their excessive profit-taking and executive compensation, their marketing expense, their vast bureaucracies devoted to denying care and their imposition of massive paper-pushing obligations on actual health care providers.

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Washington, D.C., hit near-record high temperatures on Wednesday. But that didn’t discourage more than a hundred dedicated activists from making the two-mile walk from Dupont Circle to the headquarters of Crossroads GPS, one of those outside groups spending millions of dollars to sway the elections. These brave souls were marching to demand that Crossroads co-founder and GOP strategist Karl Rove be held accountable for selling out our democracy to the highest bidder.

As we journeyed together through the streets of our nation’s capital, I heard people talking about lots of different issues—from jobs and retirement to health care and elections. Ultimately, however, most of their grievances boiled down to a single word: fairness. These folks were out in the scorching heat because they believe that American democracy is about every citizen having a voice in government. Not about how many dollars a person (real or corporate) can spend on TV and radio ads.

At our destination, all one had to do was look around to see what real democracy looks like. It’s not the small group of people who were upstairs in an air conditioned room, figuring out how to manipulate voters into favoring the candidates that corporations want in office.  Democracy is those who cared about their country enough to brave the heat for a chance to shout in the streets that people, not corporations, should have the power in our system.

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To JPMorgan shareholders who have witnessed a $25 billion drop in market value since the “London Whale” gambled away $2-plus billion: Look on the bright side. Think of this as a public service investment in sound financial policy education. As Congress continues with hearings on JPMorgan and CEO Jamie Dimon himself takes the stand tomorrow, many reforms now enjoy an urgent new argument. This expensive episode means we should act now on a number of reforms.

Implement a strong Volcker Rule
Banks shouldn’t gamble with a taxpayer backstop. This is why a strong Volcker Rule is needed. JPMorgan’s gambling partners allowed the bank to risk so much because they knew the U.S. taxpayer would make good on extraordinary losses. Within the details of the rule, JPMorgan’s ability to continue such betting in the future boils down to the interpretation of two words in the Wall Street reform law statute: “aggregate position.” The Senate authors explain that this means the bank can hedge a specific position, such as a single bond, which the bank purchased at various times, at various prices.  JPMorgan believes this means an entire portfolio, such as its ownership of 130 separate bonds. The Volcker Rule must be tightened, implemented and enforced.

Break up big banks
Failure of a bank JPMorgan’s size could cripple the economy. At some point, banks become too large to manage. Detail-focused CEO Jamie Dimon failed to catch what he subsequently called a “badly conceived” gamble.  Federal Reserve Bank presidents in Dallas and St Louis have called for a break-up.  Sen. Sherrod Brown (D-Ohio) introduced legislation recently to reduce bank size. The bill could even garner bipartisan support, as Sen. Richard Shelby (R-Ala.) voted for the same legislation two years ago, along with 32 other senators. In the House, Reps. Brad Miller (D-N.C.) and Keith Ellison (D-Minn.) introduced a parallel bill.

Increase bank capital
Even industry apologists who oppose reducing bank size and limiting risky activities agree that bank capital—what shareholders invest and lose when loans or gambles go bad—must be high. Fortunately, JPMorgan exceeded minimum capital standards, though many think mandatory levels should be doubled. Sen. Pat Toomey (R-Pa.) supports higher bank capital, a view he voiced at the both the May 22 and June 6 congressional hearings on the JPMorgan fiasco.

Reform banker compensation
The now-terminated chief investment officer earned 94 percent of her pay from “incentive compensation.” No wonder she swung for the fences, as Gary Gensler put it at the May 22 hearing. Gensler chairs the Commodity Futures Trading Commission, the primary financial gambling regulator. The Wall Street reform law specifically bars pay that promotes “inappropriate” risk-taking, but regulators are now more than a year late finalizing it.

Stop derivative deregulation
Wall Street shills, as Rep. John Tierney (D-Mass) labels some of his fellow members in the House, are moving nine bills. Of varying danger, one of them leaves offshore derivatives trading, such as JPMorgan’s London trades, free of basic regulation. Rep. Frank Lucas (R-Okla.), chairman of a key committee, cancelled a vote on two problem bills.

Bank officers should not oversee themselves
CEO Jamie Dimon sits on the New York Federal Reserve Bank, which supervises his bank. U.S. Sens. Barbara Boxer (D-Calif.) and Bernie Sanders (I-Vt.) introduced a bill May 22 that prevents active bankers from serving on the federal supervisory agencies. Massachusetts senatorial candidate Elizabeth Warren and former New York governor Eliot Spitzer think Dimon should step down from the New York Fed.

Good financial laws, unfortunately, require a disaster, such as the failed JPMorgan bet, or the 2008 crash, which has been an enormous cost to Main Street. That’s because of massive spending by Wall Street, which collectively spends $1.5 million a day lobbying. Let’s hope that the unintended investment by JPMorgan in reform advocacy secures substantial reform.

Co-authored by Anthony So, professor of the practice of public policy and global health, director, program on global health and technology access at Duke University

The World Health Organization’s Director-General recently warned of the growing challenge of antibiotic resistance in the starkest terms: “A post-antibiotic era means, in effect, an end to modern medicine as we know it. Things as common as strep throat or a child’s scratched knee could once again kill.” In the case of tuberculosis, many infections are already resistant to first-line therapy, and second-line therapy costs between 50 and 200 times more. For methicillin-resistant Staphylococcus aureus (MRSA), an antibiotic-resistant infection that claims more lives than AIDS in the U.S. each year, the costs of these infections to hospitals may reach as high as $4 billion annually.

Responding to this challenge, existing antibiotics must be conserved and novel antibiotics developed. To preserve the effectiveness of antibiotics for human use, Europe banned feeding antibiotics to livestock for growth promotion in 2006. In Denmark, where such use of antibiotics had been phased out more than a decade ago, drug-resistant pathogens in livestock are down while industry output is up. Yet a bill to restrict such use here — The Preservation of Antibiotics for Medical Treatment Act — languishes in the U.S. Congress.

Instead, the Generating Antibiotic Incentives Now, or GAIN, Act has piggybacked into the FDA bill reauthorizing user fees for drug approval. GAIN would provide five more years of monopoly protections for new antibiotics. Already receiving three to seven years of exclusivity, some antibiotics may receive up to 10 years of protection after market approval. This measure defies both the economics and biology of antibiotic resistance.

Resistance to an antibiotic increases as the drug is used more frequently, so the use of new antibiotics must be reserved for resistant infections. However, monopoly protections conflict with the need for preservation by encouraging companies to sell as much of the new drug as possible. Further, this incentive does little to defray the upfront costs of R&D but risks imposing a heavy cost on consumers, both here and abroad. Rationing antibiotics by monopoly pricing will not ensure appropriate use by doctors or patients. Lengthening the monopoly period will not lead to firms forfeiting today’s profit for preserving tomorrow’s antibiotic effectiveness. In fact, the same drug companies do not even reserve classes of antibiotics important for treating human disease from non-therapeutic use in growth promotion in animals. And there is no profit from drugs kept in reserve.

Multiple drugs used in combination are the mainstay of treatment for diseases like tuberculosis. Yet extended exclusivity may thwart the innovation and access to such combination therapy. Consider the lessons from Abbott’s hold over ritonavir, a drug that boosts the effectiveness of other HIV drugs used in combination. In 2003, Abbott hiked the price of ritonavir by 400 percent — except when used for its own combination product, Kaletra — placing other combination treatments relying on this booster drug at a market disadvantage. So does this incentive approach lead to GAIN — or just greed?

Worse yet, the bill fails to address the serious scientific bottlenecks in the pipeline. The customary approaches to identify novel drug candidates have produced dismal results. The experience of a leading drug company suggests that it would take 80 times the number of screens of potential drug compounds to yield one antibiotic launch compared to one drug launch in other therapeutic areas. Throwing just any incentives at antibiotic R&D is not going to work. The solution to the faltering antibiotic pipeline is not an extra dose of data exclusivity.

We need to get back to the basics — the 3Rs — sharing resources, risks and rewards. Greater public support for new models of R&D collaboration would help share resources and risks with the private sector. Bolstering such efforts, like those at NIH’s National Center for Advancing Translational Sciences, might help lower the barriers to bringing forward new antibiotics to clinical trials. One method of sharing rewards — offering prizes — could enable companies to recuperate their R&D investments without relying just on revenues from the quantity of antibiotics sold.

In these austere economic times, where might such monies come? Leading all sectors in defrauding the federal government under the False Claims Act, the pharmaceutical industry has paid $23 billion in settlements and fines to federal and state governments over the past two decades, some portion of which might have been directed to a foundation that would support innovation and access to such life-saving medicines.

The failure to find suitable incentives reflects a poverty of policy imagination. The greatest cost, though, may be the complacency that comes with believing that Congress addressed antibiotic resistance with this measure. Even with the GAIN Act’s passage, this public health challenge will still remain: Tomorrow’s infections will not be cured with this expensive placebo.

For more by Robert Weissman, click here.

For more by Anthony So, click here.

For more health news, click here.

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