Convergences

FTC & Intel: Disco Isn't Dead

The Federal Trade Commission has filed a complaint against Intel charging it with maintaining a monopoly in computer Central Processing Units (CPUs) and trying to obtain a monopoly in Graphics Processing Units (GPUs).

A couple of points are immediately interesting.

One is that Intel is charged with bullying some of the world's most sophisticated tech companies into acting against their own long-term interest, a proposition that seems unlikely.

Second - the Commission relies primarily on Section 5 of the FTC Act, which gives it power over vague "unfair" acts or practices and "unfair" methods of competition, divorced from the doctrinal limits of the Sherman and Clayton Acts. Antitrust law as a whole is a mess; "unfairness" is a mess on stilts. 

In the 1970s, the Commission was burned when it tried to push too aggressively the authority over unfairness given it by the S&H case in 1972. The agency pulled back to more sensible limits after 1980, but now -- Disco is not dead!  Tom Rosch, who is now a Commissioner, was head of the Bureau of Consumer Protection during the 1970s, and was perhaps the most prominent proponent of the  attaque à outrance, so he may be motivated by the spirit of revanchism.  

Several decades ago, when I was an Assistant Director in the FTC, and during the sobering up process, I was part of a group that considered how to put some meaning and limits into the agency's unfairness powers. I do not recall that we got very far, though there were some papers and reports, copies of which reside in boxes in my basement.  Reading the FTC documents on the Intel matter is true deja vu.

Here is the standard by which Intel will be judged, per the Supreme Court:

Thus, legislative and judicial authorities alike convince us that the Federal Trade Commission does not arrogate excessive power to itself if, in measuring a practice against the elusive, but congressionally mandated standard of fairness, it, like a court of equity, considers public values beyond simply those enshrined in the letter or encompassed in the spirit of the antitrust laws.

Biotech & Data

FierceBiotech says that the Health Care Reform draft includes a 12-year data exclusivity provision for biosimilars, thus following the Senate, and dealing a loss to Henry Waxman.

However, passage of Health Care Reform in the near future seems improbable, so the data exclusivity issue will still be open. The House Health Committee is solidly in favor of the longer period, though.

Also, FB's John Carroll notes:

At some point, rising costs may force lawmakers to actually get tough with drugmakers, and that would have an effect on biotech--the de facto R&D arm of the global drug industry. So far along, the industry has managed to dodge a bullet. But something tells me that the war over drug prices won't be ended by this reform bill.

Bleeding Biotech

At The American, a new article Bleeding Biotech, arguing for better protection of intellectual property in data. I frame the question as

In the end, we will never be able to arrive at agreement on the perfect period for data protection for biological research. There is still no agreement on the proper period for patent protection, and that system has been around for hundreds of years. A 20-year period was picked for patents, and it seems to work well enough, so the failure to achieve perfection is not of great concern.

With regard to biotechnology and data exclusivity, we are and will remain similarly ignorant. So the question is actually quite simple: what are the costs of error in each direction?

The answer is that the costs of too much protection are low, or non-existent; the costs of too little are very high. Which should make the decision easy.

In re Bilski: Business methods, software patents, and beyond.

The deadline for filing amicus briefs in support of the Federal Circuit's attempt to trim back business method patents in Bilski passed on October 2. Many briefs have been filed, and much fuss has been made in the tech community, for business method patents are linked to the problem of software patents. Many software patents, such as Amazon's 1-click order patent, are for business methods.

If the courts ultimately trim back business method patents, will this take some of the software-patent-related pressure off both tech and the patent system? Not as much as many in the tech community or the patent community would hope, for reasons I examine below. Patent reform is now being driven by business constituencies, and these constituencies are not good at all at working on big picture institutional problems. There, in short, is a not-seeing-forest-for trees problem.

State of Biotech

To the extent that the health care debate thinks about biotech, the focus is on how quickly generics can be introduced so as to cut immediate costs.

Back in the real world, investors seem dubious about the industry. Xconomy is running a series and concluded:  "Luke did a massive analysis of the financial health of all the public biotech companies we follow the Boston area and the news… Well, it wasn’t good." The situation:

Even though jobs have been cut, drug candidates have been shelved, and some last-ditch partnerships have been struck, all that frenzied activity didn’t really add up to a strengthened financial future for a majority of the region’s money-losing companies. The cash crunch has prompted a couple of Massachusetts companies to fold this year . . .  a couple more to sell out for a pittance . . .  and one company that actually improved its financial position to move to Wisconsin . . . .

Rather than worrying about sharing the wealth, the political system should be worrying more about how to produce the wealth in the first place. The Xconomy report is not exactly a harbinger of Spring.

Health Care & Innovation

Anything written by Reason science correspondence Ronald Bailey is worth reading, and his "Does High-Tech Medicine Mean Higher Health Care Costs?" is no exception.

He analyzes a new study by economist Frank Lichtenberg published by the NBER and finds that the answer is "no." 

FIrst of all:  "[L]ife expectancy increased faster in states that more rapidly adopted advanced diagnostic imaging techniques, newer drugs, and attracted an increasing proportion of doctors from top medical schools." But: there was no correlation between increases in spending on high-tech and new drugs and increases in per capital health care expenditures.

Lichtenberg's tentative explanation is that "while newer diagnostic procedures and drugs are more expensive than their older counterparts, they may reduce the need for costly additional medical treatment."

Bailey's translation:  "In other words, high-tech medicine may initially cost more, but it reduces spending in the long run, while increasing the life expectancies of patients."

So contrary to the fashionable CW, innovation in pharmaceuticals and devices is a remedy for the cost inflation, not a cause.

P.S. Shrinkwrapped also likes Bailey's article, and adds:

[K]eep in mind that every government run healthcare system treats innovations as expenses to be minimized rather than as opportunities to enhance life.  This is inevitable and one of my major reasons for opposing the current plans for fundamental reform in how we finance our healthcare.

I concur - see Saving the Goose: Intellectual Property and Follow-On Biologics (FOB) (pp.13-14).

The New Innovation

Bill Frezza of Adams Capital writes on Uncle Sam Takes Over the VC Business. It is not a cheery piece:

The discipline of venture financing and the winnowing process of early stage failure are being skipped as politically favored projects go directly to large scale project financing. New constituencies whose survival depends on the uninterrupted flow of federal largess are sprouting up like weeds, funneling a percentage of that money back to the Congressmen who keep the whole thing going. The antiquated theory that in order for a business or industry to be sustainable it must create more wealth than it consumes is being discarded in favor of the belief that if you fervently hope for something good to come true, then it will.

Read the whole thing -- several times.