For profit drug and medical supply companies are geared to maximize profits

This topic is not a new one and is one I first wrote of several years ago. The concern is the number of for-profit companies who make drugs and medical supplies are not geared toward fighting pandemic or new bacterial strains that keep cropping up. They are geared toward profit. What do I mean by this?

Think of all of the television commercials about new prescription drugs. It will not be hard as there is a growing number with new names that make you ask, now what does this do? Quite simply, a drug company makes more money creating a maintenance drug you take every day for the rest of your life than they do making cures for major diseases.

It is not unusual for the company to codify a new illness which is neatly packaged with this new pill. Or, the new pill may be a supplement to an existing drug to make it better or address the side effects. Did you know there is an anti-constipation drug that is sold to help alleviate the constipation caused by opioid painkillers? Please note this is not intended to slight anyone who is gaining benefit from one of these drugs.

Making a drug that will cure something, simply has a low or negative ROI. One reason is the company would look poor if they charge to high a price for a cure. This is where the CDC and NIH must garner funding to pay for the development of drugs before the pandemic catches fire. The other risk is the new bacterial strains that may develop beyond our ability to fight the strain. This is where I first learned of the funding deficiency for massive exposure problems.

The same can be said of medical equipment. The New York Times has a good piece on the recent history of ventilator production. Agreements have been made then voided by acquisitive companies. These acquisitions were either to protect a higher priced ventilator or a market share. So, there were a number of false starts. What is frustrating is how easily contracts can be voided after an acquisition. This is horribly unfair to the buyer of the service or product, especially when the contract could help many.

There are a couple of larger points to be made. This is a great example of where there needs to be a blend of financial responsibility on investment for the greater good. This is not new. Our country has a history of a blend of corporate, venture capital, private and government investment. This is a key theme of Pulitzer Prize winning author Thomas Friedman’s book “That Used to be Us: How America fell behind in the world it created and how it can come back.”

Per another economic advisor, David Smick (“The World is Curved”) who advised Republican and Democrat presidents, this blend of capital investment need not occur on every investment or in some set order. Sometimes government funding leads and sometimes it may trail. The point is we have way to many either/ or arguments when the right answer is a blend of both or multiple. This is known as the “tyranny of the or.” Our history is built on the blend of capital investment, especially for large infrastructure projects.

So, greater good investments need to be evaluated as soon as possible. When the risk is identified, that is when the spend is needed, if not before given what the challenge is. Not having a COVID-19 vaccine early on is one thing that should have been addressed a few months ago given the development time. Not having enough ventilators is something that should have been addressed well before given their need. Leaving certain things to solely a for-profit lens will mean that some needed investments may not get made or not made soon enough.

Two misconceptions need to be challenged

“Innovation is portable,” said David Smick, an economic advisor to Congressman Jack Kemp and Presidents Ronald Reagan and Bill Clinton, in his book “The World is Curved.” In essence, innovation will occur where it is welcome and the initial jobs will be created around it. We should not lose sight of this observation as we discuss our economic future.

Smick surprised many when he noted in his book the similarities in Bill Clinton and Ronald Reagan, who were the number one and three best job creating Presidents, in that order. They both loved global trade and hated deficits. And, they were known for their collaboration with Congress, even with an opposite majority in power. Collaboration is essential to getting buy-in and understanding of the problem and possible solutions.

With this context, we need to challenge some notions that do not tell the whole story and, as a result, could lead us down the wrong path. We need to look at holistic causes to problems, so that we can address them effectively. Our problems are not solvable by bumper sticker solutions, no matter how loudly and forcefully they are espoused.

Here are two of those simplistic notions and challenges to think about:

Immigration is taking jobs away. This is far too simple a statement. Our history has been built on immigration, who have tended to be hard workers and spawned a higher relative percentage of entrepreneurs. As noted in the famous play “Hamilton,” by Lin-Manuel Miranda based on the book by Ron Chernow, immigrants tend to work hard to make it in our country, as they did not have such opportunity from whence they came. Our economy actually flourishes more with immigration. But, as we look to better govern immigration, we should look at the whole picture. And, on the subject of illegal immigration, a concerted study of the impact of curtailing such on certain industries – housing construction, landscaping, agriculture harvesting, etc. – is critical as we move forward with better governance.

Global Trade is bad for domestic jobs. Global trade is actual good for a domestic economy creating more jobs around the world and here. The downside is companies tend to chase cheaper labor and always have, but an even greater threat to jobs is technology advances. A CFO said in the book “The Rich and the Rest of Us,” an employer will hire no one if he could make it work. Yet, what creates jobs more than anything else is “customers,” per Nick Hanauer, a venture capitalist. And, more trade means more customers. When we look to better govern trade, we need to look holistically at the jobs created domestically versus the ones lost. The ill-fated Brexit decision failed to consider all of the foreign companies who have European Headquarters, distribution and manufacturing sites in the UK. These companies are now reconsidering locations should Brexit move forward.

Of course, we need to better govern immigration and global trade, but we must guard against throwing the babies out with the bath water. Let me close with three thoughts.

First, we cannot shrink to greatness. Retrenching from your global market share makes little sense.  Second, think of all of the foreign companies who employ people in the US like Michelin, BMW, Mercedes, Husqvarna, Doosan, Volvo, Nissan, etc. who do so to keep manufacturing near distribution of its goods to their customers. Third, as an example, Steve Jobs is the biological son of Syrian immigrants. Had he not been in America, would Apple exist today at all or as an American company?

We cannot govern off bumper stickers. Our issues are complex. People who tout such ideas are doing a disservice to the problem and citizens through false promises.

 

 

While US ponders bathrooms, we are missing a larger picture

David Smick, the author of “The World is Curved” and former economic advisor to Ronald Reagan, Jack Kemp and Bill Clinton, notes that “innovation is portable.” His attention getting comment is if we don’t grease the skids like we have in the past, innovation will occur elsewhere. And, where innovation occurs, the initial manufacturing will be there as well.

On this D-Day anniversary, an interesting article appears which should make our leaders stand up and take notice around this concept of innovation. In essence, this article called “7 Reasons why European Cities are going to beat US Cities as Hubs for Innovation,” says America needs to not forget what made us great and start improving what we do in cities to attract, retain and reward innovators.

To be frank, we also need to stop spending our time debating issues that matter little in day-to-day matters and start focusing on major initiatives that will move this country forward such as addressing the new technologies, investing in hubs of growth, retraining workers and training students, and investing in our infrastructure and environment. Debating where folks go to the bathroom and discriminating against people is not where we should be spending our time. This is small minded and unconstitutional. It also hamstrings financial growth and innovation.

Rather than repeat this article, let me merely list the seven reasons and encourage you to click on the link below. Relative to the US:

  1. Europe has better designed cities
  2. Europe has more smart cities
  3. Europe has more rapid adoption of soft infrastructure for entrepreneurship
  4. Europe has better safety nets and less inequality
  5. US has lost its leadership in key benchmarks of innovation
  6. US has more venture capital, but it matters less with other sources
  7. Europe makes it easier to be an entrepreneur

The US has a tremendous university system which draws people from all over, but access to those systems may not require people to move here as much as they did with online learning. Also, when they do come, we need to make sure we keep talented people here and not build actual and figurative walls around our country – I worry more about the figurative ones than actual ones.

We have pockets of success, but unless we focus more on this and less on issues of little import, we will miss an opportunity to invest in keeping America competitive. In our favor is a freer, more mixed society which provides all genders, races, ethnic groups, sexual preferences, etc. opportunity. Leaders of companies should know that you never know where innovation will come from, so you better make the communication avenues available to all people.

Let me close with an easy example. Before he died, Steve Jobs designed Apple’s new headquarters. He purposefully placed small meeting rooms with white boards and technology access along the paths to the restrooms and breakrooms. Why? So, that when people bumped into each other and discovered what each was working on, they could easily pop in a room to share ideas. That is precisely how we should design our hubs of innovation. If we do not, we will fall behind.

http://www.fastcoexist.com/3060446/world-changing-ideas/7-reasons-why-european-cities-are-going-to-beat-us-cities-as-hubs-for-i?utm_source=mailchimp&utm_medium=email&utm_campaign=coexist-daily&position=1&partner=newsletter&campaign_date=06062016

 

Innovation is portable (and attractive)

Innovation is portable. This is a quote from David Smick’s book “The World is Curved.” Who is David Smick, you may be asking? He was an economic advisor to Congressman Jack Kemp, President Ronald Reagan and President Bill Clinton, two Republicans and a Democrat. His comment is telling in that he notes if we do not do our best to keep the innovators here, they will go elsewhere. And, when they go elsewhere, manufacturing from the innovation will be based elsewhere.

The US has the world’s best college and university system and it draws people from around the globe and country. So, we should grease the skids to make it easier for them to stay and innovate here post graduation. It would be a shame for the idea creation to start here and migrate to another country. As that will be where the job creation begins.

So, what do we need to do about it? We need to make sure our immigration laws are improved to make it easier to keep talent. Industry has been crying out for this, yet it is held hostage by a political gamesmanship to speak to a strident base. We need to reform our patent laws to make sure “patent trolls” do not interfere and sabotage the innovators. These trolls are extortionists who will use a key word or phrase in an idea by someone else to state that someone is violating a patent they filed (with no product or development behind it). What the troll wants is “go away money” without a court case.

We need to understand the historical marriage and timing of venture capital, government funding and other investor capital. Our nation has been forged on the interplay between these funding sources, as they are needed to perpetuate ideas and implement the initial manufacturing effort. The money is needed at various times in the process, with the government money sometimes in advance of the venture capital, sometimes in tandem with the venture capital and sometimes following it. The need varies based on the what is needed to get stuff off the ground.

There are numerous examples of joint investment. I spoke of one last night about an offshore wind turbine testing facility in Charleston, South Carolina. It is a joint venture between folks like GE and Siemens who make turbines, Clemson University, the City of Charleston, the US Department of Energy and the SC Department of Energy (although it may have a different name). The idea is to improve the efficacy of these offshore wind turbines making them more economical to use here in the states, as they are done elsewhere.

Another good example in Durham, North Carolina is a company called Semprius, which makes the most elegant solar photo-voltaic panel in the world, where 33% of the sun’s energy is convertible to electricity, a huge leap forward. This is a joint venture between Pratt-Whitney Rocketdyne, Siemens and the US Department of Energy. With solar energy taking off everywhere, but especially in North Carolina with about 23,000 jobs which have been growing at a 25% annual rate the last three years, it shows what innovation means to an area. Nationally, at year-end 2014, there are 174,000 solar jobs which have been growing at a double-digit rate over the last five years per annum.

It should be obvious that I picked two renewable energy examples, as these two sources not only have to be a key part of our future energy mix, but they have and will promote jobs as a result. And, not only is innovation portable – it is attractive to new business. So, this is where we need to fund more of our resources. It is good for our environment and it is good for business. And, per Pope Francis’ encyclical on climate change which is on point, it is good for God’s creation. Given that the Pope is also a trained scientist with a Masters in Chemistry, as well as a humanitarian, I think the world should listen to what he has to say on these issues. Especially, since he is echoing the findings of so many scientific bodies and panels.