Perpetual Innovation

Category: sustainability

  • Delinkage and the Patent System for Pharma: Trouble Ahead?

    While the term “delinkage” has been around since at least 2005, it is not seen or heard very often.  It is the term used in the biomedical field by lawyers and politicians to mean a new way of funding drug R&D such that the patent system could be replaced with the result that a drug monopoly would not exist and drug prices would be significantly lower.  One of the advocates of this is Presidential candidate Bernie Sanders submitted the Medical Innovation Prize Fund as legislation in 2017 that would deny monopoly rights to pharma innovators and create a government fund.

    Delinkage is discussed in a Patent Strategy article Delinkage embraced innational elections as alternative to patents (ManagingIP, C. Kilpatrick, Nov. 14, 2019)  The article notes that in 2017 prescription drug spending was $334B and that US national healthcare spending was 17.9% of GDP.  That’s right, the US GDP, which is now at $20T devotes 18% toward healthcare! That’s approaching $4T when all healthcare from all sources are included! The high price of drugs is a big part of the escalation. Anecdotes and reports abound of grossly high prices for a drug and patients who go without needed medication because they cannot afford it.

    “We cannot control costs, reduce access barriers and protect and enhance innovation unless we change the way we finance biomedical R&D.  Delinkage is a radical and transformative approach to bring policy coherence to objectives regarding access, innovation and cost control.”  (Knowledge, Ecology International, Delinkage.org)

    The fact that this has been floating around since 2005 is proof positive that there is not a lot of momentum behind it.  Fundamental questions abound about how, how to, what if, where would the money to fund multiple projects over multiple years come from?  What if it doesn’t work?  Who pays?  What would the impact on the patent system — defined in the US Constitution — be?  There are international implications for patents so how would delinkage work globally?  What happens to the patent system if biomedical is carved out?  Is this a slippery slope, domino effect?
    At the risk of getting way out in front of our headlights, here is a possible middle road for consideration.  Keep the existing patent system as is or improved, allow the pharma company to obtain funding (much of it comes from the federal government anyway, including FDA, DARPA, Health and Human Services, etc.).  When the drug is approved for a market, the patent(s) is(are) treated like a Standards patents.  That is, it must be licensed to any and all, with a standard royalty rate, with all appropriate terms and conditions.  Multiple providers should result in reduced prices. 
    How do we control costs while protecting innovation? Delinkage might be a possible solution in Pharma.

    Non-Sustainable Healthcare Costs Revisited
    It is important to note the projection that Hall and Knab identified in a 2012 article related to healthcare costs in the US. Healthcare costs in the US had increased from 6% of GDP a few decades ago. Healthcare costs for several decades had increased by about 10% per year. During the Great Recession, this run-away healthcare costs has reduced to 4% or 5% per year, but still double or triple the rate of inflation. Some of the calming of combined healthcare costs can be attributed to many drug patents expiring, to the great recession, and to Obama Care (especially the early years of ACA).
    So, here is the trick question. If health care inflation rises back up to 10% per year, GDP growth is at 2.5% and general inflation is 2%, how many years before combined healthcare costs exceed the US GDP? Obviously, the out-of-control healthcare costs is not sustainable, but this question helps to put it all into focus. Answer: In the described case, it would take less than 24 years before healthcare costs exceeded the US GDP!.  For healthcare to increase to 50% of the US DGP would take only about 14 years.

    This out-of-control costs is horribly unacceptable. It is an unsustainable and compounding problem. Plus, the US spends more on healthcare (pre capita) than any other country, and generally has worse results!

    So, we are back to the question, what can be done here in addressing this problem? Ignoring the problem, and even adding to it, like the federal deficit, has an ugly way of coming back and biting us in the hinny.

    Maybe there’s something to the delinkage approach that can work for (almost) everyone and make a difference in bending the healthcare costs curve?

    Just to be clear, we at IPZine love innovation, we fully respect and believe in Intellectual Property, and we like capitalism – especially in places where it is sustainable and doesn’t create unmaintainable results.

    Delinkage has interesting possibilities.
    Reference
    Hall, E. B., & Knab, E. F. (2012, July). Social irresponsibility provides opportunity for the win-win-win of Sustainable Leadership. In C. A. Lentz (Ed.), The refractive thinker: Vol. 7. Social responsibility (pp. 197-220). Las Vegas, NV: The Refractive Thinker® Press. ISBN: 978-0-9840054-2-0

  • Sustainability at “the Costco”

    Costco wholesale club continues to impress. While many other retailers are struggling to stay alive and relevant, Costco keeps chugging along at a 7% sales growth and an impressive 36 Price/Earnings ratio (32 PE based on foretasted earnings), a PE ratio reserved for rapid growing tech companies not the single digit PE where most retailers find themselves. Investors like this safe, rather counter-cyclical, recession-resistant steady growth company(NASDAQ: COST). Note the huge 4.7 PEG rate (multiple of PE to 5-year growth rate) suggesting an over-priced stock. But the company itself is impressive. At $300 per share and a market cap of $132B Costco continues to push all time highs.

    Costco is also a big proponent of sustainability. In terms of paper and wood products (and the related requirements for their suppliers and Kirkland-branded products). Read about Sustainable forest products in November 2019 Costco Connection. As a wholesaler/retailer, Costco has to work through their supply chain, especially with the Kirkland-branded products. As it pertains to wood/paper/tissue, they are working through the certification organizations for trees, forest, etc.
    “We believe that the best first step is to source these products from
    responsibly managed and certified forests. To achieve this, we employ
    forest management certifications through three leading groups: the
    Forest Stewardship Council (FSC), the Sustainable Forestry Initiative
    (SFI) and the Programme for the Endorsement of Forest Certification
    (PEFC), with a preference for FSC. Products that have these
    certifications have met strict standards to support sustainable forests.”

    Costco continues to push for better, more sustainable products. You don’t have to go to the “organic” section of the store. Because of their buying power, you don’t have to pay the Whole Foods’ prices to get quality, organic foods. Each year, you find more and more shelves with the only options being “organic”, “sustainably sourced”, etc. You can spend less time reading the labels and more time packing your cart to the rafters!

    The consumer has a cost-benefit and consumer-responsibility consideration. Is the special trip to Costco worth the extra time, and is buying a 5-year supply of something — say toilet paper — really the right way to purchase. We often car-pool and share. We don’t need an entire box of printer paper, but dividing the box among 2 or 3 people works great. Kind of leaverage our buying power, while minimizing our footprint.

    One thing that you gotta love about Costco, Starbuck’s and other sustainably minded companies is their open statement about trying to figure it out together: “We do not have all of the answers, are learning as we go and seek continuous improvement.“

    [Costco’s] Sustainability Principles
    • For Costco to thrive, the world needs to thrive. We are committed to doing our part to help.
    • We focus on issues related to our business and to where we can contribute to real, results-driven positive impact.
    • We do not have all of the answers, are learning as we go and seek continuous improvement.
    [Costco’s] Sustainability Responsibilities
    • Take care of our employees.
    • Support the communities where our employees and members live and work.
    • Operate efficiently and in an environmentally responsible manner.
    • Strategically source our merchandise in a sustainable manner.

  • Sustainable Supply Chains: 75 including Ryder

    Here are 75 supply chain companies as compiled by Inbound Logistics that have significant commitment to efficiency and sustainability in their companies and in the supply chain. Shipping companies include major shipping companies: packaging (FedEx, DHL, UPS), cargo and trucking companies.

    Ryder Logistics has been honored with this distinction for 11 consecutive years. See here in business wire. Wow.

    Some of the Ryder efficiencies include EV and Fuel cell solutions for (client) trucks.  But a critical first step in shipping is the efficiency of routing and shipping. If a “better” route can reduce the truck and driver time by 10%, the savings are huge. Provide that savings to thousands of client fleets, and Ryder really makes a difference.

    Financially, doesn’t Ryder (R) stock seem rather cheap, even after a big run up to $59 this week. Forward PE is 9, PEG 0.63, Dividend Yield is almost 4%. The company has orders/contracts for years, even decades.  I guess that’s the impact of a little trade warring and economy slowing? Uncertainty can really whack out those companies in the middle of everything — especially shipping and logistics companies.

    Glad to have been associated with Ryder in the past.

  • Population is a killer for Global Warming. Good news, Kinda.

    The world’s out of control human population growth is something that few people want to talk about loudly because it sounds so very insensitive. But the increase in world population at nearly exponential levels is non-sustainable and multiplies all issues of sustainability: exhausting natural resources, pollution, etc. Estimates are that world population will grow to between 9m and 11m by mid century and then slowly decline.

    World Population Estimates
    Source: OurWorldInData
    The problem with increased population is a double whammy. Not only are there more people, but the footprint of each person should raise dramatically as more people enter the middle class (or higher). Countries like China and India that have burned only 2 barrels of oil per person annually, can be expected to move up their consumption to 4 or 5 times that, more in line with the USA. People that eat lower on the food chain, rice and corn, can be expect to start eating beef and pork which takes 20 to 30 times the resources to produce. 
    But, a new study, published in the Lancet, has found that fertility rates since 1950 have dropped faster and further than anyone expected. (See the BBC article by James Gallagher on this study.)
    The low fertility rates in developed countries means that their populations should start shrinking (without net immigration). In 1950 women had an average of 4.7 children in their lifetimes, a rate that is now half at 2.4! Fertility rates less than about 2.1 result in a decrease in population (excluding net immigration). Many of the developed countries, like the UK with 1.7, have less than 2. Japan has 1.3. With fewer young people to work, the aging retired population becomes a bigger and bigger burden on the economy. It will take decades for the change in fertility to work through the population levels. 
    Economic development has long looks at the use of population to improve the overall economy; more people could/should result in more things produces and a bigger economy. However, per capita economic development can be significantly improved by reducing the number of children. If the economy increases at 5%, but population also increases at 5%, then the per capita income remains the same. China reduced the rate of population growth, and that contributed dramatically to the improved per capita income and the rise of the middle class. I just saw stats talking about the percent of Chinese in extreme poverty at about 1950; more than 90% of the population lived in extreme poverty (currently a purchase-power-parity of $1.9 per day). By 2018, only about 1% of Chinese are in extreme poverty.  Controlling their population was a big contributor to China moving to surpass the USA in terms of economic power (GDP of more than $23T vs $19.5T for US). (Of course their single-child policies have caused many other problems and has recently been relaxed.) 
    China and India represent about 35.7% of the worlds population with 1.4B and 1.34B, respectively. China has stomped on the brakes for decades; India has only tapped on the brakes. China’s growth rate is only 0.39, while India’s is 1.2. US is 0.71 and Japan is -0.23.
    So, a big sustainability question, is first to stop the increase in population world-wide and regionally. But should sustainability initiative actually champion the reduction of world population. One way or another we need to get back to the carrying capacity of Mother Earth.  When you look at Earth over-shoot day, which has moved to August 1, it becomes graphically clear how much we are depleting the earths resources to live beyond our means. Stated differently, about 212 days into the year, we exhausted the renewable resources provided by the earth (and sun), so the resources consumed in the remaining 153 days of the year are depleting resources. In 1987, overshoot day was December 19th; in 2000, overshoot day was November 1.
    This is the same as your annual salary paying all your bills until August 1 (58% of the year), and then you have to borrow money to pay for the rest of the year. Each and every year, you have to borrow more because the overshoot day keeps moving earlier in the year. Non-sustainable issues like overshoot are cumulative, and compounding. Not only do you owe the cumulative total of all the borrowing, but the interest keeps growing at an expanding rate using the magic of compounding.
    We need to get our overshoots (and deficits) under control, and start to make the magic of compounding work for us, not against. Getting countries (and world) population growth under control is probably the most important factor in sustainability, and ultimately, the health and wellness of our plant. It’s pretty important, as well, for those things that have become accustomed to living on this planet.! 

  • Criminal Injustice: Is abnormal non-sustainable?

    We at SustainZine look for things that are abnormal, things that are so inefficient and clearly irresponsible that they should be categorized as non-sustainable. We think the Criminal Justice system in the USA qualifies and non-sustainable.

    Question, what is a “normal” rate of incarceration for you citizens? And if you are a way out-of-control outlier to the other developed countries, does this represent non-sustainability.
    That is, if you don’t put anyone in jail, are you leaving your citizens to be rampaged by mobs and vigilantes? If you have far more people in jail than any other developed country, is this non-sustainable. When does it fully represent a “broken” system of (in)justice.

    Our sister site ScenarioPlans.com (or DelphiPlan.com) talks about the US criminal system of incarceration. It is clearly broken, and totally not sane: More prisoners in US than any other country: Criminal (In)Justice Scenarios.

    Here is the first paragraph:

    The US has the most people incarcerated of any country in the world…
    Even though we only have 4.3% of the world’s population, we have more inmates —
    2.2 million — than China (1.5m) and India (0.3m), combined (36.4% of world
    population)! We have 23% of China’s population but 40% more incarcerated. We
    have almost 1% of our population (0.737%) incarcerated! We have 6 times higher
    incarceration rate than China, 12 times higher that Japan, and 24 times the
    rates in India and Nigeria. That’s right, an American has a 1,200% greater
    chance of being incarcerated than a Japanese citizen. We have even a 20% higher
    incarceration rate than Russia with 0.615% of their population in (Siberian)
    prisons and jails.

    Tell us what you think. Is this insane? Do we need to reform? What do you think could be rationally called a “sustainable” level of incarceration?