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Lumley on the Alzheimer’s drug approval

Last week we discussed the FDA’s controversial approval of a new Alzheimer’s drug. Here’s more on the topic from statistician Thomas Lumley, who knows more about all of this than I do:

[Cautious optimism is] a very sensible attitude, in the abstract: if the drug turns out to be effective it could be valuable, but it’s too early to know if that will be the case. What’s surprising is that this is the situation we’re in after the drug has been approved, and when its manufacturer is planning to charge US$56000/year for it.

The drug (or, technically, the ‘biologic’ since it’s an antibody) has been through a lot of ups and downs in its clinical trial history. There were two main trials that were supposed to show it was effective. They failed. A re-analysis of one of them suggested that it might actually work, at least for some patients. Normally, this would be the cue to do a confirmatory trial to see if it does actually help an identifiable group of people. And the FDA did mandate this trial — but they will let the manufacturer sell and promote the medication for nine years while the trial goes on. Given that the the market for aducanumab is conservatively estimated at tens of millions of dollars per day, and there’s only a possible downside to getting trial results, the trial is unlikely to end a day sooner than it has to; it’s not unheard of for these post-approval trials to just never recruit enough participants and drag on longer than ‘allowed’.

The FDA takes external expert advice on drug approvals. In this case, there were 11 people on the panel. Exactly none of them thought there was good enough evidence for approval; one was uncertain, ten were against. Three of the panel members have since resigned. It’s not unprecedented for the FDA to disagree with the panel when the panel vote is split, but it’s pretty bloody unusual for them to disagree with a unanimous panel. It’s notable that the FDA approval does not say they think there’s evidence drug improves memory or cognition or ability to live independently or anything like that . . .

I saw the link from Joseph Delaney, who adds some thoughts of his own.

63 Comments

  1. oncodoc says:

    Lifestyle choices improve cognitive decline.
    https://pubmed.ncbi.nlm.nih.gov/32780691/
    Please send me $56,000 for this efficacious, low toxicity intervention.

    • muddles says:

      “Lifestyle choices improve cognitive decline.”

      Yeah, sure, and eating less causes weight loss! Doctors…always on with the old home remedy methods. Thank goodness public health officials don’t buy into this “old home” stuff. What would we do with all those biotech PhDs? *somebody* has to pay for their education!

    • Exactly. BTW, you might like Marty Makary’s The Price We Pay. Many useful nuggets for negotiating the health insurance market and billing practices. The book is an eye-opener. Two chapters are especially tantalizing: Carlsbad and Disruption.

  2. In some ways this would be a good event if it made the scales fall from the eyes of the public about how the FDA’s main modern purpose is to be a body capable of being captured to create monopolistic profits for drug companies.

    • Ian Fellows says:

      I mean, to be fair… Monopolistic rights are exactly what patents are for. So yeah, the job of a perfectly working FDA is to create temporary monopolies.

      • First off I find the idea that patents improve society highly questionable. But even if you accept patents as an ok thing, the regulatory capture of the FDA provides for much more monopolistic rent seeking than just getting patents. For many drug companies the big competitor is patents by other companies using variants of the same type of treatment. Regulatory capture of the FDA allows large pharmaceutical companies to place evermore roadblocks up against other companies with potentially patentable drugs in the same treatment market this ensures that only a small number of very large drug companies can compete. Then there’s people like pharma bro Schkreli, who ensured that FDA requirements for manufacturing were complicated enough that no one else was manufacturing an off patent drug enabling him to have an enormous monopolistic advantage even on a generic this kind of stuff happens all the time

      • Also the purpose of the FDA is supposed to be to ensure the safety and effectiveness of medications and treatments it is not to ensure profits for pharma companies through granting of monopolies through patents patents are just one means that’s thought perhaps to increase the number of safe and effective treatments a means to an end not an end in itself

        • Chris Wilson says:

          +1. The only good news is that it appears American public, and some of our representatives, are finally waking up to the nightmarish web of monopoly problems we have woven ourselves into. I am following Lina Khan closely. She’s gonna need a ton of help though!

          • jim says:

            “he nightmarish web of monopoly problems…I am following Lina Khan closely “

            The 47 leading tech companies competing with one another – All monopolies!!! :) It’s so infuriating when efficient businesses drive down prices for consumers! Socialists need jobs where they can lay around and think about how to squeeze more out of doing nothing.

            Well, hopefully Khan will follow in Obama and Biden’s footsteps, steal American Tech’s competitive advantage and hand it off to China. Worked great for manufacturing!! :)

            • Phil says:

              I agree that this ‘monopoly’ nonsense is nonsense, when directed at the big tech companies. They have an oligopoly, none are monopolies. Actually, to the extent that there are different markets — phones, operating systems, social media, etc. — there are several oligopolies. Some of them involve just one or two companies, others have a few more.

              So, although they are not monopolies and people should stop saying they are, through tacit collusion (https://en.wikipedia.org/wiki/Tacit_collusion ) they avoid the kind of price competition that would “drive down prices for consumers.” Apple’s gross profit margin has been just below 40% for the past 9 years. Wait, I lie, last month they announced the figure for the previous year and it was just _over_ 40%.

              jim, I think you have a lot to contribute and I often appreciate your comments on this blog. I know nothing about you but I’m going to guess you’re about 25 years old and thus haven’t had time to accumulate a lot of worldly experience. Please allow me to try to pass along some of mine: If you are trying to win minds and influence people then I suggest you rethink your marketing strategy. Sarcastically implying that everyone concerned with regulatory capture, and with the FDA giving tacit endorsement to a very expensive drug that appears not to do anything good, must be a socialist who is out for a free lunch…that might win you applause if you can get invited on Tucker Carlson’s show but it will make people here conclude that you are some sort of nutcase.

              Presumably you think the FDA’s approval of the drug was the right thing to do, so how about arguing why that is the case?

              Or maybe you aren’t taking a stance on that issue but you just don’t like people saying the idea of a patent is to create a monopoly…but isn’t that pretty much the case? If you disagree, you could explain why being granted a patent is nothing like being granted a monopoly on the patented product.

              • David says:

                This conversation is already wildly off-topic… but I’ll continue that trend. Using Apple as an example of an oligopoly member is pretty silly. Apple’s main profit area is smartphones, next is probably computers. Smartphones have plenty of competition: Samsung, LG, Lenovo, Motorola, Alcatel, Huawei, Nokia, Google… the list goes on. Do you really want to argue that all these companies are tacitly colluding?

                The same could be said for computers. These just don’t seem like oligopolist markets.

              • Dale Lehman says:

                Yes, this is off topic. And jim is often off topic when it comes to economic matters, as he usually articulates a free market approach. However, the knee-jerk reaction to reject market competitiveness is often no better. Markets and competition perform better than most people suspect, and regulation often is worse. From my experience, neither view is adequate or useful.

                Technology markets are somewhat different than other markets. They are dynamic and market power is often temporary and useful as it attracts innovation and new competitors (note that pharmaceuticals are different in important ways – drug patents are complex and should not be debated in twitter feeds). But if we focus on software, smartphones, and cellular and broadband service, I depart from the conventional wisdom of most economists. There are symptoms of poorly functioning markets – the choice of phones from any facilities-based carrier are severely limited, the choice of service bundles is geared to extract maximum consumer surplus, and competition does not appear to erode pricing that does not look like competitive pricing. Note that competition is not to be measured by the advertising campaigns – these companies advertise heavily, even too heavily. You must look at the pricing and dynamic properties of these markets in order to really evaluate whether they are functioning well.

                I am fully aware that I hold minority views on these matters among economists (and have for a long time). My only contribution (if it is that) here is to observe that the debate about the competitiveness, or lack thereof, of technology markets is not well served by short superficial statements that reflect one’s deep-seated bias either for or against market forces. This applies to both sides expressed in these comments.

                The FDA is a different story. I find the comments about the evidence and decision-making at the FDA enlightening. But I doubt that the FDA is a simple story of regulatory capture. Nor do I think that eliminating drug patents would be a good idea. However, limiting the scope of such patents and improving the decision-making process at the FDA (such as making more data publicly available) would be worthwhile, in my opinion.

              • jim says:

                Apologies for going off topic. I’d like to address Phil’s comment then I’ll drop it. Thanks for others contributions.

                While I get fired up about things I respect the knowledge of the contributors here. I learn a lot from everyone here.

                “that might win you applause if you can get invited on Tucker Carlson’s show but it will make people here conclude that you are some sort of nutcase.”

                I’ve never watched Tucker Carlson or Fox news. While NPR irks me almost instantly every time I turn it on, Fox News is utterly revolting – so horrendously bad that I have never and would never voluntarily expose myself to it. Really. It physically disgusts me.

                ‘they avoid the kind of price competition…’

                Google tried to best MS Office. It just can’t. Bing tried to best Google search. It just can’t. That’s the problem. I could list dozens more examples. I bristle at attacks on Tech companies. I feel that Americans make sacrifices to have a competitive economy that generates economic, social and technological advances. Regulating tech companies would be a gift of American technical superiority – and the sacrifices it took to achieve it – to companies and economies (China and others) that are protected from those sacrifices. I strongly oppose that. Sorry I popped off with a smart-aleck attitude.

                “Presumably you think the FDA’s approval of the drug was the right thing to do…”

                I’ve been waiting for more information to form a view on that. The *medical* issue is far beyond any expertise that I have. Just the same, my prior is that the FDA wouldn’t overrule a unanimous decision by its recommending board without some powerful reasons to do so, so I assume discussion here is one-sided. There was an editorial here the other day by some leading researchers applauding the FDA decision.

                Overall, I don’t see a problem with approving any drug that’s harmless. I do see a problem – a very big problem – with the public paying for a drug that’s useless.

              • Name one company other than Apple that produces hardware which will run iOS. Name one company other than Apple which has an app store which allows you to purchase apps that run on iOS.

                Clearly apple has a monopoly on everything associated with iOS. This is no different than if there were exactly one single company that owned every single cow dairy in the entire United States. We wouldn’t call that “not a monopoly” just because there are other kinds of food than dairy products

              • Phil says:

                David,
                I’m a bit at a loss for what to say; your view of both the computer market and the smartphone market seem very different from that of most people, including me.

                Let me start by agreeing with you: there is a lot of competition in phone handset manufacturing. I don’t think that’s an oligopolistic market. Apple is not in that market at all: they do not manufacture handsets. Indeed, the robust competition in that market allows them to pay to have their handsets manufactured at a good price. Hooray for competition! I have never heard anyone claim that handset manufacturing is anything close to a monopoly market. But it’s funny to mention Apple in this context: Apple does not manufacture “Apple” phones at all (all of them are made by Foxconn, I believe, which is yet another smartphone manufacturer which did not make your list. I think Foxconn also makes the Google Pixel. I’m not sure Google makes any phones).

                But a handset is not a smartphone: it also needs an operating system. And here there are only two choices with significant market share: Apple’s operating system (called ‘iOS’), and an open source operating system called “Android.” In principle one could make an Android phone that isn’t tied to Google’s mobile system, but in practice it would take such enormous resources to develop the applications that would do that that nobody has done it, so Google makes a lot of money off Android phones. Here https://appdevelopermagazine.com/google-and-android-are-not-the-same…-and-that’s-a-good-thing/ is a brief description.

                So, sure, there are many handset manufacturers, but to say that means Apple is not in an oligopoly is not correct. That’s quite a bit like saying Microsoft isn’t in an oligopoly because lots of companies make computers.

              • jim says:

                Well if the discussion is going to continue:

                Phil:

                Your claim that Apple isn’t in the handset business is pretty weak. Jobs famously tried to patent the rectangle with rounded corners. Contracting out the production of their phones doesn’t mean they’re not in the handset market. They do everything *but* production and surely provide every specification for that too. They’re not buying generic handsets and slapping an apple on them.

                The reality is that consumers are not the least bit harmed by the high price of Apple products, phone or OS. Anyone can walk into Wal*Mart and get a phone that does every single thing an iPhone does for a *tenth* the price. Apple has created a very strong brand and as far as I’m concerned more power to them. Personally I’m happy with the Wal*Mart phone.

              • Phil says:

                jim,
                It’s not true that a customer can buy a much cheaper phone that does everything an iPhone can do. Apple is famous for having a closed ‘ecosystem’ that provides a barrier to switching out of it. For instance, they don’t let Android devices interface with iCloud (another Apple service) except in a very primitive way; see https://www.howtogeek.com/658390/how-to-access-icloud-services-on-android/ for example.

                But anyway I am not arguing whether Apple is good or bad, does or doesn’t have a great brand, does or doesn’t provide decent value, etc. I’m just saying that although they do not have a monopoly, the smartphone market is an oligopoly. If you’d like to disagree, that’s great, let’s see what you’ve got. But I don’t get your comment about the handset business at all: (1) it’s a matter of public record that Apple does not manufacture phones. (2) If they did, it would strengthen the ‘oligopoly’ case even more, it certainly wouldn’t weaken it.

              • jim, not one of those wal mart phones runs ANY iOS app. to say that it “does the same thing” is exactly like saying the monopoly on dairy production isn’t a monopoly because you can buy soy imitations of cheese and almond milk. Tell that to a high end bakery that wants to produce high quality wedding cakes but can only do so by law if they buy MILKCO’s “professional quality” milk for $85/gallon

              • Phil, apple may not assemble the phones but they specify everything about the design and the CPUs involved are completely designed by them and fabbed by someone else. They also have a bunch of custom in house designed ASICs. You absolutely couldn’t legally make a handset to compete with them for multiple reasons including both that there is no legal license to run iOS on anything other than Apple hardware, and if you wanted to clone their hardware you would never be able to make the necessary custom chips legally.

                All of this does exactly strengthen the idea that Apple is a monopoly on a very important bunch of technology and that the competitors together form an oligopoly on related tech

              • jim says:

                Phil:

                I’m not arguing whether apple is “good” or “bad” either, in a moral sense or as a product. Let’s change “good brand” to “strong brand”. There you go.

                Oligopoly: Your case that phones are an oligopoly is the classic critic’s way to redefine a market in artificially narrow terms so as to make a claim about the manufacturer’s purported “control” of the market – “we only have two manufacturers that make blue shoe laces with red diamonds on them!! They control the blue-shoelace-with-red-diamonds market entirely!!”. From the market standpoint it’s functionality that’s the issue and from a functional standpoint *many* different companies manufacture and market phones and products that can substitute for iPhones, just like black shoe laces can substitute for blue shoe laces with red diamonds. The fact that one game or another is available only on iPhones is irrelevant from a functional standpoint.

                With respect to operating systems I say this: Betamax and VHS. The fact that there are only two major operating systems on phones doesn’t create an “oligopoly” in phones any more than it did in video tape formats. There are still numerous manufacturers. Apple, like Beta, is a closed system – and like Sony did, Apple is running a substantial risk by maintaining that closed system. Sony lost that battle in the open market and Apple will lose it too. Phones are becoming a highly technical Kraft Dinner and though the KD brand still commands a premium price, it’s nowhere near the premium Apple now has. The current lawsuit by Epic games is just the first wave. Ultimately Apple’s premium will decline and so will its market share. And don’t forget that there have been other formats that simply weren’t successful – Windows phone and Amazon’s “Fire” phone. Oh, yes, and the newly dredged-up Reddit favorite, Blackberry! Hilarious.

                With respect to manufacturing: almost every manufacturer of any sort contracts some if not much of its production, and other phone makers do as well. That’s what “manufacturing” is in the modern world: rich country designers and developing country contract production, and this has been increasingly true since the early 1980s. Foxconn’s “major customer” list includes Microsoft, Google, Acer, Amazon, Cisco, Intel, and other world-leading companies. Even companies that “manufacture” products in the US generally do the smallest amount of work possible in the US under the rules regarding the “made in America” label. The few parts they assemble are contract manufactured – and often assembled by contract or temp employees that travel around to different companies to do the work. The only thing that makes them different from Apple is that they own the building the products are assembled in, and employ the management that supervises the work. The parts and workers are all contracted out.

              • jim says:

                Daniel:

                Having proprietary technology does not equal having a monopoly. Ford, GM, Kia, BMW, Mazda etc all have proprietary technology. Was Mazda a “monopoly” because it was the only company that offered the “rotary” engine? No, the standard V8 – an entirely different design – is functionally equivalent to the rotary engine.

                No doubt every phone maker has proprietary technology, regardless of the handset or OS they use.

              • Jim, the problem with your argument is that you assume an Android phone substitutes for an IPhone, it’s like assuming other types of food substitute for dairy. For some people that’s true but for many many people it’s not. Would you really say there is no monopoly problem if there were exactly one dairy company in the US. I mean you might, but noone else would.

                This isn’t at all like blue shoelaces with pink stars or whatever. It’s like having a monopoly on the production of shoes that use laces and rubber soles. Not everyone wants to play soccer or go jogging or walk the dog in loafers…

              • David says:

                All this discussion is quite interesting but it touches on something I’ve wondered about before. There must be some economic definition of “degree” of monopoly. Something about measuring product substitutability combined with market concentration that scales from 0-1, perfect competition – pure monopoly. Anyone happen to know?

              • Phil says:

                I’ve just got no patience for this. Ffs if the cell phone market isn’t an oligopoly, what is? https://www.researchgate.net/publication/343362173_The_Market_Structure_of_the_Smartphone_Operating_Systems_Industry_in_the_EU

              • somebody says:

                The economics of tech platforms are fundamentally different from cars and milk because of network effects. When you buy a car or a jug of milk, you’re buying a discrete product to be consumed, and your utility for said product is entirely separable from everyone else’s consumption. But having an Android when everyone else has an iPhone is a different experience from having the same Android when everyone else has an Android. Directly, the phones communicate with each other on different protocols and indirectly, multiple app platforms divide app developers’ resources. Typically with tech companies, because the iPhone is so dominant with the upper class of consumers, the rub is that iPhones get everything first and Android apps are a nice to have.

                Some of this is entirely unnecessary. Facebook messenger, Google Talk, and a dozen others used to be on a single XMMP messaging protocol, and they could interop with cross platform chat clients like Pidgin. They each axed the XMMP protocol for no reason, choosing to go with an in house chat solution that worked worse, slower, and less consistently, to no actual benefits. The only one that even justifies its own existence is iMessage with end-to-end encryption. This is an intentional move to divide up the market for conquest, forcing consumers to install their in-house apps and thus centralize on a particular platform.

                The most onerous example of flexing this kind of network effect is the bad old days with internet explorer. Microsoft would pay developers to use their internet explorer plugins in their websites, with the intention stated internally of making competitor browsers unusable. These days, it’s websites optimized for chromium—gmail memory leaks and balloons up to multiple gigabytes of RAM usage on any browser not based on chromium. Tech companies don’t bother checking that their desktop websites work on any other engine. It’s hard to assign intentionality here, but if it were there would be nothing stopping Google.

                In the unregulated limit, a market where Big D brand milk company can reach into my fridge to spoil my little D brand milk is obviously untenable. I can’t see anything happening now in the mobile space as onerous as it was back in the bad old Microsoft activex days (though Jim apparently sees nothing wrong with those either), but economic policy can’t just assume companies won’t do things that help them and hurt consumers out of good will. All this libertarian gung ho is old school thinking, production functions and independent separable utility of goods, build a widget, buy a widget, use a widget. The game is changed; the old rules don’t apply.

              • jim says:

                “I’ve just got no patience for this. Ffs if the cell phone market isn’t an oligopoly, what is?”

                I get it. You simply won’t accept that you’re wrong.

                The OS is one part of a phone. In the iPhone case, it’s a fixed part sold only by Apple. In the Android case, it’s a “part” that can be changed to suit the vendor. In any case, it’s not the only feature of a phone.

                The suggestion that an android phone can’t substitute for an iPhone is preposterous! It’s silly. In reality it does every day because billions of people will never own an iPhone.

              • Phil says:

                Of course Apple phones compete with Android phones. I am not saying Apple has a monopoly. I think Daniel might be saying that, but I’m not. But in between “monopoly” and “robust competitive market” there is a market called an “oligopoly”, and that’s what the smartphone market is. I really, truly don’t see how an informed person can reasonably dispute this. It follows that if someone disputes this, I don’t think they’re being reasonable. No point arguing with someone who isn’t being reasonable.

                jim, of course it’s irritating to me that you think I’m the one refusing to accept facts, but whaddyagonnado, it’s irritating to me that people think all sorts of things.

              • jim says:

                Phil said:

                “of course it’s irritating to me that you think I’m the one refusing to accept facts”

                :) Phil, we disagree on almost everything but you’re a helluva guy.

                Our dispute lies in whether or not PHONE = OS.

                I say no, you say yes. But *I* don’t see how *you* can think that because there are obvious differences between Android phones. They all the same – not even close. The OS is a *part* – more significant than, say, an exhaust manifold in a car, but *clearly* not the equal to the phone itself.

                I agree that there is an oligopoly in *operating systems* but again I say the OS is just a part. It’s *common* in manufacturing for different companies to use the same or similar outsourced parts in competing products – in some cases the end products sold by different companies are indistinguishable other than the packaging – Grape Nuts vs. Kirkland “Nutty Cereal” or whatever – but no one seems to care about that.

                “Somebody” says this is entirely a network effect, but I don’t agree. As far as I can see most smart phones can visit the same websites, send text messages and run similar apps. They are effectively equivalent. It’s a result of the cost of development and maintenance of the OS. There isn’t room for three. If there were three or more, the ultimate cost to consumers would be higher because someone would have to pay the cost of development and maintenance of the third OS.

              • Phil I say that apple has a monopoly on iOS, it’s clearly the case, the monopoly is a government granted one through copyright, they also have a monopoly on the CPU through copyright and patents.

                Whether and to what degree Android substitutes for iOS is not a single abstract fact of the world. It’s an opinion of each and every consumer. Jim must just not care super much about what apps he runs, but the fact is many many people think Android substitutes for iPhones about like a goat substitutes for a Ferrari.in other words not at all.i personally am the other way around, I prefer android, in large part because I can install things like F-droid and am not stuck on apple/google approved software.

                The fact that some people prefer android and others prefer iOS is not evidence that they substitute. In other words if you take an Android guy like myself and say “well android has been made illegal, now she’ll out for an iPhone and suck it up” I will consider that I’ve been utterly screwed. An IPhone person will not even notice.

                They don’t even close to substitute for large swaths of the population, and yes they do substitute for other swaths.

                Let’s say 50% of the population doesn’t care much and so they choose the cheaper one (Android) and 50% cares a lot and they choose their preferences. You would see a lot of diversity, but it’s still a monopoly to those who care.

                To use the dairy analogy, sure some people are just fine with soy cheese and almond milk, bit others are allergic to soy and almonds but really love to eat cereal with real cow milk in the morning. If there’s a monopoly on cow dairy production. The almond/soy people don’t care but those with allergies sure as hell do. If that’s 30% of the population the fact that there’s a monopoly on dairy production is a very relevant fact. You can’t ignore it by pointing to soy cheese and almond milk

              • Dale Lehman says:

                This has gone on too long (then why am I prolonging it?). All brands have a monopoly over their product (e.g., Trek bicycles). Economists have a model with the oxymoronic name of “monopolistic competition,” which describes a market where there are many products in close competition with each other, but which have their own markets where there is monopoly power (their brands). The ability of that market power to result in raised prices is limited by the extent to which these substitutes can easily be substituted for any particular brand. The limiting case dissolves into a competitive market, when the brands are virtually identical. However, the fewer the brands, and the more consumers of each brand don’t view the other brands as close substitutes, the less competitive the market is. The extreme case is a complete monopoly, but almost all (some economists would say all) real markets are more represented as oligopolies. I’d venture to say that most microeconomic research in recent decades (and actually predating that) concerns the behavior of oligopolistic markets. And the range of such models is immense.

                Outcomes depend crucially on a number of factors, including the ease of switching products (and, more generally, the demand characteristics of the products), the cost structure of the industry (especially the presence or absence of fixed or sunk costs), the rate of technological progress, the time horizon, and the strategic interactions of the firms (here, we can also branch off into a large number of strategic models where firms may depart from rational behavior). And so on. And, don’t forget the related markets and the extent to which there are products that are tied together in consumption and/or production.

                I don’t think you will resolve the extent to which the cell phone market is competitive. My own view is that the phone market is more competitive than the operating system market, and also more competitive than the cell phone service market. However, it is far more complicated than that since many of the firms are vertically integrated or have marketing arrangements that act as such (see how many smart phone brands you can order from AT&T or Verizon, compared with the unlocked phones you can buy from Amazon). Defining “the market” is not an easy task here. Computers, operating systems, and applications are similarly complex.

              • somebody says:

                It’s a result of the cost of development and maintenance of the OS. There isn’t room for three. If there were three or more, the ultimate cost to consumers would be higher because someone would have to pay the cost of development and maintenance of the third OS.

                This is essentially my point. Platforms are naturally oligopolistic in a way that consumer products aren’t, and as a matter of fact, an industry with exactly two firms is a duopoly. The market can support infinitely many milk producers, but if there are infinitely many smartphone operating systems, the usability of each is greatly diminished. So the analogies to dairy producers and auto manufacturers don’t work.

                Further, a naturally oligopolistic market is ripe for abuse. Firms can compromise on the quality of products or willfully worsen other’s products. And it has happened before. If the idea of free market’s is that competition incentivizes good behavior and checks the bad, you’ve already conceded that this market does not admit competition. Again, I agree that situation with smartphone isn’t as bad as it could be, or as bad as it has been in the past with desktop platforms in the Microsoft heyday, but again, a situation where you just trust the players to act well against their best interest is inviting trouble.

              • Thanks Dale for giving some context to the more sophisticated versions of the arguments. There can be no argument that Apple doesn’t have a monopoly on the production of iOS devices… That’s clearly true. But they *don’t* have a monopoly on the production of “pocket-portable computers” (I don’t even call them phones, I rarely use them to call anyone). The competition is between iOS and it’s single source of iOS hardware, and a variety of hardware manufacturers all of whom supply Android compatible hardware.

                There is no technical reason why some hardware manufacturers couldn’t create iOS compatible competing hardware. It’s 100% down to Apple having a legally granted license to prevent that competition (a copyright, which allows them to license their software **only** for use on their own hardware).

                Anyone who thinks that’s meaningful competition is being disingenuous at worst, and naive at best.

                But sure, there are different options if you just want to make calls and browse the internet on a browser and you don’t care about connecting to specific important isolated services, like facetime or whatever.

                The point is, in a world where our goal was to create policy that maximized competition, there would be laws in place that required Apple to release their source code, to license that code at a fixed price, that allowed people to build competing devices, and the price of running an iOS device would drop from something like $700 to something like $150. The ways we have of measuring “the economy” would show that this decreased GDP and was a “net loss” to the economy. On the other hand, millions of people would gain more functionality at lower prices… so it’d be a clear net functionality gain. This indicates serious problems for the profession of Economics IMHO. The presence of oligopolies, govt protection, licensing, etc so distorts the price structure of the market that the vast majority of the top companies in the S&P 500 are companies that take advantage of huge quantities of government protection… By market cap the top 20 companies are:

                Apple, Microsoft, Amazon, Facebook, Google/Alphabet, Berkshire Hathaway, Tesla, JPMorgan Chase, NVIDIA, Johnson & Johnson, Visa, United Health, Proctor & Gamble, Home Depot, Paypal, Mastercard, Walt Disney, BofA, Adobe

                Think how important Copyright, Patent, licensing, and other regulations are for the creation of these companies profits. Most people just can’t even wrap their head around it really.

              • Also Dale, for the “monopolistic competition” model, here are some facts not everyone is aware of in the smartphone market:

                Apple controls the OS, and the OS only accepts apps from the Apple app store. As I understand it, if you “jailbreak” the phone (ie. to install an app store other than apple’s), technically you lose your license to use iOS, continuing use of the phone would technically subject you to $250,000 in statutory damages. In essence, it’s illegal to install any app not approved by apple. As a developer then, you’re completely at the whim of Apple to get your app listed and available to iPhone or iPad users and as a user you’re completely at the whim of apple to list an app you want to have listed. For example the open-source syncthing app has no iOS version not because of any technical reason but just because Apple has onerous terms to get it listed.

                Furthermore, Apple charges 30% sales commissions of sales of apps. So there’s a very clear monopoly on the market for iOS apps which Apple uses to command huge markups on App sales commissions.

                Google on the other hand with their Android market doesn’t mandate that you use only their market. It’s possible to install other app stores. So that’s good. But… if you want to offer Google apps on your phone out of the box (and every consumer expects to have access to them), you must install all of Google’s “Play store” infrastructure out of the box, and the google play store has a variety of requirements that are somewhat similar to Apple in terms of getting your app listed as a developer and they also collected 30% commissions because they have an “effective monopoly” in the sense that only technically savvy users will be able to figure out how to install the other app stores so the vast majority of phones only have google play store. Recently after Apple agreed to drop its commissions to 15% for “small developers” (who make a total of less than $1M in sales) Google announced they would charge 15% commissions for the first $1M in sales and 30% after that.

                To say that these practices are similar to “Mazda is the only company allowed to put the Mazda name on products” so that it’s a “brand” thing is insane. Mazda doesn’t tell you that you can’t drive their car if you wear socks with sandals, or are in the state of Utah, or have a child named Greg, but in essence both Google and Apple have micro-level control over exactly **how** you can use their products. They can pull and delete apps off your phone remotely even after you’ve paid for them and there’s nothing you can do about it. The license on iOS or Google Play store allows them to do whatever they want, like geofence you from playing games on your phone in Canada without paying an extra fee or whatever (not that they do this, but the technology and the legality is entirely on their side if they did).

              • David says:

                Dale thanks, that is exactly the kind of information I’ve been trying to read about relating to this. Do you have any examples of well-done studies that analyze a specific market to estimate how monopolistic it is? I’d love to read about this, don’t know where to start in the literature.

              • Dale Lehman says:

                This is a response to David:
                There is an enormous economic literature on how to evaluate competition in a market. Much of it is theoretical, some is empirical, and it would take a lifetime to read all of it. You might find it interesting to look at a practical evaluation, such as the FCC’s series of competition reports on the mobile wireless industry (https://www.fcc.gov/document/fcc-releases-20th-wireless-competition-report-0). Be aware that these reports are quite political, and the FCC’s conclusion has changed a number of times, partially depending on what party is in power in DC. But you will see a good range of the things that economists look at when evaluating competition. And, if you trace through the regulatory proceedings, you will see the divergent stances that various parties have taken on the degree of competition in this one particular industry.

              • Bob76 says:

                A few observations on this topic:

                1. syncthing is almost available on ios. See https://forum.syncthing.net/t/isyncthing-ios-client-for-syncthing-now-in-beta/15815/12 In my experience, developing an app for ios or Android isn’t particularly difficult.

                2. Many apps are available on both the Apple App store and the Google play store—Adobe Lightroom is an example. In the case of such apps, Android and Apple can be quite close.

                3. It’s interesting that another source of alleged market power, cell phone chipsets, has not come up in this discussion.

                4. There is an alternative to Android and iOS. That is Huawei’s Harmony (a fork of Android 10—I think).

                5. One thing that is really remarkable about the cellphone business is how fast this interconnected ecosystem evolves. My Apple phone and your Samsung phone connect easily and correctly to an Ericsson base station owned by carrier A and to a Nokia base station owned by carrier B. It’s nice to be able to worry about market structure when the real miracle is that the system works at all! The wireless standards development organization 3GPP releases updates to the standards about every 18 months. I estimate that the 3GPP standards development operations are roughly a $billion/year enterprise.

                Bob76

              • somebody says:

                At the risk of extending this discussion yet again,

                @Dale Lehman

                I disagree that monopolistic competition is an adequate description of the smartphone situation. I’ve been working my way through this paper and I think it’s pretty good

                https://www.sciencedirect.com/science/article/abs/pii/S0167624520301244

                @Daniel Lakeland

                Here’s something you’ll appreciate

                https://twitter.com/BriannaWu/status/1407009346475675651

                You apparently (I haven’t looked at the details too closely, this could be editorializing) now need a $39.99 subscription to run on a treadmill you’ve already bought.

                Yeah, I think the law on tech platforms is tilted too far on the side of the platforms as it stands today. On the other hand, excepting Apple’s walled-garden and enormous app store fees, most of the onerous subversions of market liberties within their power that you’ve brought up are hypothetical. As many have pointed out, interop is much better than it *could be*, and artificial scarcity and exclusivity deals are rarer than they *could be*. Don’t trust it, but yes @Bob76 and @Jim, I do appreciate it while it lasts.

              • Just wanted to state for the record, for Jim and whoever else might be following, is that the **reason** this gets me so fuming mad is specifically **because** I’m in favor of free market capitalism. We don’t have free markets, we have huge protectionism for rent seeking.

                and yes @Chris, free market capitalism doesn’t work without regulation of the type “you can’t lie about your product”. so I’m also in favor of well written regulation.

              • David says:

                Thanks Dale, good read. Definitely got into the political aspects with the commissioner opinions at the end. A bit surprised at how much the report depended on descriptive statistics, didn’t see a single use of an economic model in the report.

            • Chris Wilson says:

              Yea, sorry you have zero clue what you’re talking about here. Not even wrong.

            • Also when it comes to car analogies it is far closer to Apple has a monopoly on fuel injected gasoline engines of all types and turbocharged or supercharged diesel engines with more than one cylinder. Everyone else has to drive cars with a single diesel cylinder engine that chuff along like a tugboat, or they have to choose the single cylinder diesel plus electric hybrid from Google and it’s licensees.

              • jim says:

                Dale:

                I generally agree with you that the FDA situation is more complex than a quick glance suggests. I support patents for medication as for anything else. However, it is disappointing that companies charge what seem outrageous prices for some meds. It would be cool if there were an alternative to market pricing that would be fair to both companies and the public, but their doesn’t seem to be one. The best price control has always been the size of people’s pocketbooks. That would surely be the appropriate control in the case of a drug that has been unsuccessful treating any problems!

              • somebody says:

                An alternative to market pricing is the disaster that happens now. People’s pocket books aren’t checking the price of pharmaceuticals because nobody pays for it out of their pocket books. And patents are just about the opposite of a free-market. It’s literally government granting the exclusive right to produce a good that anyone could make to single entity. The only sense in which patents have anything to do with markets is that they create artificial scarcity for an intangible that’s infinitely reproducibly, allowing people to traffic in a magical market for phantom goods called “intellectual property.”

                The status quo of health care is obviously not a free market to anyone who’s thought about it for more than 5 minutes. The only way one can defend it from a market perspective is if they’ve been conned into thinking that the interests of rich rent-seekers and working poverty is what a free market means.

              • jim says:

                “An alternative to market pricing is the disaster that happens now. People’s pocket books aren’t checking the price of pharmaceuticals because nobody pays for it out of their pocket books. “

                I agree, this is clearly a problem. That’s why price controls have been implemented in countries with nationalized health care. This “works” in the sense that in these countries people pay less for health care. But the fact that there are no price controls in the US is why companies come to the US to fund the development of new products – in part by raising capital here, in part because they can sell at higher prices. So, in effect, US consumers are funding development of the technological advances that are sold at cost of production and distribution in Japan, Canada, UK, Australia etc.

            • Dale Lehman says:

              somebody
              You have mischaracterized my position – I never said the cellphone market (handsets or services or network) is an example of monopolistic competition. Indeed I do not believe that. I only offered that explanation to clarify the issue concerning whether a company has a monopoly over its own products. As Daniel Lakeland states, I too believe in markets and personally I do not think that the mobile communications markets functions well. But that is a minority view, at least among economists.

        • Berne says:

          @Daniel Lakeland: “Also the purpose of the FDA is supposed to be to ensure the safety and effectiveness of medications and treatments”

          But as stated above “The FDA takes external expert advice on drug approvals.”

          Thus there is a fundamental conceptual problem in FDA’s existence as a supreme national regulator.
          Supposedly the FDA exists because only it posesses the technical expertise and rigorous objectiviity to judge drugs/treatments for the American people — such qualities are thought to be unavailable anywhere in the private sector (universities, hospitals, industry, private foundations & research institutions, etc).
          The private sector is havily tainted by narrow self-interest and financial gain incentives (?)

          But of course the FDA does not have the necessary expertise and must heavily rely upon external, private expertise.
          And key FDA perssonnel are are not ubermensch, free of human foibles and strong self-interest.
          FDA is composed of ordinary people exercising very extraordinay power over all Americans.

        • John Williams says:

          Regulatory capture is indeed real, but it seems that the Alzheimer’s Association also played a role in this. Certainly it is celebrating it: https://www.alz.org/alzheimers-dementia/treatments/aducanumab-news

      • Carlos Ungil says:

        “If the government did not rely on patent monopolies to finance the development of drugs, it would mean that no one would have the same sort of incentive to push drugs that are not safe and effective.”

        On the other hand, it’s not clear that anyone would have the same sort of incentive to push drugs which are safe and effective either.

        • Ian Fellows says:

          or develop drugs that are safe and effective.

          Whether you want patents or something else, pretty much the only way to get more safe and effective drugs is to drop dump trucks of money on those that develop safe and effective drugs. Innovation requires incentivisation.

          Only allowing developers to receive their incentive if the drug works and only for a limited amount of time (i.e. FDA approval + patent) seems like a pretty good general model to me. At least, I haven’t heard of a better one.

          • How about pay up front for the development of the drug, and then immediately let anyone mfg and distribute it?

            For example, put out a bounty: We want an Alzheimer’s drug that in RCTs makes at least the following improvements in important outcomes with no more than the following levels of side effects …… we will pay $100B to the first company that can demonstrate such effectiveness in trials run by third party trial-running companies…

            And then as soon as such a drug is identified, anyone can produce and sell it provided they do so to an appropriate level of quality control.

            I’m not saying there’d be no problems with that, but it definitely has some advantages, such as we can have discussion about **how much** we want a drug, as opposed to a system where once it’s approved there’s monopoly pricing **together with** strong leverage to force the govt to pay for stuff through medicare/medicaid or insurance companies to pay for stuff through private insurance. The problems caused by the principal agent problem combined with a govt granted monopoly are significant.

            Also in general generic drugs become quite cheap because of actual competition on the efficiency of production front.

            Yes regulatory capture is possible in this pre-pay model too.

            • Ian Fellows says:

              Well, I like that the bounties would only pay out the winners and it might focus more effort on medical issues that occur in non-rich people. All in all, I think it would be theoretically workable with an appropriate amount of funding. It would basically be federalizing the spending consumers do on non-generic pharmaceuticals, so it would have to be a HUGE pot of money.

              I don’t know how much it would do for regulatory capture and/or rent seeking. Generally the more government involvement you have, the more rent seeking you get and this would be a lot more government.

          • David Marcus says:

            > Only allowing developers to receive their incentive if the drug works and
            > only for a limited amount of time (i.e. FDA approval + patent) seems like
            > a pretty good general model to me. At least, I haven’t heard of a better
            > one.

            Did you read the articles linked to in the post that you are replying to? It seems not. I won’t repeat what they say because they say it better than I can.

            • Ian Fellows says:

              I read them. They don’t really make a detailed case. I remain very skeptical of government paying for research in the same way it pays for road pavers. When success requires innovation and failure is a real and perhaps more likely outcome, payment for effort is a recipe for poor outcomes.

              You get what you pay for. Pay for success and you’ll get success.

              • David Marcus says:

                The government pays for road paving, and the result is that the roads are paved. Similarly, the government pays for the space program, aircraft carriers, and NSF and NIH research. Most people do their job because they are paid a salary to do it. I suggest that you read the linked articles again because they give plenty of evidence that you can actually pay people to do things that you want done. If the articles don’t provide enough detail for you, see the free book “Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer” (https://deanbaker.net/books/rigged.htm). It usually costs much less to pay people a salary to do what you want done than if you pay for the things via patents and copyrights.

  3. Adede says:

    Looks like even the requirement for a post-approval trial is toothless:

    “…post-market confirmatory studies—ones that truly verified the clinical value of a surrogate outcome—only took place about 10 percent of the time. Despite this dismal compliance rate…the FDA has never fined a company for failing to do a confirmatory study and rarely uses its power to withdraw a drug later shown to be clinically ineffective.”

    https://slate.com/technology/2021/06/alzheimers-drug-aduhelm-fda-outcomes-plaques.html

    • GreySwann says:

      There is a treatment to prevent tooth loss :-) and, possibly, Alzheimer’s disease: periodontal treatment. https://pubmed.ncbi.nlm.nih.gov/34050719/

      Contrary to an ongoing study
      https://clinicaltrials.gov/ct2/show/study/NCT03823404
      we restricted the sample to subjects younger than 60 years and used a preclinical outcome.

    • RoyT says:

      Actually, the FDA has limited power to force the withdrawal of a drug simply because of ‘lack of efficacy.’ There are plenty of drugs out there who can’t replicate their Phase 3 efficacy results. But drug companies argue that patient populations shift over time. So, take the Biogen example. Let’s say in 6 years, the new study fails to separate drug and placebo groups in improved cognition. Biogen would argue that some underlying patient factor has changed the new trial population from previous trials so that it is more refractory to their drug.

      The only way I see Biogen’s drug being pulled is if another drug shows much better efficacy in cognitions with NONE of the serious side effects of the Biogen drug. In that situation, the FDA would approach Biogen and ask the to voluntarily withdraw their drug from the market.

      • anon e mouse says:

        Yeah my understanding is that this is closely related to why phenylephrine was still sitting around approved as an oral decongestant despite the fact that it doesn’t work when pseudoephedrine started falling under restrictions, allowing manufacturers to transition their formulations. I think FDA actually did remove that indication eventually, but the drug remains approved and widely marketed in cold medicine. (Cold medicine is basically a sugar pill for most users, except for formulations with antihistamines, and those have their own problems.)

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