JimPinto.com - Connections for Growth & Success™
No. 237 : 5 September 2007

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

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14 mins.

Pharma Lobbyists - Blatant Corruption

You've seen the vast TV advertising campaign for PPA - "Partnership for Prescription Assistance". It shows poor and elderly patients "saving" through special membership discounts. What a trick! First raise prices by 60%, and then show old folks how to save 20 or 30%. It's brazenly deceitful.

Here's what happened:

The 2003 Medicare prescription drug bill extended coverage to 41 million Americans. At an estimated cost of $400 billion over 10 years, it was the largest entitlement program in more than 40 years. It turned out to be a lobbyist's dream and an aging American's nightmare.

Several former senators and congressmen were registered lobbyists for the drug industry and worked on this bill. When it passed, there were more than 1,000 pharmaceutical lobbyists working on it. Many admit openly that bill was written by the lobbyists and stacked to benefit the pharmaceutical industry.

When it came time to cast ballots, the Republican leadership discovered that a number of key Republican congressmen had defected, arguing that the bill was too expensive, and a sellout to the drug companies. The bill was facing defeat.

The voting machines are normally open for 15 minutes - but they remained open for almost 3 hours. Why extended-hours voting? Because the votes were there to defeat the bill for 2 hours and 45 minutes. There were lobbyists going around twisting arms to get votes changed. Said one Republican Congressman, "The arm-twisting was horrible. I've been in politics for 22 years, and it was the ugliest night I've ever seen in those 22 years."

The bill passed, allowing drug companies to charge more by preventing Medicare from negotiating prices. The VA (Veterans Admin.) does bargain successfully, but Medicare cannot - it's prohibited by Law. Estimates show VA prices for the same drugs are 50-60% lower.

This is the "free market" run amok. 952 lobbyists spent a total of $141 million in 2003 making sure that Medicare money would be siphoned through their companies. Many of the lobbyists were past senators and congressmen. In the end, the 415-page bill was negotiated behind closed doors in a Senate-House committee. The lobbyists earned their keep. The provisions they promoted helped to ensure $531 BILLION (repeat, more than a half-TRILLION) for their big-pharma clients over a 10-year period.

Several lawmakers who worked on the bill have since joined Pharma lobbyist firms. A brazen example is Billy Tauzin, Congressman from Louisiana who steered this legislation through the House, and also chaired the House committee that regulated the industry. Tauzin retired, and immediately took a job as president of PHARMA, the drug industry's top lobbying group - with an annual salary of $2 million. Whaddyathink of that!? Open, brazen, in-your-face!

If you've ever wondered why the cost of US prescription drugs are the highest in the world, or why it's illegal to import cheaper drugs from Canada or Mexico, look no further than the big-pharma lobby and its influence in Washington, DC.

This summary of the background may seem unbelievable. Please follow the web links provided. I challenge anyone to send me feedback supporting this legislation and the way it was handled. Yes, yes - I know the argument, "The pharma industry spends billions on new drugs!" Is that the excuse?

The Pharma lobby spends $100+ million every year in campaign contributions and lobbying expenses. Everyone knows this. The presidential candidates talk about it. It remains to be seen who will stop this corruption, and when.

Click CBS 60 minutes: Report On Drug Lobbyists' Role in Passing Bill
That Keeps Drug Prices High

Click Prescription-drug plan elates lobbyists, but bewilders seniors

Click Big Pharma wrote the Medicare prescription drug bill

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Industrial/Military complex drives US economy

The term "Military-Industrial Complex" first got wide recognition in a 1961 speech by President Dwight D. Eisenhower when he left office. He warned, "In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military/industrial complex. The potential for the disastrous rise of misplaced power exists and will persist."

Wars continue because the military/industrial complex NEEDS war to thrive. While profits soar for the armaments and pharmaceutical industries, the American middle-class continues to decline. Politics favors the existing power structure.

There are now almost 200,000 private "contractors" deployed by the US government in Iraq. This means that US military forces in Iraq are now outsized by a coalition of corporations whose actions go largely unmonitored. In essence, the US has created a shadow army that can be used to wage wars which are extremely profitable for a few unaccountable companies.

To run for national office requires many millions of dollars, the raising of which puts the president and our elected representatives at the beck and call of the few moneyed interests that finance their campaigns. Never before in US history has the elite had such control over the government.

There's a term for this: Oligarchy, power vested in a dominant class or clique; government by a few. Most historians agree that Oligarchy is the prequel to serious decline.

These warnings are not new. I am not alone in sounding the alarm. But, who is listening? And who will act?

Click Military Contractors See a World of Business Opportunities

Click Learn from the fall of Rome, US warned

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New perspectives on Disintermediation

Disintermediation is the removal of supply chain intermediaries - "cutting out the middleman". Instead of going through traditional distribution channels (distributors, wholesalers, brokers, agents), suppliers deal with customers directly, typically via the Internet. The key is to reduce cost of servicing customers.

The "Supplier" is typically the designer and marketer (example, Apple). In this global age, manufacture is usually contracted out (iPod and other Apple products are made in China). Sales and distribution intermediaries service the consumer. Apple initially sells iPhone only through AT&T (Cingular), though iPod is now sold by several different intermediaries - retail stores and online.

Disintermediation is supposedly dooming distributors, retailers, wholesalers, and all other intermediaries between suppliers and end customers. Because the Internet lets customers connect to and order from the primary source of a product, there's presumably no need for traditional distribution channels.

But there's another side to the Disintermediation story. Some products need a significant amount of support. Industrial automation is a good example: Selection from a confusing variety of available products and options, correct ordering with optimal pricing and delivery, selection and purchase of related accessories which must be ordered separately from others suppliers, installation of the complete system, and services such as maintenance and calibration to assure optimal operation over useful system life.

Who will provide all this value? Certainly not manufacturers. Even the largest automation suppliers cannot supply the multiplicity of products. And they cannot have "local" presence everywhere. So this value must be provided by intermediaries.

Distributors are necessary - but not just for "Local stock". The job of the distribution channel is to supply all the additional products and services needed to maximize value to the customer.

The distributor who provides products and services better than anyone else is the one who is immune to "disintermediation". Any attempts by a manufacturer/supplier to disintermediate merely result in replacement by alternative suppliers. It's an interesting twist - suppliers becoming disintermediated.

Click The Myth Of Disintermediation

Click Disintermediation Stirs up Industrial Automation

Click Services - Growth on a Slippery Slope

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Patent Law improvements banish the trolls

The US Supreme Court rarely weighs in on patent law, so 3 of its recent decisions are important, even historic.

It has long been argued that the US patent system needs reform. Many think that the US Patent and Trademark Office is a major problem, because patent examiners are in short supply and unworthy patents are often granted. But the worst complaints are about unscrupulous patent-licensing companies, known as "trolls".

Trolls are merely shell companies that file lawsuits, collect money, and distribute proceeds to patent owners. They enjoyed many advantages - few documents to produce, and most can be reused against new defendants in later cases. They demand settlements, knowing that defending lawsuits can be more expensive than settling. Many trolls try hard to settle before a case even goes to court.

Good patent-licensing rewards individuals and companies for their inventions. Trolls are different. They send demand letters to thousands of supposed patent infringers, sue everyone in sight and let the grind of litigation soften them up for settlement.

In three quick strokes, the Supreme Court made things better. The recent rulings did not involve trolls, but they affect them.

  1. Lower courts were instructed to apply a traditional test before entering injunctions. Trolls can no longer count on getting injunctions, even if they win their cases.
  2. It's now harder for trolls to wage licensing campaigns. Previously, trolls could send letters to targeted companies, putting them on notice, and at risk of being found "willful" infringers facing triple damages. Now a company receiving a letter offering a patent license may simply file a local lawsuit in response, removing the risk.
  3. It's much easier to find that a patent should not have been issued in the first place, or that it should be declared invalid. "Obvious" inventions are no longer entitled to patent protection.
Hooray for the demise of "trolls"! Hey, does anyone know what happened to Solaia, the scourge of automation companies? If you have additional insights, please let me know.

Click Supreme Court to "patent trolls" - your paydays are numbered

Click Solaia Patent Bust

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US education value fizzles

Globalization and technology together are creating big changes in how work is done. Knowledge work can be broken into smaller tasks and redistributed around the world. And the rapid growth of virtual offices is transforming what it means to be "at work".

There's a mixture of enthusiasm and fear for what's happening. American jobs are becoming more interesting and complex, while supposedly rote tasks are moved offshore, or eliminated. At the same time workers are pushed by competitive pressures that leave little time or room for creativity and innovation.

Employers are seeking knowledge workers with higher levels of education. But these jobs are increasingly filled with foreign workers brought in on work visas - and American employees often train the lower-paid foreigners who take their jobs. So degreed people compete for fewer high-paying jobs and many end up working in service jobs at vastly reduced pay.

The latest report from the Bureau of Labor Statistics shows that the real wages and salaries of US civilian workers are below 5 years ago. There are persistent signs of a gloomier outlook. In 2006, US job satisfaction plummeted to a record low. Workplace demands have increased tremendously, especially as technology (email, cellphones, Internet) makes it ever harder to get away.

Two decades of rising incomes for educated workers have come to a halt. When adjusted for inflation, the real wages of US workers with at least a bachelor's degree are barely higher than they were in 2000, an unpleasant surprise in a world in which education is seen as the route to success.

Wage stagnation, combined with 60% rise in college tuitions since 2000, seems to discourage many young Americans from getting a college education. The next generation of young Americans may actually be less educated, creating a growing gap between the kinds of people companies need and the workers who are actually available.

As a result of these shifts, knowledge work is increasingly going offshore, where lots of upwardly-mobile knowledge workers are available to generate quick results.

Click Which Way To The Future?

Click The end of work as you know it

Click The Future of the Workplace: No Office, Headquarters in Cyberspace

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Merle Borg [merleborg@cox.net] feels that current US problems require more than just raising taxes:
    "Raising taxes IS a political act, but this alone won't solve the underlying problems. It has to be done along with lowering expenditures. And this won't be done while it is possible to have 'earmark' spending inserted into legislation.

    "Earmarks are how politicians reward their political base. It allows them to milk the cow while we feed it. This is what tempted the ruling Republican party to abandon it's traditional fiscal responsibility. It is doubtful whether the soon-to-be-ruling Democratic party will fix it, once their feet are firmly planted in the government trough.

    "Earmark-spending is the most serious structural flaw in our system. It has given special interests - such as military/industrial and pharmaceutical and oil/energy - far more power than they deserve. This inflated power financing Israeli and Christian fundamentalist fear and fervor has led us into our current disastrous war, an act of brutal stupidity that has destabilized the MidEast, weakened our nation, and unraveled a century of good will among our friends and neighbors. This war will take the lives of millions of innocent people before it can be sorted out.

    "There may well be other causes for the 'Good America' and the 'Bad America'. But the power that 'earmark spending' gives sitting politicians produces a fundamental conflict of interest between the nation and it's government. Such a system cannot long stand."

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Stanley J Abbot [sjabbot@juno.com] wants a better way to find candidates than the current polarized system:

    "The two political parties have become really confused and confusing. It seems there's too much at stake for real change.

    "I believe that if there were to arise somehow a pro-life Democrat the voting demographics would change dramatically. There are those of us who agree with many of the issues of the Democrats, but cannot support abortion. In a discussion with my pro-choice cousin regarding this as a litmus test, we were able to come to an understanding that there are those that feel that this issue is as serious, if not more so, than slavery.

    "How about coming up with better and more reliable ways of voting? It's difficult because we must vote for the person and their bag of values. Wouldn't it be helpful to be able to say, I'm voting for this value but not that one? Perhaps in an election we could vote yes/no for a set of issues rather than the person, and the person elected is the one that matches the results in the best way. Or there could be footnotes: I'm voting for you but I don't like your position on..."

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Rick Lamb [relamb@MidTechV.com] keeps thinking about work-ethics and asymmetric motivation:

    "The American Dream comes out of the fact that this is the land of opportunity. You have the POTENTIAL to make something of yourself, to get an education, to get a job, to learn more, to move yourself up, to provide a product/service/idea that others find valuable and are willing to pay for.

    "If you just want to be a mainstream consumer, show up for your dead-end job, spend your money on ring-tones and cheap Chinese goods from Wal-mart then you'll just end up living paycheck to paycheck while your job goes offshore to somebody a little more motivated. You'll be eking along while the super rich get richer off your credit card interest, and your desire to consume rather than to contribute.

    "I think a lot of America's problems are that we're too used to the 'good life'. Increasingly I see middle class parents taking more and more care of their kids to the point of really spoiling them. Giving them things, not riding them to be their best, not setting a good example of working hard and saving. As a result, people are getting lazy. We aren't bettering ourselves, we're relying on somebody else to take care of us. We're stuck in a cycle of wanting to satisfy our immediate needs of consumption, instead of working/saving/investing in the future. So those who actually are successful can make a killing off the unmotivated masses.

    "I think the 'asymmetric motivation' is one of the factors behind many failures. In the case of us folks here in the Industrial Midwest, most of our parents had solid steady jobs in post WWII manufacturing plants. The next generation enjoyed a lot of the benefits without having to sacrifice or struggle too much. Our right to consume overshadowed our obligation to produce or adapt.

    "The rest of the world saw what we had and wanted to get it too. They're a little more motivated to get it, than we are to keep it. We've got enough man-hours, we've got enough unused brain capacity. We just don't have the discipline and motivation that it takes to do better."

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