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Pharmaceutical Cartels Put On Notice as Insulin Gets Capped.
Highlighting The Key Economic Issues Facing The US.
Here is what we will be getting into today:
Cutting Insulin Prices and Challenging Pharmaceutical Cartels.
Inflation, Negative Wage Growth, and the Need for Infrastructure Investment: Key Economic Issues Facing the US.
Ensuring Competition and Innovation in EV Charging Infrastructure.
Let's Dive In!
Title: Did Lina Khan Just Slash Insulin Prices?
Here are the key highlights:
In 1922, scientists created artificial insulin which made it possible for patients with diabetes to live long and healthy lives. However, since the 1980s, the cost of insulin has skyrocketed due to monopolized economy and a lack of competition. In 2021, however, Eli Lilly announced that they will be cutting the list price of their insulin by 70%, which is a stunning and important news. This news has reverberated far beyond insulin markets and has caused policy changes such as caps on out-of-pocket costs for Medicare recipients, lawsuits against insulin producers, and initiatives by state governments to make their own insulin.
In November 2022, Sean Morrow of More Perfect Union had impersonated Eli Lillys corporate Twitter account and tweeted “We are excited to announce insulin is free now” - showing just how desperate people are for more affordable insulin. The tweet spread like wildfire in the media and sparked public outrage that has led to policy changes like caps on out-of-pocket costs for Medicare recipients, lawsuits against insulin producers, and initiatives by state governments to make their own insulin.
The high cost of insulin became an issue in the 1980s when monopolies started forming in the pharmaceutical industry. Pharmaceutical companies were offering rebates and fees to pharmacy benefit managers (PBMs) in order to favor high-cost drugs - a practice which could violate antitrust laws. PBMs then use this bargaining power to increase prices instead of bringing them down - meaning that pharmaceutical companies only received 47% of revenue from their products while PBMs received 53%.
The Federal Trade Commission (FTC) has taken action to revive laws against anti-competitive practices, particularly in the insulin market. Eli Lilly, a pharmaceutical firm, has decided to break from the cartel and compete on merits by cutting prices and capping payments for customers. This move is likely to put pressure on other drug makers to follow suit, while also hurting middlemen such as PBMs who are used to receiving high rebates off of inflated list prices.
However, there is still much more work that needs to be done - particularly with regards to Sanofi and Novo Nordisk who still control nearly 70% of the market - if we want to see real change in this area. It will also be interesting to see how PBMs react to this move and whether they will take steps such as moving Lilly's products off their formulary in response. Ultimately though, what this news shows is that progress can be made when companies are willing to break away from cartels and compete on merit instead of relying on kickbacks from middlemen like PBMs. It will be exciting to see if other firms follow suit or if more legislation needs to be passed before we can truly see an end to these anti-competitive practices.
YouTube Channel: Wall St For Main St
Title: Nobody Special Finance: Global Japanification Problems? Japan's Gvnmnt Financing Issues Are Here?
Here are the key highlights:
Japan plans to double its military spending over the next decade, but financing challenges may arise due to its reliance on artificial low interest rates and quantitative easing. Japan's debt-to-GDP ratio is significantly higher than the US, and it cannot afford to allow any increase in interest rates. Furthermore, Japan needs to attract qualified foreigners to support its economy due to declining birth rates.
Governments need to prioritize reducing spending and potentially raising taxes. Better regulation and oversight are necessary, as exemplified by recent crackdowns on cryptocurrency and the need for improved regulation in the wake of insider trading. The metals market is transitioning to cryptocurrency, and the use of a FED coin may require the elimination of all other options.
While nuclear power plants can power our society, proper construction and regulation are necessary to prevent disasters. SMRs offer an efficient alternative to address weak points in the power grid. Stable power supply is crucial, highlighting the need for a change in policy to address infrastructure investment and regulatory issues. It is crucial to keep energy consumption cheap and plentiful, without raising prices that could hurt small businesses.
Inflation rates are high, and real wage growth is negative. Both political parties need to focus on cutting spending and providing value to the economy. Investing in infrastructure and reducing foreign aid to Ukraine could help improve the economy. Hedging with commodities is a way to protect oneself from the effects of inflation. The oversupply of oil in the market has led to a pile-up, which could have negative consequences.
The Federal Reserve is considering buying commercial real estate mortgage-backed securities to prop up the market and prevent bankruptcies for companies. Despite the increase in government spending, tax receipts are likely to be substantially lower this year. There is also concern around potential fraudulent accounting practices used to plug financial holes in the government's budget deficits. Additionally, the subprime auto loan bubble is likely to collapse, leading to high car payments for some professionals who are already burdened with student debt and expensive housing costs.
Newsletter: Knowledge Problem
Title: Should regulated utilities be prevented from owning EV charging assets?
Here are the key highlights:
The electric system is undergoing significant changes with the emergence of new technologies such as generation, storage, digital devices, and electric vehicles (EVs). These innovations reduce transaction costs and can lead to the formation of new markets. However, vertical integration remains persistent in many states, which could lead to anti-competitive effects if not regulated properly.
Vertical integration is a business model where one company controls multiple stages of production or distribution within an industry, which utilities have used for decades to control electricity delivery and pricing. While this model has its advantages, it also has drawbacks when it comes to competition and innovation. This business model can give utilities an unfair advantage over independent firms that lack the same level of access and control over the market.
The emergence of EV charging infrastructure presents a particular challenge for regulated utilities. With the increasing popularity of EVs and their growing market share, utilities have incentives to enter this market by proposing to build EV charging infrastructure in competition with independent firms. However, if utilities are allowed to rate-base these assets, it could give them an unfair advantage by underpricing competing firms, leading to anti-competitive effects that ultimately hurt consumers by limiting choice and innovation.
To ensure fair competition in emerging markets like EV charging infrastructure, regulators must ensure that any entry into this market is done in a way that protects consumers from anti-competitive practices while still allowing for competition and innovation. It is essential to encourage independent EV charging companies to compete with utilities in the EV charging market to promote innovation and consumer choice.
Innovation among independent EV charging companies has been remarkable, as seen through their development of new products and partnerships with other businesses. These companies are essential for a competitive market for EV chargers, and they should be encouraged to innovate to provide resources in their highest-valued uses for consumers. Quarantining the monopoly of regulated utilities through contract rather than ownership will create a level playing field that allows these independent companies to compete fairly and continue to bring their innovative ideas to the market.
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