Tim Wu is a law professor at Columbia University. He ran for Lt. Governor in New York on a progressive ticket with Zephyr Teachout.
On April 24, 2012, the Federal Trade Commission, the nation’s principal gatekeeper for health care mergers, published an innocuous-seeming notice granting a request for “early termination” of its review of a $108 million health care acquisition. Newport Medical Instruments, a small developer of cheap, portable ventilators, was being acquired by Covidien, a much larger American company headquartered in Ireland for tax purposes. Covidien makes, among other things, larger and more expensive ventilators.
The government’s review was not extensive. One of the lawyers involved, a former F.T.C. staff member, notes that he successfully steered the merger through the F.T.C. “without second request” — without extensive review.
We now know that approving that merger without conditions had severe costs. It would cripple what had been a prescient federal program, begun in 2007, to build an emergency stockpile of up to 40,000 portable ventilators with the eventual help of Newport Medical Instruments. But Covidien terminated the project, apparently in large part because it was insufficiently profitable.
That cancellation set back the federal ventilator program by at least seven years. In fact, 13 years later, in the midst of the coronavirus crisis, and despite a new contract with another company, not a single ventilator has been delivered.
It is easy to criticize the F.T.C. for missing the dangers to public health in the Newport merger. But it’s a mistake to see the episode as an isolated blown call or a case of insufficient diligence. The real problem is that United States’ approach to corporate consolidation is broken, and nowhere is this more clear than when it comes to health care. As it stands, the F.T.C.’s power to review mergers takes little account of what makes health care different from other industries. And tragically, the Newport merger is only one in a long line of disasters.
The Federal Trade Commission is staffed by skilled lawyers and economists who try their best, within their authority, to stop the worst abuses. (I’m biased: I was at the F.T.C. from 2011 to 2013.) But the agency’s own rules treat the market for ventilators as little different than the market for, say, bowling balls. The scope of review is too narrow for the concerns that arise when it comes to potentially lifesaving products like ventilators, pharmaceuticals and hospitals. In fact, in the Newport case, even if the lawyers had suspected Covidien’s motives, there was probably little under existing law that they could have done.
The problem is systemic. Consider that over the past decade, the F.T.C. has found itself largely unable to stop another abuse: the transfer, by large pharmaceutical companies, of individual drug brands to tiny companies that subsequently raise the prices of the drugs by factors of thousands. (The F.T.C. has the power to review transfers retrospectively and undo them.)
Perhaps the most notorious example was the sale of Daraprim, a drug used to treat a life-threatening parasitic infection, from Impax Laboratories to Turing Pharmaceuticals. Turing raised the price of Daraprim from $13.50 to nearly $750.
And Turing isn’t even the worst offender. For $100,000, a company named Questcor bought from Aventis the rights to a $40 treatment for infantile spasms. Questcor jacked up the price by an astonishing 69,900 percent — from $40 to an $28,000. (A company that bought Questcor in 2014, Mallinckrodt, jacked it up even more, to $39,000.)
In most markets, such exploitative tactics are difficult to sustain, because customers would revolt. But health care markets are different. For many drugs or treatments, there are no realistic substitutes. And the markets are further complicated by insurance and government involvement — and ultimately, by the fact that we care about human health in ways that are hard to quantify.
Perhaps the greatest calamity, in terms of harm done, has been the F.T.C.’s inability over the past two decades to stop hospital consolidation, despite its best efforts and growing evidence of negative effects. In theory a hospital merger might produce welcome efficiencies, but in practice too many hospital mergers tend to yield higher prices and lower quality of care (measured by morbidity), not to mention bed shortages. After a bad hospital merger, patients pay more and die more.
To its credit, the F.T.C. has tried hard in this area, litigating aggressively to stop the most outrageous hospital mergers. Yet despite notable victories in court, the agency’s case-by-case approach has not effectively stopped the waves of hospital consolidation.
Very few observers who are not on the industry’s payroll find it easy to defend what has happened over the past decade when it comes to health care mergers. Action is overdue. The F.T.C. might, as Commissioners Rohit Chopra and Rebecca Slaughter have urged, dig deeper into its own authority and begin writing special rules for the worst abuses. Congress, which is considering the first major antitrust overhaul since 1914, might create special scrutiny for health care transactions, sensitive to their broader effects.
What’s certain is that we can do better. In an alternative universe, the F.T.C. lawyers scrutinizing the Newport deal, equipped with greater authority and resources, might have flagged the acquisition as suspicious, consulted the Department of Health and Human Services and made the deal contingent on full performance of the federal contract for ventilators. And now, instead of squabbling for supplies, we might be facing the coronavirus crisis with a stockpile of new ventilators — grateful for the foresight of the federal government and the vigilance of the F.T.C.
Tim Wu (@superwuster) is a law professor at Columbia, a contributing opinion writer and the author, most recently, of “The Curse of Bigness: Antitrust in the New Gilded Age.”

But the agency’s own rules treat the market for ventilators as little different than the market for, say, bowling balls.
It will not escape the notice of most readers of this blog that the sentence could easily be rewritten
The oligarchs’ and think wankers’ arguments treat the “market” for education as little different than the “market” for, say, bowling balls.
But let’s think for a moment about all the politicians and economists who approve of the kind of thing that Mr. Wu writes about above. All those dead people? Well, those are “market efficiencies.” Don’t be all crybaby about it. When babies die because parents can’t afford what used to be a $40 treatment but now costs tens of thousands, that’s nature’s way.
When grifters run proprietary colleges and saddle their unemployable former students with hundreds of thousands of dollars in debt, that’s nature’s way.
When Trump starts a “university” and cons people out of thousands and thousands of dollars with a promise to teach them the secret to riches in real estate, that’s nature’s way.
We operate in a free market. That’s one in which the bigger lizard can eat the smaller ones at will.
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For example, the more lizard-like the brain of the economist, the more likely that he or she will be appointed to a chair in an economics department endowed by the Waltons. It’s nature’s way.
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Or Koch or Arnold.
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For decades, consulting firms made a killing peddling “Lean JIT” (just in time production inventory and other supply chains). JIT, which could have stood for Joyfully Ignoring Transience, or Unpredictability.
Hubris kills.
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On the 50th anniversary of the S&P Stock Index, 70 percent of the companies originally on the index no longer existed. The primary reason for this breathtakingly high failure rate was that they didn’t foresee some major change. “On the seventh day, God created Smith Corona,” the company’s ads used to say. Then, on the eighth, God created computers, which replaced typewriters. Oops.
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“The problem is systemic.’ It is time to revamp our health care system, and our democracy in general. We have been shrinking the size of government to the point where it can no longer function, and it has all been done to benefit corporations and the 1%. We need to restore balance to the public sector, and give it some regulatory power. Our income inequality has resulted in too much power placed in the hands of corporations and the 1%. Oligarchs are calling the shots, not the people. Voting is more important today than ever. It is the only way to work for change. We cannot afford four more years of unhinged conservative rule.
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Unhinged. Precisely the right word.
Unless, of course, one is thinking of rule that slams the door on the lives, liberties, and aspirations of all but the few. That door has strong new hinges and locks.
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The Federal Trade Commission is staffed by skilled lawyers and economists who try their best, within their authority, to stop the worst abuses.”
If that’s their best I’d hate to see their worst.
The FTC has essentially been “asleep at the switch” for a very long time and not just on this issue
https://www.seattletimes.com/business/data-privacy-abuses-prompt-calls-for-federal-trade-commission-to-bare-teeth/
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Privatize the profits and socialize the losses. The healthcare industry has been privatized for years and the public hasn’t fully realized until now. Every piece of healthcare…insurance, medication, hospitals, equipment and even staff are part of the Privatized health industry. MEDICARE FOR ALL!!!
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I had to stop reading this post after
And Turing isn’t even the worst offender. For $100,000, a company named Questcor bought from Aventis the rights to a $40 treatment for infantile spasms. Questcor jacked up the price by an astonishing 69,900 percent — from $40 to an $28,000. (A company that bought Questcor in 2014, Mallinckrodt, jacked it up even more, to $39,000.)
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Wu is delusional if he actually believes the FTC does the best they can within their authority.
But denial is the way some people deal with cognitive dissonance.
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Orphan Drug Laws allowed this to happen. The FDA is in on it, too. When my mother was alive, her Gout medication that she paid $12 for a 3 month supply was pulled from the market. 6-12 months later it was re-released with a new name but NO new formulary and a cost of $375 per month…… after her insurance payment!!!. She couldn’t pay so she didn’t purchase the meds and had numerous bouts of painful Gout. I eventually found the paperwork (with help from a very nice Pharmacist) to apply to get her the drug at reduced cost or for free. It’s fortunate that I worked in healthcare my whole life or I would not have known what to do or where to start. It was a continual round of paperwork and red tape that I had to keep on top of. The Drug companies make it as hard as possible and then they sell their company/rights to a Chinese manufacturer of the drug and it gets even harder to keep up with the paperwork. The greed of it all is just so sickening.
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Obama presidency and regulatory capture=the fix guarding the henhouse. All five commissioners who presided over the Covidien case eventually left the FTC for major private law firms with significant corporate antitrust practices. The chairman at the time, Jon Leibowitz, became a partner at Davis Polk, a firm which boasts its lawyers’ “substantial government experience” in obtaining merger approvals.
https://prospect.org/health/men-and-women-who-shrank-the-us-ventilator-supply/
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The fix: The Obama administration’s January 2011 executive order directed Cabinet agencies to develop and submit plans for reviewing, modifying, streamlining, and repealing unnecessarily “burdensome regulations”.
https://obamawhitehouse.archives.gov/the-press-office/2011/01/18/executive-order-13563-improving-regulation-and-regulatory-review
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This post exempllifies what I have been saying for several years. Notice that the countries with high PISA scores were able to contain/track infected individuals. Please compare infection rates from South Korea, Taiwan and Singapore and also death rates with USA. Diane, do you now agree that countries that test well in real world situations tend to do better in real world situations?
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I see an almost peer reviewed, science-based paper coming on titled “On the correlation coefficient between PISA scores and COVID-19 death rates”. I am sure, there is even a million-dollar grant down the line for such research.
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