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Monopolies, Healthcare, and Consumer Protection


It's predicted that by next year, the average Fortune 500 company will spend more on healthcare than it makes in profits.


Thomas Hazlett, former Chief Economist for the FCC, released a study commissioned by XM (XMSR) and Sirius (SIRI) that found a merger would benefit consumers.

It said that the predicted post-merger savings of $3 billion to $7 billion would "permit more aggressive investment in satellite systems and products and prompt competitive responses from terrestrial broadcasters and other rivals" and would "result in a wider array of popular programming to subscribers and in lower prices for the service and receivers."

But, in a letter to the Justice Department, the FCC and the FTC, 72 members of Congress expressed opposition to the merger.

"On its face, we believe that sanctioning the marriage of the only competitors in the satellite radio market would create a monopoly, which would be devastating to consumers," the letter said, whose chief authors were Reps. Gene Green (D-TX) and Jim Sensenbrenner (R-WI).

Would a merger actually harm consumers?

Opinion seems to be split. There is no controversy, however, that lead paint can harm consumers, which was found on 1.5 million Thomas & Friends trains and accessories made in a Dongguan, China factory for RC2 (RCRC), of Oakbrook, Illinois.

The New York Times reported yesterday that China manufactured every one of the 24 toys involved in U.S. safety recalls so far this year, and that China is responsible for 60% of all product recalls today, compared with 36% in 2000.

So, does it run on leaded gas?

The Toy Industry Association says that Chinese toys make up 70% to 80% of the toys sold domestically-a somewhat frightening proposition in light of the fact that the Consumer Product Safety Commission has, according to the Times, "only about 100 field investigators and compliance personnel nationwide to conduct inspections at ports, warehouses and stores of $22 billion worth of toys and tens of billions of dollars' worth of other consumer products sold in the country each year."

"Yeah, we oughta be all set with 100 inspectors nationwide…"

Toys are one thing. Surely there are plenty of eyes watching things like prescription drugs...

Not really. According to James Surowiecki in this week's New Yorker, for every seven FDA employees who work on drug approval, only one works on post-market safety.

The FDA holds all the cards while a drug is undergoing clinical trials, but once it's on the market, it can only make recommendations.

Surowiecki says that post-market surveillance is "left to a motley collection of altruists, academics, lawyers, self-publicists, and drug companies, who make their own arbitrary decisions about which drugs to study, how to evaluate them, and what risks to look for."

"Hmmm…what do I feel like studying today?"

In other words, it's a "dartboard" approach that catches potential dangers purely by chance. As Surowiecki says, the coronary risks of Vioxx "were discovered only because Merck (MRK), hoping to gain approval for a new use of the drug, happened to run some new studies."

The risks of diabetes drug Avandia were detailed in a recent New England Journal of Medicine report which suggested that it raised the possibility of heart attack by 43%.

The report (which has been disputed by Avandia's manufacturer, GlaxoSmithKline (GSK)) reduced new Avandia prescriptions by 21%.

It also reduced GSK's market capitalization by $12 billion.

As detrimental to one's health as a dangerous drug may be, not having access to healthcare at all can be even worse.

In a policy analysis for the Cato Institute, Christopher J. Conover, an assistant research professor with the Center for Health Policy, Law and Management in the Terry Sanford Institute of Public Policy at Duke University, makes the case that over-regulation is to blame:

"The high cost of health services regulation is responsible for more than seven million Americans lacking health insurance, or one in six of the average daily uninsured. Moreover, 4,000 more Americans die every year from costs associated with health services regulation (22,000) than from lack of health insurance (18,000). The annual net cost of health services regulation dwarfs other costs imposed by government intervention in the health care sector. This cost exceeds annual consumer expenditures on gasoline and oil in the United States and is twice the size of the annual output of the motion picture and sound recording industries."

Christopher Conover

Now, corporate profits are about to become dwarfed by corporate healthcare costs.

McKinsey & Co. predicts that, by next year, the average Fortune 500 company will spend more on healthcare than it makes in profits.

Howard Schultz, CEO of Starbucks (SBUX), estimates spending on health care for its 80,000 U.S. employees to be about $200 million a year--more than the total amount it spends on coffee beans.

How much coffee are people really drinking?

The National Coffee Association estimates average coffee consumption in the United States to be 3.1 cups per day.

Sarah Kerrigan and Tania Lindsey of the New Mexico Department of Health, Scientific Laboratory Division, Toxicology Bureau, cite a report that pegs the average caffeine content of a cup of coffee or tea in the United States at somewhere between 40 and 150 mg.

What 40-150mg caffeine looks like…

However, the Center for Science in the Public Interest shows that a 16-ounce Starbucks coffee contains 550mg of caffeine.

…and what 3.6 to 14 times that does.

How much caffeine do you think a maximum-strength No-Doz tablet contains?


Fast, effective, and safe as four-tenths of a Starbucks grandé

Come on-caffeine's not that bad for you.

The Encyclopedia of Mental Disorders says caffeine is classified together with cocaine and amphetamines as an analeptic, or central nervous system stimulant.


  • People have reported ringing in the ears or seeing flashes of light at doses of caffeine above 250 mg.

  • Studies have found that pregnant women who consume more than 150 mg. per day of caffeine have an increased risk of miscarriage and low birth weight babies.

  • Caffeine interferes with the body's absorption of iron, and with drugs that regulate heart rhythm, including quinidine and propranolol.

  • Long-term consumption of caffeine has been associated with fertility problems and with bone loss in women leading to osteoporosis in old age.

  • Doses ranging from 250 to 750 mg. can produce restlessness, dizziness, nausea, headache, tense muscles, sleep disturbances, and irregular heart beats.

  • Doses of over 750 mg. can produce all of the above as well as a reaction similar to an anxiety attack, including delirium, drowsiness, ringing ears, diarrhea, vomiting, light flashes, difficulty breathing, or convulsions.

Good thing Starbucks provides health coverage to its employees.

Maybe they ought to start providing it to their customers, as well.

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