by Tyler Cowen
on June 22, 2013 at 12:32 pm
1. Would you settle for a flying book? (video)
2. Bank notes featuring scientists and mathematicians.
3. Pigeon birth control.
4. How an old bottle becomes a new bottle.
5. Are L.A. restaurants better than NYC?
6. Who is smart enough to buy generics?
I think the link for #6 is wrong
yes, admin still needs to correct this on the front page – still wrong link on Jun24.
#6. All it usually takes is a nudge. For example, there are automatic generic substitution laws for prescription drugs in most states. You or your doctor can get the branded version, but it must be requested. But the large majority of consumers do not go out of their way to request the brand name in those cases–they just accept the generic that is dispensed to them. That implies that people do really know the generics are just as good as branded drugs. Another factor might be that the difference between branded and generic drugs available OTC might not be as large as the difference in co-pays between branded and generic Rx meds. It does make me think that I should consider switching to more branded food products.
“Who is smart enough to buy generics?”
I think their names are “the thousands and thousands of American Ranbaxy customers.” How bout we either (a) allot the massive amount of additional money needed to regulate foreign generics at the level of domestic, or (b) stop putting them in the same category and place massive restrictions on their sale? Two options likely to find tremendous support among the present US congress, no doubt.
The prescription drug user fee act that was reauthorized last year, FDASIA, does just what your letter A suggests. See the Quality section of this: http://www.fda.gov/RegulatoryInformation/Legislation/FederalFoodDrugandCosmeticActFDCAct/SignificantAmendmentstotheFDCAct/FDASIA/ucm310992.htm
Why do you think most generics are made in different places than the brand names?
This. I don’t think you’ll find many Hatch-Waxman litigators that will acceptc a generic. I certainly don’t. The generic often isn’t the same as the branded drug – different excipients and, in some cases, a chemically distinct API (e.g., a different polymorphic form of the API than that used by the brand). For bioequivalence, FDA only looks at dissolution profile and plasma curves. API identity is supposedly validated by the tests listed in the pharmacopeias, but those tests may not be enough to give visibility to differences in the purportedly identical generic API.
Oh, good, we can further spread about a chemical that interferes with mitochondria and the membrane of the egg. Already used in broiler chickens (it’s o.k., they have to wait four days after the last dose before butchering them to feed to us) to disrupt parasite eggs, and in controlling goose populations.
You know what a sane country would do with too many geese and pigeons? Eat them.
FTA #6: “There is no difference between the two products, other than the brand name. The dosages are the same, as is the active ingredient…”
This confidently-relayed assumption should be further examined.
(1) There is a always a chance in medicine that the ‘inactive’ ingredients, used for volume/delivery/shape/etc, also affect the benefits delivered, and off-brand formulations may vary such that their effects are not identical to the tested/experienced effects of other pills with the same ‘active ingredients’.
(2) Suggestive/placebo effects are important, and I would suggest especially for in transient and subjective symptoms like headaches. Having ‘the’ most-well-known, most-advertised, and not-cheapest pill may enhance faith in its effects, and thus its effects.
(3) The major-brand pills often have the most distinctive containers and pill coloring/shape/marking. This offers both an avenue for triggering the suggestive effect (2) above, and tangible utility: it’s quick and easy to distinguish the pill from other pills, or the bottle from other bottles. (Off-brand ibuprofen, acetaminophen, aspirin, allergy medicine, etc. often comes in very similar bottles/pills, but motrin, tylenol, bayer, zyrtec stick out on a shelf or in a pill case.) If your time is valuable, or your sight is weak, this could justify paying extra.
(4) If “brand is promise”, and other regulations or quality-controls or liability-assignments sometimes fail, a consumer might expect an off-brand to be more likely to suffer manufacturing problems or tampering, and afterwards simply disappear/shut-down. Big brands have a reputation to defend and can be found and sued after any incident. They’ll then try to prove they’ve improved, and at all times have a private incentive to prevent others products, with or without their ‘active ingredients’, from being labelled as coming from them.
Each of these potential mechanisms justifying a somewhat-rational preference for branded medicines could be tested, informally or rigorously.
I think you can amplify all of the above when the medication is a particularly vital one. If you like your chicken soup you may overcome any one of the above in order to give a shot at a generic, knowing you’ve had a bad meal if it doesn’t work out and you have to go back. But if your heart medication or insulin works, you are unlikely to switch medications unless you think you can get a *better* result — you’re not going to risk getting a worse result, even for one day.
The blood sugar testing strips we use are a great example, test strips cost $1 each retail. Walmart has developed a generic that costs a quarter of that. I don’t know anyone with Type 1 that would use it, because the accuracy isn’t as proven and you just don’t want to risk a hospitalization for those savings. But a Type 2 might use them, because accuracy in testing is not as essential (most don’t dose insulin based on a number, just monitor progress with them).
I generally agree with what you say, but on (1) keep in mind that branded drug makers also change their inactive ingredients and suppliers, even their manufacturing processes, quite frequently. So the variation is not just across brands but within them as well.
Do generic cornflake or puffed rice or rolled oat makers change their ingredients or manufacturing process frequently? How about frozen peas or corn?
Even the generic soup makers – why would they change things frequently?
Why would an aspirin maker change things frequently?
I grew up in the 60s when people were opening food coops which drove grocers to add bulk commodity bins. Those had their problems, so the use of generic packaging of commodities was an obvious alternative, with lots more potential.
And before that, Bayer being Nazi lost all its assets in the US including its brand: Aspirin, so lots of US drug makers were free to sell the brand Bayer created. But that wasn’t the only one. Bayer was forced to rebrand their most profitable product from Aspirin to Bayer…
You forget that the brand maker is changing their products and the manufacturing, and generally more rapidly than the generics. Look at the history of Coke and Pepsi. Their products are nothing like what they were in the 50s or the 60s or 70s. They aren’t even the same from one region or nation to the next? I loved when I travelled in some regions how Coke was much more highly carbonated, at least when Coke had not bought most of its franchises.
You are simply trying to justify your irrational behavior.
Btw, I’m not saying their are no differences – I much prefer the Wal-Mart GV frozen corn to any other brand or generic corn I’ve tried, at least in New England, and this is my consistent experience over the past 10-15 years at least.
Did you misread what I wrote? I said _branded_ drug makers change those things all the time, because the above commenter seemed to imply some superiority for branded drugs. However, it actually applies to both generics and brand-names. It is because suppliers go out of business, they get a better deal from on excipient source, implement an efficiency in manufacturing process, etc.
Branded drug makers change less often than you think. Every change to the process has to be approved by FDA. On a related point, you’ll also find that muchof the research done on many pharmaceuticals uses the branded drug (it provides consistently, and the brands are generally willing to supply it free or at a steeply reduced cost to researchers).
Gorden is right; in debates about the FDA, the first thing people say is “what’s to stop pharmaceutical companies from putting weird crap in their products if the government doesn’t regulate them?”
The branded rent stream is capitalized into brand equity, creating a large bond held by Bayer as a commitment device. It makes sense for consumers to deviate from trustworthy brands only when they have enough industry-specific information to do so.
Tyler’s clearly being a Straussian troll: his implicitly derogatory word choice “Who is smart enough”, rather than a more neutral “In which industry contexts are various experts well-informed enough”, may seem to lower the status of brand-name buyers. Yet brand equity enables one of the important decentralized commitment strategies necessary to sustain the anarchist utopia he secretly espouses–it’s unlikely that he’d lower the status of such a mechanism. Add that to his dislike of conflating questions of status and questions of fact (i.e. “mood affiliation”), and it’s unlikely that the derogatory frame is genuinely his opinion.
Can I just pass on my thanks to you, Alex, and to Gordon Mohr above. I have worked in advertising for 24 years; in my spare time I regularly trawl economics blogs, partly just to get myself angry – something I find motivating. This is is the first time in years I have seen anyone on such blogs understand the game-theoretical role brands and reputations play in ensuring product quality (or at least, for satisficers, the absence of product crappiness).
Because mainstream economics generally creates its models for a fantasy world of perfect information, perfect perception and perfect trust, it has in effect created a model where marketing, commitment devices, costly signalling and so forth should not exist. This This is a serious problem. I would suggest that research into the placebo effect might pay far higher dividends than the same amount spent on pharma research.
Large, coloured, branded pills usually work better than small, white unbranded pills, even if the chemical contents are identical. This isn’t a problem: it’s a useful scientific finding, surely?
“Yet brand equity enables one of the important decentralized commitment strategies necessary to sustain the anarchist utopia he secretly espouses.” Who are you, Alex A? This is the best sentence I have read all year. If I had known it when I started work 24 years ago, I could have saved myself a couple of decades of grief!
Consider this in the realm of the apocryphal, but I was told in England that the reason the two pound coin has etched on it “standing on the shoulders of giants” is a tribute to Newton’s role in developing the grooved edges to foil penny pinchers.
Back in the day it was common to recycle milk bottles and soda bottles – used to reused. And beer bottles. Beer bottles in particular were (still are some places?) made in a common shape for the bar trade. Beer distributors picked up the empties when they delivered the beer.
Part of the amusement of living in Canada for me was bringing back a case of empties to Brewer’s Retail when I was restocking.
Yes. Remember those old thick Coke bottles? It used to be said, perhaps unreliably, that they were refilled 40-50 times on average.
Bottles had city names on the bottom. I suppose it was the site of the bottling plant that initially ordered them. But of course they moved around the country as they were reused, and a common small stakes gambling game was betting on whose Coke bottle originated the farthest away.
Probably the most extreme reycling was done by the old At&T (not the new AT&T that bought the name when the old one went bankrupt). Your new-looking Western Electric phone seldom had new parts in it, except the cord. The plastic shell was stripped and repainted, and all of the electronic components were reused. If you took apart a phone received in the 1970’s, the date codes on the parts inside were often from the 1950’s. The old AT&T was an outstanding company — the opposite of the slimeball company using the name today.
The start of that video annoyed my where she made it seem as if glass recycling is something new and all we did in the old days was to crush and landfill.
Is it actually more efficient to collect used bottles, put them through a crushing/separating/re-manufacturing process than to simply wash and refill them? I’ve always suspected that the unions that represent bottle manufacturing employees were behind this type of re-cycling.
6. I’d wager that anyone who knows what the word “acetominophen” means likely buys all generic drugs. But I also think lots of bargain shoppers have picked up on the store brand medicines labeled “compare with”.
I have to admit though that the pretty candy coatings are preferred, and when they go on sale I pick them up much to the chagrin of my penny pinching wife.
#2: Their list included some non-science/math types, so they ought to have included the 50 pound note issued by the Clydesdale Bank in Scotland, which feature Adam Smith.
(According to Wikipedia, in addition to the Bank of England issuing pound sterling notes, several private banks are permitted to issue their own bank notes: http://en.wikipedia.org/wiki/Banknotes_of_the_pound_sterling)
#2: On page 3 of the link are several bills honoring Tesla:
Nikola Tesla, 10000000000 Yugoslavian Dinar (1993)
Nikola Tesla, 5000000 Yugoslavian Dinar (1993)
Nikola Tesla, 100 Yugoslavian Dinar (1994)
Nikola Tesla, 100 Serbian Dinar (2003)
Nikola Tesla, 5 Yugoslavian Dinar (1994)
A complicated bit of history is represented by these. It’s a bit amusing that the higher the denomination, the more old and wrinkled Tesla looks.
@mkt: The Clydesdale Bank bill with Adam Smith is there, on page 4.
Adam Smith, 50 Britsh Pounds, Clydesdale Bank, (2003)
Why was Jefferson included in the scientists/mathematicians on money list? I wasn’t aware that Jefferson actually performed any research.
I quite definitely agree with 5. I’m personally trying to make the case that San Jose has better food than San Francisco, which will get you lynched in San Francisco. The case is that San Jose has a larger ethnic population – particularly Mexican and Vietnamese – that translates into better availability of spices or take-home ingredients (the take-home mole at the San Jose Flea Market is amazing). It’s also closer to Monterey which has probably the best Mexican food north of San Diego. And there are a few weird places like the Chinese-owned Cajun shrimp place (which tastes more or less like Sichuan hot pot).
Though of course the selection of wine and cheese in San Jose is nowhere near as good as in San Francisco, and the Italian restaurants in San Francisco are all excellent, where in San Jose they’re generally mediocre.
Los Angeles is so large that you can find anything there, for relatively low cost. Which is great if you have time to explore.
Links 5 and 6 take me both to the same page (5). Is it only me?
#5: This seems obvious. Restaurants in New York pay higher rents than in LA, and their staff face higher living costs too. Your $15 budget meal in New York is made up of $5 in wages, $5 in ingredients, and $5 to pay the rent, tax, electricity, etc. The equivalent restaurant in LA pays less in rent, so it can afford to spend more on ingredients and/or better chefs. So that $5/5/5 split becomes maybe $6/6/3. A couple of extra dollars go a long way in budget food.
Its really nothing more than what Andrew M. says. Actually I’ve noticed a deterioration in quality in New York restaurants over the past few years that seems directly tied to the rising commercial rents. This sort of thing could be imaginary, but its the type of intersection of economics and culture that this blog normally does well at.
I have not eaten enough in LA recently to make that direct comparison, but while there is much diversity and plenty of good food in NYC, there is also a strong tendency for many of the restaurants, including the top end ones, to be both overpriced and overrated.
I’ve eaten high and low, though probably not quite the variety of the author. My money stands with Portland. We have a food culture that rewards experimentation, and rents to keep it available.
But I’d argue that LA’s driving culture encourages travel to far-flung destinations more than New York’s subway system. You can always take a detour when you’re in a car, but there’s a good chance your MTA routine never takes you near the 7 train to Flushing. For that reason, LA’s geography is more democratic than New York’s;
“But I’d argue that LA’s driving culture encourages travel to far-flung destinations more than New York’s subway system. You can always take a detour when you’re in a car, but there’s a good chance your MTA routine never takes you near the 7 train to Flushing. For that reason, LA’s geography is more democratic than New York’s;”
I have never thought of this before. I know that the US is a driving culture to be sure. But I never thought of cars as being more democratic than trains. I love when a seemingly innocuous specialized article gives me a new perspective on the big picture. Great find.
Please, someone invent something like this for rats and mice. Please.
Comments on the 20 January, ‘Why is there still inflation in Greece’ are closed. So I’ll post the answer here: at the moment there is actually 2,6% deflation. http://rwer.wordpress.com/2013/06/23/the-low-real-level-of-inflation-in-the-eurozone-and-the-uk/
Q: Do the stores make more money/profit/margin when a generic or branded is purchased? It might make a difference in how it is displayed in the store and impact sell-through.
It goes beyond merely rewinding and forwarding the show.
If you have a multimedia room and you have placed this type of Pioneer Plasma HDTV in a
dark room like those in home theaters, you can adjust its brightness so it will not strain your eyes
while watching. It is a touching series that I would definitely
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