October 12, 2005

RE: Steve Laffey: “I will never run as an independent”

I like a lot of the answers Andrew describes Steve Laffey as saying at a recent meeting. I also think Laffey is a serious man with many talents, unlike his opponent. With that viewpoint, I want to continue to push on some of Laffey's policy views because I think they still need work.

I would like to hear more about his views on the appropriate role of government. They sound good at a superficial first glance but I am not sure they hold up to greater scrutiny. What makes any of us confident that the government can do many things better than the private sector - or should even try?

More specifically, it is a far different day from Teddy Roosevelt when government was much smaller and the bully pulpit was useful in no small part because it didn't come with a federal government that already controlled 20% of the nation's GDP. It also didn't come with the issuance of tens of thousands of pages of government regulations written by nameless, faceless bureaucrats in Washington, D.C. who have no accountability to taxpayers while they keep churning out regulations without having to live with any of the real-world consequences of their actions.

Bottom line, there is already a lot of government intervention in the economy, most of which only makes problems worse. We need to be cautious about assuming the federal government is focused solely on the public interest. I will accept the interstate highway system idea as a good one from 50 years ago but would like to hear what other specific ideas are appropriate for federal government intervention today. The just-referenced posting provides specific examples of how many of the problems that have been used as a rationale for government intervention were first created or magnified by prior government intervention in the economy.

As a 22-year veteran of the life sciences industry, I found Laffey's answers on the drug industry to be uninformed and still not making sense.

First, the era of "me-too" only drugs is old news and meaningless to the policy debate of today. Me-too drugs were newly developed and approved drugs that showed largely equivalent therapeutic efficacy to drugs already on the market. There was a time when the nth beta blocker drug could make it to the market. Not any more because the formularies that determine reimbursement won't cover most me-too drugs.

Second, the phrase of me-too drugs can be used too loosely to lump all drugs in one therapeutic category into one large bucket. However, to do so would be to say that any new drug in an existing therapeutic area that showed differentially better efficacy should not be developed.

Third, the new era of molecular medicine is taking our rapidly expanding understanding of disease at the molecular level and focusing drug discovery and development on the biological activity and endpoints of disease and not just clinical endpoints used in past decades. This has already led to a number of what are called targeted therapeutics (e.g., Herceptin, Velcade, Gleevac, Iressa) because it is increasingly possible to target sub-populations of people with a given disease for therapeutic intervention. Take the breast cancer drug, Herceptin, as an example. Herceptin works for about 25% of the women with breast cancer, the ones where a particular gene is upregulated. There is a test that can determine if a woman has that upregulation. If so, she gets the drug. If not, the drug will be ineffective and she won't get a prescription for it.

Ongoing breakthroughs in the biological sciences are already beginning to transform drug discovery and development. This is expected to change the pharmaceutical industry model from one focused on blockbusters to what one expert called "mini-blockbusters" based on targeted populations where efficacy for that sub-population has been shown in prior clinical trials. I certainly hope Mayor Laffey isn't suggesting that the federal government can regulate that evolution better than industry.

Fourth, I didn't see any mention in Andrew's posting about importing drugs from Canada. I have previously noted that is a flawed idea and, hopefully, Laffey won't continue with that line of thought. The same posting also notes that everyone likes to focus on the cost of drugs without ever considering the highly relevant economic benefits derived when drugs reduce hospitalizations or time away from productive work in the marketplace.

All these critiques aside, I would now like to see Senator Chafee come before the same group and talk with the same level of seriousness and specificity across the same broad range of issues as was covered by Mayor Laffey in his speech.

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He did mention his plan to allow importation of drugs from other countries, again under the rubric of patent law. His argument is that the patent laws that allow drug companies to charge high prices in the US are not immutable forces of nature, they are laws that exist to balance the general public interest against the innovative interests of the drug companies. Going to a place where the patent laws are different is the short-term fix. Fixing the patent laws is the long-term solution.

I don’t have any industry-specific knowledge about the drug industry, but I do know that in the software business, patent law is generally regarded as a farce that rewards the companies that put the most time and resources into manipulating the law, not the companies that are actually innovating. I also believe that the entertainment lobby has been successful in extending copyright protection, limiting the flow of IP into the public domain, in legislation that serves no discernable public interest.

Given the state of affairs in other areas, I am open to the possibility that America’s intellectual property laws are less than optimal, and the right adjustments might fix some of the problems of high drug prices.

Posted by: Andrew at October 12, 2005 11:02 AM


Patents in the drug industry are quite different and not comparable to software patents. As you note, they don't mean anything much in software; they do mean something in the world of drug discovery.

Mayor Laffey is focusing on patent law when he should be focused on trade practices that have led to government regulation of pharmaceutical pricing. Much of the rest of the world has governments that mandate prices at artificially low prices. If you reread carefully the posting about the drug industry referenced in this posting on Laffey, you will see what that government intervention has done for pharmaceutical innovation outside the USA: Trampled on it. His proposal to import drugs from Canada won't work for various reasons noted and will only serve to trample new drug innovation in the USA. That means less new drugs for Americans and less jobs because the drug industry will have no incentive to continue spending 20% of their sales on R&D - which amounts to well over $30 billion/year. They won't do it because the investment world will not finance a high risk business like drug development when the government sets arbitrarly low prices.

The debate should be about trade practices around the world that lead to government-mandated prices, not patent laws.

Posted by: Donald B. Hawthorne at October 12, 2005 2:21 PM

Andrew, Were you at last nights meeting? Since I was and I was the person who asked the questions about the Oil company commercials and drug companies. Steve Laffey is still much better Republican than Senator Chafee could ever be. Senator Chafee has been invited to come before our group, if he does I would really be surprised. Mayor Laffey answered all our questions, Maybe not the answers most of us would like to have heard but he did not avoid the questions. He is Pro-Life with the exception of Rape, Incest and when it is medically necessary for the mother. Fiscally conservative "with spending". I personnaly do have issues with his immigration policies, but he did state he is a Nationalist.I think when he does become 1 of 100 other senators he will relize that all the things he truely cares about may not all get done. Andrew and Don your letters are great.

Posted by: Fred on the Blog at October 12, 2005 7:35 PM

"Fred on the Blog," I like the sound of that. ;)

Yes, Andrew was there in the corner studiously taking notes. Fred pointed out quite well that Mayor Laffey answered all the questions that he was asked; he didn't try to beat around the bush or change the topic, he just answered the questions; and some of them were pretty tough questions, even from an audience that on the surface might be assumed to be friendly! The way that he conducted himself was extremely refreshing, esp. considering how very little we've come to expect out of our leaders these days in Rhode Island.

As for Sen. Chafee, since we have always held our statewide meetings in Chafee's hometown of Warwick, and have been doing so for nearly five years now, I'd be absolutely stunned, but extremely curious to see if the junior senator would walk into the lion's den.

One thing that I've liked about Mayor Laffey right from the beginning, besides his straightforward speaking style, is that he has Republican principles and beliefs, and is actually willing and able to defend them. He is also committed to growing the Republican Party; from the bottom up, not from the top down. And when his beliefs on a particular topic, for instance on "big oil" or "big drug companies" or "corporate welfare" or something like that, aren't in 100% agreement with the person asking the question, Mayor Laffey didn't try to whitewash his answer, apologize, or back-peddle. He simply re-stated his beliefs, provided a rational basis for having them, and said "this is what I believe." When was the last time you heard that from a "politician?"

If Mayor Laffey wins this race, it will be because he will have put in far more energy into his campaign and rallied regular grassroots support, than his opponents did. It will also be because the electorate realizes that he says what he means, and means what he said. He will never have to apologize for that.

Once again, I'd like to thank Mayor Laffey for taking the time to speak to our relatively small, but growing group of conservative Republicans in Rhode Island. He made me even more certain that my own initial instincts were right that this man has what it takes to represent Rhode Islanders in the US Senate, and that he is pursuing that goal for all the right reasons.

Will Ricci
Northeast VP, NFRA

Posted by: Will at October 13, 2005 12:52 AM

I am sorry that my radio show fell in the same hour as the meeting. I would have enjoyed attending and have enjoyed the NFRA in the past.

I wouldn't have expected anything but a serious response from Steve and it is unsurprising that few feel they could have gotten the same level of response from Chafee, however, serious does not mean encompassing or persuasive. It is simply not hard to earn a reputation for more being more thoughtful in dialogue and less dismissive of conservative ideals than Chafee.

Admitting I did not attend I won't pretend the reports to have represent the entirety of the exchanges, but mouthing concerns about "me too" drugs is not an encompassing defense of the anti-capitalist rhetoric being tossed at drug and oil companies.

There are some great and spirited arguments from great thinkers (Tom Palmer at the CATO institute comes to mind, check out www.tompalmer.com) about why patent laws are an infringement of liberty and not a proper protection of intellectual property. At the end of the day (An expression I hate, but exceedingly appropriate here) I find them unconvincing.

Strong intellectual property protections (coupled with strong real property protections with the least precondition on the class of the property holder in any society) arguably undergirded the industrial revolution in America that lead to our preminent, if precarious, position as the world leader in all of its various connotations.

If me-too drugs are an issue, it is because of other poor government policies (e.g. forcing drug companies to provide them through government regulation of the kind of coverages health insurance companies can offer). If there is no significant additonal benefit to a me-too drug, insurance companies should be free to decline to pay more than the price of the original. And health consumers, instead of begging the government for price controls (which is all that importing drugs from Canada as a political issue is about) should simply inform themselves of the relative benefits of drug choices.

Anger at the oil companies is even more absurd. Did Steve Laffey name a single "subsidy" for oil companies that he disagrees with?

How to address the security implications of our energy consumption is a rational question. But oil company profits are not the threat to our security. Even bearing in mind that a reasonable case can be made for less dependence on oil whose producers fund terror, I do not favor subsidizing the oil companies to accomplish that, but that is not what is happening. Why isn't Steve Laffey complaining about all the areas in this country that are off limits to drilling if he is so worried about the security implications of where we get our oil???!!!!!!!

I favor continuing the dormant but historically successful policy of encouraging exploration of federal lands and offshore waters. This is very expensive work and the opening of these land is not a subsidy. Rather it unleashes the private capital that everybody is complaining the oil companies are accumulating. Oiland gas exploration has always provided for a royalty to the government if there are discoveries and exploitation (as properly distinguished from hardrock mining, I'll argue in favor of the existing mining law at some other time.)

As I have said previously, if there is more oil supply from the US, not only would that change the percentage of energy we import, but it would put downward pressure on prices so that the terrorists will receive less money for from mideast oil. By the same calculation it is not in the least a 'gift' to the oil companies but to the American people in the form of lower prices.

Of course price pressure can also be lowered by reducing consumption. Looking at all the articles about plummeting SUV sales and the like it is fair to say that the market is doing what it is supposed to do in that regard. We don't need the government to do it.

I have no problem with a bully pulpit campaign to reduce consumption. If Steve wants to embrace such an outlook and ride a bike from city to city , like dave rogers swam from city to city or something, thats fine.

Pat Michaels, one of the leading climatologists who is skeptical of the claims of the global warming lobby, bought one of the first Honda Insight Hyrbrids in DC and drives it off to give speeches about how global warming is not a threat. There is no inconsistency in saying that the market, not the government, should set oil prices and then calculating one's participation in that market.

It is a Rooseveltian (pick one) cop out, in my opinion, to say you don't have anything against the oil and drug companies but that government has to 'keep them in line'. The line can't be a moving target. The law should be the same regardless of industry. In my book , you don't change a two century tradition of patent law because Canada has price controls.

If you can buy a movie on the street in Bejing for $1 that would cost you $30 here, does that mean we that we have to keep Hollywood in line by reconsidering copyright laws? (I'm not a pure fan of the latest Copngressional extensions of copyright as I am unsure that they hew to as historical a construct of the extent in time of the intellectual property right involved, but I would not support vacating copyrights so citizens could buy new movies for $1.) To the extent that Hollywood's product is overvalued (as many on this blog might agree), they are facing their own slump at the moment.

Rant over.I'll bide my time for a chance to ask these questions directly.


Posted by: Brian at October 13, 2005 7:41 PM

Good posts on Laffey!

Do you guys think it would help Laffey or hurt Laffey if he was backed strongly by a group like the Club for Growth?

I think that the club would help him win the primary but would hurt laffey in the general.

What do you think?

Posted by: Sentinel at October 13, 2005 9:02 PM

I wouldn't be surprised to see Club for Growth back Laffey at some point. They certainly aren't going to be backing Chafee! The CFG is hardly an "ultra right-wing extremist" organization, so I think they could provide considerable help in both the primary and general elections. They really only tend to focus on economic issues, as opposed to social issues. I would expect Laffey's general focus to be more economic. It's just a matter of what issues they choose to focus on.

Knowing their history, unlike the NRSC, they actually spend their money on effective, quality ads; not silly ones. Also, given that the Club for Growth's current president is former Rep. Pat Toomey, the 2004 conservative primary candidate against RINO Sen. Arlen Specter (who only won by 1.7%), and that Pat is also a native Rhode Islander, I would find it absolutely stunning if Mayor Laffey didn't get some kind of support from them eventually! We've only just begun!

Posted by: Will at October 13, 2005 11:05 PM

I have been affiliated with the Club for Growth over the last several years and Will is right that they are not an extreme group. What the Club understands, among other things, is that economic growth is spurred on by cuts in marginal tax rates and they support candidates who clearly grasp that point as well as the need to reduce the role of government in our economy.

Some people choose to deny those economic realities for blind ideological reasons but their arguments don't hold up to scrutiny when looking at empirical economic growth and wealth creation data from tax cut policies implemented during Mellon's years as Secretary of Treasury in the 1920's, the Kennedy tax cuts, the Reagan tax cuts, and the GWB tax cuts.

The Club's dislike for RINO's like Senator Chafee is well-known. However, I am uncertain if that dislike would translate into an endorsement for Mayor Laffey when he is espousing policy ideas on the drug and energy industries (here, here, here) that can easily be construed as encouraging government intervention in the marketplace.

I personally think Mayor Laffey has blundered on some major policy issues around the pharmaceutical and oil industries. Brian's posting pushes him hard - and appropriately - in response to those issues. And I would be surprised if his stands did not translate into some trouble with the Club.

Posted by: Donald B. Hawthorne at October 14, 2005 2:22 AM

Don wrote:
>I have been affiliated with the Club for >Growth over the last several years and >Will is right that they are not an >extreme group.

I'm not sure Harriet Miers would agree!

Harriet - please withdraw.

Posted by: Brian at October 14, 2005 9:50 AM

I also attended the NFRA meeting with Laffey.

Mixed results, in my opinion. Trying not to "turn him off" to NFRA, I made clear that I was speaking for myself only when I questioned him - accused him, if you prefer - of pandering to the illegal immigrant lobby, and expressed my concern that while Chafee is an "all caps" RINO, Laffey might be a "small caps" rino.

He got very defensive and challenged me to provide one example of his pandering to the illegals. I responded with the recognition "matricula consulars" in Cranston. He then (admittedly fairly effectively) used humor to deflect it by dismissing it as (I'm paraphrasing) "if that was a pander it was a small pander."

On Second Amendment rights he said he supports them and then went into a story about employees in his old firm (in a right to carry state) having firearms on the premises. I believe that Andrew's post mentioned something about Laffey saying something along the lines of regulation being up to the states - leaving open the question of why Laffey thinks that states can regulate rights reserved "to the people" under the U.S. Constitution. My impression was that Laffey told the story about co-workers to imply that he was stronger on Second Amendment than he might actually be - I suspect that while he is no Brady Campaign type, he may not be as "pro-Second Amendment" as he wants us to believe.

No matter the subject, Laffey kept turning the conversation back to oil and alternative energy sources. Nothing inherently wrong with that, it just gave me the impression that that industry may have been one of his investment specialties and so he is comfortable talking about it.

It's hard not to like Laffey when you see him / interact with him. Also, he is obviously quite intelligent and accomplished. With his business background it seems safe to say that his natural inclination is toward the "real Republican" side of the camp.

It is also safe to say that his personal ambition - and ego - are well within the high end of the bell curve. In and of itself that is not a bad thing, but causes me to still have concerns that Laffey will turn out to be a "small cap" rino - that the personal drive to acquire and maintain a Senate seat will drive him (or impel him to rationalize to himself) to do what is expedient (i.e., be a "moderate" a/k/a neutered Republican). (The matriculas consulars perhaps serving as a precursor.)

Overall, I liked, and was impressed, with the guy. No doubt he is preferable to Chafee.

But if he wins I think we all need to be prepared to again have been victims of the old "bait and switch" pulled on conservative voters ... discovering that once in office Laffey turns out to be a small-cap "rino."

Posted by: Tom W at October 14, 2005 12:09 PM