Post Hoc Ergo Propter Hoc

We all remember that Megan McArdle lied about data to support her attempt to destroy subsidies for the poor so they could afford to buy health insurance like the middle and upper classes, who usually get subsidized insurance through their jobs. I apologize for rehashing old material but it is necessary because McArdle is still attempting to tell the same lies. She now skips over data and merely restates her premise, confident that there is nothing anyone can do to hold her to account. She is right.

But the truth is always the truth, no matter how many lies are told.

[yap yap yip] Right now, the U.S. accounts for a disproportionate share of the profits that make it attractive to keep looking for new drugs, precisely because we do not have a pricing board that attempts to hold down reimbursements to levels closer to marginal cost. That means we're providing a disproportionate share of the incentive for new research. Every so often, there is a clamor about lowering our prices and forcing other countries to pay their "fair share" of research costs, but there is no practical way to do it. So the only question is, are we willing to subsidize new research?

I am not arguing that the current prices of these drugs reflects some platonic ideal of value, or that the free market has found the best possible combination of affordability and incentive for innovation. As I mentioned above, the pharmaceutical market has all sorts of strange wrinkles that make it hard to assess the value they are delivering for the prices they charge.  

However, people who are advocating for a government price-setting board cannot simply say, "Well, there are some issues with the way that pharmaceuticals are priced." The onus is on them to show that the government would do a better job of determining the tradeoff between innovation and current prices than the market already does -- that it would not, for example, set prices artificially low in order to reap temporary political benefit, at the expense of future generations who would then have to go without beneficial treatments. And perhaps they will. But saying "Merck could still make drugs with a 9 percent profit margin" is hardly adequate.

Unfortunately, making that case is hard, because the systems in other countries are smaller, and benefit from that implicit subsidy from the U.S. There's no way to see what the world would look like if the U.S. decided to hold prices closer to marginal cost, except by moving to a pricing board and accepting the risk that we might be shooting the goose that's laying the golden eggs.

Look, Ma, no data! See how easy that was? We already subsidize research via the government but trying to fight lies with facts is crazy talk. McArdle would just hide behind even more vague statement and implications. You'd have to be an idiot to fight back.

susanoftexas • 3 days ago You said you made up the statistics that were the basis for this claim. From your Washington Post chat:  

Anonymous: You said that medical innovation will be wiped out if we have a type of national health care, because European drug companies get 80% of their revenue from Americans. Where did you get this statistic?  

Megan McArdle: It wasn't a statistic--it was a hypothetical.  

McMegan > susanoftexas • 3 days ago As I believe I explained after that exchange, I had confused the question with a different post than the one the questioner referred to. I also stopped using that stat, because I don't think it's reliable. However, I don't think we need to relitigate an offhand remark in a web chat that is now seven years in the past. It's basically arithmetic. If we agree that drug prices for brand names are higher here--and we all do!--then mathematically, the US must be producing a disproportionate share of the profits for new drugs. http://www.bloombergview.com/a..  

If you think this is not the case, could you explain where you think the extra spending on drugs that we're all complaining about is going. Is it being diverted to complicated money laundering operations that place most of it in the hands of someone other than the company, its managers, or its shareholders? Are pharmaceutical firms paying higher taxes here than in the United States? Is it being destroyed by the hyperinflation of the US dollar? Is FDA overregulation making it unprofitable to release drugs here? What is your working theory of what happens to the money that does not produce disproportionate profits on new drugs in the United States?

McArdle attempts to confuse the issue by switching to a discussion of whether or not the US provides most profit for drugs. This is a time-honored trick of propagandists; get the enemy to agree with something-anything-and use that distraction to insist you are right about the main point. It is a big mistake to engage in an argument created only to distract.

susanoftexas > McMegan • 3 days ago If I were you I would not base my claims on my ability to do arithmetic. http://www.theatlantic.com/business/archive/2010/07/in-search-of-effective-stimulus/60129/#disqus_thread  

McMegan > susanoftexas • 3 days ago I am more than happy for you to correct my arithmetic and tell me where the money is going.  

ratiocination > McMegan • 3 days ago It's moot! Seven years is wayyy past the statute of limitations for Internet errors (or non-errors - I'm disinclined to see what the other poster is referring to because it's, well, moot). A skier who doesn't fall down once in a while is not trying hard enough. A pundit who does not go out on a limb, only to see the limb break, isn't being bold enough. Keep on keeping on! A divided and uneasy nation looks forward to your thought-provoking essays, cogency, and engaging writing style.

"Going out on a limb" is an interesting way of describing lies.

JoshInca > ratiocination • 2 days ago I can't believe that I agree with rationalization. What's next, cats and dogs sleeping together?  

susanoftexas > McMegan • 3 days ago It is up to you to explain, not me. You admitted you made up your statistics. Perhaps it would be a good idea to do a little investigative journalism and find out. You can start off with this. http://www.nybooks.com/article...  

McMegan > susanoftexas • 3 days ago This about sums up my opinion of Marcia Angell's incredible lack of understanding of how businesses and investment works. http://marginalrevolution.com/... Or as I said above: budget decisions and investment decisions are very different. If you confuse them, you go badly astray.

McArdle has never analyzed Angell's work herself for obvious reasons.

SgtFraggleRock > susanoftexas • 3 days ago You cut out the rest of her statement: "However, whenever I have been able to find pharma financial statements that break down their profits by region, the lion's share always comes from the US." For those who want the full context: http://www.washingtonpost.com/...

And the trap is sprung.

susanoftexas > SgtFraggleRock • 3 days ago McArdle:  

'A reader sends in this note: "I am a former tax lawyer who worked for years on pharmaceutical international transfer pricing cases. The basis for such cases revolves around what share of profits is attributable to a given country. Let me tell you, you will never get an accurate figure, because no such figure exists - all the numbers are purely notional.  

[snip]  

For this reason, any number as to the percentage of pharma profits made in the U.S. should be treated as arbitrary and bogus. It will entirely depend on how the costs were allocated, which will differ from company to company, and may even differ from one company's financial statements to its tax returns."  

I find this argument pretty compelling. So it looks like I got taken, at least in the sense that there's probably no way to come up with an estimate that I would find acceptable. I wouldn't have put that number in a blog post, because I would have looked for better corroboration, and I'm sorry that I used it when responding on the fly, which I did several times.  

I'm now adding this to my long list of "dark numbers", with the best available proxy being the global sales of New Chemical Entities. Two thirds of those, not more than three quarters, occur in the United States, versus about a quarter in Europe. You can argue about what the fixed costs are in various places, but as my correspondent implies, given how much cross border activity there is, the problem seems to be indeterminate, so I'll stick with a number we know. This doesn't really change my assessment of the problem, since 2/3 is still pretty overwhelming, but statistics matter.  

On a side note, the reason I said 80% was a hypothetical in the Washington Post chat is that . . . well, I didn't. I forgot that conversation, and thought the commenter was referring to this post. These are the perils of typing thousands of words a week, and also, of getting old.'  

Also:  

I may be in error on that--I've heard 80-90% from people in healthcare consulting, and I've seen that sales and profits in the US are usually larger when they're broken out on financial statements, which they aren't all that often. But they were not speaking on the record, and financial statements are not necessarily a very good guide to allocating the net profitability of a drug, because of various tedious pricing strategies involving market timing that you can read about in an exhaustive volume from the OECD that I have on my desk, if you want to come to my office, or spend $100 to buy it yourself. There are also issues of the way that companies allocate profits across international borders, which vary for all sorts of reasons, including the location of the company." http://meganmcardle.theatlanti...  

Also:  

80% may not be right, and I can't back it up with any hard numbers, because there are no hard numbers available. But multiple corresponding sources suggest that the number is well over 50%. 60% is probably the floor of likely." http://www.theatlantic.com/bus...  

Also:  

"I'm glad that you have never, ever made a basic cognitive error, NDM, but there you are, I do from time to time. We live in a world of imperfection and travail. "http://www.theatlantic.com/bus... For those who want the full context, excepting people not Megan McArdle who have also debunked this claim.  

SgtFraggleRock > susanoftexas • 3 days ago So, she admitted a mistake and corrected it multiple times about a stat . This is why I trust her more than the Washington Post or the New York Times (who tried to claim Kim Davis (a Democrat) was a Republican).

She foolishly admitted she lied out of arrogance. Naturally this had no effect on her readers who wanted to believe her lies. He even rationalizes that the "mistake" means McArdle is honest. There is nothing anyone can say or do to convince such people. The truth has no effect but that never stopped me before.

susanoftexas > SgtFraggleRock • 3 days ago Except here she is, repeating that same claim after denying it--as she has done many times since.  

McMegan > susanoftexas • 3 days ago I'm not repeating a statistic. I merely made the obvious arithmetical point that if prices are higher here, and production costs are not, then the profits must be higher here, as well.  

susanoftexas > McMegan • 3 days ago Proof that depends on belief is not proof.  

McMegan > susanoftexas • 3 days ago ... and refutation that depends on non-responsive answers is not refutation--nor, grasshopper, is it even argument.

McArdle thinks her "witticisms" will hide the truth; she is admitting she simply believes this to be true and doesn't have any facts to back her up. She thinks my refusal to argue her distraction is a sign of weakness.

susanoftexas > McMegan • 3 days ago Nice goalpost moving. The issue is not whether profits are higher here. The issue is whether medical innovation depends on keeping American drug prices high.  

McMegan > susanoftexas • 3 days ago You are, of course, free to believe that the size of the available profits has no impact on the number of drugs developed. I have stated a different opinion.  

susanoftexas > McMegan • 3 days ago More goalpost moving. I did not say profits have no impact on the number of drugs developed. I said you made up statistics in support of your claim that medical innovation would be wiped out.  

McMegan > susanoftexas • 3 days ago And yet I neither used said statistic in this post, nor claimed that medical innovation would be wiped out--only that we would run the risk of losing beneficial treatments, if we brought monopsony pricing to the US.  

susanoftexas > McMegan • 3 days ago Yes, it is true that your warnings are getting less and less specific and you are relying on implication rather than made-up "facts."  

McMegan > susanoftexas • 3 days ago I do not think the words "repeating" and "statistic" mean what you think they mean.

This retort must have been devastating at some point in her life since she continues to use it.

Maggie Mahar > susanoftexas • 2 days ago Yes.

Ms. Mahar says elsewhere in the comments that she is a 'Long-time senior editor at Barron's--wrote many investigative pieces about the drug industry. Author of Money-Driven Medicine--a book that was favorably reviewed by NEJM, and then made into a documentary by Alex Gibney Healthcare Fellow at The Century Foudation, where I created the blog "HealthBeatBlog.com"'

susanoftexas > McMegan • 3 days ago Then by all means continue to pass off information you personally debunked as the truth. Your readers do not care and you have been very successful using your current business model.  

ajwpip > susanoftexas • 3 days ago it kind of lessens the Perry Mason go ha moment when the surprise witness against Megan is Megan herself. It doesn't actually show her having less integrity. It does the opposite. But I give you points for implying she lies for money without going the full Kochtopuss. You must have wanted to very badly. Hey, I haven't read anything posted by Nepotismis(whatwastherestofthatscreenname?) lately. Nep is that you?  

susanoftexas > ajwpip • 3 days ago Actually, nothing could be more effective than the person making the claim admitting that the claim is not proven. If you want to discuss Ms. McArdle's connection to the Koches (I do not) you can find that information elsewhere very easily.

Trap set.

ajwpip > susanoftexas • 3 days ago Making the most reasonable inference and being open about doing so is not something that calls one's integrity or motivations into question. For instance I am inferring that you buy into Koch paranoia by your implicit endorsement of all the Koch -mcardle screeds on the Internet. Is it proven? No. But am I intellectually dishonest for making an inference. Nope. Yet under your schema you would feel justified in implying that I am a paid Koch shill. That seems ironic in an Alanis Morisette kind of way.

Trap sprung.

susanoftexas > ajwpip • 3 days ago  

Endorsement means "an act of giving one's public approval or support to someone or something." Saying that I will not discuss McArdle's ties to the Koches and telling someone to look elsewhere for that information is not an endorsement. In fact, such a statement might imply that I do not endorse them because I refused to discuss them. Therefore you are being intellectually dishonest by implying I am endorsing unethical connections between McArdle and the Koches.  

However, relating facts about any of McArdle's associations with the Koches would not be an endorsement either. For instance:  

McArdle trained as a journalist at the Institute for Humane Studies. The IHS's board chairman is Charles Koch. Charles Koch donated $12.4 million to the organization from 2008-2012. She was emcee for IHS's 50th anniversary dinner in honor of Charles Koch. Those are facts. Reciting those facts does not imply McArdle is a shill for the Koches.  

McArdle has spoken and/or moderated at centers that have received Koch funding such as the Mercatus Center, America's Future Foundation, and Cato Institute. Stating these facts does not imply she shills for the Koches.  

McArdle was a judge for Reason's Bastiat prize. Reason received funds from Koch Foundations. She has written for Reason. McArdle defended the Koches from accusations that it was funding the Tea Party. The Tea Party received funds and/or assistance from Freedomworks and Americans for Prosperity, both of which have received Koch funds. (McArdle's husband worked for Freedomworks and works for Reason but that is pertinent only to her public disclosures of Koch associations required by professional journalism standards and practices.)  

McArdle defended the Heartland Institute from an Obama fundraising letter. The Heartland Institute also received Koch funds. These are facts. Stating those facts does not imply McArdle is a Koch shill.  

However, "a shill, also called a plant or a stooge, is a person who publicly helps a person or organization without disclosing that they have a close relationship with the person or organization." McArdle has disclosed some but not all of her ties to organizations funded by the Koches while stating that she was making a complete disclosure and so has left herself open to accusations of being a shill.  

Maggie Mahar > susanoftexas • 2 days ago Susan-- -Thanks for so many facts  

sufferingsuccatash > Maggie Mahar • 2 days ago Maggie---McArdle is a libertarian who is a Koch Bros. shill. Her columns draw the libertarian crowd like Marshal and Joshlnca below. They are a condescending lot---  

susanoftexas > Maggie Mahar • 2 days ago You're welcome.  

JoshInca > Maggie Mahar • 2 days ago She didn't post any 'facts'. Your believing that she did discredits you.  

Joe_Hubris > ajwpip • 3 days ago Not Koch. Koche.  

McMegan > susanoftexas • 3 days ago I'm not sure what your complaint is. You seem to be upset that I am continuing to use statistics that I abandoned years ago, and also that I am not continuing to use them. Which is it?  

JoshInca > susanoftexas • 2 days ago Logic, how does it work? 

y81 > susanoftexas • 3 days ago This lawyer is talking about profits, McMegan is talking about revenues, which are much less subject to manipulation.

McArdle made a rare substantive post later that day discussing microaggressions, thereby giving her audience something new and less embarrassing to read and discuss.

Fighting lies might be a waste of time but it beats getting futilely upset that the rich can control our lives and pay for an endless stream of propaganda. It won't harm or bother McArdle; what is a fleeting humiliation compared to all that lovely cash?