Text 5333, 91 rader
Skriven 2010-02-27 07:14:04 av Robert Bashe (2:2448/44)
   Kommentar till text 5311 av Ward Dossche (2:292/854)
Ärende: No profit without risk (was: Banking)
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Ward Dossche wrote to Robert Bashe on Friday February 26 2010 at 15:00:

RB>> And I'd like Ward to tell us just how he thinks a company could get
RB>> back it's R&D development expense and make a profit to boot without
RB>> somehow limiting re-use of such seed.

WD> No contest there for as far as that investment must be recovered.

WD> The questions to be answered then are:

WD> * What was the investment?
WD> * When will it be recovered? (in the case of the Monsanto seeds that
WD> is considered around 18 months)
WD> * How disgustingly rich can one be allowed to become as a result of
WD> such a practice?

The thing you conveniently forget, here and in the tirade about patented
medicines, is the fact that companies can't and don't simply say one day "Hey,
let's invent a product and get rich on it!".

What actually happens is that companies develop a large number of products at
great expense, most of which are never marketed because of inadequate efficacy,
difficulty of large-scale manufacture, unexpected side effects, expense of
registration for small-volume products and many other reasons. If you've ever
dealt with registrations, as I have with those for agrochemicals, you know that
they are both complex and very expensive - and that the tests are often useless
in the end because the product can't be registered for some reason that wasn't
known at the beginning.

The registrations must also be made for each individual country, multiplying
the cost and complexity, as various countries can require different testing for
registration. An FDA registration doesn't mean zilch in Germany, nor a Germany
registration in the USA.

It's not merely the development and registration costs of the one specific
product that may be a blockbuster, but the development and possibly
registration costs of the host of other products that for some reason never
become profitable. A R&D organization for such products costs a mint to set up
and run even if it develops nothing profitable - the buildings are expensive
(these are labs, not just offices), the equipment too, and the personnel are
highly qualified and cost a great deal of money.

And then there is the risk of catastrophic side effects that only become
obvious after a product is marketed - some provision for that has to be made,
and no insurance company will accept such an incalculable risk. In fact, such
an event can very well bankrupt your company.

So when you're off on a tirade about "obscene profits", don't forget the
"obscene risks" that balance them out. Sure, if a company gets lucky, like
Roche with diazepam ("Valium"), you can make many millions before the patents
run out. But such things are once in a lifetime strokes of luck and most
companies never experience anything that good. The trick in a
pharmaceutical/agrochemical company, or one like Monstanto with genetically
modified seed, is to at least break even or make a fairly modest profit in the
long run, and to hope for the "big one" that will make you a leader in the
industry. Monsanto has been lucky - but has also worked hard to get to that
point.

WD> I've no problem with people making money on one's invention ... but
WD> I've got a problem with the strangle-hold after that.

Then wait for the patents to run out and make generics. Lots of people do just
that. Diazepam is a generic nowadays.

WD> There's the famous case of a French farmer who grew unmodified canola
WD> on his extensive fields. Then Monsanto planted modified canola in an
WD> adjoining field.

WD> "By accident", a few of the modified seeds reached the other farmer's
WD> field. They sued him into bankruptcy because he refused to cooperate
WD> by paying the license fees for all of his fields.

I suspect the "accident" was helped along a little by the farmer, and that a
little more was involved than what you read in thge papers. Possibly the farmer
was a member of one of these anti-genetic modification ("manipulation" being
the emotional term) leagues that are so prevalent in Europe, or was supported
or actually paid by one. Such people are not above provoking a situation to
make companies like Monsanto look bad in the newsmedia.

WD> Nice going ... this is the way the agro-business is going to evolve
WD> ... cows which aren't cows anymore, pigs that aren't pigs anymore,
WD> etc...

You exaggerate mightily. A genetic modification to allow less use of pesticides
in grain - something that environmentalists should really want and approve of -
isn't the end of the world by any means.

Cheers, Bob

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