Sunday, April 17, 2011


Crapitalism is a contraction for crony capitalism. It is a system of economics and governance that is antithetical to true capitalism and threatening to a free society. Crapitalists seek profits not by producing quality products at reasonable prices and out-competing other producers of similar products, but rather by getting special tax-breaks and subsidies from government or special rules and regulations that regulate their competitors out of business. Examples include protective tariffs; subsidies for oil, ethanol, sugar, and wool; tax breaks for a specific company to come to a specific state and out compete other businesses in that state that have to pay the taxes (usually done in the name of job creation); publicly funded sports stadia; and other regulations that favour one company over its competitors. In other words, all the shenanigans that Michael Moore complains about and inappropriately labels as capitalism. Unlike the true capitalist, the crapitalist makes his profits at taxpayer expense. Crony capitalists, rather than seeking ways to produce more efficiently than their competition, hire lobbyists to go to Washington (or state capitals) and lobby for tax breaks, subsidies, and regulations that hurt their competitors. What follows is a particularly disgusting example.

In 1989 the United States signed the Montreal Protocol, an agreement to phase out the use of chlorofluorocarbons (CFCs) that have been implicated in the depletion of the ozone layer. The 1990 Clean Air Act empowered to EPA to ban the use of CFCs and begin the elimination of aerosols and refrigerants that contain CFCs. Inhalers for asthma attacks contained CFCs, but the law allows exemptions for essential uses of CFCs and the FDA had labeled such inhalers as medically necessary to allow their continued use.

The most commonly prescribed inhaler for acute asthma attacks is albuterol. In 1995, the patent for albuterol expired and generic albuterol inhalers became available at lower cost than brand name. In 1996, Schering-Plough introduced an albuterol inhaler (brand name Proventil) that uses hydrofluoroalkane (HFA) as a propellant, instead of CFCs ( HFA does not deplete ozone. Currently, there are only four available HFA-inhalers ( In addition to Proventil, there is Ventolin (manufactured by Glaxo-Smith-Kline), ProAir (manufactured by Teva), and Xopenex (manufactured by Sepracor). There are no generic HFA albuterol inhalers ( and the brand name HFA inhalers cost about three times as much as generic, CFC-containing, inhalers. Acute asthma attacks can also be treated with epinephrine inhalers. Epinephrine is available generically and over-the-counter (Primatene Mist). Initially there were concerns that the epinephrine inhaler might not be as effective, nor as safe, as an albuterol inhaler, but a small study in 2005 suggested that there may be similar safety and efficacy with epinephrine compared to albuterol ( In 2003, the FDA removed the essential use exemption from CFC containing albuterol inhalers because a non-ozone depleting alternative was available and all CFC containing albuterol inhalers (i.e. all generic inhalers) were removed from the market by December 31, 2008 ( In 2007, the FDA followed suit with epinephrine inhalers that contain CFCs, removing the essential use exemption. Epinephrine inhalers will become unavailable as of December 31, 2011 (

Ostensibly, this has been done to protect the environment. However, CFCs from asthma inhalers were a very small component of total CFC emissions ( and Certainly this move is of no benefit to patients with asthma as it takes cheaper and equally effective medications off the market. It is easy to see, however, who benefits from these regulations. Schering-Plough, Glaxo-Smith-Kline, Teva, and Sepracor have had their less expensive competitors regulated out of existence and people suffering from asthma are now forced to purchase their more expensive alternatives. Indeed, in a statement to USA Today, the FDA nearly admitted as much stating that it took action because sales of the environmentally friendly inhalers were lagging behind the less expensive generic inhalers containing CFCs, "This regulation is necessary because private markets are very unlikely to preserve levels of stratospheric ozone sufficient to protect the public health." ( One could argue that the FDA's hands were tied with regard to albuterol because once there was a non-ozone depleting alternative they could no longer grant an essential use exemption to albuterol inhalers. But if so, why didn't the FDA take action as soon as an HFA-albuterol inhaler was available rather than wait years and only take action after it was apparent that expensive HFA inhalers couldn't compete against cheaper generic inhalers that contained CFCs? And what about epinephrine? There is no HFA-inhaler version of epinephrine. Therefore, despite demonstrated efficacy, the FDA is essentially saying you can't use a medication that we know works as an alternative to albuterol. It seems clear that the FDA has taken these actions purely for the benefit of powerful pharmaceutical interests.

Using the Woodward and Bernstein principle of identifying who benefits and following the money, it seems almost certain that big Pharma lobbied for these rule changes to eliminate their competition form the market place. In fact, two patient advocacy groups petitioned the FDA in 2003 to remove the the essential use exemption from CFC containing albuterol inhalers. The Allergy and Asthma Network Mothers of Asthmatics launched a campaign to lift the exemption sponsored by Sepracor (and the President and Founder of this group has owned Sepracor stock) and the American Lung Association took $1 million from Teva to promote the CFC withdrawal ( It stretch credulity to suggest that big Pharma money isn't behind the regulatory change for epinephrine inhalers as well. Under the guise of protecting the environment and with the lobbying of big pharmaceutical companies, the federal government has regulated competitors of the big pharmaceutical companies out of the market and caused millions of Americans to pay more to treat their asthma. Teva, Glaxo-Smith-Kline, Sepracor, Schering-Plough, all get to increase their profits at taxpayer expense, not by producing a better or more affordable product in a competitive market, but by having their competition eliminated by regulatory fiat.

This type of crony capitalism, or crapitalism, has no connection to true capitalism. In true capitalism the consumer is king because the only way competitors are eliminated from the market is when they cannot produce a product as well or as efficiently and cheaply as their competitors. In a truly capitalist society a company can only corner a market by producing the best product at the best price and in an openly competitive economy if anyone else develops a way to produce that product better or cheaper then that company will no longer corner the market. Either way, the consumer benefits. In crapitalism business interests lobby government to regulate their competitors out of existence and the consumer is then stuck with either and inferior product, or a more expensive one, or both. These anti-competitive regulations, subsidies, tariff protections, and tax breaks need to be abolished. Profits should be earned, not transferred from average Americans to influential interests by legislative or regulatory fiat.