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Atlas Shrugs In Ann Arbor

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You've got to appreciate this. Pfizer closes its Ann Arbor plant in a restructuring, leaving the leftist governor, mayor, and University of Michigan president to do political damage control. Coleman called it a crisis, of all things. Note the welfare-beneficiary mindset - nowhere are Pfizer's interests even considered, it's all about the lost jobs, internships, and tax revenues, not to mention the politicians' desire to take credit for creating a life sciences corridor in Michigan.

"There is nothing Michigan could have done to prevent this from happening," said the governor. That may be, but no business ever closed up shop because the state was too business-friendly. They paid $13 million in taxes to the city alone in 2006!

Pfizer to shut Ann Arbor facility

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The article is all about job loss and government loss of "revenue"; however, is this really a case of "Atlas shrugging"? From what I understand, Pfizer recently had a big surprise when some drug-trials showed bad results. This meant that a drug on which they had pinned hopes for future revenue would not be saleable. The now lowered revenue expectations meant they would have to cut back on sales force and future research. So, Ann Arbor is one research facility that they decided had to go. It could well be that they chose Ann Arbor, instead of a facility in another state because of the higher costs here, but the article does not say so.

Michigan is in pretty bad shape these days, if one compares it to the US averages. Sadly, most people do not see that the unions are the major cause the problems. (As an aside, many more that before do now admit that the unions are part of the problem.) Now, with business down, government money is constrained. The politicians are proposing more taxes.

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From the article:

http://media.www.michigandaily.com/media/s...gepublisher.comGranholm said Pfizer's decision was part of a global restructuring and had nothing to do with the local labor pool, the state's taxes or the state's business climate.

Is this really shrugging?

[edit]

Man, SN got there first

Edited by Cogito
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Well in a broad sense, I would say yes, for this reason. What's missing for Ann Arbor, for Michigan, and most of all for Pfizer are minds, the product of which would have enabled them to succeed. It's hard to fault Pfizer for pulling out of Ann Arbor, after all it seems clear that one thing the University did not deliver on was the intellectual horsepower needed to grow the business. Maybe the mind wasn't on strike per se, but it sure wasn't where they needed it to be.

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Well in a broad sense, I would say yes, for this reason. What's missing for Ann Arbor, for Michigan, and most of all for Pfizer are minds, the product of which would have enabled them to succeed. It's hard to fault Pfizer for pulling out of Ann Arbor, after all it seems clear that one thing the University did not deliver on was the intellectual horsepower needed to grow the business. Maybe the mind wasn't on strike per se, but it sure wasn't where they needed it to be.

Huh? As a contractor at Pfizer I find that comment extremely disingenous. There are a lot of very intelligent people here, there is no shortage of minds at Pfizer. Creating new drugs is an extremely complex and expensive operation, no mind would have made this drug not produce the ill effects it did. New drugs are discovered through numerous screening process, starting with the most basic where millions of potential compounds are screened, to more advanced tests which measure absorbtion rates and how long a drug stays active in the body (if you have to take a pill every 15 minutes its worthless) they then move into biological simulation trials, animal studies, and then clinical human studies. Many pharmaceutical companies are working on ways to simulate protiens in order to create drugs that will bind to particular spots, I myself was able to view a 3D simulation of a protien and try to 'dock' a molecule to it.

If there are problems that need correcting it is the public mindset that drug companies are evil, it is the incredible hoops that companies have to jump through to get approval from the FDA (yet somehow the market is still flooded with fat burning pills and breast enlargement pills which clearly do not ever work). Any intelligent motivated person can help with those problems, the US is the last country in the world where Pharmacueticals are not price controlled, and every country that enacts these price controls sees all their drug companies headquarters move to the US. If politicians get price controls on drugs, you wont see any new drugs. Sure an individual pill only cost a few cents to make, but that first pill cost 500 million to make.

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The closest relation I can see to AS is a general theme: laws that prohibit men from realizing the consequences of their mind's work are bad. One such consequence of such laws is that men of the mind may decide "I can no longer tolerate this", at which point they will leave. Pfizer guy might be willing to share insider information about whether this reflects the reasoning of the decision makers (assuming he doesn't care about his future ;) ); otherwise, I wouldn't go too far in assuming anything at all about what the decision-maker was really thinking. I'd love for him to come here and officially announce "Yes, we found it intolerable and impossible to work in Michigan", I just don't think it's gonna happen. (Oh, and this isn't the Ohio / Michigan thing... not like Ohio would be all that much better. Although....).

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"There is nothing Michigan could have done to prevent this from happening," said the governor. That may be, but no business ever closed up shop because the state was too business-friendly. They paid $13 million in taxes to the city alone in 2006!

Pfizer to shut Ann Arbor facility

That's a pretty low tax rate, actually. Kimberly-Clark Corp, in 1986, annually paid $20M in taxes to New Milford. I can only imagine what it pays today.

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Huh? As a contractor at Pfizer I find that comment extremely disingenous. There are a lot of very intelligent people here, there is no shortage of minds at Pfizer.

Well, then - perhaps no amount of brains in the world could have saved Pfizer's plant. Maybe Pfizer learned all that could be learned about drugs, made every rational decision and still got stuck losing market share and closing facilties. If so, I was wrong.

I'm surprised no one has mentioned this:

Many of its patents are set to expire over the next five years.

Especially in light of the time it takes to bring new drugs to fruition and turn a profit, this seems like it might be a significant violation of Pfizer's rights in addition to taxes and regulation. Regardless of whether Pfizer consciously shrugged or not, violations of rights do have consequences in making life harder, and even impossible for businesses such as this.

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Especially in light of the time it takes to bring new drugs to fruition and turn a profit, this seems like it might be a significant violation of Pfizer's rights in addition to taxes and regulation.
What is the rights violation? The taxes, yes, but the patent expiration certainly it's. Was the quite a total mistake?
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What is the rights violation? The taxes, yes, but the patent expiration certainly it's. Was the quite a total mistake?

I believe that patents protect Pfizer's right to its intellectual property. I see your objection as, and correct me if I am wrong, failing to protect rights is not the same as violating rights. I agree, that was not correct, but more broadly the government is still pursuing laws that, by failing to protect IP rights, make life harder for Pfizer.

Edited by Seeker
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Hi seeker. Your observations about govt response to the closing announcement are probably right on. However, I have no idea how this would be Atlas Shrugging. It is simply a cost cutting measure and consolidation of expense. Unless you have some other data, I'm not sure it can be inferred that it is anything out of the ordinary.

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Hi seeker. Your observations about govt response to the closing announcement are probably right on. However, I have no idea how this would be Atlas Shrugging. It is simply a cost cutting measure and consolidation of expense. Unless you have some other data, I'm not sure it can be inferred that it is anything out of the ordinary.

Then please forgive me for overstating the parallels. I rather enjoyed seeing the state officials awareness of how much they depend on private enterprise when it goes, and I saw, perhaps wrongly, the company's misfortune as the product of government policy on the one hand, and its own intellectual failure on the other. Others may view Pfizer's (and Michigan's) economic problems as predetermined and unavoidable but I don't - I think, because all wealth is the product of man's mind, that a withdrawal of the mind is the cause of economic ills. So it is hard for me to look at this unfortunate situation and not have at least some sense, if not the convinced judgment, that Atlas is shrugging. Maybe that is not the case, however; your point is well-taken.

Edited by Seeker
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How do you compute the rate from just the amount paid?

I'm not. I'm making a 'ballpark guess' based on similarly-sized plants. K-C was a paper mill (I say 'was' because 3 years ago K-C closed their plant, citing the high cost of doing business here). Nestle, another company that pays a similar amount in taxes for a similarly-sized plant, also closed in 2005. I have no idea what their last tax bill was. But I do recall reading time and again, public notices in the paper about K-C being tax-delinquent, hinting that perhaps K-C was having difficulty raising the money to pay the town.

I know that K-C paid $20M in the late 1980s when the rates were much lower than today, as were the assessments. Since that time, my own property assessment has increased 8.2X what it was 20 years ago, therefore, if the industrial real property assessments followed suit, then the tax that would be owed by K-C today, were it still in business here, would likely exceed $100M, based on the inflation of property values over a 20 year period.

From that, I concluded that Ann Arbor's tax rate must be quite a bit lower, as a high-tech pharmaceutical facility like Pfizer's would easily be worth what a paper mill is worth, perhaps even more, in real dollars, therefore a $13M tax bill is amazingly low, given what it might cost them if they were located in my town.

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I believe that patents protect Pfizer's right to its intellectual property. I see your objection as, and correct me if I am wrong, failing to protect rights is not the same as violating rights.
No, this was the question whether IP can be held in perpetuity, contra Rand's argument that IP must be of limited duration. Kendall has advanced a worthy argument for perpetual patent, but I think it depends on different principles about the claim (that they have to be much more specific). So it's not clear that, under such criteria, Pfizer has valid patents.
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I'm making a 'ballpark guess' based on similarly-sized plants.
Well, I don't think that size matters. Without knowing the square footage of the plants and the value of the property, I'd say that the two tax bills are "about the same", meaning that the rates are about the same, and differences in net tax payment is because of differences in the property values, not the tax rate. Income-based taxes are usually based on income, not real estate. Now, I wonder whether the reported taxes paid by Pfizer and KC were exclusively real estate, or also income-based.
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Well, I don't think that size matters. Without knowing the square footage of the plants and the value of the property, I'd say that the two tax bills are "about the same", meaning that the rates are about the same, and differences in net tax payment is because of differences in the property values, not the tax rate. Income-based taxes are usually based on income, not real estate. Now, I wonder whether the reported taxes paid by Pfizer and KC were exclusively real estate, or also income-based.

Also, I was comparing how much tax K-C paid in the mid 1980s, a time when assessments and rates were comparitively low. That said, towns levy real estate taxes, and the federal government and state government get tax revenue on their business income, so it comes from various directions. Ann Arbor collected $13M in, what is most likely, real estate taxes.

I know it's dubious to compare apples and oranges in this manner, but I have a hunch I would not be too far off. Tax reform is one thing I've been politically active in and researching the tax structure has made me aware of what businesses are paying.

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Pfizer’s senior vice president in charge of Michigan, David Canter, says the cuts cannot be blamed on Michigan’s tax climate, union demands, or unfavorable weather. His position is that this is just business-streamlining. This may have something to do with a 43% drop in 4th quarter profits. It's hard to know who is lying.

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Well, then - perhaps no amount of brains in the world could have saved Pfizer's plant. Maybe Pfizer learned all that could be learned about drugs, made every rational decision and still got stuck losing market share and closing facilties. If so, I was wrong.

or maybe there arent actually any omniscient infinitely intelligent people that never make legitimate mistakes from judgements, nor is there a finite technology level available at any given time, nor computational resources, nor time to analyze judge and react, nor only a certain amount of resources that can be dedicated to any particular task at any particular time. If only men's minds werent so restrained, we would all be instantly infintely omniscient. yeah.... Do you think you can possible anticipate every single possible scenario which could plausibly arise and prepare counter plans for those scenarios which themselves plan for other varying scenarios, to what level of regression? How much time would it take to prepare for every possible change in the market? Just out of curiousity, do you own and or run a business?

No, this was the question whether IP can be held in perpetuity, contra Rand's argument that IP must be of limited duration. Kendall has advanced a worthy argument for perpetual patent, but I think it depends on different principles about the claim (that they have to be much more specific). So it's not clear that, under such criteria, Pfizer has valid patents.

Part of the problem is that drugs must be patented five to ten years before they even can go to market, and drug companies patent probably over 1,000 times as many drugs as they actually make and sell. They do this because the FDA process requires identification of the drug and compound, allowing any generic company the formula to make the drug. Additionally, even after FDA approval a drug company can STILL get sued for safety issues relating to that drug, what then is the purpose of the FDA if not to allegedly prove safety and efficacy and not take the liability for that claim?By the time a drug gets to market often half of it's effective patent life span is all ready expired.

Edited by Matus1976
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Part of the problem is that drugs must be patented five to ten years before they even can go to market, and drug companies patent probably over 1,000 times as many drugs as they actually make and sell.
Without suggesting that the FDA testing process is good (I think testing is good, but not their version), that's a good argument for an extension of the patent duration.
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Also, I was comparing how much tax K-C paid in the mid 1980s, a time when assessments and rates were comparitively low. That said, towns levy real estate taxes, and the federal government and state government get tax revenue on their business income, so it comes from various directions. Ann Arbor collected $13M in, what is most likely, real estate taxes.

I know it's dubious to compare apples and oranges in this manner, but I have a hunch I would not be too far off. Tax reform is one thing I've been politically active in and researching the tax structure has made me aware of what businesses are paying.

I'd have to question this assumption as well. The Pfizer facility is not a plant. It is a research lab. So it is not comparable to any other sort of "plant". Additionally, one plant to another can be very different in size and scope. A "plant" can be anytyhing from a collection of different manufacturing units to just a single facility so the taxable bases differ wildly. Thirdly, each state and municipality assesses and collects differently, and most time, large contributory industry negotiate property tax abatements so the rates can vary considerably.

I don't thikn one can tell anything from the absolute amount of propety tax paid by Pfizer in Ann Arbor, especially since this is not a revenue generating operation.

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  • 4 weeks later...
Many pharmaceutical companies are working on ways to simulate protiens in order to create drugs that will bind to particular spots, I myself was able to view a 3D simulation of a protien and try to 'dock' a molecule to it.

Aren't those cool?

Biological sciences should be studied with the aid of 3D graphics (I think some of the textbooks already come with those).

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  • 4 weeks later...
Huh? As a contractor at Pfizer I find that comment extremely disingenous. There are a lot of very intelligent people here, there is no shortage of minds at Pfizer. Creating new drugs is an extremely complex and expensive operation, no mind would have made this drug not produce the ill effects it did. New drugs are discovered through numerous screening process, starting with the most basic where millions of potential compounds are screened, to more advanced tests which measure absorbtion rates and how long a drug stays active in the body (if you have to take a pill every 15 minutes its worthless) they then move into biological simulation trials, animal studies, and then clinical human studies. Many pharmaceutical companies are working on ways to simulate protiens in order to create drugs that will bind to particular spots, I myself was able to view a 3D simulation of a protien and try to 'dock' a molecule to it.

If there are problems that need correcting it is the public mindset that drug companies are evil, it is the incredible hoops that companies have to jump through to get approval from the FDA (yet somehow the market is still flooded with fat burning pills and breast enlargement pills which clearly do not ever work). Any intelligent motivated person can help with those problems, the US is the last country in the world where Pharmacueticals are not price controlled, and every country that enacts these price controls sees all their drug companies headquarters move to the US. If politicians get price controls on drugs, you wont see any new drugs. Sure an individual pill only cost a few cents to make, but that first pill cost 500 million to make.

Outstanding points! I work in the business as well, and Pfizer's problem is more about the FDA, and the public's perception of an evil industry than anything else (so in some sense there is a shrugg here).

However, what I've wanted to see for just 6 months, and it is pretty harsh, but I think it would give the public a reality check. I would like America's pharmaceutical industry to go on a sebatical for 6 months. No more manufacturing, no more drugs, just for 6 months. What would people do without their Prozac, or Viagra, or Lipitor, or Insulin, or etc? Wait, the drug companies keep me alive? Hmmm. But since they keep me alive, they have some MORAL OBLIGATION to set prices low...

Just 6 months, would change the perception into a realization of the importance they have in society, vs the current EVIL mantra we hear on the new about them.

(And lets start with getting rid of corporate welfare to all companies, so they can really make strong arguments/cases against the government).

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However, what I've wanted to see for just 6 months, and it is pretty harsh, but I think it would give the public a reality check. I would like America's pharmaceutical industry to go on a sebatical for 6 months. No more manufacturing, no more drugs, just for 6 months.
Can't happen. The government would declare a national emergency, the National Guard would be sent in to force people back to work, and the industry would be nationalized. You'd have to move to the Gulch permanently.
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