The Economist - USA (2019-07-20)

F

ora nationthatregardsitselfasthe

cradleofreason,theFrenchdisplaya

peculiarfondnessforhomeopathy.More

thanhalfofthemhaveingestedhomeo-

pathiccures,basedonthenotion,de-

bunkedbynumerousscientificstudies,

thatwaterretains“memory”ofactive

ingredients,whosehealingpowerrises

astheirconcentrationsfalltoa few

moleculesperdose.Nowhomeopaths’

profitsriskbeingwatereddownafter

France’shealthministryruledearlierthis

monththattheirproductswouldno

longerberefundedbysocialsecurity.

Francehasrecognisedhomeopathic

remediesasakintomedicinesincethe

1960s.In 1984 it madethemeligiblefor

partialreimbursementfromthepublic

purse.Patientsthereguzzle$700m-

worthofthestuffa year,outofglobal

salesofperhaps$4bn.Thefavourable

treatmentowesa lottoa vocalhomeo-

pathic-pharmaceuticallobby.The

world’sbiggestmakerofsuchcuresis

Boiron,basedoutsideLyon,withtotal

salesof€600m($674m)lastyear.

Manydoctorspractise homeopathy,

butputitssupposedbenefitsdowntothe

placeboeffect(whichisreal).Atfirstthe

healthminister,AgnèsBuzyn,seemedto

acceptthecasethatpatientswhopop

sugarpillsmightcutdownonantibiotics

andotherpharmacology,whichthe

Frenchnotoriouslyoverconsume.But

theadviceofscientists—andthepros-

pectofsavingover€100ma year—pre-

vailed.Reimbursementrateswilldecline

from30%todaytonothingby2021.

Boiron’sbosseshavedescribedthe

cutsasshockingandunfair.Theymust

fearforthehealthofitsoperatingmar-

gins.At18%theserivalthoseofbigdrug-

makerssuchasNovartisandPfizer.

Homeopathsdonotcommandthehigh

pricesofadvanceddrugsbutcanscrimp

onscience.Boironemploysjust 13 people

inresearch,ina workforceof3,700,and

spends€3.8ma year,or0.6%ofsales,on

innovation.Bycontrast,oneinsixem-

ployeesatmanybigpharmaceutical

firmsisa researcheranddrugmakers

spendanaverageof16%ofrevenueon

developingnewtreatments(theyalso

chargea lotmoreformanymedicines

thanhomeopathsdo).

Boiron’sshareshavelostnearlyhalf

theirvalueinthepastyearasinvestors

pricedinthehealthministry’sdecision.

ThebossofWeledaFrance,a rival,wor-

riedwhatit couldmeanforhomeopathy

inplaceslikeIndiaandSouthAmerica.

Hopefully,a dilutionofinfluence.

Watereddown

Homeopathy

PARIS

Bitternewsformakersofsugarpills

The EconomistJuly 20th 2019 Business 55

2

1

can regulator. A Facebook which works

with governments rather than around

them appeals to shareholders.

So does Facebook’s ability to rake in

money. The growth of its core social net-

work is slowing down (see Graphic detail).

But revenues from Instagram, its popular

photo-sharing app, are growing apace. It

has yet to realise the money-spinning po-

tential of WhatsApp, its messaging service.

Analysts expect Facebook’s second-quarter

results, due out on July 24th, to show rev-

enues up by 25% from last year, to $16.3bn.

Unlike profits at some other technology

firms (see previous article), its net income

is expected to rise, by 6% to $5.4bn—more

than enough to cover the fine.

Facebook is not out of the woods. Other

regulators and politicians are lining up to

take a swipe at Big Tech, and not just in

America. Financial authorities are leery of

Libra, worrying that it could become a vehi-

cle for fraud and money laundering, as

happened with some other cryptocurren-

cies. Central bankers fear that if adopted

widely enough it could threaten financial

stability. On July 16th Ursula von der Leyen,

president-elect of the European Commis-

sion, the eu’s executive arm, said she wants

the tech giants to pay more taxes. The next

day the bloc’s competition chief, Margre-

the Vestager, announced a probe into Ama-

zon’s use of merchant data. In some coun-

tries data-protection regulators want to

order non-compliant companies to stop

processing data altogether. That would

hurt considerably more than a fine. 7

Fineanddandy

Sources:Pressreports;

companyreports

*Precedingyear

†Reported

Selectedtech-companyfines,USandEU

Company(year) Fine,$bn

Apple (2016)

Google (2018)

Facebook (2019)

Google (2016)

Google (2019)

Intel (2009)

Microsoft (2008)

Qualcomm (2018)

Microsoft (2013)

5.1

5.0†

2.7

1.7

1.4

1.3

1.2

0.7

19.4

20.1

11.4

5.5

16.2

6.8

46.5

3.3

14.6 20.1

As%of

operatingprofit*

Reason for fine: Tax Antitrust Privacy

B

ayer coulddo with a few Aspirin these

days. On July 16th a judge in California

rejected a request by the German chemicals

giant (which makes the painkiller) for a re-

trial of a case in which jurors awarded the

plaintiff $80m after concluding that

Roundup, Bayer’s bestselling herbicide,

caused his cancer. The judge’s decision to

reduce damages to $25m offered only mar-

ginal analgesic relief. The verdict could

open the floodgates to 13,400 other plaint-

iffs around the world who claim to have

been harmed by Roundup. It comes on top

of another headache caused by Austria’s

lower house of parliament, which voted

this month to ban glyphosate, Roundup’s

active ingredient, from November.

The glyphosate lawsuits—and the polit-

ical backlash—stem from a finding by a di-

vision of the World Health Organisation,

which said in 2015 that the chemical was

“probably carcinogenic”. The study, con-

troversial among scientists, has dogged

Bayer ever since it bought Monsanto,

Roundup’s American inventor, in 2018.

Bayer’s market capitalisation has nearly

halved since the takeover, to €55.5bn

($62.4bn), a little less than the $63bn it paid

for the American agrochemicals giant.

The uncertainty over the toll of glypho-

sate litigation explains much of the fall. It

nevertheless looks like an overreaction.

The lawsuits could certainly be painful but

look unlikely to prove fatal. Markus Mayer

of Baader Bank, an investment bank, esti-

mates that they could cost between €5bn

and €20bn—a fair bit less than the drop in

Bayer’s share price would imply. Bayer

plans to appeal against the verdict in Cali-

fornia. At the end of June it signalled that it

might be open to a settlement to end its le-

gal battles once and for all. It set up a spe-

cial committee to examine its legal strategy

and appointed John Beisner, a combative

lawyer, to advise on trial tactics.

Losing Roundup altogether would simi-

larly hurt but not kill the German firm. The

weedkiller accounts for 12-15% of sales at

Bayer’s crop-business and perhaps €1bn, or

around a quarter, of Bayer’s operating pro-

fit. Despite talk of prohibitions around the

world, many farmers fear that losing

Roundup will reduce their yields—and

have made their concerns known to their

political representatives. The Austrian ban

must still be approved by the upper house

of parliament. It may be incompatible with

the eu’s decision in 2017 to renew glypho-

BERLIN

Weedkiller woes prompt calls to split

up a drugs-and-chemicals giant

Agribusiness

Bayer’s remorse