Data Mining Ban Upheld, Pension Investments and Paid Sick Days Victory

Data Mining Ban Upheld, Pension Investments and Paid Sick Days Victory

Friday, November 21, 2008


Data Mining Ban Upheld, Pension Investments and Paid Sick Days Victory


Tuesday, New Hampshire’s first-in-the-nation law banning the sale of data on physician prescribing habits to drug industry marketers was upheld by a federal appeals court.  The legislation and subsequent court ruling dealt a significant blow to the drug industry and its heavy-handed marketing tactics. The 2006 New Hampshire law, sponsored by Rep. Cindy Rosenwald, will protect the privacy of physicians and their patients by banning data-mining - the process by which the drug industry uses, or mines, the prescribing habits of providers to inform direct-to-provider marketing. As Rep. Rosenwald stated in a press release, the "decision unanimously recognizes that States have the right to protect the prescriber-patient relationship and patient safety, and to try to reduce the cost of pharmaceuticals.” Maine and Vermont passed similar laws which have been held up by litigation, but will now move forward.

The Federal Appeals Court's ruling will open the flood-gates of reform in other states. Sharon Treat, a Maine State Representative and Director of the National Legislative Association on Prescription Drug Prices (NLARx), reports that 12 states in 2008 introduced similar bills.  But, largely “because of the pending litigation challenging the New Hampshire, Maine and Vermont laws, these bills were withdrawn or did not pass. Now that legislators have been given the green light in this unanimous and clear victory, we can expect that these and other states will consider resubmitting this legislation.”

The drug industry spends at least $7 billion each year marketing directly to physicians — pitching the latest "celebrity" drug and driving up health care costs for states, businesses, and consumers.  As the New York Times explains, with “data describing which doctors prescribe what drugs, pharmaceutical sales forces are better able to identify which doctors might use their products and be receptive to their sales pitches. They can also focus on persuading doctors who do not write many prescriptions for their products to change their minds.”

In Tuesday’s unanimous ruling, the court called the data-mining process “mind-boggling.” Stating, “[t]he record contains substantial evidence that, in several instances, detailers armed with prescribing histories encourage the overzealous prescription of more costly brand-name drugs regardless of both the public health consequences and the probable outcome of a sensible cost/benefit analysis.”

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Taking Action on Job Creation: Invest Michigan! Fund

In the past few years states have become increasingly unwillingly to rely on the chance that volatile global investment markets will choose to invest in their local communities. Instead, states are choosing to directly invest themselves in local emerging opportunities.  The great advantage of direct investment, instead of simply raiding the state treasury and giving away corporate welfare, is that by making direct investment in local businesses, states create a financial stake in firms.  If these businesses are successful, they will return equity to the tax payers that can be reinvested in other projects.  According to the National Association of Seed and Venture Fund, as of 2006, all but six states had state venture capital funds.

An emerging key source of venture capital is state pension funds. One of the most progressive efforts by a state to provide capital to entrepreneurs who create jobs is the Invest Michigan! Fund, which features The Michigan Opportunities Fund and the Growth Capital Fund. The Invest Michigan! Fund is capitalized with $300 million from the state's pension fund, and made its initial investments this past week in two technology related ventures.  

The overall objective of the Invest Michigan! Fund is to grow the state's pension funds "by investing in new businesses in emerging sectors and encouraging companies in established industries to innovate and expand."   According to a release by the Governor's office, "encouraging growing companies to plant roots in Michigan or existing companies to expand in Michigan has at points been challenging...Traditionally, Michigan has lacked a continuum of capital necessary to help technology companies start and grow."  The hope is that by investing in small and medium-sized Michigan-based companies, the state will attract and retain successful businesses, which will create jobs and a more diversified economy.

Michigan is not the only state utilizing state pension funds as a source of venture capital.  An earlier adopter of the strategy, California, found in a recent study that its California Public Employees’ Retirement System (CALPERS), the nation’s largest pension fund, has used an estimated $15.1 billion in state-based investments in 2006 to create 124,000 jobs.   Other examples include:

  • The New York State Common Retirement Fund has "dedicated more than $800 million to investments targeted in New York, with an emphasis on the underserved upstate region. Since 1999, the program has invested more than $271 million in 107 New York companies. The New York Common Retirement Fund manages $154.5 billion of which only 6.5 percent — or about $10 billion — is allocated to alternative investments. Of that, $836 million — or a little over 8 percent — is specifically targeted for in-state investments."
  • Florida enacted an economic stimulus plan that redirects $1.95 billion of the states’ pension fund into direct investments of Florida’s companies.  
  • In 2007 New Jersey launched the New Jersey Directed Investment Fund which joins pension fund investment with private-equity partners to support companies willing to expand state operations -- including biotech companies and green ventures
  • The Ohio Public Employees Retirement System "dedicated $50 million in 2005 and then doubled its commitment to $100 million citing excellent initial investment returns and 1,450 jobs."
  • Indiana’s "Public Employees Retirement Fund dedicated $155 million in 2006 to an in-state investment program" and theNorth Carolina Retirement System committed $250 million."


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Paid Sick Days Victory in Milwaukee- But Business Lobby is Going to Court

One key victory on election day was a victory for paid sick days in Milwaukee by a commanding 69-31% of city voters.  Parents in Milwaukee who need to take a day off to care for a sick child can now afford to do so now that their paid sick days referendum has Milwaukee following the lead of San Francisco, CA and Washington DC. in adopting a program to require employers to provide paid sick days.  Under the measure, full-time workers in large businesses will earn up to 9 paid sick days a year and workers in smaller businesses with fewer than 10 employees will earn up to 5 days a year.

While business leaders didn't challenge the referendum at the ballot box because they knew polling showed overwhelming public support for paid sick days legislation, but the Metropolitan Milwaukee Association of Commerce has launched a legal challenge to the approved ordinance. 

Community and labor groups are working with Mayor Tom Barrett, who opposed the measure but has decided to respect the voters' wishes. The referendum must be implemented within 90 days of publication in local papers.   While the Milwaukee business leaders are trying to argue that the local law endangers local businesses, their counterparts in San Francisco, where similar rules are already in place, disagrees that such policies lead to businesses relocating:

Jim Lazarus, the senior vice president of public policy for the San Francisco Chamber of Commerce, said more than 90 percent of member businesses already offered sick-leave policies so the new law didn’t change much. “I can’t imagine this burden would be at such a level that a business would relocate based on that.”

While some business lobbies are fighting paid sick days laws, others obviously recognize that the burden is low but the gains for families are tremendous.  Rather than hurting business competitiveness, one study on the likely effects of the Milwaukee ordinance found it would actually save businesses $38 million a year in reduced employee turnover and gains to public health.  Given the popularity of paid sick days and the weakness of their economic arguments, hopefully the Milwaukee lobby will soon give up on their legal fight and work with their employees to improve their families' lives and the public health.

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Report: Stop Retailers Pocketing over $1 Billion in Sales Tax Revenue

According to a new study by Good Jobs First, state and local governments lost over $1billion in sales tax revenue last year as a result of laws that allow retailers to retain a percentage of the sales tax they collect.

The study, Skimming the Sales Tax: How Wal-Mart and other Big Retailers (Legally) Keep a Cut of the Taxes We Pay on Everyday Purchase, finds that 26 states provide retailer compensation, and 13 of those states have no limit on the amount that individual businesses can retain.  States without caps lose significant amounts of sales tax revenue annually; Illinois loses $126 million, Texas loses $89 million, Pennsylvania loses $72 million, and Colorado loses $68 million.

Good Jobs First Executive Director Greg LeRoy highlights the problematic nature of these polices, particularly as state and local governments face severe budget shortfalls, "This legal skimming is depriving governments of desperately needed revenue."

The practice of retailer compensation, often referred to as "vendor discount" or "dealer collection allowance" was first implemented when business records were kept by hand, and it was intended to compensate business owners for the additional burden of collecting sales tax on behalf of the government.  Despite the advent of new technologies that greatly decrease this burden, outdated compensation policies remain in place in many states.  

Large retailers, such as Wal-Mart, which receives an estimated $60 million per year from retailer compensation programs, benefit disproportionately from these laws, as the major costs associated with collecting sales tax are fixed costs (such as software programs) that do not rise with increased receipts.

In addition to addressing concerns regarding the existing retailer compensation practices, Good Jobs First also notes that states that currently do not provide compensation may have to do so in the future in order to participate in a new sales tax system for interstate transactions created by the Streamlined Sales and Use Tax Agreement (SSUTA).  Proposed federal legislation (H.R. 3396 and S.34) to facilitate the collection of sales tax on interstate transactions requires states to provide "reasonable compensation" to all retailers, not only to those selling across state lines.  The legislation does not explicitly define "reasonable compensation," and thus, it will be up to state policymakers to address this issue.

Good Jobs First also continues its investigation into economic development subsidies, which include sales tax rebates and sales tax increment financing (STIF), that result in significant revenue losses for local governments.  Although national data is not available on such subsidies, the study finds that Wal-Mart projects have received a total of $130 million from sales tax-based subsidies over the past decade.

In light of the research presented, the study concludes with three main policy recommendations:

  • Put Limits on Current Retailer Compensation
  • Plan for Prudent Compensation Levels under SSUTA
  • Save Economic Development Subsidies for Truly Needy Areas

Given the current economic climate, it is critical that states make wise policy decisions regarding retailer compensation and economic development subsidies in order to reduce the amount of sales tax revenue that is lost by such practices and to protect essential public services that depend in part on this revenue.

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Research Roundup

A few good resources highlighting the need for a federal recovery program focused on aid to the states:

A couple of reports highlight rising inequality and the shakiness of the American Dream:

  • From Middle to Shaky Ground (Demos) - This new report finds that 4 million American households lost economic security between 2000 and 2006, and that a majority of America's middle class households are either borderline or at high risk of falling out of the middle class altogether.  Median financial assets are falling, housing expenses are rising, and middle-class families with at least one member lacking health insurance is growing.
  • U.S. Intragenerational Economic Mobility From 1984 to 2004 (Economic Mobility Project) - This report highlights that despite strong economic growth during the late 80s and 90s, income inequality by most every measure is higher today than in 1984. More than 7 in 10 Americans who start at the bottom of the income ladder remain below middle income status 10 years later.
  • A Green Prosperity Path (Center for American Progress) - While immediate stimulus is needed, this resource emphasizes that investing in a cleaner, renewable, and more efficient energy system must play a key role in any comprehensive economic rescue and revitalization effort.

The Progressive Income Tax: An Essential Element of Fair and Sustainable State Tax Systems (IETP) - As states struggle with fiscal crises, this policy brief outlines why a fair and progresive tax on incomes, particularly on the wealthy, is critical to promoting stable revenues and funding social and physical investments.

The 2008 State New Economy Index (Information Technology and Innovation Foundation (ITIF)) - Ranking states on their strength in becoming global, entrepreneurial and innovation-based economies, this report finds that five states - Massachusetts, Washington, Maryland, Delaware and New Jersey -- are leading the nation, while Mississippi, West Virginia, Arkansas, Alabama and Wyoming are ranked lowest on the studies' 29 indicators of effectiveness in national and global competition.

Opportunity Agenda this month is highlighting the role of international human rights in state law and public opinion:

The Center for American Progress has two new studies on education:

  • Financial Incentives for Hard-to-Staff Positions - this report details new approaches to teacher compensation that encourage teachers to work in "hard-to-staff" areas such as math and science, as well as placing them in schools with high proportions or disadvantaged students and in isolated rural areas
  • Addressing the Teacher Qualification Gap. - With less qualified teachers more likely to be placed in schools serving less wealthy students, this report examines the literature showing the inequitable results of such differences are argues for financial incentives to address the problem.

Two new reports highlight challenges for early education:

  • Child Care Assistance in 2006: Insufficient Investments  (CLASP) - While spending on child care assistance increased slightly in 2006, this combined thirty-two states increasing spending, with 19 states making cuts -- and unless federal support is increased, more programs will face cuts.
  • New Report: Middle-Class Families in Difficult Pre-K Pinch (PreK Now) -Eligibility requirements and prohibitively high costs lead most middle class families to sacrifice basic household needs to pay for early education and care for their children, or to settle for low-quality options with unproven benefits.

Sustaining Anti-Poverty Solutions: Keep an Eye on the Prize (CLASP) - Local solutions to poverty that provide opportunity are taking hold in different ways around the United States and this article identifies for funders and others a set of issues that should get considered when tackling poverty.

Please email us leads on good research at


Data Mining Ban Upheld, Pension Investments and Paid Sick Days Victory

NLARx — Federal Court Upholds New Hampshire Drug Marketing Restrictions
Progressive States Network — Reducing Prescription Drug Costs and Rein in Abusive Drug Industry Marketing Practices
US Court of Appeals — IMS Health and Verispan vs. State of New Hampshire

Taking Action on Job Creation: Invest Michigan! Fund

Invest Michigan! Makes Initial Investments
Invest Michigan! Aggressive Economic Transformation Through Investment Capital
Progressive States Network, Broadband and Technology Investments: Policy Options for 2009
Progressive States Network, Economic Strategies for Nurturing Innovation and Job Growth
CALPERS - CalPERS - An Economic Engine
National Association of Seed and Venture Funds

Paid Sick Days Victory in Milwaukee- But Business Lobby is Going to Court

Paid sick days Milwaukee
Progressive States Network - Paid Sick Days and Family Leave Political Winners
Progressive States Network - Paid Sick Days on Ballot in Milwaukee
Sloan Work and Family Institute - Sick Leave Policies
Institute for Women in the Workplace - Valuing Good Health in Milwaukee: The Costs and Benefits of Paid Sick Days


The Stateside Dispatch is written and edited by:

Nathan Newman, Policy Director
Caroline Fan, Immigration and Workers' Rights Policy Specialist
Julie Schwartz, Broadband and Economic Development Policy Specialist
Christian Smith-Socaris, Election Reform Policy Specialist
Kayla Southworth, Privatization and Contractor Accountability Policy Associate
Adam Thompson, Health Care Policy Specialist
Austin Guest, Communications Specialist
Marisol Thomer, Outreach Coordinator

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