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What a meltdown! It was at $27 at 2:00 and then decided the "fraud" thing was just too much.
"As a result of their agreement with respect to the Per-Procedure Fee under the PPP
Agreement, VISX and Summit charged consumers significantly more than they would
have been charged in the absence of the agreement. Based on the number of procedures
performed in 1996, it is likely that this overcharge exceeded $10.5 million. Based on
estimates for procedures performed in 1997, it is likely that this overcharge exceeded
$30 million."
That is rediculous! At $250/procedure for 195,000 procedures we get a grand total of $48,750,000 in fees to PPP. So the FTC is saying that the fee should be (1-30/48.75)*250 = $96.15 per procedure. You've got to be kidding! If there were no PPP, the fee would be at least that high ($250) and maybe higher.
Summit is just now breaking even so how exactly has the monopoly profited. Visx has been able to make a small profit so far by keeping costs under tight controls. However, neither company has yet to recover the costs of bringing their inventions to the marketplace. So how on earth could you say they have overcharged $30 million in 1997? The only crime is that commited by the Government. What about the fraudulent release of Visx's design documents from within the FDA? What about the willful failure to act by the FDA on illegal lasers that caused "unfair competetion" for Visx and Summit and their customers. The Optometrist's get $400 for a referral, so the $250 per procedure isn't that high considering the manufacturer can be sued by any unhappy patient. And the cost of the machines should really be around $3 to $5 million, but in order to successfully bring the technology to the marketplace, the most appropriate way was to lower the initial price of the machines and make up the difference in per procedure fees. What do drug companies charge for a new drug? They charge an expensive per pill fee as long as they can (patents expire), or until a competing drug forces them to lower the price.
After PPP is split-up, Visx should up the fee to say $300 to recover the legal costs because they have to fight the rediculous FTC charges.
Also, if PPP is split-up it will probably hurt competition! Under PPP, Visx and Summit would have to license all newcomers. When PPP is broken up, Visx and Summit will not have to license newcomers. They could charge $1000 per procedure or more. And if the other companies do not like it, they could wait until the patents expire to bring their technology to market, or they could try to design around the patents and try to get re-approval by the FDA, or they could try to fight it out in court only to more than likely lose.
The FDA has now made it harder for the competition to "make it" in the U.S. market.
As for the patent fraud, well that is a new one. I hope Mark Logan really goes on the offensive to dispute these charges. Today's response by Visx is not enough. We need a detailed rebuttal. In any event it will not preclude Visx from charging the per procedure fee as Visx has numerous other patents for the technology.
I guess what it comes down to is that the FTC has put Visx on sale at 25% off. I'm sure Logan is not going to give away the rightfully deserved fruits of Visx's inventions and labors. Visx deserves to reap a great reward on their high risk inventions now that the public is benefiting. Around $100 million was invested in Visx to get the technology into the marketplace. A return on investment of 20+ times is an appropriate payback considering the risk that the company and investors had to take to bring this great technology to the marketplace. |
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