tag:theconversation.com,2011:/institutions/villanova-school-of-law-1692/articlesVillanova School of Law2024-03-08T13:38:33Ztag:theconversation.com,2011:article/2228582024-03-08T13:38:33Z2024-03-08T13:38:33ZAsthma meds have become shockingly unaffordable − but relief may be on the way<figure><img src="https://images.theconversation.com/files/579691/original/file-20240304-18-r33cu5.jpg?ixlib=rb-1.1.0&rect=25%2C51%2C8538%2C5469&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Its price will take your breath away.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/man-using-blue-asthma-inhaler-medication-royalty-free-image/1179346207?">Brian Jackson/Getty Images</a></span></figcaption></figure><p>The <a href="https://www.businessinsider.com/cost-asthma-medication-doubled-unjust-2023-7">price of asthma medication has soared</a> in the U.S. over the past decade and a half. </p>
<p>The jump – in some cases from around <a href="https://doi.org/10.1001/jamainternmed.2015.1665">a little over US$10</a> <a href="https://www.singlecare.com/blog/albuterol-sulfate-hfa-proventil-hfa-without-insurance/">to almost $100</a> for an inhaler – has meant that patients in need of asthma-related products <a href="https://www.businessinsider.com/cost-asthma-medication-doubled-unjust-2023-7">often struggle</a> to buy them. Others simply <a href="https://asthma.net/living/cannot-afford-inhalers">can’t afford</a> them. </p>
<p>To make matters worse, asthma <a href="https://www.fda.gov/drugs/buying-using-medicine-safely/generic-drugs">disproportionately affects</a> lower-income patients. Black, Hispanic and Indigenous communities have the <a href="https://aafa.org/asthma-allergy-research/our-research/asthma-disparities-burden-on-minorities/">highest asthma rates</a>. They also shoulder <a href="https://aafa.org/asthma-allergy-research/our-research/asthma-disparities-burden-on-minorities/">the heaviest burden</a> of asthma-related deaths and hospitalizations. Climate change will likely <a href="https://www.hsph.harvard.edu/c-change/subtopics/climate-change-and-asthma/">worsen asthma rates</a> and, consequently, these disparities.</p>
<p>I’m a health law professor at <a href="https://www1.villanova.edu/university/law/faculty-scholarship/faculty-directory/profiles/AnaSantosRutschman.html">Villanova University</a>, <a href="https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=2667484">where I study</a> whether patients can get the medicines they need. And I’ve been watching this affordability crisis closely.</p>
<p>In many ways, it shows what happens when law and policy decisions aren’t aligned with public health needs. The good news, however, is that there finally seems to be some political will to rein in the price of asthma meds.</p>
<h2>Why inhaler prices are skyrocketing</h2>
<p>In 2008, the U.S. Food and Drug Administration <a href="https://www.fda.gov/drugs/frequently-asked-questions-popular-topics/transition-cfc-propelled-albuterol-inhalers-hfa-propelled-albuterol-inhalers-questions-and-answers">banned inhalers</a> that use chlorofluorocarbons, or CFCs – which were once widely used as propellants – because they can damage the ozone layer. The FDA was following a timeline set by an environmental treaty, the <a href="https://www.unep.org/ozonaction/who-we-are/about-montreal-protocol">Montreal Protocol</a>, which the U.S. ratified in the late 1980s. </p>
<p>From 2009 onward, CFC inhalers were phased out and replaced with hydrofluoroalkane, or HFA, ones, which are more environmentally friendly. They’re also a lot pricier. For patients with insurance, the average out-of-pocket cost of an inhaler rose from $13.60 per prescription in 2004 to $25 immediately after the 2008 ban, <a href="https://doi.org/10.1001/jamainternmed.2015.1665">a 2015 study found</a>.</p>
<p>Today, the <a href="https://www.singlecare.com/blog/albuterol-sulfate-hfa-proventil-hfa-without-insurance/">average retail price</a> of an albuterol inhaler is $98. Unlike CFC inhalers, which have <a href="https://www.fda.gov/drugs/buying-using-medicine-safely/generic-drugs">generic versions</a>, HFA inhalers are <a href="https://www.scientificamerican.com/article/unlikely-victims-of-banning-cfcs/">covered by patents</a>. While <a href="http://doi.org/10.1089/jamp.2016.1297">the drug itself</a> hasn’t changed, the switch to a different device allowed companies to increase their prices.</p>
<p>In 2020, the FDA finally approved the <a href="https://www.fda.gov/news-events/press-announcements/fda-approves-first-generic-commonly-used-albuterol-inhaler-treat-and-prevent-bronchospasm">first generic version</a> of an albuterol inhaler. But generic competition still isn’t robust enough to lower prices meaningfully.</p>
<p>Patients with good insurance <a href="https://allergyasthmanetwork.org/advocacy-updates/united-healthcare-albuterol-epinephrine-cost/">may pay very little</a> or even nothing. But uninsured patients face steep market prices, and as of 2023, there were <a href="https://aspe.hhs.gov/sites/default/files/documents/e06a66dfc6f62afc8bb809038dfaebe4/Uninsured-Record-Low-Q12023.pdf">over 25 million</a> uninsured Americans. <a href="https://www.cdc.gov/asthma/asthma_stats/insurance_coverage.htm">Even insured patients may have trouble</a> affording their asthma meds, the CDC has found. </p>
<p>The same asthma medication for which U.S. patients pay top dollar is available elsewhere at much cheaper prices. Consider the following case for inhalers. The pharmaceutical company Teva sells <a href="https://dailymed.nlm.nih.gov/dailymed/drugInfo.cfm?setid=ccd3aaec-4892-40d0-ad60-3e570178fbe1">QVAR RediHaler</a>, a corticosteroid inhaler, <a href="https://doi.org/10.1016/S2213-2600(24)00012-2">for $286</a> in the U.S.</p>
<p>In Germany, Teva sells that same inhaler for $9.</p>
<h2>Seeking meds from Mexico and Canada</h2>
<p>Some U.S. patients have traveled abroad to obtain cheaper asthma medication. After the 2008 ban on CFCs, it became common for patients to <a href="https://doi.org/10.1177/8755122515595052">visit border towns in Mexico</a> to purchase albuterol inhalers. They were sold for <a href="https://doi.org/10.1177/8755122515595052">as little as $3 to $5</a>. </p>
<p>A study of inhalers available to U.S. patients in Nogales, Mexico – about an hour south of Tucson, Arizona – found that Mexican products were <a href="http://doi.org/10.1177/8755122515595052">generally comparable to U.S. inhalers</a>. But researchers found some differences in performance, suggesting that American patients who use them could be getting a slightly different dose than their usual.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Asthma medication is seen on the shelves of a Mexican pharmacy." src="https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/580250/original/file-20240306-24-xrc96u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Asthma meds are considerably more affordable south of the border.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/the-interior-of-farmacia-san-pablo-news-photo/1041982048">Jeffrey Greenberg/Universal Images Group via Getty Images</a></span>
</figcaption>
</figure>
<p>There have also been reports of Americans turning to Canadian pharmacies to purchase asthma inhalers at much cheaper prices. In one case, a U.S. pharmacy would have charged $857 for a three-month supply. A patient obtained it for <a href="https://www.seattletimes.com/life/wellness/canadian-pharmacy-provided-inhaler-at-a-fraction-of-us-cost/">$134 from a pharmacy in Canada</a>.</p>
<h2>One potential fix: Importing cheaper meds</h2>
<p>U.S. law has long <a href="https://www.fda.gov/about-fda/center-drug-evaluation-and-research-cder/frequently-asked-questions-about-drugs">prohibited</a> personal importation of pharmaceutical drugs. However, a recent development could <a href="https://www.reuters.com/business/healthcare-pharmaceuticals/us-fda-allow-florida-import-cheaper-drugs-canada-2024-01-05">pave the way for states</a> to import cheaper asthma drugs.</p>
<p>In January 2024, the <a href="https://www.reuters.com/business/healthcare-pharmaceuticals/us-fda-allow-florida-import-cheaper-drugs-canada-2024-01-05/">FDA authorized</a> the importation of certain prescription drugs from Canada for the first time. <a href="https://www.kff.org/policy-watch/what-to-know-about-the-fdas-recent-decision-to-allow-florida-to-import-prescription-drugs-from-canada/">For now</a>, this authorization is limited to Florida, and it covers only drugs for HIV/AIDS, prostate cancer and certain mental health conditions.</p>
<p>Should it prove successful, the program could serve as a blueprint for other states.</p>
<h2>Another possible solution: Price-capping</h2>
<p>Policymakers could also try borrowing a page from the insulin playbook. Insulin prices <a href="https://doi.org/10.1001/jamanetworkopen.2023.18074">climbed for almost two decades</a> before Congress acted, capping the cost of insulin for Medicare patients. The 2022 <a href="https://www.congress.gov/bill/117th-congress/house-bill/5376/text">Inflation Reduction Act</a> established an out-of-pocket ceiling of $35 per month for prescription-covered insulin products. </p>
<p>If this cap had been in effect two years earlier, it would have saved 1.5 million Medicare patients about $500 annually, <a href="https://www.hhs.gov/about/news/2023/08/16/first-anniversary-inflation-reduction-act-millions-medicare-enrollees-savings-health-care-costs.html">a recent study estimated</a>. It also would have saved Medicare <a href="https://www.hhs.gov/about/news/2023/08/16/first-anniversary-inflation-reduction-act-millions-medicare-enrollees-savings-health-care-costs.html">$761 million</a>.</p>
<p>A similar approach could be taken for asthma meds.</p>
<p>Congress could create an asthma-specific rule similar to the insulin case. Or it could place provisions for asthma-med prices into a larger piece of legislation.</p>
<p>While this approach depends on the political environment, there are signs the government is becoming more willing to act. In January 2024, the U.S. Department of Health and Human Services <a href="https://www.hhs.gov/about/news/2024/01/29/readout-hhs-officials-meeting-private-sector-patient-advocacy-leaders-improve-national-access-important-asthma-medications.html">hosted a meeting</a> to discuss the problem with manufacturers and other stakeholders.</p>
<p>It’s a start. And – together with other measures – it brings some hope that asthma meds might soon become more affordable to those in need.</p><img src="https://counter.theconversation.com/content/222858/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ana Santos Rutschman does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>An inhaler that costs nearly $300 in the US goes for just $9 in Germany. What gives?Ana Santos Rutschman, Professor of Law, Villanova School of LawLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1897602022-09-05T12:23:11Z2022-09-05T12:23:11ZAmerica’s next big labor battle could be Minor League Baseball<figure><img src="https://images.theconversation.com/files/482605/original/file-20220903-20-euu876.jpg?ixlib=rb-1.1.0&rect=186%2C7%2C2172%2C1342&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Minor league players often endure lengthy bus trips.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/players-for-long-beachs-new-minor-league-baseball-team-the-news-photo/569176245?adppopup=true">Bob Chamberlin/Los Angeles Times via Getty Images</a></span></figcaption></figure><p>When the Major League Baseball Players Association <a href="https://www.nytimes.com/2022/08/29/sports/baseball/mlbpa-minor-league-union.html">sent union authorization cards</a> to approximately 5,000 minor league players in an attempt to unionize them, I was both surprised and not surprised at all. </p>
<p>If any industry is crying out for unionization, it’s this one. Minor league baseball players <a href="https://www.insidehook.com/article/sports/frontlines-battle-better-working-conditions-minor-league-baseball">are subject to some</a> of the poorest wages and most dreadful working conditions in America. Most of them toil for years before being washed out of the game <a href="https://sabr.org/journal/article/the-chances-of-a-drafted-baseball-player-making-the-major-leagues-a-quantitative-study/">without ever having reached</a> the promised land of the big leagues. </p>
<p>On the other hand, as someone <a href="https://www.press.uillinois.edu/books/?id=p080975">who has written about baseball’s labor history</a>, I’ve noticed how nobody seemed to care all that much about minor leaguers until relatively recently. </p>
<p>Which begs the question: Why now? </p>
<p>Unionization, once a powerful weapon in the arsenal of the nation’s workforce, <a href="https://theconversation.com/america-is-in-the-middle-of-a-labor-mobilization-moment-with-self-organizers-at-starbucks-amazon-trader-joes-and-chipotle-behind-the-union-drive-189826">looks to be making a comeback</a> – at least marginally, after decades of declining membership and <a href="https://www.washingtonpost.com/technology/2022/04/24/amazon-apple-google-union-busting/">strong-arm tactics</a> by management to defang it.</p>
<p>If unions can work their way into the strip mall coffee shop, why not Minor League Baseball? </p>
<h2>Big leaguers get their due</h2>
<p>It was hard enough to get major league players to work collectively on behalf of one another. </p>
<p><a href="https://sabr.org/bioproj/person/marvin-miller/">Marvin Miller</a>, a former labor negotiator for the United Steel Workers of America, became the executive director of the <a href="https://www.mlbplayers.com/">Major League Baseball Players Association</a> in 1966. He soon realized that he faced a monumental task in encouraging big league, brand-name players to stand up for themselves against management. </p>
<p>By 1968 he was able to negotiate the first collective bargaining agreement for MLB players. <a href="https://baseballhall.org/hall-of-famers/miller-marvin">Two years later</a>, he succeeded in not only raising the minimum major league salary 25% to US$10,000, but also securing for his players arbitration rights. <a href="https://baseballhall.org/discover/short-stops/free-agency-still-fuels-baseball">By 1976</a>, players with more than six years of service had won the right to become free agents and negotiate with any team of their choice. <a href="https://scholarworks.uni.edu/cgi/viewcontent.cgi?article=1120&context=mtie">Salaries skyrocketed</a>.</p>
<p>As the MLBPA scored victory after victory on the labor front, life for the minor leaguers remained as it had been, and the chasm between being a big leaguer and a minor leaguer grew more pronounced as the decades passed.</p>
<figure class="align-center ">
<img alt="Man with mustache speaks in front of microphones." src="https://images.theconversation.com/files/482604/original/file-20220903-34667-pnlr93.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/482604/original/file-20220903-34667-pnlr93.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=405&fit=crop&dpr=1 600w, https://images.theconversation.com/files/482604/original/file-20220903-34667-pnlr93.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=405&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/482604/original/file-20220903-34667-pnlr93.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=405&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/482604/original/file-20220903-34667-pnlr93.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=509&fit=crop&dpr=1 754w, https://images.theconversation.com/files/482604/original/file-20220903-34667-pnlr93.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=509&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/482604/original/file-20220903-34667-pnlr93.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=509&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Former MLBPA executive director Marvin Miller was able to score huge victories for big league ballplayers.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/executive-director-marvin-miller-of-the-major-league-news-photo/90346172?adppopup=true">Focus on Sport/Getty Images</a></span>
</figcaption>
</figure>
<p>Over time, the grueling life of a minor leaguer became the stuff of legend, <a href="https://www.milb.com/news/beyond-bull-durham-10-movies-about-the-minors-313223890">explored in films</a> like “<a href="https://www.imdb.com/title/tt0094812/">Bull Durham</a>” and “<a href="https://www.imdb.com/title/tt0990413/">Sugar</a>.” Travel often remained as it always had been: by bus. Trips could last for days; it wasn’t considered cruel and unusual punishment to include clubs residing in <a href="https://www.milb.com/news/get-to-know-the-minor-league-teams-in-the-double-a-northeast">Maine, Virginia and Ohio</a> in the same league.</p>
<p>Players are only paid during the roughly five-and-a-half month season. According to <a href="https://www.advocatesforminorleaguers.com/">Advocates for Minor Leaguers</a> – which was subsumed by the MLBPA as part of the union organization push – until 2021, the minimum minor league salary came out to around $4,800, which amounted to about one-third of <a href="https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines/prior-hhs-poverty-guidelines-federal-register-references/2021-poverty-guidelines">the national poverty level of $12,880</a> for a single-person household. Meanwhile, the median minor league salary hovered around the national poverty level. On top of all this, players were responsible for securing and paying for their own housing.</p>
<h2>A weak attempt to appease</h2>
<p>In 2021, <a href="https://news.sportslogos.net/2021/02/15/a-breakdown-of-minor-league-baseballs-total-realignment-for-2021/baseball/">MLB began restructuring the minor leagues</a>, realigning and contracting them such that 43 out of 163 minor league clubs <a href="https://www.usatoday.com/story/sports/mlb/2020/12/09/mlb-announces-minor-league-affiliate-invites-some-teams-miss-cut/3805929001/">were eliminated</a>.</p>
<p>After this reorganization, MLB <a href="https://www.espn.com/mlb/story/_/id/28702734/mlb-raising-minimum-salary-minor-leaguers-2021">finally upgraded minor league pay, at least somewhat</a>, <a href="https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/03/30/baseball-players-press-lawmakers-for-minor-league-labor-standards">increasing</a> the Single-A minimum salary from $290 to $500 per week and the Triple-A minimum salary from $502 to $700 per week over the course of the season. MLB also assumed responsibility for most player housing.</p>
<p>This improved things, but only incrementally. Most minor leaguers still toil for substandard wages under conditions that seem unfathomable given <a href="https://dodgerblue.com/average-mlb-team-payrolls-declined-despite-increasing-revenue/2021/12/29/">the gravy train</a> that is pretty much everything else Major League Baseball touches.</p>
<figure class="align-center ">
<img alt="Baseball player slides into home plate to avoid a tag." src="https://images.theconversation.com/files/482607/original/file-20220903-30403-3ahajh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/482607/original/file-20220903-30403-3ahajh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=387&fit=crop&dpr=1 600w, https://images.theconversation.com/files/482607/original/file-20220903-30403-3ahajh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=387&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/482607/original/file-20220903-30403-3ahajh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=387&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/482607/original/file-20220903-30403-3ahajh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=486&fit=crop&dpr=1 754w, https://images.theconversation.com/files/482607/original/file-20220903-30403-3ahajh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=486&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/482607/original/file-20220903-30403-3ahajh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=486&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Some players in Single-A earn only $500 per week.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/catcher-alex-lavisky-of-the-lake-county-captains-prepares-news-photo/143087859?adppopup=true">David Dermer/Diamond Images via Getty Images</a></span>
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</figure>
<p>To be sure, not all minor leaguers suffer under these circumstances. Early-round draft picks have the luxury of dipping into their <a href="https://www.nbcsports.com/washington/nationals/mlb-draft-2022-explaining-signing-bonuses-slot-value-and-more">substantial signing bonus money</a> to supplement their minor league incomes. But all minor league players remain subject to a litany of further indignities at the hands of their employers: Clubhouses – where players can spend up to 12 hours a day – <a href="https://www.foxsports.com/stories/mlb/ben-verlander-minor-league-baseball-player-not-so-glamorous-life-behind-the-scenes">can be dingy shacks with dirt floors</a>. Off days are few and far between – <a href="https://www.mlbdailydish.com/2018/10/10/17919590/talking-about-the-grind-of-life-as-a-minor-league-baseball-player-with-minorleaguegrinders">sometimes as few as a single day per month</a> – and players are often made to feel disposable. </p>
<p>“Minor-league players need to be looked at as investments, not pawns,” one minor leaguer confided to a reporter for <a href="https://theathletic.com/2750280/2021/08/05/cockroaches-car-camping-poverty-wages-why-are-minor-leaguers-living-in-squalor/">The Athletic</a> in 2021. </p>
<p>“They act like we aren’t a part of the organization,” added another.</p>
<h2>The winds of change</h2>
<p>Suddenly, however, there’s been movement on the minor league front. </p>
<p>If nobody else saw this coming, MLB likely did. Why else did the league finally make incremental changes in 2021? </p>
<p>I doubt the MLB did this out of the goodness of their hearts. I believe they did it because, like Bob Dylan, they didn’t need a weatherman to know which way the wind was blowing. </p>
<p>In July, MLB settled <a href="https://www.nytimes.com/2022/07/15/sports/baseball/mlb-lawsuit-pay.html">a $185 million class-action lawsuit</a> over minor league pay, <a href="https://www.si.com/mlb/2022/07/20/rob-manfred-minor-league-wages-all-star-game">agreeing to permit clubs</a> to compensate these players for their work during spring training.</p>
<p>Formerly, clubs were prohibited from doing so. Now they’re free to compensate their players for this time – if they so choose. </p>
<p>The MLBPA could sense the shifting winds as well. </p>
<p>After decades of silence, people with influence were at last beginning to take note of what was going on down on the farm. Reporters started digging, and former players started speaking up, <a href="https://bleacherreport.com/articles/2062307-an-inside-look-into-the-harsh-conditions-of-minor-league-baseball">publishing thoughtful and incisive pieces</a> detailing not only <a href="https://www.foxsports.com/stories/mlb/ben-verlander-minor-league-baseball-player-not-so-glamorous-life-behind-the-scenes">MLB’s back-of-the-hand treatment</a> of minor league players, but also how the MLBPA <a href="https://www.sbnation.com/mlb/2018/6/5/17251534/mlb-draft-minor-league-baseball-union-phpa">often ignored</a> or sold out their minor league counterparts in labor negotiations.</p>
<p>And then, of course, there have been the <a href="https://www.theguardian.com/us-news/2022/jul/27/us-union-boom-starbucks-amazon">high-profile unionization efforts</a> at places such as Starbucks, Amazon, Apple, Chipotle and Trader Joe’s, which signaled that something was clearly afoot beyond the bushes.</p>
<p>According to <a href="https://news.gallup.com/poll/398303/approval-labor-unions-highest-point-1965.aspx">a recent Gallup poll</a>, Americans’ support for unions is not merely ticking upwards – it’s at a 57-year high. </p>
<h2>The real work begins</h2>
<p>The unionization effort is far from a done deal; the MLBPA merely distributed union authorization cards. Now it’s up to <a href="https://apnews.com/article/mlb-sports-minor-league-baseball-spencer-jones-6c02bdb34e1f221fc21b3e230eeddf78">a critical mass of minor league players</a> to vote in favor of unionization. </p>
<p>How many of these highly vulnerable minor leaguers are going to be willing to risk angering the people who hold their precarious futures in their hands? How many of them are going to be willing to put their lifelong dreams on the line for a union card? How many are confident enough that their skills are such that they won’t be released in retaliation for organizing?</p>
<p>All I know for sure is that minor league baseball today finds itself in a place it has never been before: on the precipice of real, profound change. </p>
<p>Depending on how things turn out, perhaps one day the reality of being a professional ballplayer might actually resemble the fantasy so many young ballplayers have clung to for generations.</p><img src="https://counter.theconversation.com/content/189760/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mitchell Nathanson does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>If any industry is crying out for unionization, it’s this one.Mitchell Nathanson, Professor of Law, Villanova School of LawLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/328532014-10-28T09:35:51Z2014-10-28T09:35:51ZNeed to access cash is driving surge of corporate inversions, not the high US tax rate<p>Corporate inversions have been front page news in the US for months with everyone from President Barack Obama to the man on the street expressing a view as their usage has surged. Unfortunately, many of these views are not well informed.</p>
<p>For example, most <a href="http://www.bloombergview.com/quicktake/tax-inversion">news reports</a> cite the 35% US corporate tax rate as a major cause of inversions. While it is true the US has the highest corporate tax rate in the developed world, it is not causing inversions. </p>
<h2>What is an inversion?</h2>
<p>Although corporate inversions can take many forms, the end result is that a business previously owned by a US parent corporation is now owned by a foreign parent, as the chart below shows. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/62679/original/7dcdmznv-1414100678.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/62679/original/7dcdmznv-1414100678.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/62679/original/7dcdmznv-1414100678.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=486&fit=crop&dpr=1 600w, https://images.theconversation.com/files/62679/original/7dcdmznv-1414100678.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=486&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/62679/original/7dcdmznv-1414100678.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=486&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/62679/original/7dcdmznv-1414100678.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=611&fit=crop&dpr=1 754w, https://images.theconversation.com/files/62679/original/7dcdmznv-1414100678.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=611&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/62679/original/7dcdmznv-1414100678.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=611&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
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<span class="attribution"><span class="source">J Richard Harvey</span>, <span class="license">Author provided</span></span>
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</figure>
<p>In most cases, the foreign parent is an entity with few employees. Thus, an inversion is effectively a legal change of ownership. </p>
<p>It does not mean a business will move its headquarters and employees out of the US – though there is justifiable concern that over time jobs could leave the US.</p>
<p>At least 13 companies that used to be based in the US <a href="http://www.bloombergview.com/quicktake/tax-inversion">have completed</a> inversions since the beginning of 2012, compared with six in the previous three years, according to Bloomberg. Six more inversions are pending. </p>
<h2>Why companies are inverting</h2>
<p>Many have argued companies are pursuing inversions to avoid the bite of the US’s 35% corporate rate, but international tax planners know better. Even if it were miraculously reduced to 15%, US corporations would still invert.</p>
<p>The real reason is that they need access to their cash. Specifically, companies have shifted so much income to offshore tax havens that the US parent needs the cash from foreign earnings to pay dividends and buy back stock. </p>
<p>But there is a major problem: the US parent cannot access the foreign earnings without incurring domestic tax. Tax planners and Washington politicians <a href="http://cber.utk.edu/confpapers/Gra_Han_She.pdf">refer to this</a> as the “lock-out effect.” </p>
<p>Some believe corporations have been hoisted on their own petards because they have shifted so much income overseas. Others argue that they need to do so to remain competitive with foreign corporations. Both views have merit.</p>
<p>Regardless, the bottom line for US corporations is that foreign earnings are needed back at the US parent and they don’t want to pay any meaningful domestic tax on such earnings. Thus, it is the lock-out effect that is driving corporate inversions, not the high US corporate tax rate.</p>
<h2>Territorial tax systems</h2>
<p>In order to eliminate the lock-out effect, US companies have vigorously <a href="http://www.politico.com/story/2013/03/group-wants-to-limit-tax-bite-on-overseas-profits-88470.html">lobbied</a> for a “territorial” tax system so that dividends from foreign corporations are not taxed in the US. Since the US is the only major country that has not adopted such a system, companies were initially optimistic their lobbying efforts would be successful. </p>
<p>However, many politicians have been unwilling to adopt a territorial tax system unless there are significant safeguards against shifting their income to other countries. Their fear is that without such safeguards the US corporate income tax could effectively become optional. </p>
<p>The end result is the lock-out effect will not be addressed until there is major corporate tax reform. Such reform could be many years away, assuming it ever takes place.</p>
<h2>The lock-out effect?</h2>
<p>Inversions are effectively a self-help measure for US corporations to obtain a territorial tax system. Instead of waiting for the US tax law to change, they can invert and access their foreign cash. </p>
<p>For example, assume a US corporation has a foreign subsidiary with US$1 billion of previously accumulated earnings and $2 billion of projected earnings over the next ten years. </p>
<p>First, immediately after the inversion, the new foreign parent could borrow US$1 billion from the foreign subsidiary and incur no US tax. The foreign parent could then use the US$1 billion as it wished.</p>
<p>Second, the new foreign parent could also access the US$2 billion of future earnings without US tax cost. Absent an inversion, the US parent would not be able to access either the US$1 billion of accumulated earnings or the US$2 billion of future earnings without incurring US tax.</p>
<p>The US Treasury, however, stepped into the fray in September and issued new rules intended to give pause to corporations contemplating an inversion. The regulations make it substantially more difficult for the new foreign parent to immediately borrow that US$1 billion from the foreign unit without incurring US taxes. </p>
<p>And in at least one case it succeeded. The US drug company AbbVie, for example, last week <a href="http://dealbook.nytimes.com/2014/10/20/abbvie-and-shire-agree-to-terminate-their-deal/">canceled</a> its US$54 billion acquisition of Irish-based Shire in what would have been the biggest ever inversion. </p>
<h2>Treasury rules will not stop the flow</h2>
<p>Although the Treasury rules may stop companies from immediately borrowing the $1 billion in the above example, the potential long-term benefits of exempting $2 billion of future earnings from US taxation are significant.</p>
<p>The bottom line is that as long as a US corporation can materially benefit by inverting, we should expect them to continue. Admittedly the Treasury’s intervention will slow the pace of inversions, but assuming the US does not take any other action, it is reasonable to predict that after 10 to 20 years a substantial number of US corporations will have inverted by one method or another.</p><img src="https://counter.theconversation.com/content/32853/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>J Richard (Dick) Harvey Jr. does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Corporate inversions have been front page news in the US for months with everyone from President Barack Obama to the man on the street expressing a view as their usage has surged. Unfortunately, many of…J Richard (Dick) Harvey Jr., Distinguished Professor of Practice, Villanova School of LawLicensed as Creative Commons – attribution, no derivatives.