10/22/2015
By Charles Payne

The privately held Turing Pharmaceuticals got the ball rolling when it was revealed that the company bought a decades-old AIDS drug and immediately hiked the price from $13.50 to $700 a pill. The outrage was swift and became harsher when the company CEO Martin Shkreli gave a callous interview that didn’t even attempt to justify the hike or nullify the criticism.

The price hike shocked most folks, but it was the laid-back and cavalier attitude that had the media calling Shkreli The Most Hated Man in America.

Donald Trump called Shkreli a “spoiled brat,” a “nothing,” and a “zero.” And he said that he should be ashamed of himself.

Marco Rubio went a little further to admonish the entire industry by saying, “These companies decide, we can get away with charging it, and so we do,” referring to the industry’s habit of marking up drug prices as demand wanes.  He went on to call the practice “pure profiteering.”  According to Bloomberg, drug price hikes are running rampant in the industry.

• Pfizer (PFE) hiked prices on 133 drugs
• Merck & Co. (MRK) hiked prices on 38 drugs

Democrats seeking their party’s nomination also went on the attack, but it was Hillary Clinton whose comments not only resonated the most, but also actually unmoored biotechnology stocks from their entrenched rally.

The former Secretary of State tweet sent biotech stocks lower:

September 21, 2015:

Price gouging like this in the specialty drug market is outrageous.  Tomorrow I’ll layout a plan to take it on.

At the time, shares of Valeant Pharmaceuticals (VRX) were changing hands at $229 a share; a week later, the share price was $158.  The stock rebounded to $182 by October 2, but this week after posting financial results that beat the Street on the top and bottom, management admitted it was making changes to its business model of buying abandoned drugs and capping price increases.

The stock was mostly a sitting duck when a major short issued a report with damming innuendos, sending the shares reeling to $88 before it was halted.  Management officials refuted the insinuations and actual allegations, helping the stock regain much of its lost footing.

Still, the die has been cast and VRX has become the poster child for the drug industry, which could possibly be taking over the top spot on the most hated list.

Yesterday, Hillary Clinton flexed her muscles again with comments about merger mania with healthcare insurers, saying she had “serious concerns.” The news sent shares of Aetna (AET), Cigna( CI), and Anthem (ANTM) reeling, although most recovered much of the lost ground.

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Charles Payne
Wall Street Strategies

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