Morning Commentary
Well, if you thought Barack was bad for business, wait until you get Hillary. I followed up on a New York Times article that focused on a small biotech company that hiked the price of a drug from $13.50 to $700. Progressives sprang into action and Hillary got the jump on Bernie Sanders. The company in question bought a drug that was losing money. Whether this is the right price or gouging, I am not sure, but I know if the opportunity is there, a rival will sell a similar product for less.
There is no doubt that this is the perfect populist issue and a perfect example of corporate greed- a 5000% markup for a drug. Where’s the humanity, concern, and sense of community?
The problem is that most drugs cost more than a billion dollars to develop and many are never approved. Once drugs are approved; sooner or later, there will be a generic version, essentially destroying the ability to recover cost or generate profits.
I am not sure where this particular situation is going, but I know it’s a topic that will not fade away. It would provide another Trojan horse that would swell the government even more and add political correctness to decisions, resulting in wasted resources and fewer medical breakthroughs. However, for Main Street, this next story about the CEO of a peanut company convicted and sentenced last night to 28 years in prison for hiding a salmonella outbreak will make folks want to pick up the pitchforks.
One thing is for sure; CEO of Turing Pharmaceuticals isn’t apologizing for the 5000% markup of Daraprim, which is used by AIDS patients. While admitting each pill only cost a buck to make, he says there are other costs factored into the price. Something tells me that Martin Shkreli just vaulted to the top-ten list of potential Donald Trump running mates.
I am just sayin’
Medicine & Miracles
I’ve had a lot of experience with the medical industry, mostly supporting past and current loved ones. Moreover, I get how we can become frustrated with the whole thing. It starts with the doctors and nurses, to the cost, and mostly to the inability of them to make our loved ones well. Families sometimes greet the ups and downs of the treatment of our love ones with scorn and distrust, while our love ones lay in a hopeless state, which can be frustrating. However, where we are with medicine is a miracle in and of itself, and it is something we should celebrate, not punish.
Before we start putting in more levels to getting new drugs and treatments to patients, we must know it will get much worse.
Right now, developing and vetting a new drug can take more than ten years.
Path to Approval |
||
Phase |
Goals & Objectives |
Time Period in Years |
Pre-Clinical |
This is the discovery phase |
Three years + |
Phase I |
Human testing for tolerance |
One year |
Phase II |
Human testing for effectiveness patients 100- 300 |
Two years |
Phase III |
Human testing side effects, logistics and large supply |
Three years |
New Drug App (NDA) |
Review of entire process 100,000 pages including tests |
Two years |
So, we’ll hear more from Hillary today on what she would do to make sure drugs are fairly priced. Yesterday’s tweet crushed the biotech space with the iShares Nasdaq Biotechnology ETF (IBB), down 4.6%. I’m excited about buying some of these names on weakness.
Side Note:
The fact a Hillary tweet could knock the stuffing out of a segment of the market highlights just how much biotechnology stocks have rallied, but it also hints that Wall Street might think she’s going to win the White House.
The Market
I was pleasantly surprised that the rally held. It’s not uncommon these days for markets to bounce back, but once the initial burst fades, it is not surprising to see all gains fade in a huff. Instead, yesterday, stocks held up and closed with respectable gains.
Once again, I want to stress to keep an eye on oil. Goldman Sachs (GS), which predicted crude oil would be cheaper than lemonade, did something of a double take by lowering their U.S. production estimate by 5,000 barrels a day; so many rigs being taken offline, including eight last week (as crude finished +4.5% to $46.68). It’s a global commodity, but watch crude oil and the stock market as a gauge for the U.S. economy.
Today’s Session
Global markets are lower and the US will join the parade at the open. Sticking with the corporate scandal theme, Volkswagen is one for the record books. By now, most have heard that the auto giant loaded up its vehicles being tested for emission output with software designed to fool regulators.
#WTH
Yes, these guys pulled the kind of stunt one might expect from high school seniors trying to cheat on finals. Now the company, which has admitted guilt, is saying it expects to fork over $7.3 billion in fines and penalties. There is no word if they expect any executives to go to jail.
For the market, the wild ride continues. This is why I continue to say keep your powder dry as each spike that carries all stocks lower, creates huge opportunities.
Comments |
The Turing case is an example of a perfect storm of Federal policies and artificially low interest rates. The insane process of our FDA approval causes our drugs to be prohibitively expensive. Companies are pinched between social responsibility and financial management,. Manage this tightrope poorly and you lose money. Enter zero rates that have facilitated a misallocations of resources due to disruption of the pricing of risk. Markets spiral and bubbles are created leading to insane valuations like what Shkreli paid for Turing. In a normal risk assessed environment the deal probably never would have been done. Scott Manahrt on 9/22/2015 11:41:39 AM |
A research biotech is saving my life. There was no cure until they came up with one. This will save 130–150 million people around the world. They deserve the profits. Good investment too :) Insurance pays for it, is she worried about insurance profits ? Blake1956 on 9/22/2015 8:03:02 PM |
I understand this drug has been around for 60 years. Some generic company should start producing lots and lots of it. Don't you just love market competition? Leelee on 9/22/2015 8:37:10 PM |
Hillary will NOT winb the White House, Joe Bidden (Obamas man (socialist too) will be the Democrat candidate, Running against? joe Caymn on 9/22/2015 9:34:33 PM |
I once had a male spouse to whom I was married to, but we had separate lives, and I still did the family bills. He gave me the receipts for the prescription drugs he took, so that I could send them in for reimbursement. He was so embarrassed when I saw the price for Viagra, and I mentioned that I wasn't on the receiving end of about $15 per pill, and he then told me it wasn't covered under our insurance plan. That all happened pre ObamaCare, but maybe some of those progressive insurance cos. cover the natural change of life mood boosters. Does any ObamaCare plan cover male lack of erection drugs? Viagra, Cialis, etc. Paula on 9/23/2015 2:41:44 AM |
I have always thought that the company who makes the drug with all the expence should get to sell their product for many years before it can be copied. Then they recoup their losses and can reduce the cost themselves. Valerie on 9/24/2015 6:15:40 PM |
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