Over the weekend, The New York Times published an article about a drug called Daraprim, the price of which skyrocketed from $13.50 to $750 per pill (an increase of over 5,000%) overnight.
Naturally, progressives sprang into action, but it was Hillary Clinton who got the jump on everyone else Monday.
On Twitter, Clinton retweeted the article with the caption:
Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on. -H https://t.co/9Z0Aw7aI6h
— Hillary Clinton (@HillaryClinton) September 21, 2015
Well, if you thought President Obama was bad for business, wait until you get Hillary. But before we get to all of that, let’s back up a moment to talk about the drug and why it saw a near 5,500% increase in just a few hours.
Daraprim has been on the market for 62 years, and it is used to treat a life-threatening parasitic infection found in AIDS and cancer patients, among others. After being acquired by start-up Turing Pharmaceuticals in August, the price of the medication was increased almost immediately.
Turing Pharmaceuticals just bought the drug in August, and according to founder and CEO Martin Shkreli, the scarce use of Daraprim means the impact of the price hike would be “minuscule.” Shkreli insists that the company would use the proceeds from the drug to work on finding a better cure for the parasitic infection that had fewer side effects.
The drug was losing money, so Shkreli jumped in to give it new life.
Now, whether this is the right price or price gouging, I am not sure. However, I do know that if the opportunity is there, a rival will sell a similar product for less money.
Contrary to Shkreli’s claims, I think this is the perfect example of corporate greed (although it is important to note that Shkreli has since agreed to lower the drug’s price to an unspecified amount).
Where’s the humanity, concern and sense of community?
Here’s the issue: Most drugs cost more than a billion dollars to develop, and many are never even approved. If the drug is approved, sooner or later there will be a generic version that will essentially destroy the ability to recover the initial costs and generate any profit. While it’s the big drug companies and insurance businesses that write the policies, it’s the small biotech companies that are targeted for not playing the game or forking over the cash.
To be honest, I’m not sure where this particular situation is headed, but it’s clear that this is a topic that is not going to fade away any time soon. In fact, I expect it to remain a political football throughout the 2016 presidential campaign. 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.
But on the other hand, the recent story about the CEO of a peanut company convicted and sentenced for hiding a salmonella outbreak will make folks on Main Street pick up their pitchforks.
As a result of the weekend noise, biotech stocks sold off on Monday. The iShares Nasdaq Biotechnology (IBB) was down 4.5%, and has continued to pull back another couple of percentage points over the last few days.
But while weakness is typically frowned upon in the market, I’m actually excited to see the weakness, as it should be a good opportunity to buy some of these names at lower prices.
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