Has Big Pharma Silenced Bernie Sanders’ ‘Drug Price Rant’?

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Senator Bernie Sanders set off the drug price debate when he went on an HCV rant against Gilead (GILD) in 2015. Hillary Clinton and Donald Trump made it a campaign issue in 2016. Sanders is now pushing for the importation of drugs to help tamp down the rising costs of drug prices. He is also accusing big pharma of trying to stymie his efforts:

To address this crisis, I introduced the Affordable and Safe Prescription Drug Importation Act with Rep. Elijah Cummings and Sens. Cory Booker and Bob Casey. If passed, our legislation would allow individuals, pharmacists and wholesalers to purchase low-cost medicine from Canada and other countries. Not only would it save lives, but according to the Congressional Budget Office, it would save the U.S. government more than $6 billion over the next decade … The prescription drug companies and their allies are doing everything they can to defeat this legislation.

They are running TV commercials in 13 states and bought full-page ads in newspapers including The Washington Post against this bill. And they have paid academic “experts” hundreds of thousands of dollars to spread myths in popular news outlets about low-cost drugs from Canada being unsafe.

In shedding light on price gouging lawmakers have helped expose companies like Valeant (VRX), Mallinckrodt (MNK) and Mylan (MYL) with runaway drug prices. However, the momentum on drug prices appears to have lost steam since the presidential election.

Healthcare Costs Are Rising At Multiples Of The Rate Of Inflation

Despite the efforts of lawmakers healthcare costs continue to rise. According to PricewaterhouseCoopers (“PwC”), healthcare costs are expected to grow by 6.5% this year.  That is over three times the rate of inflation which remains under 2%.

Though not the total piece of the healthcare puzzle, drug prices are a major component. The government’s wealth effect has not been able to spur inflation above 2% or wages above 3%; it has driven the stock market to new heights. Stocks of healthcare companies have benefited from the overall rise in financial markets and expanding p/e ratios. CEOs of healthcare companies have also made millions stock options. Expanding p/e ratios means that every dollar that falls to the bottom line is worth more. In my opinion, by spurring the stock market the Fed might have given healthcare companies an incentive to aggressively grow earnings.

In December 2016 the Senate Special Committee on Aging released a 130-page report titled, Sudden Price Spikes In Off-Patent Prescription; it described how certain drug makers acquired drugs that were off-patent, created barriers to entry and raised prices. Two major suggestions from the committee were to import cheaper drugs and prioritize FDA review of generic drug applications for certain off-patent prescription drugs.

In January Senator Sanders urged the government to allow Americans to purchase cheaper drugs from Canada. However, the Senate voted down the plan 52-46. Dissenters were concerned the plan lacked consumer protections to ensure foreign drugs met American safety standards. The Affordable and Safe Prescription Drug Importation Act(“The Act”) later proposed by Senator Sanders, Senator Cory Booker (D-NJ) and Senator Elijah Cummings (D-MD) recommended the importation of drugs manufactured by FDA-inspected facilities from licensed Canadian sellers. It still has not been approved despite a concerted effort to address dissenters’ safety concerns.

Where Next For Senator Sanders?

To keep pressure on lawmakers to follow through on the findings of the Senate Special Committee on Aging, Senator Sanders should try the following:

Enjoin President Trump

Seeking lower drug costs would be consistent with Trump’s populist message that helped get him elected. Last month he cited opioids as a national emergency, helping to shine light on a growing epidemic. According to the National Institute on Drug Abuse in 2015 there were 52,404 overdoses, more than twice the 23,518 reported in 2002. In 2015 opioid prescription drug overdoses were 43% of all drug overdoses. That figure was 32% in 2002, as opioid overdoses continue to hit record highs. President Trump has used the bully pulpit to hopefully [i] reduce the number of opioid prescriptions made by doctors and [ii] prompt opioid drug manufacturers to help tamp down on suspicious orders of opioids. If Trump used the bully pulpit to rally support for the import of safe prescription drugs it could [i] potentially increase its chances of approval and [ii] offer him the opportunity to work effectively with Congress on bi-partisan legislation.

Push For The FDA To Streamline Approval Of Generics

It could behoove Senator Sanders to push the FDA to steamline the approval of more generic drugs. In December 2016 the FDA green-lighted the approval of a generic version of Valeant’s heart drug Nitropress. In my opinion, this was a big victory for consumers and proof that lawmakers could put drug price legislation into practice. More victories like this could help keep drug prices in check until a bill to import drugs from Canada is approved, if at all.

Conclusion

The drug price debate could become a political football. Senator Sanders could get more bang for his buck in pushing for faster approval of U.S. generics. I recommend investors avoid VRX and MNK who may be highly-susceptible to potential rollbacks of drug prices.

On Shock Exchange

Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead explains the stock market and U.S. economy through the eyes of the New York Shock Exchange, a financial literacy program Ralph Baker started in 2006 to share his passion for investing and basketball with his 11-year-old son and other boys his age. The book predicts the “pain ahead” for the U.S. economy, the demise of China, the pending stock market crash and social unrest.

Shock Exchange has been trumpeted by President Obama, the Senate Finance Committee and House Ways and Means Committee. However, they conveniently forgot to cite the source. Critics try to make and unmake authors, but the market always decides. The book was also recently added to Trump Syllabus K12, crafted by Dr. Kaye Wise Whitehead of Loyola University Maryland. Shock Exchange is the best book on Wall Street in the past 20 years, and on economics, it may be the most important book since the Great Depression.

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