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“Our Sick Drug Business”: Congress Writes Laws To Enrich Drug Companies At The Expense Of American Consumers

Sometimes the road to hell is paved with bad intentions. A company adopts a business model so twisted that justice must come clanking down on its executives and bankrollers. Justice is now being served on Valeant Pharmaceuticals International. Evil this blatant is headed for the full Hollywood treatment.

Valeant preys on sick people by acquiring essential drugs and then multiplying their price for a fast profit. Example: Upon buying the maker of Cuprimine, a 53-year-old drug that treats a rare genetic disorder, the Canadian company hiked its price 5,787 percent. Example: After obtaining the rights to two heart drugs, Isuprel and Nitropress, Valeant jacked up their prices by 525 percent and 212 percent, respectively.

Charlie Munger, the vice chairman of Warren Buffett’s Berkshire Hathaway, called Valeant a “sewer” at the conglomerate’s recent annual meeting. If the burning fires of hell are not available, a sewer will do.

Get this: Valeant charges Americans almost 100 times more for flucytosine than it does Britons. Used to treat cryptococcal meningitis, flucytosine costs $2,000 a day in the United States, versus $22 a day in Britain.

How could this be? Ask your Congress.

From the Medicare drug benefit on up, it has written laws to enrich drug companies at the expense of American consumers and taxpayers. Valeant’s going down not because it was greedy but because it was insanely greedy.

Calling Valeant a “drug company” is problematic because it’s not much into researching and developing new medications. “Bet on management, not on science,” its outgoing CEO, J. Michael Pearson, was fond of saying.

It takes some doing to provoke the U.S. Senate to hold a hearing on a drug company’s pricing. In this, Valeant (and previously Martin Shkreli’s Turing Pharmaceuticals) succeeded.

Under the harsh lights, Pearson conceded that his company made “mistakes.” His big mistake was not recognizing that even the most pliable champions of America’s medical-industrial complex have their limits.

Pearson’s description of Valeant’s program offering price breaks for hospitals that use some of its drugs didn’t glow for long. Hospitals responded that when they tried to obtain those alleged discounts, they got nowhere. Valeant didn’t answer their emails. It didn’t answer the phone.

What else made Valeant think it could get away with such anti-social behavior? No doubt Wall Street’s willingness to invest in its money-raking scheme contributed. Hedge fund giant William Ackman was Valeant’s leading pitchman, enticing other big funds to join in the pillage.

Valeant has problems in addition to a business model so repugnant it couldn’t be allowed to live. Among them is a high pile of debt. And its accounting practices aren’t so hot, either.

Thus, it’s no huge surprise that Valeant’s stock price has collapsed 85 percent since last summer. Ackman’s Pershing Square Capital Management and other hedge fund participants have lost billions.

Ackman told the hearing that his fund was not entirely aware of Valeant’s drug pricing policy. He was a “passive” investor, he said. Somehow the truth would have seemed less damning. Are we to believe that Pershing Square poured $4 billion into a company without inquiring as to how it made money?

In an almost comical exchange with the senators, Ackman said: “I totally get it. We’re going to come up with an appropriate (drug) price based on an appropriate rationale.”

All is not forgiven. Investors lost billions, but patients may have lost far more.

One hopes that spotlighting this egregious gouging on drug prices won’t deter attention from the lower-level daily gouging that our laws enable. The only remedy for that, frankly, is new lawmakers.

 

By: Froma Harrop, The National Memo, May 3, 2016

May 4, 2016 Posted by | Big Pharma, Congress, Pharmaceutical Companies | , , , , , , | 3 Comments

“Christie’s Latest Scandal”: How He Sold Public Pensions To Wall Street Donors

The media would label it Pensiongate — if they were interested.

When Governor Chris Christie (R-NJ) cruised to his first statewide election victory in 2009, his promise to responsibly manage the state’s pensions helped deliver him the governor’s mansion. It’s Democrats like Governor Jon Corzine who are playing fast and loose with public pensions, the Christie campaign argued. “Jon Corzine made it easier for his friends from Wall Street to manage New Jersey’s pension fund,” read a campaign press release.

But soon after Christie took the reins as governor, his skepticism of the relationship between Wall Street and pension funds quickly evaporated. Hedge funds managed by influential Republican donors soon landed enormous contracts to manage public pensions. Friends of The Governor benefited handsomely.

As the Investigative Fund’s Lee Fang reports, the controversy centers around Paul Singer, the billionaire founder of Elliott Associates. The month prior to Christie’s first 2009 gubernatorial victory, Singer donated $100,000 to the Republican Governors Association, a fervent supporter of Christie’s election bid. After his election, and despite his campaign rhetoric to the contrary, Christie suggested that Elliot Associates be given a contract to manage $200 million in public pensions. In 2012, the firm was indeed granted the contract.

The result of this investment was large payoffs for the hedge fund, while New Jersey public workers saw their pension returns fall below average. In 2013, the median pension return was 16.1 percent; in New Jersey, the pension program delivered a return of just 11.79 percent.

But because of fines and fees associated with a hedge fund investment, it was a lucrative business for managers like Singer. As Fang reports, Singer benefited greatly from the deal: Chris Tobe, a former trustee of Kentucky Retirement Systems, estimates that in 2013 alone, Elliot Associates collected close to $8.6 million in fees from the New Jersey public pension fund.

And Singer, it seems, is not one to let a favor go unreturned. After Christie became chair of the Republican Governors Association in 2013, Singer donated $1.25 million to the group.

Interestingly, Singer’s profitable deals with politicians do not start and stop with the embattled Governor Christie. A recent report in The Hill shows former Rep. Connie Mack (R-FL) may also have used his office to aid the notable Republican donor. Mack, now a lobbyist, has registered to lobby for American Task Force Argentina, a group that seeks to “hold medium and wealthy nations accountable for the repayment of their debts to U.S. creditors and to uphold U.S. court judgments against these same nations.” Holding impoverished South American nations accountable for their debt to American companies is an initiative Mack touted during his time in office.

As it happens, Elliot Associates is also a member of Task Force Argentina. According to The Hill, employees of Elliot management were the second largest contributor to Mack’s failed 2012 Senate run. Furthermore, another hedge fund linked to Singer is owed $1.6 billion by the Argentine government.

 

By: David Feuerherd, the National Memo, March 20, 2014

March 22, 2014 Posted by | Chris Christie, Wall Street | , , , , , , , | Leave a comment

“Exceptions, Exemptions And Loopholes”: How J.P. Morgan Chase Has Made The Case For Breaking Up The Big Banks

J.P. Morgan Chase & Co., the nation’s largest bank, whose chief executive, Jamie Dimon, has lead Wall Street’s war against regulation, announced Thursday it had lost $2 billion in trades over the past six weeks and could face an additional $1 billion of losses, due to excessively risky bets.

The bets were “poorly executed” and “poorly monitored,” said Dimon, a result of “many errors, “sloppiness,” and “bad judgment.” But not to worry. “We will admit it, we will fix it and move on.”

Move on? Word on the Street is that J.P. Morgan’s exposure is so large that it can’t dump these bad bets without affecting the market and losing even more money. And given its mammoth size and interlinked connections with every other financial institution, anything that shakes J.P. Morgan is likely to rock the rest of the Street.

Ever since the start of the banking crisis in 2008, Dimon has been arguing that more government regulation of Wall Street is unnecessary. Last year he vehemently and loudly opposed the so-called Volcker rule, itself a watered-down version of the old Glass-Steagall Act that used to separate commercial from investment banking before it was repealed in 1999, saying it would unnecessarily impinge on derivative trading (the lucrative practice of making bets on bets) and hedging (using some bets to offset the risks of other bets).

Dimon argued that the financial system could be trusted; that the near-meltdown of 2008 was a perfect storm that would never happen again.

Since then, J.P. Morgan’s lobbyists and lawyers have done everything in their power to eviscerate the Volcker rule — creating exceptions, exemptions, and loopholes that effectively allow any big bank to go on doing most of the derivative trading it was doing before the near-meltdown.

And now — only a few years after the banking crisis that forced American taxpayers to bail out the Street, caused home values to plunge by more than 30 percent and pushed millions of homeowners underwater, threaten or diminish the savings of millions more, and send the entire American economy hurtling into the worst downturn since the Great Depression — J.P. Morgan Chase recapitulates the whole debacle with the same kind of errors, sloppiness, bad judgment, excessively risky trades poorly-executed and poorly-monitored, that caused the crisis in the first place.

In light of all this, Jamie Dimon’s promise that J.P. Morgan will “fix it and move on” is not reassuring.

The losses here had been mounting for at least six weeks, according to Morgan. Where was the new transparency that’s supposed to allow regulators to catch these things before they get out of hand?

Several weeks ago there were rumors about a London-based Morgan trader making huge high-stakes bets, causing excessive volatility in derivatives markets. When asked about it then, Dimon called it “a complete tempest in a teapot.” Using the same argument he has used to fend off regulation of derivatives, he told investors that “every bank has a major portfolio” and “in those portfolios you make investments that you think are wise to offset your exposures.”

Let’s hope Morgan’s losses don’t turn into another crisis of confidence and they don’t spread to the rest of the financial sector.

But let’s also stop hoping Wall Street will mend itself. What just happened at J.P. Morgan – along with its leader’s cavalier dismissal followed by lame reassurance – reveals how fragile and opaque the banking system continues to be, why Glass-Steagall must be resurrected, and why the Dallas Fed’s recent recommendation that Wall Street’s giant banks be broken up should be heeded.

 

By: Robert Reich, Robert Reich Blog, May 10, 2012

May 11, 2012 Posted by | Banks | , , , , , , , , | Leave a comment

“Rich American Exceptionalism”: Whose Swiss Bank Account Hedges Against The American Dollar?

No, that’s not a trick question. Yes, the answer is that easy. Of course, it’s Mitt Romney.

According to the manager of his trust, Mitt Romney’s Swiss bank account wasn’t an exercise in tax avoidance—rather, it was a hedge against a decline in the dollar. I’m not qualified to say whether or not his explanation is the full truth, but it certainly doesn’t provide evidence that Mitt Romney hates America. Obviously, an investment that bets on the decline of the dollar might not sound good, but when you have as much money as he does, you’re going to end up placing bets that might not be great soundbites for a campaign. In substantive terms, Romney is going to have a much bigger problem explaining why Bain profited from destroying companies than he will have explaining this.

But while the mere existence of the Swiss bank account doesn’t by itself raise questions about Mitt Romney’s loyalty to America, it provides one hell of a way to respond to Romney when he engages his his now-familiar attacks on President Obama’s loyalty. Despite all the attention paid to Newt Gingrich’s “food-stamp” line, Mitt Romney himself is no stranger to the hate card. His preferred formulation: that President Obama doesn’t believe in American exceptionalism, that he seeks to “poison the American spirit”, and that he wants to turn America into Europe and “keep us from being one nation under God.”

Of course, Mitt Romney is nothing like that at all. He’s just the kind of guy who bets on America’s decline to protect his own ass.

February 1, 2012 Posted by | Election 2012, GOP Presidential Candidates | , , , , , , , | 1 Comment

Americans Elect: Goo-Goo Mischief-Makers

I’ve been ignoring the whole Americans Elect phenomenon in the hopes that it would somehow go away, like many earlier do-gooder efforts aimed at creating a third party that avoids the messy process of actually believing in something other than its own nobility. But now that the group is using its hedge-fund donations to buy ballot access in a significant number of states, it’s probably time to pay attention. It’s been generally assumed that the whole enterprise was created to give Michael Bloomberg the option of running for president if that strikes his fancy, but Americans Elect’s ballot lines could become a tempting target for other billionaires or for crazy people. Indeed, as Ruth Marcus recently pointed out, the “democratic” internet-based process Americans Elect says it will use for choosing a presidential ticket seems tailor-made for exploitation by, say, the Ron Paul Revolution or somebody like Donald Trump.

That, of course, is that rationalization for the anti-democratic measures built into Americans Elect’s structure: the power of a board to set aside (subject to a veto override from “voters”) the People’s Choice in order to create a legitimately “balanced, centrist” ticket, whatever that means.

As Jon Chait notes today, it’s all a recipe for mischief, and perhaps multiple third-party candidacies:

[T]he picture is that you could have any of Trump, Paul, or [Gary] Johnson, running on the Americans Elect line, or possibly in addition to an Americans Elect candidate. All these decisions will be heavily influenced by behind-the-scenes maneuvering. Americans Elect may not have only a struggle between its voters and its elites. Surely the Republican and Democratic Parties will try to get involved. Since third parties tend to hurt major party candidates most ideologically similar to themselves, the GOP will try to push liberal alternatives, like Bloomberg, into the race, while the Democrats will try to get right-wingers like Trump or Paul to run. Obama’s aides are warning loudly against the undemocratic nature of Americans Elect’s leadership. They don’t care about transparency, they care about letting Americans Elect help their candidate rather than hurt him. The outcome of these maneuverings could have a far larger impact than many of the stories the media is obsessively covering.

Yep. Sinister or simply naive, the organizers of Americans Elect could be opening a real-life Pandora’s Box.

By: Ed Kilgore, Washington Monthly Political Animal, December 29, 2011

December 30, 2011 Posted by | Democracy, Voters | , , , , , | Leave a comment

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