Former hedge fund manager, Martin Shkreli, bought a biotech company and raised the price of a drug used to help people with HIV from $13.50 to $750 almost overnight. This outrageous 5,000% increase in price was instantly met with some incredibly harsh criticism namely from presidential hopeful Hillary Clinton who said that something needed to be done about price regulation in the pharmaceutical industry.
Many investors saw this possibility of impending regulation as a huge red flag and many biotech companies have seen a large decrease in stock price since. Some experts are saying that this is an overreaction because Clinton isn't even the Democratic nominee, but others cite this as a sign that this issue is going to be addressed.
In the meantime, however, this is an excellent time for long term investors to purchase biotech stock.
5 comments:
I find this to be very interesting given our discussion in class about the hike in price for this pill. You can't blame him for increasing the price per pill, seeing as he has a monopoly for the item and there are certainly people out there willing to pay for it. What is concerning moving forward is whether or not more regulations will be put in place in order to create a more affordable industry for people in need of these medicines, and in turn how it will affect the company stock prices if such a thing was to happen.
Although this is an extreme price raise for the medicine, price regulations or ceilings, in my opinion, may end up hurting innovation and the incentive to patent medicines. It is very important for people to get the proper healthcare and drugs needed to be healthy, so there needs to be a happy medium where both parties are satisfied. Patent laws could be less strict, so that other companies can produce these goods. Let the market bring out competitive firms that produce medicines so that it is sold cheaper to consumers.
I agree with Cooper about how you cannot blame him for increasing the price per pill. The only reason why he bought the patent was to make money, and the only way to do that is to increase the price. I would of done the same thing. I do think that there will be new regulations forced somewhat soon regarding affordability and making it easier for people to buy their medicine.
While price ceilings and floors may end up hurting innovation, I think you have to think about individuals who have medical needs that are not in high demand because they are so rare. They often have to pay ridiculous amounts to receive treatment because there are generally fewer treatments and less demand for them, and insurers are most likely hesitant with taking on these individuals and covering such large costs. If anything, there may be some benefit of regulations in these cases.
I doubt Hillary will do anything about regulation. Although she doesn't have the proper power now, even if she was elected I doubt she would make a move on the Biotech industry, at least not soon. Bashing biotechs has always been a tactic of politicians, since most of the population has an angry sentiment towards them. On the plus side, her verbal bashing has caused the industry to dip, which has provided a great opportunity for investors to enter.
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