But one name in particular – Mylan NV (MYL) – has really been taking it on the chin. It lost 5.4% yesterday, following declines of 4.8% and 1.6% on the prior two days. That’s because its EpiPen anti-allergy injector is at the epicenter of a huge new debate over soaring drug prices.
|Mylan has hiked the price of an EpinPen 2-Pak 17 times in about nine years.|
You’ve probably heard about the EpiPen, or may have used it yourself. It’s designed as an emergency treatment for anyone experiencing a severe allergic reaction known as anaphylactic shock.
Parents are often required to purchase EpiPens for their children in case they go into shock at school.
The problem is that Mylan has been jacking up the price of the EpiPen. A two-pack of the injectors now lists for more than $600, compared with around $100 in 2007 when Mylan bought the rights to the drug injectors. In fact, Mylan reportedly raised EpiPen’s price 17 times – with the pace of those hikes accelerating recently due to the potential for generic competition.
Mylan isn’t the first drug company to come under fire for pricing strategies. Gilead Sciences Inc. (GILD) and Valeant Pharmaceuticals Intl. Inc. (VRX) have also faced Congressional pressure. But with the presidential election right around the corner, it has become an easy whipping boy for Hillary Clinton and several Democratic and Republican lawmakers.
Mylan is responding by saying that insurance covers a large amount of the cost for EpiPen. It also said it would broaden its existing discount programs, including a savings card that’s designed to offset the out-of-pocket deductibles that consumers have to pay.
But it’s in a tough spot from an investment standpoint because EpiPen is Mylan’s best-selling drug. It accounted for more than $1 billion of the firm’s 2015 $9.5 billion in revenue.
|The U.S. healthcare system is still a mess.|
Can Mylan talk its way out of this crisis? Unclear. But one thing is abundantly clear – to me and others: The U.S. healthcare system is still a mess.
Insurers are backing out of the Obamacare program because they can’t make money off of it. Deductibles, co-payments, and other out-of-pocket costs continue to rise for average Americans. And none of the so-called “solutions” bandied about seem to be working to fix the system.
That’s my take, anyway. What’s yours? Do you think Mylan’s price hikes were justified, or corporate profiteering at the expense of average Americans? What can be done about soaring drug costs, deductibles, and out-of-pocket expenses?
From an investment standpoint, do you think Mylan and its cohorts are worth buying here? Or is the political pressure so great, the best option is just to stay away? Please take some time out to comment on these very important issues when you get a chance.
Until next time,
Judging from your comments in the past few days, it doesn’t seem like many of you are card-carrying members of the “Janet Yellen Fan Club.” Nor do you seem all that enthusiastic about the outlook for the markets and the economy.
Reader Jerry said: “This is a no-growth economy, fabricated by easy money. It’s like a balloon floating around in a room full of needles, never knowing where the fatal prick will come from.”
Reader Lawrence D. said: “My father often said ‘History teaches us one thing only and that is that we never learn.’ We watched what trade unions did in England and then repeated the same steps in North America to the length that the tail starts wagging the dog.
“Economic indicators and past performances should be a very real warning to us all, yet the media and the so-called pundits keep saying the same old, same old — that we’ve nothing to worry about! I for one am very worried and will take all I can from your newsletter and wealth report to guide me in the coming crisis.”
Reader Justin added: “In the short term, it certainly looks like a sell-off is setting up. We’ll likely see a routine summer-to-fall decline in the stock market at the minimum. After that comes the big question: ‘Will this be the one that pops the bubble?’
“Something that warrants watching is the yield curve. If we do get a decent drop in the stock market, there will be the inevitable flight to safety in Treasury bonds, with the longer-term durations having preference. That could flatten, even invert, the yield curve. Then the bottom will drop out of the economy, and there will be nothing the Fed or anybody else can do about it.”
Lastly, Reader Howard had some advice on where to invest in trying times like these: “The answer is to buy GOLD. It’s already sold and beaten down. It has a better chance of going up in the next 10 years than negatively priced bonds. Gold ownership is easily transferable and tradeable and protected from government meddling, failing banks, and reclaiming with bail-ins.”
I appreciate all the comments. We’re definitely seeing more hidden tremors in various corners of the market, suggesting investors are growing increasingly uneasy about the future. While there hasn’t been a sharp break … yet … I believe the risk of one is growing. Judging from indicators like the VIX, many investors aren’t prepared for it either.
Rescuers in Italy are continuing to dig through the rubble from Wednesday’s deadly earthquake. The 6.2-magnitude quake struck in central Italy, killing at least 247 people in several smaller towns.
I’m not the only one who thinks the Federal Reserve is completely lost, swaying in the wind with every data release, failing to stick to any sort of long-term plan, and repeatedly crying “Wolf” without actually doing anything. Bond market managers, who handle hundreds of billions of dollars in assets, feel the same way, according to Bloomberg.
Said one: “There’s a failure to communicate.” Said another: “The Fed has lost credibility.” Said a third: “The market is looking for some clarity on the path for rates.” We’ll see if Chairman Janet Yellen delivers or not tomorrow morning.
Investors care much less about earnings per share these days. Instead, they’re buying stocks for dividends in the era of NIRP/ZIRP. That’s the conclusion of this Wall Street Journal story, which notes that an analysis of the correlation between dividends and stock performance suggests investors are more sensitive to payouts than at any time since 1993.
The problem? Companies are going to have a tougher time sustaining dividend payouts if earnings keep coming in weak. S&P 500 firms are paying out the greatest percentage of profits as dividends since 2009, with some paying out even more than they earn.
What do you think about the Fed’s flip-flopping? Are bond managers right to complain about the inconsistencies? How about the intense focus on dividend yield? Is it healthy? Or are companies responding by doing misguided things, like paying out too much of their earnings as dividends or borrowing to make dividend payments? Let me know in the comment section.
Until next time,