Stock investing is tough enough when you have to deal with the specifics of pany and an industry. When you throw politics into the equation it es a whole new ball game. Now stock investing can be a crap shoot at best. Let’s take a look at what’s going on currently, and you decide. First let’s look at a little y.
the better part of 50 years, the drug industry has been nothing t of a fabulous stock investment. Whether it was Johnson & Johnson, Pfizer, Merck, any one of a dozen other panies that developed into giants, you would have made a killing with these stocks. One of panies Johnson and Johnson is the best ming publicly traded stock of the last 100 years with pounded growth y surpassing 15% per year.
It was a ncept, but yet difficult to execute. panies created drugs and then marketed them via advertising to a captive audience of s, and their captive audience the patients. As a stock investment, the industry was basically unsurpassed. The reason is that every other high tech investment as a rule had a longevity of about 7 years. Technology can obsolete technology very easily as you know.
This was not true of drug manufacturers, where it takes a long time to bring a drug to market. You then have a long patent life, and usually you can extend that patent life at least once. Big Pharma as the panies came to be called were making a tune, and the stockholders with them. When it came to stock investing, uldn’t own enough of these panies.
It all started to change in the 1980’s. A marvelous new, but small industry started to emerge called the biotech industry. Rates of growth Big Pharma started to slow down. Something was needed to kick-start the drug industry once again, and the Federal government was e than willing to lend a helping hand.
By the 1980’s government had e big s of drug research. Our government had poured billions of tax payer dollars into ting basic and applied research at llege, and university level. Myriad PhD’s were hired, ies built, and graduate students employed to go find, and develop the next marvelous drug.
ngress then passed a law that mandated that the veries taking place in these government ed research labs (usually the top lleges in the United States) would have to be given to the giant panies final testing, and distribution. This meant that Big Pharma would be the recipient of all this largess bestowed on the government labs. The giant panies would be the direct beneficiaries of tens of billions of dollars of citizen ed research. It was the best of all lds.
Throughout the 1980’s, and 1990’s, these actions sustained the growth of the panies. Unbeknownst to the general citizen, the e up with less than 5% of all the drugs sold in untry. The real s have been those government ed labs, and the small panies that have been spawned everywhere.
Even with the giant government outlays, by the beginning of the 21st century, we started once again to see a slow-down in growth rates Big Pharma. What was needed was a shot in the arm. In 2003, the federal government supplied the adrenalin, and the panies were only too glad to accept it.ngress passed a new part III to the Medicare law which meant that the government was going to start picking up prescription drugs citizens 65 years of age and older. This program st tens of billions of dollars.
e tantly, the government would not be allowed to negotiate the prices of the drugs that they would pay under the act. This meant that the panies would be able to charge BILLIONS OF DOLLARS e than if they had to negotiate. It was the ultimate bonanza the panies, and their profits were inflated by billions. As an aside, the program also called panies e in between the user which was the citizen, and the Medicare program. This was a successful attempt to also reward the insurance industry with billions in profits.
Democrats may have last laugh?
The problem is that it seems likely that the Democrats will take over the House of Representatives in November. If successful, they have already stated their intent to change the program immediately. The Democrats want the federal government to now have the right to negotiate lower drug prices on behalf of the citizens. This will result in lowering pany profits to the tune of billions of dollars.
Here’s the wild part of the whole deal. decades the Democrats wanted to create a prescription verage program as part of the Medicare Program. uldn’t get it done. They tried, and tried, and failed, and failed. It took the Republicans to do it, but they only did it, to benefit the panies, and the panies as well. Now that the Democrats may ntrol, they will have the tunity to roll back the panies participation in the outlandish profits they are making. At the same time, the Democrats will be able to keep a program in effect, that they desperately wanted, uld never make happen on their own.
It’s fascinating how what seems e around, always goes around. Our advice is don’t be caught dead owning drug stocks if the Democrats take over the House in the November election. They are in some ride on the downside, as we all will be watching the granddaddy of federal giveaways get taken away.
Goodbye and Good Luck