As if the world needs another reason to hate Martin Shkreli, he could be to blame for this latest debate on drug pricing and Democratic Presidential Candidate Hillary Clinton’s reinvigorated move to rain down fire on the pharmaceutical industry. Shkreli has rapidly become one of the world’s biggest villains, even going so far as to threaten rapper Ghostface Killah of Wu-Tang Clan in a video obtained and posted by TMZ.
One would think a man facing as many charges as Shkreli does would try to keep a low profile, but that’s not happening. Certainly his big mouth makes him a lawyer’s worst nightmare as a client as the more he talks, the angrier people get.
Martin Shkreli’s outrageous moves draw Hillary Clinton
Jeffrey Loo of S&P Capital IQ told ValueWalk that although Shkreli didn’t spark the original debate about high drug prices, he reinvigorated the debate by raising Hillary Clinton’s ire and directing it to the drug industry as a whole:
“High drug prices have always been an issue for various stakeholders (i.e., drug firms, PBMs, drug distributors, health insurers, and ultimately, the consumer). For example, Gilead Science’s CEO was called in front of Congress to justify the $84,000 price tag for Sovaldi, Valeant Pharmaceuticals received subpoenas for the pricing of certain drugs, other drug companies, particularly those who manufacture drugs for orphan diseases are often questioned over drug prices that typically cost over $100,000.
However, it was Shkreli’s smug and flippant attitude and, of course, 5,000% price high for a generic drug that really caught the attention of the media and ultimately, Hillary Clinton. He has unfortunately become the poster child for high drug prices. FYI, BIO, the main trade organization for the biotech industry, threw Shkreli’s firm, Turing Pharmaceuticals, out of the organization when the controversy erupted.”
Hillary Clinton is best for Healthcare investors
Interestingly, Loo said in a recent report on the Healthcare sector that Hillary Clinton being elected president would be “the best scenario for healthcare investors.” He expects the Republican-dominated Congress to remain controlled by the conservative party, thus keeping both sides of the healthcare issue in balance. He wrote:
“In this scenario, in spite of Clinton’s numerous ‘threats’ to rein in drug prices, allowing the re-importation of drugs, and allowing Medicare to negotiate drug prices, we believe it is highly unlikely Clinton will be able to pass these initiatives through a Republican controlled [sic] Congress. Conversely, the Republicans’ efforts to repeal Healthcare Reform, would be thwarted by a Clinton veto as we do not anticipate the Republican obtaining the 2/3 votes to override a veto.”
S&P Capital is optimistic on Healthcare
Loo noted that the S&P 1500 Health Care Index has climbed 130.7% over the last five years, compared to the S&P 1500 Composite Index’s 61.9% increase over the same time frame. He does see a number of challenges that the sector will have to overcome in order to keep outperforming the markets, but he remains positive on Healthcare.
For one thing, he expects earnings growth to decelerate across the sector with a 10.7% growth rate compared to a 16.9% growth rate for firms in the S&P 1500. He also expects M&As in the sector to decline and problems with insurance enrollment through the Marketplace and questions about whether the Affordable Care Act can survive following this year’s elections. Indeed, it seems millions of consumers are finding that they can’t afford the insurance plans offered through the marketplace as Loo reports that many canceled their plans at some point in 2015 because of high deductibles and copayments.
On the plus side though, he expects the Healthcare sector’s sales to continue climbing and see companies benefit from international expansion. He also believes that the volatility from “presidential election year rhetoric” is merely headline and perceived risks instead of real risks. He also likes the sector’s valuation at 15.1 times 2016 estimated earnings compared to the S&P 1500’s 15.2 times, saying that although the discount isn’t much, this is the first time since 2011 that Healthcare is trading at a discount.