Shares of Valeant Pharmaceuticals continue to dive after a seething report issued this month by investors betting against the company compared it to Enron and critics questioned its drug-pricing and other business practices.
Valeant is just the latest in a string of biotech companies and drug makers to face such high-profile attacks. Since the beginning of the year, investors who bet a stock will go down by selling borrowed shares have lodged 43 campaigns against dozens of health technology companies, according to Activist Shorts Research, or ASR.
As millionaire and billionaire investors take on drug companies — and each other — Americans who rely on the medications at the center of much of the controversy could wind up big winners. Many of these short sellers will not only enrich themselves, but they may also end up lowering drug prices for everyone.
Here’s a look at three investors that could make a difference in what you pay for pills and medical treatments.
The Accidental Hero
Cutting drug prices was not what Shkreli, a young but well-known biotech short seller, wanted to do when he crossed into notoriety last month. His drug company, Turing Pharmaceuticals, made headlines when it raised the price on a drug used by cancer and AIDS patients by 5,000 percent, putting the spotlight on an increasingly common practice of biotech companies buying undervalued drugs only to hike their prices later.
Despite media reports of the practice before Turing’s move, it was Shkreli’s brash personality and lack of remorse that helped keep it in the limelight. Shkreli publicly bickered with journalists and everyday Americans on Twitter and Reddit, quoting Eminem at times, and did a television blitz defending his position. He briefly became known as the most hated man in America.
While Shkreli promised to roll back the price increases when the backlash became too much, it was too late. As part of her presidential campaign, Hillary Clinton seized on the issue and put out a plan to reform the drug industry to protect Americans from price-gouging, while House Democrats subpoenaed Valeant for documents relating to its price hikes. That roiled biotech stocks as investors considered the possibility that the future of drug-price gouging was grim. Specialty drug-maker Imprimis Pharmaceutical said last week it would make available an alternative to the Turing drug for as little as $99 for a 100-pill bottle.
All thanks to the most hated man in America.
Kyle Bass
Since January, the head of Dallas-based hedge fund Hayman Capital Management has filed petitions to invalidate drug patents at 14 drug companies while also shorting their stocks, according to ASR. Revoking the patents would allow other drug companies to produce cheaper, generic versions for consumers.