What is this 30-something former hedge-fund manager’s motivation? I find it difficult to believe that it is altruism. Given his background, I suggest it is, as Pope Francis calls it—“the dung of unfettered capitalism,” otherwise known as profit.
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Until recently, one of the few sectors doing well in the current economic environment was the pharmaceutical industry, and stocks leading the pack have been, by far in that sector, the small companies. This is because, as in many other sectors and has been the case for decades in the United States, it is the small companies that innovate.
People like this former hedge fund manager turned CEO purchase these small companies speculating that large pharmaceutical companies will purchase them at an obscene price in hopes that one of the drugs in the smaller company’s pipeline will be the next multibillion dollar seller. When this inexperienced CEO raised the price on a newly acquired drug so dramatically, however, stock prices of most pharmaceutical companies tanked. Why, you ask. The answer is simple—fear of regulation.
Since passage of the Affordable Care Act (ACA), the cost of pharmaceuticals in many cases—if not most—has risen more than 100 percent. These are commonly used, effective drugs that have served—and will continue to serve—humanity well. Examine stock market trends and you’ll find that on any day there is some affirmation that the ACA will remain in place—Supreme Court rulings and the like—stock prices across the health care sector jump. Why, you ask. Again, the answer is simple—profits. Investors know that events that affirm the ACA prompt the U.S. government to throw more unregulated cash at a health care system that ranks 37th in the world—based on outcomes—at a cost dwarfing its closest competitor.
There is, without a doubt, need for innovation in health care, but innovation should not be solely for innovation’s sake and increasing profits. Why do we need new and improved drugs if an existing product works well? When there is need for innovation, it needs to be incentivized. Expectation of profits is one way to do that. However, in other sectors, innovation funded by capital markets results from expectation that a product will stand on its own in being adopted and creating profits. You don’t see Elon Musk, founder of Tesla, buying a small car company for the purpose of raising prices to fund development of electric-powered cars. Why, you ask. Another simple answer: These sectors can’t count on unfettered capital being bestowed upon them by the government.
We can no longer allow capitalism to run roughshod over our health care system. The result, predicted by many moderate economists, will be bankruptcy of our nation. Along about now, you may be asking yourself, “Who is this guy making these claims?”
I am a capitalist and an entrepreneur. I am the former CEO of a high-tech company telling you that innovation can still occur the old-fashioned way. I created jobs. I founded a successful—and profitable—health-care IT company that positively impacts patient outcomes. We built our company the old-fashioned way, through hard work. We did not raise capital, thereby becoming beholden to investor whims and quarterly-earnings expectations. Yes, it still can be done. The American Dream is still alive. And that dream does not—and should not—have to come on the backs of the American taxpayer.
I could share my thoughts on finding a solution to what is truly a crisis, a crisis below the radar of the average citizen, but that has never been the purpose of this blog. I want to hear from you.
What are your thoughts? How can the United States, leveraging a capitalist system that has made it the most innovative country on the planet, but which also may contain the seeds of its demise, repair its broken health care system?
For Reflections on Nursing Leadership (RNL), published by the Honor Society of Nursing, Sigma Theta Tau International. Comments are moderated. Those that promote products or services will not be posted.
