The Sickening Tales of Big Pharma
The fallout from the opioid crisis continues... The sickening tales of Big Pharma... 'These guys are desperate to avoid trial'... A $50 billion 'offer'... But it's not all bad news in the pharmaceutical world...
This is not a joke...
Back in 2015, when people paid less attention to the opioid crisis in this country, at least one executive from a major drugmaker had a bright idea...
He decided to film a rap music video... to motivate his sales team to push a highly addictive fentanyl spray to doctors.
Now, asking your employees to make the company money is not a crime in and of itself...
But it's a bit different when that cringe-worthy five-minute video comes to light during a high-profile federal trial... one that will decide if your company used bribes and kickbacks to pay doctors who wrote large numbers of prescriptions for the opioid spray.
I think one of the jurors said it best: "The rap video just made me sick to my stomach."
In the picture below, the guy dressed up as the "Subsys" spray bottle (labeled at its highest dose) is Alec Burlakoff, Insys Therapeutics' former vice president of sales. He pleaded guilty to racketeering charges before the trial started this February...
Insys became the first major company to fall as a result of investigations into the opioid crisis...
A Boston jury found Insys' founder and four former executives guilty of racketeering and other crimes.
Subsys is a narcotic meant to treat cancer patients. Among the charges, prosecutors said the former executives bribed doctors to prescribe the spray to many patients who didn't have cancer. They also asked doctors to "titrate" patients up to the maximum dose of the spray...
"I love titrations and it's not a problem," the Insys reps rapped in the music video. "I got new patients and I've got a lot of them."
Goodbye, Insys...
As we wrote in the June 12 Digest, just days after Insys agreed to pay $225 million to settle the claims against it, the company filed for Chapter 11 bankruptcy protection.
It's a penny stock today, down from a 2015 high of more than $40 a share. And it's far from the only major pharmaceutical company in trouble from the opioid epidemic, which has been linked to 400,000 deaths in the U.S. over the past two decades.
Beyond that, the crisis has created a huge economic cost to the country...
Caring for the people who developed addictions and their families cost the U.S. nearly $300 billion between 2015 to 2018, according to a paper published by the Society of Actuaries ("SOA") last week.
When you add the lost wages of people who died from overdose and other costs to society, the SOA's estimate balloons to $631 billion – more than the gross domestic product ("GDP") of Belgium, Sweden, or Taiwan.
We've likened the opioid crisis to Big Tobacco 2.0... The drug industry is facing more than 2,600 lawsuits across the country, seeking to hold companies accountable for fueling this drug crisis.
And these court cases are only starting to unfold...
On Monday, three of the biggest U.S. drug distributors and a manufacturer agreed to a landmark settlement...
Drug distributors AmerisourceBergen (ABC), Cardinal Health (CAH), and McKesson (MCK) agreed to pay a combined $215 million to Summit and Cuyahoga counties in Ohio... while Israeli-based drugmaker Teva (TEVA) said it will contribute $20 million in "cash" and $25 million worth of drugs used to treat opioid addiction. The companies admitted no wrongdoing as part of the settlement.
The firms and counties reached the deal just before the case was to go to trial on Monday morning.
The four companies' settlement totaled $260 million. That's not a lot of money for companies as big as they are. But remember, that's $260 million to just two counties in Ohio.
The drugmakers and distributors are accused of turning a blind eye to the mountains of opioids that were sent to pharmacies in hundreds – if not thousands – of communities across the country.
A lot of state and local prosecutors have the industry in their crosshairs. Marie Napoli, an attorney representing Cuyahoga County, told USA Today the Ohio cases were supposed to be a "bellwether" for how other cases around the country might be treated by a jury...
Stansberry's Big Trade editor Bill McGilton, a trained lawyer, has been following the opioid-related cases. As he wrote in the publication's April issue...
The opioid crisis in this country has become so big that it's likely to lead to large litigation payouts and to a much stricter and costlier regulatory environment for pharmaceutical distributors... We expect stock in these companies to perform poorly over the next few years...
The resources of states and local governments are under severe strain from the burden. While major pharmaceutical distributors like McKesson and Cardinal Health fail to stop suspiciously large and frequent shipments of opioids around the country, the costs are piling up for families, states, and local governments.
And... they are turning to the courts for a solution.
In particular, Bill recommended a short position in one of these distributors that's already operating on razor-thin profit margins, and is facing increased competition in addition to the risks of opioid litigation affecting its bottom line.
He told Big Trade subscribers "the market is significantly underestimating" these risks. (If you'd like to follow Bill's work on the opioid lawsuits and get his latest update on his recommended trade, you can find out more about a Big Trade subscription here.)
The settlement in Ohio only indicates more trouble ahead for these 'Big Pharma' companies...
The "Big Three" drug distributors and two manufacturers – Johnson & Johnson (JNJ), along with Teva – are trying to be proactive.
As Bill said, they're motivated to avoid trial, where documents – and in Insys' case, disturbing video – could be entered into the public record, like in the Big Tobacco litigation days.
In the wake of the Ohio settlement, Bill told our colleagues in the Stansberry NewsWire, "Once other counties get a whiff that these guys are desperate to avoid trial – settlements will cost more."
In fact, the Big Three, along with Johnson & Johnson and Teva, have reportedly offered a total of $50 billion to settle all the lawsuits filed by towns, cities, counties, and Native American governments and avoid going to trial.
On Monday, Teva offered to "donate" about $23 billion worth of the addiction treatment Suboxone and pay $250 million over a decade in an attempt to reach a so-called "universal settlement" deal with state and local governments.
The deal would be the largest settlement deal ever inked by a drugmaker.
Of course, not all the news out of the pharmaceutical world has been bad lately...
As we've written recently in the Digest, our colleague Dave Lashmet has seen enough promising research that he's convinced that talking about a cancer "cure" – a word that he has been so hesitant to use over his career – is a real possibility...
Dave, the first analyst Porter hired 20 years ago, writes Stansberry Venture Technology. He has covered this amazing development in cancer treatment in recent Digests here and here... and in greater detail to his Venture Technology subscribers.
In short, a handful of small biotech companies have been working on new "immunotherapy" techniques that aren't just killing tumors – they're eliminating cancer from patients' bodies with greater frequency.
Doctors have long believed these immunotherapies could work to help fight cancer. But new advancements have not only improved response rates... they have totally eliminated cancer and led to a clean bill of health in an unprecedented number of near-terminal patients. It's happening frequently enough that many in the scientific community believe a universal cancer cure is within reach.
Click here to watch a new video that Dave and his team put together to learn more about these exciting recent developments, as well as the companies involved in this area that could see their sales grow from a few million dollars or less, to billions... while bringing life-saving treatments into the mainstream.
New 52-week highs (as of 10/22/19): Celgene (CELG), Dollar General (DG), Digital Realty Trust (DLR), JPMorgan Chase (JPM), and Masco (MAS).
In today's mailbag, a subscriber weighs in on the tax proposals from Democratic presidential candidates. What's on your mind? Tell us at feedback@stansberryresearch.com.
"The tax them dry dimwits don't seem to realize that Billionaires can lease their properties, buy a permanent residence in Puerto Rico and travel the US freely. Nobody tracks how many days they stay here and their tax rate will be very low. Nobody is going to stay at that tax rate. Just as [former Maryland Gov. Martin] O'Malley drove the millionaires out of his state and eventually had to resort to a 'rain tax,' the same will happen in the U.S." – Paid-up subscriber Craig R.
Regards,
Corey McLaughlin
Baltimore, Maryland
October 23, 2019