Hedge funds are driving up drug prices

Hedge Funds Attack American Health Care

Hedge Clippers, September 30, 2015

It’s not just one highly unethical man: dozens of high-flying financial speculators at hedge funds and private equity firms are driving up the price of pharmaceuticals across the country.

Out of the twenty-five drugs with the fastest-rising prices over the past two years, twenty are owned or have been acquired by firms with significant activity from hedge fund, private equity, or venture capital firms. 

Yes, you read that right: 80% of the drugs with the fastest-rising prices were involved in hedge fund, private equity or similar speculative attacks in the past two years.

The exact circumstances of each deal varies, but the outcome is always the same: branded pharmaceuticals — drugs for which no lower-cost generic alternative drug exists — see their prices increase many times over to satisfy the greed of speculative investors.

One company that stands out in all this is Valeant, a drug manufacturer that partnered in 2014 with a hedge fund called Pershing Square Capital Management to attempt the takeover of Allergan, another pharmaceutical company.

Billionaire hedge fund manager William “Bill” Ackman runs Pershing Square, and his manipulative moves exploded prices for medications needed by ordinary Americans – Americans who aren’t billionaires, and who can’t afford to pay billionaire prices for their medications.

Valeant produces twelve of the twenty-five branded drugs that have increase most in price over the past two years. Among the top fifty, Valeant produces twenty-seven.

Given that branded drugs are essentially a license to print money, it appears that Valeant was pumping up the prices of these medications to finance the Allergan takeover attempt – and/or to ensure big profits for billionaire hedge fund manager Ackman.

Looking back at the data on the pharmaceuticals with the largest price increases in the past two years, Horizon Pharma’s Vimovo is at the very top of the list.

The Vimovo acquisition follows a pattern similar to other pharmaceutical purchases made by companies with hedge fund, private equity, or venture backing.

  • Speculative private capital is used is used to acquire an existing branded drug from an established pharmaceutical company.
  • Because the drug is branded, no generic exists, and the producer is granted a monopoly on the sale of the drug.
  • Once the acquisition is completed, the company drastically increases the price of the pharmaceutical.
  • Because no generic exists, customers who need the drug are forced to accept any price dictated by the companies.

The only winners in this game are the pharmaceutical companies and their financiers: the hedge funds, private equity firms, and the venture capitalists. These speculators stand to make fortunes.



By Don McCanne, MD

The full Hedge Clippers article, available at the link above, provides many examples of outrageous drug price manipulation by hedge fund, private equity, or venture capital firms. These confiscatory price increases have not been for financing new drug research, rather they have been for the sole purpose of redistributing money from patients in need of these drugs to the the money managers at the very top of the income and wealth scales, further compounding our crisis of inequality.

Government intervention is imperative. It would be automatic if we enacted a single payer national health program.