Wednesday, September 02, 2009

I Know It When I See It

The pharmaceutical behemoth Pfizer has agreed to pay $2.3B in fines levied by the U.S. government for allegedly violating federal drug rules. You can read about it here.

And now, the astonishing fact: Pfizer's stock closed TEN CENTS lower than yesterday, at $16.28 a share.

That Pfizer stock would do so well in the face of a record-breaking fine can only mean a couple of things:

1) the market expected the fine to be bigger than $2.3B and this was good news; or
2) the fine was such a small piece of Pfizer's profits, and the advantages that came from breaking the law so big, that even a $2.3B fine is small potatoes for a company like Pfizer.
3) the market had already anticipated the loss and spread it over a few trading days. Even so, Pfizer only lost about $.60 since Aug 28.

Now consider this: On August 18, Pfizer reported worse than expected profits, with its first first quarter profits "dropping" to $2.78B. There you have it. The largest fine ever paid by a drug company does not even wipe out all of the profits from the first quarter of FY 2010.

It's okay to make money in America, nothing wrong with that. But when you make a big chunk of that obscene amount of money by gouging American consumers (for example, by buying political support to prevent the government from negotiating drug prices for government-funded programs, like every other civilized government in the world does with drug companies), is there nothing wrong with it still? Remember that, as a torrent of anti-reform ads hit the airwaves. (Incidentally, you should not see any anti-reform ads from the Pfizer or any other pharmaceutical company because the White House has already been bought, pledging not to force price negotiation on the drug industry in exchange for $80B in drug price discounts over the next 10 years, and a $150m advertising committment by PhRMA in support of health care reform.)

Like Justice Potter Stewart said in Jacobellis v. Ohio, I know obscenity when I see it, and it's not Janet Jackson's nipple during the Superbowl.

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