“Big Pharma” beats Bass in war over drug prices
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“Big Pharma” beats Bass in war over drug prices

In early 2015, hedge fund manager Kyle Bass launched a patent-law attack on drug manufacturers that had the industry spooked. Now, that war is over. In an email that Bloomberg describes as “defeatist sounding”, Bass wrote: “In the end, lobbying and special interests pay. Medicare and U.S. consumers pay the ultimate price for the evergreening of bad patents by the pharma cabal.”

This is not the first time that hyperbolic battles of will have played out in the media over drug prices. In 2015, former drug executive Martin Shkreli raised the price of Daraprim – a medication used to prevent toxoplasmosis infection in HIV sufferers – more than 50-fold. Public outcry was huge, and Shkreli was cast in the role of villain (a role, it must be said, in which he seemed to revel).

And earlier this year, President Donald Trump caused a panic in the sector by Tweeting that pharmaceutical companies were “getting away with murder” in regards to the high price of drugs in the U.S.

However, the battle between Bass and U.S. drug makers was quieter, more calculated, and more serious.

Bass sponsored a group called the Coalition for Affordable Drugs to target 14 medicines using the patent-reform law of 2012. This law was designed to help tech companies fight off “patent trolls” – companies that acquire patents and threaten lawsuits to obtain out-of-court cash settlements.

This novel legal approach, particularly when backed by someone with the financial clout of Kyle Bass, who made a fortune on investments predicting the 2008 mortgage crash, was a serious cause of concern for the healthcare sector. Bass refused to state whether he “shorted” investments on the holders of the patents he targeted, but he did tell Bloomberg that he “challenged the drug patents for profit”, before claiming that his “motives are irrelevant”.

In the end, however, only 3 of the 14 patents Bass targeted were invalidated, and those invalidations “didn’t lead to lower prices or sustained declines in company shares,” according to Bloomberg.

Bad news for Bass; good news for “Big Pharma”.

Disclosure

Dominion invests in a number of pharmaceutical companies through its Global Trends Managed Fund.


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