The Rising Cost of Healthcare Taken To Another Extreme

By Chad Brand of Peridot Capitalist

LOS
ANGELES, March 26 (Reuters) – Shares of Alexion Pharmaceuticals Inc.
(ALXN) rose more than 9 percent on Monday after the company told
analysts that its treatment for a rare blood disorder would be priced
at $389,000 per year.

The drug,
Soliris, was approved earlier this month as the first product to treat
paroxysmal nocturnal hemoglobinuria (PNH), a condition that affects
fewer than 200,000 people in the United States.

“We
considered many factors when establishing a price for Soliris. These
included the rarity of this disabling and life threatening disease, the
compelling clinical benefits that PNH patients experience with Soliris
… the cost of discovery, development and production, and of ongoing
research …,” David Keiser, the chief operating officer said on the
call.

The company’s shares rose $3.71 to close at $43.78 on Nasdaq.

Imagine you are one of those approximately 200,000 people in the U.S. who have PNH. Finally, a drug has been approved by the FDA that may help you tremendously. You would likely be exuberant, for a little while anyway, until you learned how much the drug will cost. And that price is at the wholesale level.

This isn’t a political blog, so I’m not going to get into a discussion about what our country should do about healthcare costs that are spiraling out of control. No matter your view on the subject, investors should realize that until something changes, until a drug that is the first one approved to treat a condition doesn’t cost $389,000 per year, healthcare companies are probably going to have an easy time making money.

Some people won’t care, some people will be outraged and refuse to buy a stock like Alexion, and others will be outraged but will also separate their inner beliefs and politics from their investment strategy for the sake of reaching their financial goals. I have no opinion on the investment merit of Alexion stock, as I haven’t done work on it. It’s no shock though that it reacted well to this news.

Full Disclosure: No position in the company mentioned at the time of writing

http://www.peridotcapitalist.com/