Wednesday, November 15, 2006

Consequences II

While perusing the Wall Street Journal (subscription required) today, I found an article on page A2 by Mr. Alan Murray: Drug Makers’ Politics Produces a Bitter Pill. I almost skipped over it because of a Boeing article on the next page. I’m glad I didn’t. Welcome to another unintended Consequence from midterm elections 2006. I take the liberty of reprinting parts of it here:

Since election day, drug stocks have gotten clobbered. Pfizer, Wyeth, Eli Lilly and Novartis have tumbled 5% or more; GlaxoSmithKline, Merck and Johnson and Johnson are down 4% or more; and Bristol-Myers Squibb is down 3.5%.

Add it up, and you’ve got nearly $50 billion in market value wiped out by Democratic victories.

Holy crap! $50 billion dollars gone in a week. That is truly something. Part of the reason that this happened is that these pharmaceutical companies bet heavily on Republicans maintaining power. While I’m sure that they would have loved to spread the love around, the Democrats have come out as these firms' natural enemy.

The list of Democrats lobbing mortars at the drug firms is long and violent. Remember the Clinton Administration painting these firms as faceless, evil entities (all the while testing Viagra no doubt). Remember Hillary Health Care? Remember Al Gore talking about the little old lady who couldn’t afford to eat? Please.

The truth is that the only reason we have all of these great drugs is because the companies keep trying to solve problems. I don’t think that the average American realizes how much education a typical researcher has to have for this kind of work. I have a buddy who works for a drug company. He has 2 ph.Ds and is a Doctor of Veterinary Medicine on top on it. Does he make good money. Hell yes. Could I do his job? Not a chance!

But thanks to him and his team, we have a somewhat larger variety of drugs that are helpful and safe. Safe is really key. Clearly we don’t want these drugs to be unsafe. In fact, the FDA has grown exponentially over the years. Regulations have grown even faster. Thanks to PETA and their leftist sympathizers, animal testing is really gone. Hey, I’m all about some humane treatment, but you can’t demand that companies don’t cut corners on one hand and then demand that they lower prices on the other (under threat of legislation). But I digress…

$50 billion dollars of capital have magically disappeared. Most of us have holdings in these companies in our IRAs and 401(k)s. The American people just voted money out of their own pockets… and it had nothing to do with taxes at all. I’d call that an unintended consequence.