Drug companies have a history of raising the prices of their drugs with the aim to increase revenue and profits. Obviously this is a big concern regarding moral standards and ethics, but it can also lead to government intervention, which can dramatically influence the company’s market position.
Valeant Pharmaceuticals is a drug company whose stock price has experienced a significant decrease in the last two months, going from $320 per share in September to $110 per share in November. Earlier this year, they raised the prices of Nitropress and Isuprel by 6 times and 3 times, respectively. This raised concerns with the government, and also US presidential candidate Hilary Clinton, who came up with a proposal to regulate drug prices, which combined, saw Valeant Pharmaceuticals stock price plummet.
In class, we learned that it is important for companies to keep shareholders happy, whether that be with increasing stock prices or paying out dividends, in order for the company to continue to be able to find capital. However, when large shareholders lose enormous amounts of money (such as Pershing Square Holding losing $2 billion) the credibility of Valeant Pharmaceuticals decreases, making it hard for investors to make that decision.
Valeant Pharmaceuticals must deal with their current market and financial situation with caution, as the decisions they make now will influence the future of their product and company’s credibility.
Sources
- Gandel, Stephen. What the drop in Valeant’s stock says about hedge funds’ herd mentality. N.p.: Fotune, n.d. Web. 10 Nov. 2015.
- Healy, Patrick, and Margot Sanger-Katz. Hillary Clinton Proposes Cap on Patients’ Drug Costs as Bernie Sanders Pushes His Plan. N.p.: New York Times, n.d. Web. 10 Nov. 2015.
- Pollack, Andrew. Aleant Chief Says Issues Stem From Fast Growth. N.p.: The New York Times, n.d. Web. 10 Nov. 2015.