# The Daily View : Stocks Plunge, RIP American Dream, Why Prescription Drugs are so Expensive

Here is the backstory behind the 5,000% price hike of Daraprim.

In Martin’s defense, the drug is classified as an ‘orphan drug‘, which means there is little demand due to the rarity of the underlying condition it is supposed to treat. In order for phrama companies to profit from orphan drugs, they have to charge a lot, and since the left says every life is sacred, no matter the cost, taxpayers will always front the bill in the end. The left wants it both ways: affordable drugs for everyone to treat even the most obscure of diseases, but provided the company that sells them is not allowed to make too large of a profit. Maybe Daraprim was unprofitable at $13 a pill, necessitating a price hike. Turing paid$55 million for the rights to Daraprim, but due to the low demand it will take a decade to turn a profit at the old price:

Let’s consider the case of Daraprim. The US market for this drug is actually quite small. Last year, American sales of Daraprim totaled only $5 million. While that would still amount to an 8% annual return on Turing’s$55 million initial investment, it is far below the billions of dollars in revenue and 30% profit margin of most blockbuster pharmaceuticals.

Maybe the profits from Daraprim will be used for new research. We don’t have the full story. The left does not understand that the development of new drugs is very expensive (around \$1-2 billion per drug), with a high failure rate, and a long development time (10-15 years from conception to approval). Out of 10,000 chemical compound, maybe only 250 will show promise for tests on mice and other small mammals, of which only 10% of drugs will qualify for tests on humans. Of these, only 21% pass clinical trials. Finally, just because a drug clears all the regulatory hurdles doesn’t mean it will succeed commercially. A notable example is Provenge, an expensive custom vaccine-based treatment for terminal prostate cancer, that received regulatory approval in 2010 but still failed because sales were not high enough to recoup the enormous expenses. As someone who follows stocks, I lost count of the number of biotech companies that have failed, but it’s a high percentage. Biotech companies need high profits on existing drugs to finance the development of new drugs. Perhaps Shkreli’s approach was wrong, and in his AMA he concedes he could have handled it better.

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Some say the American dream is dead. However, I argue that it’s merely being redefined. We all have varying ‘dreams’ attainable within our cognitive capacities. Smart people have more options than less intelligent people, but that’s the way the cookie crumbles, as unfair as it may seem.

He’s right about the growth of freelancer and ‘temp’ economy. We’re seeing a major shift in the labor market from salaried jobs to freelancer jobs:

These jobs, while not paying as much as traditional labor, may create more economic value for employers than regular jobs.

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Don’t see a compelling catalyst for a bear market, but this decline is getting pretty bad, with the S&P 500 now twelve percent below the record highs of 2130. More likely, stocks will make a comeback later in 2016. The ‘experts have been saying to sell stocks, yet every year the market keeps going higher. So being a rationalist, the rational thing to to is heed the empirical evidence that we’re in a bull market until proven otherwise. None of my ‘sell’ indicators have been triggered. But the past two weeks have been pretty dreadful though.

Stock prices plunged again Friday and are down more than 8 percent in just two weeks, an unprecedented slide for a start of a year.

The vicious drops feel even more unsettling because they’re such a departure from the placid and strong returns that investors had been enjoying for years. Like vacationers returning from a warm beach to a slushy commute to work, the shock of change is making something already painful even more so.

But the left says that US economy is supposed to be weak and the housing market a bubble. If America is as awful as the left insists it is, why is all this foreign cash flowing here?

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