Express Scripts: Rebate System is a Financial Engineering Kickback Scheme

, ,

One company in the healthcare system that deserves to fall to the mighty sword of the new Trump administration is Express Scripts.  (NASDAQ:ESRX) has used their position as the nation’s largest PBM to make itself into


“The reason drugmakers sharply raise list prices without a corresponding increase in net price is that PBMs demand higher rebates in exchange for including the drug on their preferred-drug lists”

— Enrique Conterno, President, Eli Lilly diabetes business

Rebates are pharma-speak for “Kickbacks”.

But Do Not Listen to Citron!  We are Biased!
All ESRX investors must read this devastating CMS bulletin, issued last week:

  • The rate of growth of PBM rebates from 2013-2015 is double the rate of growth of gross drug spending
  • Often, the Part D sponsor or its pharmacy benefits manager (PBM) receives additional compensation after the point-of-sale that serves to change the final cost of the drug for the payer, or the price paid to the pharmacy for the drug. Examples of such compensation include rebates provided by manufacturers and concessions paid by pharmacies.
  • As the growth of rebates and other price concessions places more of the burden on beneficiary cost-sharing, Medicare’s costs for these beneficiaries also grow.
  • The growing use of rebates and other price concessions has contributed to an important shift in how Part D spending is distributed across the final three phases of the part D benefit
  • Rebates and discounts biopharmaceutical companies pay to PBMs and payers do not directly reduce cost-sharing for these patients.

As Medicare drug costs spiral out of control, the percentage of pharma spending Express Scripts extracts from rebates is far greater than its peers, and expanding. This sum is now approaching $100 per person per year for every citizen in the U.S.  Ironically, ESRX diverts huge cash flows from companies that actually invest in innovative R&D into “kickbacks” for themselves.  They create no new or improved drugs.

The problem is so obvious we read in today’s WSJ:

“Merck has offered higher rebates and discounts to pharmacy-benefit managers so that they would keep Merck products on preferred-drug lists”

Conclusion:  It is simple math:  If ESRX loses 50% of its rebates, they lose 30% of EPS, and the stock goes straight to $45.

Our 2 cents…..without the rebate.

Could TransDigm be the Valeant of the Aerospace Industry?

, ,

Wall Street:  Be Careful!  President Trump has become to Aerospace what Hillary was to Pharmaceuticals


President Trump has promised to end the long-standing, infuriating tradition of “sticking the US Government with tab”.  He has already made lowering prices for military aircraft a pillar of his transition into office.

President Trump has already met with the both Boeing and Lockheed Martin, who have promised to lower the prices for Air Force One and the F-35 fighter jet program.  These lower prices will no doubt trickle down to subcontractors.

While Boeing and Lockheed Martin have been the “poster children” of this policy initiative, everyone in the aerospace industry knows that one company stands out when it comes to egregious price increases foisted on the government:


TransDigm’s business model is to aerospace as Valeant was to the pharmaceutical industry. TransDigm acquires airplane parts companies (over 50 in total), fires employees, and egregiously raises prices.  This business model has made them a dominant supplier of airplane parts to the aerospace industry while burdening its balance sheet with sky-high debt load… sound familiar?

For the rest of the story you won’t read anywhere else, Click Here:

Lannett: Citron Exposes the Lawsuits that will Wipe Out the Equity

, ,

Lannett will be the First Pharma Company to go Bankrupt amid Continuing Drug Pricing Scrutiny

If Even Modest Price Cuts Hit Either of Lannett’s Cash Cow Drugs, It Will Violate Its Debt Covenants 

$13-$15 Near Term Target

Equity Worthless Over Long-Term

In the past month we have seen a series of lawsuits against Lannett that Wall Street has completely overlooked.  These lawsuits, along with the Trump administration’s dedication to confront indiscriminate drug price raises, illuminates a clear path to 0 for the equity of Lannett.

For the rest of the story you won’t read anywhere else, click here …