Health and politics should never meet. But when they do (and they certainly have), you can be sure not only your well-being is at stake... but your money is on the line as well.
Our contributors have stretched more into the political realm than usual over the last few weeks. It’s not by accident.
Not only is it a topic that affects our everyday lives, but more than ever, it affects your money.
If you’re a fellow Pfizer Inc (N:PFE) investor, you know what I mean.
We’ve written plenty about tax inversions over the past year. We won’t rehash our thoughts. Instead, let’s look at exactly what Pfizer’s $160 billion plan to merge with Ireland’s Allergan (N:AGN_pa) has to do with the oh-so-awkward marriage of health, politics... and money.
For investors, there’s no doubt the deal is positive.
Pfizer will go from a 25.6% corporate tax rate to something much lower. Allergen admits to paying a mere 5% tax rate last year, but Pfizer expects a rate of about 17% in the first full year after closing the deal.
That tantalizing figure alone illustrates why politics affects our investment choices. With a simple change of address, billions of dollars could flow to Pfizer’s bottom line.
But what’s so intellectually compelling about the Pfizer deal is the effect it will have on future generations.
It’s not hyperbolic to say lives are at stake. As one of the world’s most innovative drug companies, a leaner, more fiscally efficient Pfizer no doubt means better research and better medicine.
Again... politics stretches into our lives.
If Pfizer can merely meet its goal of a 17% tax rate in 2017, it frees $2.1 billion worth of cash that year - a large chunk of which will be spent on developing new drugs. One of them may save your life.
Don’t forget, Pfizer was a pioneer in the realm of antibiotics. Imagine if it had decided not to pursue that research due to tax ramifications.
Or, better yet, imagine if it had an extra billion bucks right now to fight the waning effects of today’s antibiotics.
Lives would be saved.
Of course, it’s not just Pfizer. The decisions in Washington affect your health and those who want to profit from improving it in plenty of other ways.
Thanks to yet another deal involving Allergan, the generic giant Teva Pharma Industries Ltd (N:TEVA) just announced it’s going to unload about a billion bucks’ worth of assets in order to get the nod of antitrust regulators.
You may have heard that in July Teva announced its plan to buy Allergan’s generic business. But regulators are skeptical to allow it to move forward without first requiring the company to unload some of the overlap in what will be its combined drug portfolio.
There’s no doubt anti-trust measures have merit, but it’s one more example of the effect political decisions have on not only our portfolios, but our health.
Teva will have fewer life-saving arrows in its quivers... because that’s what Washington - not doctors - wants.
Finally... the most politically incendiary news from the world of publicly traded health: UnitedHealth Group (NYSE: N:UNH) just told us Obamacare has been bad for business.
It’s news that even I was surprised by.
After all, four years ago I stood on a stage in Las Vegas and told the crowd to buy the stock right away. The oncoming gush of cash from Obama’s then-proposed plan and UnitedHealth’s dominance of the Medicare world would send the stock soaring.
I was right. Shares went from $45 to a high of over $120 in the past 48 months. But now we’re learning the company may have reached a bit too far into the realm of public healthcare.
Its decision to get involved in the health insurance exchanges of nearly half the states in the nation wasn’t as fruitful as planned.
"We did not believe it would form this slowly, be this porous or become this severe," the company’s CEO admitted this week.
It’s important to note the insurance company is becoming much more vocal about a different segment of its business... a segment that’s growing fast and quite profitably.
A segment that’s largely removed from the government’s long arm and sticky hands.
Most folks don’t know it, but UnitedHealth is broken into two groups - the insurance business and a much smaller segment known as Optum, which provides pharmacy management and IT services, and also runs doctor’s offices and clinics.
As the insurance business evolves (or, more accurately, devolves), it’s clear that Optum and its double-digit revenue growth is becoming a bigger focus for the company.
The company’s recent emphasis on Optum is more evidence that the politically sensitive insurance realm and its shrinking margins have transformed a once-stable business based on numbers and actuary tables to something that’s much more volatile and dependent on who lives at the White House.
It’s politics at work in your portfolio.
The subject of politics is never fun. There truly are no winners in the debate. But it’s clear our elected leaders affect not only our investments... but our health.
The vital takeaway here hits at the heart of our mission... investor education and information.
The only way to successfully navigate a politically divided minefield is to know the facts, understand the variables and sort the fact from the fiction.
We gulp as we admit it, but politics absolutely affects your health and your wealth.