He described the largest U.S. drugmaker as if it was a nonprofit corporation dedicated to advancing the greater good. Rather than a corporate profiteer bent on pilfering the federal treasury, blowing up the deficit, and pushing drug prices beyond the reach of millions of ailing Americans.
If the New York-based company was a state, its annual budget would rank 12th between Michigan and Virginia. If it was a country, it would rank 82nd among the 191 national economies on Planet Earth. Right between Lebanon and Bulgaria.
Pfizer is the 54th largest U.S. company, with a gross profit margin of 78 percent. Meaning that if it was really a nonprofit you and I would be able to purchase five times as many doses of Lyrica, Prevnar, Enbrel, Celebrex, Viagra and the like for the same prices we pay now.
Why are Pfizer’s prices and profits so ridiculously high?
Because America’s publicly traded companies are hellbent on the destruction of the human race by any means necessary. They think it’s excusable because they don’t mean to do it.
Just as they don’t mean to pervert capitalism, stymie free markets and undermine representative democracy. To ask modern corporations not to destroy America would be akin to asking a cloud of locusts not to consume everything in their path.
Sure it could happen, but who’s going to be the first corporate locust to stop gorging itself?
Who’s going to be the first pharmaceutical company to stop using its political hookers to rape the treasury and grow the deficit by overcharging for meds?
Certainly not Pfizer.
The executives of companies like Pfizer think they don’t have a choice. They think that if they don’t grow their profits by at least 8 percent each year – the minimum threshold for a “growth company”– investors will ignore them. And they’re right.
Pfizer is up about 14 percent so far in 2017.
Why is this kind of rapid growth suddenly so problematic?
Because there used to be a place in global stock markets for good corporate citizens. Meaning profitable companies that grew sedately and served as stable economic engines and job centers.
Today, every publicly traded company has to be a growth company. The only way many of them can manage to do that is by exploiting their own employees and customers, and cooking the books. Self defeating tactics which are akin to burning your furniture to stay warm in the winter.
The advent of big data and high speed trading now allows investors to identify the companies with the best growth – either real or fake – and instantly buy their shares. It also allows them to ignore everyone else.
Today, financial professionals can identify the top 20 growth companies among the 3,600 or so listed on U.S. stock exchanges in about a second with the right online trading system. Their automated trading programs can do it even faster. Whereas in 1980, they might not have been able to do it at all.
This kind of savage capitalism is a zero sum game.
When one publicly traded company sells $10 million in stock certificates, the inflow of capital usually comes at the expense of another. The same kind of thing happens when the super rich get richer – year after year after year – at the expense of the rest of the human race.
The new trading climate is a license to print money for big investors. It’s the main reason they keep getting richer, U.S. jobs keep moving overseas, and the number of publicly traded companies in the U.S. has been cut in half since 1996.
Instead of maturing into stable job providers, Sports Authority and Circuit City grew fast after their initial public offerings and collapsed under the pressure of sustaining the same breakneck pace.
The painful truth is that 8 percent or more is just not sustainable.
A company with $100 million of annual profits in 2011 would generate $76 trillion a year by 2187 in an inflation-free environment if it grew by 8 percent year after year (compounded quarterly).
As in T-R-I-L-L-I-O-N.
That’s about equal to the entire Gross World Product on Planet Earth right now.
To be blunt, there’s just no way to sustain such a ridiculous pace.
It’s not realistic for one publicly traded company. Much less all of them.
One of the unintended consequences of this breakneck pace is corporate misconduct. Meaning fake growth in the absence of the so-called “organic growth” produced by game-changing products like Pfizer’s Viagra boner pill, which debuted in 1998; Apple’s iPhone, which debuted in 2007; Blackberry’s original handheld texting device, which debuted in 1999; and the Facebook social media platform, which began in 2004.
Corporate cosmetic surgery takes several forms. It ranges from outright fraud – remember Wells Fargo, Enron, and Bernie Madoff – to acquisitions, stock repurchases, layoffs, and substitution.
All of these shenanigans are meant to make a mature company look like a young venture with innovative products and services. They’re the financial equivalent of boob implants, Botox, and facelifts.
Buying a competitor makes a company look bigger, but it doesn’t necessarily make it better. The appearance of growth is part of the reason Pfizer paid $68 billion for rival Wyeth in 2009.
Buying back your own stock is also popular with investors, because it raises the value of the remaining shares. Which is why Pfizer announced yesterday that it would buy back another $10 billion of its $212 billion worth of shares.
If Pfizer had the organic growth investors are looking for it wouldn’t need to resort to such trickery.
If Pfizer doesn’t release some real blockbuster drugs quick, fast and in a hurry it’s going to have to jack up the price of its boner pills. And/or start laying off people like the manager I met a few days ago.
That kind of garbage is called monetizing your “corporate goodwill” by betraying the loyalty of your employees, customers and suppliers. Goodwill being financial speak for a company’s positive reputation as a responsible corporate citizen who provides quality goods and services.
Boston Market is the very best example of monetizing goodwill I have ever seen. It went public in 1993 and was bankrupt by 1998. It has just 462 restaurants today – down from 1,143 restaurants in 1998. Thousands of Americans lost their jobs.
When Boston Market started out you could buy a really good meal there for $5. In the absence of organic growth, the chain kept raising prices and reducing portion size until customers were paying $17 for the equivalent of a cheap in-flight airline meal.
At which point everyone stopped going.
The same kind of process is now underway with Gillette and its $30 disposable razors, movie tickets, prescription eyeglass frames, printer ink, cellular phones and airline luggage fees.
All of which brings us to the practice of growing profits via substitution, like using wood cellulose in ground beef instead of real ground beef. Taco Bell got busted doing that just a couple years ago.
Pink slime is the same kind of corporate game. It’s comprised of the kind of slaughterhouse detritus which once went into animal feed. Food companies mix it with the cuts of beef meant for human consumption and pocket the difference.
Because any time you reduce costs you can present the savings as profit growth. That’s why American workers are now being treated like disposable towels, forced to work overtime for free, and fired just for lifting company health insurance premiums.
This awful race to the bottom is compromising the American social compact, but no one in the corporate world seems to posses the guts to step off the gerbil wheel.
Even worse, no one in government is capable of reining them in. It’s been purchased by the “profits over people” crowd.
Take Driscoll’s Fruit. Before The North American Free Trade Act this Sam’s Club fruit supplier grew strawberries and the like mostly in California, where it paid around $8 an hour. Now it has huge farms in nearby Baja, Mexico, where it pays people $8 a day.
As in D-A-Y.
Sadly, the prices for the trays of fruit sold here at home haven’t changed.
We’re being charged first-world prices for third-world fruit. Same thing is true of our iPhones, which are now being made in China for pennies on the dollar. That’s the new corporate business model and it doesn’t include paying us a living wage and providing us with fordable medical benefits.
The painful truth is that today’s publicly traded business model bears almost no resemblance to the one which made America great from 1932 to 1973.
It’s closest parallel is the practice of human sacrifice practiced by the failing Mayan civilization, which Hollywood captured in the film Apocalypto (right). They killed their own to appease their angry gods, sending bodies and severed heads tumbling down the stairs of their massive pyramids.
No one had the guts to say “hold up a minute. Let’s think about what we’re doing to our own people here for a second.”
The only difference is that our god is forever profit growth, by any means necessary. Morality, humanity and sanity be damned.
Gee, I wonder how it’s all going to end. I like happy endings.
Somehow I think not.