One Simple Reason to Stay With This Market

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Created on Monday, 10 October 2011 00:00

Published on Monday, 10 October 2011 00:00

Written by Andrew Snyder, Editorial Director, Inside Investing Daily

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Don't do it. Don't jump now.

This is a dangerous market. Lots of folks are scared. Lots of investors are leaping for the land of cash. Don't join them.

Here's why...there's still plenty of opportunity.

Get this. In a story you have not heard, the government is working to build a pharmaceutical "Fort Knox" -- a massive stockpile of our most vital cancer treatments.

It makes sense. We store oil. We store gold. But for the true lifesavers -- our sweet, sweet drugs -- we rely on a rickety and undependable supply chain.

What's worse is our lives hang on the whims of Big Pharma. If you thought the banksters were capable of playing hardball, wait until you're having chest pains at 2:00 a.m. and the doc says he can't get the right drug... they stopped making it. The margins stink.

That's right. Thanks to the recent massive push toward generic drugs, the nation's largest producers have opted out of producing their least profitable medicines.

Like all industries, it's about the bottom line. If it can't make a buck, Big Pharma doesn't care if your blood pressure rises or if your cancer spreads. Sorry... but that's the way the world works.

It's a phenomenon that has created what doctors call a gray market for cancer drugs. With a shortage of some 170 drugs last year (five times the number in 2005), cancer patients and providers are doing whatever they can to get the help they need.

For example, according to the Canadian Medical Association Journal, a doctor in Florida traded two college football tickets to get his patient the drugs needed to treat her lymphoma.

The list below comes from Elijah Cummings, who plays a key role on the House Oversight and Government Reform Committee. He's looking to nail the folks profiting from the gray market:

Miami-based Allied Medical Supply offered to sell leukemia drug cytarabine for $990 per vial (typical cost about $12, according to Cummings). Premium Health Services of Columbia, MD, hocked cancer drug leucovorin for $270 per vial (more than 50x the typical sale price) and PRN Pharmaceuticals of Rockville, MD, offered cancer drug fluorouracil for $350 per vial (typically $15).

In all, a study by the Premier Healthcare Alliance says the gray market pushes prices higher by some 650%.

"This is a major crisis ... and we will be hearing more about it," Dr. Jennifer Ashton tells us. Our healthcare system has failed.

Washington swears it will fix what ails us, but so far, we've seen nothing but smoke and mirrors. Our insurance premiums continue to soar and with each passing year, the problems stack up like cordwood.

But this idea of a cancer drug stockpile... it isn't half bad. It would at least save a few lives in the event of a supply chain meltdown.

Better yet -- and more to our purpose -- to fill the nation's empty drug cabinet, Uncle Sam will have to go on one heck of a buying spree. Hundreds of billions of dollars will be spent over the course of a few years.

But even if the stockpile never happens, even if Washington finally decides it cannot afford something, this is a sector every investor must be aware of... and must take advantage of.

Spending on cancer drugs in the U.S. is expected to surge by 42% by the end of 2013. And across the world, the experts tell us cancer drug sales will reach $80 billion.

...and that's without Uncle Sam opening his wallet.

If Washington decides to stockpile, mark my words, all hell will break loose in the realm of Big Pharma.

They call it a Fort Knox of drugs... we call it an opportunity. Despite this mess this nation's in, there's still room to make money.