Wednesday, January 28, 2009

Medicare costs growing like cancer

Medicare costs associated with cancer treatment are growing as fast as the drug companies can throw new products or new uses for old products at the malady. Problem is, the efficacy of the drugs is best measured by the drug companies' income statements rather than the health of the patients being treated by all this nothing's-too-good-for-my-little-girl care. All this according to BusinessWeek according to the New England Journal of Medicine:
Although it is not the case with other drugs, Medicare must reimburse doctors or patients for virtually all cancer drug uses, even those not yet approved by the Food & Drug Administration. And it is not permitted to favor the lowest-cost treatment. As a result, says author Dr. Peter Bach of Memorial Sloan-Kettering Cancer Center in New York, "the prices of cancer drugs appear to be rising faster than the health benefits associated with them."

Bach notes that Medicare spending on drugs administered in a doctor's office, the vast majority of which are cancer treatments, rose from $3 billion in 1997 to $11 billion in 2004, a 267% increase. Overall Medicare spending rose by only 47% over the same period. Spending on cancer drugs is likely to rise even faster in coming years since a November decision by the agency that greatly expands patient access to cancer drugs as required by law.

Cancer drugs, long a backwater of the pharmaceutical market, have become incredibly lucrative over the past decade as a new generation of treatments arrived with fewer side effects and better outcomes—but only for some patients. The prices of these drugs, however, are much higher than for cancer treatments in the past because there are few if any competitors for any one drug. Fifteen years ago, Bristol-Myers' (BMY) Taxol was the only commonly used cancer drug that cost more than $2,500 per month. Today, Genentech's (DNA) Avastin, Eli Lilly's (LLY) Erbitux, and Novartis' (NVS) Gleevec, all widely used, can cost $10,000 per month and up.

Medicare now allows reimbursement for an extremely broad range of "off-label" cancer treatments (meaning the drugs are used in ways that have not yet been approved by the FDA). Off-label uses are incredibly common in cancer therapy because oncologists often try a broad range of drugs against a tumor until they find one that works.

But Bach argues that the high spending on cancer drugs has brought little advantage to patients. Several studies have shown, for example, that the magnitude of the cost increase for each new drug for colon cancer exceeded the magnitude of improvement in efficacy. "It's pretty clear with many of these new drugs, their cost effectiveness is lower than previous drugs," Bach told BusinessWeek. "For each extra day or year of life they give, we're paying more than we did for the last one."

Medicare is barred by law from negotiating with drug companies on prices, but it can hold the line when it concludes that several drugs are virtually interchangeable. In that case, the agency can reimburse for the least costly alternative, no matter which drug is used, or choose a weighted average of prices for that class of drug. When it comes to cancer drugs, however, Congress requires Medicare to pay for any drug used "for a medically accepted indication," or for which the treated condition is major or life-threatening.

Saturday, January 24, 2009

Making another Valad point

The Australian listed property market has been a roller coaster ride. In the go-go days, it was straight up, as the Macquarie Model was utilized to lever giddy heights from the likes of Centro and Valad. Hapless, staid, conservative types such as Stocklands, were looked down upon as oldies in cardies.

Well, now the oldies in cardies are still shuffling right merrily along, thank you very much, and the go go guys are getting the go go boot.

Valad sheds staff - and 36% market value
THE embattled Valad Property Group had up to 36 per cent of its market value wiped out yesterday after revealing it was cutting staff numbers by 25 per cent and planning to sell 19.9 per cent of its shares to its main investor, the Britain-based Scarborough group.

But of more concern, analysts said, was the signals that the troubled Valad Capital Services and Crownstone divisions would incur more write-downs in value. In October Valad revealed VCS had taken a $31 million hit on investments in the Queensland developer Petrac, which is now in receivership. The overall carrying value for VCS and Crownstone remains about $610 million.

As part of [its] growth strategy, Valad paid close to $2 billion for Scarborough's British residential assets in June 2007. In return, Scarborough received a 3 per cent stake in Valad and a board seat for a Scarborough director, Kevin McCabe, and about £37 million ($78 million) in cash.

However, only a few months later the British residential market was hit by the falling global market, which has weighed heavily on Valad's balance sheet. Valad still has $67 million owing for the final payment on its Scarborough acquisition and is reviewing a proposal to pay part of this in Valad equity, up to a 19.9 per cent stake, with the balance of cash owing now deferred for three years.

Fortunately for someone, but it is getting harder and harder to discern who as governments throw an opaque TARP over this stuff, the Australian government is scheming to do something about it.

According to Dow Jones NewsWires,
the Australian government [is working] with the country's major banks on a funding lifeline for the corporate sector, to compensate the possible withdrawal of credit lines by foreign banks looking to reduce their offshore lending.

In an interview with Sydney radio Friday, [Australian Treasurer Wayne] Swan recognized the need to assist Australia's commercial property sector in particular, saying the government "has a scheme in mind." He gave the strongest signal yet that the government plans to commit its own funds [stop and re-read that: "its own funds"] to backstop the sector, adding that any public funds would be used "responsibly".

Hot tuna

Tuna fetches six figures
The Tokyo restaurant world was shocked this week when a 128kg Japanese bluefin tuna fetched 9.63 million yen ($153,000) - the highest price paid for a bluefin tuna in eight years.

Whattya reckon: is a bid returning to the economy?

Or, is tuna being over-fished?

Short of nothing

One of the first things Government regulators did upon waking up to the monetary disaster befalling around them last year was ban short-selling. Amid the cry from the boardrooms that it was evil short-selling that was ailing the market, bans were put in place around the globe.

As an example, Guambat points to Babcock & Brown, a Macquarie Model emulator. Last year Guambat commented on B&B's whinge at the short-sellers in the post, Short people got no reason.

And how is that working out? Have markets rebounded now that short-sellers are sidelined? Not exactly.

Shareholder wipeout in Babcock rescue

"The board believes that in the current market environment, and based on continuing discussions with the banking syndicate, there will be no value for equity holders under the revised business plan balance sheet restructure," the Sydney-based company said in a statement.

Babcock shares worthless as banks bleed
The already fragile confidence in the domestic banking system was dealt another blow when Babcock, Australia's second home-grown investment bank which made its name as one of the market's most aggressive deal makers, revealed there would be nothing left for shareholders after its lenders took their cut under a plan with its bankers. Babcock also said there would be negligible or no value for the holders of subordinated notes, meaning any funds raised from the sale of company assets would go to its banks.

The investment bank , which just 18 months ago held a stake in a company worth $10 billion, became the biggest stock market victim of the financial crisis.

Wednesday, January 21, 2009

Ya think the wheels have come off the supercycle?

OK, so Guambat was early. WAY early. Way TOO early. And for that he's paid.

But not wrong.

The wheels have well and truly come off the supercycle.

Here's a few of the thousand words on the subject:

BHP to cut 6,000 jobs, take $1.6 bln charge on mine
BHP Billiton Ltd/Plc (BHP.AX) will cut 6,000 jobs and close its giant Ravensthorpe nickel mine in Australia, writing off $1.6 billion, as the global resources giant battles a collapse in commodity prices.

Until now BHP, the world's largest miner, had set itself apart by maintaining production and just last month said sales volumes were holding up despite a global downturn.

But as it became increasingly apparent there would be no quick fix to the slump in commodity prices, BHP was forced to do what it long resisted -- close mines and cut jobs.

BHP Chief Financial Officer Alex Vanselow warned on Wednesday more mines could be closed given the uncertainty in commodity markets, with the Australian metallurgical coal mines already slated to reduce output by 10-15 percent.

"The world changed a lot since October. It's been a very steep and dramatic change ... " Vanselow said.

And here's a picture worth a thousand more:

Monday, January 19, 2009

In over his head, again

Guambat gazes over Tumon Bay every day, but it took his kids' insistence to finally snorkle right in the middle of it, over Christmas. Some photos:

You get the picture.

Saturday, January 17, 2009

2 bit horrible

Guambat ain't no finance wiz (but that Son of a Guambat is becoming one), but even old Guambat knows that 6 quarters is a buck and a half.

So how can you turn a buck fifty into a $39,100,000,000.00 loss?

Ask Merrill Lynch, aka Bank of America, aka the American Taxpayers:
Merrill Lynch Lost $39.1 Billion In Six Quarters
But don't ask Barry Ritholtz.
The United States of Wall Street just added another major holding to its portfolio of financial garbage: Bank of America.

Like Citi, BA has now received more MORE IN BAILOUT MONEY than its actually worth. (BAC = $53B; C = $21B) How this can ever be a profitable investment, as some mathematically challenged Congress-critters have suggested, is all but impossible to imagine.

Blaming “previously undisclosed losses from its Merrill Lynch,” B of A threatened to kill their purchase of Mother Merrill. Treasury made an emergency capital injection of $20 billion, on top of the $15B and $10B already received by BA and MER respectively. The taxpayers will also backstop $118 billion of assets, setting up what is likely to be a jumbo money losing trade.

What should have happened in both instances was an orderly liquidation, selling off the pieces to competent managers who understand risk, and can manage smaller portions of the firm. Instead, the same idiots who helped destroy all of companies involved are still running the show.


Guambat keeps up (only to use a phrase) with things mainly by regularly checking in on his GoogleNews page, which aggregates dozens of stories for him.

On occasion, the juxtaposition of some of the articles gives him a good chuckle, a yuck as it were.

For instance, just now there is one article titled
Who will succeed N Korea's Kim Jong-il?

Just above that one is
Bush eyes busy post-White House life

Guambat figures NoKo is already bankrupt and friendless, so maybe George can squeeze in some pro-bono on their behalf, with no harm done.

Yuck yuck yuck

Wednesday, January 14, 2009

Marshalling a car pool

Joseph Band is a lawyer. He was a lawyer for the US Marshals Service, working in its Office of General Counsel. When he wasn't working for Fox, that is, as a sports statistician.

He was also the lawyer who was, according to one unidentified Marshall, "the guy who advises us on ethics".

He was also the ethics advising lawyer who commandeered US Marshals to pick him up and get him to major sports events in government limousines, Marshalling an official motorcade to get him back to the airport.

The Department of Justice IG investigated the matter based on an anonymous tip, and issued a report.

Have a read of it. The audacity and arrogance is Fox Newsworthy.

Friday, January 02, 2009

Happy Aril Fool's Day?

A highly placed and respected Russian political academic and diplomat, who predicted in 1976 the collapse of the USSR, named Igor Panarin, has been, for the last decade, predicting the collapse of the USA by mid-2010.

The WSJ reports, In Moscow, Igor Panarin's Forecasts Are All the Rage; America 'Disintegrates' in 2010.

Mr. Panarin posits, in brief, that mass immigration, economic decline, and moral degradation will trigger a civil war next fall and the collapse of the dollar.

[He] called U.S. foreign debt "a pyramid scheme," and predicted China and Russia would usurp Washington's role as a global financial regulator.

Around the end of June 2010, or early July, he says, the U.S. will break into six pieces -- with Alaska reverting to Russian control.

He predicts that economic, financial and demographic trends will provoke a political and social crisis in the U.S. When the going gets tough, he says, wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow. The U.S. will then split along ethnic lines, and foreign powers will move in.

California will form the nucleus of what he calls "The Californian Republic," and will be part of China or under Chinese influence. Texas will be the heart of "The Texas Republic," a cluster of states that will go to Mexico or fall under Mexican influence. Washington, D.C., and New York will be part of an "Atlantic America" that may join the European Union. Canada will grab a group of Northern states Prof. Panarin calls "The Central North American Republic." Hawaii, he suggests, will be a protectorate of Japan or China, and Alaska will be subsumed into Russia.

The Journal article included this post-breakup map.


(Click map to enlarge)

First degree felony?

The Wall Street Journal has posted a list of Madoff's "victims". Kevin Bacon made the list, he of the Six Degrees of Kevin Bacon fame. That puts Madoff right up in the first degree category.