American Consequences - August 2017


In the finance world, Left, 46, is what is known as an “activist” short-seller. After he places a bet against the price of a stock, he then publishes research designed to torpedo the company’s value, often by airing accusations of fraud or abuse. This is entirely legal, as long as what he publishes is not itself fraudulent. Left takes short positions in companies across a whole range of industries – Tesla, Valeant, GoPro – and though he makes mistakes, he has an unusually high success rate. For a year he had been assembling a file on Express Scripts, a pharmacy-benefits manager with $100 billion in revenue. Pharmacy- benefits managers occupy an eye-glazingly complex netherworld in the prescription- drug supply chain, serving as intermediaries between drug makers and insurers. Express Scripts ostensibly exists to keep drug prices low, by negotiating with drug makers on behalf of insurers, but Left believed that the company was actually inflating them, because higher prices meant larger rebates from the drug makers, which meant more profit. He believed that this was true of all pharmacy- benefits managers, but especially of Express Scripts, the most powerful. Its second-largest customer was the Department of Defense; downward pressure on drug pricing from the government could seriously threaten its bottom line. By rights, then, Trump’s threat in the interview should have tanked Express Scripts’ stock. That the price remained unchanged

indicated to Left that many people on Wall Street had no clue what a pharmacy-benefits manager does. Trump, he thought as he pulled out of the Madison Club, had given his stale, year-old story a fresh hook. (A spokesman for Express Scripts denied Left’s claims, noting that “roughly 90% of rebates go directly to our clients.”) Fifteen minutes later, Left was driving west on Interstate 10 in his black Bentley Continental GT. From the car, he placed a call to a hedge- fund manager, a man who was already short Express Scripts and therefore had a stake in providing Left with information. Express Scripts, this man reminded Left, did not disclose the amount it made in rebates, while some of its operating metrics exceeded those of Apple; something seemed wrong. Left heard “rebates” and thought “kickbacks.” Express Scripts was, in Left’s mind, “the man behind the man”; it was “the mob.” If he went public with a short position tomorrow, JOURNALISM IS YOU CAN MAKE MILLIONS OF DOLLARS, he conceded.

72 | August 2017

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