American Consequences - September 2018

purchasing process is managed in a way that’s hard for other vendors to duplicate based on Cardinal’s clinical, regulatory, and legal knowledge. Gomez goes on and insists that competition from new distributors is “a lot of noise.” And he doesn’t see Cardinal Health’s customers interacting with them. It’s a very shortsighted view. And it’s not just Cardinal Health looking the other way, ignoring the massive threats. Wall Street is, too... As always, Wall Street is myopically focused on estimates of increased sales and earnings. Investors assume that people need drugs and will use more drugs in the coming years. So that has to be good for a drug distributor, right? Wall Street is making the fatal assumption that everything will continue as is forever. Disruption is something only to consider when it’s right in your face... when it’s too late. But we know better... Already, there’s been an explosion of opioid litigation cases on the county and municipal levels. New York City just filed a suit. Look Bill McGilton is the editor for Stansberry's Big Trade – a speculative options trading service aimed at profiting from the worst corporate credit and companies with broken business models in America.

for more states to join... putting pressure on the federal government to take action. Many investors are still unaware of the extent of the litigation. The settlement expenses and fines can end up being enormous. In the Big Tobacco settlement, the four largest tobacco companies agreed to pay two-and-a-half years of the government’s health-related costs. If a similar settlement is worked out with opioids, we’re looking at a potential $50 billion settlement. And it could be higher. Either way, we’re talking huge money. Cardinal’s margins are slim. Its business metrics are bound to get worse as regulators crack down on its practices. As the market becomes aware of these risks and Cardinal’s involvement, look for the risk to be reflected in a lower stock price. Plus, any firm willing to take on Cardinal now must be ready to sign up for years of difficult litigation and bad press... making it an unattractive takeover candidate. The bottom line: There’s significant risk of disruption to Cardinal’s business through competition and litigation. And we don’t think the market appreciates the extent of the risk.

Bill has been a lawyer for the past 16 years, with experience in corporate litigation research, including securities, contracts, anti-trust, options backdating, foreign-exchange fixing, and trademark and patent infringement.

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