The Bangor Mall and Medicare for All. If you’ll bear with me, I’ll try to tie these two together. Think I can do it?
This past week, the Bangor Daily News reported that the Bangor Mall may soon be insolvent; its total debt will exceed the value of the assets. That is not entirely surprising. After all, retail business models are changing; even the august Toys ‘R’ Us — with a jingle that spanned generations — was forced to file for bankruptcy protection as they struggle to compete in a new environment.
So while the news may be a footnote nationally, it is still a significant story for one of Penobscot County’s largest buildings in a city undergoing its own economic change. But such is the way of the world; as some businesses falter and fail, new ones arise to take their place. Tears will not be shed for its owner/operator, Simon Property Group. They are an international company with more than 100 shopping centers in their portfolio.
However, there is a bit more to the story. In the BDN’s coverage, the reporter noted a small fact: The mall also has two minority owners. The Michigan State Treasury and the California Public Retirement System.
If the mall is foreclosed on, those two public institutions will suffer losses. Such is the nature of investment. They will need to make it up with gains elsewhere or otherwise seek bailouts from their state taxpayers. But if you were guessing who might be harmed by the Bangor Mall’s potential demise, retirees of the California Highway Patrol were probably not at the top of the list.
That leads us to Bernie Sanders’ newest “Medicare for All” proposal. One of the major sales pitches thrown in favor of the plan concerns prescription drugs. It’s compelling. By any objective standard, American consumers pay significantly more for those treatments than those in other modern, first-world nations. Under the nationalization plan, the federal government would take control of the pharmaceutical market by negotiating with manufacturers and grinding down price points. Or, simply, the European model.
Yet the rhetoric advanced in support of this effort is, in part, based on accusations of greed by these companies. In some cases, that is fair criticism. We can look at “pharma-bro” Martin Shkreli — now Inmate #87850-053 — who raised the price of a fairly simple drug 56-times to help pay off his other debts. Or Heather Bresch, daughter of a Democratic U.S. senator pushing federal action to get her product — EpiPens — into schools while raising their price by over 400 percent. kreli
But those exceptions are not the norm. Most pharmaceutical companies try to make a profit. Then they spend those profits chasing the next discovery, hoping to find another treatment — ahead of their competitors — that will generate additional profits, and on they go. Sometimes, they will pay portions of those profits out to shareholders.
Shareholders like the Maine Public Employee Retirement System. Similar to every other state in the nation, our public pension fund invests the tax dollars it receives to generate returns and provide retirements for state employees. Nearly $80 million of that fund has been put behind stocks in just three pharmaceutical companies: Johnson & Johnson, Pfizer, and Merck. When those companies make profits, they provide for teachers, cops, and road crews as they leave the workforce.
This doesn’t mean Americans should simply roll over and pay the world’s highest price for drugs. Many pharma companies could pare back their marketing budgets; just watch an NFL game or prime time show to see why.
Or, for many years, across successive administrations, the United States has pushed its NATO allies to live up to their defense funding commitments rather than sleep under a safety blanket funded by American taxpayers. Those same pressures can be brought to bear in medical markets for other first-world nations; for some treatments, it may be reasonable to expect French or German patients to pay a little more that the price currently imposed by their government.
However, whether it is the Bangor Mall or the American pharmaceutical industry, investment flows where the potential for profit exists. Models will change, and with reward comes risk. Yet, when proposing massive changes in law like national drug pricing, it is important to remember who holds the risk. In many, many cases, it is borne by the retirement plans of regular people. And at the end of the day, someone always will have to pay the bill.