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PBMs: Caremark hiccup or It’s better to be lucky than good

Well I told you last week that I’d had a small bet on the PBMs losing value this week as investors realized that the Medicare legislation wasn’t guaranteed to pass.  It happened for random reasons that I bought put options last week on AdvancePCS, which trades in lockstep with Caremark, which is acquiring it. (In case you don’t know, put options go up if the underlying stock goes down). Did it go down because of the delay in passing the Medicare bill? Heck no, so I was wondering what to do as the options expire tomorrow.  Then midday today the news comes out that Caremark is being sued by whistleblowers who:

    allege that Caremark resold returned drugs, failed to credit the state employees’ health plan for copayments on returned drugs and falsified and destroyed documents to make it appear as if the company had complied with contractual time limits for processing and delivering prescriptions.

Interestingly enough, the state of Florida which was the client and who supposedly was defrauded, did not join the suit. So it probably has no legs. 

Nonetheless the news was enough to push AdvancePCS stock down $2 and to make my options to be worth 3 times what I paid for them.  As the traders say, "it’s good to be good and it’s good to be lucky, but it’s better to be lucky than good!" Pity that it was only a small bet.

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I have learned to trust the government players more than the corporate CEOs that would run the system you envision, Barry. The CEO has but one goal: to maximize profits and his own personal wealth. The government can screw up and send us screaming to the politicians, but they won’t kiss you off like private industry will. I’ve been very happy with my social security and Medicare; even more so than the companies I’ve investments in. I simply don’t understand the concerns expressed over a Medicare-for-all system.