Should you invest in a ­disreputable company?

Dear Mr. Berko: I won’t own stock in companies that sell guns, sell tobacco, sell liquor, poison the environment or cheat the American public as banks and health insurance companies have. My stockbroker recommended that I buy 300 shares of Pfizer. But I don’t want to invest in a pharmaceutical company that is being sued for hundreds of millions of dollars because it hurts and deceives people. He says I am “being stupid.” We have disagreed over this frequently. Please give me your thoughts.
— LN, Wilmington, N.C.

Dear LN: Your broker recommended a supercalifragilistic stock. Most industries in which government money is involved — banking, defense, construction, Social Security, Medicaid and Medicare — are rife with heisters. That’s life; get used to it.

We have tons of fraud, graft, artifice, embezzlement and flimflammers among doctors, hospitals, nursing homes and the pharmaceutical industry. It’s as natural as rain and as normal as sunshine. In 2017, Americans spent $3.6 trillion on health care, and that amount should grow by 7.4 percent annually over the coming decade. According to the Rand Corp., over $98 billion of our annual health care spending was prosecutable last year. (That’s a low estimate, according to an unnamed source who’s a big shot with a large publicly traded health insurer.) That $98 billion would buy enough marshmallows to fill Yankee Stadium 48 times over.

Meanwhile, Pfizer’s (PFE-$35.50) missteps are small beans. In 2016, PFE agreed to a $785 million fraud settlement, claiming that between 2001 and 2008, it overcharged Medicaid for its acid reflux drug Protonix. In 2009, PFE paid $2.3 billion to settle criminal allegations that it had illegally marketed a pain­killer called Bextra, which effectively and quickly relieves most arthritis pain. And in 2004, PFE paid $392 million because of excessive charges to Medicare and Medicaid for Neurontin, a highly effective anti-seizure drug.
PFE isn’t alone; others, including Merck and Eli Lilly, are guiltier than sin. Hospital Corporation of America, Tenet Healthcare and LifePoint Health have also paid billions in fraud charges. And because of their importance to the health care industry, these companies and others are considered TBTF — too big to fail. Though fraud, embezzlement, kickbacks and graft are inimical to our economy, they’re also a normal cost of doing business in most industries that depend on federal government funds. And like it or not, fraud, artifice and deception are natural phenomena in many business and social episodes. All this plunder is factored into the market prices of the shares you buy.

Pfizer, the company that gave us Viagra and is as naughty and dastardly as past events claim, is a jim-dandy, classy and conservative member of the big pharma gang. PFE — with expected 2018 operating margins of 47 percent, expected net profit margins of 22 percent and a frequently raised dividend — is, in the opinion of many on Wall Street, among the most attractive stocks in the pharmaceutical industry. PFE’s portfolio of pharmaceuticals is un­matched in terms of breadth and depth in the global drug market. If you watch TV, you’ll recognize Lyrica, a treatment for nerve pain and epileptic seizures; Prevnar 13, a vaccine widely used to prevent 13 types of pneumococcal bacterial infections; Ibrance, for breast cancer; Enbrel, for rheumatoid arthritis; and Viagra, which speaks for itself. There are other biggies, too, such as Eliquis, which treats pulmonary embolism and blood clots, and Xeljanz, for severe rheumatoid arthritis. Then there are Lipitor, Celebrex, Zithromax, Diflucan and numerous over-the-counter products, such as Advil, ChapStick, Dimetapp, Robitussin and Preparation H, to name just a few.

Many in the brokerage community believe that if PFE continues its TV advertising, it will produce steadily growing revenues, earnings and dividends, plus an even more fecund pipeline. PFE enjoys an A++ financial rating and has a policy of annual share buybacks. Its balance sheet and income statement are solid, and cash flow should exceed $3 a share this year. I wish you would buy PFE and — like Vanguard, J.P. Morgan, Wellington Financial and T. Rowe Price — enjoy its sweet 3.7 percent dividend.

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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo. com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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