Fintech, Adoption & 23% Interest

Always on the lookout for material for my classes, the headline of Hannah Levitt's article in the Wall Street Journal (July 3, 2018) caught my eye:

Personal Loans Surge to a Record High

The article was about fintech, newer players on the consumer lending scene.  Established entities like Goldman Sachs have entered the market along with startups.  What got me though was the lead:

"Heather Turner and her husband needed a few thousand dollars to jump-start the adoption of a teenager from Ukraine.

"The Turners, of Lewiston, Maine, needed a speedy loan and didn’t want to borrow against their house or car. Heather Turner said LendingClub arranged a 3-year loan for less than $10,000 last October at an interest rate around 23 percent -- similar to that of a credit card. Most notably, the loan is unsecured."

TWENTY-THREE bleeping percent!

A whole load of unanswerable questions popped into my mind, not the least of which was the 23%.  Doesn't that border on usury?  What was the need for speed?  What was the time pressure on adoption?  Was the kid on sale?  If the Ukrainian government was set to impose restrictions that fact wasn't in the article.

I understand the compassionate urge, but going into debt?  I didn't have the nerve to try to contact them to find out why, but then there's the internet and a gofundme page to supply the answers.

So Old News

It takes me a long time to get around to reading stuff, and a little longer to actually doing something.  Here's the latest example: An article in the November 18, 2015 WSJ with the headline "Mallinckrodt: Infant Drug, Gown Up Problem".

(I have a soft spot in my heart for Mallinckrodt because I still have their 60 year old notepads with yellow grid lines.  My dad drew cyclic organic compounds on them andI thought they were cool.  Also, I like pronouncing their name.)

The article concerned the drug Synacthen and Mallinckrodt's decision to raise the price of the drug 2,000%, a move which put it on the same footing as all the other bad boys in Pharma who wanted to show that without competition they could stick it to the patients.  The explanation/excuse was that the drug had been sold at a loss and the new price would insure that the company could continue to produce the drug.

The fact that the drug was approved to treat infantile spasms triggered a dim memory of drugs which were approved for one use, but were used for others.

A web search (just now) found a Washington Post article dated January 18, 2017 "Maker of $34,000-a-vial drug to pay $100 million for allegedly preventing competition".  If the revenues from that drug brought in $1 billion in 2015, a penalty of 10% of gross sales might not be too tough to handle.  The charge was that the drug, H.P. Acthar Gel, which once sold for $40 a vial, was acquired by Questcor Pharmaceuticals in 2001.  Questcor raised the prices and was acquired by Mallinckrodt.  When a rival company, Novartis, planned to market Synacthen, a potential competitor to Acthar, Mallinckrodt bought the rights, thereby eliminating a competitor.

There's nothing as comforting as a story which reinforces my believe in the venality behind much of big business.  And I say this knowing that my own financial security is dependent on companies making money, often by sticking it to those who are powerless to resist..