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WSJ (14 Aug ’09)

The Bill and Melinda Gates Foundation [...] sold off almost all of its pharmaceutical, biotechnology and health-care investments in the quarter ended June 30, according to a regulatory filing published Friday. [It] sold its total holding of 2.5 million shares in health-care giant Johnson & Johnson in the quarter [as well as] millions of shares in major drug makers, including 14.9 million shares in Schering-Plough Corp., almost 1 million shares in Eli Lilly & Co., 8.1 million shares in Merck & Co. and 3.7 million shares in Wyeth, over the same time period. The foundation no longer holds shares in any of those companies. Among the other health and life sciences-related investments the foundation liquidated are Allos Therapeutics Inc., InterMune Inc., Auxilium Pharmaceuticals Inc. and Vertex Pharmaceuticals Inc. The only life science-related holding the foundation retains is a 3 million-share stake in Seattle Genetics Inc.

Weak journalistic analysis:

The foundation’s decision to drastically reduce its exposure to health-related stocks is striking, as many of its charity grants have been disbursed to address developing country health issues. Its move comes against the background of anxiety among drugmakers and healthcare insurance firms about the potential impact of the Obama administration’s proposed overhaul of the U.S. healthcare system, which could put pressure on prescription drug prices.

Sooner of later the GF (et al.) need to, as Nixon famously said he said, pee or get off the pot: whatever they may gain from healthcare-related investments is more than matched by losses incurred by the increasingly dysfunctional economics of “healthcare,” which are by no means limited to the current shouting match in the US.

Factors to consider: (1) alternative R&D models: the GF has become the major sponsor ofpublic–private research partnerships, but like every other philanthropic organization it’s facing serious liquidity concerns. Pulling these investments will free up funds to support alternative nitiatives and interests and (2) send a signal that major hands-on investors aren’t happy with current political trends; and (3) pensions: collapsing pension funds (cf. Detroit, California, etc.) will be forced to make drastic cuts in healthcare costs in general and pharmaceutical costs in particular. The market won’t bear skyrocketing pharma costs anymore; but there’s something more afoot here.