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tv   Nightly Business Report  PBS  February 5, 2016 1:00am-1:31am PST

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this is "nightly business report" with tyler mathisen and sue herera. suddenly silent. the man known for hiking the price of a life-saving medicine refused to answer questions under oat. can congress realistically do anything to curb drug price hikes? dividends slashed. conoco phillips becomes the first fler gy company to slice its payouts. will others follow? open for business. economic sanctions may be lifted but western companies still face big obstacles trying to do business in iran. all that and more tonight on "nightly business report" for thursday, february 4th. >> good evening and welcome. high drama on capitol hill. it involved grinning, mugging for the cameras, insulting tweets.
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the word imbusineeciles, referro members of congress. but no testimony. the leader of turing chemicals refused to testify today. the man known as pharma's bad boy for raising the price of an older drug by 500% cited his fifth amendment right against self-recrimination. but as meg reports from capitol hill he was anything but silent. >> reporter: representatives from valiant pharmaceuticals, fda, and the pharmacy benefits manager industry group, were all invited to testify today at a congressional hearing on drug pricing. but the star witness was the infamous martin shkreli. his former company, turing pharmaceuticals, gained notoriety for hiking the price of a 62-year-old drug by more than 5,000%.
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shkreli is separately facing federal charges of securities fraud. he managed to steal the show while not answering any questions. >> i intend to follow the advice of my counsel, not yours are i invoke my fifth amendment privilege against self-incrimination and decline to answer your question. on advice of counsel i invoke my fifth amendment privilege. >> reporter: even if sir relevantly was silent his face wasn't. >> like a ponzi scheme, it appears that turing, made revenues to research and entify the next drug it will acquire and then impose similarly massive price increases on future victims. it's not funny, mr. sir relevantly. people are dying. >> reporter: his attorney acontributed the responses to nerves. >> it's extraordinarily unfair that turing has been singled out for the type of unfair publicity
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that they have received and when all of the facts about turing are ultimately disclosed i think everyone will recognize that mr. sir relevantly is not the villain, at the end of this torrey he's a hero. >> reporter: saying he's confident they will be cleared of all criminal charges. his client took to twitter minutes after leaving the hearing to fire shots back at congress saying, hard to accept these imbeciles represent the people in our government. he's due back in court on his federal charges may 3rd. the hearing didn't let all others off the hook. valiant intern ceo howard shiller was dressed down about price increases his company has taken. he said they've made changes to that strategy and continue to refew it. fda was questioned about how it can speed up its reeventually process for sxwrener innic drugs with the hope more competition could help bring down drug prices. in an election year this issue is expected to stay front and
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center. experts say mit gives congress easy target. >> how much power does congress really have when it comes to lowering the cost of prescription drugs? joining us now to answer this question and others is graig garthwife, assistant professor of strategy at northwestern university kellogg school of management where he specializes in health care. nice to have you with us tonight. >> thank you. >> i guess that is the question, does congress have much power or any power to control or to lower drug prices? >> congress has some power. it's important we split these drug price increases into two broad groups. the sort of turing and valiant pharmaceuticals, people who are buying generic drugs and raising the price dramatically and taking advantage of a market imperfection. for those congress can commit to allowing the fda to reimport drugs from england if you have a large price increase, they can speed the entry of new generics
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through the fda, fast track authority, let new drugs come onto market, solve that. the other side of the market we talk about high drug prices are innovative new drugs like the cure for hepatitis c or the oncology products we've seen. we have to question whether we think the high drug prices or bad or if we're giving the proper incentives for the development of new and innovative products. >> i guess most meshes would say we want innovation, we think that innovators deserve to be compensated for their breakthroughs as in the case of gill yad and the help c thing. in this case i think what rankles is mr. sir relative's company went out and brought a drug that had -- an old drug, dating back to the 1950s, that had very little competition, and saw that. and quote took advantage of, as yous say, a marketplace imperfection. have i got that sort of right? >> that's exactly the difference. it's an old drug, a critical drug for people who need it, but
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it has no patent protection. the only reason we don't see more people entering is there are only about 10,000 prescriptions a year. it's not really profitable for a second company to come in. given that fact, congress could do things like allow the fda to say that a very large generic price increase is equivalent to a drug shortage and in drug shortage we can reimport drugs from western europe -- >> at a lower price. >> that would bring the price down. >> the same drugs? bring it over from britain at a lower price because they get it at a lower price? >> exactly. to be clear i'm talking about that only for sort of these older generic drugs with small patient populations. >> you say congress can change the patent length in terms of how long a company can hold a patent on a particular drug if they are the sole supplier of it. explain that a little bit more for me. >> what we're saying is for the innovative drugs like the hour for hepatitis c, rather than trying to implement price controls or trying to determine
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what's the appropriate price, congress does want to decrease the amount of profit pharmaceutical companies are making, they could look at other tools they have like the patent length. that's well within their control. maybe we don't want to have as long of a patent length as we used to have, or as long of a patent length for drugs as we do for software, other areas. that's a fine thing to look at but we have to be very clear if we do that, if we lower profits for these drugs, it decreases the incentives in the margins to develop new ones. we all want new oncology products looks what jimmy carter took to reduce his carry, hepatitis c drugs, these are conversations we want, how much do we want to sacrifice cost for innovative? that's a productive but politically popular conversation. >>py need a quick answer, how much would allowing medicare to negotiate the prices of drugs retard the expansion or rise in drug pricing? >> it wouldn't do much. we require medicare cover basically every drug. because of that, you can
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negotiate all you want on price as a group, but the pharmaceutical firms know you have to cover their drug in the end. if you want to use medicare to lower prices what you have to do is allow them to exclude drugs, that's going to mean some seniors won't get the drugs that they want. >> on that note, craig, thank you so much for your perspective and shedding light on what is a top of mind topic right now. craig garthwife, northwestern university's kellogg school of management. relative calm on wall street though the session was choppy, stock swings were noticeable but weren't of the magnitude that investors have become accustomed to lately. by the close the dow industrials roles 1779 points to 16,416. had been up as much as 150 at session highs after opening lightly lower. nasdaq gained 5, the s&p up 3. oil prices settled down about 2%. conoco philips did something many oil companies do not want
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to do, slashed its dividend by a lot. in the face of tumbling oil prices shares fell more than 8% as the energy firm also reported a loss for the quarter. now the question is which companies might be next? morgan brennan takes a look. >> conoco philips slashed its quarterly give vend by two-thirds. yeo ryan lance called a "gut-wrenching decision." the largest u.s. independent producer conoco is the first major oil company to cult. while the yield had soared to 8% the move came faster than many on the street anticipated. the reason stocks sank in today's traiting. at a time when oil majors like exxonmobil, chevron, bp, and royal dutch shell continued to defend dividends conoco's move could be seen as harbinger of more cuts to come if crude stays this low and credit markets tighten. it comes down to the cash pile, whether a company can pay shareholders bout borrowing to do so. >> it goes to the point, cash is king in this market. anything you can do to conserve
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cash and ride this out, the better position you're going to be. >> conoco had dramatically cut capital spending, something it did again today as well. but with crude at $30 a barrel, management felt that wasn't enough to address the shortfall. some analysts worry royal dutch shell could be next, despite company comments to the contrary. thank toth a portfolio of pricey offshore projects and chevron's promise to maintain a payout through 2017 has been questioned as well. though its oregon natural gas project should help cash flow next year. but throughout the energy sector this has become an issue as equity prices have dropped dividend yields have jumped. averaging 4% after recently hitting their highest level since at least 2000. according to fact set, some names that could be ripe for reset, williams companies which yield a staggering 14%. one oak which yields 10%. murk oil which pays out 7%. while for now at least most oil majors may be defending their dividends, analysts warn energy
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stocks with yields over 6% might best be approached with caution. for nightly business report, i'm morgan brennan. the white house will propose a $10 per barrel oil fee in its 2017 budget. the money collected if ever collected will be used to invest in clean transportation projects and if approved would be phased in over five years. the fee would be paid for by oil companies. many say the likelihood of it passing a republican-controlled congress is slim to none. after a batch of soft economic data we got more today, including the job market. the number of americans filing applications for unemployment benefits rose. and as hampton pearson reports there's growing concern among some economists that the labor market is losing momentum. >> reporter: one day before the labor department's january jobs report, more signs of a possible economic slowdown. planned job cuts surged by 218%
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last month according to a leading outplacement firm. among the 75,000 announced layoffs more than 22,000 were in retail. where walmart has announced plans to close 269 stores nationwide. and another 20,000 energy sector jobs will be lost due to slumping oil prices. >> these are the highest cuts since last summer and they're coming primarily to two big industries, our retail which we often see after the holiday selling season, and then energy. >> first-time clients for unemployment increased by 8,000 last week, suggesting some loss of labor market momentum. following reports earlier this week that the overall economy grew just .7% in the fourth quarter. leading economists still expect payrolls to increase by 190,000 in january with the unemployment rate holding steady at 5%. however, it's far below the
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december surge which saw 292,000 new hires. at the same time, brand-new data show worker productivity declining. and labor costs for employers are increasing, creating some tough choices for businesses. >> we have a labor cost problem. and that labor cost problem's for american businesses. and now american business is responding in one of two ways. try and raise prices which gives the fed a problem if they succeed. or profits get squeezed. >> market watchers may look to tomorrow's jobs data as a possible speed bump to slow down future fed rate hikes. while most workers will be looking for signs of higher wages. for "nightly business report," i'm hampton pearson in washington. weak data have increased the talk of a possible economic recession and some are looking to the stock market for signs that one may be coming. but is the market a good predictor? steve leishman takes a look. >> back in 1966 the eminent
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economist paul sanderson famo famously quipped the stock market had predicted nine of the last five recessions. we went back to see, is that accurate? how good is the stock market at predicting recessions? we looked at every bear market, using information from the financial research firm bespoke, every bear market in the post-war period, and there have been 13 of them. and they're denoted by the bear claws right there. you'll see the second, why some of them are red and some of them are white, we look at the next screen what you see is these are the recessions. each one of the red claws here show you that they did predict recessions. what's the record? sanderson, 9 of 5, that's like shooting 55% from the field. this 13 of 7 is 53%. so that quip turns out to be pretty good. is there information in there that investors can use? and there actually is. we did a little bit more work on this. what you see is that the average length of a bear market is 362 days. no recession, in other words,
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those bear markets that don't predict recessions, they're a little bit longer at 192 days. the recessions, bear markets that do predict recessions, are longer, 508 days. raising the question as to whether or not the bear markets themselves have a very negative impact and have caused their recessions. and you get a lead time of 253 days. so the lesson from all this is, don't panic. but beware the bear. for "nightly business report," i'm steve leishman. still ahead, what are nervous investors to do? advice from investment professionals to keep your money on track.
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increased volatility, slowing public growth, plunging crude. it's a topic of conversation among the hundreds of investment advisers gathered in orlando, florida. mike santoli is talking to some of the men and women who manage your money. >> the market's wicked start to 2015 has put a bit of a scale into retail investors and volatility is the talk of td ameritrade's investor conference in orlando. according to an adviser survey unveil the here 29% say investors are less willing to take risks than they were three months ago, forcing advisers to soothe raw nerves. anxiety is especially high among investors closer to retirement. >> my clients tend to be closer to my age. so they've been through 20 to 2002, they've been through 2008. so i think their concern is, oh,
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i know what this feels like. are we getting ready to have another 2008? >> advisers too are cautious. more are skeptical of the u.s. economy's strength than at any time since 2009. but it's not just the markets and the economy that have main street investors unnerved. >> get through the fall election then once the president is elected the markets like the certainty. we'll see the markets go one direction or the other and hopefully it will reduce some of the volatility. >> advisers are in the business of helping their clients stick to a long-term plan. in a way rough markets are when they can prove their value to investors who might be tempted by less expensive so-called robo advisers or automated investment services. >> 2008-09 prepared investors and advisers for what we're seeing today. 2008 some advisers got caught flat-footed and you saw a lot of communications coming in from clients, where now advisers have the infrastructure built and they recognize, we need to be more proactive with our clients to help talk them through these
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types of situations. because when the markets get scary, many investors run the risk of losing sight of their long-term goals. for "nightly business report," mike santoli in orlando. shares tumble in after-hours trading. the companies set current quarter profit and revenue will come in below wall street estimates. the professional social network cited weakness in some businesses outside of north america. that warning comes despite strong results in its most recent quarter. shares dropped sharply in after-hours trading as you can see there. but in the regular session the stock was fractionally higher to 192.28. clothing retailer ralph lauren posted a decline in sales for its latest quarter missing expectations. unseasonably warm winter, stronger dollar, and fewer north american tourists hurt its holiday sales. the retailer cut its sales outlook for the current year. that news sent ralph lauren shares down 22% to 89.95. and a similar story at the
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retailer kohl's which saw shares fall after cutting its earnings forecast for 2015. the retailer cited poor sales during the holiday season and sluggish demand for winter products. the company is expected to report full fourth quarter results later this month. kohl shares fell nearly 19% to 41.51. viacom named felipe doman as the company's next executive chairman replacing redstone. the decision came during a board meeting today and follows news yesterday mr. redstone had resigned from the same post at cbs. shares gained more than 1% to 45.34. hasbro and mattel, two of the biggest toy companies, have reportedly held talks about merging. first reported by bloomberg, hasbro approached mattel late last year and the companies have held talks off and off since. no comment from either company. mattel shares up over 1% to 32.29. hasbro also higher by 1% to 75.90. dunkin' donuts reported
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better than expected earnings despite declines in same-store sales and traffic at its u.s. locations. the company citing increased competition as the reason for the decline there. dunkin' donuts shares soared 6% to 43.36. iran's economic isolation may have ended weeks ago when the nuclear deal was implemented and sanctions were plifted. the country hopes to see $50 billion in foreign investment. as kayla tallshy reports the challenge is getting it there. >> reporter: iran is open for business. inking billions in deals in france and italy following sanctions relief for infrastructure. oil and gas pipelines and commercial aircraft. the problem, finding a way to get that money from the companies to iran. >> it's the new gold rush. but all businesses will have to be financed somehow and that's going to have to involve banks. >> the deal reached over iran's nuclear program, lifted sanctions on banks outside the united states.
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but harsh rules still apply to u.s. financial institutions. any foreign bank that does business in iran must ensure no part of that transaction touches or gets routed through the account of a u.s. company or citizen for years. there are clear reasons the white house is still cautious of this activity. >> some of it will end up in the hands of the irgc or other entities, which of which are labeled terrorist. to some degree -- i'm not going to sit here and tell you that every component of that can be prevented. >> the banks are also concerned for their reputations. >> for banks and financial institutions which have been targeted by very significant penalty actions in recent years, there's going to be i think a very cautious incremental approach. >> those penalties have topped $15 billion in the last decade. mostly from the department of justice. enforcing u.s. rules on foreign banks operating here. former attorney general eric
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holder warned them of that fact in 2014 while announcing criminal money laundering charges against french bank bnc. >> banks thinking about conducting business in violation of united states sanctions should think twice before they do so, because the justice department will not look the other way. >> a recent treasury memo outlined exactly what non-u.s. persons and companies can do now. they can invest in iran's natural resources and do business with iranian nationals not blacklisted by the u.s. government. it also said iran can issue sovereign debt and credit cards for its citizens. mastercard ceo told investors that may tyke five to ten years. >> there has to be a whole change in the sanctions regime that allows companies like us and our competitors and banks to operate freely in iran. that has yet to be seen. >> some exceptions have been made for trading carpets, pistachios, medical products and humanitarian aid. the rest of the u.s. economic
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sanctions are not expected to be relieved until 2023. in the meantime, iran may be open for business, but many businesses have yet to figure out whether they can be open to iran. for "nightly business report," i'm kayla tashshi in new york. why this weekend is also game time for one silicon valley firm. just days from the big game. the city of san francisco is playing defense. working to prevent a logistical transportation nightmare for fans in the city trying to get to the stadium miles away. but as jane wells reports, one company has a solution.
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>> reporter: the super bowl has come to san francisco. and not everyone likes it. protests, construction, security. traffic is bad on a good day here. and this week around super bowl city, at times it's been a nightmare. google is trying to help, letting the host committee use its employee shuttles for game day fans. uber has taken the lead on the super bowl of logistics. >> there's going to be huge demand, that's for sure. >> reporter: long-time uber driver ben amadad hopes to profit from that sunday. there are over 40,000 uber drivers in the bay area. for the first time the company has become an official sponsor of the super bowl, paying the host committee an undisclosed amount somewhere south of a half million dollars. >> this is our hometown. the super bowl is here. six years ago we didn't exist, right? >> uber's amy friedlander ubered me to a parking lot a 15-minute
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walk from levi's stadium. this is what the company gets by being an official part of the game. tell me what we get. >> we have a lot. today this looks like a parking lot. for game day we're going to turn it into the uber experience. and so that means a few things. that means we will have hundreds of cars that will be here, ready and waiting, drivers that will be ready and waiting for people. >> if i were a lift driver how close could i get to pick someone up? >> a lot farther. >> i think it's going to be extremely important to have a pickup location. >> reporter: amadad said without an official parking lot, security around the stadium might force fans to walk at least a half hour to find him. but this being san francisco nothing corporate ever goes down well. some uber drivers are protesting fare cuts and they're report ee vowing to shut down the super bowl on sunday, ironically at the time when they can make more money when fares can rise due to demand. while some uber drivers may be
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unhappy, uber the company has tried to make riders happy, delivering puppies as a tie-in to the puppy bowl. sunday will be the test as this san francisco startup turned juggernaut finds out if it's worth it to play ball with the super bowl. jane wells, san francisco. >> i hope it's a good game. >> i hope it's a good game. i think it may be, we shall see. >> i'm not going to ask you who you're rooting for. >> tomorrow. >> for "nightly business report," i'm sue hererra thank forth joining us. >> i'm tyler mathisen. have a great evening, everybody. see you here tom
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man: it's like holy mother of comfort food.ion. woman: throw it down. it's noodle crack. patel: you have to be ready for the heart attack on a platter. crowell: okay, i'm the bacon guy. man: oh, i just did a jig every time i dipped into it. man #2: it just completely blew my mind. woman: it felt like i had a mouthful of raw vegetables and dry dough. sbrocco: oh, please. i want the dessert first! [ laughs ] i told him he had to wait.

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