Flynn v. Holder
The Powerful Bull Market
You know how it is when you’re walking through a mall and people try to get you to sample something, or register for a promotion? Usually, I give them a quick “No thanks.” and walk on by.
You probably do, too.
But a few weeks ago, I was walking through a Boston mall, engaged in conversation with my wife, when a cheerful young woman with a clipboard appeared—seemingly out of nowhere—and asked, “Would you like to register as a bone marrow donor?”
My mind whirled.
I was no more expecting to hear that question that day than I was expecting penguins to march on Washington.
Yet the answer that came out of my mouth surprisingly easily was, “OK.”
Now, I have zero first-hand experience with bone marrow. I’ve never known anyone who’s needed it, and I don’t know anyone who’s donated any.
But the reasoning behind my split-second decision at the time was this: Bone marrow matches are special, in that it’s often very hard to find a match, so if I can be the person who actually saves another person’s life, that would be worth doing.
So I spent a few minutes filling out paperwork. I gave up some skin cells by rubbing two cotton swabs inside my left cheek and two inside my right cheek.
And for my trouble, I got a sweatshirt and a tote bag.
And then … once we were away, my wife and I had a “discussion,” which included the phrases “What did you do that for? In this book I just finished, they said that half the people who die in hospitals die from infections they get there.”
My response included the simple reasoning I mentioned above.
I also said, “The statistic that matters is not how people in hospitals die but what percentage of bone marrow donors die as a result of donation.”
And I capped it off with the reassuring, “It’s so hard to find a match, they’ll probably never call anyway.”
So we moved on to other matters, and the words “bone marrow” haven’t been mentioned since.
But I’ve been doing some research, and what I’ve learned is very interesting, especially from an economic point of view.
About 1,000 patients die every year from blood diseases like leukemia because they cannot get bone marrow for transplant. One reason they die is that it’s prohibitively expensive to store bone marrow for long periods of time, thus donors must be found who are ready to give when the marrow is needed.
The other reason is that matching marrow is much more difficult than matching blood. The chances are one in a million that two people of the same race are a bone marrow match. As a result, the average Caucasian finds a donor 75% of the time, but for African-Americans the number is less than 25% … and less than 18% in less than six months.
The entire process of locating and testing a potential bone marrow donor typically takes six to eight weeks.
But once a match is found, the actual donation process is pretty simple, and while it was quite painful years ago, it’s much less so now. In fact, it’s often handled as an outpatient procedure, and 98.5% of donors feel completely recovered within a few weeks.
Fewer than 2% of donors experience complications due to anesthesia or bone damage. And as far as I can discover, none of them has died as a result. (Happy, sweetheart?)
And the number of successful transplants grows, year by year, as the number of registered donors grows. The biggest registry, which runs the “Be The Match” program, is the National Marrow Donor Program, which has facilitated more than 40,000 transplants since operations began in 1987.
But there are many smaller registries in the U.S., and there are big registries in most developed countries as well. They share information, to some degree, but because family members are a person’s best chance for a match, and people of similar race and heritage are the next best, matches tend to be found closer to home.
Yet there remains a huge imbalance between supply and demand … which is why roughly 1,000 people die each year waiting for a match.
And I think that’s too many.
So let’s take a look at the National Marrow Donor Program (NMDP).
Its press releases say the “nonprofit organization manages the Be The Match Registry; facilitates transplants worldwide; conducts research; and provides education and support to patients, donors and health care professionals. The U.S. government has entrusted [my emphasis] the NMDP to operate the National Program and provide a single point of access to marrow donors.”
Entrusted. That means it gets Federal funding, through the Health Resources and Services Administration, to the tune of $23 million annually … and rising if a new bill passes. It also gets some money from the U.S. Navy (yes, the Navy), because the Navy had one of the very first bone marrow registries.
The program also receives income from donations, from fees charged to donors for tissue typing (roughly $50 to $75 … my insurance company will pay for mine), from fees charged for in-depth database searches (initial searches are free, full searches can cost thousands of dollars), and from the fees charged to the transplanting hospital once a match is found and the stem cells have been transferred. This charge is about $21,000, which is higher than the fees charged by other registries in the U.S. and abroad.
You might ask why our government is subsidizing the highest-cost provider.
One reason is that as the hub of the network of registries, it does more, so its costs are higher. Another might be that, because getting potential donors to register is difficult, NMDP pays affiliated donor centers and recruitment groups for every new donor they sign up.
By the way, the final cost to the patient or his/her insurance company for a completed transplant can range from $100,000 to $250,000. But it’s not that price tag that’s responsible for 1,000 people dying annually; it’s the lack of sufficient donors.
Now, as a student of markets, I know that when trade is unimpeded, buyers and sellers quickly find agreement at rational prices … meaning prices that are attractive to both. More importantly for this case, when trade is unimpeded, supply almost always meets demand. The exceptions are when supply is truly limited, like Super Bowl seats.
But trade in blood marrow is not free and unimpeded, for the simple reason that donors cannot be paid for their marrow.
And what’s the reasoning behind this?
It starts with kidneys and similar organs. The sale of all these organs was banned with the passage of the National Organ Transplant Act (NOTA) in 1984. Most people—though not all—agree that selling kidneys, lungs, eyes, etc., is to be discouraged.
On the other hand, the sale of blood, sperm and ova is perfectly legal. The difference is these viscous products are renewable. The organs above are not.
But when the law was being written, someone decided that bone marrow—which in fact has the consistency of jelly—was an organ, rather than a renewable product. In hindsight, that was wrong. Blood marrow renews just as quickly as ova.
But NMDP has grown quite comfortable with the current state of affairs—after all, it’s nice being top dog—and it doesn’t want to change.
So a lawsuit—Flynn v. Holder—was filed a year ago by groups—including www.moremarrowdonors.org and the Institute of Justice—that want to try to increase the number of registered potential donors by starting a pilot program that would pay a person the equivalent of $3,000—as a scholarship or housing allowance or gift to the charity of their choice)—but only if that person was found to be a suitable match and went through with the process of giving marrow.
As it is today, 47% of the people in this country who are matched as bone marrow donors eventually decide not to donate. And the groups behind the suit believe compensation would go a long way toward changing that, boosting the number of real donors and reducing the number of people who die waiting for a donor.
The NMDP, on the other hand—ignoring the lessons learned from the healthy markets currently serving the need for blood, sperm and ova—argues that commercialization of the market might taint the process—encourage people to withhold medical information—and thus compromise patient and donor safety.
Now 13 months old, the suit is making its way through our speedy justice system, and it will be interesting to see if reason eventually trumps power.
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As for the market, the current correction is likely to run its course by the middle of December. And I fully expect the market to hit new highs in January.
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Yours in pursuit of wisdom and wealth,
Cabot Wealth Advisory