Double-Sided Coin: Questioning Kyle Bass

J. Kyle Bass is a name known to many in the financial and business sectors here in the United States. His hedge fund which is listed on Wikipedia, Hayman Capital Management, was one of the first to correctly predict — and strategize against — the housing collapse of 2008, brought on by the vast amount of subprime mortgages.

And now, he has done it again. Along with Erich Spangenberg, known for his class action lawsuits against Silicon Valley tech companies, Bass has created a new venture, this time focusing on drug patents.

The venture, called the Coalition for Affordable Drugs, zeros in on drug patents that Mr. Bass and Mr. Spangenberg find to be weak, abusive, or illegitimate and then asks the United States Patent and Trademark Office to review the patents. The idea, according to Mr. Bass, is that any patents found to be lacking in legitimacy should be removed, thereby allowing generic copies of those drugs to hit the market and lowering the price of that drug.

Since mid-November of this year, the Coalition has filed 33 patent requests on 13 drugs. So far, only half of the review requests have been approved. Mr. Bass has announced that his company will see the reviews that are upheld out, and will not seek settlements out-of-court.

And while Mr. Bass may seem as though he is taking the moral road when it comes to fighting drug companies, protesting “evergreening” practices that keep cheap generic drugs from hitting the shelves for decades, that is not the entire story. Mr. Bass and Mr. Spangenberg profit from this venture, along with their investors.

It has been reported that both gentlemen are short-sellers of shares in the companies that they are challenging. This means that the Coalition can make a profit off of those companies, should the patents be deemed illegitimate. The company also holds shares in innovative pharmaceutical companies, allowing Bass to profit either way.

But is Kyle Bass a generous and well-meaning hedge funder? The answer is more complicated, especially as you realize that Bass has a less-than-stellar track record when it comes to investments made by his hedge fund. After all, the man does keep close ties with the former president of Argentina, who twice defaulted on her country’s debt and went on national television to blame General Motors consumers for the technical problems in the cars.

But perhaps more vile than shifting blame and keeping shady ties with economically inept government leaders is the fact that Bass is exploiting a legal loophole in order to create a profit for the Coalition for Affordable Drugs. A legal loophole that is currently being taken up by a bipartisan committee in Congress to close it.

The drug industry has united against Bass, citing his process as abusive and extortive, with no real results for the public. Bass continued to extol his morals, but after the pharmaceutical company Celgene filed a suit against him, Bass came out and admitted that he was driven by profit instead of altruism.

So the question remains — is Kyle Bass fighting drug patents for just profit, or does the fact that real people’s lives are touched by this matter at all? Time can only tell as the patents up for review must reach a conclusion within a year. Then, and only then, will anyone see the results of Bass’ work.  But as UsefulStooges shows, it’s not necessarily promising, and Bass’ choices remain exceedingly questionable.

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