Transcript: Nightly Business Report- December 1, 2015

NBR-ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: December to remember? The month that’s usually kind to investors got off to a strong start.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Hitting the gas. What the U.S. auto industry did today that it’s never done before.

MATHISEN: And out of reach. Why some patients have a difficult time getting access to certain drugs, just when this he need them the most.

All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, December 1st.

HERERA: Good evening, everyone. And welcome.

December is here, and the calendar is on your side. The month that’s historically good to stock investors got off to a strong start, shaking off weak manufacturing data and focusing instead on strong sales in the auto industry. As investors hope to stretch the market’s win streak to three straight months.

Today, the major averages all gained about 1 percent. The Dow Jones industrial average rose 168 points to 17,888. The NASDAQ added 47 and the S&P 500 was up 22 to close above the psychologically important 2,100 level.

Bob Pisani has more on the sectors that tend to do well in the final month of the year.


BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Historically, December is the best month for the S&P 500. In the last 25 years, the S&P 500 has been up 80 percent of the time in December for an average gain of nearly 2 percent. That’s according to data from Kensho.

What’s less commonly known is that the sector performance is a little bit uneven. So, according to Kensho again, the best performing sector in December for the last 25 years has been industrials, up 84 percent of the time for an average gain of almost 3 percent. That’s a surprise.

Another surprise, utilities was the second biggest gainer. Now, oddly, the sector that gets the biggest publicity in December, and that’s technology stocks, they’re the laggards. They’re only up about half the time.

Now, why is that? The data doesn’t tell us, but it’s possible investors are still unsure about the capital spending plans of companies and since technology is where a lot of the capital spending occurs, investors just fear the worst.

For NIGHTLY BUSINESS REPORT, I’m Bob Pisani at the New York Stock Exchange.


MATHISEN: More now on those hot November auto sales. The results show the American consumer is not slowing down spending on new cars, trucks and SUVs. In fact, the annualized is sales pace climbed above 18 million vehicles for the third straight month, something that has never happened before in the U.S.

As Phil LeBeau reports, it was a very good month for every automaker with one notable exception.


PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Year end promotions offering slightly greater discounts kept auto sales moving at a near record pace last month. Toyota (NYSE:TM) led the largest automakers in terms of sales gains. But all of them had a solid November thanks to strong demand for bigger, more expensive pickups and SUVs. Jeep sales surged 20 percent, while Ford truck sales were up almost as much.

JOE HINRICHS, FORD: We’re seeing strong demand for the F-Series truck. We had a strong month in November of sales again. And we’re predicting increased sales over the next couple years.

LEBEAU: In fact, Ford is hiring another 2,000 workers to expand production of its F-Series super duty pickups.

Overall, low interest rates and high consumer confidence are convincing many that this is the time to buy. And when they do, they’re opting for trucks and SUVs. Because gas prices are so low, fuel efficiency is not a priority.

MARK WINFIELD: We’ve got momentum in the last three months, we believe, because people are starting to accept that gas prices are going to be lower for longer. And people are then taking that into their spending habits, at least in cars.

LEBEAU: For Volkswagen, November was rough. Sales plunged 24 percent, largely because dealers could not sell many diesel models that failed to meet pollution standards.

It’s unclear when Volkswagen will have a fix for its diesel engines but until that happens, the German auto brand will likely struggle in the U.S. even as Americans buy a record number of new vehicles.



HERERA: While the auto sector seems to be firing on all cylinders, the overall manufacturing sector is not, shrinking in November for the first time in three years. The Institute for Supply Management registered its lowest reading since 2009 and the reasons for that decline are pretty familiar — weakness overseas, low oil prices and the strong dollar.

MATHISEN: Chief executives aren’t feeling quite so positive about the economies these days. According to a survey of the Business Roundtable, CEOs’ economic expectations hit the lowest level in three years. This is the third straight decline for that index and as a group, the CEOs have lowered their forecast for sales and capital spending over the next six months.

HERERA: And that decline in business spending was documented in a “Wall Street Journal” article today. A number of recent reports show that companies are not investing as much in things like machines and computers and new buildings. And there’s some concern that the weak investment could hold back gains in the economy.

Jack McIntyre is the portfolio manager with Brandywine Global and he joins us now tonight.

Jack, welcome. Nice to have you here.


HERERA: Are you concerned about that, as well, the lack of reinvestment in machines and technology and the like?

MCINTYRE: I am because those are the things that add to productivity. And our economy, you know, the productivity component’s been missing in action. So this is — if we can get higher wages but if you get higher productivity, then it doesn’t flow through to inflation. If you get higher wages, low productivity, then you actually start to see some inflation pressures and that’s a little bit of a concern.

MATHISEN: Can you blame companies for not spending on capital equipment?


MATHISEN: No. Because they just don’t see the growth there, right?

MCINTYRE: Yes, I agree. If I were a CEO, which I’m not, if I was, I’d be worried, too. I think the uncertainty over growth. So, globally, since the global financial crisis in aggregate, we’ve had about $23 trillion, that’s with a “T”, of monetary fiscal stimulus but we are still in a growth challenged world. Washington is certainly over-regulating the corporate sector. We’re going into this presidential election cycle. We’ve got kind of an anti-business mentality.

So, there’s a list of reasons why the CEOs should continue to be uncertain. It is going to have a little bit of a negative drag on the economy.

HERERA: Has it affected the way that you invest, Jack, or look at the bonds and high yield areas that you take a look at every day?

MCINTYRE: Well, so a couple of things. One is that we know that it’s going to have an adverse effect I think on sort of multinationals, on technology. IBM, Honeywell, GE, Caterpillar (NYSE:CAT). I think the strong dollar which adds to that uncertainty is going to have a little bit more of a negative impact on the economy than just sort of the uncertainty that CEOs have. But it’s also I think it is going to slow the economy.

We are — we still own U.S. treasuries. We just see sort of disinflationary pressures, still kind of sort of structural in nature.

MATHISEN: Very quickly, you’re a CEO and got choose between investing in a new plant or bay paying a nice dividend or buying back shares. What do you do?

MCINTYRE: Yes. Well, I wish I had the confidence to invest in a new plant but I’d probably do the dividend buybacks, M&A, things a little bit more shorter term in nature.

HERERA: All right, Jack. On that note, thanks for joining us tonight. Jack McIntyre with Brandywine Global.

MCINTYRE: My pleasure.

MATHISEN: And still ahead, why some drugs for sick patients are out of reach to them when the — at the time they are needed the most.


MATHISEN: House and Senate negotiators can agree to a $305 billion five-year highway bill. The legislation funds roads, mass transit programs and it reauthorizes the controversial Export/Import Bank. The bill would be financed in part by surplus Federal Reserve funds.

HERERA: Also in Washington, a Senate investigation says drugmaker Gilead put profits before patients when it priced treatment for hepatitis C drugs at $1,000 per pill. A bipartisan report said the company’s own analysis showed making Sovaldi less expensive would allow more patients to be treated.


SEN. RON WYDEN (D), OREGON: They were fully aware that as the prices kicked up, the number of Americans treated and cured would go down. Yet, based on our investigation, the company chose to put revenue ahead of affordability, of accessibility for millions of patients.


HERERA: The report also showed that Medicaid programs spent more than $1 billion before rebates on Sovaldi last year to treat fewer than 2.5 percent of enrollees with the disease. Gilead now has a more expensive next generation pill called Harvoni and says it disagrees with the committee’s conclusions.

MATHISEN: The nation’s largest pharmacy benefits manager Express (NYSE:EXPR) Scripts is partnering with a drug company to make a low price alternative to a treatment that costs $750 a pill. The new drug from a so-called compounding firm called Imprimis will be available to some patients for less than a dollar a pill. The medicine contains the active ingredients in Daraprim which gained notoriety when Turing Pharmaceuticals raised its price from $13.50 a pill to $750. The drug treats a rare parasitic disease.

HERERA: Express (NYSE:EXPR) Scripts, CVS (NYSE:CVS)/Caremark and other benefit managers try to keep drug costs down. To do that, they sometimes have to limit the drugs on their approved lists to balance what they refer to as both access and affordability.

But as Bertha Coombs reports, that can mean difficult choices for patients.


BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Annemarie Ciccarella needs a new health plan. The Long Island breast cancer survivor can’t find one with her doctor in network but she’s accepted that.

ANNEMARIE CICCARELLA, BREAST CANCER SURVIVOR: I’ll give up my oncologist and find someone to follow me and as heartbreaking as that is, I’m going to do it.

COOMBS: She doesn’t want to change medications after a bad experience with a generic, but can’t find a plan that covers brand drug Femara, which costs about $700 a month.

CICCARELLA: The goal of that drug is to keep the cancer at bay. It’s to suppress the estrogen. We know my cancer was fed by estrogen. So I don’t want to play games with that drug.

COOMBS: Close to one-third of mid-tier ACA exchange plans limit coverage of cancer and HIV drugs according to an Avalere health study requiring patients pay up to 40 percent of the cost of the drugs out of pocket. Most employer plans aren’t as restrictive, but like narrow doctor networks, brand drug limits are becoming more common.

DR. STEVE MILLER, EXPRESS SCRIPTS: If you can actually narrow the networks, you can give bigger discounts. And so, we’re constantly balancing access and affordable.

COOMBS: CVS (NYSE:CVS) and Express (NYSE:EXPR) Scripps which negotiate prices for large employees increasingly use their approved drug list or formularies to demand discounts from specialty drugmakers.

MILLER: If we can’t get to the price we need, we’re willing to go exclusive with one company or the other just like we would did with hepatitis.

COOMBS: Express (NYSE:EXPR) Scripts excluded Gilead’s $84,000 drug Sovaldi to protest its price and now only covers the new hepatitis drug from a rival drugmaker which provided a big discount. That’s worrisome to Aon’s John Malley.

JOHN MALLEY, AON HEALTH: When they start wielding the power and saying you know, we’re representing this particular product and not representing any of these other products, before really all the data is in, I think it’s a little bit premature.

COOMBS: Malley says most employers stick to Express (NYSE:EXPR) Scripts and CVS’s formularies. He worries their push for discounts is driving too much of the process.

MALLEY: I think that could limit access to the right drug for the right person.

COOMBS: The drug benefit firms say they put patients and drug effectiveness first but price matters. Annemarie Ciccarella thinks they need patients at the negotiating table along with pharma and pairs.

CICCARELLA: Let’s lock the door, throw away the key and until somebody comes up with some kind of reasonable answer, nobody leaves the room.

COOMBS: But first, she needs to find a health plan.



MATHISEN: Sally Pipes joins us now to talk more about pharmacy benefit managers and the issues affecting pricing of specialty drugs in the U.S. She’s the president and CEO of the Pacific Research Institute.

Welcome, Ms. Pipes. Good to have you with us.

I want to start at a very basic level to make it real clear. And the question is this — what do PBMs do, who pays them and how do they make money? What are their incentives?

SALLY PIPES, PACIFIC RESEARCH INSTITUTE: Well, PBMs are administrators for drug benefit plans. Their main clients, of course, are insurance plans and those companies that are self-insured.

But they also pay out claims to the people that they — the companies that they cover. They develop formularies which are the types of drugs that are available to people who need to use drugs. And they negotiate discounted prices with drug companies for to try and get lower prices. So, they cover about 210 million people in America and there are three major players in the PBM market.

HERERA: Is that how they got that the power? Because it wasn’t always this way. But it seems as though there’s been so much concentration merging, you know, the smaller players kind of squeezed out, that you have very few players with a lot of power.

PIPES: Right. Exactly. There are three, Express (NYSE:EXPR) Scripts, of course, is the largest. And their main goal and that have CVS (NYSE:CVS)/Caremark, they want to be the preferred providers for all of these plans. You know, with Obamacare, now, you know, the plans and the formularies for drugs are very important part of the plans and what we’re finding is under Obamacare exchange plans, a lot of the newer and more innovative drugs are actually not available. And that puts people at risk who need the newest and latest drugs.

MATHISEN: So let’s say there’s an individual such as in the piece we just saw whose been prescribed a branded drug that is not on the formulary of the pharmacy benefit manager that my company happens to use. What do I do then if it’s not on there? Do I just pony up and say, OK, I’ll pay the full price? Do I go for a generic that is on the formulary but may not work for me? Do I fight them? What do I do?

PIPES: Right. Well, I guess the first thing would be to try and fight and see if the drug your doctor prescribed could get on the formulary. But for most part, it means that these people who have been prescribed a brand name drug that’s not available, they’re going to have to, as you say, pony up for the price. In many cases, you know, middle income and lower income people can’t afford to do that. So, you know, it’s a real quandary.

But you have so much power with the PBMs now and they’ve really been negotiating these deep discounts. If you take a drug like Sovaldi from Gilead, or J&J drugs, I mean, the Express (NYSE:EXPR) Scripts developed a really deep discount with Abbvie’s Viekira. And so the other two companies which might have better drugs are not available because they’re not on the formularies. It hurts the patient and the consumer.

MATHISEN: All right. Ms. Pipes, thank you very much. This is an ongoing story. I’m sure we’ll visit you again on it. Sally Pipes with the Pacific Research Institute.

PIPES: Thank you.

HERERA: A hedge fund warning sends shares of Terraform Power surging. And that is where we begin tonight’s “Market Focus”.

Hedge fund manager David Tepper sent out a public letter to Terraform Power’s board, accusing its parent company, which is Sun Edison, of pushing low grade projects on to Terra. Its shares rose on Tepper’s disclosure that he has a position in the company. The stock was up 32 percent to $9.15.

Schlumberger (NYSE:SLB) revealing another round of job cuts. That adds to the 20,000 already announce this year as oil prices continued to plunge. No details yet on the number of layoffs. Shares rose 1 percent to $78.17.

MATHISEN: Johnson Control says it expects its sales in 2016 to rise 4 percent, helped by strength in its building efficiency and power solutions businesses. The firm also said it expects to complete the spinoff of its automotive business by next October. Shares lower by 1 percent to $45.47.

Amazon (NASDAQ:AMZN) announces that it had its best sales weekend ever for its consumer devices. The online retail giant says it’s best selling products were its Fire tablets and Fire TV streaming device. Shares up 2 percent there at $679.06.

Ascena Retail reported earnings in revenue that topped analysts’ estimates after the close. The clothing chain owner said it saw strong sales performance in its Lane Bryant stores. Shares rose. During the regular session, the stock was about 4 percent high at $11.78.

HERERA: Puerto Rico avoided default, making a crucial debt payment. But the commonwealth warned its financial position is deteriorating and it could trigger future defaults. The governor also said he would start taking the extraordinary step of diverting revenue paid on certain bonds to pay for public services.

MATHISEN: In Paris today, global leaders continued to work on a landmark climate change agreement. And today, President Obama said he would like to see a deal both ambitious and legally binding.

Steve Sedgwick reports tonight from the climate conference in Paris.


STEVE SEDGWICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: The key focus on day two of COP21 client change talks in Paris were the closing remarks from President Obama at the OECD before he left Paris to go back to the United States. The president is negotiating two very thorny issues. On the one hand, of course, geopolitical problems in the Middle East. On the other hand, trying to negotiate a successful climate change deal at COP21.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: What we think it’s an agreement where progress paves the way for countries to update their mission targets on a regular basis. And each nation has the confidence that other nations are meeting their commitments. We seek an agreement that makes sure developing nations have the resources they need to skip the dirty face of development if they’re willing to do their part and that make sure the nation’s most vulnerable to climate change have resources to adopt to the impacts we can no longer avoid.

SEDGWICK: He met President Erdogan of Turkey emphasizing the partner to de-escalate the tension with Russia. Of course, that tension having built up post the downing of a Russian bomber over Turkey (INAUDIBLE) Syrian territory within the last week. He also said that president Putin he thought understood the process that needed to take place to reach peace and to get an accord with Turkey and so they could concentrate on ridding the Middle East of ISIS.

In terms of a climate change deal, he said it was a very ambitious deal but the U.S. was playing its part leading from the front, having agreed a deal with China early on in 2014 which he thought laid the basis for a broader agreement here in Paris.

Also perhaps seeking to isolate GOP opposition saying if the world’s scientists got it, 180 world leaders got it, and indeed the climate change was very apparent with El Nino and the facts (ph) as well, he felt that he hopes the Republican opposition would understand that this was for the greater good rather than for scoring points against him as the president.

This is Steve Sedgwick, for NIGHTLY BUSINESS REPORT, in Paris.


HERERA: Coming up: when it rains, California wants to capture that water. So what companies big and small are doing to hold onto the coming El Nino storms?


MATHISEN: Here’s what is to watch tomorrow: We will hear from Fed Chair Janet Yellen. She speaks at the economic club in the nation’s capital. ADP releases its employment report and we also get data on labor productivity and costs. And that’s what to watch Wednesday.

HERERA: In California, it’s all about water — more specifically, the lack of it. And what companies big and small are doing to capture it when the coming El Nino storms bring much needed rain to the West Coast.

Jane Wells has our story.


JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: L.A. may be a desert but it still rains once in awhile and when it does, all that storm water runs out into the ocean. It doesn’t have to. You could try to keep it.

DAVID CRAWFORD, RAINWATER MANAGEMENT SOLUTIONS: Ten inches doesn’t seem like a lot but if you take it off a million of squares buildings, it’s millions of gallons of water.

WELLS: David Crawford (NYSE:CRD.A) founded Rainwater Management Solutions, an industry he estimates is worth $100 million but growing. For one thing, the federal government has new rules demanding storm runoff be captured and reused to stop contamination of groundwater with pollutants. But out west, everyone from individuals to cities to big companies now see it as a way to hold onto the deluge El Nino may bring.

What’s the biggest project you’ve done so far?

CRAWFORD: Probably a 6 million gallon hospital, million gallon system at the Gates Foundation.

WELLS: In Fresno, for example, rather than spend billions and wait years to build a new dam, the irrigation district is spending $20 million to build new ponds to capture El Nino’s rains now.

When full, this ponding facility will hold about 1,000 acre feet of water. All of which will trickle down into a massive underground aquifer.

In the private sector, Seagate (ph) Technology has installed a massive rooftop system to keep as much water as El Nino will bring and filter it to use for the cooling system or in the company bathroom.

STEVEN DEASON: Our real goal was to reduce the demand and have an environment that we could actually sustain our operation for a long period of time.

WELLS: For companies in the business of selling the equipment, rain water catchment is still a small niche but getting bigger.

SHAD KAZEROONI: Over five years when we’ve been doing rain harvest and really developing our program, we’ve carried 50 products online, now we carry over 200 products online.

WELLS: Of course, whether you spend 98 bucks on a rain barrel or hundreds of thousands of dollars on a rooftop system, to get a return on that investment, it needs to rain.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.


MATHISEN: Today is called Giving Tuesday and Mark Zuckerberg and his wife Priscilla promised to donate 99 percent of their Facebook (NASDAQ:FB) shares to charity. That’s about $45 billion over the course of their lives. The charitable endeavors will focus on personalized learning, curing disease and connecting people.

HERERA: And finally tonight, one Minnesota couple recently dropped a $500,000 check into a Salvation Army red kettle outside a grocery store. The donors told the organization they had once relied on discarded food from a local grocery store and they now can afford to help others.

And while some still give by check, more and more are turning to crowdfunding Web sites. Over the past year, the site Go Fund Me reports that it has raised over $1 billion from more than 60 million donors in nearly 30 countries.

MATHISEN: That’s a great story.

HERERA: A good story to end on, right?

MATHISEN: Five hundred thousand dollars, wow.

HERERA: That does it for us tonight. I’m Sue Herera.

We want to remind you, this is the time of year your public television station seeks your support.

MATHISEN: And thank you for your support. I’m Tyler Mathisen. We’ll see you back here tomorrow.


Nightly Business Report transcripts and video are available on-line post broadcast at The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2015 CNBC, Inc.

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