“Cost-cutting has been key to the turnaround…”

Starboard Value Partners has revived Olive Garden, turning all-you-can-eat bread sticks into some serious dough. 

The stock has rebounded, and before the Monday selloff in the broader market, shares hovered near $70 per share.

The company has experienced six consecutive quarters of financial growth.

The way that Starboard completed this turnaround is perhaps one of the most unconventional stories of the year. The hedge fund started its efforts in September when it released a 294-slide shaming presentation that criticized the restaurant chain for not salting its pasta water, for placing non-Italian items on its menu, for wasting too much food like breadsticks and pasta sauce.

The frugal presentation and enthusiasm won over investors.

After winning every seat on Darden’s board of directors, Starboard then went to work… literally.

“Every board member worked inside of a restaurant,” Starboard CEO and Darden Chairman Jeff Smith told Bloomberg in June. “Once we went on the board, every single board member took a night and worked inside of a restaurant.”

It was a successful effort to get to know their brand.

“How are we going to be able to make good decisions in the board room without really knowing what’s happening inside the restaurants?” Smith said.

The menu changes worked.

They pushed higher margin items in alcohol.

The stock is up 45% since October 2014.

And its promotions couldn’t be hotter.

Just last week, the firm’s highly-anticipated Never Ending Pasta Pass sold out all online in less than one second. That means the 2,000 people who bought a pass for $100 can receive a dinner portion of pasta with bread sticks, a salad, and unlimited Coca-Cola twice a day for the next seven weeks. All day, every day.

And before anyone says, “Hey, that sounds horrible for you,” keep in mind that these passes sold out in one second and that they are now being resold on the secondary market for up to $899 on eBay.

Starboard realized that Americans love and will pay for exclusivity, unlimited food, and convenience. Some people may think it is nuts to eat at the same restaurant every day, but the man who founded “Body by Chipotle” would disagree.

Repeat customers are the heart and soul of a successful business. As analysts at Sum All explain, “25% to 40% of the total revenues of the most stable businesses in the SumAll network come from returning customers.”

Starboard’s success will probably serve as a Harvard Case Study in the coming years.

“Valeant is using precisely the same business model as Martin Shkreli, the 32-year-old former hedge fund manager whose company recently purchased the life-saving drug Daraprim and increased the price from $13.50 to $750 per pill ‘overnight.”

For Bill Ackman, Monday was a Terrible, Horrible, No Good, Very Bad Day.

On paper, yesterday’s 16.5% plunge in Valeant Pharmaceutical International (VRX) stock likely cost Ackman more than $600 million in one day.

The stock was down another 1.5% today as the moral panic over prescription drugs accelerates.

The stock plunged after Democrats on the House Committee on Oversight and Government Reform asked Chairman Jason Chaffetz, R-Utah, to subpoena the drug company and ask them to testify next week after the firm hiked the prices of two medications it recently purchased.

In the quote above, Maryland Congressman Elijah Cummings accuses Valeant and other drug companies of price gouging. It’s becoming increasingly clear that most Congressmen keep pitchforks over their desks.

Last week, we introduced readers to Martin Shkreli, a hedge fund manager and fan of Chamillionaire lyrics, who hiked the price of an HIV drug by nearly 5,000% after his company Turing Pharmaceuticals purchased its rights.

Since then, Congressional Democrats and Presidential Candidate Hillary Clinton have pushed for pharmaceutical price controls…

Because economics is not their strong suit. (Only 20% of Congressmen have any training in business or economics. Out of Congress’ 535 voting members, just one has a Ph.D. in economics)

There are two outstanding pieces in the last 24 hours on why these price increases are happening in the biotech sector and what Congress’ plan will ultimately lead to down the road.

First, John Graham at Forbes quickly explains that Shkeli exploited poor regulatory oversight and the FDA’s inability to approve generics in a timely fashion. Government has created barriers to entry for competition in the sector… color us all shocked.

Second, here's Megan McArdle over at Bloomberg teaching prescription economics to a person who wants to be the President of the United States and lead the world’s largest economy…

Both are worth your time today.