Price-Gouger Martin Shkreli Becomes Known as ‘Most Hated Man in America’
By John Lawrence
Turing Pharmaceuticals chief Martin Shkreli will face new competition for Daraprim, the drug he recently hiked 5,000 percent in price, after competitor Imprimis Pharmaceuticals said it would market a similar drug for just $1 a tablet. Daraprim is used mainly to treat toxoplasmosis, a parasitic infection that’s common in AIDS and HIV patients, as well as cancer sufferers.
Greedy buttwipe Martin Shkreli, the hedge fund guy that bought the drug Dariprim and then raised the price from $13.50 to $750. a pill will actually lose his ass on this venture. At these prices the estimated annual cost of treatment for toxoplasmosis, for the pyrimethamine component alone, would be $336,000 for patients who weigh less than 132 pounds, and $634,500 for those who weigh more than that. Daraprim is given for at least six weeks to knock out the infection, and then often for a year or even indefinitely to help the immune-compromised patient keep the parasite at bay.
The problem for Shkreli, that he didn’t take account of in his lust for speedy profits, is that Dariprim is actually a generic. It’s been around for 62 years. That means that anybody can manufacture it. That’s exactly what one San Diego drug company did. Moreover, Imprimis intends to come up with cheap versions of other drugs that some businesses sell for far above their manufacturing costs. The trick for Imprimis was to combine pyrimethamine with another generic drug, leucovorin, thus giving it the right to operate as a compounding pharmacy and to avoid a lengthy approval process by the US Food and Drug Administration.
There goes Shkreli’s profits right out the window. Adios you greedy bastard. You and your company Turing Pharmaceuticals are going to lose your shirts. In particular you’re going to lose all the money you paid for Dariprim. Turing Pharmaceuticals acquired the drug from Impax Laboratories in August 2015 for $55 million. Shkreli can kiss that $55 million good-bye.
Imprimis CEO Mark Baum said he hopes his company’s action provides a market based answer to exorbitant drug pricing. Yeah, go get him Mark! I love it when the market slays another marketer in the interests of the shell shocked public of whom the weak and vulnerable are being price gouged out of existence. Who but the rich could afford $750. a pill for a life saving drug?
Shkreli: ‘I Believe Drugs Should Be Priced Relative to the Value They Confer’
From Alternet:
Shkreli expressed regret that he had been a “flippant jackass” instead of carefully explaining the price increase, although he told another Reddit user he didn’t understand how raising the price to $20, for example, might have been more reasonable than a 5,500 percent hike.
“I believe drugs should be priced relative to the value they confer,” he said.
Of course, if somebody sticks a gun to your head and says “Your money or your life,” you’re going to give him all your money because the value that that confers is sparing your life. Shkreli operates in accordance with the same principal: if you want to go on living and you have a terrible disease for which you need a drug that only Shkreli can supply you with, you’re going to give him all your money. There’s no difference from the situation in which a gun is put to your head. And that, my friends, is the ethics of capitalism.
But there was one flaw in Shkreli’s plan to bilk sick people out of their money. And that is that the drug is a generic. Shkreli has no patent rights over it. But he probably figured that any other company that wanted to market the drug would have to undergo a lengthy approval process with the FDA. The decision to sharply increase the price for an old, generic drug — in other words, a drug that any other pharmaceutical company could also manufacture — is based on a gamble that no other company will be nimble enough to immediately get FDA approval for a generic competitor for Daraprim. That would give Shkreli time enough to make a killing before the other drug came on the market.
There is one other angle that Shkreli is fully prepared to use. He was gearing up to bilk not only individual customers but Medicare itself. The 2003 Medicare Prescription Drug, Improvement, and Modernization Act contains legislation that forbids Medicare from negotiating drug prices. That legislation, signed into law by George W Bush, introduced a market opportunity for scumbags like Shkreli. Medicare is forced to pay whatever Shkreli decides the price should be for Dariprim since Medicare Part D is required to cover approved cancer drugs. So even though Shkreli has graciously (no, not really) offered to give the drug away free to certain individuals, he intended to have Medicare pay the full freight thus ultimately putting taxpayers on the hook.
Pharmaceutical costs are a top reason that health insurance companies justify raising their policy rates, and society at large ends up paying for it with more expensive insurance plans, or by contributing a bigger percentage of their paychecks to cover health care costs. And I guess his plan now is to have doctors prescribe his pill, Dariprim, instead of the generic version that Imprimis is making. I hope no doctor falls for this. And Medicare should be on full alert not to pay for Dariprim at $750. when a generic from Imprimis is available for $1.
The best laid plans of mice and men often go awry. Shkreli didn’t figure on Imprimis being able to avoid the lengthy FDA process by setting up a branch that could be a compounding pharmacy and start marketing the drug immediately. Both Hillary Clinton and Bernie Sanders have spoken out on the ridiculousness of a market system that lets some whippersnapper like Martin Shkreli price gouge needy and vulnerable people. He’s become known as “the most hated man in America.” Hillary tweeted: “Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on.”
Other vulture pharmaceutical companies have pulled the same scam as Shkreli. Daraprim is not the only fairly old drugthat’s seen astronomical price increases recently. The price for cycloserine, a medicine used to treat drug-resistant tuberculosis, increased to $10,800 for 30 pills from $500 in August. Two heart drugs owned by Valeant Pharmaceuticals, Isuprel and Nitropress, saw their prices increase by 525% and 212% respectively this year.Even everyday drugs like antibiotic doxycycline have been affected, with its price rising to $1,849 a bottle in April 2014 from $20 a bottle in October 2013, according to a Congressional report.
A new cholesterol drug on the market from Regeneron, for those for whom statins don’t suffice, costs more than $14,000 a year. The drug’s name is Praluent. Regeneron CEO Dr Leonard Schleifer, another scumbag, gives the same old “they need the money to do research” crap. It’s BS. They sell the same drugs in foreign countries for half what they sell them to Americans for. They’re just banking on the Republican 2003 legislation that requires Medicare to cover drugs but forbids Medicare from negotiating a lower price. I wonder whose lobbyists got that legislation passed. Not the lobbyists for We the People. That’s for sure.
Wall Street Loves Greedy Profit Maximizing Bastards
Wall Street loves Valeant with its shares hitting an all time high last August. Valeant is something of a role model for Shkreli. They created a network of “phantom pharmacies” to steer potential customers toward their more expensive drugs instead of lower priced alternatives. Valeant bought smaller drug developers and then hiked prices on the medicines developed by those companies. It’s profits skyrocketed as it slashed research into new drugs. They and Shkreli justify their price hikes by saying that they need the money to “do research.” The truth is they have no intention of doing research. The only approval they are looking for is from Wall Street which will facilitate their stock prices soaring. Money is the only criterion here even if it means price gouging the sick and vulnerable.
The name Turing Pharmaceuticals was no doubt taken from the name of the great mathematician and cryptologist Alan Turing who most famously broke the Nazi codes during the Second World War. Turing’s name has been unfortunately besmirched by being taken for the company name of a scam artist and profiteer. He’s probably rolling over in his grave.
I hope jackass Shkreli loses his shirt on these machinations. And I hope the stupid idiots in Congress will allow Medicare to negotiate drug prices with the companies that provide them. Otherwise, the Shkrelis, Valeants and Schleifers of the world will seek to profit by raising prices for life saving drugs. Either we as individuals, if we are unfortunate enough as to have one of these life threatening diseases, will pay their outrageous prices or we will pay through increased health insurance costs and increased taxes to cover Medicare’s skyrocketing costs which pay for these price gougers’ arbitrarily set prices. But they will be laughing all the way to the Wall Street banks. They and Wall Street could care less about people’s misfortunes. They only care about money. Greedy bastards!
But a shout out to Imprimis Pharmaceuticals, the company that’s going to eat Shkreli’s lunch by supplying the equivalent of Dariprim for $1. a pill. I like to give credit where credit is due. See, I’m not totally anti-corporation; just those who are Wall Street toadies who only care about money and not a whit about alleviating the suffering of the unfortunate. Good guys like Imprimis CEO Mark Baum deserve a pat on the back. Hats off to ya, Mark.
John Lawrence
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Perhaps it’s too soon to write off Martin Shkreli. He might have a future as a Republican campaign consultant.
I appreciate this information. Like most people I was horrified to see his plan gouge people with the cost of this pill. We need more companies like Dariprim. I really appreciate having more information that the mainstream media has failed to provide
I’ve said it before, and I’ll say it again, “It’s a great country, Amerika!” (It may be better than some others, but that doesn’t make it very good, does it?)
Good article, John! The greed of some is absolutely horrific. Talk about totally materialistic values…this takes the cake!
“And that, my friends, is the ethics of capitalism.”
No, it isn’t. His actions are made possible by him having a temporary monopoly (the exact opposite of competition). The powers of capitalism allowed Imprimis to enter the market at a better price and destroy the gouger. I am sure Imprimis is still making money on this, and by doing so are helping the greater good.
His actions are made possible by the 2003 Medicare Prescription Drug, Improvement, and Modernization Act which contains legislation that forbids Medicare from negotiating drug prices.
Valeant Pharmaceuticals is in hot water over its practice of steering patients to pharmacies it is in cahoots with who make sure that the patient receives Valeants brand name drugs instead of a cheaper generic. Some doctors are in cahoots with this practice also. Then they get insurance companies or Medicare to pay for the drug driving up costs for health insurance.
Prescriptions he wrote were routinely filled by a pharmacy partner of drugmaker Valeant Pharmaceuticals International Inc. called Philidor Rx Services, which dispensed brand-name drugs he wanted his patients to get, even when they couldn’t win their insurers’ OK — or if they didn’t even have insurance. And he said the relationship was great for his staff, because Philidor took over some of the paperwork that bogs down the day-to-day operations of many doctor’s offices.
This is from Bloomberg.com:
[Providing a convenient way to get drugs]may have come at a steep cost to the health-care system by making it easier for doctors to get brand-name drugs into the hands of their patients instead of cheaper generics.
Some specialty pharmacies like Philidor are now drawing attention for the lengths they go [to] to fill prescriptions with brand-name drugs and then secure insurance reimbursement. On Wednesday, Express Scripts Holding Co., the largest U.S. manager of prescription drug benefits, said it had removed the mail-order pharmacy Linden Care LLC from its network after concluding it dispensed a large portion of its medications from Horizon Pharma Plc and didn’t fulfill its contractual agreements.
‘Captive Pharmacies?’
Express Scripts said it’s evaluating other “captive pharmacies” that it said are mostly distributing Horizon drugs. Horizon said it has no exclusive arrangements with pharmacies, including Linden, and note that Express Scripts’ own mail-order pharmacy unit competes with Linden. In a statement, Linden said Horizon is just one of its many customers.
Philidor, meanwhile, is being shut down in the wake of questions raised about its ties to Valeant, whose shares have plummeted 68 percent since Aug. 11 amid questions from investors and lawmakers about its business model and pricing strategy. The specialty mail-order pharmacy used a variety of tactics to get Valeant’s brand-name products covered by insurers even when cheaper generics were available, according to former employees who declined to be identified discussing the company’s practices.
That is “not a sustainable proposition,” said Gregory Curfman, a cardiologist and editor-in-chief of Harvard Health Publications. Because generic drugs save money for individual patients and the health-care system, “it should be the exception when a prescription is not filled with a generic.”
Philidor’s relationship with Valeant was especially close: The drugmaker had paid $100 million for the option to acquire the pharmacy at no additional cost within a decade. In their push to boost sales of Valeant drugs, Philidor workers sometimes changed codes on doctors’ prescriptions to ensure they were filled with the brand name instead of the generic, according to the former employees. Philidor denies that allegation and has said it only filled prescriptions with drugs doctors and patients sought.
This is an interesting and potentially valuable discussion, the one between “cunning” and John Lawrence, that is if it leads to an idea for a solution to the problem. On the one hand “cunning” defends the virtues of free market capitalism by describing how that market system corrects the injustice perpetrated by the gouger, while John complains that it happened in the first place. One shortcoming of this method of correction, one that is taught in economics classes, is that in too many cases the pain and suffering of victims must reach an intolerable level before a correction takes place.
My own view is that yes free market capitalism does self-correct and “cunning” describes how it does so in this case. Sometimes, unless the system is manipulated by those who seek to avoid such corrections, which is often those with lots of money to pay lawyers to do their manipulating for them, money they gained through their capitalist exploitation of others. However, John is objecting to an economic system (ours) that incentivizes this kind of greed in the first place, which capitalism does do.
John also mentions that both Hillary Clinton and Bernie Sanders have criticized a market system that permits this kind of behavior to occur in the first place. Criticism is easy. Does either one have a solution? I haven’t heard any economic solutions from Hillary. Bernie’s might be socialism. And I’m all for that if it solves this problem. But what specifically does he propose for us and will it work?
Although human greed cannot (at least for now) be done away with altogether, I agree that a better economic system is one that at least does not structurally encourage greed and reward greedy people by permitting them to get rich. But what is that “better” system, that is the big question?
Thanks for your perceptive comment, Paul. I think that a system that encourages entrepreneurialism does not necessarily have to encourage greed. Bernie’s solution would be to discourage lobbying and get the money out of politics. Then the 2003 Medicare law, written by lobbyists, would never have gotten passed.
Secondly, Bernie would tax outrageous windfall profits like Shkreli stood to make by hiking the price of Dariprim 5000%. There’s no need to abandon that aspect of capitalism that encourages self-interested people to produce more, but Shkreli produced nothing. He just raised the price of a product waaaay beyond its manufacturing cost. The greed just needs to be regulated and controlled. That all can be done within capitalism or whatever you want to call it.
Capitalism and socialism are just labels, after all. They don’t capture the complexities and nuances of modern economic systems which even in America are syntheses of capitalism and socialism. However, the socialistic aspects of American capitalism mainly benefit the rich, not the poor.
Cunning’s argument that capitalism corrects itself through competition hardly applies in this case. If another drug company with the same greedy motives actually wanted to compete with Shkreli, they would price their product at $700. a pill or better yet merge with his company so that they both could become billionaires. Or they could collude in their pricing strategies. Pure greed cannot describe Imprimis’ motives within the capitalistic system. Clearly, Imprimis’ motives were not pure capitalistic greed.
Mutant Shkreli seems to have fertilized real discussion of late-stage capitalism by exposing its heartless and destructive motives. Violence has long been monetized by the weapons industry but Big Pharma is deciding who will live and die, which could be an even more ominous outgrowth of narcissism and personal power. For now, the last man standing won’t be Martin Shkreli, and we can be thankful for that. And maybe we can return to the notion that making things that improve living conditions, or that inspire in us productive emotions — music and art — or that provide services to those who are suffering are acts that deserve rewards. Let cars drive themselves, but let me have some time to think and do.
As the holder of 3 US patents, I have some experience with entrepreneurship. I am an inventor and an entrepreneur, having developed my invention into a commercially viable product, I formed a start-up company and took my invention to market. (More on that later for those who may be interested.)
Speaking from my own experience, entrepreneurship can be encouraged by more than monetary reward. Inventors and entrepreneurs are motivated by many things, not just money. In fact, money is not even at the top of my list. I am more motivated by recognition of my accomplishment and respect than I am by money.
Again, we’re back to capitalism’s imbalanced focus on the value of money. I don’t think it is necessary to abandon those aspects of capitalism that encourage the entrepreneurial spirit, but the reward mechanism needs to be modified.
An economic system that incentivizes greed, which then must be controlled by regulation, is what we have. Depending on who is in power, this works ok for a time and then not so ok as regulation gets increasingly cumbersome, as history has shown us. I view regulated free-market capitalism as an endless cat-and-mouse game in which regulation is an absolute necessity, but not a solution. The solution is an economic system that does not incentivize people to be greedy in the first place, reducing the need for regulation in the first place.
Paul, some of the supposedly “socialist” countries are actually hotbeds of entrepreneurialism. Here is a quote from an article by Inc. magazine I posted on my blog:
“Norway has more entrepreneurs per capita than the United States, according to the latest report by the Global Entrepreneurship Monitor, a Boston-based research consortium. A 2010 study released by the U.S. Small Business Administration reported a similar result: Although America remains near the top of the world in terms of entrepreneurial aspirations — that is, the percentage of people who want to start new things—in terms of actual start-up activity, our country has fallen behind not just Norway but also Canada, Denmark, and Switzerland.”
So it’s not only the system that needs to change. It’s the culture, the attitudes of the people. The attitudes of the entrepreneurs mentioned in the article were that they didn’t mind paying high taxes. Despite that they were still getting rich, just not obscenely rich like here in Amerika.
Ronald Reagan changed the mindset of America when he encouraged everybody to just be selfish and pursue their own self-interest regardless of anyone else. That attitude of encouraging greed didn’t take much encouragement in order to be taken to heart by the American people.
John, In your last post you said, “So it’s not only the system that needs to change. It’s the culture, the attitudes of the people.”
I couldn’t agree more.
To digress, understanding this speaks volumes about the terrorist attacks in Paris yesterday. I don’t wonder why we are a huge terrorist target.