Was Martin Shkreli Arrested For Hiking Drug Prices?

Martin Shkreli

I don’t subscribe to conspiracy theories. I never believed a second shot was fired. Nor do I believe that Bill Clinton was stalked on the grassy knoll. So I won’t speculate that Martin Shkreli’s arrest for alleged securities fraud that happened years ago is related to his raising Daraprim’s price by 5500 %.

Just because something isn’t suspicious doesn’t mean that it isn’t odd.

Shkreli is a perfect poster child for rapacious pharmacocapitalism – so perfect that it’s odd. He openly admits “I have a sworn duty to my shareholders to maximize profit.” Shkreli’s admission is odd not for its implausibility, but brazen honesty.

Who, in the business of making money, says they’re in the business for profit?

Elizabeth Holmes wants to change the world, including Africa, by biotechnology, and she has recruited Henry Kissinger, known for his contributions to emerging economies and biotechnology, to help. Even Goldman Sachs believe their work leads to greater good. Their CEO once said banking is “doing God’s work.” I developed a Richter’s hernia reading that.

In a land where capitalism is infused with puritanism, Shkreli is odd because he says it as it is. We’re not attuned to such honesty because we want to believe that people want to do the right thing first, that money is incidental. Shkreli says this is not so – if you want new and better drugs for rare diseases, you must please the shareholders by making them money.

Dear Lord, deliver us from the truth.

I haven’t decided what to make of Shkreli, but there is one thing I know. History’s Chaucerian frauds weren’t in your face capitalist pigs. They were pious peddlers of righteousness. They not only feasted on gullibility, but were revered by the insatiably gullible who were gagging to believe in someone. We, too, are gagging to believe, no longer in priests, but in entrepreneurs – our new pardoners.

The robber barons were in it for the money – the railroads were incidental. Healthcare’s puritans are in it for the progress – the money is incidental. We got railroads. We have yet to see Theranos’s amazing detectors work their magic.

Oddly, Shkreli wasn’t arrested for fleecing immunocompromised patients, but for a Ponzi scheme allegedly setup by his hedge fund. Unlike Enron, which collapsed because it kept digging ponzily, unlike the American Insurance Group, which would have collapsed but for the grace of socialism, Shkreli’s investors actually made money! What an odd Ponzi scheme.

Shkreli is shredding our gullibility. He is saying: children, this is how capitalism in the US healthcare works. Did mommy forget to tell you?

He is not fooling us, but reminding us that we’re fools for being so easily fooled by piety such as this:

“My startup will solve diabetes burden, including in the poor”

“Fantastic. Here’s a check for $400 million.”

We may not be fools, but we live in a kakistocracy. Recently, politicians demanded transparency from Gilead, the manufacturers of Sovaldi. After strutting in to Gilead’s office like Spanish Inquisitors, and reading company documents, and interrogating their staff they concluded that pharma prices drugs to maximize profit.

ROTFLMAO! What a revelation!

Maximizing profits. You really nailed them, Senators.

That high drug prices are irrational is part fallacious and part disingenuous. Yes they are irrational, but only if we limit the price for extending our lives. What’s irrational is that we believe we’re priceless but everything else should be cheap.

Another fallacy is that politicians know how to control drug prices. Neither Senator Sanders nor Senator Clinton show any understanding of, and any willingness to accept, the trade-offs of price control. Mercifully, Mr. Sanders has not blamed high drug prices on global warming. As for the Republican front runners – I can only assume drug pricing is still not taught in kindergarten.

Some say Shkreli is a narcissistic sociopath. Be that as it may, it is rather irrelevant. Because when you stop obsessing about Shkreli’s moral compass and follow him, he will show you the worst warts our regulatory system has created. The more we focus on the gamers of the system, the less likely we’ll fix a system that’s so easily gamed.

Pharma is suddenly interested in benznidazole. This drug treats Chagas disease, an infection uncommon in the US, but common in Latin America. How did pharma’s compassion for poor Latinos, who suffer the disproportionate burden of Chagas, suddenly arise?

FDA recently gave Chagas a “rare disease” status. If pharma brings a rare disease drug to the market – it matters not that they didn’t develop that drug – they get a voucher for an expedited review for another drug. This “jump the Disneyworld queue” voucher sells for hundreds of millions of dollars in the market. The price should signal something.
The CDC, which buys benznidazole from a Brazilian company, dispenses it free. Yet Shkreli spotted an opportunity, and a need – doctors must fill reams of paperwork because the CDC can’t dispense benznidazole unless for experimental purposes. Hospitals want a distributor.

After the nearly-bankrupt KaloBios Pharmaceuticals, bought rights to one version of benznidazole, under the auspices of a Shkreli-led firm, their shares soared. Because the market, spared of the fog of piety, knew that Shkreli would make money.

KaloBios may raise benznidazole’s price by factor of 100, 000. A course of benznidazole is $60 in Latin America. It may cost $100, 000 to treat Chagas here. If KaloBios wins FDA’s approval, it will have exclusive rights to sell benznidazole for 5 years in the US. Welcome to the rule of law.

I know you’re seething with pious rage. Before grabbing the pitchforks answer the following:

a)      Why, like the CDC, can’t/ don’t hospitals buy benznidazole directly from that company in Brazil?

b)      Why haven’t insurers pushed for buying drugs directly from foreign manufacturers for infectious diseases?

c)       What will motivate a startup to sell benznidazole in the US at Latin American prices? Please don’t say compassion for poor Latinos. Christmas is no excuse for being that naïve.

d)      Why did no US pharmaceutical company (capitalist or righteous, large or small) bother looking at benznidazole before the FDA declared Chagas a rare disease?

e)      We have an FDA-approved diagnostic kit for Chagas but no FDA-approved drug for Chagas. Why?

When Shkreli says big pharma doesn’t care about rare diseases unless they’re profitable, he speaks an inconvenient truth. The Roche Group, the developers of Avastin, developed benznidazole. But benznidazole wasn’t making money because poor Latinos aren’t a lucrative market. So Roche did what we do with our most useless possessions – donated it to charity. Roche gave supplies and rights to Lafepe, a company owned by the Brazilian state. Roche could have distributed benznidazole in the US – they would barely have noticed a dip in their profits.

It’s more profitable making pills which lower cholesterol, pills which make kids quieter, pills which remind old men transiently of their youth, than pills which cure multiple sclerosis. This strikes me as a decidedly upside down world. But, then again, piety never really helped the most vulnerable.

Shkreli is boldly articulating to you what classy CEOs of big pharma won’t dare admit to themselves, even in their sleep. Ladies and gentlemen, this is how it works. To draw hyenas you throw leftover food. To draw pharma you show $$$$.

Enjoy the schadenfreude over his arrest. Remember, though, our regulatory warts won’t magically disappear, even if Martin Shkreli is convicted.

Merry Christmas.


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10 replies »

  1. I don’t know, isn’t there an implied ethics to do good for society as a reward for profit? Old fashioned I guess. If not why is capitalism better than oligarchy.

    What did Shkreli do except corner the market, there was no added value. Are we that stupid not to see the difference between pharma’s larceny and Shkreli’s grand theft? If tax evasion worked for Capone good, it’s not hard to grasp the needed comeuppance.

  2. A more interesting question than Shkreli is why Medicare doesn’t get competitive bids on meds. Compared to that, Shkreli is a pimple on a gnat’s ass.

    Its Kabuki theater for the easily distracted

  3. If the theory that there are political motivations involved is correct, the analogy is the Al Capone tax evasion strategy. We’ll get ’em however we can get ’em.

    I’m not ready to say it is, but the argument is certainly plausible enough to consider. Few would contest that Martin Shkreli is wonderful political theater.

    From a writer’s point of view, there is an interesting narrative shaping up around figures like Martin Shkreli and Elizabeth Holmes. I think you’ll see a series of stories digging into this story as authors attempt to work out what it all means.

    If Mr. Shkreli and Elizabeth Holmes are any indication of what’s coming as young pharma and biotech leaders adopt a “we’re reinventing the world, we deserve to be paid for it” tech industry mindset, things are going to get crazier before they get better

  4. In Freudian speak, he is pharma’s Id.

    The main story, less interesting though, is why Roche couldn’t give a rat’s tail about Chagas. The rest is noise.

    Pharma has found their villain.

    In 4 years we’ll be asking the same question: why do Americans get fleeced by pharma?

    Meanwhile some well meaning entrepreneur will get several millions for promising utopia.

    Carry on!

  5. 29 page pdf. I have it. Not one word about drug pricing. He’ll eventually be Pleading for some relatively soft time in a Club Fed. Probably have to spend some of whatever money he has left for one of those Successfully-Coping-With-Your-Prison-Time consultants. Whatever this tangentially, inferentially “says” about the corrupt Pharma world is utterly beside the point. This kid is just an arrogant boiler room grifter, a poseur Master-of-the-Universe wannabee (and a laughable repeat failure at that) who’d have tried to pull the same crap with companies in other business lines were he focused on them.

    Beyond the indictment specs, read up on his KaloBios CusterFluck. Boy, THAT was a short CEO & Board Chair hostile takeover tenure (all of about 5 weeks).

    Don’t hold your breath for a Michael Lewis book and movie about this loser. He won’t even merit a Vanity Fair article.

  6. #SchadenShkreli

    “Was Martin Shkreli arrested for hiking drug prices?”

    Read the indictment.