Martin Shkreli was arrested today. Yay! The whole world will (rightly) cheer. Call it karma, call it “getting his,” call it “reaping what you sow,” call it “justice.”
However, keep in mind that he wasn’t arrested for anything to do with drug pricing or the shady business practices of Turing Pharmaceuticals. Turing Pharmaceuticals, and “companies” like it will continue to exist. And that is the real problem.
When Turing announced its price hike of Daraprim from $13.50 to $750/pill, the world reacted with horror and Shkreli quickly became the most hated man in the world. Daraprim is a life-saving medication for people suffering from toxoplasmosis, caused by a rare parasite affecting mostly those with compromised immune systems. In addition to the price hike, Turing made the drug available only at their specified pharmacy (Walgreen’s) for outpatients.
Turing and Shkreli were caught completely off-guard by the outrage. Shkreli tried to explain that it was a “great thing for society” and that he “shouldn’t be criticized” for this, but the public wasn’t buying it. Eventually, his defense shifted to saying that he had an obligation to make money for his company and that the drug was way underpriced. He has employees to pay and they’ll be unemployed if he doesn’t make money.
But what about that company? No one had ever heard of Turing Pharmaceuticals before this debacle. What is it that they do?
The darapram fiasco IS WHAT THEY DO.
Turing Pharmaceuticals has no research labs, no scientists in white lab coats, and no plans for new drug development. They don’t even have drug manufacturing facilities or anything related to the production, distribution, or selling of pharmaceuticals. They are a “pharmaceutical company” in name only. This is their business model:
1.) Scour the pharmacopeia for niche drugs that fit a certain profile and are “underpriced.” (more on this later)
2.) Buy the manufacturing rights to those drugs. (They still won’t actually make anything. They’ll pay the same plants to make the same pills. Nothing changes.)
3.) Jack up the price of those drugs.
4.) Make huge profits. (Buy yachts, helicopters, and $9,000 bottles of wine.)
5.) When others eventually come in and force the price down, sell the manufacturing rights back, probably at a much higher price.
6.) Move on to the next drug.
This company is not about making or developing drugs. It’s about making money. There’s nothing wrong with making money, but that is ALL that they do.
This is vulture capitalism at its absolute worst, and the way that they pick the drugs to purchase underscores this. The drugs they want are those that fit a certain profile: old, out of patent, sold by just one or two companies, targeted at a very narrow market, and most important of all… the drug must be life-saving and without available alternatives.
In other words, they want to find drugs that people will die if they don’t get. This allows them to charge as much as they want and the patients will have no choice but to pay.
Turing knows that their price-hike will be temporary because competitors will get in on the game, but if no other companies are currently making a drug, it can take a couple years to get the operation up and running because they still have to get FDA approval. It’s not as long and involved as approval for a new drug, but they do have to show that they can make the drug safely. During those 2-3 years, Turing can extract millions from patients that desperately need the life-saving medication.
Turing has tried to defend itself by saying that they will price the drug at $1 for the poor and uninsured. First of all, does anyone believe that will actually happen? How would that even work? But even if they could do that and they actually followed through, this is still a horrible situation because when insured patients need the drug – WE end up paying for it!
If the patients are insured, those prices are then passed to insurance companies, who pass it on to consumers through our sky-high premiums and co-pays. If the patients are on medicaid or medicare, we all pay for it through our payroll taxes. Either way, we pay for it.
The end result of Turing’s business practice is the massive transfer of wealth from all of us to Martin Shkreli and his sleazy partners. AND WE GET NOTHING IN RETURN.
It’s true that we all transfer massive amounts of wealth to already wealthy companies every day, but we usually get something in return. I have transferred thousands of dollars to Apple over the years, but I got iPhones and MacBooks in return. But daraprim was already developed and on the market for decades. They didn’t CREATE anything.
Turing doesn’t develop anything, doesn’t invent anything, doesn’t create anything, doesn’t produce anything. They are simply in the business of finding hidden corners of the pharmaceutical market where they can swoop in, like the vultures they are, and extract huge sums of money from unsuspecting, and very ill, patients. And it’s all perfectly legal.
Before August of this year, Martin Shkreli had made himself famous in business circles with this general business model, even if the rest of us had never heard of him. He was hailed as a visionary, a genius. We live in a world where this type of vulture capitalism is not just tolerated, but cheered. The only reason the rest of us now know about him is that he went just a bit too far with his pricing. (Not according to him. He thinks it actually should have been higher.)
Turing Pharmaceuticals is not a visionary company. It is a leech. And we are the host. And like all leeches, they provide nothing to their host. They simply take.
Turing and Shkreli touched a nerve this fall because the product they choose to hold ransom is life-saving medication, but how many other companies are there that operate this same vulture model in other industries? What other products and services are price-inflated so that scumbags like Shkreli can extract their piece of the pie, while giving us nothing in return.
They pat themselves on the back and call themselves visionary geniuses, but they are merely clever thieves. And our regulatory system does nothing to stop them.