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How Drama Over Martin Shkreli’s Price Raising Actions Is Impacting Public Perception of Pharmaceutical Fraud Cases

pills on a tableIn September, news agencies broke a riveting pharmaceutical industry story that’s stimulated an impassioned national conversation about pharmaceutical fraud and drug industry regulations.

At the center of the media maelstrom is 32-year-old Martin Shkreli, a hedge fund manager whose Turing Pharmaceuticals company recently acquired ownership of a lifesaving drug called Daraprim. He and his team suddenly elevated the price of a pill from $13.50 to $750, a cost increase of over 5,000 percent. Physicians use Daraprim to resolve toxoplasmosis infections, which disproportionately affect unborn children and patients with compromised immune systems (caused, for instance, by the HIV virus). Epidemiologists say that approximately 25 percent of the U.S. population (ages 12 and up) carries this parasite.

Although the price hike legally did not constitute fraud, analysts widely decried Shkreli’s action as a miserable tactic that needlessly placed a high burden on low income patients, allowing Shkreli and his co-investors to profit at their expense. A September 20, 2015 story in The New York Times, (“Drug goes from $13.50 a tablet to $750 overnight”), described the situation: “Turing’s price increase is not an isolated example. While most of the attention on pharmaceutical prices has been on new drugs for diseases like cancer, hepatitis C and high cholesterol, there is also a growing concern about huge price increases for older drugs, some of them generic, that have long been mainstays of treatment; some price increases have been caused by shortages, others have resulted from a business strategy of buying old neglected drugs and turning them into high priced ‘specialty drugs.’”

Defenders say that Shkreli’s actions are in line with mainstream practices in the pharmaceutical industry. Even so, medical institutions haven’t exactly been withholding opprobrium. The HIV Medicine Association along with the Infectious Diseases Society of America addressed a letter to Shkreli’s company, calling the spike in the toxoplasmosis drug’s cost “unjustifiable for the medically vulnerably patient population [and] unsustainable for the healthcare system.”

Shkreli has been in the legal hot seat in the past. Four years ago, he owned a company called Retrophin, which used a very similar business model. It acquired old pharmaceuticals and then steeply increased prices for those drugs. In 2014, this company’s Board fired Shkreli, alleging that he had used company funds to pay off hedge fund investors. Shkreli in turn denied these accusations and filed for arbitration against Retrophin, seeking $25 million in severance pay.

How Shkreli’s Case May Affect Perceptions of Pharmaceutical Fraud

  • The high profile coverage of Shkreli’s actions won’t likely lead to substantive changes to the law, but it could influence attitudes of those who could wind up on a jury.
  • Condemnation of Shkreli from high profile political figures, like Hillary Clinton, is not likely to win the industry any new fans, and it could generate increased media attention over future fraud cases.

Another company, Imprimis Pharmaceuticals, has since announced that it will offer a $1-per-pill alternative to Daraprim, proving to some potential jury members that the pharmaceutical industry isn’t monolithic – in other words, that there are “good guys” and “bad guys” in the industry, just as there are in any large industry.

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