Going To Plaid: Should the Ludicrous Pricing of Life-Saving Drugs Be a Crime?

Oct. 1, 2015 (Mimesis Law) — Taking a break from all of the death penalty and controversial execution conversations of late, I’m taking a very different topic out for a drive: white collar crime in the pharmaceutical industry. A couple of weeks ago, a story in the New York Times caught everyone’s attention: buying pharmaceutical assets on the cheap and then hiking the price of the drugs to stratospheric proportions.

While this story went viral, it’s not a new tactic, as a Wall Street Journal article from earlier this year points out. The company at the center of this brouhaha is Turing Pharmaceuticals and its puppet master, Martin Shkreli. The drug at issue: Daraprim, a 62-year-old medication used to treat the parasite infection toxoplasmosis, a condition that can be life-threatening in those with HIV, AIDS, or compromised immune systems. Toxoplasmosis may be difficult to pronounce, but what is not difficult is the pronounced climb of Daraprim’s price in mid-September, moving from $13.50 to $750 per pill—an increase of 5,400 percent.

This isn’t Shkreli’s first rodeo, and Turing Pharmaceuticals isn’t alone in peddling once-affordable drugs back for insane prices. Horizon Pharma pushed the price of its pain tablet, Vimovo, up by 600 percent. Other drug companies have similarly bought drugs on the cheap and then flipped them into profit centers.

Shkreli formerly helmed Retrophin, another pharmaceutical company that he founded, now suing him for $65 million. During his turn as CEO of Retrophin, that company amped up the prices on a 1980s kidney medication by roughly 20 times its original cost. Much like the current Daraprim scandal, Retrophin, purchased the drug, Thiola, and moved the price of each individual pill from $1.50 to $30.

Thiola treats cystinuria, a lifelong disease for which there is no known cure nor alternative medication. The disease affects about 20,000 patients in the United States who are typically diagnosed at a very young age.

Shkreli quickly has become one of the world’s most hated men. Now, one might think that just like profiteering providers of goods in a hurricane, this conduct is a crime. But the answer is not really (spoken like a lawyer). There are state laws that prohibit price gouging and federal laws that deal with antitrust violations and market manipulations. There even was some failed federal legislation a few years ago, but really nothing on point that has the teeth to legally clamp down on this practice, especially when pharmaceutical companies justify their prices by using the predictable defense of “we need to charge more to offset the cost of research and development.”

But outside the law, public opinion does matter. So, Shkreli caved a bit after the story broke and agreed to lower the price. It remains to be seen what the new price will be, but in a neat post-script to this story, more news about Shkreli has come out, and it seems like the feds are pursuing the (alleged) price-hiking swindler.

Since January, 2015 (and possibly earlier), Shkreli has been under criminal investigation by federal prosecutors in the Eastern District of New York. The criminal investigation appears to be in tandem with the million-dollar lawsuit filed against Shkreli by Retrophin. The quick and dirty: Shkreli took money, lied about it, and broke securities laws.

Shkreli may not answer for his history of price-hiking life saving drugs, but he may be his own worst enemy. He appeared on television and tweeted to validate and win support for the price adjustment. Instead, he fell under the microscope and earned the outrage and disgust of politicians, lawmakers, and the very people he depends on to buy the drugs. The firestorm over his actions makes him far more attractive to prosecutors than he was in January.

With shots fired on multiple fronts, even the pharma lobby backed away from Shkreli. The Pharmaceutical Research and Manufacturers of America, a trade group that represents the pharmaceutical industry in the U.S., dumped Turing like a hot potato and tweeted:

@TuringPharma does not represent the values of @PhRMA member companies.

Even the leading Democratic presidential candidates, Hilary Clinton and Bernie Sanders, got in on the bashing and condemned the obscene price inflation. Clinton labeled it “price gouging” and used it to support her recent proposals to reduce drug costs. No word on whether Republican candidates will adopt a similar platform. Doubtful, based on current conditions.

Whatever your thoughts on capitalism (the Pope included), this practice is a problem. The return on investment should not trump the health and well being of sick Americans.

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