How Martin Shkreli is Driving Down Drug Costs

By Kristal Lee

Thirty-two-year-old pharmaceutical executive, Martin Shkreli, responsible for raising the price of Daraprim, a drug used to treat malaria and HIV, has no regrets.

The self-proclaimed “most successful Albanian ever to walk the earth” entered the exclusive pantheon of “most hated men in America,” stating that raising the price of the potentially life-saving drug by 5,000 percent was not enough. During a Q&A session at Forbes Healthcare Summit, Shkreli said he was shocked at the public backlash. He repeated that his fiduciary responsibility is to his shareholders. In the unsettlingly captivating interview, Shkreli was asked how he would re-do the months preceding the controversy, to which he plainly stated, “I would have raised prices higher. That’s my duty.”

Shkreli believes he is being incredibly bold by espousing “the ugly, dirty truth.” And he is. Shkreli knows his role as a CEO­­—it is to maximize profits.

“At the end of the day if we want all corporations to not have the obligation to maximize shareholder duty we should take a big ol’ vote and have Congress and Senate change the law. But right now that’s the law. One’s general conception of ethics are generally not at play here.”

Shkreli said aloud what pharmaceutical corporations say with action. He is not here to save the most lives; he is here to make the most money. Not a surprising response from a former hedge fund manager.

After its 5,000 percent price hike, Daraprim cost $750 and made headline news. Its equivalent, Pyrimethamine, cost 10 cents a tablet in India. In terms of percent increase, drug markups exceeded 10,000 percent. One could look up Time’s piece on the markup on hospital Acetaminophen (i.e. Tylenol), the federal investigation of Valaent’s Flucystosine, or the price history of Colchicine, a drug used to treat gout. In terms of cost per pill, Gilead Medicines marketed Sovaldi, a medication used to treat Hepatitis C, at $1,000 a pop. Solvaldi is prescribed at one pill per day for a treatment regimen of 84 days. In terms of long-term cost, Alexion Pharmaceuticals, Inc. sold Soliris at a tune of $440,000 per year.

“Drugonomics” is a twisted game, but not as twisted as the accounting ledgers of Big Pharma.

Shkreli may have raised the price of Daraprim sky-high, but what he did is neither uncommon nor illegal, others are simply more progressive about their price increases and less publicly belligerent. Shkreli is the face that is in-your-face, whereas few can name the names of even the largest pharmaceutical companies, let alone put a face to it.

American healthcare is a paradox. The public views healthcare as a right yet fights to keep it a commodity, leaving room for business to capitalize. The two entities are at odds. While competition spurs ingenuity, it also begets pricing power. In a market where life and quality of life are on the table, where people are willing to pay for any marginal reduction in suffering or safer alternative, pharmaceutical companies have immense leverage. And they know it. To their credit, Big Pharma walks the walk. If there were a virulent bacterial outbreak, the “evil capitalists” would more likely be the first to find the cure—not the charitable philanthropies, not Research University scholars.

Shkreli says the price increase is for the good of patients, stating that the markup will go towards research and design. However, pharmaceutical companies justify drug upcharges based on research and design cost incurred, not the other way around. So he missed the mark there, but he is driving down prices in another way.

Since the mass media coverage of the flagrant increase in the price of Daraprim, further investigation is being done on drug policy and price regulation. Lesser known instances of egregious price-hikes have gained more attention. People are now asking the more important question of how: How was Shkreli able to increase a World Health Organization Essential Medicine price that high overnight? More and more, the public is expressing dissatisfaction with the barefaced audacity of Big Pharma.

Companies, too, have responded to the “Shkreli incident.” San Diego-based Imprimis Pharmaceuticals will release a patient-specific formula of Pyrimethamine (Daraprim) at $1 a pill. They will do so by compounding, a process in which ingredients will be combined, mixed, or altered to make a customized drug, thus avoiding stepping on Shkreli’s patent rights.

In an ironic twist of fate, Shkreli’s greed is working in favor of patients as we will likely see a slowdown of pharmaceutical price increases, more stringent price regulation, and reform. Shkreli has incurred the wrath of many, not just for himself, but also for the industry as a whole.