The Ultimate Greed of a Pharmaceutical Giant
The Ultimate Greed of a Pharmaceutical Giant
Most of us by now accept the fact that huge pharmaceuticals manufacturers make large and sometimes excessive profits selling prescription drugs. It upsets many people but they are businesses and like any other business, they have a responsibility to make a profit for their shareholders. Your best defense is to try not to take any pharmaceutical drugs and use the money to buy shares in these companies.
Just recently in the news we have learned about the ultimate in greed of a pharmaceutical giant, Turing Pharmaceuticals and its CEO, Martin Shkreli, who was just arrested on securities fraud.
The fraud charges against Mr. Shkreli have nothing to do with the fact that he increased the price of a lifesaving anti-parasitic medication to $750 a tablet from $13.50 each. It is just Karma, that he was arrested for his limitless greed.
The charges against him are that he illegally took stock from Retrophin Inc., a biotech company Mr. Shkreli founded in 2011 and from which he was fired in 2014 and then used it to pay off disgruntled investors from another failed venture, MSMB Capital management.
He may end up in jail or he may be back on Wall Street but he is not a scientifically trained person, but a money-manager who uses hedge funds to acquire investors for his companies. However, his actions are a symptom of a much larger problem; the way drugs are approved and priced can lend itself to serious corruption and disincentives that make essential drugs unavailable.
Mr. Shkreli is legally exploiting an obscure U.S. government initiative that was supposed to spur development of drugs for neglected diseases and has, in many cases made them unaffordable.
Back in 2007, U.S. Congress adopted rules that would grant companies that develop drugs for rare tropical diseases and rare pediatric conditions a voucher that entitles them to expedited approval from the Food and Drug Administration. The voucher shaves about 4 months off the drug approval process. It also gives a company de facto exclusivity that can deter competitors and allow free rein to set prices, which can be worth billions.
In Canada, it seems we are less greedy. When a Canadian research team developed a cure for the Ebola virus, Health Canada hurried it through the approval process and provided it free to the victims of this disease. But of course, that is Canada.
Mr. Shkreli, our greedy American neighbour, seeks out companies that have developed drugs for neglected and rare diseases, drugs that have the potential to get voucher approval and purchase them. The loophole is that there are many drugs used to treat tropical diseases in developing countries that are not approved by the United States; by getting a voucher, companies such as Turing can essentially corner the market, jack up prices and make windfall profits. All of this is totally legal and even the price-fixing portion.
In Mr. Shkreli’s most publicized case, Turing Pharmaceuticals bought the rights to Daraprim, a 60 year old drug used to treat toxoplasmosis, a parasitic condition that affects people mostly with AIDS, from CorePharma. As the sole supplier, Turing could set any price it wanted and it did. In September, the cost of treatment jumped from $1,000 annually to $63,000 a year and Mr. Shkreli became known as the $750 a pill man.
In the United States, this activity causes people to have to sell their homes to pay for their drugs and in Canada it would cause Health Canada to delist the drug from all of our provincial formulas leaving these victims in the lurch.
In November, Turing moved again, purchasing KaloBios Pharmaceuticals, which produces the drug benznidazole, used to treat Chagas disease, another parasitic infection.
Treatment for Chagras currently costs $50 to $100 in Latin America. However, once Hoffman la Roche stopped making it and turned it over to a Brazilian manufacturer, there was first an immediate shortage of the drug and then availability at a much higher price. Right now in the United States the drug is provided free of charge but requires a lot of paperwork from your physician. When Turing wins FDA approval, the cost of treatment will actually wind up somewhere between $60,000 and $100,000 annually.
Wild price hikes to pharmaceutical drugs are much more commonplace than rare. What is puzzling is the very public way Mr.Shkreli draws attention to himself, his company and his sleazy practices. His previous company, Retrophin, raised the price of Thiola, used to treat a rare condition in which kidney stones recur repeatedly, to $30 a pill from $1.50. It also sold a voucher for the pediatric drug Cholbam to Sanofi Pharmaceuticals for $245 million. Another example of this practice is Knight Pharmaceuticals, which sold its voucher for the drug miltefosine for treatment of leishmaniasis (a parasitic illness caused by sandfly bites) to pharma giant Gilead for $125 million, though in that case the price of the drug did not increase substantially.
Mr.Shkreli has long been a hedge-fund investor. He takes risks on tiny, usually troubled biotech companies and sucks them dry for profit.
What he does has nothing to do with most of the pharmaceutical and biotech industries which have been unfairly tarred by his antics. With Turing, there is no research, no real investment and no original products, just exploitation.
Turing is to a research based-company like a loan-shark to a legitimate bank. His company is a parasite feeding on victims of parasitic diseases who tend to be poor and desperate.
Hopefully in the future the U.S.government will close this loophole that allows his parasitic behaviour. Eventually the American influence comes across the border and why should Canadians be compromised and possibly lose the ability to acquire drugs for rare diseases because of the evil and unethical actions of this one man.