Martin Shkreli, Poster Boy For Regulatory Capture And Patent Abuse

The New York Times has an article about a hedge fund operator named Martin Shkreli, whose firm, Turing Pharmaceuticals, has the apparent sole purpose of running up the cost of certain drugs. Since buying out the manufacturer of the drug Daraprim (a 62-year-old drug developed by Gertrude Elion to combat malaria, but now the only drug licensed to treat toxoplasmosis), the price of the drug has gone up from $13.50 a tablet to $750.

Martin Shkreli, the founder and chief executive of Turing, said that the drug is so rarely used that the impact on the health system would be minuscule and that Turing would use the money it earns to develop better treatments for toxoplasmosis, with fewer side effects.

“This isn’t the greedy drug company trying to gouge patients, it is us trying to stay in business,” Mr. Shkreli said. He said that many patients use the drug for far less than a year and that the price was now more in line with those of other drugs for rare diseases.

“This is still one of the smallest pharmaceutical products in the world,” he said. “It really doesn’t make sense to get any criticism for this.”

And yet. And yet. As always, the invaluable Techdirt has much, much more background on this than the NYT piece, which includes a look at the long-expired patents, and what Shkreli's actual plans are:

Turing, of course, defends the increased price by claiming the exorbitant profit margin will result in increased R&D. But let's take a closer look at what its spokesman is actually saying.

Rothenberg defended Daraprim's price, saying that the company will use the money it makes from sales to further research treatments for toxoplasmosis.

Translation: this money will be dumped into finding another variation to patent, thus locking out potential competitors and allowing Turing to continue charging whatever it wants for the medication.

They also plan to invest in marketing and education tools to make people more aware of the disease.

Translation: we will market the hell out of this new drug.

This sort of thing isn't exclusive to Turing. It's standard MO for all pharmaceutical companies. Rather than engage in meaningful competition, these companies are awarded lengthy monopolies on drugs and treatments by the US government. Turing is no different than Amedra -- part of the holding company acquired by Turing along with the Daraprim rights. But when Amedra acquired the rights from GlaxoSmithKline, it somehow managed to keep its price hike to a couple of dollars, rather than several hundred.

The FDA has built a regulatory moat around pharmaceutical companies which con artists like Shkreli use to their advantage, and to the detriment of everyone else. Patents are surely part of the story (they figure large in Turing's future plans for keeping the price of Daraprim high). The argument favoring patents is that without them, inventors wouldn't invent, but it's unclear that's ever true. The reverse, an endless stream of arbitrary restrictions and high prices for very old drugs, seems to be playing out almost every month now. Similar problems exist for regulating drug makers; why was there only one manufacturer of an elderly but still useful drug?

Update 2015-09-23: Techdirt once more has a useful followup; apparently Shkreli will do something good in the future about the price, but we don't know how much it will go down or when. Sounds great to me!