On August 4th 2017, “Pharma Bro” Martin Shkreli was convicted on 3 of 8 charges in court, including securities fraud. An American businessman, Shkreli was the co-founder of four large hedge funds, the co-founder and former CEO of the biotechnology firm Retrophin, as well as the founder and former CEO of Turing Pharmaceuticals. Morals and ethics have often been a point of contention when it comes to the decision-making of large pharmaceutical companies like Turing Pharmaceuticals. Turing itself fell under the spotlight in 2015 after raising the price of a lifesaving drug, Daraprim, by 5000% to the shock of patients, healthcare professionals, and the American public at large.
Daraprim was an FDA approved drug that had been on the market since 1953. Two years ago, under the leadership of Shkreli, Turing Pharmaceuticals bought the rights to the drug from Impax Laboratories and placed it on the market. Due to the lack of a generic replica of this drug on the market, the expiration of the patent on Daraprim, and restrictions imposed by the Turing-Imax agreement, Turing Pharmaceuticals was able to take control of drug prices. Overnight, the price of this life-saving drug surged from $13.50 per pill to an astonishing $750 per pill.
Daraprim is used alongside other medications to treat toxoplasmosis, a serious parasitic infection common in people afflicted with HIV. Turing Pharmaceutical’s surreal price hike was criticized by many groups including the Infectious Disease Society of America and the HIV Medication Association. In late 2015, Shkreili’s company decided to cut the price of daraprim by 50% for hospitals, where patients receive their initial treatment for toxoplasmosis, but the cost remained generally fixed around $375 per pill- about 2700% greater than previous years.
The increase in Daraprim’s prices placed an unjustifiable amount of stress on the patients and the healthcare system in general. It was reported that about 2000 American patients use Daraprim annually. The new annual cost for this treatment was recently estimated to be between $336,000 to $634,000. This placed additional pressures on ill patients and their families, who were forced to take into consideration the hefty price tag of their treatment.
When the cost for drugs such as Daraprim increased for users, it also increased for providers. Hospitals and other healthcare departments have a budget for their annual expenses, and skyrocketing prices of medication used in these facilities placed a limitation on the amount of resources that can be administered to patients. In 2016, the NORC of the University of Chicago presented the American Hospital Association with a report on hospital trends, specifically disclosing that the increased drug prices constricted hospitals from having accessible quality drugs and hindered them from fairly paying hospital professionals. In addition, the Daraprim cost increase also affected insured citizens, as private insurance companies had the right to refuse cost coverage of certain medications for a variety of reasons. If the insurance company did refuse to provide coverage, clients still had the right to fight the case, or pay from their own pocket. Regardless, someone has to eventually pay for these inflated prices.
For 16 years, Dr. Armstrong, a physician at Emory University, had treated HIV and AIDS patients. As reported by CNN, in 2016 of the Daraprim price hike, Dr. Armstrong was treating a patient who urgently needed the drug since they had developed a brain infection. Unfortunately, the hospital she worked for ran out of the drug in the middle of the patient’s treatment. Dr. Armstrong put in a request for more pills and immediately received a call from the hospital’s pharmacy, informing her that the order for more Daraprim would have to go through the hospital review committee- a tedious process in a an urgent situation.
Although pharmaceutical companies have a moral obligation to the public, pharmaceutical companies are still largely considered a business. Daraprim had been in the market for over 60 years with no advancements made to its formula by any company. This disease that Daraprim treats effects less than 1% of the American population, making this a very unlucrative market. In the eyes of companies such as Turning Pharmaceuticals, they must raise drug prices to make a return on investment, continue advancing their drugs, and stay in business. However, an absurd raise in price overnight, by over 5000%, creates unexpected and unreasonable challenges for the entire healthcare system.
Daraprim is not the first drug to experience a controversial price hike, nor is it the first price hike Shkreli has been responsible for. Back in 2014, Shkreli’s biotechnology company, Retrophin, raised the price of Thiola from $1.50 to $30 per pill.
The route that Shkreli took with Turing Pharmaceuticals and his acquisition of Daraprim is not illegal, nor is price gouging. There was no legal action taken for this behavior, but the shock of the his actions was felt across the nation. His strategic business plans took research, time, and the evaluation of the drug, as well as a final decision: is reaping in a profit of more value than the lives of thousands? Companies such as Turing Pharmaceuticals often exercise their ability to exploit the inelastic demand for medications that treat rare illnesses. The question that remains is whether or not Shkreli’s imminent downfall is a lesson to other pharmaceutical companies, or whether pharmaceutical gambling is bound to be repeated in the future. One would certainly hope not.
By Dhruvika Angrish