Daraprim's market is very small -- about 2,000 people annually in the United States -- and the patients who need it REALLY need it.
A generic version of Daraprim sells for less than $1 a pill in the U.K., and its U.S. manufacturer sold it for as little as $1 a pill not many years ago. More recently the price had been raised to $13.50 a pill, which was rather high.
But then in August, something remarkable happened.
The drug was acquired by Turing Pharmaceuticals, which immediately raised the Daraprim price by 5,550 percent, to $750 a tablet.
Not surprisingly, reactions to the price increase were swift and angry. Turing got lots of bad press even after its founder, Martin Shkreli, explained that the new, higher price would generate money that Turing would invest in medical research to develop new products for the betterment of all mankind.
A September post on the Business Insider website said this of the guy:
Shkreli has been named in numerous lawsuits in which he was accused of carrying
out "schemes" to take money from former employers; making "false and misleading
statements"; deceiving "the investing public"; and using Facebook and other social-
media channels to harass family members of a man with whom he had a business
dispute. Along with these allegations about his professional conduct, Shkreli is also
facing an accusation of "gross" behavior in his personal life.
Recently, Turing has announced that it will discount the Daraprim price by as much as 50 percent -- to a scant $375 a pill -- in sales to hospitals.
On Thursday Shkreli was interviewed at a business summit sponsored by Forbes magazine, where he told a slightly different, less ennobling story.
"I could have raised (the price) higher and made more profits for our shareholders,
which is my primary duty. No one wants to say it, no one's proud of it, but this is a
capitalist society, capitalist system and capitalist rules, and my investors expect me
to maximize profits, not to minimize them, or go half, or go 70 percent, but to go to
100 percent of the profit curve that we're all taught in MBA class."
My understanding of capitalist theory is that, ideally, it works for everyone -- businesses supplying wanted goods to consumers willing to pay fair prices. Shkreli sounds more like a rape-and-pillage guy to me. Like him, I have an MBA (at least he claims to have one), but what do I know?
In fact, a pharmacy benefit company is planning a workaround -- compounding, or filling individual orders one at a time -- to get the essential ingredient of Daraprim to patients at a reasonable price. I hope it works.
Still, we must keep in mind that Turing bought Daraprim based on an assumed price of $13.50 a dose. It seems likely that Shkreli can cut his new price very substantially and still make a profit.
Corporate Drug Abuse
We have a lot of problems with pharma companies in this country, including these: overinvestment in products to treat wrinkles and hair loss, underinvestment in drugs to treat serious conditions that afflict small numbers of people, and massive public advertising to plump up demand for newly patented drugs.
What I have described above is a newer abuse.
Once you get past the grotesquery of Turing's extortion of money from very sick people and their insurers, you have to conclude that Shkreli's strategy was pretty smart.
It is by no means unique. Turing is only the most recent wannabe to follow a path that seems to have been plowed by a now-prominent "pharmaceutical company" called Valeant.
More on that later.