Making a Killing in Big Pharma


2015-09-22 – A sickening story about drug pricing has been circulating the last couple days. Here’s the Daily Kos story:

Hedge Fund Manager Buys Rights to
Critical Drug, Hikes Price By 5000%

After the critical drug Daraprim was acquired by a pharmaceutical start-up run by former hedge fund manager Martin Shkreli, the company raised the price of each tablet of the stuff from $13.50 to $750, a 5556% increase. Daraprim is used to treat toxoplasmosis, a parasite infection, and malaria.

It’s a good thing for Shkreli that Daraprim is not an erectile dysfunction (ED) drug.

Because, if it were used for ED, the affected middle aged white males would put a stop to this shenanigan in an instant. Instead it is used for babies born to women who became infected during pregnancy, for people with compromised immune systems like AIDS and cancer patients, and for malaria patients. These people have no clout.

And many of them are poor, so the big price hike is going to be picked up by the government through Medicaid. People on regular health insurance or Medicare could be just out of luck.

* * *

Before I get into my rant, I want to say that I basically agree with the idea of free markets, but I have to emphasize the word “idea.” People get enamored with ideas. Often the facts of a situation fall short of the idea.

That’s what we have here. Pricing of drugs is not an example of a free market. It is crass distortion of a free market by private anti-competitive action. You can cry “free market,” but crying doesn’t make it so.

This happens wherever there is intellectual property. Those who create  intellectual property—whether it’s a drug or a song—and those who consume intellectual property are frequently crowded out by predatory hedge fund managers. These are folks who used to be reviled as middlemen when they jacked the price up 556%. But they need a new name when they jack it up 5556%. So I am calling them predatory hedge fund managers (PHFMs).

They operate in a market that is far from free. You see, they have a government sanctioned monopoly (called a patent) that allows them to charge whatever in the world they want. The only thing that limits the greed is the reduced demand for this drug that will come with the deaths of those who can’t afford it.


As always, this PFHM pleads that he needs the money to conduct research to create new and better drugs. This too is a lie. PFHMs are not in the business of finding cures for disease. PFHMs are in the business of buying and selling.

As I mentioned before, this kind of price gouging is made possible entirely by the government. But you won’t hear any Republicans crying outrage over something like this. Our anti-government party thinks that this is government at its best.

End of rant. Read on.

* * *

Now I’ve just dissed Martin Shkreli by calling him a PFHM. There’s nothing worse than a PFHM. But I thought it only fair for you to hear his side of the story.

Here is a Slate piece that contains a video interview of Shkreli. Don’t get put off by his smirks. Listen to what he has to say.

He brings up a several interesting points. One is that his company has a program to give the drug to people who can’t afford it. By his claim, half of the patients receiving the drug will be on a free or low-cost program. The other half will be paying a huge price. Isn’t there something weird about this? Our whole health care system is like this. Obamacare has made only a slight dent in these practices. (Single payer would improve the situation dramatically. Repeal would make it far worse.)

The second has to do with the cost of developing new drugs. They are huge. Companies do take big risks to develop new drugs and they want to be rewarded with big profits. At the same time, we know that companies mitigate their risks by cheating in the trials. Many of the drugs that turn a profit do little to improve peoples health (though, obviously, some do). Maybe risks this huge are too big to be borne by PFHMs. Remember, we’re not just talking dollar risk. We’re talking risks to people’s lives.

At the end of the day (as Shrkreli says repeatedly), the guy is a PFHM. He knows what is broken in our health care system. So that’s where he’s gone to make his billions.

But if the system is broken, shouldn’t we fix it rather than shovel more billions at guys like this?


@BernieSanders @Hillary Clinton

One response to “Making a Killing in Big Pharma

  1. Pingback: What Do ‘Happy Birthday’ and the AIDS Drugs Have in Common? | Eightoh9·

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