Former Hedge Fund Manager Raises Drug Price 5,000% Overnight and Fights Twitter

A 31-year-old former hedge fund manager served as the CEO of a publicly traded biotech company until he was fired for stock irregularities. The company sued him, seeking $65 million in damages for allegedly using company funds to pay off the claims of investors from his hedge fund. What would the next logical career step be for a fired and legally tied up manager with questionable ethics? How about licensing a crucial drug that’s been on the market for more than 60 years and raising the price from $13.50 per pill to $750.

The drug is Daraprim, a life-saving booster for weakened immune systems normally used by HIV and food-born illness patients. The former hedge fund manager is Martin Shkreli, of Turing Pharmaceutical. Shkreli inflated the price of Daraprim 5,000% over its previous purchase price overnight.

Turing licensed the older drug and re-marketed it with the new price tag and not much else. Their justification is that the income generated from the dramatic price increase will fund a next-generation version. The company issued an explanation through their website that read: “Toxoplasmosis is a very serious, sometimes deadly disease, yet there have been no significant advances or research into this disease area in decades. For toxoplasmosis and other critical, under-treated diseases, the status quo is not an option. Turing hopes to change that by targeting investments that both improve on the current formulation and seek to develop new therapeutics with better clinical profiles that we hope will help eradicate the disease”.

As expected, the public vitriol towards its representative, Shkreli, is intense. Victims of toxoplasmosis, the food born illness, have used Daraprim since 1953. The disease afflicts those with a weakened immune system from

diseases like HIV. Many have asked how the price-hike of such a vital drug is even legal.

The practice of licensing drugs and re-marketing them with a higher price tag is nothing new to the industry. Small pharmaceutical companies need venture capitalists to invest in biotechnology. The pressure of providing a huge return on the VC’s investment leads them to use questionable and highly unpopular practices. While the vast majority of VC funding goes towards developing novel drugs, there has been an increase in licensing older drugs and raising the price in the name of “research” as a profitable avenue.

Development and marketing of a new drug costs as much as $2 billion. The race to license older drugs with an existing market is far more cost-effective than developing something new. Most drugs companies fly under the radar and get away with it, but not this time.

Shkreli is a controversial figure. Instead of lying low while the controversy blows over, he’s fighting on Twitter by mocking critics ranging from a guy with less than 100 followers to a biotech journalist with his obnoxious, arrogant comments. Shortly after the New York Times article that broke the story’s release, Shkreli sent out more than 100 tweets to all the “haters”. The website, has a best-of compilation of his charming and eloquent tweets. He appears to love the attention and thinks he’s very clever.

But when news of his inappropriate harassment of a former colleague’s family and other questionable activities started publishing, Turing Pharmaceutical had a change of heart.

“Public concern for the increased cost of Daraprim has led Turing Pharmaceuticals to decide to lower the cost of the medication. In the coming weeks, we will be meeting with patient and physician groups to better understand their perspective on the balance between cost, reimbursement, and much-needed innovation. For now, we will work directly with any patient or institution to ensure anyone who needs Daraprim will receive it, including continuing to offer the medication without charge to qualified, uninsured patients”.

While some are relieved by the statement, given Shkreli’s track record, expect an insignificant discount and a new Twitter war.

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