Martin Shkreli, the CEO who infamously raised the price of a critical drug by 5,000%, spoke at the Forbes Healthcare Summit last week, reminding everyone of his reason for price gouging.
“It’s a business, we’re supposed to make as much money as possible,” he said at the conference.
While that may have seemed shockingly blunt, he also added a defence of his decision: His company, Turing Pharmaceuticals, is investing heavily in researching and developing drugs to treat other infectious diseases, particularly rare diseases, he said. In other words, the decision wasn’t entirely driven by greed.
But, according to experts in the health care industry, this argument doesn’t hold water. In fact, it’s completely backwards, they say.
Typically, companies raise money through capital campaigns, in which investors lend financial support to a company in the hopes that one day, they will make a profit off of the drugs the company develops. But they often don’t turn a profit for more than a decade while their drug takes all the necessary steps toward approval. It’s an incredibly high-risk business. For that reason, new, innovative drugs are typically priced higher under the argument that it’s an incentive for more innovation down the line.
That’s much different than what Shkreli’s company, Turing Pharmaceuticals, did with Daraprim: They bought the 62-year-old antiparasitic drug and raised its sticker price from $13.50 a pill to $750 a pill.
“It’s total hokum,” Sam Peltzman, a health economist and professor at the University of Chicago told Business Insider in September. “The sources of research funding are the attraction of getting a return on the research-funding investment. They do not come from someone making a lot of money and saying, ‘I’ve got nothing else better to do with it, so I better do some research.’ The economics is backwards in a statement like that.”
To his credit, Shkreli said he has raised the capital as well: about $100 million.
“We were spending it before, we will be spending after Daraprim,” he told Business Insider in October. “It’s more cash flow to spend on research.”
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