Price Gouging of Daraprim

In September of this past year, a unique action taken by a minor pharmaceutical company known as Turing dominated the news. Martin Shkreli, founder and CEO of Turing, found himself instantly in the limelight for his quite controversial actions

Daraprim is a medication used in the treatment of certain infections. The most common infection, known as toxoplasmosis, is a parasitic infection of the brain and eyes that is particularly worrisome for people who are HIV positive. Daraprim is a long established drug that has been heavily used in the treatment of people with AIDS and cancer for the past 62 years. The drug once cost only $1 per tablet and cost $13.50 for a long while until September. Once Shkreli’s company acquired sole ownership of the drug, they raised the price 5556% to $750 per tablet.

Courtesy of Daily Mail

To many, this price gouge was unethical, despicable, and a variety of more profane things that I’ll leave to your imagination. However, this wasn’t the first time that price gouging struck the pharmaceutical industry. There are countless examples of significant price increases once a certain company became the sole distributor and producer of a certain drug. It’s often being done on newer drugs for cancer, Hepatitis C, and high cholesterol, but there are some cases of older established drugs being drastically hiked in price. Cycloserine, a long-used drug for tuberculosis, was hiked from $500 for 30 pills to over $10,000 this past year as well.

In fact, in a topical vein, two members of Congress reached out to Valeant Pharmaceuticals after they raised prices on two heart drugs by 525% and 212%. One of these congressman – presidential candidate Bernie Sanders.

But, I digress. Back to the bold businessman Martin Shkreli. A former hedge fund manager, Shkreli formerly served as CEO of a different pharma company known as Retrophin. While leading Retrophin, Shkreli also jacked up prices on a well-established kidney disease to over 20 times the original cost. Clearly, Shkreli has a history of aggressive business maneuvers to couple the absolute harshness of his impossible-to-type last name.

Courtesy of CNN Money

Initially, I felt about how you probably do right now; Shkreli is a shmuck. It’s absurd that any one company can step in and do the ridiculously steep price gouge that Turing did. There has to be some sort of legal loophole that Turing stepped through, and we need to close it. Actually, though, there is nothing illegal (or even vaguely illegal) about what they did to the price of Daraprim. To this end, it seems like a huge oversight by the legislative system that there isn’t some sort of control on price changes in the medical sector. These price hikes are toying with people’s health. Even though our market is a free one, when peoples’ health is at risk, there has to be some sort of control.

Without legal control over the system, the Infectious Diseases Society of America and the HIV Medicine Association sent a letter to Turing. In the letter, the two organizations (obviously) criticized the price gouging, arguing that it is unsustainable in the current health care system and unjustifiable given the current patient dependency on Daraprim.

In response, Shkreli claimed “This isn’t the greedy drug company trying to gouge patients, it is us trying to stay in business”. Representatives of Turing claim that the price hike was required in order to fund research that Turing was doing in other potential cures for toxoplasmosis. Dr. Aberg, of Mt. Sinai Hospital in NYC, disagrees, hypothesizing that the price hike “seems to be all profit driven for somebody…and think[s] it is a very dangerous process”.

Many agreed with Aberg’s negative perspective on Shkreli’s actions, including, most notably, Presidential candidate Hillary Clinton. Soon after the news broke, Clinton tweeted that this sort of price gouging is outrageous and that she will be planning ways to remedy this practice.

Courtesy of CNN Money

While this all seems like a reach for an ethics of money blog, this price gouging epidemic (a health pun for you dedicated readers) is incredibly controversial and strikes at the heart of some key economic issues. The debate itself comes down to regulation vs. free market principles. Shkreli formed a monopoly on Daraprim and then jacked the price up, a perfectly valid and legal action for someone who has entire pricing control over a product. Without being undercut, Shrekli can do whatever he wants with Turing. To many, this seems unethical, especially when it comes to medical products. For a drug that prevents HIV sufferers from getting life threatening infections, it seems that some control should be in place to protect the consumer.

Monopolies have always been the root of some problems. Many criticize the free market for not protecting consumers from the steep prices that monopolies can yield. Ever since Cecil Rhodes found all those diamonds in South Africa and formed the first monopoly, people have hated the idea. Unless, of course, you’re the smug monopolist.

Courtesy of The Daily Sheeple