Profiting off Despair

The Incurable Greed Virus and the Demise of "Pharma Bro"

EXPLORE AFTER READING

In the world of pharmaceuticals, few names have sparked as much public outrage as Martin Shkreli. A former hedge fund manager turned pharmaceutical executive, he became infamous after drastically increasing the price of a life-saving medication—a move that ignited global debate over the ethics of drug pricing and access to essential medicines.

Shkreli’s notoriety began in 2015, when his company, Turing Pharmaceuticals, aimed to acquire off-patent drugs that were vital for specific patient populations, allowing it to benefit from existing demand without the lengthy process of developing new drugs. He purchased the rights to Daraprim (pyrimethamine), a decades-old drug used primarily to treat toxoplasmosis in immunocompromised patients, such as those with HIV/AIDS. Shortly after acquiring the drug from Impax Laboratories for an undisclosed sum, Shkreli raised its price overnight from $13.50 to $750 per pill—a staggering increase of more than 5,000 percent.

This decision had immediate and dramatic consequences. Hospitals and patients faced skyrocketing costs, raising fears that many would be unable to receive life-saving treatment. The move triggered a firestorm of criticism from patient advocates, politicians, and the general public. Media outlets quickly dubbed Shkreli “the most hated man in America,” and he became a symbol of pharmaceutical greed.

Price Gouging Epidemic

"Price gouging” refers to the practice of raising prices to an unreasonable or unfair level, often during emergencies, natural disasters, or crises when essential goods or services are in short supply. In the US, price gouging is both a legal and ethical issue, with many states having specific statutes to prohibit it, especially during officially declared emergencies.

One of the factors contributing to this phenomenon is the lack of competition. While not directly related to Daraprim, the Orphan Drug Act incentivizes pharmaceutical companies to develop drugs for rare diseases by providing extended market exclusivity. Companies can exploit this law to maintain high prices even when there is a meaningful need for the drug. When a company controls the supply of products, such as a monopolistic drug, particularly one with few or no alternatives, it gains significant power over pricing. Limited regulations on price-setting for older medications open the door for sudden increases when a new company acquires production rights, compounded by the lengthy and complex process to bring new drugs to market, which prevents timely introduction of generic versions.

While Shkreli’s actions caught headlines, he was not the only executive to exploit loopholes in the pharmaceutical market. Medication price gouging has long been a challenge in the United States. Shkreli often shifted some of the blame onto the pharmaceutical industry and healthcare system as a whole, arguing that Turing’s pricing reflected broader systemic issues related to drug development and insurance reimbursement practices.

There have been several instances where price gouging was practiced during crises and periods of desperation. After Hurricane Katrina devastated New Orleans and the Gulf Coast, there were widespread reports of steep price increases on essentials such as gasoline, with some stations accused of doubling or tripling prices overnight. In many areas, bottled water was sold for several dollars per bottle, and bags of ice for up to $10 each.

During the early stages of the COVID-19 pandemic, hand sanitizer bottles that typically cost $1 to $2 were sold online and in stores for up to $20 or more. N95 masks, usually priced under $2 each, were being sold for $10 to $30 per mask. Sellers on platforms like Amazon and eBay listed toilet paper and cleaning supplies for 10 to 20 times their normal prices. Some individuals and companies hoarded essential products to resell at extreme markups, prompting action from state attorneys general and online platforms.

Defending the Indefensible

Martin Shkreli often defended the price hike by invoking free market principles, suggesting that the pricing was justified as part of a competitive market landscape. He argued that companies should have the right to set prices based on demand and the necessity of the drug, asserting that the increase would not significantly affect patients, claiming that most patients using Daraprim had insurance that would cover the cost. He emphasized that Turing Pharmaceuticals primarily sold Daraprim to hospitals and specialty pharmacies, which would negotiate prices, thus shielding individual patients from the cost increase, as they would generally not have to pay the full price out of pocket.

He also contended that the price increase was necessary to fund research for new drugs, asserting that the revenue generated from Daraprim sales would help support the development of additional treatments for diseases, including potentially life-threatening conditions. He claimed that his focus on increasing the price was part of a broader strategy to ensure the sustainability of Turing Pharmaceuticals and its ability to innovate.

Welcomed Treatment

Shkreli's morally questionable actions resulted in a renewed examination of an ill pharmaceutical industry supposed to provide cures. His conduct highlighted vulnerabilities in the generic drug market and the potential for companies to exploit the lack of competition for older medications. This spurred efforts by the FDA to streamline generic drug approvals and identify drugs lacking generic alternatives. Several states responded by passing anti-price-gouging legislation and enacting price transparency requirements for prescription drugs.

The U.S. Department of Health and Human Services mandated that direct-to-consumer advertisements for drugs exceeding $35 per month prominently display their list prices. In 2019, Congress passed the CREATES Act, aimed at dismantling barriers that delayed generic competition - a tactic Shkreli had used to maintain his monopoly on Daraprim.

The Federal Trade Commission (FTC) and several states, including New York and California, pursued legal action against Shkreli and his company, according to the New York State Attorney General. These actions ultimately led to a lifetime ban from the pharmaceutical industry for Shkreli and a $64.6 million disgorgement order related to the anticompetitive scheme to prevent generic competition for Daraprim.

In response to the backlash and increased regulatory pressure, the pharmaceutical industry has reportedly become more cautious about implementing drastic price increases. Annual price hikes, which were once around 10%, have reportedly decreased to approximately 4%.

A Fatal Dose of Arrogance

Shkreli's combative, provocative, and unapologetic demeanor, along with his trolling on social media, and evilish looks, fueled public anger rather than sympathy.

While he did not face legal consequences specifically for price gouging, he was arrested in 2015 and convicted in 2017 on two counts of securities fraud and one count of conspiracy to commit securities fraud. He was sentenced to seven years in federal prison, has since been banned for life from participating in the industry, and was ordered to pay nearly $65 million.

Shkreli's lawyers tried to secure his early release due to concerns about the COVID-19 pandemic, arguing that he is at increased risk due to his pre-existing health conditions., but the request was denied. He was released from prison early in May 2022, serving a little over four years of his sentence. and moved to a community confinement program, which ended four months later.

As of 2025, he's been active online and is estimated to have a net worth of around $27 million, a decrease from the $70 million before his legal troubles. His current net worth is primarily tied to reported shares in various companies, including Travere Therapeutics, a biopharmaceutical company, which focuses on developing therapies for rare diseases.