[Marxism] Martin Shkreli All but Gloated Over Huge Drug Price Increases, Memos Show
lnp3 at panix.com
Wed Feb 3 09:34:21 MST 2016
NY Time, Feb. 3 2016
Martin Shkreli All but Gloated Over Huge Drug Price Increases, Memos Show
By ANDREW POLLACK and MATTHEW GOLDSTEIN
Martin Shkreli anticipated huge profits from raising the price of a
decades-old drug for an infectious disease, belying any notion that
helping patients was foremost in his mind, according to information
released by congressional investigators on Tuesday.
The investigators also provided evidence showing that Valeant
Pharmaceuticals International carefully pondered how much it could raise
the price of two old heart drugs, Isuprel and Nitropress, before buying
them a year ago and increasing their prices overnight, by 525 percent
for Isuprel and 212 percent for Nitropress.
Mr. Shkreli practically gloated about the potential profits in an email
he sent last August, just after his company, Turing Pharmaceuticals, had
paid $55 million to acquire the drug Daraprim, and had raised its price
more than fiftyfold to $750 a pill, or $75,000 for a bottle of 100.
“So 5,000 paying bottles at the new price is $375,000,000 — almost all
of it is profit and I think we will get three years of that or more,”
Mr. Shkreli wrote in the email to someone the congressional staff
identified only as an outside contact.
“Should be a very handsome investment for all of us. Let’s all cross our
fingers that the estimates are accurate.”
The email excerpt is included in a memo released by Representative
Elijah E. Cummings, the ranking Democrat on the House Committee on
Oversight and Government Reform, in advance of a committee hearing on
Thursday about drug price increases.
Mr. Shkreli left Turing after he was indicted on securities fraud
charges in December.
The House panel subpoenaed him to appear as a witness, but he has said
he will invoke his Fifth Amendment right and not answer questions.
He has also hired a new lawyer, Benjamin Brafman, replacing the lawyers
at Arnold & Porter, a major Washington firm.
Mr. Brafman is a seasoned New York criminal defense lawyer who has
specialized in representing prominent defendants, including celebrities
and members of organized crime families. His clients have included
Dominique Strauss-Kahn, the former managing director of the
International Monetary Fund; the hip-hop mogul Sean Combs, known
variously as Puff Daddy, Diddy and P. Diddy; and the pop star Michael
Mr. Brafman said no decision had been made on what Mr. Shkreli would do
with regards to Thursday’s hearing.
The memo released by Mr. Cummings contained excerpts and conclusions
gleaned by Democratic staff members from more than 250,000 pages of
documents provided by Turing. A separate memo about Valeant was based on
75,000 pages of documents from that company, whose interim chief
executive, Howard B. Schiller, is expected to testify at Thursday’s hearing.
The committee did not release all the documents or even the entire text
of the emails that were quoted.
Turing said in a statement on Tuesday that it set the drug price to
“balance patient access to our existing drugs with investment in
research and value generation for our shareholders.” It said that in
November — months after it set off public outrage for its price increase
— it began offering discounts of up to 50 percent to hospitals that use
large amounts of Daraprim.
Valeant said in a statement on Tuesday that it was now offering
discounts of up to 30 percent to hospitals on Isuprel and Nitropress.
“We’ve heard from hospitals, as well as from Congress, that we set the
price for these two drugs too high,” it said.
Mr. Shkreli, 32, gained attention in September after the huge overnight
increase in the price of Daraprim, a six-decade-old drug that is the
standard of care for toxoplasmosis, a serious parasitic infection.
Mr. Shkreli has argued that Daraprim was such a small-selling drug that
the price increase would not affect the health care system, and that the
company would help with co-payments and take other steps to make sure
that no patient would be denied the drug. He said the money from the
price increase would go toward research on new drugs, and Turing is
doing some such research.
But some of the documents released by congressional investigators show
some patients were being hit with co-payments as high as $16,800, and
others of $6,000, and Turing was receiving protests from doctors.
The documents also show Turing executives anticipated at least $200
million in annual revenue from Daraprim and were focused on the profits.
Last Sept. 17, Tina Ghorban, senior director of business analytics and
customer insights, forwarded a single purchase order for 96 bottles of
Daraprim at the full price. “Another $7.2 million. Pow!” she wrote.
One email to a commercial loan company in September said Turing was
considering going public in the first quarter of 2016 and acquiring
another drug, this time from Teva, that was “also going to be a big
price-increase deal with good upside.”
The recipient of the Aug. 27 email in which Mr. Shkreli gloats about the
money to be made on Daraprim is Gregory Rea, a Florida radiologist. Mr.
Rea, in a phone interview, said he did not want to discuss how he came
to know Mr. Shkreli and did not want to comment on the email “without
going through my records.”
Mr. Rea was an investor in a private placement that KaloBios
Pharmaceuticals, another company Mr. Shkreli briefly led, conducted in
early December. Mr. Rea invested $3 million in the private offering on
Dec. 4 that closed just days before Mr. Shkreli was arrested. KaloBios
fired Mr. Shkreli soon after his arrest and filed for bankruptcy at the
end of December.
On Jan. 7, Mr. Rea and other investors in the private placement filed a
lawsuit in the bankruptcy proceeding claiming they were “fraudulently
induced” to invest in the private placement and KaloBios should have
been aware of the pending criminal investigation against Mr. Shkreli.
The investors, including Mr. Rea, are seeking a return of their investment.
Another email was sent by Mr. Shkreli to an outside contact on Saturday,
Aug. 8, 2015, saying that the deal to acquire Daraprim would be
announced on the following Monday. In a subsequent email, Mr. Shkreli
estimated to the same unidentified contact that sales would be in the
$200 million range, according to the documents.
Regarding Valeant, the Democratic staff memo says the company identified
the revenue goals for Isuprel and Nitropress and raised the prices to
reach those goals.
Before buying the two drugs in February 2015, the company hired a
pricing consultant who concluded that there was ample room to raise the
price because previous big price increases had not dampened use.
One internal presentation showed that Isuprel and Nitropress had
combined “2015 plan revenue” of about $525 million, up from $153 million
in 2014 under the previous owner. The explanation for the big increase
was “aggressive pricing through consultant recommendation.”
One email that got attention on Wall Street was sent May 21, 2015, from
Mr. Schiller, who was then the chief financial officer, to J. Michael
Pearson, Valeant’s chief executive. Mr. Schiller said that price hikes
accounted for 60 percent of Valeant’s growth in the first quarter of
2015, or 80 percent if the company counted the contribution from the two
heart drugs it had just acquired.
That seemed to contradict comments made by Mr. Pearson on a conference
call announcing first quarter earnings, where he said, “Volume was
greater than price in terms of our growth.”
A spokeswoman for Valeant said that when the company talks about this
issue it refers to organic growth, excluding acquisitions.
The company, which has taken big price increases on other products
besides the two heart drugs, has been saying recently that it will rely
on volume growth in the future. Mr. Pearson is on medical leave after
the company said he was hospitalized with severe pneumonia just before
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