Vulture capitalists prey on patients

Turing Pharmaceuticals CEO Martin Shkrelidefends Daraprim price hike on CBS This Morning Sept. 22, 2015.
Turing Pharmaceuticals CEO Martin Shkrelidefends Daraprim price hike on CBS This Morning Sept. 22, 2015.

There’s a terrible new trend in the pharmaceutical industry: Buy an old drug that is the standard treatment for rare but life-threatening diseases, then jack up the price on the captive market.

We don’t criticize sharp business people for trying to make a buck, but these are vulture capitalists, not venture capitalists.

Their immediate victims are the patients who rely on these drugs to stay healthy. But we’ll all end up paying as insurers, hospitals and government health plans get hit with this price gouging. (A Medi-Cal spokesman says it will be keeping an eye on the potential impact.)

As The New York Times reported Sunday, officials and industry watchers are getting increasingly concerned about this rapacious practice. Some members of Congress launched investigations, which is good and necessary.

But clearly, federal regulators need to take a hard look as well. The Food and Drug Administration must reevaluate its rules for bringing old drugs into the modern marketplace, and determine whether loopholes are being unfairly exploited by these startups.

Exhibit A in this travesty is Martin Shkreli, a 32-year-old former hedge fund manager whose business model was to urge the FDA to reject drugs made by companies whose stock price he was betting would drop.

His new venture is Turing Pharmaceuticals, which in August paid $55 million for a drug called Daraprim. Approved by the FDA in 1953, it has been used to treat malaria, but is also the drug of choice against parasitic infections that attack patients with weakened immune systems, including those with HIV.

The drug’s price increased during a series of deals – from about $1 a tablet several years ago to $13.50. The companies increased their revenue even as the number of prescriptions held steady or declined. Turing immediately jacked up the cost again – to an astounding $750 per pill.

Medical groups quickly objected, calling the price spike “unjustifiable for the medically vulnerable patient population.”

The despicable tactics of Shkreli and his ilk give a black eye to Big Pharma, already viewed with suspicion by the public. While its trade group tweeted Tuesday that Turing “does not represent the values” of its members, reputable companies that actually spend the time and money to develop drugs ought to be more loudly condemning these parasitic startups, or they could face regulations they don’t want.

Thankfully, the bad publicity has already caused one reversal.

The going rate for cycloserine, used to treat about 40 patients a year who have tuberculosis resistant to other drugs, skyrocketed from $500 for 30 capsules to $10,800 after its rights were acquired last month by Rodelis Therapeutics. Rodelis has agreed to return the drug to its former owner, a nonprofit affiliated with Purdue University. It still plans to increase the price to $1,050, but that’s easier to stomach.

Hopefully, public shame will push Shkreli to do the right thing as well. Perhaps it already has. Late Tuesday, Shkreli told NBC News that the price will drop to a level where Turing will break even or make a “small profit.”

Even vulture capitalists, it seems, don’t want to be hated.