This story was updated at 7:50 p.m. on Dec. 17.
The arrest of Martin Shkreli gave pharmaceutical industry executives a golden opportunity to separate themselves from the “$750 pill guy” who has done so much damage to their image.
They might not want to celebrate too much.
When asked whether she saw a difference between Shkreli and the rest of the pharmaceutical industry, Representative Rosa DeLauro, who sits on a House Democrats task force on drug pricing, gave a one-word answer: “No.”
“I’m sure pharma guys will potentially try to make it, ‘Oh he’s just unusually bad and he’s out there by himself.’ I think that would be a huge mistake,” said former Health and Human Services Secretary Kathleen Sebelius.
The reality, Sebelius said, is that the public is still furious about rising drug prices, and Big Pharma won’t be able to pin all of the blame on a former hedge fund manager who gained notoriety this fall for raising the price of a decades-old drug used to treat AIDS patients more than fiftyfold.
“He may be the front of the line, but there’s certainly lots of others who are now in the sights,” Sebelius said. “To sort of say, ‘We’re all fine except for him,’ I think misses the point entirely.”
That may be true. But on Thursday, those in the industry took a moment to savor the spectacle of Shkreli’s arrest on securities fraud charges — complete with photos of law enforcement officers hauling him away.
“The word that is in just about every one of the emails or text messages that I’ve received has been ‘karma’ — karma’s coming back to bite you,” said Mark Baum, chief executive of the San Diego drug compounder Imprimis Pharmaceuticals, which makes a $1 alternative to the medication for which Shkreli raised the price from $13.50 to $750 per pill.
Baum said he had received more than 100 messages from friends and acquaintances in the pharmaceutical industry or on Wall Street in the seven hours after the news broke about Shkreli’s arrest.
Among the general public, the reaction on social media was gleeful. Peter LaMotte, a consultant who works with pharmaceutical and biotech companies at the Washington, D.C.-based public relations firm Levick, said he had never seen more people online use the word “schadenfreude.”
Even the FBI’s New York field office couldn’t resist chiming in on Twitter, saying agents didn’t have a warrant that would allow them to seize the coveted only copy of a Wu-Tang Clan album that Shkreli recently bought for $2 million.
Shkreli was released on $5 million bond late Thursday. He issued a statement through a spokesman, Craig Stevens, saying that he “strongly denies” the allegations and “expects to be fully vindicated.”
“It is no coincidence that these charges, the result of investigations which have been languishing for considerable time, have been filed at the same time of Shkreli’s high-profile, controversial and yet unrelated activities,” Stevens said.
Publicly, most pharmaceutical industry officials are keeping quiet about the charges, which don’t have anything to do with Shkreli’s work at Turing. Pharmaceutical Research and Manufacturers of America, the big industry group, said it wouldn’t comment on a “specific legal case.”
But John Maraganore, chief executive of Alnylam Pharmaceuticals (ALNY) who has been among Shkreli’s most vocal critics in the drug industry, said a conviction of the brash young executive would “highlight yet again how different he is from the rest of our industry.”
“Almost all of our companies in industry do not have hedge fund managers leading them, and almost all of the top companies in our industry do not have crooks leading them,” Maraganore said.
That sentiment reflects the strategy across the industry: Cut Shkreli loose. “They want to make him the face of evil in the industry as opposed to tarnishing the entire sector,” said Kenneth Kaitin, director of the Tufts Center for the Study of Drug Development.
Realistically, though, that’s not likely — especially given rising public anger over skyrocketing drug prices. In a recent poll by STAT and the Harvard T.H. Chan School of Public Health, three quarters of Americans said brand-name drug prices had become unreasonable, and fewer than half said drug companies are doing a good job for their customers.
Eric Dezenhall, a crisis communications consultant in Washington, said he always tells his clients to keep their expectations realistic in a public relations crisis. “The best you’re going to be able to do is differentiate your actions from this guy,” he said. “You’re not going to make people happy about the fact that drug companies make a lot of money and a lot of their products are expensive.”
In fact, Robert Blendon, a public opinion expert at Harvard University who directed the STAT-Harvard poll, said the incident could actually hurt the pharmaceutical industry in one important way: It could put drug prices back on the national agenda after a long period in which terrorism has dominated the political discussion, especially on the presidential campaign trail.
So far, the presidential contenders have kept quiet about the Shkreli arrest — including Hillary Clinton and Bernie Sanders, the Democratic candidates who have called him out as the symbol of out-of-control drug costs.
But the two top senators on the Senate Special Committee on Aging — chairwoman Susan Collins, a Maine Republican, and ranking Democrat Claire McCaskill of Missouri — released a statement saying the committee’s investigation of the causes of drug price hikes would continue. House Democrats, meanwhile, hope to call Shkreli in to testify.
Baum, the chief executive of the compounder that competes with Turing, said he would welcome a political focus on pricing policies.
“I don’t think this is a time to gloat, I don’t think this is a time to be happy,” he said. “It’s really a time for policymakers to buckle down and end these practices.”
The biggest thing pharma companies can do to distance themselves from Shkreli is to be transparent, said LaMotte, the public relations consultant.
“What executives and boards have to do is make sure that their actions cannot be associated in any way with his behavior,” LaMotte said. “They want to make sure that they are taking actions that show … they are ethical players in this industry and for their shareholders.”
Dylan Scott contributed to this report.