Martin Shkreli’s name has become synonymous with pharmaceutical industry greed. He’s drawing fire as our villain, our Joker. But like Heath Ledger, Shkreli has stolen the movie.
When, as CEO of Turing Pharmaceuticals, Shkreli abruptly raised the price of a decades-old medication more than fiftyfold, he earned scorn from others in the pharmaceutical industry, Congress, the media, and the American public.
More than a year later, a new public relations campaign by the industry trade group PhRMA has cast Shkreli as a scoundrel in a hoodie who does not represent an industry of angels wearing white lab coats.
I understand why PhRMA feels compelled to discredit and distance itself from Shkreli, especially now that he’s under federal indictment on security fraud charges. But aspersions against the industry are no longer just from the fringes: It is a rare dinner conversation these days in which I enjoy mentioning that I work in pharma.
Yet I’m more than a little appalled by the tone-deaf nature of the latest plea from PhRMA that says, “trust us, we got this; pharmaceutical development is really hard; you wouldn’t believe the economics but sometimes, despite the odds, we give you a great new medicine.”
Although industry lobbyists have tried to paint Shkreli as “not us,” some of his jabs, cringe-worthy though they may be, are on target. Shkreli has called attention to the hypocrisy in his vilification, calling out companies that pulled back from selling drugs to his company only to raise the price by 400 percent overnight, as well as companies whose entire annual increases in revenue came from boosting prices instead of launching new products.
Shkreli may choose to communicate in a way that most pharmaceutical company CEOs won’t, but what he is saying is often something we all need to hear. In choosing to speak when most apparently prefer the “strategy” of see no evil, hear no evil, speak no evil, Shkreli has been an easy sacrifice to appease the critics.
I don’t like Shkreli’s business model. But the industry created it and defended it well before he came along — and is still using it. Sadly, the issue has become more about magnitude than ethics. Who decided that Allergan’s 9 percent yearly increases are OK while Mylan’s 400 percent increase isn’t? This issue isn’t something the pharmaceutical community has discussed.
The latest play by PhRMA seems to be this: We’re ethical and deserve our just reward. Those who aren’t ethical don’t deserve a reward. Innovative pharma gives you new drugs, so leave us to our lab benches and focus your scorn on that guy there.
I believe that most of the people working in ethical pharmaceutical companies deserve to be seen more positively. That’s why I am leading the development of a code of ethics for the industry. I went looking for a code — but couldn’t find one — because I don’t believe we can fix our reputation by somehow getting the public to believe that because our work is hard we deserve to be rewarded for it, and that if they don’t start liking us they won’t get new drugs.
If companies factor in the cost of all of their failures into the price of each new drug, with little incentive to keep costs down, then incentives to fail cautiously are lost. But let’s be honest — we are not trying to limit the price of our new medicines. Companies price their drugs at what someone will pay or, more typically, at what someone can’t refuse to pay. And even if a company limits its yearly increase to 9 percent, what the public hears is that it is raising an old product’s price because it can, not because the drug suddenly became 9 percent more valuable. The antipsychotic medication Fanapt, for example, isn’t 160 percent more valuable today than it was in 2012.
The public already knows that the medicines we make can be enormously valuable. They just think we charge too much for them, and it is hard to find a good argument that we aren’t doing that. Take Sovaldi — Gilead launched a cure for the scourge of hepatitis C, something everyone wanted, priced it at what the market couldn’t refuse, and then faced the inevitable backlash.
In good years, innovation in the pharmaceutical industry amounts to 30 to 40 new products. Yet we’re charging the world for the 50,000 candidates that it took us to get to those 30 or 40. And that ratio is unlikely to change for as long as the market will bear the increasing cost. Unfortunately, there are signs that the market and public opinion have changed, and the lobbyists have chosen to ignore them.
The answer to fixing the pharmaceutical industry’s reputation doesn’t lie in vilifying Shkreli. He just supersized its business model, one that the lobbyists are defending at all costs.
Instead, we must choose to be different. We need to regain our ethical core and to be, once again, known as ethical pharma. And that’s where we need real leadership.
Mike Rea is CEO of IDEA Pharma, the global path-to-market design practice behind the Productive Innovation Index.
What is the difference between what Skreli did, and what AZ is doing with Vimovo? $2400 for 60 tablets. About $40/pill. This for a combination of Nexium ($2 a pill, to drop shortly as generics flood in), and naproxen sodium (6 CENTS a pill). This is, in effect, a 38 dollar per pill charge for nothing more than mixing two existing drugs together! Or, we could look at Pfizer’s drive to move off-shore to save on taxes. Granted, the CEOs of these companies have a fiduciary duty to increase revenue and cut costs to increase long-term profit, but if their only innovative moves are financial dodges, and grossly obscene price hikes on existing medicines, what does that really say about big pharma’s research productivity?
skreli was wrong with his business model, but many others also have those models. He just didnt try to hide it. He is right with his rebuttal in pharmaskeletons.com. there are many bad players. the price issue to me is pricing “me too” drugs too high, rising the price dramatically of old drugs, and even the continually 10% raises per year of almost all meds. I do think pharma should self-impose a max 5% price increase per year. its still 2x inflation, and the price of infrastructure gets lower and lower each year after a drug is on the market for 7+ yrs. pricing a very life saving or cure worth innovative drug very high at the beginning doesnt bother me, unless is is a drug like Sarepta’s where they have an outrageous price for a drug that has not been proven to work
FDA could also do a lot more to expedite approval of generics. and the continually patent litigations to block biosimilars is something that needs to be addressed.
PhRMA Should Have Listened to THIS “Guy in a Hoodie” aka me! http://sco.lt/8ZJw2L
Shkreli didn’t raise the price of a new innovative product but of a old one. ….all the talk here of the cost of developing new drugs is beside the point.
A big problem seems to be that the FDA restrains the marketing of generics. Shkreli and others are just using regulations to build monopolies.
So, what *are* the author’s ideas to make the pharmaceutical industry ethical again?
I don’t have the answers, but I do have questions… There’s more here: http://ideapharma.com/junkie/ethical-pharmas-code-of-ethics?sthash.Sq2GJ7sB.mjjo
Frankly, I’d hope no-one was interested in my ideas, but in those of the group of people I’m assembling.
The first thing is to agree on/ discuss an ethical standpoint – not just on issues like pricing, but on developing world access, diversity in clinical trial recruitment, etc.
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