Martin Shkreli says securities fraud charges are ‘baseless’

23 Dec 2015 | Author: | No comments yet »

Former drug executive Martin Shkreli calls fraud allegations ‘baseless’.

NEW YORK: Martin Shkreli, the boyish pharmaceutical entrepreneur who caused a public uproar after he drastically raised the price of a life-saving prescription drug, was arrested on Thursday for engaging in what US prosecutors said was a Ponzi-like scheme at his former hedge fund and a pharmaceutical company he previously headed.

There is ample evidence that drug prices have been pushed to astronomical heights for no reason other than the desire of drug makers to maximize profits. Shkreli, who has become a lightning rod for growing outrage over soaring prescription drug prices, was arrested before dawn at the tony Murray Hill Tower Apartments in midtown Manhattan.

Prices in many cases far exceed what’s needed to cover the costs of research and clinical trials, and some companies have found ways to rake in profits even without shouldering the cost of drug development. Prosecutors allege that he designed a “Ponzi-like scheme” in which he illegally used assets from a biopharmaceutical company that he founded, Retrophin Inc., to pay off debts from a hedge fund he also managed.

The two worst offenders are bottom feeders that simply buy companies they believe have underpriced their drugs and then quickly raise prices to astronomical levels. It was a dramatic turn of events for Shkreli, who in recent months became a pariah for his controversial remarks in the press and taunts on social media outlets, including to Democratic presidential candidate Bernie Sanders. It also protected its high-priced dermatology drugs by urging doctors to send prescriptions to a mail-order pharmacy that would make sure no cheaper alternative was substituted.

The Pharmaceutical Research and Manufacturers of America, a trade group, described Turing and Valeant as essentially investment vehicles “masquerading as pharmaceutical companies.” Yet even some mainstream companies have set high prices that seem hard to justify. In an odd foreshadowing of events, a video posted last night on his YouTube page shows Shkreli answering a phone call during a live stream in which a caller at 1:22:10 identifies himself as a “special agent” before Shkreli appears to cut him off and hangs up. Previously Hillary Clinton, the frontrunner for the Democratic presidential nomination, pilloried him for price-gouging, and he was pulled into congressional investigations into drug pricing. Eli Lilly said its new lung cancer drug, Portrazza, would cost about $11,430 a month in the United States, six times the $1,870 price that leading oncologists said in a recent journal article would be a fair reflection of the benefit the drug offers compared with older therapies.

Shkreli, who is chief executive officer of Turing Pharmaceuticals and KaloBios Pharmaceuticals Inc, was charged in a federal indictment filed in Brooklyn relating to his management of hedge fund MSMB Capital Management and biopharmaceutical company Retrophin Inc. Similarly, Pfizer set the list price for Ibrance, a drug to treat a form of advanced breast cancer, at $9,850 a month, a price that remains high even after the 20 percent discount demanded by insurers. But in employer-based health insurance plans, drug benefits account for 19 percent of spending, not much less than spending on inpatient hospital care, according to a recent analysis by the Kaiser Family Foundation.

The indictment, the result of an ongoing investigation, also charged Evan Greebel, a former partner at law firm Katten Muchin Rosenman who was Retrophin’s outside counsel. Experts have proposed several ways to reduce drug prices, like fostering greater competition among drug companies or allowing the government to negotiate lower prices. Encouraging the development of innovative drugs and setting prices in ways that make lifesaving medicines affordable to all are not mutually exclusive ideas.

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