Turing CEO posts $5M bond, resigns

23 Dec 2015 | Author: | No comments yet »

How Martin Shkreli, the Teen Wolf of Wall Street, Thrived.

Shkreli was arrested Thursday in New York on charges related to hedge funds he ran and his old drug company Retrophin Inc. A news conference announcing federal securities fraud charges against former hedge fund boss Martin Shkreli took an unusual turn on Thursday with a question about a $2 million (Dh7.3 million) copy of a Wu-Tang Clan album he bought in May. Shkreli, 32, had bragged to Bloomberg Businessweek about buying the only copy of the popular New York-based hip-hop collective’s Once Upon a Time in Shaolin, drawing ire from music fans around the world when he said he had no plans to listen to it. But his strategy of finding an old drug, raising its price, and taking the profit is one that’s increasingly common among a new breed of drugmakers.

Disdaining a business model dependent on expensive research and development, companies like Shkreli’s Turing Pharmaceuticals, Valeant Pharmaceuticals International, Rodelis Therapeutics and others have taken advantage of inefficiencies in the U.S. health-care system. Shkreli’s alleged depravity stands out for its audacity and for his ability to keep the con going long after it should have been stopped dead in its tracks. The company announced today that Shkreli has resigned as CEO. “Shkreli has become the Wolf of Pharma Street — he’s basically come to represent everything that was bad and wrong with pharma,” said Art Caplan, a medical ethicist at New York Universitye. On Thursday, US Attorney Robert Capers told reporters, “We’re not aware of where he got the funds that he raised for the Wu-Tang Clan album.” Capers’ comments immediately spurred hopeful posts on social media from music lovers that the album might be forfeited by the Turing chief executive officer during his federal prosecution.

And while Shkreli may be reviled, said Caplan, “he’s not doing anything in terms of prices that other companies haven’t done.” The company took two heart drugs, Nitropress and Isuprel, and raised their prices by 212 percent and 525 percent, respectively. Shkreli is best known, of course, as the pharmaceutical entrepreneur who bought orphaned, lifesaving drugs and then jacked up their prices to astronomical levels. Rodelis was working to ensure “long-term availability” of the tuberculosis drug, and planned to maintain patients’ access, the company said on its website.

The drug’s rights were returned to the nonprofit Purdue Research Foundation, who sold it to Rodelis earlier this year, in September after an outcry over the price increase. Shkreli, called him “a genius,” adding, “I’m betting he’s going to make a billion dollars rather than blow up.” Earlier this month, Business Insider praised him for “exposing the critical need for balance between the interests of shareholders and patients.” According to the indictment, the only group that Mr. Questcor raised the price in 2007 because Acthar was no longer profitable, according to Mallinckrodt, and since it was acquired Mallinckrodt says its price increases have been in line with or below inflation. After his first hedge fund collapsed, he started a second, MSMB Capital, which also lost millions, although he assured investors that it was making them lots of money.

And he’s taken pains to distance himself from Turing and Shkreli. “To compare us to Turing is ridiculous,” Pearson said during a Dec. 15 interview with CNBC. “That is a single-product company.” Valeant declined to comment for this story. Yet Pearson has criticized Big Pharma companies for overspending on research, and the company has said that it looks for products that can be sold better and more profitably by Valeant. In Daraprim, and other drugs, Shkreli may have seen the same opportunity. “If you talk to anyone in pharma, maybe I don’t have the same resources as Pfizer, I may not have the same experience as Merck, but I’m crafty as f—,” Shkreli said in a Dec. 16 interview with the publication HipHopDX. To settle with Merrill, he used his investors’ money to pay the firm around $1.5 million, then liquidated his fund, telling investors they had “doubled their money,” and that they could get cash or a combination of cash and shares in a new health care company, Retrophin, he had incorporated. It said in September that Turing doesn’t represent its values, and in October that Valeant’s strategy “is more reflective of a hedge fund than an innovative biopharmaceutical company.” “It’s becoming a new financial model, it’s not just Turing — Horizon does this, Valeant does this,” Steve Miller, chief medical officer at drug-benefit manager Express Scripts Holding Co. said by phone.

He then started a third hedge fund, MSMB Healthcare, and, based on his misrepresentations of his previous performance, induced 13 people to invest $5 million in it. (It was around this time that the approving Forbes article appeared.), As Mr. Miller has been a frequent critic of drugmakers, and he sits at the other side of the negotiating table, managing pharmaceutical costs for health insurers. “We have a new class of leadership at these organizations that no longer feels encumbered by the social contract that had previously existed,” Miller said.

Last month, he acquired a majority stake in a floundering drugmaker, KaloBios Pharmaceuticals Inc., sending its shares soaring, and named himself CEO. Companies like Turing and Valeant that acquire drugs instead of developing them are the “exceptions and not the rule,” said Robert Langer, a professor at MIT and co-founder of more than 25 biotechnology companies.

The increase in the price of Turing’s drug, a potentially life-saving treatment for some children and people with HIV, isn’t right, said Hank Greely, a Stanford University bioethicist. After he pleaded not guilty to the charges of securities fraud and was released on $5 million bail, he tweeted that he was “glad to be home” and “thanks for the support.” But there hadn’t really been much. Dudley, the president of the Federal Reserve Bank of New York, to rehabilitate Wall Street by focusing “less on the search for bad apples and more on how to improve the apple barrels.” Can Wall Street change or is human nature beyond repair?

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