A (Tentative) Defense of Martin Shkreli

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In the last few days, Martin Shkreli has become the Internet’s most hated man. The short of it is that after acquiring the rights to Daraprim, a drug used to treat toxoplasmosis- he immediately raised its price by 5500%, meaning that a yearlong course of the drug could cost in excess of $35,000. Given that its most common use is to treat opportunistic secondary infections in AIDS patients, people saw his actions as rapacious, immoral, and cruel. When you listen to him being interviewed, he certainly comes off as a douche (and his personal history seems to reinforce this impression), but what he’s doing may not be as terrible as we’re making it out to be. Forgive me if I take a slightly long wind-up in this explanation…

Some background: in 2000, I took an externship working in South Africa at the Centre for Applied Legal Studies. The Centre, located in Johannesburg’s University of Witwatersrand, financed the country’s top legal scholars to work on cases that they might not otherwise be able to take because they might involve lengthy and expensive litigation. I was placed in the Centre’s AIDS Law Project (ALP), a division whose main mission was to work with large pharmaceuticals to get reductions in the price of antiretroviral medications and other drugs needed by people at various stages of the HIV-ARC[1]-AIDS continuum (fighting secondary infections, etc.).

Put succinctly, ALP was suing the drug manufacturers on several grounds, including violations of the South African Constitution’s human rights provisions and also international patent law. It was an open secret, however, that the suit was mostly a means of leverage to get BigPharma to negotiate lower drug prices and to agree to not prosecute patent cases against makers of generic versions of drugs used in the AIDS cocktail. For the most part, the strategy worked. ALP didn’t get everything we wanted, but most of the large manufacturers did agree to allow generic manufacturing before the expiration of the patent, and they also distributed free and below-cost drugs as well.

But, the pharmaceutical companies did put important restrictions into the deal. Primarily, they wanted these deep discounts to be focused *only* in developing countries, and thus any company that manufactured generics could not export to the United States or Western Europe, nor could any country that received the generic or reduced cost drugs export those drugs to the United States or Western Europe. Moreover, there was discussion privately and in the South African media that the reductions in cost in Africa and Southeast Asia would also bring with them increases in the same drugs in America and Europe because the companies needed to make up for losses by passing them along to people who could pay.

Most South African lawyers and healthcare advocates accepted this as something that simply had to be. That is, absent the creation of a robust and capable system of not-for-profit drug research centers, South Africa (where one in six people was HIV-positive, and 45% of all deaths were HIV-related) hoped for the creation of new drugs that might either cure AIDS, provide a vaccine, or offer easier treatments that required less logistical support and had fewer side effects.[2]  The big pharmaceutical companies told ALP that if there was no path to profitability for AIDS research, they would simply stop doing it. We had every reason to believe them, and I still do. Given the need for profitability of AIDS medications, these costs were always –if we are being frank- going to be passed along to people in the West who could afford to pay for the medications.

Now, getting back Martin Shkreli. In his interview with Bloomberg  he made several points (he may very well be lying, of course):

  • The profits from the hiked prices are being put back into research for a better version of this drug that had fewer side effects and was easier to administer.
  • There are enormous costs associated with distributing this particular drug. (very true)
  • People who cannot afford it will get it for either very cheap, or even for free.

This is basically the paradigm that negotiators at ALP sought to get from the pharmaceutical companies in 2000. That is, the drug is affordable for people who can pay, and expensive for people who can pay more. If he’s telling the truth, this is about how it has to be. One can quibble with the numbers, but under our current paradigm, I’m happy with any system that a) provides drugs to those who can’t afford it and b) puts profits back into research for better drugs. The logic of this would seem to add a Point C): the costs + profit amount gets passed along to people who can pay.

Now, there are perhaps bigger arguments that can be made about whether a for-profit healthcare or pharmaceutical industry makes sense or whether there could be more robust government systems that subsidize the creation of drugs that might not be profitable but would have important public health benefits. But, absent that sort of massive change, what we’re likely going to have to strive for as a workable ideal is some version of what Martin Shkreli is doing: soak people capable of paying, provide it free for those can’t, and put some of the profits into improving the drug.

That said, my douche alarm does go off here, so I remain skeptical about whether he’s actually doing what he says. Going forward, we’ll need to see whether in fact he is making the drug affordable for everyone and how much of the profit is being put back into research.

Either way, in the specific case of AIDS drugs it will likely be the case that without massive government subsidies, people who can pay are going to pay a lot more than they might otherwise had paid simply because the demographics of this disease include so many more poor people than rich or insured middle-class.

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[1] ARC is no longer used clinically in the United States or South Africa, but in 2000 it was. We now have more precise and useful ways of describing and quantifying the nature of people’s HIV infections.

[2] The HIV cocktail has numerous unpleasant side effects, and it is expensive and difficult to distribute these drugs in rural and poor urban areas of South Africa where the vast majority of HIV-positive people live.

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