If you watched any news last week, you likely saw the spectacle of former Turing Pharmaceuticals CEO Martin Shkreli smirking his way through a hearing before the House Committee on Oversight and Government Reform. From the multiple whispers from his attorney and the Fifth Amendment pleas, I don’t think we’ve seen a more prototypical Big [insert hated industry] “defendant.”
Here’s the back story:
Daraprim [owned by Turing] fights toxoplasmosis, which infects people whose immune systems have been weakened by AIDS, chemotherapy and pregnancy, according to the Center of Disease Control. It’s also used to treat malaria.
Turing Pharmaceuticals of New York bought the drug from Impax Laboratories in August for $55 million and raised the price from $13.50 a tablet to $750.
For some patients, this hike in price brings the annual cost of treatment to hundreds of thousands of dollars. Even those with insurance could be paying $150 a tablet.
The company will be putting the money it makes into developing better treatments for toxoplasmosis, with fewer side effects. They also plan on investing in marketing and education tools to make people more aware of the disease.
The federal government, oblivious to its involvement in the mess that is the pharmaceutical industry, heard the people’s outrage, and so whipped up a bureaucratic lynch mob (see the videos):
Congressman Jason Chaffetz (R-UT 3rd) to current Turing CEO Nancy Retzlaff: “Ms. Retzlaff, uh, the proper role of Congress is not to micromanage a private company. Um, it’s not my role, um, but, and I do believe in the right to profit. I think profit is a motivator that does a lot of good.”
But I also do believe that’s it’s imperative that people tell the truth, that they’re ethical, that they not mislead the public, that they properly represent the truth. Would you disagree with that, or agree with that?
Have you noticed that most of what people say before the word “but” is a lie? Chaffetz showed a little statist ankle when he conceded that profit is a “motivator that does a lot of good” — as if profit is an adorable, ancillary benefit and not the cornerstone of a business. After Chaffetz threw out a flimsy “I believe in the free market” disclaimer, he questioned how extra profit is defined, and what Turing was doing with that profit — as if it’s any of his business.
Let’s get this out, right here and now: Shkreli looks and acts like a weasel. Aside from Daraprim, he has other problems including securities improprieties as well as an alleged copyright infringement for artwork on a single copy of a Wu Tang Clan album he bought for $2 million. He’s a bad CEO for bringing bad press upon his company as well as flubbing a platinum opportunity to educate the public on why drug prices are rising out of the reach of most Americans (good article on that here). Also in the hearing were Congressman Trey Gowdy (R-SC 4th), who said Shkreli had a great opportunity to educate Congress on high drug prices, and Congressman Elijah Cummings (D-MD 7th) who, in a rare moment of clarity, said Shkreli had a chance to “change the system.” They were both right.
“But but but,” you interject. What about Daraprim and the fact that Shkreli was price gouging? He’s evil, right??Wouldn’t you know it, there are other ways to treat toxoplasmosis. This makes Shkreli’s decision to raise the price so high a bad decision. Today’s global economy might produce a few truly unique goods or services, but their uniqueness is always short lived. Rest assured, the minute you think you have the only special sauce, there’s someone in his garage producing it better or cheaper than you.
I am no special pleader for drug companies; I am a special pleader for free enterprise. CEOs are responsible for the value of the organizations they lead. The equation is simple: Bring in more money than you spend.
Sometimes it takes years for the equation to be positive, and many years you run negative. In the end, stakeholders — private investors or public stockholders — must get a return on their money, or they go elsewhere and the CEO or president is usually canned.
The Daraprim story is an indictment of the media in false reporting this story (it took me all of five minutes to find alternatives to Daraprim), an indictment of a smarmy, little pipsqueak CEO who made multiple bad decisions as leader of his company, and an indictment of Chaffetz, Gowdy, Cummings, and virtually all of Washington, D.C., who tepidly claim to support free enterprise but — in hauling industry leaders before a panel to berate them on how they manage their companies — act as only statists can.
Image: Screen Shot, from ToMo News, courtesy of: https://www.youtube.com/watch?v=Ek6PRSrG_O8