Entrepreneur Martin Shkreli made the drug Daraprim famous by engaging in pharmaceutical price gouging. But it isn’t as simple as one little man trying to pull one over on the insurance industry (and, therefore, every person who pays for insurance) with a get-rich-quick scheme. Here’s some background information about the much-maligned guy:
1. According to the 2012 edition of Davis’s Drug Guide, a commonly used medical reference manual, Daraprim (pyrimethamine) is used to treat certain strains of malaria, pneumonia, and a parasitic infection called toxoplasmosis. For the treatment of toxoplasmosis, Daraprim is taken daily for six weeks with an antibiotic in a group called sulfonamides. Although sulfonamide antibiotics are very common, Daraprim is the only drug of its type available for toxoplasmosis and is therefore a necessary part of treatment. Toxoplasmosis is usually curable, but in some cases the disease remains chronic, meaning the pills must be taken daily for years, perhaps for life. This all means the drug was already a major financial hurdle for patients even at the “lower” price of $13.50 per pill, before Shkreli’s company bought it.
2. The U.S. Centers for Disease Control and Prevention (CDC) recently heightened its research into toxoplasmosis, because it is estimated that 22% of the U.S. population will become infected with the parasite at some point in their lives. Spores of the toxoplasmosis parasite are passed to humans by eating undercooked meat, primarily pork, or from accidentally ingesting the spores after touching cat feces. In an average healthy adult, the disease usually does not cause symptoms and is controlled by the person’s natural immune system. However, it can be very dangerous in people with compromised immune systems, such as people with AIDS or those being treated for cancer, as well as women who are pregnant who can spread the disease to their children during birth. Symptoms of toxoplasmosis include seizures, lung scarring, blurred vision due to retinal swelling, and altered mental status.
3. Shkreli claimed that the price increase was necessary to make a profit on the medicine, since previous drug companies were “giving it away” at $13.50 per pill. However, anyone who has watched Shark Tank on TV would know that the first thing investors look for is a proof of profitability before taking on an investment risk, so it certainly raises the question of whether or not Shkreli was speaking the truth with that claim.
It is an easy question to answer: Daraprim seems to have been very profitable when Shkreli bought it. According to IMS Health, which tracks costs of prescription medicine, the pills were sold for $1 each for many years by pharmaceutical giant GlaxoSmithKline (GSK). Then in 2010, a company named CorePharma bought the rights to manufacture and sell the drug in the U.S., where drug prices are not regulated. GSK retained rights to sell the drug in the rest of its markets around the world. CorePharma then engaged in the “we have to raise prices to fund research” scheme, and by 2014 they had raised the price to $13.50 per pill. That is a 1,350% increase in four years. Due to that increase in price, number of sales fell slightly, most likely among patients with diseases that could be treated with other drugs; but thanks to patients with toxoplasmosis, revenue of Daraprim sales shot through the roof, from under $700,000 to $9.9 million. In other words, it seems Shkreli lied.