The arrest of Martin Shkreli on charges of securities fraud has certainly attracted attention, and the internet is riddled with helpful advice, mainly directed to ensuring Shkreli has to pay a huge amount more than anyone else for the same service, especially lawyers’ fees, or bail fees. The reason lies in Shkreli having had control of Turing Pharmaceuticals, which purchased to sole rights in the US for the drug Daraprim. Daraprim is the go-to drug for treating toxoplasmosis, which, while not common, can be deadly for unborn babies and for people with compromised immune systems. He then decided to raise the price of a pill from $13.50 to $750, seemingly because he wanted more money. Don’t we all! Somewhat later, he stated that if he had the opportunity to do it again, he would have raised it higher. Now, there is compassion and contrition, Wall St style.
Naturally, this sort of person does not do something only once. Kalobios Pharmaceuticals acquired the licence for Benznidazole, the standard treatment fro a deadly parasitic disease in Central and South America, and has announced plans to increase the price from something like $200 for two months, to something more like $60,000. So far, it appears it has not done it, and with Shkreli where he is, maybe they won’t. He is also allegedly responsible for raising the price of Thiola from $1.5 per pill to $30. A deeper background can be found at http://www.bloomberg.com/features/2015-martin-shkreli-securities-fraud/
However, the current arrest has nothing to do with price gouging, but rather to do with fraud. Shkreli has a raft of companies, and he is accused of taking money from one to pay off debts of another. He is accused of backdating records, making phoney loan agreements between one of his companies and a hedge fund, and creating sham consulting agreements as a way to route cash from recent investors to earlier ones, which of course, is partly the structure of a Ponzi scheme.
Apparently in an earlier phase, he set up a hedge fund, trashed biotech stocks in online chat rooms, then shorted them, making lots of money. Meanwhile, lots of ordinary people were losing lots of money. This is, of course, the deep spirit of capitalism.
At this stage, we might wonder at the efficiency of the laws. The good news is that Daraprim may now have a generic alternative, from San Diego-based Imprimis Pharmaceuticals Inc. The drug is 60 years old, so it is clearly out of patent, and the only things stopping manufacturing generics is the question, is it worth it? Following Shkreli’s approach, most certainly, if only for the advertising.
One of the other things that impressed me about this is the antics the SEC accuses Shkreli of are very similar in nature to the antics I described in my novel Red Gold, which was about fraud during the colonization of Mars. It is always comforting to get confirmation from a good authority, and the SEC is a good authority on fraud, that the antics I described are indeed characteristic of frauds.
One unusual thing about fraud is that it takes quite a lot of thought and effort to carry it out successfully, and if the same effort were to be put into more respectable activities, the person might be hailed as a successful citizen. So the question is, why carry out fraud? At first sight, greed, but I don’t think that is enough. I think in only too many cases the desire to be seen as important, and to wield power, are also important.
This will be my last post for 2015. I live in the Southern Hemisphere, and here, Christmas is hot, and subsequent days are also hot, so working is less desirable and most people go on vacation. So, guess what I shall be doing? I shall be back about the third week of January.
Meanwhile, I hope you all have a very merry Christmas with friends and family, and I wish all the best for 2016.