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Of Rotten Apples and Rotten Systems

By       Message Robert B. Reich       (Page 1 of 2 pages)     Permalink

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Reprinted from Robert Reich Blog

From youtube.com/watch?v=NS9blbLrKv4: Martin Shkreli: I Would've Raised Prices Higher
Martin Shkreli: .I Would've Raised Prices Higher.
(Image by Forbes, Channel: forbes)
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Martin Shkreli, the former hedge-fund manager turned pharmaceutical CEO who was arrested last week, has been described as a sociopath and worse.

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In reality, he's a brasher and larger version of what others in finance and corporate suites do all the time.

Federal prosecutors are charging him with conning wealthy investors.

Lying to investors is illegal, of course, but it's perfectly normal to use hype to lure rich investors into hedge funds. And the line between the two isn't always distinct.

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Hedge funds are lightly regulated on the assumption that investors are sophisticated and can take care of themselves.

Perhaps prosecutors went after Shkreli because they couldn't nail him for his escapades as a pharmaceutical executive, which were completely legal -- although vile.

Shkreli took over a company with the rights to a 62-year-old drug used to treat toxoplasmosis, a devastating parasitic infection that can cause brain damage in babies and people with AIDS. He then promptly raised its price from $13.50 to $750 a pill.

When the media and politicians went after him, Shkreli was defiant, saying "our shareholders expect us to make as much as money as possible." He said he wished he had raised the price even higher.

That was too much even for the Pharmaceutical Research and Manufacturers of America, Big Pharma's trade group, which complained indignantly that Shkreli's company was just an investment vehicle "masquerading" as a pharmaceutical company.

Maybe Big Pharma doesn't want to admit most pharmaceutical companies have become investment vehicles. If they didn't deliver for their investors they'd be taken over by "activist" investors and private-equity partners who would.

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The hypocrisy is stunning. Just three years ago, Forbes Magazine praised Shkreli as one of its "30 under 30 in Finance" who was "battling billionaires and entrenched drug industry executives."

Last month, Shkreli got control of a company with rights to a cheap drug used for decades to treat Chagas' disease in Latin America. His aim was to get the drug approved in the United States and charge tens of thousands of dollars for a course of treatment.

Investors who backed Shkreli in this venture did well. The company's share price initially shot up from under $2 to more than $40.

While other pharmaceutical companies don't raise their drug prices fiftyfold in one fell swoop, as did Shkreli, they would if they thought it would lead to fat profits.

Most have been increasing their prices more than 10 percent a year -- still far faster than inflation -- on drugs used on common diseases like cancer, high cholesterol, and diabetes.

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Robert Reich, former U.S. Secretary of Labor and Professor of Public Policy at the University of California at Berkeley, has a new film, "Inequality for All," to be released September 27. He blogs at www.robertreich.org.

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