The former hedge fund manager whose pharmaceutical company has come under withering attack for allegations of egregious price-gouging on life-saving medication is the subject of a $65 million lawsuit by his former employer for alleged stock manipulation—and it turns out he once tried a similar price hike scheme with that company. During Martin Shkreli’s tenure as CEO of Retrophin—the company that is now suing him—the company increased prices on a decades-old kidney medication by about 20 times its original cost, a move similar to the controversial price increase by his new company reported by the New York Times on Sunday.
Martin Shkreli’s current company, Turing Pharmaceuticals, has been criticized by Democratic presidential candidates Hillary Clinton and Bernie Sanders for spiking the price of a 62-year-old drug called Daraprim now used to treat AIDS patients. The price of one pill, which once cost $1, went up from $13.50 per tablet to $750 after Turing purchased it.
When Shkreli was CEO of Retrophin, the company purchased a kidney medication approved by the FDA in 1988 called Thiola and increased the cost from $1.50 per pill to $30 per pill.* That drug treated cystinuria, a lifelong disease for which there is no known cure and which afflicts about 20,000 patients in the United States. Forbes health care contributor Steve Brozak described the disease last year when news of the price increase broke:
Patients are usually diagnosed with the disease at a very young age and have an abnormally high concentration of an amino acid called cystine present in their urine. The excess cystine crystallizes regularly into stones that painfully travel through the kidneys, ureters or bladder. Imagine having a kidney stone form or pass once a month, tearing through your organs as it tracks its way out of your body.
There was no alternative drug for cystinuria sufferers, Brozak reported, and the 20-fold hike raised the price to about between $54,750 and $109,500 per year. At the time, Brozak argued that Retrophin was “turning patients into commodities like barrels of oil,” while University of Pittsburgh School of Medicine Associate Professor of Urology Benjamin Davies called it a case of “predatory capitalism on the backs of the sick and silent.” Writing for Science Translational Medicine, pharmaceutical columnist Derek Lowe said the Thiola increase was the “most unconscionable drug price hike I have yet seen.”
Shkreli is currently going on business news programs arguing for the current price hike on Daraprim by saying that it is necessary for future research and development. Last year, Retrophin made the exact same argument in a since-removed business presentation on its website to justify its price increase on Thiola, saying that it “plans to develop a long-acting version of Thiola® for once daily dosing.” (In a hilarious and perhaps not atypical legal notice about the “anticipated development, timing, data readouts and therapeutic scope of programs in our clinical pipeline,” the proposal warned “[t]hese forward-looking statements may be accompanied by such words as ‘anticipate,’ ‘believe,’ ‘estimate,’ ‘expect,’ ‘forecast,’ ‘intend,’ ‘may,’ ‘plan,’ ‘project,’ ‘target,’ ‘will’ and other words and terms of similar meaning. You should not place undue reliance on these statements.”)
Retrophin, meanwhile, announced last month that it was suing Shkreli for more than $65 million in damages, alleging that he misused company funds to settle legal disputes against him and hedge funds he ran. Bloomberg Business reported at the time that Shkreli was “the target of investor lawsuits over his trading in Retrophin stock, and the company has said it received a subpoena tied to a probe by federal prosecutors in Brooklyn, New York.” The company claimed that the government had asked for information about Shkreli. It also alleged that through “sham consulting agreements” and stock manipulation schemes, he had fraudulently obtained more than $5.6 million in cash and $59 million in Retrophin stock from the company.
Shkreli told Bloomberg that the lawsuit was “baseless and meritless” and called the suit “preposterous” in an interview with Forbes. He also went on Twitter at the time of the lawsuit seeming to threaten a $150 million countersuit, saying “yeah whatever,” and citing Wu-Tang Clan.
*Correction, Sept. 22, 2015: This post originally misstated the original cost of Thiola as $1 per pill.