CEO who jacked up price of lifesaving drugs arrested

CEO who jacked up price of lifesaving drugs arrested
Martin Shkreli, the pharmaceutical CEO who jacked up the price of a life-saving drug more than fiftyfold, was arrested Thursday on unrelated fraud charges.
4 min read
18 December, 2015
Martin Shkreli was later released on a $5 million bond [Getty]

Martin Shkreli, the former hedge fund manager who caused outrage for buying a pharmaceutical company and jacking up the price of a life-saving drug more than fiftyfold, was arrested Thursday on securities fraud charges unrelated to the furor.

The 32-year-old entrepreneur is a relentlessly self-promoter who has called himself "the world's most eligible bachelor" on Twitter.

He recently plunged into the hip-hop world by buying an unreleased album by the Wu-Tang Clan, with the sale agreement including a clause stating that the seller, Hollywood actor Bill Murray, or members of the Wu-Tang Clan can steal the record back with no legal ramifications.

     Online, many people were gleeful over in his arrest, some of them joking about a judge ratcheting up his bail or lawyers jacking up their hourly fees

Online, many people were gleeful over in his arrest, some of them joking about a judge ratcheting up his bail or lawyers jacking up their hourly fees 5,000 percent for defending him in his hour of need.

Shkreli was charged in an indictment unconnected to the drug price hikes imposed by his company Turing Pharmaceuticals.

The charges involve his actions at another pharmaceutical company, Retrophin, which he ran as CEO up until last year.

Prosecutors said that in a "Ponzi-like scheme" between 2009 and 2014, Shkreli lost hedge fund investors' money through bad trades, then raided Retrophin for $11 million in cash and stock to pay back his disgruntled clients.

Shkreli "engaged in multiple schemes to ensnare investors through a web of lies and deceit," US Attorney Robert Capers said in a statement.

Shkreli was charged with securities fraud and conspiracy. A second defendant, lawyer Evan Greebel, of Scarsdale, New York, was charged with conspiracy.

If convicted, both men could get up to 20 years in prison.

Vulture capitalist

The Brooklyn-born Shkreli has found himself at the center of a firestorm over drug pricing in the last few months, and he hasn't been afraid to throw on more fuel.

It began after Turing Pharmaceuticals spent $55 million in August for the US rights to sell Daraprim, a 62-year-old drug for a rare parasitic infection, and promptly raised the price from $13.50 to $750 per pill.

The drug is the only approved treatment for toxoplasmosis, a disease that mainly strikes pregnant women, cancer patients and AIDS patients.

The move sparked outrage that resounded from the presidential campaign to the punk rock world and turned him into the new face of corporate greed.

Headlines called him such things as "America's most hated man," the "drug industry's villain," "biotech's bad boy" - and those were just the more printable names.

Doctors and medical groups said the price hike was cutting patients off from life-saving treatment, activists protested outside Turing's offices, and the episode helped prompt a Senate hearing on drug prices.

     Shkreli unapologetically made a business-is-business argument for the price jump and recently said he probably should have raised it more.

Shkreli said the company would cut the price of Daraprim. Last month, however, Turing reneged. Instead, the company is reducing what it charges hospitals for Daraprim by as much as 50 percent.

Shkreli unapologetically made a business-is-business argument for the price jump and recently said he probably should have raised it more.

"No one wants to say it, no one's proud of it, but this is a capitalist society, a capitalist system and capitalist rules," he said in an interview at the Forbes Healthcare Summit this month.

"And my investors expect me to maximize profits, not to minimize them or go half or go 70 percent but to go to 100 percent of the profit curve."

The Campaign for Accountability, a nonprofit watchdog group that urged Congress to investigate Shkreli's price increases, called his arrest "long overdue" and added: "He has avoided accountability despite a pattern of fraudulent behavior."

Recently it emerged that he bought the only copy of a Wu-Tang Clan album titled "Once Upon a Time in Shaolin," which the group sold on the condition that it not be released publicly. He said he paid $2 million.

In August, though, Retrophin sued Shkreli for more than $65 million, accusing him of using his control of the company to enrich himself and to pay off the claims of financial fund investors he had defrauded.

Shkreli plead not guilty to securities fraud charges in New York hours after his arrest and was released on a $5 million bond.

"It is no coincidence that these charges, the result of investigations which have been languishing for considerable time, have been filed at the same time of Shkreli's high-profile, controversial and yet unrelated activities," said Craig Stevens, a spokesman for Shkreli.

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