Shkreli Keep Giving Valuable Lessons in the Dirty Secrets of the Drug Industry
[Thursday, January 30, 2020] It has been a few years since the infamous Martin Shkreli was in the news. And we have another opportunity to thank him for exposing (unintentionally, of course!) some of the worst secret practices of the drug industry. This time Mr. Shkreli shows how companies can use non-disclosure agreements and exclusivity contracts to artificially keep the price of drugs higher. Shkreli got infamous a few years ago for abruptly raising the price of a generic drug by 4000% thereby exposing a common practice where companies determine the price of their drugs based on how much they can gouge, and not based on the cost of developing the said product. He got in trouble with the law not because of the price gouging accusations, as they were “perfectly legal” but because of his other crimes. This week the State of New York (NYS) and the Federal Trade Commission (FTC) jointly sued Shkreli, his business associates and the company he still owns for anti-competitive practices. And the practices they list in their petition are a laundry list of contracts, agreements and other measures taken by the defendants to limit competition. We are told that by simply buying the only source of active ingredient and limiting how much drug supply their distributors are allowed to sell to competition, companies can limit development of competing products. It is not clear from the petition if the contracts and non-disclosure agreements were illegal. But that fact that these contracts existed for the last few years, states a story of its own. It is hard to believe that these are isolated practices. And while the case is just getting started, these contracts would keep delaying the competition. The FTC and NYS have asked the courts to permanently ban Shkreli from working in the pharmaceutical industry and for penalties, but if the contracts are legit and legally enforceable, it is anyone’s guess where the case might lead. The drug industry uses several tools to delay competition such as filing frivolous patents, pricing drugs based on flawed one-sided logic, buying away competition to create monopolies, and lobbying politicians to pass favorable laws. Shkreli is an easy target. He has built a bad reputation mostly due to his smug attitude in public but without someone like him, it is possible that these unethical and dirty practices may never get to see the sunshine they deserve. So, thanks, Martin Shkreli, you did it again. |
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