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Pharma boss Martin Shkreli arrested on fraud charges

Published 17/12/2015

Martin Shkreli is escorted by law enforcement agents in New York (AP)
Martin Shkreli is escorted by law enforcement agents in New York (AP)

Martin Shkreli, the former hedge fund manager vilified for buying a pharmaceutical company and hiking up the price of a life-saving drug, has been arrested on securities fraud charges.

The 32-year-old entrepreneur - who has called himself "the world's most eligible bachelor" on Twitter and recently plunged into the hip-hop world by buying an unreleased album by the group Wu-Tang Clan - is in custody awaiting an appearance in federal court in Brooklyn.

He was charged in a seven-count indictment unconnected to the drug price hikes imposed by his company, Turing Pharmaceuticals.

The charges instead involve his actions at another drug company, Retrophin, which he ran as chief executive from 2012 to 2014.

The indictment said Mr Shkrelia and others orchestrated three interrelated fraud schemes from 2009 to 2014.

It said they fraudulently induced investors to sink their money into two separate funds and misappropriated Retrophin's assets to satisfy Mr Shkreli's personal and professional debts. He was charged with securities fraud and conspiracy.

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

Mr Shkreli has found himself at the centre of a firestorm over drug pricing in the last few months, and he has not been afraid to throw on more fuel.

It began after his company, Turing Pharmaceuticals, spent 55 million US dollars (£37 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 dollars (£9) to 750 dollars (£504) 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.

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

Hillary Clinton called it price gouging and said the company's behaviour was "outrageous".

Donald Trump called Mr Shkreli "a spoiled brat", and Bernie Sanders returned a donation from him.

And indie record label Collect Records said it was severing ties with Mr Shkreli, who had been an investor.

Mr 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%.

While most patients' co-payments will be 10 dollars (£6.70) or less a month, insurance companies will be stuck with the bulk of the tab, potentially driving up future treatment and insurance costs.

Mr Shkreli has said that insurance and other programmes allow patients to get the drug despite the cost, and that the profits are helping fund research into new treatments.

But he has also unapologetically emphasised a business-is-business argument for the price jump. In fact, he 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 maximise profits, not to minimise them or go half or go 70% but to go to 100% of the profit curve."

Mr Shkreli's public profile added another dimension when it recently 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 two million dollars (£1.3 million).

In August, Retrophin sued Mr Shkreli for more than 65 million dollars (£44 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.

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