Genius or Greed?

I recently commented about news stories detailing the outlandish price increases of some essential generic drugs.  This news stories provoked widespread outrage and were even mentioned by one of those running for President.

On September 23, 2015, The New York Times ran an extensive profile of the man responsible for raising the price of a 62-year-old drug used to treat toxoplasmosis, Daraprim, from $13.50 per pill to $750 per pill.

As it turns out, the man is Martin Shkreli.  He is 32 years old and, depending upon your point of view, he is a genius in the financial world or just plain evil.

Shkreli has worked for hedge funds and has also created a hedge fund.  It seems that his specialty is speculation in the stock of pharmaceutical companies.  As described by The New York Times, his typical bet is to “short” a company’s stock.  This means he is betting that the stock price will fall rather than rise.  There is more to his story than genius and good timing.

In one instance, Shkreli shorted the stock of a drug company and then actively campaigned against FDA approval of that company’s drugs so the company’s stock price would fall.

In the Daraprim situation, it was also necessary for Shkreli to manipulate the situation in order to succeed.  Since Daraprim had no patent protection, the cost was low ($13.50 per pill) and other makers of generic drugs could come into the marketplace to compete if it appeared profits were available.  To hamper competition, when Shkrell agreed to buy the drug from its maker, Impax Laboratories, for $55 million, he obtained an agreement from Impax that it would not make the drug available to other generic companies so that it would make it harder for those companies to copy the drug.  In other words, Shkrell, by premeditation and manipulation, was able to corner the market for a time.

Is this genius or evil?  I wouldn’t ask the infectious disease physicians, or the people with AIDS or cancer, or the mothers and fathers of the babies who depend on this drug.

The New York Times writer interviewed one of Shkreli’s investors who made a very interesting comment: “There’s nobody there in Martin’s life to tell him what the right thing is.”  That means to me that genius or not, this man has no moral compass.