Martin Shkreli was trying to explain himself, so he turned to YouTube.
In the conference room at Turing Pharmaceuticals, the company he heads, his fingers flew across a laptop keyboard, and up popped a YouTube video on a large wall screen. It was a heartfelt appeal from three young brothers in North Dakota who suffer from a degenerative and often fatal brain condition. "Only 300 people in the country have this disease," Shkreli said.
Why show the video? "I invented a new drug," to treat the disease, he said, shrugging nonchalantly. "But it's hard to sell a drug for 300 people, to go through the process. You have to charge a lot per person to make it a viable product." His point was that new drugs - especially for rare conditions - don't come cheap and someone has to pay for them. This is more truism than earth-shattering revelation. But Shkreli has become a public villain for twisting that notion to apply to a decades-old drug that Turing merely acquired. By raising the price of that drug overnight to $750 a pill from $13.50, Shkreli became a caricature of pharmaceutical industry greed.
A former hedge fund manager, Shkreli drew the wrath of consumers, became a talking point in the presidential campaign, and spurred federal and state inquiries as well as a dialogue about how and whether to control rising drug prices. As proof of Shkreli's toxicity, Bernie Sanders rejected his $2,700 campaign donation, turning it over to a health clinic instead. And in a sharp slap, just Tuesday, Express Scripts, the largest pharmacy benefit manager, endorsed the use of a compounded alternative to Daraprim, the $750 pill. That treatment will sell for about $1 a pill.
Shkreli's price increase is likely to take another pummeling at a Senate committee hearing investigating skyrocketing drug prices next Wednesday.
Rather than cower as he takes a beating, Shkreli seems to relish his time in the ring. He taunts his critics on Twitter or wherever he can. (Shkreli on Bernie Sanders to Fox Business Network: "I don't think he understands pharmaceuticals at all.") Most recently, he live-streamed hours of himself at his desk, talking to co-workers and viewers about medical research and investments and tapping at his computer (action high point: hair-twirling). Last month, he and a group of investors took a large stake in another drug company. He sparred contemptuously with an executive of Express Scripts at a recent Forbes conference. And he
still has time to occasionally post pictures of cats rolling in cash on Twitter.
In Turing's Manhattan offices last Tuesday, Shkreli, 32, wore a simple black T-shirt and dark jeans and seemed less brash than his public persona, but no less boastful. That Shkreli's elfin features are now the face of pharmaceutical greed is fine with him. While he contended that he receives little compensation from his companies, he proudly noted that he has become quite wealthy thanks to his investments.
Even before the Daraprim price increase, his business practices had come under scrutiny. He acknowledged the regulatory and criminal investigations into claims of wrongdoing at hedge funds he once controlled as well as at Retrophin, the public pharmaceutical company he ran - and from which he was expelled. But he was dismissive of their importance.
He also dismissed critics of the Daraprim price increase, saying his biggest duty is to his investors. He recounted how, at dinner the previous night, a hedge fund investor in the privately held Turing had "beat the crap out of me" for not raising a drug price more.
Besides, he said, returning to his theme: The high price on the drug Turing sells is a way to raise enough revenue to develop new medicines for debilitating illnesses.
Critics say that if Turing wants to develop new drugs, it should use money from investors, like most biotech start-ups do, not burden existing patients and hospitals. "This is a stupid investment," said Carlos del Rio, a professor at Emory University and chairman of the HIV Medicine Association, referring to Turing's $55 million purchase of the Daraprim rights.
"They paid a fortune for it, and now they have to recover their money."
For Shkreli, money isn't the sole motivation. His name is on two patents held by his former company, Retrophin, for drugs to treat the degenerative brain disease afflicting those North Dakota brothers. He says he's working on "an even better version" of the drug at Turing.
He's doing this, he added, "partly to spite my old company."
Then he gave a cheeky grin.
Shkreli was an indifferent student in high school and studied business in college. Yet almost anyone who knows him will remark on his ability to practically memorize medical journals and textbooks, accumulating an encyclopedic knowledge of drugs and diseases that interest him.
"Martin is the smartest guy in the room at all times," said someone who worked closely with him on Wall Street. This person was reluctant to discuss Shkreli at all during a phone call, but did say, "The guy's intellect is unparalleled."
His brilliance does not preclude him from sometimes behaving like an immature teenager. "He's driven by ambition to let people know that Martin Shkreli's made it," said an early investor in his first public company, who spoke on the condition of anonymity to preserve relations in the industry. "The affirmation is as important to him as the financial success."
Shkreli grew up in a small apartment on Ocean Avenue in Brooklyn with his three siblings and parents, immigrants from Albania who, he said, worked janitorial and other odd jobs. Neighbors say the family kept to itself.
Shkreli was clearly bright. He was admitted into Hunter College High School, an elite Manhattan public school for the intellectually gifted. But former classmates said he was more interested in chess and playing electric guitar in a band, Coney Island Whitefish, named, he said, after a Joan Jett song. He stopped attending classes and was asked to leave before his senior year. "At the school, the difference between an A and an A-minus was significant," Shkreli said. "So I said, 'How about I get a bunch of F's?'"
"I didn't like the conformity of the school," Shkreli said, "the expectations."
Shkreli received the credits needed for his high school degree though a program that also placed him in an internship at the Wall Street hedge fund Cramer, Berkowitz & Company.
He took classes at Baruch College, worked briefly for a Wall Street investment bank and then, in his early 20s, started his own hedge fund, Elea Capital, using a couple of million dollars he obtained from an investor.
Elea met its demise in 2007, when Shkreli made a $2.6 million bet that the stock market would decline. It didn't. At least not at the right time for him.
"I learned a lot about using leverage, the perils of leverage," Mr. Shkreli said. "Back then, this was almost 10 years ago, I was rushing to succeed. I made a monster bet that the market would crash, and I was wrong."
The lesson didn't sink in right away, as Mr. Shkreli kept taking big risks. Despite Elea's failure, Mr. Shkreli was able to attract enough money to start a second, bigger hedge fund, MSMB Capital.
In 2011, while still running MSMB, Mr. Shkreli started Retrophin, which adopted a business strategy that had been used by other companies like Questcor Pharmaceuticals and Valeant Pharmaceuticals. It acquired old, neglected drugs, usually for rare diseases, and raised their prices to be closer to those of modern drugs. Retrophin, for instance, raised the price of Thiola, used to treat a disease that causes kidney stones, to $30 a pill from $1.50.
Mr. Shkreli said that higher prices made the supply more secure and were better for patients because they gave the company the financial wherewithal to educate doctors about the diseases and possible treatments. Many cases of cystinuria, the disease Thiola treats, are undiagnosed, he has said.
But there was discord within the company. On Sept. 30, 2014, Retrophin announced that its board had replaced Mr. Shkreli, effective immediately.
A lawsuit filed by Retrophin this summer illuminates some of the strife. According to the suit, which seeks $65 million in damages, when the MSMB hedge fund ran into trouble on a bad bet in the market, Mr. Shkreli began an elaborate shell game, using Retrophin cash and assets to pay off discontented MSMB investors. Retrophin also disclosed in regulatory filings that it had received a subpoena relating to an investigation by the Justice Department into Mr. Shkreli's transactions.
In an emailed statement, a spokesman for Retrophin said that the board replaced Mr. Shkreli "because of serious concerns about his conduct" and that a subsequent investigation "identified substantial self-dealing and breaches of fiduciary duty."
When asked about the lawsuit, Mr. Shkreli waved his hand dismissively. "It's rife with inaccuracies," he said, adding it contained "vile accusations."
As with other setbacks, Mr. Shkreli's ouster from Retrophin did not seem to impair his ability to start something new, in this case Turing. The company announced in August that it had raised $90 million, an unusually high amount for a first round of financing for a biotech company. Mr. Shkreli says he owns about half of the company. He would not reveal the other investors, but people on Wall Street say they include some hedge funds that made a lot of money on Retrophin.
Turing's first big move was the one that made Mr. Shkreli notorious. He paid $55 million for the American marketing rights for Daraprim, a 62-year-old drug for toxoplasmosis, a parasitic infection that can be devastating for babies and people with AIDS. The immediate price increase brought the cost of a course of treatment for some patients to hundreds of thousands of dollars.
Mr. Shkreli could do this because in the United States, unlike many other countries, there are no drug price controls.
Daraprim is so old that it no longer has patent protection. A generic company could sell a lower-priced copy, but revenues from the drug were so small, until now, that no generic company was interested, and it would take a few years for one to get regulatory approval. Moreover, at both Retrophin and Turing, Mr. Shkreli has tightly controlled distribution of the drugs, making it difficult for generic companies to obtain the samples they need for testing. The New York State Attorney General's office has asked Turing about this, saying it may violate antitrust laws.
Many proposals have been made for reining in drug prices, but they face opposition, particularly from the pharmaceutical industry. One that the Obama administration favors, but which is now prohibited by law, is to let Medicare negotiate with drug companies, using its huge buying power to wring discounts.
Another idea is to allow imports of drugs from Canada and other places where prices are far lower. Last month, the Republican senators Chuck Grassley of Iowa and John McCain of Arizona urged the administration to allow imports, particularly in cases like Daraprim, though they did not name that drug, in which a company has acquired the American marketing rights and jacked up the price but the drug remains available at a lower price abroad.
At first, in response to the outrage over the increase, Mr. Shkreli said he would lower the price. But he never lowered the list price of Daraprim, instead saying that Turing would offer discounts of up to 50 percent to hospitals. He now says the extra money will be used to develop better drugs for toxoplasmosis and other diseases. The company has begun a clinical trial of a drug for severe forms of epilepsy.
"Haters, please tell me about the latest in apicomplexa genetic drift," Mr. Shkreli posted on Twitter to counter skeptics who say that a new drug for toxoplasmosis is not needed. "You are all Protozoa experts equipped to judge and advise me, right?"
Mr. Shkreli said that he made virtually no money from his hedge funds, but that his Turing stake and the $100 million he said he made selling Retrophin stock after he left made him very rich. Plus, he said he pocketed $30 million to $40 million this year selling short the stock of two companies, Celladon and Vital Therapies, whose products failed in clinical trials. This year, he flew some Turing employees to Las Vegas to watch a boxing match.
In late November, Mr. Shkreli led a group of investors that acquired 70 percent of KaloBios, a biotechnology company that days earlier had announced it would shut down because its drugs had failed in clinical trials and it was running out of cash.
Mr. Shkreli, who said he saw promise in one of KaloBios's experimental drugs, was named chief executive, and several other Turing executives were also appointed to top posts at KaloBios. While the two companies are being run separately, Mr. Shkreli said on Thursday that KaloBios was "exploring opportunities" with Turing. Shares of KaloBios, which were selling for a dollar or two when Mr. Shkreli bought them, are now above $30.
Still, it is likely to be a few years before Retrophin, Turing or KaloBios gets a new drug to market. Until then, it will be hard to say if Mr. Shkreli really is good at developing new drugs or just exploiting old ones.
Seemingly secure in his wealth, Mr. Shkreli has started putting money toward philanthropy. (He also collects arcana, including a credit card formerly owned by the Nirvana frontman Kurt Cobain and Enigma encoding machines.) Earlier this year, he started the Shkreli Foundation, run by his sister Leonora, which he said has given more than $3 million to various causes.
Dr. David Feifel, a professor of psychiatry at the University of California, San Diego, is also a recipient. He said Mr. Shkreli contacted him out of the blue two years ago and later donated $100,000 to help with his research on new treatments for depression. "He's more complex than the cartoon character," Dr. Feifel said.
The foundation also gave a $1 million gift to Hunter College High School. Was this a way of showing he had made it, despite not graduating? "Maybe. Maybe that's right," Mr. Shkreli said, nodding thoughtfully. "That you could do it, doing it your own way." He added that he was considering an even bigger donation of $5 million or more.
Some alumni have started a campaign to raise $1 million so the school can return Mr. Shkreli's donation. He smiled at that.
"Fine. Let them do it. Whatever," he said. "But can they raise $5 million?"
©2015 The New York Times News Service
