Why the law can’t touch CEO who raised pill price 5,000 percent
By Alexander Raths From The Litigation Daily
Turing Pharmaceuticals CEO Martin Shkreli has become one of the most reviled people in America after his company raised the price of a drug used to treat life-threatening parasitic infections in AIDS patients from $13.50 per pill to $750.
Among the invectives on Twitter: “The most punchable face on the planet… howling wasteland of his soul…utter callousness towards human suffering…garbage monster…united every possible group in their hatred of him… parasite…should be shunned for eternity.”
For someone whose conduct is so widely condemned, you might think there would be recourse under the law, some angle a creative lawyer could pursue.
The sad thing is, that’s not likely.
The Federal Trade Commission, with its elastic authority under Section Five of the FTC Act to go after unfair or deceptive methods of competition, comes closest to having the power to take action.
The agency tried once before, in a case with a fairly similar fact pattern. The FTC and the Minnesota AG sued Ovation Pharmaceuticals, now Lundbeck Inc., in Minneapolis federal court in December 2008. The company bought the rights to a drug called NeoProfen used to treat premature babies with life-threatening heart defects, then promptly raised the price 1,300 percent.
Likewise, Turing bought the rights to Daraprim from Impax Laboratories in August for $55 million. The medicine, which was first approved by the U.S. Food and Drug Administration in 1953, treats toxoplasmosis, a parasitic infection that can be fatal in people with compromised immune systems.
The FTC went to trial against Lundbeck in 2010 –and lost across the board, on every claim. Then the agency lost on appeal in 2011 before the U.S. Court of Appeals for the Eighth Circuit.
Although the government’s case was “superficially appealing” – Lundbeck bought the rights to NeoProfen and the price went up, “therefore Lundbeck must have done wrong,” wrote U.S. District Judge Joan Ericksen of the District of Minnesota, “a considered evaluation of the evidence reveals that Lundbeck did not engage in the alleged statutory violations.”
The problem was that the government couldn’t make its antitrust claim stick. Ericksen found that NeoProfen (like Daraprim) didn’t have any competitors. Therefore, when Lundbeck bought the rights to it, the transaction didn’t lessen competition or create a monopoly because there already was one. The state of Minnesota’s unjust enrichment claim failed for the same reason.
It’s an unsatisfying but legally correct outcome that is likely to nix any inclination the FTC might have to challenge Daraprim’s price spike.
What’s funny in an ironic way is that if the product at issue was, say, a checking account or credit card, the feds would have a killer case. That’s because it would then fall under the jurisdiction of the Consumer Financial Protection Bureau. The new agency has the authority to police actions that are not only unfair and deceptive, but also abusive—and this is abusive in spades.
It makes little sense that consumers have more protection when it comes to financial services products than life-saving medicine. One legacy of the Daraprim price spike may be to change that. Presidential candidate Hillary Clinton in a Tweet called it an “outrage” and promised “a plan to take it on.”
Biotech stocks tumbled in the aftermath – from the industry’s point of view, Shkreli’s over-the-top price hike may wreck the regulatory regime for them all.
