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When Drug Startups Make Big Pharma Look Like the Good Guy

In which a recently formed pharmaceutical company run by a disgraced hedge fund manager starts charging $750 a pill for an essential drug.

by Michael Byrne
Sep 20 2015, 9:28pm

Until recently, the anti-malarial/anti-parasite drug Daraprim (aka pyrimethamine) went for $13.50 a pill. This isn't exactly cheap given that the drug has been in use for 62 years and is on the WHO's List of Essential Medicines, which is considered to be the bare minimum pharmaceutical foundation of a bare minimum health-care system. Daraprim is especially crucial for HIV and other immunocompromised patients for fighting off Toxoplasma gondii infections.

$13.50 was nothing as it turns out. In August, the rights to Daraprim were sold by Impax Laboratories to a start-up called Turing Pharmaceuticals, theNew York Times reports. Almost immediately, Turing raised the price from $13.50 per tablet to $750 per tablet. Now, what was once just a pretty expensive treatment goes for hundreds of thousands of dollars for an annual supply.

That's pretty bleak. In early September, the Infectious Diseases Society of America and the HIV Medicine Association sent a joint letter to Turing calling the increase, "unjustifiable for the medically vulnerable patient population" and "unsustainable for the health care system."

Turing went official as a company only earlier this year, with hedge-fund manager Martin Shkreli listed as its founder and executive chairman. Shkreli had mostly recently come from a similarly minded pharma startup called Retrophin, which he'd launched in 2011 but had been fired from a year ago. Last month, Retrophin filed a criminal complaint against Shkreli, alleging that he'd been using the company as "as a personal piggybank to pay back angry investors in his hedge fund."

"Shkreli was the paradigm faithless servant," the complaint reads. "Starting sometime in early 2012, and continuing until he left the Company, Shkreli used his control over Retrophin to enrich himself, and to pay off claims of MSMB investors (who he had defrauded)."

In any case, Turing's first three acquisitions came from Retrophin, including an intranasal formulation of ketamine, Syntocinon (and oxytocin nasal solution), and Vecamyl, a blood pressure medication. "New York-based Turing will focus on developing and commercializing innovative treatments for serious diseases and conditions across a broad range of therapeutic areas, for which there are currently limited or no treatment options," the company boasted at the time.

Before Daraprim entered the gnarled world of (relative) no-name pharma acquisitions and drug flipping it could be had for $1 a pill, from its original manufacturer and unlikely good-guy GlaxoSmithKline. GSK sold the marketing rights for the drug to CorePharma in 2010, who then sold it to Impax in 2014. Finally, Turing paid Impax $55 million for the drug in early August. This happened to occur on the same day that it announced $90 million in Series A financing, "one of the largest Series A rounds in biotech history," the company noted in a press release.

"This isn't the greedy drug company trying to gouge patients, it is us trying to stay in business" Shkreli told the Times. "This is still one of the smallest pharmaceutical products in the world," he said. "It really doesn't make sense to get any criticism for this."

The drug is well past its window of patent protection, which means that it could theoretically be produced generically by someone else. The catch is that Daraprim isn't sold through regular drug stores and its distribution is tightly controlled by Turing, with the upshot being that any would-be generic manufacturer would have a hard time getting hold of the samples needed to copy it.