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CEO That Raised Drug Price By 5000% Arrested For Fraud

Publish Date
Friday, 18 December 2015, 7:07AM

Martin Shkreli, previously under fire for buying a pharmaceutical company and ratcheting up the price of a life-saving drug, is in custody following a securities probe.

A seven-count indictment unsealed in Brooklyn federal court charged Shkreli with conspiracy to commit securities fraud, conspiracy to commit wire fraud and securities fraud. A second defendant, attorney Evan Greebel, of Scarsdale, New York, was charged with conspiracy to commit wire fraud. It was not immediately clear who will represent Greebel in court.

The indictment said the men, along with others, orchestrated three interrelated fraud schemes from September 2009 through September 2014. It said they fraudulently induced investors to invest in two separate funds and misappropriated the assets of a publicaly traded pharmaceutical company, Retrophine Inc., to satisfy Shkreli's personal and unrelated professional debt obligations.

Calls to an attorney who has represented Shkreli in the past were not immediately returned.

Shkreli was the chief executive officer of Retrophin from December 2012 to September 2014, the court papers said.

Shkreli stirred public outrage earlier this fall when his company, Turing Pharmaceuticals, jacked the price of a drug used to treat a life-threatening infection by more than 5000 percent. Turing raised the price on Daraprim, a 62-year-old drug whose patent expired decades ago, from US$13.50 to US$750 per pill. The drug is the only approved treatment for a rare parasitic infection called toxoplasmosis that mainly strikes pregnant women, cancer patients and AIDS patients.

The internet has reacted with joy to the news of Shkreli's arrest:

 

 

Shkreli said the company would cut the drug's price. Last month, however, Turing reneged on its pledge. Instead, the company is reducing what it charges hospitals for Daraprim by as much as 50 percent. Most patients' copayments will be capped at US$10 or less a month. But insurance companies will be stuck with the bulk of the tab, potentially driving up future treatment and insurance costs.

Turing, with offices in New York and Switzerland, spent US$55 million in August for the US rights to sell Daraprim.

The uproar over price hikes at Turing and by other companies like Valeant Pharmaceuticals led to government investigations, proposals by politicians to fight "price gouging," heavy media scrutiny and a drop in stock prices for biotech companies.

However, the price of KaloBios Pharmaceuticals shares surged from around US$2 to above US$40 after the struggling cancer drug developer named Shkreli chairman and CEO in November. The South San Francisco, California, company had been winding down operations when Shkreli and the group swooped in to take control and committed to a US$10 million equity financing facility.

Shares of KaloBios Pharmaceuticals Inc. shed more than half their value, or US$12.56, to US$11.03 in early trading Thursday.

In an August civil lawsuit in Manhattan federal court, Retrophin sued its founder, Shkreli, seeking $65 million in damages and disgorgement of Shkreli's compensation from the company.

It said Shkreli repeatedly breached his duty of loyalty to Retrophin, which was formed in March 2011, by using his control of the company to enrich himself and to pay off the claims of financial fund investors he had defrauded.

The lawsuit said he obtained over $5.6 million in cash or Retrophin shares through his schemes and obtained the use of over two million shares of Retrophin, which were worth over $59 million last summer.

NZ Herald