Finding Transparency in an Opaque System

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Nick Sadler

May 7, 2016

ACE

Prof. Beebe

Finding Transparency in an Opaque System

Imagine being at the hospital and hearing your doctor utter these three gut-wrenching

words You have AIDS. Now, imagine after weeks or even years of pain and suffering you

find out that the price of your treatment medication goes up, not by one or two, but by over

five-thousand percent. Weve always been taught to fight through pain and to never give up, but

doesnt it seem like going from paying $800 for two months worth of medicine to a

mind-numbing $45,000 is a little bit beyond our threshold of tolerance?

Daraprim, generically known as pyrimethamine, was developed in the early 1940s by

pharmaceutical company GlaxoSmithKline, in order to treat deadly parasitic diseases such as

toxoplasmosis (Walters). Though much developing research on the drug itself has not been made

for decades, at the cost of $13.50 per tablet, it seemed well worth the cost to save a life (Beck).

However, recently acclaimed pharmaceutical bad-boy named Martin Shkreli, co-founder of

hedge fund MSMB Capital Management and ex-CEO of Turing Pharmaceuticals, believed that

he could turn a profit on the drug, raising the price from an affordable $13.50 to a whopping

$750 per pill (Walters). The media and public immediately began accusing Shkreli of price

gougingwhen a goods price is spiked to a level beyond what is considered reasonable or

ethicalbut Shkreli has retorted these accusations by stating, We sell our drugs for $750 a pill


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to Walmart, ExxonMobil, to all these big companies and they pay full price because fuck them,

why shouldnt they? If I take that money and Im using it to do research for dying kids, I think

Im a hero (VICE).

Though offered at a steep price to hospitals, Shkreli advocates that if anyone who is sick

cannot afford the drug, he will gladly give it to them for free. However, The Infectious Diseases

Society of America (IDSA) and the HIV Medicine Association (HIVMA) did not seem

convinced by Shkrelis promising assurance, writing a letter to Turing Pharmaceuticals arguing

that, This cost is unjustifiable for the medically vulnerable patient population in need of this

medication and unsustainable for the health-care system (Beck). Though people are lashing out

at Shkreli, Turing Pharmaceuticals is not the first company to skyrocket the price of prescription

drugs. According to a study published in the Official Journal of the American Academy of

Neurology, the cost of multiple-sclerosis drugs has increased annually at rates 5 to 7 times

higher than prescription drug inflation between 1993 and 2013 (Beck).

The underlying basis of Shkrelis motivation towards immensely increasing the price of

Daraprim appears to be the cost of research and development, otherwise known as R&D.

According to Shkreli in an interview with VICE News, Turing Pharmaceuticals spends about

sixty percent of our revenue on R&D. The average drug company spends about fifteen [percent].

We put all of our extra income into R&D If thats the price I have to pay to find a new

medicine for a dying kid, Ill raise it even more (VICE). In Shkrelis eyes, there are no actual

people suffering from this price increase, other than big, fat corporations that can easily afford

to spare the money. In fact, Turing Pharmaceuticals claims to be the first company in decades


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that is actually willing to sit down and figure out how to make Daraprim a more reliable and

efficient drug.

The Huffington Post article titled, What the Daraprim Price Hike Actually Does to

Health Care, insists that Shkrelis actions are labeled not as a pharmaceutical strategy, but rather

as a predatory strategy (Almendrala). Though the article admits it is not fair that this

controversy is played out to be the first time a pharma company has boosted the price of drugs,

referencing CorePharma, another company that had acquired Daraprim and had done the same

thing, proof is shown that this price hike can and has in fact affected the healthcare system.

According to the In

fectious Diseases Society of America and the HIV Medicine Association,

hospitals and pharmacies are no longer able to stock the medication, adding, year-long

treatment for toxoplasmosis will now cost $336,000 for those who weigh less than 132 pounds,

and $634,500 for those who weigh more than that (Huffington Post). Additionally, this leads

federal healthcare programs such as Medicare and Medicaid to increase the price of premiums,

meaning individuals, whether they realize it or not, are literally paying money from their own

salary towards increased healthcare costs.

In an era of endless opportunity and an increase of entrepreneurial mindset, it is possible

to find a connection between the effects of money on behavior and that of Martin Shkrelis

price gouging of the drug Daraprim. Shkreli has retorted the accusations of opportunism and

greed by indicating that his company, Turing Pharmaceuticals, used sixty percent of their

revenue for research and development, compared to the average pharmaceutical company which

only uses roughly fifteen percent of revenue on R&D. So, is it possible to argue that Shkreli has

a good motive for this price-hike of the drug? Sure. But, if that argument holds, then why is there


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a clear consequence to those in need of Daraprim, and even tax-payers? As big healthcare

companies such as Medicare and Medicaid boost the price of premiums in response to the

price-hike, the working class citizens have percentages of their salaries going directly to these

companies to compensate for the 5000% increase of Daraprims original price. A well-educated

and experienced businessman such as Shkreli had to have been aware of these consequences

when debating this price increase. Can we definitively conclude that Shkreli was blinded by the

thought of profit, leading him to disregard the substantial consequences of his actions? Not

necessarily. However, we can certainly assume that the money has something to do with it. As

the co-founder of the hedge fund MSMB Capital Management, it is no stretch to argue that

Shkreli is fond of money.

Its not hard to believe that we pair success and happiness with the mere thought of

money or wealth. However, a study published in the Journal of Experimental Social Psychology

uncovered that those who were presented with tasks involving money were far less social and

less concerned with the well-being of people around them than that of those who were presented

with tasks disregarding money. Additionally, in 2013, a study in the journal of Organizational

Behavior and Human Decision Processes observed that being exposed to money, made people

more likely to behave unethically in these experiments, money-primed subjects were more

willing to lie to make money in a simple game and were more likely to rate certain scenarios,

such as swiping extra office supplies for personal use, as ethically permissible (Pinsker). The

closer weve gotten to 2016, more and more case studies have been done on the effects of money

and the behavior of individuals, and results appear to get increasingly negative.


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So, lets say that Shkrelis motivation for this price hike is, in fact, the money. Its

possible that future business heads and other powerful figures (not necessarily powerful in a

positive light, but powerful as in a figure who has a substantial amount of money, and whether

we like it or not, money is a huge factor in progress), get inspired by Shkrelis radical actions,

and execute similar strategies of their own. This can lead to a downfall in the morality of how we

perceive success, and in turn lead society in the wrong direction. If money is as detrimental to

our moral compass as research claims it to be, shouldnt we aim to recalibrate our understanding

of success and wealth?

There is certainly an irony to be acknowledged when pairing two seemingly opposite

policies: healthcare and capitalism. We know that capitalism thrives off the principle of taking

and earning, whereas the fundamental reason healthcare exists is not for profit but rather for

exactly what it is namedcaring about the health of our citizens. So doesnt it seem odd that

someone like Shkreli could be considered within his legal rights in increasing the price of a

life-saving drug for a 5000% increase in profit? Notice the word being usedprofitnot an

increase in saved lives or an increase in patient care, but an increase in profit. Though it wouldnt

be fair to exclude the positives of capitalism in healthcare, such as millions of dollars going to

newer and more advanced technology and medication, there is a line we are morally obligated

not to cross. However, as writer James Hamblin states in Healthcare, Meet Capitalism, todays

healthcare system, incentivizes doctors (and hospitals) to do tests and procedures, instead of

paying them to do their jobskeeping people healthy. It's like paying carpenters to use nails.

The idea that doctors are being paid by companies to push certain medications rather than

the most effective medications for each individual patient is where the needed transparency of


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our healthcare system begins to become opaque. I first-handedly experienced the consequences

of pushed medication when sitting in the office of a psychiatrist whom I thought I was paying

to work in my best interest. After being asked how I was feeling on Lexaproan

anxiety-treating medication that had been helping me for over two yearsI responded, Good. I

feel normal again. Rather than the expected, Great! So what have you been up to? usual

therapy talk, my doctor responded with a prompt, What if I told you that you could be feeling

even better?. To most people, such a response to my statement seems like something out of a

sci-fi film, where the mad scientist proceeds to hand the patient a glowing glass vial and tells him

that this will take away all of his problems. However, this problem solving medication I was

offered was the beginning of a nightmare I lived out for months. My doctor insisted that I take

20mg of Prozac and see how I feel. In just a matter of 4 days my dosage was increased from

20mg to 60mg, a dosage given to adults with incredibly severe anxiety, but I was a 17 year old

with mild to moderate anxiety. Weird, isnt it? Well, it took me a few weeks of the medication to

realize that, yes I was less anxious, but I was also less human . Conversations with friends were

more like the muffled trumpet sounds of adults talking one could here in the Peanuts cartoons. It

soon became apparent to me that I had not been helped, but instead fell victim to the dangers of

paid medication endorsement. What these profit-motivated acts prove is how detrimental the

incentive of money becomes in an environment whose sole intent is to help the public. Yes,

hospitals and doctors need large funding to expand research and technology, however there is a

line that is getting crossed too often at this point. We must understand that transparency in the

healthcare system is essential in ensuring that we know where money is going and that patients

are truly getting the best care they can get.


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Work Cited

Almendrala, Anna. "What The Daraprim Price Hike Actually Does To Health Care." HuffingtonPost. N.p., 22 Sept. 2015. Web. 12 Apr. 2016.

Beck, Julie. "The Drug With a 5,000 Percent Markup." The Atlantic. Atlantic Media Company,

22 Sept. 2015. Web. 10 Apr. 2016.

Hamblin, James. "Healthcare, Meet Capitalism." The Atlantic. Atlantic Media Company, 2 July

2014. Web. 08 May 2016.

Pinsker, Joe. "Just Looking at Cash Makes People Selfish and Less Social." The Atlantic . Atlantic

Media Company, 30 Oct. 2014. Web. 17 Apr. 2016.

VICE. "Martin Shkreli on Drug Price Hikes and Playing the World's Villain."YouTube.

YouTube,

29 Jan. 2016. Web. 09 Apr. 2016.

Walters, Joanna. "Martin Shkreli: Entrepreneur Defends Decision to Raise Price of Life-saving

Drug 50-fold." The Guardian . Guardian News and Media, 22 Sept. 2015. Web. 10 Apr.

2016.

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Finding Transparency in an Opaque System