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Why Does Everyone Hate Martin Shkreli?
2016-01-14 15:12:01
By Danya Glabau
The investor-boy-wunderkind-turned-pharmaceutical-CEO Martin Shkreli
was the end of the year’s emblem of schadenfreude. Shkreli has been in
the news regularly since September 2015 when his company, Turing
Pharmaceuticals, announced plans to raise the price of decades-old
toxoplasmosis drug Daraprim from $13.50 to $750 per pill. Public
discussion about Turing’s pricing strategy prompted a congressional
hearing on drug pricing and brought him firmly into the public eye: he
appeared on numerous cable news networks, and a Gawker piece about
his YouTube channel pushed one of his videos to over 122,000 views. His
misfortune has continued since his December 17 arrest: on December 18,
he resigned as CEO of Turing, on December 21, he was terminated from
his other CEO position at KaloBios, and on December 24, KaloBios’ stock
was delisted from the Nasdaq. The Securities and Exchange Commission
(SEC) complaint against him catalogs his crimes in animated legalese,
clearly meant for wide public readership. The charges document a series
of failed investments in the pharmaceutical space that he “lied” (in the
language of the complaint) about to his investors to cover up. Yet Shkreli
managed to spin his losses into promises of greater future gains, enabling
him to raise yet more financing that he claimed was for his current and
future projects, but that was actually used to hide what had gone wrong.
This episode is a prime ethnographic moment in a much larger, more
complex story about how the production of biomedical knowledge is now
being shaped by the financial services industry. In this essay—the first of
what I hope to be many that I write on this topic—I am less interested in
Shkreli’s mendacious psychology than I am in starting to pry open the
logics of the milieu in which he committed his crimes: the intersection of
biomedicine, biotechnology, and venture investing. What makes him so
delightfully hateable aren’t the particular lies he told to investors and
regulators, but how he so gleefully espoused the benefits of corporate
profit-seeking in the pharmaceutical industry prior to his downfall. Yet his
views are not extraordinary; rather, they are emblematic of how this
peculiar corner of industry does business.
Turing Pharmaceutical’s pricing scheme was troubling because it
contradicts the common sense assumption about what biomedicine is: a
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set of technologies and techniques designed to make sick people well. I
call this the “care thesis of biomedicine.” As anthropologists of medicine
and the body tell us, this understanding of medicine is deeply social and
moral—and often troubling and contradictory. We expect that by taking care
of the weak and vulnerable, we can make bodies better (if not “whole”),
restore social personhood, and open up new opportunities for participation
in political life (Scheper-Hughes and Lock 1987, Das and Addlakha 2001).
Further, the efflorescence of life-preserving technologies in the 20th and
early 21st centuries provide examples aplenty of how biomedical tools and
techniques are generative of moral obligations between members of
society and between individuals and a variety of biomedical institutions
(Sharp 2001, Lock 2002, Kaufman and Fjord 2011). The moral register of
the care thesis is evident within biomedicine, too. The Hippocratic Oath
lays out the first rule of this ideal: first, do no harm. But this “care thesis”
of biomedicine is, and has always been, at least partially mythical—the
origin myth of modern, Western biomedicine that is embedded in key
rituals of medical practice (Dingwall 2016). As a myth, it sets forth an ideal,
but falls short in describing the real state of things in the world, or how to
fix them.
Today, biomedicine is a booming industry as well as a set of caring
practices, and an industry from which investors know they can make
extraordinary returns. Biotechnology companies in particular—originally
those companies whose technologies involve making or delivering
biologically-derived compounds, but now often used to mean any small,
newer company making a product for use in biomedicine—have proven to
be cash cows for investors frequently enough to drive a biotech investing
frenzy. The enthusiasm surrounding the financial promise of biotech
(particularly biopharma, biotech companies who strictly work on
pharmaceuticals) is so strong that some industry insiders warn that biotech
is the next financial bubble. I am not the first anthropologist to be drawn to
biotech. Kaushik Sunder Rajan (2006) and Michael Fortun (2001) have
provided lively commentary about the promissory allure of biotechnology.
Sunder Rajan and Fortun were both drawn to the linguistic nature of the
promise, inspired by Jacques Derrida’s engagement with the time and
politics of the futur anterieur. By contrast, what fascinates me about the
promise of biotechnology at this moment is the dense net of social
relations, the markers of distinction and accomplishment, and the
emergent standards for scientific knowledge that animate networks of
actors to make promises about future value to each other and to the
public. In other words, I see value not only in understanding the rhetoric of
biotech, but also, like Cori Hayden (2003), the make up of the
actor-network (Callon 1986, Latour 1983, 1987, Law 1986) and the flow of
power, capital, and materials between its nodes.
Venture investment groups are important nodes in the biopharma network.
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Venture capital (VC) firms lead the way in venture investing, though hedge
funds, mutual funds (Shkreli’s own institutional background), institutional
investors, and other investors are also becoming major players in the field.
Venture capital firms are small organizations typically led by one to three
managing partners with anywhere from zero to dozens of more junior or
part time partners, associates, principals, and others. In healthcare- or life
science-focused firms or divisions of large firms, much of the staff has
training in the life sciences or medicine, often holding PhDs or MDs, with a
few MBAs as well. VCs, as individual employees are metonymically
referred to, are everywhere all the time, gathering information,
coordinating new investments and deals with companies previously
invested in, and always looking to maximize returns.
Venture capital is “expensive” in financial terms. In exchange for funding
in the hundreds of thousands to tens of millions of dollars, VC firms (and
firms that make venture-style investments) take a percentage ownership of
the company, earning them rights to a portion of the company’s stocks if it
goes public and to a proportionate amount of proceeds if it is sold. They
typically expect 500% to 1000% returns in five to seven years—rather
unlikely returns in most of the financial system, unless fraud is involved.
VC investors may still exercise significant control over the company even
after it goes public because of its ownership of company stocks, especially
in the first months and years after an initial public offering (IPO). VCs
structure their deals so that they are first in line to get paid when the
company is sold or liquidated, leaving founders and employees, many of
whom get paid in stock rather than cash, responsible for picking up the
pieces without compensation. Further, major investors often earn board
seats, which gives them the power to hire or fire company executives and
thereby exert soft control over company strategy. Employees of
investment firms are not infrequently hired by the company that the
investors control to run key business operations or to take over an
executive position.
An influx of venture capital takes a large enough slice of the company pie
that it changes how company executives see the science and products
their company produces. Plus, they can now lose their job if investors
decide they are not pursuing future profits aggressively enough. Doing
clinical studies isn’t discussed in terms of doing research or even creating
knowledge once investors get involved; it is about derisking the investment
for investors. An idea for a drug is risky because the drug can always fail
to show a significant difference from a placebo in a Phase II or Phase III
clinical trial. Running these trials and ironing out the supply chain for the
drug can cost in the tens to hundreds of millions of dollars. Even with
evidence from clinical trials, the FDA can fail to be convinced by the trials
or by the company’s ability to reliably and safely produce large quantities
of their product. The product can fail to attract users because insurers may
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hesitate to pay for the cost or the route of administration may not fit into
the already-established business models of the physicians who are
expected to prescribe it. Seemingly outrageous pricing is one of many
ways that executives demonstrate their serious interest in achieving the
desired returns of venture investors.
Given this state of affairs, some of Shkreli’s bombastic claims begin to
make an uncomfortable degree of sense. For example, on December 4 at
the Forbes Healthcare Summit (an industry networking event where he
was featured on the event website’s front page), he told an audience, “I
probably would have raised prices higher, is probably what I should have
done. I could have raised it higher and made more profits for our
shareholders. Which is my primary duty.” By contrast, Maine Senator
Susan Collins’ comments about the “egregious” pricing strategies of
investor-dependent biotech companies at a December 9th hearing on drug
pricing in the Senate Committee on Aging sound rather naïve. Her view,
reported by NPR, expressed surprise and outrage: “Some of these
companies seem to act more like hedge funds than traditional
pharmaceutical companies.” She also compared the behavior of
pharmaceutical companies to that of unsavory banking practices, saying,
“These companies are to ethical pharmaceutical companies as a loan
shark is to a bank.”
Senator Collins’ critique of drug pricing, prompted by Turing’s pricing
announcements, is motivated by a belief in the care thesis of biomedicine;
it falls flat for me because it is manifestly true without offering any
particular insight, critique, or solution. Biopharma and biotech companies
behave like financial vehicles in search of maximized revenue and profits
because that is what they are. They are value-maximizing machines
whose only moral obligation is to fulfill their agreements, implicit and
explicit, to maximize value for investors. This bothers us because we
believe that the care thesis ought to shape the culture and practice of
biomedicine, and moreover, that it applies equally to pharmaceutical
companies as it does to individual physicians who take the Hippocratic
Oath. The truth is that it does not fully account for the activities of either
group, and it accounts for much less of the activities of the manufacturers
of biomedicine than the practitioners of it.
The question of whether the care myth ought to structure the business and
practice of biomedicine is a different one from whether it does—two things
which often get conflated in public discussion of drug pricing, health care
costs, and health insurance reform. The recent turn to studying ethics and
morality in anthropology (Zigon 2008, Csordas 2014, Laidlaw 2014),
particularly with regards to biomedicine and public health (Lambek 2010,
Fassin 2014, Mattingly 2014, Zigon and Throop 2014), provides some
traction for decoupling descriptive research into the moral reasoning of
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social and cultural actors from the normative prescriptions for safeguarding
personal liberty traditionally offered by bioethicists. Understanding the
logic of the biopharma industry goes a long way toward understanding
why someone like Shkreli could operate with apparent success for years. It
also provides breathing space to follow the network to pinpoint which
actors and relationships are really behind this state of affairs.
I hope my short analysis of some aspects of the Shkreli case illustrates
what an ethnographically-informed investigation can teach us much about
the rising costs of medical intervention. Since cost so frequently inhibits
access to medical care in the United States, this episode also raises
questions about what would need to be done to make care more central to
biomedicine. Although he lied about the particulars of his deals to an
unusual extent, the general framework of Shkreli’s actions—moving back
and forth between investor and pharma executive roles, approaching drug
pricing with the intent of maximizing returns—constituted business as usual.
Private financing of drug development is contingent upon continuously
demonstrating the ability to live up to highly challenging financial
expectations—contractual promises upon which the personal and
professional fortunes of the executives in charge can rise or fall.
With Turing Pharmaceuticals and other venture-backed biotechnology,
medical device, and pharmaceutical projects, we are many layers removed
from the fetishized commodity object. It is not (merely) consumer demand
for biomedical objects that drives pursuit of higher prices in the
pharmaceutical industry—already a fetishization of their value, in Marxist
terms—but demand for a maximization of already immaterial investment
capital. But in the absence of publicly-funded translational
(“bench-to-bedside”) research on the scale necessary to reach FDA
approval of new drugs and devices, this is what drives pharmaceutical
innovation in the United States today. The moral outrage of Shkreli’s time
at Turing Pharmaceuticals ought not to be that pharmaceutical companies
can raise prices with impunity, or that dishonest people can amass fame
and fortune, but that there is no alternative to this way of doing research
and development in contemporary biomedicine.
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Danya Glabau is a PhD candidate in Science and Technology Studies
(STS) at Cornell University, Faculty at The Brooklyn Institute for Social
Research, and Director of Medical Affairs at Allovate Therapeutics, a
biopharmaceutical company developing new treatments for allergies. You
can check out her (currently hibernating) blog, Allergy and the City, to
learn more about her dissertation research on the culture surrounding food
allergies in the United States, check out her upcoming class at the
Brooklyn Institute, Imagining Immunity, and follow her on Twitter at
@allergyPhD.
AMA citation
Glabau D. Why Does Everyone Hate Martin Shkreli?. Somatosphere.
2016. Available at: http://somatosphere.net/2016/01/why-does-everyone-h
ate-martin-shkreli.html. Accessed January 15, 2016.
APA citation
Glabau, Danya. (2016). Why Does Everyone Hate Martin Shkreli?.
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Retrieved January 15, 2016, from Somatosphere Web site: http://somatos
phere.net/2016/01/why-does-everyone-hate-martin-shkreli.html
Chicago citation
Glabau, Danya. 2016. Why Does Everyone Hate Martin Shkreli?.
Somatosphere. http://somatosphere.net/2016/01/why-does-everyone-hate
-martin-shkreli.html (accessed January 15, 2016).
Harvard citation
Glabau, D 2016, Why Does Everyone Hate Martin Shkreli?,
Somatosphere. Retrieved January 15, 2016, from <http://somatosphere.ne
t/2016/01/why-does-everyone-hate-martin-shkreli.html>
MLA citation
Glabau, Danya. "Why Does Everyone Hate Martin Shkreli?." 14 Jan. 2016.
Somatosphere. Accessed 15 Jan. 2016.<http://somatosphere.net/2016/01/
why-does-everyone-hate-martin-shkreli.html>
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