Biotech bad boy Martin Shkreli became the face of high drug prices this week after his company raised the cost of a decades-old medicine from $13.50 per pill to $750. But this is not the first time the former hedge fund manager has appeared to prioritize profits over patients.
Four years ago, Shkreli asked the Food and Drug Administration to reject a new type of cancer diagnostic from a small drug maker called Navidea Biopharmaceuticals. He simultaneously — and very publicly — bet against the company’s stock. He had earlier tried a similar tactic against another company, MannKind Corp., that was developing an inhalable insulin.
The moves caused Navidea’s value to plummet at the time, threatening to hurt the company’s ability to prepare for the launch of the product.
Ultimately, the FDA approved the diagnostic, which some physicians now see as a valuable medical tool — and one that patients might not have had access to if Shkreli had succeeded.
“It was like a frivolous lawsuit that bottlenecks the system and threatens progress,” said Dr. Anne Wallace, a breast cancer surgeon at the University of California, San Diego, who ran clinical trials for Navidea’s diagnostic. “This sort of tactic can ruin science.”
Through a spokesman, Shkreli declined to comment.
Until this week, Shkreli was largely unknown beyond Wall Street and the pharmaceutical industry. He gained sudden notoriety for jacking up the price of Daraprim, a drug used to treat life-threatening infections, just two months after his company, Turing Pharmaceuticals, acquired the medicine.
Initially defiant in the face of an onslaught of criticism, the 32-year-old chief executive agreed on Tuesday to lower the price, although he has not indicated when or by how much.
Shkreli employed a similar pricing strategy at Retrophin, another drug company he ran before its board of directors booted him from his executive position. Last month, Retrophin accused him in a lawsuit of using company funds to repay investors after his hedge fund became insolvent.
Shkreli also has a track record of betting against pharmaceutical stocks — a practice known as short selling. And in at least two cases he pressed federal regulators to reject the companies’ product at the same time he was betting the stocks would go down.
In 2010, while running his hedge fund, Shkreli wrote a letter to the FDA urging the agency to turn down an application from MannKind, a company he was shorting that was seeking approval for an inhaled insulin product, according to news accounts. The agency initially had multiple issues with the drug but eventually approved it last year.
In 2011, Shkreli then turned his attention to Navidea and its cancer diagnostic, called Lymphoseek — this time going so far as to a file a “citizen’s petition,” a more formal kind of regulatory complaint. Shkreli has no formal medical or scientific training. But while shorting the firm’s stock, he argued there were problems with the design of clinical trials used to evaluate the radioactive agent.
He publicized his complaints and financial bets against Navidea, which caused the company’s stock value to drop by nearly half, to about $250 million, leaving the drug maker in turmoil.
By filing the petition, Shkreli “almost derailed the Lymphoseek program,” said Steve Brozak, who heads WBB Securities, which helped raise money for Navidea (which was known as Neoprobe at the time). “He created an illusion there was an issue [with the trials], but the only thing he did was make money by shorting the stock. Meanwhile, patients could have been penalized.”
Simultaneously shorting a stock and petitioning the FDA, as Shkreli did with Navidea, was “highly unusual,” said Ira Loss, a health care analyst at Washington Analysis, a consulting firm. “In fact, I can’t think of another instance where that happened.”
In 2012, an organization called Citizens for Responsibility and Ethics in Washington asked the US Securities and Exchange Commission and the Department of Justice to investigate whether Shkreli manipulated the stock prices of drug companies under FDA review. According to an organization spokesman, nothing came of either request.
Consumer groups often file citizen’s petitions to voice concerns about the safety of drugs. But petitions can be wielded like weapons by companies or others seeking to thwart an approval. And even when rejected, these requests can delay FDA reviews and drain the resources of small companies, which must take the time to respond to regulatory inquiries.
The episode with Navidea upset physicians who say Lymphoseek represents an improvement because it caused patients less pain than existing diagnostics.
“It’s a better agent for marking the lymph nodes that are at the highest risk for containing the spread of cancer from the primary tumor,” said Dr. Stephen Lai, a head and neck surgeon at the University of Texas M.D. Anderson Cancer Center in Houston and a consultant for Navidea.
The FDA rejected Shkreli’s petition in 2013 at the same time that it approved Lymphoseek for evaluating melanoma and breast cancer. Last year, the agency added head and neck cancer, too.
An FDA spokeswoman said the petition did not cause a delay in reviewing Lymphoseek.
However, Frederick Cope, a Navidea senior vice president and chief scientific officer, said the incident “made us rethink our schedules and slow things down.”