Whitman School Professor John Petosa Weighs in on Martin Shkreli and Turing Pharmaceuticals

When businesses make praised, innovative decisions, the media will cover it in a story, maybe two. When businesses make mistakes, the media will keep the company in headlines for weeks as people try to make sense of the situation. Whitman professors are a resource that can provide additional perspectives on current news stories to boil the situation down to “lessons learned,” in true academic fashion.

To do so, we asked Professor John Petosa to respond to a few questions regarding the Turing Pharmaceuticals scandal.

The Story: Martin Shkreli and Turing Pharmaceuticals

In August 2015, Turing Pharmaceuticals led by Martin Shkreli acquired Daraprim. This specific drug treats parasitic infections, which affects about 1 million people annually. One month after the acquisition was made, the price of the drug went from $13.50 per tablet to $750 per tablet. This dramatic price increase happened overnight and Turing Pharmaceuticals immediately faced backlash from the hospital industry and the general public.

In his own defense, Shkreli stated that because of the low rate at which hospitals actually use the drug, the effect on the health care system would be “minuscule.” He claimed that the money Turing earned from the price hike would go toward developing a better treatment for the parasitic infections.

On the other hand, because of the price hike, hospitals are forced to rethink the treatment of the parasitic infections, which could lead to a less effective alternative, as Daraprim was the leading drug to treat the infection.

Lessons Learned: Professor John Petosa weighs in

Q: When you heard about the scandal with Martin Shkreli and Turing Pharmaceuticals, what was your first thought or reaction? 

Mr. Shkreli has made a nice living by finding older drugs that have limited distribution and appeal, purchasing them and then raising the price of the drug knowing that no one would likely have the ability to fight the increased price. While it could be argued he had the legal ability to raise the price of the drugs, it was not a good business decision because of the negative feedback. I think many would have considered a modest price increase of say $10 per tablet acceptable, but a raise to $750 cast Mr. Shkreli in a poor light.

Q: If you could go back in time and if Martin Shkreli were a student in your class, what business lesson would you want to teach him? 

Bears and bulls make money but pigs go to market. Even if he could justify this increase it looks like greed. Unfortunately, the importance of the lifesaving drugs gives an added layer of analysis when considering the price increase. How many may die because they can’t get the medicine they need because of its price?

Q: If Martin Shkreli elected you to be on a committee to fight for the price increase, how would you frame your defense? 

The cost to produce, distribute and create new research for a better drug requires a drastic price increase. Further, there had been no price increase in over 30 years, it was well overdue.


Sarah Graham