Turing Pharmaceuticals: Shkreli’s Move Crushes Biotech Stocks As Clinton Weighs In On Debate
Described by Xconomy as nothing more than a “bit player” in the biotech industry, Turing Pharmaceuticals recently attempted to jack up the price of a live-saving drug by over 5,000 percent. Martin Shkreli, CEO of Turing Pharmaceuticals, appears to have publicly backtracked on the price increases in the face of the pressure. However, it is not clear at the time of writing what Turing Pharmaceuticals intend to set as the new price.
Rent taking is a business practice where instead of generating new sources of wealth, existing assets are bought and sometimes, but not always, improved (for example, a block of apartments upgraded), and usually, the rent increased. Turing Pharmaceuticals’ purchase of Daraprim clearly demonstrates the danger of rent taking in the healthcare industry.
Despite Turing Pharmaceuticals’ relatively lowly status in the industry, the public outrage surrounding the price increase has proved somewhat of a gift to politicians seeking to rein in prices and reform the industry. The Washington Post reports that Hillary Clinton was one of the first to comment on the “price gouging” by Turing Pharmaceuticals, promising to “take it on.” They also report that as Turing Pharmaceuticals is hardly the first company to make aggressive moves to increase pricing on old drugs, commenting that it happens with “such frequency” that congressional attention was inevitable.
Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on. -H https://t.co/9Z0Aw7aI6h
— Hillary Clinton (@HillaryClinton) September 21, 2015
The political response to the Turing Pharmaceuticals outrage has had an immediate knock-on effect on stock prices in the biotech industry. Xconomy continued their report to note that the mere hint of Clinton’s plan to regulate drug prices on the back of the Turing Pharmaceuticals price hike had “altered the financial landscape.” They reported industry stock prices falling a staggering six to seven percent in just 48 hours following Clinton’s tweet.
Shkreli’s move, aimed at boosting Turing Pharmaceuticals’ profits, has had the unexpected effect of bringing back onto the political agenda everything from restricting out-of-pocket costs to allowing Medicare to wield its full negotiating power to drive down prices. With the Washington Post also reporting that a recent study showed that the majority of Americans, even before the Turing Pharmaceuticals story broke, were unhappy with prescription drug prices, it’s likely that politicians will not face substantial opposition to policies aimed at reining in aggressive pricing policies.
Turing Pharmaceuticals may have presented a gift to politicians on a silver platter, but at the same time, Turing Pharmaceuticals has definitely put pressure on the biotech industry to justify pricing and plan for a future where more aggressive controls may be in place. It’s possible biotech stocks may have further to fall on the back of the Turing Pharmaceuticals backlash.
[Photo by Scott Eisen / Getty Images]
