Martin Shkreli and the Criminals Who Arrested Him

In February of 2015, a little known entrepreneur by the name of Martin Shkreli founded Turing Pharmaceutical, and proceeded to buy up the licenses for out-of-patent medicines. For the most part, these pills were for rare diseases with small markets, and had no generic competition in the United States. One of these medications was a 62-year-old antimalarial drug called Daraprim, that is also used to treat and prevent toxosplasmosis infections in people with compromised immune systems.

After buying the drug, Shkreli immediately jacked up the price from $13.50 per pill, to $750 a pill. The man that everyone loves to hate was born. This smug and annoying man who fancied himself a capitalist suddenly became the poster child for everything that is wrong with capitalism (at least, according to the people who think they know what capitalism is).

Now Shkreli has finally been arrested for his business activities, though not for the ones he became notorious for.

Disgraced pharma magnate Martin Shkreli defaulted to his defense-by-Twitter ways on Saturday to label allegations of fraud lobbed against him as “baseless and without merit.”

Shkreli, 32, was arrested Thursday by the FBI on seven counts related to “widespread” securities fraud through a hedge fund and drug company he once ran.

An indictment said Shkreli and others orchestrated three interrelated scams from September 2009 through September 2014. Federal prosecutors allege that he illegally used assets from a biopharmaceutical company that he founded, Retrophin Inc., to pay off debts from a hedge fund he also managed — “like a Ponzi scheme.”

Retrophin had previously sued Shkreli in federal court for $65 million, claiming he had used his control over Retrophin to pad his bank account and bring his hedge fund into the black.

As you might expect, the internet cheered upon hearing this news. It was the kind of righteous narrative that one rarely sees outside of a movie. An evil capitalist buys a lifesaving drug and like a supervillain, decides to jack up the price to absurd levels. But in the end, justice is served when the law finally catches up to his trail of misdeeds.

However, these people who are cheering on Shkreli’s arrest, as well deserved as it may seem, have completely overlooked an entirely different class of market-rigging criminals. They forgot all about the people who had him arrested.

When Shkreli first raised the price of Daraprim, the knee jerk response from most people, was to demand better regulations. Writers from Slate and Vox called for price caps on these unpatented drugs, and presidential candidates like Bernie Sanders and Hillary Clinton spewed their own proposed regulations. However, none of these people (with the exception of Slate) have bothered to ask how Shkreli even pulled off his price gouging in the first place.

I mean, this is a drug with an expired patent right? Why can’t another company just produce the same drug for a lower price? Fortunately, somebody is doing just that. Shortly after he raised the price of Daraprim, a company called Imprimus Pharmaceutical announced that they would start producing the same drug. Unfortunately, they won’t be making Daraprim any time soon.

To manufacture any drug in the United States, even a well documented drug with a proven track record, you first have to go through the FDA. You have to prove that your version of the drug really is identical to the original, and is safe for consumption. Sounds simple and fair, but this process is anything but. It’s incredibly expensive and often takes about three years.

That’s why Shkreli bought the license for the drug for a whopping $55 million. Since the condition it treats is rare, the market is too small for anyone else to butt in. It certainly wasn’t worth it with the FDA standing in the way. In addition, the people who used it would die without it, so they can’t afford to not buy it. And finally, our government won’t allow foreign drug manufacturers to sell it to the United States unless they go through the FDA’s bureaucratic gauntlet (in India, the drug sells for about 5 cents, so it was already significantly overpriced to begin with).

In other words, Shkreli didn’t buy a drug, and what he did was hardly capitalistic.

He bought a monopoly. A monopoly that wouldn’t exist without the onerous laws created by our government, and was guaranteed by law to last at least three years. The same government that would eventually arrest him for running a ponzi scheme (a government that runs its own ponzi schemes like Social Security, but that’s a story for another day).

Shkreli simply took part in a scam that our government perpetuates every day. Contrary to what the statists on the Left and the Right would tell you, monopolies don’t exist in the free market. If they do, they don’t last long. It’s government regulations that create the conditions for these market anomalies to flourish.

And what happens when these monopolies inevitably take root? The people and the politicians clamor for more regulations. It’s an endless cycle that gives the government more power, and nets the corporations more profits. And we the consumers get fleeced by this criminal operation. If you ask me, Shkreli needs a bigger cell, and a few more bunkmates to keep him company.