​Why it Doesn’t Matter that Martin Shkreli is a Huge Jerk

Joel Anderson  |

Much of America still seems to be basking in the glow of Martin Shkreli’s tremendous tumble from, well, not grace,but at least a position of high stature in his own little bubble. The so-called “Pharma Bro” presented a heady bouquet of unlikability that seemed tailor-made to be a social-media receptacle for certain people’s opinion of what’s wrong with America. Between jacking up the price of life-saving drugs to buying the singular Wu Tang Clan album to running what was essentially a Ponzi Scheme, Shkreli was God’s gift to schadenfreude.

However, I think there’s a real tragedy to the fact that Shkreli wound up being such a perfect villain. Because, in a lot of ways, it wound up papering over some of the more serious issues his fall from grace might have otherwise exposed. The fact that Martin Shkreli the individual was so cartoonishly evil helped make him appear to be a singularity, when the reality is actually a lot more complicated..and a lot more dangerous.

Obviously, a lot of Shkreli’s actions were pretty specific to him. We can at least hope that the sort of fraud that landed him in jail isn’t wide spread (fingers crossed), and there was just that one Wu Tang. However, selling life-saving drugs for profit isn’t. That’s common place. And by focusing on Martin Shkreli, we may all be letting the consequences of that bigger truth slide right by.

It’s a Health Care Industry, Folks

When the story first broke, I remember being a little confused. “Evil Man Increases Price on Life-Saving Drug” blared the headlines. For a lot of people, that might have been a source of outrage, but for a guy like me - someone who has spent a fair bit of time researching and writing about the biotech industry - my first thought was “well, yeah, that’s sort of business as usual.”

Granted, Shkreli was, arguably, stepping over a line - even by the standards of his industry - but not to the degree you might think. After all, there are perhaps thousands of companies out there today developing treatments that might help save people’s lives. And each and every one of them is planning on selling those drugs at a price that will maximize profits.

Take the story of Sovaldi, the Hepatitis C drug developed by Gilead Sciences (GILD) in 2013. That drug was essential to preventing liver damage for those people suffering from Hep C, and Gilead Sciences responded by pricing it at $1,000 a pill. And the ploy worked, significantly spiking profits for Gilead in the first quarter it was on the market.

Even that example is something of an outlier, as there was some public outrage over the story. But the fact is, these are the realities of living with a private healthcare system. Public companies maximize profits by developing and selling medical treatments. Martin Shkreli and Gilead Sciences aren’t hideous outliers, they’re the industry norm stretched a bit farther than usual.

Shkreli’s One (Accidental) Good Deed

This is problematic because a long hard look at the nature of our healthcare industry could be valuable, but that conversation is getting completely overlooked in favor of knee-jerk outrage. Martin Shkreli certainly appears to be a pretty terrible person, but he’s also uniquely terrible many ways. Meanwhile, the consequences of the broader healthcare industry, good and bad, affect millions of people...with or without a convenient villain as a focal point.

In his own perverse way, Shkreli highlighted a fundamental issue with our system of healthcare. Healthcare has entirely inelastic demand. When a treatment might save a person’s life, it’s impossible for the market to find the correct price given that death is the alternative. A person’s health is too important to bargain over, placing the supply side in a position of permanent and prohibitive advantage.

It’s part of why healthcare costs in this country have exploded over the last few decades. Healthcare spending is currently about 17% of GDP, highest in the world save the island nation of Tuvalu and its $38 million GDP. In fact, per capita public spending alone actually exceeds the levels reached in a number of countries with public health care systems.

This isn’t to say that our private system of health care lacks any benefits. To focus purely on its flaws would miss some important ways that our free-market approach actually improves the quality of medicine the world over. The tremendous amounts of money made by drug companies does go towards things like enriching shareholders and marketing, but it’s also often spent on research and development. The money we spend on medical treatments helps drive market forces that produce life-saving treatments the whole world might not otherwise have access to.

All in All, Shkreli’s Just Another Prick in the Wall

Personally, I feel as though it’s impossible to create an efficient market in circumstances where demand is so tangibly tied to a person’s lifespan. However, I can’t ignore the reality that without the free market, some of modern medicine’s greatest wonders may not exist.

What can be said for sure is that the rise and prompt fall of Martin Shkreli has not changed much of anything about this bigger system. He was one person, and no matter how objectionable a person that may be, his impact is pretty minimal.

Martin Shkreli getting carted off to jail does not mean that people have stopped profiting from drugs that other people depend on to survive. That engine continues chugging right on with or without pharma-bro. So, if you were one of the people horrified that someone might try to profit from someone else’s life-threatening illness, you aren’t really angry with Shkreli. Okay, maybe you are, but just make sure you save some anger for the system that encourages his worst impulses.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.


Symbol Last Price Change % Change