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Martin Shkreli’s former company reaches $40 million settlement in price-gouging case

Vyera Pharmaceuticals raised the price of a life-saving drug for HIV patients from $17.50 a pill to $750

Former pharmaceutical executive Martin Shkreli speaks on Capitol Hill in 2016. (Susan Walsh/AP)
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A pharmaceutical company formerly owned by Martin Shkreli will pay as much as $40 million to resolve price-gouging allegations brought by federal regulators and seven states.

Vyera Pharmaceuticals, known as Turing when Shkreli ran the operation, acquired the rights to Daraprim, an anti-parasitic medication used to treat HIV patients and others with immunocompromised conditions, and raised the price of a pill from $17.50 to $750 — more than 4,000 percent.

It also blocked competitors from producing a generic version of the drug by restricting access to key ingredients, according to charges brought by the Federal Trade Commission and attorneys general from California, Illinois, New York, North Carolina, Ohio, Pennsylvania and Virginia.

Under the settlement filed in the Southern District of New York, Vyera and its parent company, Phoenixus AG, will pay $10 million up front and as much as $30 million over 10 years if their financial condition improves. They are required to make Daraprim available to generic competitors. Kevin Mulleady, who succeeded Shkreli as CEO, will be banned from owning, working or consulting for a pharmaceutical company for seven years.

The agreement resolves all federal and claims against Vyera, including a pending class-action lawsuit, according to a statement released by the FTC.

Martin Shkreli had the only copy of a Wu-Tang Clan album. The U.S. government just sold it to cover his debt.

Shkreli, who was convicted of securities fraud in 2017, is set to go on trial for his role in the Daraprim scheme this month. Prosecutors allege that in recent years he continued to run Vyera and its price-gouging strategy from prison.

The Shkreli-backed price hike sparked an outcry and congressional investigation. During a February 2016 hearing before the House Oversight and Reform Committee, then-Rep. Elijah E. Cummings (D-Md.) called him “the bad boy of pharma.”

Rep. Jason Chaffetz (R-Utah) pointedly asked: “What do you say to that single, pregnant woman who might have AIDS, no income, and she needs Daraprim in order to survive?” Shkreli did not answer.

Daraprim is used to treat toxoplasmosis, an infection caused by one of the world’s most common parasites. It can be fatal to individuals diagnosed with HIV and other immunocompromised conditions. It can also be fatal for babies born to mothers infected with the disease.

Shkreli in 2015 rejected calls from lawmakers, medical experts and patient advocates to reduce the price of the drug. He said that the decision was a good business practice and that his company would increase its volume-discount program for certain hospitals. It quickly abandoned that plan.

“Today’s action puts money back in the pockets of drug patients fleeced by a monopolistic scheme,” FTC Chair Lina M. Khan said in a statement. “Martin Shkreli masterminded an elaborate plan to dramatically jack up the price of life-saving drug Daraprim by blocking cheaper options. While litigation against Shkreli continues, the order shuts down the illegal enterprise run by his companies, Vyera and Phoenixus, and bans his associate from the industry.”

The action also “puts corporate leaders on notice that they will face severe consequences for ripping off the public by wantonly monopolizing markets,” Khan said.

Vyera representatives did not respond to requests for comment, but Shkreli through the years has maintained the company’s practices were legal and reflected a poor pricing model in the pharmaceutical industry.

Martin Shkreli sentenced to seven years in prison for defrauding investors

“If there was a company that was selling an Aston Martin at the price of a bicycle,” he once told Bloomberg News, “and we buy that company and we ask to charge Toyota prices, I don’t think that that should be a crime.”

Shkreli is serving a seven-year sentence for defrauding investors of his hedge funds, MSMB Capital and MSMB Healthcare, of more than $10 million. Shkreli lied to obtain investors’ money and then didn’t tell them when he made a bad stock bet that led to massive losses, prosecutors argued. Instead, they said, he raised more money to pay off other investors, or took money and stock from Retrophin, a drug company he founded.

He also was ordered to forfeit more than $7.4 million, including a Picasso painting and one-of-a-kind Wu-Tang Clan album, “Once Upon a Time in Shaolin.”

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