Martin Shkreli, chief executive of Turing Pharmaceuticals and KaloBios Pharmaceuticals. (Paul Taggart/Bloomberg News)

Martin Shkreli, the brazen pharmaceutical entrepreneur who has become the poster child for drug industry misbehavior, was arrested in his Manhattan home on Thursday morning on charges of securities fraud. But that's not the only reason he has attracted the attention of federal officials this week.

On Tuesday, the House Committee on Oversight and Government Reform raised concerns in a letter to the Food and Drug Administration about a recent business maneuver by the 32-year-old former hedge fund manager. Through a new business investment, KaloBios Pharmaceuticals, Shkreli had bought the rights to a drug for Chagas disease, a rare tropical parasitic ailment, earlier this month.

KaloBios said it expected to receive a coveted "priority review voucher" from the FDA as a reward for getting U.S. approval for the drug. Those vouchers are like golden tickets that companies can use to speed up the regulatory review of another drug — but some pharmaceutical companies have been selling them to make millions of dollars on the side.

These vouchers are supposed to act as an incentive for companies to develop drugs for underserved diseases — such as tropical or rare pediatric diseases — for which there is unlikely to be a large market. Then the company can use the vouchers to get its drugs to market faster. According to the FDA website, the goal for completing a priority review is six months, while the goal for a typical review is 10 months. But the concern is that companies aren't actually developing new drugs, but simply pushing existing ones through the FDA process to profit from selling the voucher.

It's a tactic that Retrophin — the company that Shkreli is accused of defrauding — also used recently, after Shkreli was kicked out as chief executive. A voucher that Retrophin had acquired was sold to French drugmaker Sanofi in May for $245 million. The drug that initially earned the voucher was cholic acid, an old drug used to treat a rare pediatric disorder.

In a letter sent Tuesday to the Food and Drug Administration, members of the House Committee on Oversight and Government Reform expressed concern that the priority voucher program was being exploited by companies that desire to obtain — and resell — priority review vouchers without actually creating a new drug. The price tag for these vouchers has soared over the past two years: This summer, biopharmaceutical company AbbVie bought one for $350 million from United Therapeutics.

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"Skyrocketing ... resale prices, and the recent acquisition of KaloBios, have raised questions about the potential exploitation of the PRV [priority review voucher] program by those who may be applying ... not to develop new therapies but rather solely to capitalize on the PRV resale market," Oversight Committee Chairman Jason Chaffetz (R-Utah) wrote.


In a commentary published in the Journal of the American Medical Association, Harvard Medical School professor Aaron Kesselheim questioned whether the vouchers were really rewarding investment and innovation. He pointed out that Knight Therapeutics last year received a voucher for an old treatment for the parasitic disease leishmaniasis. That drug was originally developed in the 1980s for cancer and found to be an effective treatment for leishmaniasis in the 1990s. Nevertheless, Knight Therapeutics pursued approval, received the voucher and then sold it to Gilead Sciences for $125 million last year.

"One way to potentially prevent such windfalls would be to redesign the voucher system so that drug companies would have to show some level of investment in a new drug's development before earning the reward," Kesselheim wrote in JAMA.

In a letter sent to two senators in November, a number of organizations focused on global health and neglected diseases made much the same argument, asking that the policy be changed to include a requirement that drugs that qualify for the voucher be novel and that there be a plan in place on how to make the drug accessible to patients.

"The lack of requirements for a product to be novel or to be made available to and affordable for those whom the product is designed to treat or protect are two critical flaws in the design of the program that remain unaddressed," the letter said.