As I read the news and social media feeds today, I am finding a lot of hate for Martin Shkreli, the CEO of Turing Pharmaceuticals. According to media sources, he is defending his company’s decision to raise the price on a drug used to treat toxoplasmosis from $13.50 a pill to $750. As one can imagine, the vast majority of people expressing an opinion are outraged, criticizing Shkreli for making a life-saving drug unaffordable.
However, like so many issues we see, this is not a simple, black-and-white issue.
Why was the price raised?
Say what you want about Shkreli, at least he has granted media interviews to talk about why he felt the need to raise the cost of the drug. In an interview with CNBC, Shkreli states the price of the drug was raised for two reasons.
The first reason for raising prices is that the company is losing money. This explanation is simple economics–if a company cannot make money selling products and services at current price points, then raising the price to increase revenue should be considered. Certainly no one would begrudge a company for wanting to turn a profit, right? He also states the profit the company will make after the price hike will not be outrageous but reasonable. Granted, these are relative terms, and the profit deemed reasonable by a CEO may be outrageous to a patient needing this drug.
Another reason for raising prices is to fund research and development for a better version of the drug. Shkreli states there is a need for a better version of the drug, explaining that people still die each year from toxoplasmosis.
So what’s the big deal?
If we ignore the fact that lives are at stake, it’s no big deal. However, Twitter and Facebook have been aflame with hatred for this CEO because of the possibility of people dying from the lack of access to medication. However, Shkreli states the company has active plans to make the drug available to those who cannot afford it. If this is true, what’s the big deal? Why have Hillary Clinton and Bernie Sanders expressed outrage at the price hikes?
The truth is that healthcare is a touchy issue for Americans. Many of us do not want our taxes raised to provide healthcare for everyone, or to allow the government to control medical services. Others believe that healthcare is a God-given right, and the federal government should control it for just that reason.
The current state of healthcare
Right now, Americans are not guaranteed full healthcare. If I show up at an emergency room without money or insurance, I will likely receive enough medical care to stabilize my condition, but it is not comprehensive or preventative care.
Providers may receive government funds for services through programs like Medicare or the ACA (Affordable Care Act), but these businesses are privately funded and created. This includes the vast majority of research and development for new medications and treatments. So, when Pfizer develops a new drug, they have to raise the funds for that research from somewhere…most likely from sales of current drugs.
Therefore, when companies like this raise prices so they can invest in R&D, should we not be happy about it?
What is really going on?
I see this debate in a couple of different ways.
The first view will certainly offend some people. I believe that too many people have had knee-jerk reactions to this announcement. The company has answered concerns regarding consumers that cannot afford the drug. They are not out to kill anyone, they just want to make a profit and develop product improvements. I do not believe we can issue condemnation of this organization as quickly as we have.
Now that’s out of the way, let’s discuss the real, underlying issue. We are the only first-world country where healthcare is not provided as a direct product of the government. Many Americans believe that healthcare is a right, not a privilege. When companies make decisions to raise prices or restrict access to products in the healthcare arena, people insist on government involvement to prevent anyone from suffering or dying.
As a corollary to that point, who is really paying for these drugs? Some people do pay for these drugs out of their own pocket; nonetheless, insurance companies will likely be the most frequent customers.
This reality shapes the true essence of this debate. If this guy was selling any ordinary product for $13.50 then jacks the price to $750, his company would have made its last sale–unless his company is Apple. He was able to raise the price for only two reasons: it is a life-saving drug without a cheaper equivalent, and also because the cost is hidden to the average consumer because it is borne by the insurance companies.
We need to stop having such extreme reactions to headlines. We have more information at our disposal than any other group of people at any other time in history, but we make rash decisions based on nothing more than a sentence or two. People have crucified this CEO for trying to make a company profitable and sustainable, even as he has promised that access to the drug will not be hindered because someone cannot afford it.