Security & Fraud

The Hidden Pricing Lessons Of Martin Shkreli’s Downfall

Six months ago, Martin Shkreli was the 20-something millennial CEO of a pharmaceutical company. Today, he is soaking up social media loathing every time clips of his Congressional hearing or one of his tweets catches the media spotlight. However, as Shkreli prepares to go down in history as a flattened-out, mustache-twisting villain of the 1 Percent, a closer reading of the facts points to a different reality of predatory pricing strategies and the average consumer’s tolerance level for them.

First of all, it is worthwhile to point out what Shkreli is currently being charged with and what the general consensus of his crimes are. Esquire has a full breakdown of the Shkreli drug price-hiking saga, which began in the distant past of Sept. 2015 with Shkreli’s company, Turing Pharmaceuticals AG, first buying a pill and then skyrocketing its price from $13.50 to $750 per pill. Initially, the story blew up based on that headline alone, but Shkreli’s behavior on Twitter, belittling people’s opinions, was a Super Bowl 50-worthy punt to the hornet’s nest of social media outrage culture.

However, lost in the weeds of Twitter beefs and the too-hard-to-believe purchase of a long-lost Wu Tang Clan album was the fact that when Shkreli was arrested in mid-December, it wasn’t on charges that he price-gouged patients in need of a lifesaving drug. Instead, The Wall Street Journal reported that Shkreli was brought in on accusations that he misled investors in Turing Pharmaceuticals, moving money around to different backers in an attempt to create the illusion of increasing returns.

In fact, Turing is not even going to lower the price of Daraprim, the drug in question. Quartz reported that Turing CCO Nancy Retzlaff told the same Congressional oversight committee that so satisfyingly roasted Shkreli that her company still took a loss on every bottle of the drug sold to patients under insurance plans covered by federal assistance programs. Though Congressmembers from both sides of the aisle chastised both current and former Turing employees with requisite self-righteousness, they can’t actually stop the company from selling the drugs at its chosen price.

In the months since Turing and Shkreli’s legally kosher yet morally questionable actions came to light, it was also revealed that federal investigators had known of Shkreli’s investing schemes for some time. However, it wasn’t until the crap hit the social media fan that much happened on that particular front. And therein lies the ultimate lesson from Shkreli’s — but, tellingly, not Turing’s — downfall: You might just get away with predatory pricing practices but not if your CEO is refusing to play the tried-and-true PR damage control game of press release remorse.

If there’s one major mistake that Shkreli made — other than the decision to engage in a multimillion dollar Ponzi scheme with his own investors’ money — it was never getting out of the public spotlight. His constant presence on Twitter and a series of bizarre videos streamed live from his webcam portrayed the wrong type of transparency and all but guaranteed Turing couldn’t assume the contrite pose most consumers and regulators have come to expect when brands and retailers overstep their ethical bounds.

However, rumors abound that federal investigators accelerated their case against Shkreli’s investment activities when he became a notorious Internet figure. That may be the best lesson to draw from the odd saga of the Pharma Bro’s rise and fall: The general public, more or less, expects corporations to try and pull one over on them; they just don’t appreciate it when the ones doing the pulling don’t even try to make, at the very least, superficial amends.

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