Last week, pharmaceutical executive Martin Shkreli was sentenced to seven years in prison for securities fraud. But those charges are not what gained him notoriety. In August 2015, his company bought monopoly rights to a life-saving drug that treats parasitic infections in people with weak immune systems. Without adding any value or doing significant research, the company then raised the drug’s price by more than 5,000%, from US$13.50 to $750 for a single tablet.
Plenty of drug-industry insiders decried Shkreli as “not one of us”, emphasizing the virtues of biotechnology and innovative pharmaceuticals. I am a fan of the drug industry — I invest in promising leads and start-ups. But the public sees our industry as one entity, not an industry of good and bad players. When any executive engages in price gouging, it is a reflection on us all, and validates the negative bias against our industry. Innovators and opportunists will go down together, unless the former agree to push the latter out.
Yes, the drug industry is a business. But it is a business with a beautiful purpose: treating what ails people. As a venture capitalist, I look for ideas that increase value. If we succeed in finding new and better therapies, we should be rewarded for the risks and investments we make. A course of the hepatitis-C drug sofosbuvir (Sovaldi) can run, controversially, into the tens of thousands of dollars — but the drug took years of cutting-edge research to produce and cure a disease that otherwise requires a liver transplant, which costs upwards of $500,000.
As George Merck, president of drug company Merck from 1925 to 1950, put it: “We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered that, the larger they have been.”
Passed down from Merck to executives such as Roy Vagelos, a former head of Merck, and George Yancopoulos, now chief scientific officer at Regeneron Pharmaceuticals, is a fierce belief that if you do the science right, you will ultimately deliver innovative drugs to patients that will save lives and cure disease. I feel confident that investments (some by my firm) in science-driven companies such as Genentech, Kite Pharma and Achaogen will produce results. So will a new generation of companies, such as eGenesis, Encoded Genomics and Vir Biotechnology, which work, respectively, on producing transplant organs, ways of regulating genes and fighting infection. It takes people with their kind of scientific fanaticism and high standards to hold our collective feet to the fire.
I think there are many more George Mercks in the drug industry than Martin Shkrelis. But too many in the industry, driven by the demands of Wall Street, have shifted to a model that seeks to maximize profit over helping patients. Among others, Michael Pearson, former chief executive at Valeant Pharmaceuticals, has been publicly criticized for jacking up prices on several drugs. And I have, unfortunately, been privvy to conversations in which executives planned price rises to force wholesalers to make larger purchases so they can hit sales expectations.
None of us wants to believe that we are part of the problem. But as long as we tolerate the presence of these bad actors, we are all complicit.
An academic colleague once asked me about violating a company’s patents because, he assumed, “you guys in business do that all the time”. No, we don’t. We depend on patents. Responsibility in our business means following the laws that safeguard our own intellectual property when the time comes.
Over the long term, mistrust raises the cost of capital and makes it difficult to fund worthy science. Just this week, the US government charged Theranos and its chief executive, Elizabeth Holmes, with defrauding investors. (She and the company reached a settlement without denying or admitting wrongdoing.)
In my experience, the biggest drag on our stock prices is our bouts of dishonesty with Wall Street, physicians and patients. And, ultimately, it’s the patients who suffer.
The innovations ahead of us are both breathtakingly effective and expensive: gene editing, chimaeric organs, personalized immunotherapy. But members of the public will not support this research if they suspect that they are being gamed. Transparency about pricing decisions, while sometimes painful in the short run, builds trust.
So, what to do? When we see practices that put profits ahead of patient needs, we need to call foul publicly and not look the other away. We need to move away from gimmicks that raise only the price of drugs, not their value. People who use these tricks should be fired. Their projects should be shunned by venture capitalists and potential funding partners. We should lobby for a patent system that rewards real novelty, not more years of monopoly for a mint-flavoured version of an existing drug. (I exaggerate, but many of the reformulations used to retain rights are incremental improvements, at best.) Trade groups such as the Biotechnology Industry Organization and PhRMA, both in Washington DC, should emphasize this in their codes of ethics, and members should hold each other to account.
If the pharmaceutical industry is to thrive, we must all embrace the Hippocratic oath, whether in academia, business, finance or at the bench. The cost of lost trust to the drug industry is worth much more than manipulated short-term gains.
Nature 555, 561 (2018)