Martin Shkreli
No tie, Martin?
Infamous former Turing CEO Martin Shkreli and Howard Schiller, the interim chief executive of the pharmaceutical company Valeant, just faced Congress.

Legislators on Thursday wanted them to answer for dramatic drug-price increases that affect the lives of Americans.

Shkreli caught national attention when his company purchased a lifesaving drug called Daraprim and then raised the price by over 5,000%.

Wall Street was closely watching Schiller; Valeant's stock was a darling until accusations of malfeasance from a short seller and government scrutiny over pricing chopped off a quarter of its stock price last year.

Not a few bad apples

At the hearing, Rep. Elijah Cummings (D-Maryland) opened by saying, "It's not funny — people are dying" because drug companies "jacked up" prices.

"These tactics are not limited to a few 'bad apples,'" he said. "They are prominent throughout the entire industry. Lannett, Pfizer, Horizon, Teva, Amphastar, Allergan, Endo — all of these companies have taken significant price increases on their drugs."

He also submitted letters from Human Rights Campaign, Consumer Union, the American Federation of Teachers, and more, expressing their concern about drug-pricing practices. Cummings also discussed regulation against what he called price gouging.

After Cummings spoke, Schiller took the hot seat. Schiller's prepared remarks are here.

Among his points were:

  • Valeant paid an outside consultant to determine prices.
  • Valeant passes costs onto hospitals, not patients, and it actually lowers costs for patients through its assistance programs.
  • The FDA should speed up the approval process for generic drugs.

And then there's this interesting argument (emphasis ours):

"When these drugs are priced to reflect more closely their true clinical value, the more accurate price signals incentivize generic competition and innovation. Higher prices draw generic competitors into the market, which in turn tends to put significant downward pressure on prices."


Shkreli, as expected, invoked the Fifth Amendment and seemed to suppress laughter during his testimony. Turing's chief commercial officer also testified.

Shkreli was asked whether he had done anything wrong and was questioned about comments he had previously made.

Rep. Trey Gowdy (R-South Carolina) tried to convince Shkreli that some answers would not subject him to incrimination and that the two could talk about something else. That included his Wu-Tang Clan album.

"Is that the name of the group?" Gowdy asked.

"I intend to follow the advice of my counsel and not yours," Shkreli responded.

Shkreli continued to look away and smile. At points it looked as if he were about to burst out laughing.


He added that there were "so many people that could use your help."

Cummings ended by telling Shkreli "God bless you" and requesting that Shkreli be escorted out.

Later, outside Congress, Shkreli's lawyer said his client had been unfairly singled out. Eventually, he said, people would come to realize that Shkreli was "not a villain, but a hero."

Shkreli's people

While Shkreli got off fairly easy, Turing's CCO, Nancy Retzlaff, was grilled.

Retzlaff tried to argue that price had nothing to do with people's inability to access Daraprim.

"We paid the majority of the copay," she said.

No one was having it.

"When anyone acts like Turing is acting, Congress ... can suspend the exclusivity period for you to produce that drug," Rep. Stephen Lynch (D-Massachusetts) said. He called it a "poison pill."

"You're going to cause us to put heavy regulations on good companies ... Look at the impact you're having!"

Retzlaff also acknowledged that there was really nowhere a patient could see the real price of a drug, leading Boyle to say, "What we have here is a broken market."

Retzlaff was also asked whether her company ever thought about the public interest while pricing its product. She said she was comfortable with the pricing because of Turing's patient-assistance programs. She also said there was a lot of misinformation about pricing and that the problem was with public relations.

"Despite your best efforts it became a major news story," Cummings said later. Then he brought up that, in response to the public's reaction, a consultant advised Turing to lower the price and to tie profits of Daraprim to new research and development.

"Which is exactly what you're doing today," he said. "You followed most of the consultant's advice, except for one thing. You never lowered the price of Daraprim!"

Communications surrounding that, which Cummings read aloud to the session, made it clear that Turing knew patients were having problems paying for the drug but that it was unwilling to give on price.

Rep. Jason Chaffetz (R-Utah) later played a video in which Shkreli said Turing took all of its "extra profit" and put it into R&D.

"That's not true, is it?" Chaffetz said. "Are you really testifying that you're losing money, because I've seen your spreadsheets and you're making money hand over fist."

Retzlaff denied it, and Chaffetz said: "Oh no? I'll release these documents to the public, and you can fight it out there."

He also brought up an investor who suggested waiting until the PR storm died down to increase prices. He also brought up that Turing was handing out bonuses. Retzlaff denied both statements, and Chaffetz countered by reading documents that Congress had subpoenaed from the company.

Then Chaffetz got real:

"Did you spend money on a yacht night?"

Retzlaff said yes.

Did you spend money on a cigar roller for that yacht night?

Retzlaff said yes.

"So don't tell me you're not making money. So what's a woman who's dying of AIDS supposed to do — is she supposed to tweet Martin Shkreli?"

Valeant interim CEO Howard Schiller.

One congressman asked Schiller of Valeant whether hospitals really had a choice in giving patients Isuprel and Nitropress, two cardiac drugs whose prices Valeant raised by 525% and 212% respectively.

Schiller basically affirmed that hospitals may not have a choice to give a patient a drug, but he said Valeant had checked with hospitals on how they use the drug.

In the same breath, he confirmed that hospitals were taking the cost of the drug — but one congressman argued that that cost goes back to the patient in the form of a higher bill for the patient's trip to the hospital.

"Given the choice between higher prices and risking the health of their patients ... you're forcing hospitals to choose ... almost holding the patients as hostages," Rep. Gerry Connolly (D-Virginia) said.

He argued that this diverted funding from research and improving the care at hospitals. "The reality is hospitals are suffering in this country," he said.

He then asked Schiller whether it was true that Valeant's motto was, "Do not trust science — trust management."

Schiller said that he thought the company was changing and that he wasn't sure when CEO Michael Pearson, who has been on medical leave since December, said that. He then tried to talk about the value Valeant was driving to shareholders.

Connolly broke in, "I understand that your main concern in shareholders ... but it's unconscionable."

Cummings was equally hard on Schiller: "Mr. Schiller one question for you. You just said 'in some cases we were too aggressive in increasing prices.' Are you going to reduce prices?"

Schiller tried to say he looked across the portfolio and reduced some brands by 10% and that they would continue to make changes.

Cummings promised that he would be watching.