A view from Dave Trott: First, do no harm
A view from Dave Trott

First, do no harm

Martin Shkreli began his career in a Wall Street hedge fund.

He was a fast learner, the rules were pretty simple – demand and supply.

The greater the demand for something, the more you could charge for supplying it.

Later on, Shkreli added a twist – he spotted that if he could find something people HAD to have, then they’d HAVE to pay whatever he charged.

In 2017, he bought the rights to Daraprim, a drug that cost pennies to make.

Shkreli knew Daraprim was used to treat Toxoplasmosis and for patients with HIV/Aids.

He immediately raised the price, from $13.50 a tablet to $750 a tablet.

Shkreli wrote to his shareholders: “I think this will be huge – 5,000 paying bottles at the new price is $375,000,000 – almost all of it is profit, and I think we will get three years of that or more. Should be a very handsome investment.”

Joe Mattingley is a professor at the University of Maryland School of Pharmacy.

Shkreli and Daraprim are a case study on his course on pharmaceutical business strategy.

Tactfully, he says: “The market sets a price where, if you NEED it, you HAVE to pay it.”

In reality this means, how much is your life worth: money is no good if you’re dead, so would you pay everything you’ve got for this treatment, yes or no?

And then Shkreli sets the price accordingly, in this case a 5,000% increase.

Of course, Shkreli doesn’t put it like that, he says: “If there was a company that was selling Aston Martins for the price of a bicycle, and we buy that company and sell them for the price of a Toyota, I don’t think that would be a crime.”

In 2017, Kaiser Health News said Shkreli’s price increase would bring the average Daraprim cost up to $35,556.48 per prescription.

Several years before, Shkreli had seen another way of making money from medicine.

He filed requests with the FDA to reject a new cancer diagnostic device from Navidia Biopharmaceuticals and an inhalable insulin therapy from Mannkind Corporation.

He did it because he was short-selling both stocks.

Short-selling is where you borrow the stock to sell while the price is high.

Then you wait for the price to drop and buy the stock back at the lower price, returning the stock you borrowed and keeping the profit.

But for this to work, you need to make sure the price of the stock drops.

Which was why Shkreli lobbied the FDA to reject the improved treatments: it would be bad for people with cancer and diabetes but it would be good for his business.

In each case, what Shkreli did may have been immoral but it wasn’t illegal.

There was an outcry about the Daraprim price rise, but Shkreli didn’t lower the price.

He just changed his company’s name to Vyera Pharmaceuticals.

If you look on its website today, you’ll see one of the statements on its homepage is: “Vyera believes that patients should not have to overcome significant barriers to access treatment.”

Given that Shkreli was its chief executive, you may find this strange.

Then again, given what we know about “brand purpose”, you may not.

Brand purpose is something marketing people make up that usually has nothing to with the company at all.

It only has to do with what they think the client and customers want to hear.

It doesn’t have to be true, it doesn’t even have to be believable to ordinary people.

Brand purpose isn’t meant for ordinary people, it’s meant for other marketing people.

Just something obvious and bland that no-one can object to.

Which also means that no-one will notice it or remember it.

Which, perhaps not entirely by coincidence, sums up 90% of advertising.

Dave Trott is the author of Creative Blindness and How to Cure It, Creative Mischief, Predatory Thinking and One Plus One Equals Three