The investor-boy-wunderkind-turned-pharmaceutical-CEO Martin Shkreli was the end of the year’s emblem of schadenfreude. Shkreli has been in the news regularly since September 2015 when his company, Turing Pharmaceuticals, announced plans to raise the price of decades-old toxoplasmosis drug Daraprim from $13.50 to $750 per pill. Public discussion about Turing’s pricing strategy prompted a congressional hearing on drug pricing and brought him firmly into the public eye: he appeared on numerous cable news networks, and a Gawker piece about his YouTube channel pushed one of his videos to over 122,000 views. His misfortune has continued since his December 17 arrest: on December 18, he resigned as CEO of Turing, on December 21, he was terminated from his other CEO position at KaloBios, and on December 24, KaloBios’ stock was delisted from the Nasdaq. The Securities and Exchange Commission (SEC) complaint against him catalogs his crimes in animated legalese, clearly meant for wide public readership. The charges document a series of failed investments in the pharmaceutical space that he “lied” (in the language of the complaint) about to his investors to cover up. Yet Shkreli managed to spin his losses into promises of greater future gains, enabling him to raise yet more financing that he claimed was for his current and future projects, but that was actually used to hide what had gone wrong.
This episode is a prime ethnographic moment in a much larger, more complex story about how the production of biomedical knowledge is now being shaped by the financial services industry. In this essay—the first of what I hope to be many that I write on this topic—I am less interested in Shkreli’s mendacious psychology than I am in starting to pry open the logics of the milieu in which he committed his crimes: the intersection of biomedicine, biotechnology, and venture investing. What makes him so delightfully hateable aren’t the particular lies he told to investors and regulators, but how he so gleefully espoused the benefits of corporate profit-seeking in the pharmaceutical industry prior to his downfall. Yet his views are not extraordinary; rather, they are emblematic of how this peculiar corner of industry does business.
Turing Pharmaceutical’s pricing scheme was troubling because it contradicts the common sense assumption about what biomedicine is: a set of technologies and techniques designed to make sick people well. I call this the “care thesis of biomedicine.” As anthropologists of medicine and the body tell us, this understanding of medicine is deeply social and moral—and often troubling and contradictory. We expect that by taking care of the weak and vulnerable, we can make bodies better (if not “whole”), restore social personhood, and open up new opportunities for participation in political life (Scheper-Hughes and Lock 1987, Das and Addlakha 2001). Further, the efflorescence of life-preserving technologies in the 20th and early 21st centuries provide examples aplenty of how biomedical tools and techniques are generative of moral obligations between members of society and between individuals and a variety of biomedical institutions (Sharp 2001, Lock 2002, Kaufman and Fjord 2011). The moral register of the care thesis is evident within biomedicine, too. The Hippocratic Oath lays out the first rule of this ideal: first, do no harm. But this “care thesis” of biomedicine is, and has always been, at least partially mythical—the origin myth of modern, Western biomedicine that is embedded in key rituals of medical practice (Dingwall 2016). As a myth, it sets forth an ideal, but falls short in describing the real state of things in the world, or how to fix them.
Today, biomedicine is a booming industry as well as a set of caring practices, and an industry from which investors know they can make extraordinary returns. Biotechnology companies in particular—originally those companies whose technologies involve making or delivering biologically-derived compounds, but now often used to mean any small, newer company making a product for use in biomedicine—have proven to be cash cows for investors frequently enough to drive a biotech investing frenzy. The enthusiasm surrounding the financial promise of biotech (particularly biopharma, biotech companies who strictly work on pharmaceuticals) is so strong that some industry insiders warn that biotech is the next financial bubble. I am not the first anthropologist to be drawn to biotech. Kaushik Sunder Rajan (2006) and Michael Fortun (2001) have provided lively commentary about the promissory allure of biotechnology. Sunder Rajan and Fortun were both drawn to the linguistic nature of the promise, inspired by Jacques Derrida’s engagement with the time and politics of the futur anterieur. By contrast, what fascinates me about the promise of biotechnology at this moment is the dense net of social relations, the markers of distinction and accomplishment, and the emergent standards for scientific knowledge that animate networks of actors to make promises about future value to each other and to the public. In other words, I see value not only in understanding the rhetoric of biotech, but also, like Cori Hayden (2003), the make up of the actor-network (Callon 1986, Latour 1983, 1987, Law 1986) and the flow of power, capital, and materials between its nodes.
Venture investment groups are important nodes in the biopharma network. Venture capital (VC) firms lead the way in venture investing, though hedge funds, mutual funds (Shkreli’s own institutional background), institutional investors, and other investors are also becoming major players in the field. Venture capital firms are small organizations typically led by one to three managing partners with anywhere from zero to dozens of more junior or part time partners, associates, principals, and others. In healthcare- or life science-focused firms or divisions of large firms, much of the staff has training in the life sciences or medicine, often holding PhDs or MDs, with a few MBAs as well. VCs, as individual employees are metonymically referred to, are everywhere all the time, gathering information, coordinating new investments and deals with companies previously invested in, and always looking to maximize returns.
Venture capital is “expensive” in financial terms. In exchange for funding in the hundreds of thousands to tens of millions of dollars, VC firms (and firms that make venture-style investments) take a percentage ownership of the company, earning them rights to a portion of the company’s stocks if it goes public and to a proportionate amount of proceeds if it is sold. They typically expect 500% to 1000% returns in five to seven years—rather unlikely returns in most of the financial system, unless fraud is involved. VC investors may still exercise significant control over the company even after it goes public because of its ownership of company stocks, especially in the first months and years after an initial public offering (IPO). VCs structure their deals so that they are first in line to get paid when the company is sold or liquidated, leaving founders and employees, many of whom get paid in stock rather than cash, responsible for picking up the pieces without compensation. Further, major investors often earn board seats, which gives them the power to hire or fire company executives and thereby exert soft control over company strategy. Employees of investment firms are not infrequently hired by the company that the investors control to run key business operations or to take over an executive position.
An influx of venture capital takes a large enough slice of the company pie that it changes how company executives see the science and products their company produces. Plus, they can now lose their job if investors decide they are not pursuing future profits aggressively enough. Doing clinical studies isn’t discussed in terms of doing research or even creating knowledge once investors get involved; it is about derisking the investment for investors. An idea for a drug is risky because the drug can always fail to show a significant difference from a placebo in a Phase II or Phase III clinical trial. Running these trials and ironing out the supply chain for the drug can cost in the tens to hundreds of millions of dollars. Even with evidence from clinical trials, the FDA can fail to be convinced by the trials or by the company’s ability to reliably and safely produce large quantities of their product. The product can fail to attract users because insurers may hesitate to pay for the cost or the route of administration may not fit into the already-established business models of the physicians who are expected to prescribe it. Seemingly outrageous pricing is one of many ways that executives demonstrate their serious interest in achieving the desired returns of venture investors.
Given this state of affairs, some of Shkreli’s bombastic claims begin to make an uncomfortable degree of sense. For example, on December 4 at the Forbes Healthcare Summit (an industry networking event where he was featured on the event website’s front page), he told an audience, “I probably would have raised prices higher, is probably what I should have done. I could have raised it higher and made more profits for our shareholders. Which is my primary duty.” By contrast, Maine Senator Susan Collins’ comments about the “egregious” pricing strategies of investor-dependent biotech companies at a December 9th hearing on drug pricing in the Senate Committee on Aging sound rather naïve. Her view, reported by NPR, expressed surprise and outrage: “Some of these companies seem to act more like hedge funds than traditional pharmaceutical companies.” She also compared the behavior of pharmaceutical companies to that of unsavory banking practices, saying, “These companies are to ethical pharmaceutical companies as a loan shark is to a bank.”
Senator Collins’ critique of drug pricing, prompted by Turing’s pricing announcements, is motivated by a belief in the care thesis of biomedicine; it falls flat for me because it is manifestly true without offering any particular insight, critique, or solution. Biopharma and biotech companies behave like financial vehicles in search of maximized revenue and profits because that is what they are. They are value-maximizing machines whose only moral obligation is to fulfill their agreements, implicit and explicit, to maximize value for investors. This bothers us because we believe that the care thesis ought to shape the culture and practice of biomedicine, and moreover, that it applies equally to pharmaceutical companies as it does to individual physicians who take the Hippocratic Oath. The truth is that it does not fully account for the activities of either group, and it accounts for much less of the activities of the manufacturers of biomedicine than the practitioners of it.
The question of whether the care myth ought to structure the business and practice of biomedicine is a different one from whether it does—two things which often get conflated in public discussion of drug pricing, health care costs, and health insurance reform. The recent turn to studying ethics and morality in anthropology (Zigon 2008, Csordas 2014, Laidlaw 2014), particularly with regards to biomedicine and public health (Lambek 2010, Fassin 2014, Mattingly 2014, Zigon and Throop 2014), provides some traction for decoupling descriptive research into the moral reasoning of social and cultural actors from the normative prescriptions for safeguarding personal liberty traditionally offered by bioethicists. Understanding the logic of the biopharma industry goes a long way toward understanding why someone like Shkreli could operate with apparent success for years. It also provides breathing space to follow the network to pinpoint which actors and relationships are really behind this state of affairs.
I hope my short analysis of some aspects of the Shkreli case illustrates what an ethnographically-informed investigation can teach us much about the rising costs of medical intervention. Since cost so frequently inhibits access to medical care in the United States, this episode also raises questions about what would need to be done to make care more central to biomedicine. Although he lied about the particulars of his deals to an unusual extent, the general framework of Shkreli’s actions—moving back and forth between investor and pharma executive roles, approaching drug pricing with the intent of maximizing returns—constituted business as usual. Private financing of drug development is contingent upon continuously demonstrating the ability to live up to highly challenging financial expectations—contractual promises upon which the personal and professional fortunes of the executives in charge can rise or fall.
With Turing Pharmaceuticals and other venture-backed biotechnology, medical device, and pharmaceutical projects, we are many layers removed from the fetishized commodity object. It is not (merely) consumer demand for biomedical objects that drives pursuit of higher prices in the pharmaceutical industry—already a fetishization of their value, in Marxist terms—but demand for a maximization of already immaterial investment capital. But in the absence of publicly-funded translational (“bench-to-bedside”) research on the scale necessary to reach FDA approval of new drugs and devices, this is what drives pharmaceutical innovation in the United States today. The moral outrage of Shkreli’s time at Turing Pharmaceuticals ought not to be that pharmaceutical companies can raise prices with impunity, or that dishonest people can amass fame and fortune, but that there is no alternative to this way of doing research and development in contemporary biomedicine.
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Danya Glabau is a PhD candidate in Science and Technology Studies (STS) at Cornell University, Faculty at The Brooklyn Institute for Social Research, and Director of Medical Affairs at Allovate Therapeutics, a biopharmaceutical company developing new treatments for allergies. You can check out her (currently hibernating) blog, Allergy and the City, to learn more about her dissertation research on the culture surrounding food allergies in the United States, check out her upcoming class at the Brooklyn Institute, Imagining Immunity, and follow her on Twitter at @allergyPhD.