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Robert Reich: ‘Pharma bro’ Martin Shkreli isn’t the only ‘bad apple’ in the hedge fund and pharma industry

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Martin Shkreli, the former hedge-fund manager turned pharmaceutical CEO who was arrested last week, has been described as a sociopath and worse.

In reality, he’s a brasher and larger version of what others in finance and corporate suites do all the time.

Federal prosecutors are charging him with conning wealthy investors.

Lying to investors is illegal, of course, but it’s perfectly normal to use hype to lure rich investors into hedge funds. And the line between the two isn’t always distinct.

Hedge funds are lightly regulated on the assumption that investors are sophisticated and can take care of themselves.

Perhaps prosecutors went after Shkreli because they couldn’t nail him for his escapades as a pharmaceutical executive, which were completely legal – although vile.

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Shkreli took over a company with the rights to a 62-year-old drug used to treat toxoplasmosis, a devastating parasitic infection that can cause brain damage in babies and people with AIDS. He then promptly raised its price from $13.50 to $750 a pill.

When the media and politicians went after him, Shkreli was defiant, saying “our shareholders expect us to make as much as money as possible.” He said he wished he had raised the price even higher.

That was too much even for the Pharmaceutical Research and Manufacturers of America, Big Pharma’s trade group, which complained indignantly that Shkreli’s company was just an investment vehicle “masquerading” as a pharmaceutical company.

Maybe Big Pharma doesn’t want to admit most pharmaceutical companies have become investment vehicles. If they didn’t deliver for their investors they’d be taken over by “activist” investors and private-equity partners who would.

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The hypocrisy is stunning. Just three years ago, Forbes Magazine praised Shkreli as one of its “30 under 30 in Finance” who was “battling billionaires and entrenched drug industry executives.”

Last month, Shkreli got control of a company with rights to a cheap drug used for decades to treat Chagas’ disease in Latin America. His aim was to get the drug approved in the United States and charge tens of thousands of dollars for a course of treatment.

Investors who backed Shkreli in this venture did well. The company’s share price initially shot up from under $2 to more than $40.

While other pharmaceutical companies don’t raise their drug prices fiftyfold in one fell swoop, as did Shkreli, they would if they thought it would lead to fat profits.

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Most have been increasing their prices more than 10 percent a year – still far faster than inflation – on drugs used on common diseases like cancer, high cholesterol, and diabetes.

This has imposed a far bigger burden on health spending than Shkreli’s escapades, making it much harder for Americans to pay for drugs they need. Even if they’re insured, most people are paying out big sums in co-payments and deductibles.

Not to mention the impact on private insurers, Medicare, state Medicaid, prisons and the Veterans Health Administration.

And the prices of new drugs are sky-high. Pfizer’s new one to treat advanced breast cancer costs $9,850 a month.

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According to an analysis by the Wall Street Journal, that price isn’t based on manufacturing or research costs.

Instead, Pfizer set the price as high as possible without pushing doctors and insurers toward alternative drugs.

But don’t all profit-maximizing firms set prices as high as they can without pushing customers toward alternatives?

Unlike most other countries, the United States doesn’t control drug prices. It leaves pricing up to the market.

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Which enables drug companies to charge as much as the market will bear.

So what, exactly, did Martin Shkreli do wrong, by the standards of today’s capitalism?

He played the same game many others are playing on Wall Street and in corporate suites. He was just more audacious about it.

It’s easy to go after bad guys, much harder to go after bad systems.

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Hedge fund managers, for example, make big gains from trading on insider information. That robs small investors who aren’t privy to the information.

But it’s not illegal unless a trader knows the leaker was compensated – a looser standard than in any other advanced country.

Meanwhile, the pharmaceutical industry is making a fortune off average Americans, who are paying more for the drugs they need than the citizens of any other advanced country.

That’s largely because Big Pharma has wielded its political influence to avoid cost controls, to ban Medicare from using its bargaining clout to negotiate lower prices, and to allow drug companies to pay the makers of generic drugs to delay their cheaper versions.

Shkreli may be a rotten apple. But hedge funds and the pharmaceutical industry are two rotten systems that are costing Americans a bundle.

Report typos and corrections to [email protected].
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Right-wing radio show ratings tank as host undermines Trump’s ‘promises made, promises kept’ re-election slogan

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The fact Donald Trump's base sticks with him no matter what he does is negatively impacting a conservative radio host attempting to hold the president accountable for his campaign promises.

Michael Alan Weiner, who goes by the stage name Michael Savage, hosts the "Savage Nation" radio show.

The host once praised Trump as the "Winston Churchill of our time" has been criticizing the president recently, The New York Times reported Tuesday.

"Now Mr. Savage is an outlier once again, dismayed more each day as the budget deficit continues to swell, thousands of new migrants are apprehended at the border, and the wall Mr. Trump promised to erect and make Mexico pay for remains unbuilt," The Times explained.

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LISTEN: Here’s the creepy broadcast at Trump’s rally telling supporters the right way to deal with protesters

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On Tuesday, President Donald Trump officially kicked off his 2020 re-election campaign in Orlando, Florida.

Those who entered the venue were treated to a pleasant female voice booming out instructions to protestors — and a creepy warning.

"While we all have the rights to free speech, this is a private event paid for and hosted by Donald J. Trump for President, Inc., and you came to hear the president," said the voice. "To accommodate the right to free speech and peaceful assembly, while ensuring an orderly rally, we have provided a secure area outside the venue for all protesters, and we ask anyone wishing to demonstrate to please exit to that secure area."

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Ukrainian-Russian developer with Trump Tower Moscow ties suing after getting bilked for $200,000 at inauguration

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It is illegal for foreigners to donate to presidential inaugurations, but a new lawsuit sheds light on how wealthy foreigners attempted to buy access to the Trump administration.

"A Ukrainian-Russian developer who wanted access to President Trump’s inauguration filed a lawsuit on Tuesday saying he was bilked out of the $200,000 he paid for what he thought would be V.I.P. tickets to the event," The New York Times reported Tuesday.

"The developer, Pavel Fuks, who once discussed a Moscow real estate project with Mr. Trump, said in the lawsuit, filed in the United States District Court for the Central District of California, that he had paid the money to a firm at the direction of Yuri Vanetik, a prominent Republican fund-raiser and sometime lobbyist," the newspaper explained. "But, the lawsuit said, Mr. Vanetik failed to come through with the promised tickets, and Mr. Fuks ended up watching the inauguration from a Washington hotel bar."

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