Thursday, December 17, 2015

Martin Shkreli Dropped Some Hints

Today I woke up to what most of the world considered good news, that "Pharma CEO" and expensive music buyer Martin Shkreli had been arrested.  This post is going to involve a lot of embedded tweets, let's get it started,  I actually learned about the arrest by Ben Casselman's epic tweet:


HISTORY ON SHKRELLI


It appears that the arrest is on charges related prior securities fraud, not his current venture; what initially brought him press (the pricing of Daraprim) is not related to his current legal issue.  I have written about Shkreli's Daraprim pricing once before on this blog, specifically pointing out... well  this:
The CEO's rhetoric tells us that he is leveraging higher pricing against the financial-insurance system, and effectively betting on the ability to extract large mid-term profits from it.  The insurance system, as it exists,  enables this type of cost increase by giving *ordinary* people *extraordinary* ability to pay for effectively one-time services.
Actually, I pointed out three things in my blog:
  1. While it's fathomable that the drug was under-priced to the point of not being profitable, the price shock he used was likely exorbitant. 
  2. His claims of using pricing to create capital for future research is likely just "CEO BS."
  3. He's just leveraging against incentives in the current insurance system.

NEW TWEETS

Shkreli had alluded to using the insurance system to leverage his profits, but never came out and said it.  Yesterday, he did.  Starting with this nice sounding tweet, no one ever pays more than $10 out of pocket!



And he continues to say nice sounding things like this:
But the best tweet of the day from Shkreli (where he actually admitted to the concept of my prior blog post) was this one:


Effectively Shkreli is outright saying here, let me charge the insurance system huge prices, or I'll just give it away for free.  The full details of why this happens relates to diffuse impacts of insurance system, this being a low-use drug, and what happens when you artificially give people more "ability to pay" for something.  I detailed that out in more detail in my prior post.

CONCLUSION/TAKEAWAYS

This situation gives me mixed feelings. I'm not really a supporter of single pay health insurance, but Shkreli may be a good argument for it.  At least in this sense: as long as the current quasi-governmental insurance incentive system exists, "bad actors" like Shkreli will have incentives to push the system for personal profits.  Even if not every Pharma CEO is like Shkreli, this will likely lead to micro pricing increases due to the relative consumer price insensitivity.  Shkreli could be the initial call for a reformed healthcare system.




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