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Martin Shkreli was arrested Thursday morning on charges of securities-fraud.
The charges were not related to the incident that made Shkreli, who is currently the CEO of Turing Pharmaceuticals and KaloBios, a household name – his 5,000% price increase of a critical anti-parasitic drug called Daraprim.
While the Daraprim price hike is what got him so much notoriety, it wasn’t the first time he’s done this. In 2014, as the head of pharmaceutical company Retrophin, Shkreli bumped up the price of a drug called Thiola by 2,000%.
Shkreli has been charged by the federal government with seven counts, or statements of different alleged crimes:
- 2 counts of securities fraud2 counts of conspiracy to commit securities fraud3 counts of conspiracy to commit wire fraud.
All of the above charges are related to events that happened earlier in his career, while he was managing hedge funds.
Here’s where the two narratives meet up: After managing funds at MSMB Capital, where he lost $3 million on bad trades but neglected to tell investors, according to allegations from US Attorney Robert Capers, he then went on to found another hedge fund, called MSMB Healthcare and convinced investors to back it as well. With that money, he payed back his debts to MSMB Capital investors, alleged Capers.
From there, the federal government alleges in a complaint, there was “a scheme to defraud Retrophin by misappropriating Retrophin’s assets through material misrepresentations and omissions in an effort to satisfy Shkreli’s personal and unrelated professional debts and obligations.” That was interwoven in the MSMB Capital and MSMB Healthcare relationships.
In other words, the charges have little to do with the drug industry or with his practice of hiking up drug prices.
James Stansel, a partner with Sidley Austin and former acting general counsel of the US Department of Health and Human Services, the department that oversees agencies like the FDA, CDC and Medicare and Medicaid, told Business Insider that the drug pricing conversation that’s become a hot topic in recent months won’t go away even if Shkreli becomes otherwise occupied.
“He has been the poster child for bad behavior,” he said. “But even if he went away, the subject matter is now top of mind and I think there’s still going to be interest.”
Everything related to that still awaits Congress, which has recently amped up its investigations into his behavior and other companies who’ve taken similar actions. It does mean that the House of Representatives might have a harder time getting Shkreli to attend their hearing.
And they may have the power to prevent drug price hikes from happening in the future.
“Everything you’ve been seeing just in the last six months is actually not new,” Stansel said. “It’s not the first time, and I’m sure it won’t be the last time.”