Martin Shkreli Raises Daraprim Price by 5,000%, From $13.50 to $750 Per Pill

In September 2015, Turing Pharmaceuticals under CEO Martin Shkreli purchased the American marketing rights to Daraprim (pyrimethamine) and immediately raised the price from $13.50 to $750 per pill—a price increase of over 5,000%. The move became a symbol of pharmaceutical price gouging and exposed how generic drug manufacturers could exploit monopoly positions on essential medicines without regulatory intervention.

The Drug and Its Importance

Daraprim is listed on the World Health Organization’s List of Essential Medicines as a critical treatment for toxoplasmosis, a parasitic infection particularly dangerous for people with compromised immune systems including AIDS patients, cancer patients, and pregnant women. The drug was developed in 1953 and had been available as an affordable generic for decades.

Before Turing’s acquisition, Daraprim cost about $1,130 for a full treatment course. After the price increase, the average cost rose to $63,000, with some patients facing costs as high as $634,000 depending on their treatment duration.

The Business Model: Acquiring Rights to Old Generics

Shkreli’s strategy at Turing Pharmaceuticals involved obtaining licenses on out-of-patent medicines and drastically increasing prices to generate windfall profits without developing new drugs or conducting research. This represented a pure rent-seeking business model: acquiring monopoly rights to drugs the company did not invent, research, or improve, then exploiting captive patient populations who had no alternatives.

Turing purchased Daraprim’s U.S. marketing rights from Impax Laboratories in August 2015 for $55 million. Within weeks, Shkreli implemented the massive price increase, transforming an affordable generic into one of the most expensive treatments in pharmaceutical history.

Justification: “Altruistic Properties”

When challenged about the price increase, Shkreli defended the move by claiming there were “a lot of altruistic properties to it.” He argued the company could spend profits on developing a new, better drug for toxoplasmosis—though Turing had conducted no such research and the existing drug was already highly effective.

Shkreli also claimed most patients wouldn’t pay the full price due to insurance coverage and patient assistance programs. However, this argument ignored:

• Uninsured and underinsured patients who faced catastrophic costs
• Insurance companies passing costs to consumers through higher premiums
• The burden on public health programs like Medicaid
• Hospitals and clinics struggling to afford adequate drug supplies

Public Outrage and Political Response

The Daraprim price hike generated massive public backlash and became a defining moment in the pharmaceutical pricing debate. Presidential candidates Hillary Clinton and Bernie Sanders condemned the increase, with Clinton calling it “price gouging” and proposing legislation to address drug price manipulation.

However, despite intense public outcry, no laws were passed to prevent similar price increases. The FDA lacked authority to regulate drug prices, and Congress took no action to grant such authority or implement price controls. The incident demonstrated the pharmaceutical industry’s political power and regulatory capture—public outrage produced no meaningful policy response.

Legal Consequences: Fraud, Not Price Gouging

In 2017, Shkreli was convicted of securities fraud related to his hedge fund operations—not for the Daraprim price increase. Everything he did regarding drug pricing remained perfectly legal under U.S. law. He was sentenced to seven years in prison for defrauding investors, not for exploiting patients.

In January 2022, a federal judge ordered Shkreli to pay $64.6 million in disgorgement of profits and banned him from the pharmaceutical industry for life. However, this ruling came from his securities fraud case, not the Daraprim pricing itself.

Regulatory Capture: No Authority to Act

The Daraprim scandal exposed critical gaps in pharmaceutical regulation:

FDA Limitations: The FDA has authority to approve drugs for safety and efficacy but no power to regulate prices or prevent price increases, even on essential medicines.

Generic Drug Monopolies: When a single company controls the only approved generic version of a drug, as Turing did with Daraprim, they can set prices without competition or regulatory constraint.

Importation Barriers: U.S. law prohibits importing cheaper versions of the same drugs from other countries, even when they meet the same quality standards, preventing market competition from forcing prices down.

Congressional Inaction: Despite multiple hearings on pharmaceutical pricing, Congress has repeatedly failed to grant regulatory agencies authority to control drug prices or allow Medicare to negotiate prices directly.

Industry Pattern, Not Isolated Incident

Shkreli’s approach was not unique—it exemplified a broader pattern in the pharmaceutical industry:

Valeant Pharmaceuticals raised prices on heart medications by up to 525% after acquiring the drugs in 2015.

Marathon Pharmaceuticals planned to charge $89,000 annually for a drug that cost $1,200 before they acquired it, though they abandoned the plan after public backlash.

Mylan raised EpiPen prices by nearly 500% over seven years (2009-2016), from about $100 to over $600 for a two-pack.

These cases demonstrated that Shkreli’s strategy of acquiring and repricing old drugs was an established business model, not an aberration. The difference was Shkreli’s brazen public defiance and Twitter provocations, which drew attention to practices his competitors pursued more quietly.

The “Pharma Bro” Persona

Shkreli embraced public notoriety, taunting critics on social media and portraying himself as a misunderstood entrepreneur. He live-streamed himself playing video games and offered to play chess with critics. This performative villainy made him a symbol of pharmaceutical greed while obscuring that his pricing strategies were legal and widely practiced across the industry.

His persona served as a distraction—focusing public anger on one individual’s personality rather than the systemic regulatory failures that enabled his business model. Major pharmaceutical companies pursuing similar pricing strategies faced less scrutiny while Shkreli absorbed public outrage.

Failed Market Solutions

After the Daraprim controversy, several groups attempted to develop alternative generic versions to introduce competition:

Imprimis Pharmaceuticals announced plans to produce a compounded alternative for $99 for a 100-pill supply. However, compounded drugs face different FDA regulations and cannot fully substitute for approved generics in many insurance formularies.

Generic manufacturers in other countries produced the same drug for pennies per pill, but U.S. importation restrictions prevented these from reaching American patients.

The attempted market solutions demonstrated that regulatory barriers—not market failures—enabled Turing’s pricing power. The FDA approval process and importation restrictions created artificial monopolies that companies like Turing exploited.

Precedent for Future Abuse

The Daraprim case established a troubling precedent: pharmaceutical companies can implement extreme price increases on essential medicines with no legal consequences. The outcome showed that:

• Price gouging is legal: No law prevents pharmaceutical companies from raising prices to any level
• Public outrage is insufficient: Intense media coverage and political condemnation produced no policy changes
• Criminal penalties are unrelated: Shkreli faced prison for securities fraud, not patient exploitation
• Industry continues: Other companies observed that the pricing strategy itself remained legal and profitable

Impact on Patient Access

The price increase created immediate access problems:

Hospital Shortages: Many hospitals could not afford adequate Daraprim supplies, forcing rationing decisions about which critically ill patients would receive treatment.

Treatment Delays: Insurance companies required extensive prior authorization processes, delaying treatment for patients with life-threatening infections.

Patient Bankruptcies: Uninsured and underinsured patients faced catastrophic medical debt or went without treatment entirely.

Public Health Impact: Clinics serving low-income populations, particularly those treating HIV/AIDS patients who face high toxoplasmosis risk, struggled to maintain access to the drug.

The $64.6 Million Settlement: Too Little, Too Late

The 2022 court order requiring Shkreli to disgorge $64.6 million in profits came seven years after the price increase and resulted from his securities fraud conviction, not from pharmaceutical pricing violations. Key limitations:

• Money went to defrauded investors, not patients who paid inflated prices
• The pharmaceutical industry ban only applied to Shkreli personally, not to the business model
• Daraprim prices remained elevated under new ownership
• No structural reforms prevented future similar schemes

Regulatory Capture and Political Donations

The pharmaceutical industry’s success in preventing regulatory responses to the Daraprim scandal demonstrated effective regulatory capture:

PhRMA Lobbying: The pharmaceutical industry’s trade association spent over $18 million on lobbying in 2015, ensuring Congress took no action on drug pricing.

Campaign Contributions: Pharmaceutical companies contributed heavily to members of congressional health committees, creating conflicts of interest that prevented regulatory reform.

FDA User Fees: The FDA receives significant funding from pharmaceutical company user fees through the Prescription Drug User Fee Act (PDUFA), creating financial dependence that discourages aggressive regulation.

Systemic Failure, Individual Scapegoat

The Daraprim scandal revealed how pharmaceutical pricing operates in a regulatory vacuum where companies can implement any price increases without justification or oversight. Shkreli became a convenient villain—allowing politicians to express outrage without implementing reforms, and allowing the pharmaceutical industry to portray price gouging as the act of one bad actor rather than a systemic problem enabled by regulatory capture and political corruption.

The case demonstrated that without government price regulation, pharmaceutical companies will exploit monopoly positions to extract maximum profits from patients who have no choice but to pay or die. Seven years of outrage produced no meaningful policy changes, confirming the pharmaceutical industry’s political dominance and the failure of U.S. healthcare regulation to protect patients from predatory pricing.