Martin Shkreli did something not-terrible on his way to infamy


It’s hard to keep up with all the Martin Shkreli news these days: if he’s not being indicted for securities fraud, he’s spending $2 million on a Wu-Tang Clan album or raising the price of an AIDS drug by 5,000%. No one wants to be associated with this man, or anything he stands for.

And yet, along the way, he might have ended up helping the cause of hundreds of thousands of Americans with a particularly nasty cardiovascular disease.

Shkreli is best known for his tenure at the helm of two notorious drugs companies, Retrophin and Turing Pharmaceuticals. But one month ago, in November, he took over a third company—KaloBios—which was on the verge of bankruptcy. He then used KaloBios to acquire the rights to benznidazole, one of the two main drugs used to treat Chagas disease. He then, of course, precipitated a predictable round of outrage when he said that once he got FDA approval for the drug, he would charge upwards of $60,000 for a course of treatment—vastly more than the $50 to $100 that the same drug costs in Latin America, where most cases of Chagas are found.

Chagas is a parasitic disease that affects the heart. It’s transmitted through the droppings of a beetle known as the kissing bug. Nobody knows how many deaths it causes worldwide, because many cases of congestive heart failure or heart arrhythmia are caused by the disease but never diagnosed as such.

As the FDA said on August 20:

Chagas disease has a disproportionate effect on poor and marginalized populations… Approximately 8 million people are believed to be infected in Mexico, Central America, and South America…
There are no approved vaccines or other preventative therapies for the disease, either in the United States or elsewhere. The only drugs used to treat Chagas are benznidazole and nifurtimox, which are not approved in the United States for this use.

That official FDA announcement, which culminated in the designation of Chagas as a neglected tropical disease, was a watershed moment in how Chagas is likely to be treated, especially in the U.S. Once the FDA officially designates a disease as being a tropical disease, pharmaceutical executives like Martin Shkreli start seeing dollar signs. This chart should give you a pretty good idea why:

What you’re seeing is the amount of money that pharmaceutical companies have made selling Priority Review Vouchers, or PRVs. The most recent PRV to change hands sold for $350 million, and the value of these vouchers has been going up.

PRVs were designed to give pharmaceutical companies an incentive to innovate new drugs for neglected diseases. It turns out, though, that merely getting FDA approval for an old, existing drug also qualifies. And so the minute that the FDA designated Chagas to be a neglected tropical disease, the race was on to get FDA approval for benznidazole and thereby win a jackpot worth hundreds of millions of dollars.

Shkreli decided that he was going to use KaloBios to join that race, and immediately, at least in the public’s imagination, became the front-runner. In a KaloBios presentation, he explained that he had acquired “worldwide rights” to a benznidazole program belonging to a company called Savant Neglected Diseases, and that the drug could be useful for somewhere between 3,000 and 7,000 patients per year. If the drug was also approved for chronic Chagas cardiomyopathy, he said, rather than just acute Chagas disease, then there would be “100x upside” on his investment, thanks to a potential 45,000 patients per year in the U.S. alone.

Shkreli is absolutely right about the need for the drug in the U.S. Right now, since it doesn’t have FDA approval, it can only be obtained on a laborious case-by-case basis from the CDC. The procedure involved in getting the drug from the CDC is so onerous that almost nobody does it—nobody, that is, except for Dr. Sheba Meymandi, by far the loudest voice in the Chagas world, and the woman who deserves more credit than anybody else for persuading the FDA to give the disease its neglected status.

Meymandi, a cardiologist, runs the Center of Excellence for Chagas Disease at Olive View-UCLA Medical Center, in Sylmar, California. Sylmar is 70% Hispanic, and when Meymandi started running tests on the local population, she found that fully 20% of her patients with heart failure turned out to have Chagas disease, and more than 1% of the local population as a whole. Locally, if you give blood at the Red Cross, they’ll test you for Chagas disease and refer you to Dr. Meymandi if you test positive. But nationally, most people with Chagas have no idea they’re infected—which is particularly dangerous for a disease often transmitted directly from mother to child.

If benznidazole receives FDA approval, then suddenly the outlook for the thousands of sufferers in the U.S. will change enormously. Any local physician, armed with nothing but a simple blood test, will be able to write a prescription and start a course of treatment, which could save lots of lives.

Of course, the drug needs to be affordable. Shkreli said that he would give the drug away to anybody who didn’t have insurance, but that’s not as generous as it sounds: all drug companies have some kind of “compassionate use protocol.” But most of the time it’s almost as laborious to slog through as trying to get the drug from the CDC is right now. Chagas is mostly found among Latin American immigrants in the U.S., a population which finds it especially difficult to navigate the various bureaucratic processes needed to obtain compassionate-use drugs.

It’s only smart to price the drug at least at a level which Medicaid can afford, since there’s really no point in charging $80,000 for a drug if you end up with zero sales as a result. Chagas is a disease of the poor, and benznidazole has to be within their reach.

What’s more, as good as Shkreli is at attracting outrage, it’s far from clear that KaloBios was ever really the front-runner for the coveted FDA approval. The announcement that he was trying to get approval for the drug did wonders for KaloBios’s stock price, and made Shkreli many millions of dollars, at least on paper. But there was no particular reason to believe that KaloBios, rather than some other company, would end up with the rights and the PRV. At least two other companies are said to also be in the race: one is Elea Laboratories, an Argentine company which is a major supplier of the drug; the other is Roche, the Swiss giant which developed the drug in the first place, in the 1970s.

Now that Shkreli has been fired as CEO of KaloBios, just about anything might end up happening with the company. KaloBios has acquired the relevant rights, which makes it a reasonably attractive acquisition target for a competitor; alternatively, it could remain independent and try to bring benznidazole to market at a more reasonable price. Shkreli might not have control over KaloBios any more, but he has set it on an interesting path, which could have very positive results for hundreds of thousands of sick immigrants down the road.

As for the PRV, Shkreli is not the only person who made a lot of money by exploiting the loophole which says that getting approval for an old drug is just as rewarding as inventing a new drug. That loophole should certainly be closed; even Dr. Meymandi thinks it’s ridiculous. But the loophole has in fact been very good for Chagas sufferers in America. Thanks to its existence, there’s an extremely high chance that benznidazole will receive FDA approval at some point in the next few years. When that happens, the lives of thousands of people with Chagas disease are likely to be utterly transformed.

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