The archive · Bio & Materials · Financial decision · 2015
Turing Pharmaceuticals hiked Daraprim from $13.50 to $750 a tablet, igniting a firestorm
Turing bet insurers would pay a 55x hike on Daraprim, an old drug with no competition — and drew an 830-point, 450-comment HN firestorm.
Turing Pharmaceuticals
What the business is
A pharmaceutical startup at the center of the 2015 Daraprim repricing; commenters described its model as buying old, sole-source drugs and raising prices by orders of magnitude.
How it started
Turing Pharmaceuticals was the company in the story, with Martin Shkreli — previously of Retrophin — identified by commenters as running the same playbook: find an old orphan drug, raise the price by orders of magnitude, and expect insurers to pay because there were no competitors. Turing had paid $55 million for Daraprim (pyrimethamine), an old, off-patent drug that was sold for about $1 a pill a few years earlier and that commenters noted was the only FDA-approved treatment for toxoplasmosis.
What happened
The New York Times reported on 2015-09-21 that Turing had raised Daraprim's price from $13.50 to $750 a tablet overnight — roughly a 55x increase. In the Hacker News discussion that followed, commenters argued about whether the market would discipline Turing: generic entry was deterred by small patient numbers and by Turing's control of distribution, and the FDA's slow generic-approval pipeline bought the company time. Several pointed to KV Pharmaceuticals, which had raised the price of the preterm-birth drug Makena and ended in bankruptcy after the FDA declined to shut down compounding pharmacies making the same drug. One commenter recounted being recruited for an IT role at Turing in February 2015 and withdrawing after researching Shkreli.
No ending yet — it is still running.
Background
Turing Pharmaceuticals was the startup at the center of the most explosive drug-pricing story of 2015. It had paid $55 million for Daraprim (pyrimethamine), an old, off-patent drug that commenters noted was the only FDA-approved treatment for toxoplasmosis, and — per the New York Times headline that set off the discussion — had raised its price from $13.50 to $750 a tablet overnight, about a 55x increase.
The playbook was not new. Commenters described Turing's principal, Martin Shkreli — previously of Retrophin — as running the same strategy he had used before: find an old drug with no competitors, raise the price by orders of magnitude, and rely on insurers having no choice but to pay. The economics worked because volumes were tiny: patient numbers were too small to attract generic entrants, Turing's distribution was tight enough to deny competitors samples, and the FDA's generic-approval pipeline moved slowly.
The reaction was immediate and huge: the New York Times story drew 830 points and 450 comments on Hacker News on 2015-09-21. Commenters compared the move to KV Pharmaceuticals' repricing of the preterm-birth drug Makena, which ended in bankruptcy after the FDA declined to shut down compounding pharmacies making the same drug — a precedent that suggested the model could blow up in Turing's face.
What has to be true
- A sole-source off-patent drug with tiny patient numbers looked like a pricing gift: no generic maker had the incentive to enter, so insurers were expected to pay the new price.
- Turing paid $55M for Daraprim partly because it was an approved Medicare drug, giving the repriced product an immediate, defensible route to reimbursement.
- The same play had a visible template: KV Pharmaceuticals' Makena price increase — which ended in bankruptcy — was known to investors in the space, yet Turing repeated the model.
- The company controlled the bottleneck: tight distribution could keep generic competitors from even obtaining samples, extending the window for monopoly pricing.
What can be applied
A price a captive market must pay is a political liability, not a moat: a 55x hike on a life-saving drug invites outrage and response, and the identical play had already bankrupted KV Pharmaceuticals.
Aftermath
As of 2015-09-21 Turing was selling Daraprim at $750 a tablet after the NYT report of the overnight increase; the story had become one of Hacker News's largest threads of the day, with 830 points and 450 comments. Commenters predicted generic entry, regulatory response, or a KV-style collapse, but the material records no resolution beyond that day's discussion.
Sources
spotted an error? The archive wants to know.
Your turn
You just read one. Describe what you are building, and see who is betting on the same thing.
Free account · 3 free questions · no card