Jun 12 • 14M

Chapter 3, Part 2: Facing the "imbeciles"

Did lawmakers want answers when they made Martin Shkreli appear at a hearing on drug prices in 2016? Or did they want a show?

Open in playerListen on);
My experiences uncovering the story of, and falling in love with, Martin Shkreli.
Episode details
Martin Shkreli appearing before the House Oversight Committee in 2016 (Getty Images)
Martin Shkreli before the House Oversight Committee in 2016. (Getty Images)

“Is it pronounced ‘Shkrel-EE?’”

Congressman Trey Gowdy’s voice was kind, even avuncular, as he addressed Martin, who was seated before him at the House Oversight Committee room nominally to testify about drug pricing on Feb. 4, 2016. 

“Yes, sir,” Martin replied.

Gowdy pounced. “See, you can answer some questions,” the silver-haired Republican from South Carolina said. “That one didn’t incriminate you.” 

Less than two months after Martin had been arrested (in highly visible fashion) on securities fraud charges — launching a wave of schadenfreude that rippled across the internet — the committee had called him to testify based on the scandal for which he was and is best known: raising the price of Daraprim, a toxoplasmosis treatment, by 5,000 percent. 

His lawyers had strenuously advised him against speaking under oath because of possible complications for the ongoing criminal case. The committee was told he would likely invoke his Fifth Amendment privilege to avoid answering questions. But the lawmakers subpoenaed him anyway. 

A top sales executive from his company, Turing Pharmaceuticals, was also present at the hearing to make public statements about Turing and Daraprim. She volunteered to provide any information the congressional representatives asked for. 

But that wasn’t enough. The committee wanted Martin — even though (or maybe because) they knew he wouldn’t say anything.

Enjoying SMIRK? Subscribe here to get new posts sent directly to your inbox.

The hearing, like his arrest, had the air of a sports event: The room was buzzing with chatter from media and onlookers as Martin took his seat before the panel. A CNBC announcer introducing the footage to viewers sounded like a sportscaster: “We’ve been waiting for Shkreli to make a statement…if he does. Here he is. Let’s take a listen.”

The room suddenly fell silent. Martin didn’t make a statement, just as he had told the committee he would not. Speaking under oath meant any slip of the tongue resulting in a half-truth or a distortion, no matter how inconsequential, could result in a perjury charge, or make it easier to convict him of something else.

Martin had a habit of exaggerating and contradicting himself, especially when nervous, so a misstep wasn’t unlikely. And he was already under indictment. An additional criminal count would be easy enough for prosecutors to tack on.

So, amid the audible noise of camera shutters clicking, he declared: “On the advice of counsel, I will not be giving an opening statement.” 

What followed next was nine minutes of jaw-dropping futility. 

One by one, the legislators took turns pretending to ask Martin questions they knew he would not, and could not, answer. Occasionally, they insulted him. His legal refusal to answer questions — repeating, “on advice of counsel, I invoke my Fifth Amendment privilege against self-incrimination and respectfully decline to answer your question” — combined with his smirking face made him seem impudent and recalcitrant, and dismissive of suffering patients, at least to most observers.

But I had a very different impression. I was watching the hearing from Bloomberg’s newsroom in Manhattan, where it was being broadcast on television monitors. (“Your man is being insane as usual,” one editor remarked to me, in reference to the huge scoop I had gotten back in December when I broke the story of his arrest.)

By that time, I had gotten to know Martin a bit. He’d told me over the phone, in a ragged voice, a week or so earlier that he didn’t want to be a “punching bag” for politicians. As I watched, though, he became exactly that.

The committee members, knowing Martin would plead the Fifth, seemed to be trying to bait him, or maybe even to trap him somehow. Drug prices might have been the subject of the hearing, but it was clear, to me, at least,  that what they really wanted was for him to start talking…about anything. Over and over again, they tried to get him to crack.

“What do you say to that single pregnant woman who might have AIDS, no income — she needs Daraprim in order to survive,” then-committee chairman Jason Chaffetz, a Republican from Utah, asked right off the bat. “What do you say to her when she has to make that choice? What do you say to her?”

Martin recited his line and declined to answer. 

Chaffetz switched to a more sympathetic tack, referencing something Martin had said in the media about his feelings on directing profits to finding new cures.

Former Congressman Jason Chaffetz, R-Utah, speaking at a hearing.
Former Congressman Jason Chaffetz, R-Utah. He retired from that role in 2017. (Getty Images)

“You are quoted as saying on Fox5 New York, if you raise prices, and you don’t take that cash and put it back into research, ‘I think it’s despicable. I think you should not be in the drug business,’” Chaffetz said, quoting Martin. “‘We take all of our cash, all of our extra profit, and spend it on research for these patients who have terrible life-ending diseases.’”

Martin nodded vigorously.

“Did you say that?” Chaffetz asked.

Martin delivered his “on advice of counsel” line again.

“Do you think you’ve done anything wrong?” Chaffetz asked.

Refusing to take the bait once more, Martin again recited his line. His face started to look contemptuous and defiant, even inappropriately playful, as he continued to stand his ground. The clicks of the camera shutters increased.

SMIRK is a reader-supported publication. Get a free or paid subscription here.

When Gowdy had his turn, after his “gotcha” question about Martin’s name, he tried getting Martin to speak by raising legal arguments, always framing them as a question in an apparent effort to elicit any sort of verbal response. 

“I just want to make sure you understand you are welcome to answer questions and not all of your answers are going to subject you to incrimination,” said Gowdy, a former federal prosecutor. “You understand that, don’t you?”

Benjamin Brafman, Martin’s lawyer, who had been sitting behind him and looking on warily, stood up and whispered in Martin’s ear. 

“I intend to follow the advice of my counsel…not yours,” Martin finally replied, grinning in a sense of awkward triumph. Having returned to his chair, Brafman appeared to be suppressing a smile. 

“Well, Mr. Chairman, I’m vexxed,” Gowdy eventually said to Chaffetz. “I don’t think he’s under indictment for the subject matter of this hearing…he didn’t have to be prodded to talk during that interview [which aired on Jan. 18, 2016], and he doesn’t have to be prodded to tweet a whole lot or show us his life on that little webcam he’s got,” the Congressman continued, referencing Martin’s penchant for live streaming himself from his apartment. 

Martin nodded as Gowdy spoke, smirking.

Gowdy went on: “So, this is a great opportunity, if you want to educate the members of Congress about drug pricing, or what you call the ‘fictitious case against you,’ or we can even talk about the purchase of the Wu-Tang Clan — is that the name of the album, the name of the group?” 

The congressman was referencing the one-of-a-kind Wu-Tang Clan album Martin had purchased for $2 million, shortly after Turing hiked the price of Daraprim. At the time, it was the highest dollar amount ever paid for a single musical work, and the purchase amped up Martin’s infamy.

Brafman stood up again and whispered in Martin’s ear, and Martin nodded. Turning back to the congressman, he recited once more: “On the advice of counsel…”

Gowdy’s face was painted with an expression of astonishment. “Mr. Chairman, I am stunned that a conversation about an album he purchased could possibly subject him to incrimination…” 

Congressman Elijah Cummings, (D-Md.), is pictured on the right. Congressman Trey Gowdy, (R-SC), is on the left. (Getty Images.)
Congressman Elijah Cummings, (D-Md.), is pictured on the right. Former Congressman Trey Gowdy, (R-SC), is on the left. Cummings passed away in 2019, and Gowdy retired from Congress in 2018. (Getty Images.)

Well, whether talking about the album might have worsened Martin’s legal travails (it was ultimately seized and auctioned off by the federal government in his case), the hearing was supposed to be about Turing’s drug prices, not Martin’s music collection. 

The latter, however, was more apt to make headlines.

Martin was well aware of the disconnect, and his face concealed nothing about his opinions.

Elijah Cummings, a Democratic congressman from Maryland, took a different approach: Instead of baiting Martin with tempting questions or accusing him of heinous misdeeds, Cummings —who passed away in 2019—took the opportunity to lecture Martin on what he could mean for society.

“People’s lives are at stake,” said Cummings, who had also been a civil rights and racial justice activist. 

“You are in a unique position, you really are, sir,” Cummings said. “Rightly or wrongly, you’ve been viewed as the so-called ‘bad boy of pharma.’ You have a spotlight and you have a platform. You could use that attention to come clean, to right your wrongs and to become one of the most effective patient advocates in the country, and one that could make a big difference in so many people’s lives.”

Not doing himself any favors from an optics perspective, Martin continued to smirk and squirm like an uncomfortable schoolboy.

“Are you listening?” Cummings growled. Martin responded by sitting up straighter.

“I truly believe you can become a force of tremendous good,” Cummings said, finally. “May God bless you.” 

Martin didn’t quite appear up to Cummings’ challenge. The cameras captured his face, again and again, as his smirking grew more and more pronounced, until finally he was excused. 

All told, the appearance took less than 10 minutes. From the train station in Washington D.C., on his way back to New York, he tweeted that the committee members were “imbeciles.” 

The House and Senate eventually had more hearings (none of which earned them quite as much media attention) on rising drug prices, as well as on another larger biotech company which also hiked the prices of old medications substantially, Valeant Pharmaceuticals. 

Perhaps learning from the negative publicity Martin received, Valeant’s CEO J. Michael Pearson fell on his sword before lawmakers when it was eventually his turn. “We have made mistakes,” Pearson told a Senate committee in April 2016. “Valeant was too aggressive. And I, as a leader, was too aggressive.” (It was also easier for him to admit fault under oath because he wasn’t under a criminal indictment.)

SMIRK is just getting warmed up. Subscribe here to get the whole untold story.

That same year, then-CEO of Mylan Pharmaceuticals Heather Bresch — the daughter of Joe Manchin, a Democratic Senator from West Virginia — raised the price of the EpiPen by nearly 500 percent to about $300 from $50. This, too, inflamed public opinion. EpiPens were widely viewed as a lifesaving necessity in every household where people suffered from serious allergies.

She, too, was hauled before the committee in September 2016. "Looking back, I wish we had better anticipated the magnitude and acceleration of the rising financial issues for a growing minority of patients who may have ended up paying the full price or more," she told them. "We never intended this."

EpiPen prices did not go down after the hearing, according to Pew Trusts and Axios, but Mylan did introduce a generic option at $300 instead of $600, allowing the company to maintain its profits and most of its market share.

Former Mylan CEO Heather Bresch testifies before the Congressional panel in 2016. (Getty Images)
Former Mylan CEO Heather Bresch testifies before the Congressional panel in 2016. (Getty Images)

Despite the hearings, media attention and public outcry, no bill was passed to regulate or lower drug prices (although many were introduced, and continue to be introduced to this day). Meanwhile, drug prices have continued marching upward.

Eventually, government officials did do something in response to the hue and cry over Turing, however. The Federal Trade Commission, and a slew of state attorneys general, brought a lawsuit against Turing (then renamed Vyera) and Martin while he was in prison.

The agency alleged that the company had tried to delay the release of other companies' generic versions of Daraprim by, among other things, locking ingredient suppliers into exclusive contracts that prevented them from complying the FDA testing requirements. Martin was no longer in charge of the company, but he was accused of orchestrating the maneuvers from behind bars with a contraband cell phone.

By the time the lawsuit was filed in January 2020, a generic version of the toxoplasmosis medication was just a few weeks away from being approved by the U.S. Food and Drug Administration. That generic, sponsored by Cerovene Inc., is now available to consumers.

The federal antitrust regulator and attorneys general won a ruling forcing Martin to personally return $65 million in profits, and banning him from the pharmaceutical industry for life. Public officials lauded this move as a resounding victory for patients. 

And the generic version of Daraprim now on the market? There is no sign that its list price is any different from Turing’s, at least based on a search of “pyrimethamine,” the generic name for Daraprim, on Goodrx.com. Another site, PharmacyChecker.com, offers discounts that push the cost down to mere $200 to $300 a pill, or $20,000 to $30,000 for a 100-pill bottle. That’s more than 11 times what it was before Martin jacked up the price.

Congress hasn’t held another hearing on it.