Using Antitrust Law to Challenge Turing's Daraprim Price Increase

Abstract

As CEO of Turing Pharmaceuticals, Martin Shkreli made worldwide headlines by obtaining marketing rights to pyrimethamine (Daraprim) and quickly increasing the price 5000 percent, from $13.50 to $750 per pill.

In addition to increasing price, Turing initiated another less widely appreciated move — it changed the distribution scheme for the drug. Before its acquisition by Turing, pyrimethamine was widely available. But in the months before the price hike, apparently as a condition of the sale to Turing, pyrimethamine was switched to a controlled distribution system called Daraprim Direct, in which prescriptions or supplies could be obtained only from a single source, Walgreen’s Specialty Pharmacy.

The Daraprim Direct system made it impossible for anyone other than registered clients to obtain the drug. This could include other manufacturers wishing to obtain samples for use in bioequivalence studies supporting a generic application. The restricted distribution scheme thus could allow Turing to prevent generic versions of the drug from reaching the market.

This Essay addresses the question of whether Turing's behavior violates the antitrust laws. Part I describes the typical distribution systems in the pharmaceutical industry. Part II examines monopoly power and considers whether Daraprim possessed such power. Part III considers the second element of monopolization claims, exclusionary conduct, and explores whether Turing engaged in such behavior. Part IV then reaches beyond pyrimethamine to offer additional examples of similar conduct. Given that the Federal Trade Commission and N.Y. Attorney General are currently conducting antitrust investigations of this behavior, this Essay offers a framework for analysis.

Keywords: Turing, Shkreli, antitrust, monopolization, drugs, pharmaceuticals, Daraprim, pyrimethamine

JEL Classification: I18, K21, L40, L41, L43, L65, O34, O38