The best laid plans of mice and corporate villains often go awry. That’s the lesson Turing Pharmaceuticals CEO Martin Shkreli is learning after a San Diego based competitor announced they were undercutting his carefully crafted drug monopoly. On Thursday, Imprimis Pharmaceuticals revealed its plan to offer a viable alternative to Daraprim, slashing the price of the potentially lifesaving medication from $750 to just under $1 per pill. The development is being hailed as a victory for free markets and social media activism alike.
And social media should be credited for the victory. After Turing acquired the rights for decades-old drug and raised the price an astounding 5,000%, the online backlash was as quick as it was fierce. Mainstream media outlets quickly picked the story up, and the politicians jumped into the fray not long after. Notably, presidential hopeful Hillary Clinton tweeted “Price gouging like this in the specialty drug market is outrageous.”
While Turing’s price hike was unquestionably outrageous, this ordeal also demonstrates an important truth. Namely, politicians and regulators need not unnecessarily rush to correct every galling imperfection that crops up in the market. Imprimis’ deft maneuver is rectifying the issue much faster than the bureaucracy encumbered Federal government ever could. What’s more is that regulations, or even the hint of regulations, often come with unintended side effects. Mrs. Clinton’s tweet sent biotech stocks tumbling and FDA rules are at least partially responsible for Mr. Shkreli’s decidedly monopolistic cornering of the market in the first place.
Critics of this view will point out that, without the social media outrage, Daraprim would still be selling unchallenged at its exorbitant price. While this is likely true, the ridiculous price gouging was practically begging to be undercut eventually. But more importantly, these critics seem to forget that social media is itself a product of capitalism. The free flow of information is essential for markets to function properly. With social media (and the broader internet) facilitating this flow, the increased public scrutiny is absolutely a market force that will help determine prices and business conduct moving forward.
None of this is to say regulations don’t serve a purpose in today’s society. Externalities and other market imperfections are real and need to be accounted for, especially in industries as vital as healthcare and pharmaceuticals. Setting patent rights so that they properly foster competition (and reasonable prices) while not disincentivizing the development of new drugs is a tricky but important business. This is doubly true when the key issue of consumer safety is factored in. The point remains, however, that not every questionable CEO needs to be hedged in by the Federal government. Just as often an outraged public and more in-touch companies like Imprimis will do the job for them. Long live the people.