Back in September, Martin Shkreli became “the most hated man in America” when the Turing Pharma CEO moved to boost the price of a toxoplasmosis drug by 5000%.
That rather egregious example of unbridled greed immediately caused the American public as well as lawmakers in Washington to begin taking a closer look at a practice that actually happens all the time in Big Pharma even if the industry’s larger players are careful to be a bit less audacious about it than Shkreli.
Following the Turing price hike, Democrats on the House oversight committee sent a letter demanding that serial biotech rollup Valeant Pharmaceuticals provide documents explaining hefty price increases for two heart drugs. Around two months later, Senators Susan Collins (R-Maine) and Claire McCaskill (D-Mo.), who together lead the Senate Special Committee on Aging, opened a bipartisan investigation into pharmaceutical drug pricing.
At that point, we thought Shkreli’s fifteen minutes of fame might have been up - we were wrong.
Exactly two weeks after the launch of the Senate investigation, Shkreli swooped in and bought over half of the outstanding shares of KaloBios, which at the time was was trading between $1-2/share, representing a market cap between $5 and $10 million. What happened next was the stuff of market tragicomedy legend as the E-trading Joe Campbells of the world lost a small fortune after Shkreli’s purchase sparked a relentless rally that would have been impressive enough on its own had he stopped there. But he didn’t. He then pulled the borrow and "Volkswagen-ed" some folks as we documented in a series of hilarious pieces posted late last month (see here, here, and here). Summing up:
Ok. Now, prepare yourself for something that will briefly seem like a complete non sequitur - bear with us.
Sometime in 2011, or 2012, or 2013, the Wu-Tang Clan began to record a double disc entitled “Once Upon A Time In Shaolin.”
For those unfamiliar, the Wu-Tang Clan are, well, legends in the rap industry. The group features some of the most famous names to ever touch a mic including Method Man, Raekwon, and Ghostface, all three of which are institutions to hip hop heads the world over. As a team, Wu-Tang has released multiple long plays considered classics among rap aficionados and when you count the various solo offerings from the group’s 10 members, their catalogue is unparalleled in rap’s short history.
In March of 2014, Forbes reported that “Once Upon A Time In Shaolin” would be a different type of album. The group would mint only a single copy. It would be sold for at least $1 million and would come in a series of handcrafted boxes by British-Moroccan artist Yahya, whose works have been commissioned by royal families and business leaders around the world.”
Last month, Forbes reported that the album had been sold in May to an American collector for a price tag “in the millions” which made it at least four times more expensive than “Jack White’s $300,000 purchase of a rare acetate recording of Elvis Presley’s first song.”
Now you’re probably starting to see where this is going.
According to RZA (who has always been the group's frontman if never the Clan's most famous member), the album attracted many bidders: “Private collectors, trophy hunters, millionaires, billionaires, unknown folks, publicly known folks, businesses, companies with commercial intent, young, old,” he told Bloomberg. “It varied.” Serious bidders got to hear the 13-minute highlights in private listening sessions arranged by Paddle8 (an upstart, angel investor-backed auction house) in New York.
Enter America's most hated man (via Bloomberg):
One of [the bidders] was a pharmaceutical company executive named Martin Shkreli. He’s 32 years old but seems much younger, with a tendency to fiddle with his hair and squirm in his seat like an adolescent. The son of Albanian immigrants, Shkreli grew up in what he describes as a tough part of Brooklyn’s Sheepshead Bay neighborhood. He skipped grades in school because he was so bright. Shkreli idolized scientists, but he was also a music fan. Primarily interested in rock as a teenager, he didn’t understand rap, but that changed when he read Shakespeare in high school. “You would get these rhyming couplets and soliloquies and stuff like that, but the couplets would really kind of jar you,” he says. “They would be really these big, soul-crushing moments that Shakespeare intended to stir your spirit. And in many ways, music does that.”
Shkreli was taken by the Wu-Tang song C.R.E.A.M., which stands for “Cash Rules Everything Around Me.” It includes the often-repeated phrase “Dolla dolla bill, y’all!” Shkreli turned out to be good at making dollars himself. He founded two hedge funds that shorted pharmaceutical stocks and then started his own drug company, Retrophin, earning a reputation on Wall Street as something of a boy genius. In September 2014, however, he says he was “asked to leave” by the company’s board. Retrophin later alleged after an internal investigation that he’d abused his position and misused assets. Shkreli says that he didn’t do anything without the company’s approval. Retrophin and its former CEO are now facing off in court. “I was pretty pissed,” Shkreli says. “But I realized that it actually would be better for me, maybe not ego-wise, but financially. I could just sell my stock and build my own next company.”
Now that Shkreli had more money, he started collecting music-related items. He once joked on Twitter about trying to buy Katy Perry’s guitar so he could get a date with her. He purchased Kurt Cobain’s Visa card in a Paddle8 auction and occasionally produces it to get a rise out of people when it’s time to pay a check.
Shkreli heard about Once Upon a Time in Shaolin and thought it would be nice to own, too. He attended a private listening session at the Standard Hotel hosted by Paddle8 co-founder Alexander Gilkes. Shkreli, who describes himself as a bit of a recluse, recalls Gilkes telling him that if he bought the record, he would have the opportunity to rub shoulders with celebrities and rappers who would want to hear it. “Then I really became convinced that I should be the buyer,” Shkreli says. (Paddle8 declined to comment, citing their policy of client confidentiality.)
He also got to have lunch with RZA. “We didn’t have a ton in common,” Shkreli says. “I can’t say I got to know him that well, but I obviously like him.”
Yes, "obviously," but what also seems obvious is that RZA doesn't like Shkreli: "The sale of Once Upon a Time in Shaolin was agreed upon in May, well before Martin Skhreli’s [sic] business practices came to light. We decided to give a significant portion of the proceeds to charity," he told Bloomberg, in a statement.
Needless to say, Congress is not amused. “My biggest challenge today is to not lose my temper. The facts underlying this hearing are so egregious but it’s hard not to get emotional about it," Sen. Claire McCaskill (D-Mo.) said on Wednesday. “This is the same guy who thought it was a great idea to pay millions of dollars for the only existing album of the Wu Tang Clan," she added, incredulous.
Now, Claire, that's not true. It's not "the only existing Wu-Tang album." In fact, the Clan has sold many millions in their day:
What he bought was the only existing copy of "Once Upon A Time In Shaolin." We're sure that once the Congresswoman understands the distinction, she'll feel a lot better about the situation.
So coming full circle, we can now see why the Martin Shkrelis of the world need to raise prices by thousands of percent (in the process raising healthcare premiums for all Americans as insurers pass along the soaring cost of specialty drugs, which as we reported a few weeks back, has now surpassed the median US household income). If they didn't, how would they afford one-of-a-kind Wu-Tang albums?
But before you're too hard on Shkreli, ask yourself this: how different is this from the big pharma CEO who buys a Rolls Royce and a couple of $50 million Picassos after hiking drug prices? Why is one a titan of industry lauded by the mainstream financial news media and the other a pariah? Both are skewering Americans and getting rich at the expense of the sick. The fact that the public thinks one has better taste than the other is meaningless.
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Bonus: Bloomberg's not-so-subtle tribute to deceased Wu-Tang member Ol' Dirty Bastard...
Bonus, Bonus: "Once Upon A Time In Shaolin" documentary from Forbes...
