Price-gouging pharma firm's Martin Shkreli arrested for securities fraud

Martin Shkreli, CEO, Turing Pharmaceuticals, who faced a barrage of criticism for price gouging vital drugs (See: Turing Pharma halves Daraprim price hike from 5,000% to 2,500%), yesterday denied securities fraud charges after an early morning arrest. He was later freed on a $5-million bond.

But the 32-year-old's brazen business style and his personal life had nothing to do with the reasons for his arrest. He faces accusations of repeatedly losing money for investors and lying to them about it, and illegally dipping into the assets of his companies to pay off debtors in another.

''Shkreli essentially ran his company like a Ponzi scheme where he used each subsequent company to pay off defrauded investors from the prior company,'' Brooklyn US attorney Robert Capers said at a press conference.

Shkreli was arrested by agents of the Federal Bureau of Investigation at his Midtown Manhattan apartment at about 6:30 am. He was forced to walk through a group of photographers outside FBI headquarters.

Evan Greebel, a New York lawyer, who allegedly helped Shkreli in his schemes, was also arrested and charged. Greebel, like Shkreli, also pleaded not guilty, and he was freed on a $1 million bond.

In the federal indictment and a complaint by the Securities and Exchange Commission, authorities said Shkreli started losing money and lying to investors from the time he started  managing money. He got nine investors to place $3 million with him, in his mid-20s, and at one point had only $331.

Leading pharmacy chain Walgreens Boots Alliance Inc, which is currently the exclusive US supplier of Turing's Daraprim, said it had inventory of the drug, which had a list price of $750 per dose.

However, growing public backlash against that price had led to the entry of new competitors - compounding pharmacies that can produce similar versions for a fraction of the cost.

Meanwhile, a number of major medical groups are calling on doctors to prescribe lower-cost alternatives to Daraprim, providing detailed instructions.

According to an emailed statement from Walgreens, it had "urged Turing to expand the number of specialty pharmacies to promote greater access, and it is our understanding that they will be doing so in the near future."