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Turing Pharmaceuticals Retreats From Plan To Raise Price Of Daraprim

KELLY MCEVERS, HOST:

We're going to learn more now about the CEO of Turing Pharmaceutical. The company came into focus after a New York Times story this week detailed how it raised the price of a drug that's been on the market for more than 60 years - and not a small increase, a 5,000 percent increase. The company has now backed down, but as NPR's Jim Zarroli reports, the controversy hasn't.

JIM ZARROLI, BYLINE: Turing didn't develop Daraprim. It simple bought the drug and then raised its price from $13 a pill to $750. Since then, the backlash against the company has been fierce. Its 32-year-old Martin Shkreli has been mocked and criticized by doctors, other biotech companies and even Hillary Clinton.

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HILLARY CLINTON: That's price gouging, pure and simple. And pharmaceutical companies that acquire an existing affordable drug that people rely on it and then turn around and charge a fortune for it just bet on the fact that desperate people will find some way to pay for it.

ZARROLI: This isn't the first time that Shkreli has been on the hot seat. A few years ago, he started his own biotech company, but he was kicked out after a financial dispute with the board. Shkreli also sold some biotech stocks short. That is, he bet the stocks would lose value, then he would try to persuade federal regulators not to approve the drugs they had in development. Noah Bookbinder is with Citizens for Responsibility and Ethics in Washington.

NOAH BOOKBINDER: Then he would go publicly and put out these statements saying these companies are going to lose value because the FDA is going to take an adverse action. And that actually did have the effect of knocking down the stock value, which made a whole lot of money for Shkreli.

ZARROLI: Regulators have never taken any action against Shkreli, and he has stopped giving interviews. So he wasn't available for comment. But earlier this week, as the controversy over Daraprim mushroomed, he defended his decision to raise the price on CBS News.

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MARTIN SHKRELI: The drug was unprofitable at the former price. So any company selling it would be losing money, and at this price, it's a reasonable profit - not excessive at all.

ZARROLI: Shkreli said raising the price would allow his company to research new drugs. It's an argument that doesn't sit well with Steve Schondelmeyer of the University of Minnesota. He says drug companies typically recoup their research costs after a drug is released. They don't raise their prices to pay for research they might do down the road. Because Turing has a lock on Daraprim, customers have to pay whatever it charges. Daraprim is a generic, and other companies can try to compete by bringing out their own version of it. But Schondelmeyer says doing so isn't easy.

STEVE SCHONDELMEYER: You can't just start marketing a new genetic tomorrow. You have to get it approved by FDA and have them inspect your plan and your processes.

ZARROLI: Schondelmeyer says the FDA is so backed up it could take six years to bring another drug to market. He says something is broken in the drug industry that needs to be fixed.

SCHONDELMEYER: And I think companies certainly need their reward for innovation, but this isn't innovation in a clinical sense. It might be in a financial market sense, but it's not in a clinical, therapeutic sense.

ZARROLI: Meanwhile, the controversy over Daraprim has thrust the issue of drug prices into the spotlight, just as the presidential campaign is heating up. Senator Bernie Sanders has called for an investigation into Turing's actions, and Hillary Clinton yesterday unveiled a new plan she says will hold down the cost of prescription drugs. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.

Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.