Martin Shkreli: The SEC’s Dirty Little Monster

Martin Shkreli has recently gained national attention for hiking up the cost of his former company’s (Turing Pharmaceuticals) HIV drug by 5,000%.  When he was called to a congressional testimony to answer for this unprecedented price increase, Shkreli smirked and pled the Fifth Amendment (13). Take a closer look at his career, and you might understand where this brazen contempt is coming from.

Martin Shkreli, owner of the most punchable face in America

When he was just 19 years old, Shkreli was investigated by the SEC for making a profit from shorting a biotech stock – but no charges were ever filed. By the age of 26 he was gaining massive returns in this way and had become notorious for posting negative reviews on stock speculation sites, like Seeking Alpha, in an obvious attempt to manipulate share price (1).  Shkreli took this audacious behavior a step further when he apparently convinced the FDA to block the approval of an innovative new diabetes drug developed by the MannKind Corporation so that his hedge fund could make a profit (2; 3). For these actions, Shkreli never faced any charges (2). 

The MannKind Corporation, a small biopharma company founded by philanthropist Alfred Mann, developed a revolutionary new product which allowed diabetes patients to breathe insulin through an inhaler (see Figure 2) (2).  Many people who have diabetes must constantly inject themselves with insulin (see Figure 1) in order to stave off serious health problems and early death (4).  Not only could MannKind’s drug reduce, or even eliminate, the need for patients to stick themselves with needles; clinical trial data demonstrated it was a superior diabetes treatment because it entered to the bloodstream more quickly (5). 

On Christmas day in 2010, Shkreli emailed all 12 FDA employees responsible for reviewing MannKind’s new drug application urging them not to approve the company’s inhaled insulin product (2; 7). The fact that Shkreli was upfront about being short on MannKind stock was apparently offset by his 30 page-long negative analyses of the company’s clinical trials. That year Shkreli had already sent a multitude of letters to the FDA stating that MannKind’s “clinical trial package was lacking” (8). With a bachelor’s degree in business administration, Shkreli was no medical expert (1). He did, however, cite FDA guidance from 2008 which stated insulin inhalers should be tested in clinical trials prior to approval (7; 9). MannKind’s insulin inhaler (see Figure 2) had been tested in bioequivalence studies, not in clinical trials – but the FDA had already approved this study design (10). 

On January 19, 2011, Shkreli posted an article on Seeking Alpha boasting about his negative letters to the FDA and predicting the MannKind Corporation would soon become bankrupt (figure 3) (8). That same day, the FDA rejected MannKind’s request to make this needle-free insulin available to patients, providing the rationale that their insulin inhaler was not tested in clinical trials (11). As previously mentioned, the FDA had approved MannKind’s request to perform bioequivalence studies instead of clinical trials (10).  The FDA’s decision meant that MannKind had to let go 41% of its workforce and hold back this promising new product from patients in need (14).  After testing their inhaler in clinical trials the MannKind Corporation’s inhaled insulin was approved by the FDA, but the company never recovered. With no approved drugs on the market generating any income MannKind was burning an estimated $10-$12 million per month (12).  

Figure 3

In 2012 the Citizens for Responsibility and Ethics in Washington (CREW) filed a grievance with the SEC accusing Shkreli of manipulating the public and the FDA for profit.  CREW provided detailed evidence for how Shkreli was systemically destroying the reputations of MannKind and other small biopharma firms in order to sabotage their share prices (8). The SEC had previously investigated the short-selling practices of Shkreli’s. Now he was blatantly demonstrating a pattern of destructive behavior for financial gain.  Inexplicably, Shkreli never faced government charges for his actions against the MannKind Corporation or any of companies listed in CREW’s grievance (2).  By the time his Turing Pharma scandal came around, Shkreli had been profiting for years off of audacious and unethical practices in a seemingly consequence-free environment. So why did the SEC fail to launch a formal probe against Shkreli? Had they investigated him back then, Shkreli might not have had free rein to purchase the rights to a life-saving HIV drug and then jack up the price like some ridiculous cartoon supervillain. Greedy corporate sharks like Shkreli are to be expected.  What is truly disturbing is how easily the regulators were manipulated and how egregiously they failed to act.

This blog was written in 2016. Check out my site for an updated article, which includes information about Shkreli’s prison sentence.

Works Cited

1. Barrett, Paul M. Once a Notorious Short Seller, Martin Shkreli Now Sees a Future in Biotech. Bloomberg Business. [Online] April 17, 2014.

2. Zinn, Marcelo. MannKind Corporation: One Large Step for Shareholders, One Gigantic Step for Diabetics. Beyond Proxy. [Online] December 11, 2013.

3. MannKind Corporation. [Online] 2016.

4. WebMD, LLC. Diabetes Basics. Diabetes Health Center. [Online] 2016.

5. Blohowiak, C. The Fate of MannKind. [Online] May 1, 2009.

6. SP Services (UK) Ltd. Infusion. SP Services. [Online] 2016.

7. CREW Letter to SEC. Scribd. [Online] March 9, 2012.

8. Shkreli, Martin. MannKind Is Simply Running Out Of Cash. Seeking Alpha. [Online] January 19, 2012.

9. U.S. Department of Health and Human Services Food and Drug Administration Center for Drug Evaluation and Research (CDER). Guidance for Industry – Diabetes Mellitus: Developing Drugs and Therapeutic Biologics for Treatment and Prevention. [Online] February 2008.…%2FGuidances%2Fucm071624.pdf&usg=AFQjCNFds6CEE6t6OgE534au2OAHbbFkKA&sig2=94aPMNxyJyzhlFtx6Lu.

10. Mann, Alfred. Mannkind Interview. s.l. : youtube, October 22, 2013.

11. Afrezza Approval History. [Online]

12. Perrefort, Dirk. Mannkind shares down on cash-flow worries. News Times. [Online] November 11, 2015.

13. Associated Press Reporter and Reporters. Disgraced ‘pharma bro’ Martin Shkreli SMIRKS at Congress committee, calls them imbeciles and pleads the Fifth as he refuses to answer questions about his 5,000% price hike on HIV drug. Daily Mail. [Online] February 4, 2016.

14. Davis, Stacy. MannKind Corp lays off 131 Danbury workers, 41 percent of employees nationwide. News Times. [Online] February 11, 2011.

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