Health Care

KC pharma CEO under fire after asserting ‘moral requirement’ to raise drug price 400%

The head of a small pharmaceutical company in Kansas City is under fire after defending a 400 percent price increase on a common antibiotic by saying he had a “moral requirement” to make as much money on it as possible.
The head of a small pharmaceutical company in Kansas City is under fire after defending a 400 percent price increase on a common antibiotic by saying he had a “moral requirement” to make as much money on it as possible. Bigstock

The head of a small pharmaceutical company in Kansas City is under fire after defending a 400 percent price increase on a common antibiotic by saying he had a “moral requirement” to make as much money on it as possible.

Nirmal Mulye, the founder of Nostrum Laboratories, has said his comments to the London-based Financial Times were taken out of context.

But as the story has spread they’ve put him at the center of the national storm over drug prices, even drawing a sharp rebuke from Scott Gottlieb, the head of the U.S. Food and Drug Administration.

Reached by phone Thursday at his home in New Jersey, Mulye said he’s been threatened by phone and email, someone made a fake Twitter account to smear him and he’s worried at this point about keeping his company afloat.

Nirmal Mulye, Nostrum Laboratories founder and CEO Submitted photo

“I have lost money in eight of 11 years, and if they keep attacking me like this I will have to shut down the plant, and all the people in Kansas City will lose their jobs,” Mulye said. “And these are high-paying jobs, by the way.”

Nostrum Laboratories is at 1800 N. Topping Ave., a couple miles east of downtown in an industrial area near the Missouri River.

Mulye said Nostrum employs about 100 people in Kansas City, at salaries that range from $40,000 a year to $200,000.

Mulye was interviewed by New York-based Financial Times reporter David Crow for a Sept. 11 story about Nostrum’s plan to hike the price of nitrofurantoin, an antibiotic used to treat bladder infections. The World Health Organization includes it on its “List of Essential Medications.”

In the story Mulye defends the eye-catching price increase of $474.75 to $2,392, saying “I think it is a moral requirement to make money when you can . . . to sell the product for the highest price.”

Mulye has since told CNN and others that the quote was misleading. He told The Star he was talking about his obligation to his employees.

“My exact words to the guy was, ‘Listen I don’t have a moral obligation to breathe and eat, but if I don’t do those things I’ll die,” Mulye said. “It’s common sense that if a business doesn’t make profit or at least break even it’s not going to be able to stay in business, right? … American jobs will be lost.”

The Financial Times has said it sticks by the story.

The day the story went online, Gottlieb referenced it in a series of tweets critical of Mulye, without mentioning him by name.

“There’s no moral imperative to price gouge and take advantage of patients,” Gottlieb posted. “FDA will continue to promote competition so speculators and those with no regard to public health consequences can’t take advantage of patients who need medicine.”

Mulye said he emailed Gottleib to say he was mischaracterizing the price hike.

Mulye said Nostrum’s generic version of nitrofurantoin has been off the market since January, when new FDA regulations took effect that required it to be reformulated.

“There is a particular ingredient being used in the formula that has to meet today’s standards,” Mulye said. “That’s what makes it difficult. If you make the drug with the current formula it wouldn’t meet FDA standards.”

Mulye said Nostrum is about to put the reformulated product back on the market. It’s pegging it to the price charged by the maker of the brand-name version, Casper Pharma, which has risen to $2,800.

“The brand hiked the price,” Mulye said. “We are just trying to bring a cheaper alternative to the brand. So I’m the savior, not the villain and everyone is making me the villain.”

Nostrum Pharmaceuticals.JPG
Kansas City-based Nostrum Laboratories has found itself at the center of a national storm over drug prices after comments its CEO made regarding a 400 percent price hike for a common antibiotic. The CEO, Nirmal Mulye, said the company provides about 100 good-paying jobs in Kansas City. Andy Marso

Mulye said a CNBC article cited 60 other recent drug price hikes last month, including at least one that was more extreme than Nostrum’s.

Ronny Gal, an analyst quoted in that story, said that Mulye was making excuses by blaming FDA fees and that it looked like he raised the price of nitrofurantoin “because there was a market opportunity to do so.”

The office of U.S. Sen. Claire McCaskill, a Missouri Democrat, said Thursday that she and U.S. Sen. Susan Collins, a Maine Republican, have sent a letter to Mulye with a series of questions about the nitrofurantoin price increase.

“In the pharmaceutical industry — as opposed to the luxury art market — pricing decisions can have a devastating impact on patients and their families that can literally amount to a matter of life or death,” the letter says.

Mulye also took issue with a section of the Financial Times story that said he “defended” Martin Shkreli, the “Pharma Bro” drug executive who was notoriously unrepentant about raising by 5,000 percent the price of a life-saving anti-parasite medication called Daraprim.

Shkreli was later convicted of federal fraud charges unrelated to the price hike.

The Financial Times quoted Mulye as saying Shkreli’s Daraprim increase was “within his rights because he had to reward his shareholders.”

“If he’s the only one selling it then he can make as much money as he can,” the story quoted Mulye as saying. “This is a capitalist economy and if you can’t make money you can’t stay in business. We have to make money when we can. The price of iPhones goes up, the price of cars goes up, hotel rooms are very expensive.”

Mulye told The Star he was only trying to say that what Shkreli did with Daraprim was not illegal.

“That’s not me defending him, that’s me just stating fact,” Mulye said.

Mulye said he came to the United States as an immigrant who barely spoke English and worked several minimum wage jobs to pay his way through graduate school.

“This is the greatness about this country, right?” Mulye said. “The sad thing is people are out to bash me. … Nobody talks about the fact that I saved these jobs. I’m committed to keeping the jobs in Kansas City.”

Includes reporting by McClatchy’s Lindsay Wise.