Martin Shkreli, CEO reviled for drug price gouging, arrested

NEW YORK – Martin Shkreli, the former hedge fund manager under fire for buying a pharmaceutical company and ratcheting up the price of a life-saving drug, is in custody on charges of securities fraud.

Calls to an attorney that has represented Shkreli in the past were not immediately returned.

He was arrested in his Manhattan apartment, a law enforcement source who declined to be identified because the indictment had not been unsealed, told The New York Times. Federal prosecutors in Brooklyn were expected to hold a news conference on the charges later Thursday.

Evan L. Greebel, a corporate lawyer who has worked with Shkreli, was also arrested Thursday, the Times reported; a spokesman for the firm declined to comment.

Shkreli, 32, stirred public outrage earlier this fall when his company, Turing Pharmaceuticals jacked the price of a drug used to treat a life-threatening infection by more than 5,000 percent.

Turing raised the price on Daraprim, a 62-year-old drug whose patent expired decades ago, from $13.50 to $750 per pill.

The drug is the only approved treatment for a rare parasitic infection called toxoplasmosis that mainly strikes newborns, pregnant women, cancer patients and AIDS patients.

Shkreli said the company would cut the drug’s price.

Last month, however, Turing reneged on its pledge.

Instead, the company is reducing what it charges hospitals for Daraprim by as much as 50 percent. Most patients’ copayments will be capped at $10 or less a month. But insurance companies will be stuck with the bulk of the tab, potentially driving up future treatment and insurance costs.

Turing, with offices in New York and Switzerland, bought U.S. rights to sell Daraprim in August, when it had no competition. Daraprim is one of numerous old drugs with limited competition whose makers have raised prices sharply.

Rising pharmaceutical prices has become a topic in the upcoming U.S. presidential race.

Congress called him out on it. Hillary Clinton tore into Shkreli. Bernie Sanders rejected a donation from America’s most unpopular businessman. Even Donald Trump called Shkreli a “spoiled brat.”

Shkreli did not do his reputation any favors by calling a journalist a “moron,” quoting defiant rap lyrics on Twitter and defending the price hike as a “great business decision.”

“Our shareholders expect us to make as much as money as possible,” he said during a health industry summit earlier this month, dressed nonchalantly in a hooded sweatshirt and sneakers. “That’s the ugly, dirty truth.”

He also promised to lower the price of Daraprim but reportedly never did.

His arrest on Thursday morning, however, has nothing to do with his much criticized Daraprim decision. Instead, the investigation dates back to Shkreli’s days at Retrophin Inc., a biotechnology firm he started in 2011 and left in September 2014 under controversial circumstances.

According to Bloomberg, prosecutors have charged Shkreli with illegally taking stock from Retrophin and using it pay off debts from unrelated business dealings.

Bloomberg said Shkreli’s lawyer and a spokesman for Retrophin didn’t immediately respond to requests for comment.

Retrophin sued Shkreli in August for misuse of company funds, accusing him of taking more than $65 million from the company and using it to secretly pay off jilted investors at a hedge fund he had nearly bankrupted, Bloomberg reported.

The SEC opened an investigation into Shkreli in 2012, according to court documents reviewed by Bloomberg.

Shkreli, who most recently trolled hip-hop fans by buying the only copy of a Wu-Tang Clan album for several millions of dollars, was typically defiant when discussing both the lawsuit and the investigations.

“The $65 million Retrophin wants from me would not dent me,” he said of the suit. “I feel great. I’m licking my chops over the suits I’m going to file against them.”

He has denied wrongdoing regarding the securities fraud investigation.

Bloomberg, The Washington Post, The New York Times and Associated Press contributed.

This story was originally published December 17, 2015 at 7:58 AM with the headline "Martin Shkreli, CEO reviled for drug price gouging, arrested."