Just recently, news broke of an american company, Turing Pharamceuticals, and its CEO Martin Shkreli increasing the price of the drug daraprim from $13.50 to $750 per pill.

Our class discussed the practice that The New York Times reported on

Drug Goes from $13.50 to $750, overnight

We first discussed the pricing decision and how revenue should rise given that this drug is fairly inelastic.  They question was then asked: If a firm’s organization structure is that of maximizing profits, is what Turing doing wrong?

We watched the interview from Bloomberg next to see how the CEO positioned the price increase:

Reaction was mixed.  Some students agreed with the pricing decision and respected how Turing used the free-market system to maximize profits.  Others quickly pointed to the moral obligations of the firm to provide the drug at a fair cost.

Our discussion was marked with some very good insights/questions:

Is it the moral obligation for the seller of the drug to vet the buyer of the drug?

At what point does regulation in the pharmaceutical lead to all drugs being classified as necessities?

What is the fair-profit price if no R&D is being done and should we follow up on R&D promises?

What is preventing the company from investing the profits claimed to be earmarked for R&D into another drug in a similar market setting?

Students were quick to identify that this CEO has done the same price hike in a previous company, with no track record of producing any tangible R&D.

CEO hikes price of kidney drug by over 2000%

Turing has since rescinded the price increase and has settled on a lower, yet to be disclosed, price.