Consider the information in Box 17.2. Are the CEOs of Turing, Valeant, or other fi rms seeking profi table opportunities by purchasing generics and subsequently raising prices just engaging in good business strategies? Are they improving social welfare in the sense that economists use this concept?

Transcribed Image Text:

BOX 17.2 Martin Shkreli and Valeant Pharmaceuticals The September 20, 2015 New York Times article, "Drug Goes from $13.50 a Tablet to $750, Overnight," created a firestorm. Turing Pharmaceuticals led by Martin Shkreli acquired the drug Daraprim. Daraprim is the standard treatment for toxoplasmosis -a parasitic disease that could be life-threatening for those with com- promised immune systems, e.g., with AIDS and certain forms of cancer. Daraprim is no longer patent protected and actually cost $1 per pill several years ago but, with only about 10,000 prescriptions per year, other pharmaceutical firms have not entered the market. Despite being called the "most hated man in America" by some media outlets, and subsequently arrested for alleged securities fraud, Mr. Shkreli told Forbes that he should have raised prices even higher because "my shareholders expect me to make the most profit... that's the ugly, dirty truth." With the spotlight on Mr. Shkreli, the public was learning that the Daraprim epi- sode is not unique. Valeant Pharmaceuticals International became the largest publicly traded company in Canada, reaching a market value of $90 (U.S.) billion in mid-2015. Valiant's growth was fueled by numerous acquisitions of pharmaceutical and medi- cal supply companies. As part of its strategy, Valeant also bought the rights to older