Martin Shkreli lifetime drug ban upheld by appeals court

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Martin Shkreli lifetime drug ban upheld by appeals court

A federal appeals court Tuesday upheld a lifetime ban on “pharma bro” Martin Shkreli from working in the pharmaceuticals industry as well as an order to pay up to $64.6 million in disgorged profits for blocking competition to the drug Daraprim after hiking its price by more than $700 per pill.

The unanimous ruling by a three-judge panel on the 2nd U.S. Circuit Court of Appeals came nearly two years after a New York federal district court judge slapped the ban on Shkreli for the monopolistic behavior of his then-drug company in the distribution of Daraprim.

The ban was in response to a civil lawsuit filed by the Federal Trade Commission and seven states, among them New York and California.

“The district court’s injunction was a reasonable measure to protect the public from the risk of recurring anticompetitive conduct in the pharmaceutical industry by Shkreli,” the ruling Tuesday said.

“Given Shkreli’s pattern of past misconduct, the obvious likelihood of its recurrence, and the life-threatening nature of its results, we are persuaded that the district court’s determination as to the proper scope of the injunction was well within its discretion.”

Shkreli first gained widespread notoriety in 2015 when his company raised the price of that life-saving drug by more than 4,000% overnight.

He later served a prison term for federal securities fraud and other financial crimes not related to his controversial price hike of Daraprim, which is used to treat toxoplasmosis, a life-threatening parasitic condition found in people with HIV, pregnant women and babies.

Henry Liu, director of the FTC’s Bureau of Competition, in a statement, said, “The Second Circuit’s decision is a win for consumers seeking affordable, lifesaving medication and clearly demonstrates that corporate executives will be held personally liable for anticompetitive actions that they help orchestrate.”

New York Attorney General Letitia James, whose office originated the suit with the FTC, in her own statement on the decision, said, “For years, Martin Shkreli and his company made millions by putting vulnerable people at great risk and denying lifesaving medication. Our latest victory once again holds him accountable.”

Shkreli’s lawyer, Benjamin Brafman, told CNBC, “The lifetime ban is too severe.”

“The courts should encourage real geniuses like Mr. Shkreli to work in the industry especially … when his conviction for fraud had nothing to do with the pharmaceutical industry,” Brafman said.

The plaintiffs had sued Shkreli and his companies, Vyera Pharmaceuticals and Phoenixus AG, and his former business partner Kevin Mulleady for violations of antitrust laws in preventing generic drugmakers from getting access to Daraprim that they needed to conduct testing on.

The scheme allowed Shkreli and others for more than a year to protect the profits they received from selling Daraprim for $750 per tablet, compared with the $17.50 per tablet it previously sold for.

The FTC and the other plaintiffs in January 2020 reached a settlement with Vyera and Mulleady that required the company to pay up to $40 million in disgorged profits, and which banned Mulleady from the pharmaceutical industry for seven years.

Shkreli took the case to trial in December 2021, and lost.

In its eight-page ruling against him Tuesday, the appeals court noted that Shkreli argued that Manhattan federal court Judge Denise Cote “abused” her discretion in imposing a lifetime ban on him from the drug business. He also argued that the injunction unconstitutionally limited his free speech, and that it violated a federal rule of civil procedure by not being specific enough.

The panel said the Federal Trade Commission Act authorizes the FTC to seek injunctive relief such as a ban for violations of that law, and that a judge can impose such a ban.

“We conclude that the district court did not abuse its discretion by imposing a lifetime ban
from the pharmaceutical industry on Shkreli because an injunction of that scope was within the range of permissible decisions,” the ruling said. “The district court found, and Shkreli does not dispute, that Shkreli’s illegal scheme was “egregious, deliberate, repetitive, long-running, and ultimately dangerous.”

The ruling also noted that Shkreli, in challenging the monetary penalty, for the first time in his appeal argued “that district court erred by relying on federal law remedies in imposing joint and several disgorgement on him under New York law.”

The panel noted that “Shkreli never made this argument” to Cote “and he proffers no reason now for his failure to raise arguments there.”

At trial, Shkreli relied “exclusively on federal equity jurisprudence” — not on any state law — in arguing that he should not be ordered to disgorge profits.

“Therefore, the circumstances here do not persuade us that we should exercise our discretion to address this new argument on appeal,” the panel said in its ruling. “Given his strategic decision in the district court, there is no injustice to Shkreli by us declining to address his new argument.”

In a footnote, the panel said that even if Shkreli had not effectively waived his argument by not raising it at trial, “it would still fail.”

Kimo Peluso, the attorney who handled the appeal for Shkreli, said “We maintain that the monetary and injunctive awards imposed on Mr. Shkreli go well beyond established legal limits.”

Peluso added, “While we do not agree with the panel’s decision today, we appreciate the suggestion at oral argument that there may be appropriate applications to the trial court to modify or clarify portions of its sweeping injunction.”

“We are considering our remaining appellate options,” he added.

Shkreli has two options for further appeals, both of which are likely long shots.

He can ask that his appeal be reheard by the full lineup of judges on the 2nd Circuit court. He also can ask the U.S. Supreme Court to take the case.

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