KV's pricing decision on its hormone therapy, Makena, has done it now. Most of you are undoubtedly aware that the company successfully introduced an FDA approved version of the drug earlier this month under the Orphan Drug Act. With its FDA approval and seven years market exclusivity provided by the act, KV promptly raised the list price to $1500 per dose from the prevailing rate of $20-30 that was being delivered from in-house compounding pharmacies. The next sound you could hear was the hornet's buzzing!
Backlash builds over KV's 'outlandish' price for prenatal drug.
KV now has members of the US Senate, the FTC, the March of Dimes, the NEJM, the American College of Obstetricians and Gynecologists (ACOG), and the American Academy of Pediatrics in hot pursuit and calling for them to roll back their "outlandish" price. The FTC, at the Senate's request, will investigate whether the company is engaging in "potential anticompetitive conduct". Most of the above groups have contacted KV directly to lobby it to reduce its price - even its former allies, like the March of Dimes, has expressed shock and outrage at the pricing decision.
For its part, KV seems to have figured out that it made a serious error in judgment but may not have figured out what to do about it. It does seem to know that it will be unlikely to get past third party payers at this point and all the other anti-constituencies that it has united. KV issued a statement in its latest 10Q filing with the SEC acknowledging the risk it now faces with its pricing. It noted the following issues it needs to deal with for its pricing of Makena:
- Ability to maintain certain net pricing
- Degree of success in obtaining 3rd party reimbursement - including government, privae health insurers, HMOs, insurance companies, and Medicaid
- Convincing medical practitioners to prescribe
- Degree to which compounding pharmacies continue to produce unlicensed alternatives
"The success of the Company is largely dependent upon these efforts and appropriately responding to both the media and governmental concerns regarding the pricing of Makena."
As noted by several commentators, the whole circumstance appears to have been created by KV receiving Orphan status and exclusivity for a product it did not discover, didn't fund clinical trial work on, and don't even manufacture. Then it MADE an egregious pricing decision for which it is deservedly being criticized. However, one must question why Orphan status was even a possibility on a drug that had been around for 50 years, was previously shown to work in this application. KV added some benefit in producing it under GMPs but certainly did NOT create any clinical value to the patient or provider along the lines of a $20 to $1500 per dose increase. That's just plain greedy.
This type of action I hope will be considered by the Congress in lookng at the Orphan Drug Act. The Act has been good generally but is clearly intended as a carrot for companies to produce novel treatments for diseases/markets that would otherwise be unattractive for their revenues -- unless conferred with exclusivity. However, it was not intended to allow a company to take an old treatment - gain approval - and then exploit a pricing position under a regulatory monopoly. With the law written as it is, there is nothing to prevent another company from doing the same in the future. It wouldn't surprise me if someone was working on new (old) projects right now.
Posted by Bruce Lehr March 26th 2011.
