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Outrage Over Drug Prices


Pharmaceutical Executive

Pharmaceutical ExecutivePharmaceutical Executive-05-01-2011
Volume 0
Issue 0

Stiff price tags draw scrutiny from Congress and consumers, and raise questions about FDA policies

What were they thinking? is the main response to any mention of KV Pharmaceutical's launch campaign for Makena, a drug to prevent preterm birth for high-risk women. This injectable progesterone has been around for decades, widely available from compounders for a relatively low $10 to $15 a dose. KV jacked that up to $1,500 a shot, causing an uproar that made pharma marketers cringe. It also raised questions about the Food and Drug Administration's orphan drug exclusivity policy, the agency's campaign to encourage registration of unapproved drugs, and the value of pharma patient assistance programs.

Jill Wechsler

The nation's focus on healthcare spending, including the squeeze on state Medicaid programs and proposals to radically overhaul Medicare (see sidebar), has cast a harsh light on pharma spending. Payers and providers complain about price hikes on AIDS drugs, as seen in a request from California officials for Gilead Sciences to cut the price of Atripla, because $22,000 a year per patient is taking a toll on the state's AIDS drug assistance program.

Slashing Healthcare Costs

High prices for new, important therapies raise concerns about access and impact on public and private health plans. Bristol-Myers Squibb (BMS) won plaudits for its new melanoma treatment, Yervoy (ipilimumab), which FDA approved in March. But patients and payers were surprised by BMS' plan to charge $120,000 for a complete course of treatment—six times more than expected. Dendreon's $90,000 price tag for its therapeutic prostate cancer vaccine Provenge prompted a review of the costs and benefits for Medicare patients by the Centers for Medicare and Medicaid Services (CMS). The agency decided that Medicare will pay for the therapy for some patients, but health advocates admit to qualms about Medicare assuming such a large cost for relatively minor benefit.

Uproar over Makena

These pricing controversies paled in comparison to the KV decision to ratchet up the price for Makena (hydroxyprogesterone caproate) to $30,000 for a full course of treatment, compared to a few hundred dollars from pharmacy compounders.

KV was free to set a high price on Makena, commonly known as 17P, because it gained exclusive rights to market the therapy under FDA's campaign to encourage manufacturers to test and seek approval of "grandfathered" products that were available prior to the 1965 amendments and remained on the market as unapproved drugs. Hologic, a Massachusetts firm specializing in drugs and diagnostics related to women's health, filed a new drug application for 17P several years ago and finally won FDA approval in February. As planned, Hologic sold the drug to KV for about $200 million, a price enhanced by Makena's orphan drug designation, which carries seven years' exclusivity.

FDA's unapproved drugs initiative has generated precipitous price hikes in other cases. A widely used gout treatment called colchicine that cost about 10 cents a pill saw its price rise to $5 a dose after URL Pharma gained approval for its Colcrys version.

Up until KV announced its new price, it had strong support from the medical and healthcare community for developing a standardized, quality manufacturing process that was expected to enhance patient access to an effective and safe therapy. The drug is projected to prevent at least 10,000 preterm births a year in the United States and directly save the healthcare system $334 million annually, according to Aetna medical officer Joanne Armstrong, writing in the New England Journal of Medicine (March 17). But, Armstrong explained, providing preventive care to some 139,000 women at risk for premature delivery would cost $42 million with a progesterone compound that cost about $300 for a 20-week treatment; with Makena, at $29,000 for treatments, the bill soars to $4 billion.

Hospitals and physicians cried foul. Insurers and payers were livid. Senators Sherrod Brown (D-Ohio) and Amy Klobuchar (D-Minn.) called for CMS and the Federal Trade Commission to investigate KV's pricing action. The March of Dimes, the American College of Obstetrics and Gynecology and the American Academy of Pediatrics, which had supported 17P registration, demanded that the company reduce the price.

No Enforcement

FDA responded to the brouhaha with a remarkable statement: It would permit compounders to continue to make the synthetic progestin product for needy patients, overriding its usual practice of closing down the old producers of an unapproved drug once a manufacturer won market approval. FDA asserted that KV "is not correct" in warning pharmacists that the agency would crack down on 17P compounders. A carefully worded release from FDA says that it does not intend to take such enforcement action in order "to support access to this important drug, at this time and under this unique situation." The surprising move clearly reflected public concern over the product's price, a topic that FDA usually is very careful to avoid.

The situation also generated calls to revise the orphan drug law to prevent a sponsor from gaining seven years' exclusivity when it makes only a minimal investment in product development. Much of the research documenting Makena's efficacy was carried out by the National Institutes of Health, which provided data in 2003 from a clinical trial indicating benefit for preterm labor, which encouraged obstetricians to prescribe the drug more widely. KV's investment is the $200 million it's paying Hologic for marketing rights and several million more dollars to conduct further studies for FDA on neonatal mortality and morbidity and long-term effects on infant development.

KV tried to soften the price blow by touting a patient assistance program (PAP) that would lower the cost for everyone with incomes under $100,000 and for uninsured patients earning less than $60,000. But $30,000 still was a lot for even wealthy households to pay for treatment. And the complex process for qualifying for PAP subsidies could delay care.

One explanation for KV's marketing strategy is that company management desperately sought new revenues to revive the nearly bankrupt firm, which FDA had shut down for failing to comply with manufacturing and quality standards. Two years ago the firm entered into a consent decree with FDA for making and distributing adulterated and unapproved drugs. There were massive product recalls, criminal fraud charges and hefty fines. In March, a judge sentenced former KV CEO Marc Hermelin to jail and ordered $2 million in fines to resolve felony charges stemming from failure to comply with FDA regulations.

KV shares dropped after FDA told pharmacists they could continue to compound the product. The company cut its price in half—to $690 a dose—and proposed extra rebates to state Medicaid agencies. It touted the benefits of its approved product and its considerable investment in research and product distribution, but by then the damage had been done.

In the end, Makena may lose sales to a progesterone vaginal gel also found to prevent premature delivery. Recent clinical trial data indicates that Prochieve, developed by Columbia Laboratories and marketed by Watson Pharmaceuticals in the US, may help women with short cervixes avoid preterm delivery. The relatively inexpensive product is approved by FDA for women undergoing certain fertility treatments, and now Watson will seek FDA approval of this broader indication. Hopefully that won't bring a huge increase in price for another beneficial product.

Jill Wechsler is Pharmaceutical Executive's Washington correspondent. She can be reached at jwechsler@advanstar.com

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