Forces lining up against Ther-Rx over Makena pricing

Since my last regular post, there’s been a bit of a pressure on KV Pharmaceutical and their Ther-Rx subsidiary, and their pricing of Makena. Forces from the U.S. Congress and the FDA have weighed in, with supportive statements from the March of Dimes and the American College of Obstetricians and Gynecologists (ACOG).

On Friday, Rep. Henry Waxman (ranking member of the House Committee on Energy and Commerce), sent a letter on behalf of the committee to Ther-Rx president Greg Divis, cosigned by Rep. Frank Pallone, Jr. (ranking member of the Subcommittee on Health) and Rep. Diana DeGette (ranking member of the Subcommittee on Oversight and Investigations) demanding that Ther-Rx provide:

  1. Any fiscal or other contributions made by Ther-Rx to the two National Institutes of Health studies that were used to gain approval for the drug.
  2. Any additional research costs to date incurred by, or studies conducted by TherRx in obtaining FDA approval for Makena, and the expected costs of ongoing research, including all information about clinical trial officially listed with the government, and for any published study information.
  3. Any research or data on similarities between Makena and the compounded versions of 17P or any previously FDA-approved versions of the drug (such as Delalutin).
  4. How much Ther-Rx has spent on promoting Makena, and details on how that money was spent, for past, current and anticipated future expenses.
  5. Ther-Rx’s total cost, and estimated unit costs, to manufacture Makena, and a breakdown of those costs.
  6. Ther-Rx’s expected revenues and profits from sales of Makena.
  7. Ther-Rx’s anticipated revenues and profits from sales of Makena to government programs such as Medicare, Medicaid, and other federal or state health care programs.

This was whipping out the big stick and threatening KV big time. Basically, Waxman is telling KV/Ther-Rx that “you used government studies as the primary means to get approval for your product, and now you’re soaking the American public on the price of the drug, including soaking the same government that funded the studies that you’re using in the first place. How much are you planning to overcharge us as a show of gratitude?”

KV Pharmaceutical released a preliminary response to Waxman and the advocate groups:

KV Pharmaceutical Company Response to Letter from Democratic Leaders.

Ther-Rx Corporation takes very seriously the concerns raised about the list price of Makena™ (hydroxyprogesterone caproate injection) by Members of Congress and other stakeholders. Ther-Rx has received a letter from Members of the Committee on Energy and Commerce and will respond to the letter. Ther-Rx is committed to ensuring that this significant, FDA-approved medication is covered at an affordable cost and available to all women who are prescribed Makena, and looks forward to cooperating with the Members of Congress on these issues.

Ther-Rx Corporation to Address Cost of and Access to MakenaTM with Key Stakeholders

Ther-Rx Corporation has been carefully listening to all stakeholders following the announcement of the list price for Makena™ (hydroxyprogesterone caproate injection). We recognize the concerns that have been raised regarding the list price, patient access, and potential cost to payors of this important orphan drug. The company already has established a Patient Assistance Program with the goal of ensuring that every woman who is prescribed Makena will be able to access and afford it. However, we have heard clearly from various stakeholders that we need to do more because the cost of therapy remains a significant concern.

Ther-Rx is fundamentally committed to the community of women, children and families whom we serve. We are scheduling meetings with key audiences – including payors and national organizations that are committed to the advancement of obstetric care and infant health. We hope to meet with them at the earliest possible dates to discuss and address all of their concerns. We are committed to working closely with all parties to develop and implement plans that will ensure that this important, FDA-approved product will be covered by the payor community and available to all women who are prescribed Makena at an affordable cost. Visit www.makena.com to learn more.

Tuesday, KV met, as scheduled, with the March of Dimes, ACOG, the American Academy of Pediatrics (AAP) and the Society for Maternal & Fetal Medicine (SMFM) to discuss the pricing of Makena and the extent of the patient assistance program. No news came immediately from that meeting.

Wednesday, the U.S. Federal Drug Administration (FDA) released a press announcement that basically cut the feet out from under Ther-Rx:

On February 3, 2011, the U.S. Food and Drug Administration approved the drug Makena (hydroxyprogesterone caproate) for the reduction of the risk of certain preterm births in women who have had at least one prior preterm birth. KV Pharmaceuticals, the drug’s owner, received considerable assistance from the federal government in connection with the development of Makena by relying on research funded by the National Institutes of Health to demonstrate the drug’s effectiveness. It also obtained seven years of exclusivity under the Orphan Drug Act, obtained approval under FDA’s accelerated approval program, and received expedited review.

For many years, a version of the active ingredient of Makena, which is a synthetic progestin, has been available to patients whose physicians requested the drug from a pharmacist who compounded the drug. Generally, FDA has exercised enforcement discretion with respect to most products made through traditional pharmacy compounding. This has included products made from the active ingredient in Makena, hydroxyprogesterone caproate.

Because Makena is a sterile injectable, where there is a risk of contamination, greater assurance of safety is provided by an approved product. However, under certain conditions, a licensed pharmacist may compound a drug product using ingredients that are components of FDA approved drugs if the compounding is for an identified individual patient based on a valid prescription for a compounded product that is necessary for that patient. FDA prioritizes enforcement actions related to compounded drugs using a risk-based approach, giving the highest enforcement priority to pharmacies that compound products that are causing harm or that amount to health fraud.

FDA understands that the manufacturer of Makena, KV Pharmaceuticals, has sent letters to pharmacists indicating that FDA will no longer exercise enforcement discretion with regard to compounded versions of Makena. This is not correct.

In order to support access to this important drug, at this time and under this unique situation, FDA does not intend to take enforcement action against pharmacies that compound hydroxyprogesterone caproate based on a valid prescription for an individually identified patient unless the compounded products are unsafe, of substandard quality, or are not being compounded in accordance with appropriate standards for compounding sterile products. As always, FDA may at any time revisit a decision to exercise enforcement discretion.

In other words, the FDA recognizes that Ther-Rx is overcharging for Makena, has recognized that KV is trying to use the FDA to threaten compounders into stopping production of the generic version of the drug that has been made by them exclusively for years, and is not going to stand for it. The FDA basically told KV that “we’re not your lap dog and stop using us to threaten the compounders.”

The FDA’s announcement was met with immediate support from ACOG and March of Dimes. The statement from March of Dimes went a bit further with their statement, noting that “To date, Ther-Rx Corporation’s handling of the launch of Makena has been unsatisfactory to the March of Dimes and to the families we represent. We’ve asked Ther-Rx in writing and in discussion to substantially lower the price of Makena and to expand coverage for patient financial assistance. We’re waiting for their public statement on this matter, which we expect will occur within the next week.” It’s nice to see them stay on the attack.

Following these actions, Ther-Rx released their own press announcement yesterday, entitled “Ther-Rx Corporation Commits to Take Action Regarding Makena Pricing.” In the press release, Ther-Rx states that they have “invested or committed over a quarter of a billion dollars to-date to bring Makena to market, including more than $50 million in research and clinical trial costs, including those associated with conducting major, multi-year follow-on health studies of Makena involving 1,700 mothers and more than 500 infants.” One point that it doesn’t note is that $199.5 million of that is the amount that Ther-Rx has paid or committed to pay to Hologic for the rights to Makena.

Now, don’t get me wrong. I don’t think that anyone denies KV/Ther-Rx the right to make money on their investment. It’s just that it’s one thing to earn a profit and another to try to extort money from a captive population. A reasonable price of $200, as anticipated by some drug outlook services during Makena’s application process, would probably not be challenged. While still 10 times what it had cost previously, it would have been reasonable for recouping the cost of getting the drug approved and purchased from Hologic. And the ability to have an FDA-approved use of 17P to prevent premature labor would be a tremendous boost to the ability of women throughout the country to receive the drug, since many still have to deal with doctors that will not prescribe 17P for off-label use. It’s just that it’s one thing to make a fair profit, and an entirely different thing to charge an outrageous price for the sole purpose of digging yourself out of a financial hole that you put yourself in through misconduct and trying to use the government to strongarm legitimate small manufacturers out of competition with you, especially when you only had a limited role in getting approval for the drug in the first place.

KV probably started their involvement in Makena (then called Gestiva) with reasonable expectations for profits from the drug. Several months later, when they got into trouble with the FDA, resulting in a two-year shutdown and having to agree to a consent decree, then watched their stock plummet along with their finances, that they decided that they needed to milk Makena for everything that they could.

Now, it’s time for KV/Ther-Rx to get hit with the reality stick.

Let’s do some math. If I understand what I’ve been reading correctly, the average cost of initial health care for a premature baby is estimated at $51,000. (While many cost a tremendous amount more, many babies considered to be premature do cost less.) Spending $30,000 to save $50,000 would seem to be an easy choice for insurers, except for the fact that 17P is reportedly effective in approximately 1 out of 5 cases. That makes it an expense of $150,000 to save $50,000. A price of $200 would give Ther-Rx gross revenues of an estimated $533 million per year (instead of $4 billion), and would cost insurers $15,000 to save $50,000. Those numbers work much better.

In another development, which I’m deciding to believe is not any type of official action on the company’s part, a KV employee posted a comment on the first of my Makena-related posts, trying to discredit me. I originally thought that this was a person in a position of some responsibility in the company, but I’ve since gotten some information from a person knowledgeable in the industry that this person’s position is really just to ensure that documents prepared by others are properly formatted, and then submitting those documents to the federal authorities using an automated tool. While his position would put him in a position of responsibility for ensuring that KV’s submissions were done properly, there is no product, testing, or other technical responsibility for the products at all. And since he’s apparently an IT guy, I’m surprised that he didn’t do a better job of covering his tracks. I find it hard to believe that KV Pharmaceutical does not have an official policy about their staff posting on social media about the company from the company’s computers. I think the guy may have been upset at everybody beating up on the company and felt that he had to lash out against me, and may have been unsure about company policy.

Moving forward, I’m looking forward to seeing Ther-Rx’s response to Rep. Waxman’s letter, and to the March of Dimes/ACOG/AAP/SMFM meeting. It’s starting to look like this is becoming a one-sided battle, but it’s not over yet.

What do you think? Has enough been done by others and it’s time to wait for KV/Ther-Rx to respond? Should more pressure be put on in the interim? Is there a sound justification other than “we need to dig ourselves out of debt” for KV/Ther-Rx to be charging $1,500 per dose? I’m looking to gain knowledge and understanding. Please share your thoughts in the comments.

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3 Responses to Forces lining up against Ther-Rx over Makena pricing

  1. John Friedman says:

    The Washington Post has been reporting on this controversy and the role that discussions on the Internet have had in shining a light on what has been happening. This is why discussions like this one are critical – they make a difference!

    http://www.washingtonpost.com/national/fda-to-allow-cheaper-preterm-baby-drug/2011/03/30/AFtDrK3B_story.html

    Profitability is not a bad thing. Profiteering is. Money is not evil. It is the love of money above all else that is.

  2. Kate RN says:

    I am wondering how Ther-RX stock is doing now that compounded medications are being questioned regarding their safety.-

  3. Mark says:

    Ther-Rx’s parent company, K-V Pharmaceutical, filed for bankruptcy on August 4, after the stock price dropped precipitously following its spike in early February. It’s stock is now trading at about 1.5% of what it was at its peak. I don’t know that it was due to questions about the safety of compounded medications, though. I think it had more to do with how much K-V had built up expectations of the windfall to come from Makena, how the market reacted once the amount of the markup was, the fact that Ther-Rx had to implement a financial assistance program to make sure that everyone that needed Makena could get it, and probably all of the major insurers negotiating big price cuts due to the amount of overcharging.

    When the stock price was run up based on a supposed windfall and then the company got smacked about the head with reality, shareholders didn’t have much patience for getting screwed over. Remember, the company was already in big financial trouble, and Makena was supposed to be the magic bullet that saved the company. Once the magic bullet failed, the company went right back down the tubes.

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