The cost of preventing preterm labor with 17 alpha-hydroxy progesterone caproate, a very cheap compounded progestin, is about to skyrocket, according to an editorial in this week’s NEJM.
Why? Because this cheap, generic, compounded drug, proven to prevent preterm birth by well-done research funded by the federal government, is now available in an identical but FDA-approved patented formulation called Makena.
In a move that is pure and shameless profiteering, K-V pharmaceuticals has decided that FDA-approval of Makena means they get to charge $29,000 for a treatment that until now cost at most $300 per pregnancy.
The advantages of an FDA-approved formulation are obvious – consistency of product, reassurance of safe compounding practices and widespread availability. But at this cost?
Aetna takes on K-V
The NEJM editorial highlighting the problem with Makena’s cost was written by Joanne Armstrong, MD, a physician with the Women’s Health Division of AETNA, who makes well-reasoned case for FDA intervention on the price of Makena.
Rather than representing a good investment of increasingly scarce health care resources, Makena will force patients, physicians, and those responsible for financing care to make hard choices. K-V Pharmaceutical has announced a copayment-assistance program, but no program providing short-term financial assistance to some patients will mitigate the harm that this new cost will cause to publicly funded programs, including Medicaid, and the women who rely on them. Nor will it mitigate the cost to employers and individuals who purchase insurance coverage and therefore directly bear all increases in health care costs. This tremendous cost increase and the likely decrease in access to an effective medicine are sizable unintended consequences of the FDA approval of 17OHP. They demand reconsideration and corrective action.
It’s a Big Insurer vs Big Pharma smackdown.
Kudos to Armstrong and Aetna for publicly taking on Big Pharma. This is one case where the interests of the insurer are clearly aligned with that of women and their families.
I for one feel like David sitting watching two Goliaths fight it out.
And this post is just me joining in the battle with my little slingshot…
It makes me so damn mad. Don’t get me started. Do we as a nation care about health care costs and well being of babies or not??? I believe we are safe using our compounding pharmacy as long as the carrier is different… ie, use sesame oil, whatever is safe for IM, do not follow the patent and all is well.
Let’s start with a good throat clearing, shall we? Altogether now…(sounds of a good clear should be imagined and inserted here…)
Let’s start off with my opinion on opportunistic “me too” products like this one. They are hacky, non-innovative, opportunistic products that come from horribly desperate companies. Looking at KV’s selling off of their debt campaign and restructuring, it is likely that they are in the desperate camp. This is a very small company with horrible financials. Not a Big Pharma company here at all. Their focus is on specialty, differentiated innovative products or generics.
However, with that said, this is an orphan drug. By definition, this means that less than 200,000 patients need this product each year, and the FDA themselves usually goes looking for parties willing to engage in formally taking on products like MAKENA.
The fact that there was data regarding the product before the approval of the drug should have given the FDA perspective here, and they should have guided the company to not spend the money pursuing the approval of the drug citing no measurable improvement in safety or efficacy compare to the compounding pharmacy product already available. You must, however, realize that would be like vinegar in the mouths of the FDA. Compounding Pharmacy safer? Are you kidding? Why if they can get someone to deliver a safe product in a new formulation would they do that?
However (again), KV has a hell of a lot of hoops to jump through to get through FDA. They are:
Product Development – at least one year and money spent on the development itself
Clinical effort – have to prove at concept and in the clinic, that it performs the way it is supposed to with a statistical significance to prove safety and efficacy. Please note that means you need to find PATIENTS – SUITABLE, WILLING PREGANT PATIENTS. Keep in mind that this is an orphan drug, which, by definition, have very few people who need the treatment.
Then you have to get the manufacturing “validated”, put it on a shelf for at least three months.
Then you get to file for the product. Now the FDA already asked them to do this, so you would think that this would be speedier, but you aren’t getting approved in less than 9 months ever. 9 months is a very fast review, and means that the clinical data, the manufacturing data, and the stability data are all perfect, and perfectly defined in the application.
Then you have to manufacture in advance of the launch, carry inventory, get it out to all the hospitals and pharmacies, and educate the community that a new product is coming so that once the file approval comes, you can sell.
Now, to have all of the people you need to be in place to produce safe, FDA-approved material, costs a good deal of money. You need to have a Quality to release the material and stamp it safe, you need to have a secure supply chain to make sure that the patients get the product, you need to make sure that you have a medical staff to monitor the drug in Phase 4, you need to have lawyers in place to make sure that your liabilities are in check. You need to make sure that you can sell it with a trained sales force. You need to make sure it is patented so that others won’t just come copy it and attach to your data. You need to make sure that you are paying your bills so that you can support the patients. You need to market so that the patients and caregivers know you are there.
These are the accountabilities required by the FDA to get a product to market and cost them millions to get there. Does that factor in at all with anyone? It’s people intensive, time intensive, money intensive. Companies need to make a profit to remain in business, and to invest in the next product. If you want less safe, and you can get that with the compounding pharmacy in this particular case, then go that way. If you want the assurances, they don’t come for free. You have to pay. People are not owed safety and security for free in this country. Safety and efficacy ARE required, but if you want it for nothing move to China where the government provides everything. But remember that your government ASKED for this, and REQUIRED that KV, a VERY SMALL pharma company (by NO means big pharma) leverage themselves for a small population of patients. Why should they not get paid back?
If you want to compare compounding pharmacy prices to an FDA filed and approved product, you are clearly not aware of what it costs to get good medicines to the patients. You don’t know what you get from these compounding pharmacies, and it seems that I recall your vehement concern over Suzanne Somers promoting compounding pharmacies in a similar (albeit not equal) light.
If this company only gets 1,000 patients per year, that means that they will only earn $29 million on this product. They probably spent at least $5 million to get the product to market, and have overheads that chew into the numbers as well. Are they profiting at $29,000 per treatment? Of course they are – probably handsomely in percentage terms, but not in sheer numbers. In fact, they are not cash-flow positive as a company. So, if you want to have an FDA approved drug, the revenues have to go up to pay the bills. That means that the patient who wants to know that the drugs their baby will get in-utero are safe the bill is going to be a lot higher.
So, if you are willing to get your patient compounding pharmacy product to stop a pre-mature delivery, you can save a bit of money for sure. If you want a brand, prepare to pay.
Hugs and kisses.
Schrugglin’
Schruggling –
Informative as always.
A couple of points –
This is not a me too product.
Per an editorial in ACEP – “The drug 17-alpha Hydroxyprogesterone caproate, or 17P, had originally received FDA approval in the 1950s for multiple indications, one of which was preventing preterm labor, but it came off the market in 2000 because of a manufacturing issue.”
The FDA approved Makena based on NIH funded studies published in 2003. V-G had no product development costs. We the taxpayers bore them.
KV paid Hologic 199 million for the rights to market Makena, about half of which appears to be Hologic’s cost, and the rest profit I assume.
http://www.hologic.com/en/news-releases/173-id.234881795.html
At these prices,they make their initial investment back in one year with sales of well under 10,000 women. You KNOW they’re going to advertise the hell out of this baby, and women will be clamoring for it. They’ve got themselves a potential multi billion dollar blockbuster drug at these prices…
Their “handsome profit” is over 97% per dose.
I look forward to the senate investigation on this one. Then we will see the real numbers.
Kisses and hugs
Peggy
[…] is tantamount to hijacking pregnant women. Dr. Peggy Polaneczky (at the Blog That Ate Manhattan) explains that reversing the price hike will depend on Big Insurance fighting off Big Pharma. […]
Ah…thanks for that market update. So if they (KV) spent $200 million to acquire the product, then they have to take on the cost to produce it, distribute it, and sell it. The ROI (return on investment) is not going to be based on the top line of the cash flow sheet, but the bottom line – the profit line.
Please keep in mind that they need a sterile formulation facility for the IM formulation, which is pretty damn expensive, and difficult to maintain.
According to the web site, they are going to offer substantial support to patients in certain income brakets, and the insurers never pay list price. They will never come close to the “list” pricing. They will make good money on it for sure, but they need something to dig themselves out of the debt they have. The PGM for this product will not be 97%, although many pharma products do carry this level of profit in order to offset losses seen on other failed candidates. If the PGM was expected to be that high, and the revenue was expected to be multi-billion, investors would be lined up. So far? not so much.
I am still of the opinion that this is a me too drug since it has been on the market in the past, and there was access to the drug through compounding pharmacies. This is just a polished version of what has already been out there – therefore, “me too”. No real innovation here.
Schrugglin’-
If this is so reasonable from a market perspective, then why is Aetna up in arms? They know the pricing structure and the business model. They know they’re going to cut a better price. They know it’s not the entire OB population, just the ones with preterm labor.
I smell something fishy here, and I suspect its the company’s new management going for the big return on their investment to resurrect this company. A few folks are gonna’ make it big on this one, and the rest of us will foot the bill.
This is why healthcare is so expensive. Everyone has to make a killing – No one just makes a living anymore (except us docs, and even some of us aren’t able to pay the rent.).
XO
P.
Aetna is screaming because they more or less have to pay, and they it’s a hell of a lot of money for what used to be pretty cheap. And they probably don’t have it budgeted. If they don’t fight it and try to deny patients, they have a huge PR problem – trying to deny women medicine to keep the bun in the oven? I bet even they have a heart when it comes to unborn babies…
I don’t claim that you are not entirely off base here by the way. This is a sleazy, non-innovative, sissy kind of way to earn money off of the market. Nothing innovative, but the FDA is an extreme organization, and forces people to think on extreme levels to recoup investments needed to get to market and stay there. The complexities in getting a drug approved are monumental, and if you are the only game in town as defined by the agency, then the patient should expect to get leveraged.
Same holds true for just about every industry out there. Including the medical community.
Jiminy, the insurance companies on the side of women and families! I think the moon just truned blue. This controversy is personal for me since my daugther is taking this medicine to avoid another preterm birth. She makes too much money to qualify for KV’s ‘patient assistance” so it will do her no good at all. She’s scrambling to find enough from the compounders to take her through 35 weeks, and it won’t be easy because all the compounders got cease and desist letters from KV last week. This is just greed. KV would make their investment back soon enough even if they charged a reasonable amount for the product…it would just take longer. All this makes me wonder just who is in whose pocket.
I am a practicing OB/GYN and when I get to the office on Monday one of the first things I am going to do is throw out all my TheraRx samples and inform the drug rep she is no longer welcome. Then I am going to make sure all the OBs at our hospital know about this shameless profiteering at the likely expense of our future neonates and encourage them to do the same. Do I care that KV is a small company? HELL NO! If I was bitten by a rabid dog would I feel better that it was just a Chihuahua? Shruggin’ must work for one of these companies or in the pharmaceutical industry to discount the potential negative effect this could have on our patients.
This means I gotta quit writing Evamist, too. Nuts.
William,
I do work for a drug company, but a generic. I am just articulating the argument. It’s not just big bad pharma at the root of the issue.
I think your approach is a good one – market dynamics that are certainly in your control should be leveraged. But will you avoid this product even if it is needed?
The pharma game is a complicated and expensive one. To get throught he FDA comes with a price. Is KV taking advantage? Absolutely! It will also be a PR mess for them and they already have severe financial trouble, so in my opinion, they are pretty darn foolish. However, they are entitled to make a profit. The FDA and the FTC play a strong role here though. Let’s not forget that in the arrogant face of “safety”, the FDA has shut down consumer price protection and fair competition. It will be up to the FTC now to determine if there is any way to continue to allow compounding pharmacies to continue with the old product.
[…] happen to agree (for once) with my Pharma-friend Schrugglin’s comment on my prior Makena post that the FDA holds a significant portion of the blame here for not steering this product […]
[…] Makena – Big Pharma vs Insurer Smackdown and FDA Does the Right Thing with Makena – I posted twice about this evolving story of what happens when Big Pharma gets its hands on an inexpensive compounded drug to prevent preterm labor. The story ain’t over yet, folks, so stay tuned… […]