The News Herald (Willoughby, OH)
Company accused of capitalizing on drug crisis
The opioid-reversal medicine naloxone is an important tool in combating the epidemic ravishing the U.S., but a new report alleges that pharmaceutical company kaléo, Inc. rocketed prices to capitalize on the crisis.
The report comes from the Rob Portman-chaired Senate Permanent Subcommittee on Investigations. According to the report, kaléo exploited the epidemic by “increasing the price of its naloxone drug EVZIO by more than 600 percent (from an initial price
of $575 per unit to $3,750 and then $4,100 eleven months later), resulting in more than $142 million in charges to taxpayers in just the last four years.”
“Naloxone is a critically important overdose reversal drug that our first responders have used to save tens of thousands of lives,” said Portman, R-Ohio. “The fact that one company dramatically raised the price of its naloxone drug and cost taxpayers tens of millions of dollars in increased drug costs, all during a national opioid crisis no less, is simply outrageous.”
EVZIO is an auto-injector used to treat a person overdosing. It uses a recorded audio message to guide a person through the injection process. The product launched in July 2014, a few months after receiving FDA approval.
The product first launched with a wholesale acquisition cost of $575. With sluggish sales at its initial price point, the subcommittee investigation states that the company implemented a new distribution model proposed by consultant Todd Smith that increased the price by more than 600 percent by 2016.
Per the report, as part of the distribution model, kaléo’s sales force focused on ensuring doctor’s offices signed necessary paperwork indicating that EVZIO was medically necessary. This ensured the medicine was covered by government programs like Medicare and Medicaid.
Before the price increase, industry experts recommended pricing EVZIO between $250-$300. Those experts told the company it would “own the market” at that price. One of those experts went on to work with Adapt to price Narcan at $125, which the report stated has “cornered the market” at that price.
EVZIO costs roughly $174 to make, according to the report. That includes $52 for manufacturing, $29 in overhead and $93 in “obsolescence.”
The investigation found that kaléo’s new distribution
“The fact that one company dramatically raised the price of its naloxone drug and cost taxpayers tens of millions of dollars in increased drug costs, all during a national opioid crisis no less, is simply outrageous.” — U.S. Sen. Rob Portman, R-Ohio
model worked. EVZIO fill rates increased from 39 percent to 81 percent.
“While kaléo said its new model focused on commercially-covered patients, the majority of its initial revenues were from Medicare and Medicaid, and the resulting cost to taxpayers, to date, has been $142 million despite the fact that much less costly alternatives are available,” the reported states.
The company paid Smith and a partner at his Underhill consulting firm more than $10.2 million for about two years of work. That rate was based on revenue generated by their distribution model, according to the investigation. Smith had previously installed his distribution model at Horizon and Novum pharmaceutical companies, where he drastically raised drug prices.
In response to the Senate report, kaléo stated it believes there are “two critical facts to the EVZIO story.”
“First, we have received voluntary reports from recipients of donated product that EVZIO has saved more than 5,500 lives since we launched the product in 2014,” the statement read. Second, we have never turned an annual profit on the sale of EVZIO. Patients, not profits, have driven our actions.”
The Senate’s report recommends that the Centers for Medicare & Medicaid Services review its policies governing physician use of medical necessity formulary exceptions for Medicare Part D to “prevent companies from inappropriately influencing prescribing.” It also recommends Congress require MCS to improve transparency regarding the total amount spent for drugs purchased by government healthcare programs.