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The situation with KV Pharmaceuticals (KVA) and the premature birth therapy Makena has been all over the news in the last couple of days. Briefly, Makena is an injectable progesterone formulation, given to women at risk of delivering prematurely. It went off the market in the early 1990s because of side effect concerns and worries about overall efficacy, but since 2003 it's made an off-label comeback, thanks largely to a study at Wake Forest. This seemed to tip the risk/benefit ratio over to the favorable side.

Comes now the FDA and the provisions for orphan drugs. There is an official program offering market exclusivity to companies that are willing to take up such non-approved therapies and give them the full clinical and regulatory treatment. The idea, which is well-intentioned (as so many ideas are), was to bring these things in from the cold and give them more medical, scientific, and legal standing as things that had been through the whole review process. And that's what KV did.

But this system says nothing about what the price of the drug will be during the years of exclusivity, in the same way that the approval process for new drugs says nothing about what their price will be when they come to market.

KV has decided that the price will now be about $1,500 per patient, as opposed to about $15 before during the off-label regime. The reaction has been exactly what one would expect, and why not? Here, then are some thoughts:

Unfortunately, this should not have come as a surprise. It seems to have, though. The news stories are full of quotes from patients, doctors, and insurance companies saying that they never saw this coming. Look, though, at what happened recently with colchicine. Same situation. Same price jump. Same outrage, understandably. As long as these same incentives exist, any no-name generic company that comes along to adopt an old therapy and bring it into the modern regulatory regime can be assumed to be planning to run the price up to what it thinks the market will bear. That's why it's going to the trouble.

KV seems to have guessed correctly about the price. You wouldn't think so, with a hundred-fold increase. And the news stories, as I say, are full of (understandably) angry quotes from people at the insurance companies who will now be asked to pay. But (as that NPR link in the first paragraph says), Aetna (NYSE:AET), outraged or not, is going to pony up. It's going to cost it $20-30 million per year, most of which is going to go directly to KV's bottom line ... but it's going to pay. And the other big health insurance providers seem to be doing the same.

Meanwhile, the company has announced a program to provide low-cost treatment to people without insurance. From what I can see, it looks like basically everyone who had access to the drug before will have it now, the main difference being that the payers with deeper pockets will now be getting hammered on by KV. This is not a nice way to run a business, and it's not something I would sleep well on after having done myself. But there it is.

How much is regulatory approval worth, anyway? That seems to be what we're really arguing about. After all, patients are getting the same drug, in the same formulation, dosed the same way as before. But now it's FDA-Approved.

For new substances, I think regulatory approval is worth quite a bit. There are all kinds of things that can go wrong. But how about drugs that have been dosed in humans for years? And already run through the equivalent of Phase II trials by other people? The main thing that's being added is some confirmation that yes, the dose that everyone's been using is about right, and yes, the effects that are being seen are, in fact, real. And that's not worthless, not at all -- but how much is it worth, really? The agency itself seems to place a pretty high value on it; seven years of market exclusivity, to be exact, and we can see by example just what that goes for on the market.

This does the drug industry no good, either. We have a bad enough reputation as it is, wouldn't you think? What's irritating to someone like me, who works at a "find a new drug" type of company, is that these no-name generic outfits (KV in this case, URL Pharma for colchicine) are doing pretty much what critics of the industry think that we all do, all the time. That is, walk up to situations where other people have done a lot of the work, a good amount of it with public/NIH money, and step right in and profit.

Now it's true that these companies have to basically run Phase II/Phase III trials to take the data to the FDA, and that's a significant amount of money. But their risks in doing so have been watered down immensely by the history of these drugs in the medical community. When a research company closes its eyes, holds its breath, and jumps into the clinic with a new molecule, that's one thing. And that's where those 90% failure rates come from. But the failure rate of drugs that have been used for years in human patients already, and already studied under clinical conditions, is not anything like 90%. Is it zero per cent? Has anyone failed yet, taking one of these old medications back to the FDA? Even once?

The company picked its target carefully. I will say this: KV's trials have presumably clarified the question of whether progesterone therapy actually does help. You'd think that the 2003 study would have answered that, and as it turned out, it had. A review of the field in 2006 concluded that it was a worthwhile therapy, from a cost/benefit standpoint, as did another review in 2007. (Mind you, that wasn't at any $1,500 a throw, was it?) But a Cochrane review from last year concluded that there still wasn't enough evidence to recommend the whole idea. And progesterone therapy doesn't seem to help with twin or triplet pregnancies or with some other gestational problems. No, the 2003 study seemed fairly strong, and has the greatest relevance to public health, so that's what the company went for. From one viewing angle, the system worked.

My take, though, is that as long as the regulatory environment is set to value FDA's stamp of approval for old drugs this highly, then people will continue to take advantage of it. You subsidize something, you're going to get it.

Personally, I don't think that the balance is right, but I'm open to suggestion about what to do about it. A shorter period of market exclusivity would just mean, I think, that the prices go up even higher once a drug gets re-approved. Just throwing up our hands and letting all that old stuff stand is a possibility, but there may well still be some of these things that aren't as effective as we think, or aren't being dosed right, and we have to decide what the cost is of letting those situations stand.

Disclosure: None

Source: KV Pharmaceuticals Gets Away With Pricing on Makena