KV Pharmaceuticals Under Federal Scrutiny for Price Gouging

| About: K-V Pharmaceutical (KVPBQ)

Two senators want the U.S. Federal Trade Commission to investigate the price that KV Pharmaceuticals (KVA) is charging for its brand new Makena med for high-risk pregnancies, given that versions of the same drug have been available from compounding pharmacies for many years at a fraction of the cost. The drugmaker, they charge, is price gouging.

The cost of the treatment went from roughly $10 to $20 to $1,500 after KV received FDA approval earlier this year. And KV has also sent letters to compounding pharmacies warning them about continuing to make the treatment or face possible legal action. A trade group representing compounders pooh-poohed the threat, but patients, doctors and insurers are outraged at the price tag (back story).

Investors, however, believe Makena represents a remarkable turnaround for a drugmaker that entered into a consent decree for making and distributing adulterated and unapproved drugs. A KV unit also pleaded guilty to two felony counts of criminal fraud for failing to report to the FDA that oversized tablets were being made. And the former KV chairman was banned from participating in federal health care programs, ordered to pay a $1 million fine, forfeit $900,000 and serve a 30-day jail sentence (see here).

Against this backdrop, two senators - Minnesota Democrat Amy Klobuchar and Ohio Democrat Sherrod Brown - wrote FTC chair Jon Leibowitz that by charging $1,500 for Makena, which is a weekly injection of progesterone, KV may be engaging in anti-competitive behavior. And they maintain that a KV patient assistance program is insufficient because it does not cover "certain groups" of women.

"KV Pharmaceutical is taking advantage of FDA’s approval of Makena and orphan drug determination to achieve rights as the sole source for this limited use of progesterone, leading to a monopolization of treatments to address preterm labors," they write. "…This price increase will (also) place a heavy burden on state Medicaid programs, which cover a majority of high-risk pregnancies. (We are) extremely concerned that KV Pharmaceutical’s actions will result in diminished access to appropriate health care for women and result in increased preterm births.

In their press release, Klobuchar and Brown used more colorful language: "This is a proven and affordable drug that has been around for over 50 years. It’s critical that we make sure this company isn’t taking advantage of its orphan-drug determination to monopolize the market and engage in price gouging at the expense of pregnant women," Klobuchar says. "At a time when rising prices for prescription drugs are stretching the budgets of middle-class families, we must be vigilant in stopping practices that would limit access to vital medicines" (see the statement and letter here).

"KV created an overnight monopoly for this lifesaving drug – and then proposed raising the price by 14,900 percent," Brown says. "Last week, I called on KV Pharmaceuticals to immediately reconsider their decision, but to this date the company continues to defend this astronomical price increase. Price-gouging is never acceptable, particularly not when it undermines public health and fleeces taxpayers. Families deserve an investigation."

Disclosure: None