Preemie birth preventive spikes from $10 to $1,500

[seekerz]

I’ve ready that they bought it for approximately $200 million. Still doesn’t excuse a 15,000% markup. KV told the SEC that it expects to make more than double that amount in sales of Makena within 2 years.

For a drug that can prevent spontaneous abortion, this is a terrible development. I wonder what the insurance companies are going to say about that…maybe they’ll just hike premiums to cover the costs. It would be great to see doctors continue to use the compounded versions but there seems little chance of that happening with the malpractice climate being what it is. Perhaps some of the costs could have to do with possible lawsuits (which can be enormous when dealing with the mother-baby market) but 15,000 % seems like way over the top.

Capping damages could go a long way toward decreasing drug costs but the way I see it, if caps are to be placed on damages that can be obtained from doctors/hospitals/drug companies then caps should also exist on the costs they can charge for products and services. I wouldn’t be too surprised to see drug costs remain exactly the same even if caps were placed on damages. All part of business some would argue.

 

[Suudy]

Which shatters the excuse that they are right in price gouging to recoup development costs. They didn’t develop anything.

You still don’t seem to be getting the point. Say Hologenic spent $200M in development, then sold it for $200M, KV is paying it instead of Hologenic. So yeah, KV is recouping the cost of Hologenic’s development cost. Somebody is paying for it.

I think there should be profit-margin caps on essential goods like food and medicine; yes.

Of course. Yet we’ve already seem what price caps do to the market: shortages and a black market. Price caps discourage innovation, and make it impossible for companies to invest in future development.

 

[EmperorNapoleon]

Of course. Yet we’ve already seem what price caps do to the market: shortages and a black market.

The only two reasons why that would occur is if the price cap was set below the cost of production or if the cost of the product is too high for the average person to afford.

Price caps discourage innovation, and make it impossible for companies to invest in future development.

No they dont. Price caps dont mean no profits.

 

[Suudy]

The only two reasons why that would occur is if the price cap was set below the cost of production or if the cost of the product is too high for the average person to afford.

Not true. There is also the fact that competing products are in development. Time to market, profit margin, and market share are three huge factors. With Makena out, they chose their price point so that they could recoup their costs and realize additional profit before a competing product also comes to market.

Business people aren’t dummies. They have a pretty good idea of what the competition is working on. And if a competitor digs into their market share, that profit margin has to be even higher.

No they dont. Price caps dont mean no profits.

They do if it ignores competition, market share, and future returns. And no price control structure has ever, or even been proposed, to control prices with these in mind.

 

[EmperorNapoleon]

Not true…

Do you have any specific examples?

Business people aren’t dummies. They have a pretty good idea of what the competition is working on. And if a competitor digs into their market share, that profit margin has to be even higher…They do if it ignores competition, market share, and future returns. And no price control structure has ever, or even been proposed, to control prices with these in mind

Makena aka Delalutin aka 17OHPC costs less than $10 per dose to produce. No company needs a profit margin of over 15,000% the cost of production to be successful.

 

[Suudy]

Do you have any specific examples?

Sure. Look at the pricing of electronics, especially newly released technology. Why were Blu-Ray players $500 when they first came out? Because companies dumped millions of dollars into development and knew that the competition was going to be coming up and digging into their market share. They needed to recoup their development costs, and earn sufficient profit to fund new projects (including redesign efforts to reduce unit costs). This is true of any new product on the market.

I can also speak to my company’s pricing. As I told you earlier in the thread our company sets its margins based upon recouping development costs within 2 years. The actual price point (and hence the margin) is derived from our expected sales (which is derived from expected market share), cost of production, and the amortized cost of development. Say it took us $500,000 to develop a product. And we expect to sell 1,000 over 2 years. And our per unit build price is $200 in materials and labor. To get $500,000 in 2 years and 10,000 units, we need to sell each unit for at least $550 dollars. Now, in reality our per unit build price is never static. We also know our competition is either developing or plan to develop a competing product. So we usually make very conservative sales estimates to try and recoup that cost before our competitors can compete. That is why we have the (typical) 2 year limit on recouping costs.

Capping margins makes it impossible for a company to recoup their costs at a fast enough rate to justify the development. Now, you say that KV announced the purchase price of $200M and that they told the SEC they expect to make double that. But what you didn’t say was what KV expected their per unit cost to be or what the expected market share to be. Say they did sell it at $1,500 per dose. Over 2 years and $400M, it sounds like they expect to sell only 133,000 doses per year. It doesn’t take much of a dip into their market share to drastically reduce that number. Say they only sold 100,000 does a year. That’s a reduction of $100M. And that’s only losing 25% of their market.

Makena aka Delalutin aka 17OHPC costs less than $10 per dose to produce.

You don’t know this. That what compounding versions have cost, which is a different mode of delivery. And, this amount ignores the recouping of the $200M purchase price.

Say you were generous and granted KV a 100% margin. Suppose their per unit cost is only $10 as you say. At that price, and selling 133,000 doses a year at $20 per dose, that is only $2.6M per year. To recoup their purchase price, they’d have to sell 133,000 does each year for 75 years. Do you really think Makena will be the only product on the market to treat this specific condition for the next 75 years? The product wouldn’t realize any profit for 75 years. Where’s the incentive?

Edit: Let’s also make this clear. Makena in no way eliminates 17OHPC alternatives from the market. Those alternate formulations are still available and are still cheaper. Let’s not pretend that KV is suddenly screwing over women that are in need of treatment. They offer an alternative that is one per week (at $1500) as opposed to once per day (at approximately $10).

No company needs a profit margin of over 15,000% the cost of production to be successful.

Your 15,000% number assumes you know the price of production. And you don’t. You don’t know their margin. If amortizing $200M over 2 years, that’s a cost of $273,000 per day. So, the price basis for determining their margin is much more than $10.

 

[Orogeny]

This is an amazing story. My wife almost fell out of her chair yesterday morning when she read about this in the paper. She is an RN in an Ob/Gyn office and they regularly have patients that need this treatment in order to keep their babies. While it is sweet of the company to give the drug either free or cheaply to women who have no insurance or whose insurance won’t cover the treatments, don’t doubt for a second that insurance companies do cover it will have to pay the full $1,500 per treatment. That includes Medicare/Medicaid. That means that WE ALL will pay for this ridiculous money grab. Please note that the legal department of the drug company has already sent out notices to compounding pharmacies to cease and desist making the drug.

I want to know where the outrage is. This administration has sold us a health care program in part to control costs and here they are giving exclusive monopoly rights to a drug company for a formulation that has been around for years. This is NOTHING but a blatant money grab.

Both the company and the administration are to blame. No amount of rhetoric excuses this.

Peace

Tim

 

[Orogeny]

Edit: Let’s also make this clear. Makena in no way eliminates 17OHPC alternatives from the market. Those alternate formulations are still available and are still cheaper. Let’s not pretend that KV is suddenly screwing over women that are in need of treatment. They offer an alternative that is one per week (at $1500) as opposed to once per day (at approximately $10).

Nope. The $10 covered a once-a-week treatment. The doctor my wife works for has been using the treatment for years.

Your 15,000% number assumes you know the price of production. And you don’t. You don’t know their margin. If amortizing $200M over 2 years, that’s a cost of $273,000 per day. So, the price basis for determining their margin is much more than $10.

The price of production in a small pharmacy that doesn’t have the benefits of volume production makes it for less than $10/dose. That should give us a pretty good idea what the price of production is.

Peace

Tim

 

[Suudy]

Please note that the legal department of the drug company has already sent out notices to compounding pharmacies to cease and desist making the drug.

As I understood it, only insofar as it violates KV’s specific mode of delivery. When I was last discussing this, I found an article that made this claim, but now I can’t find it. Perhaps that article was wrong.

Now the question is whether pre-existing solutions were prior art. If so, I think the FDA made a grave mistake in granting exclusive rights to a company for an existing formulation. However, I think it wrong to blame KV for gouging the public since they have at least a $200M cost to recoup, production costs which include higher quality and probably some capital costs, and insurance and indemnification costs. As a sole supplier, they will be the primary target of lawsuits with regard to quality, drug interactions, etc.

I want to know where the outrage is. This administration has sold us a health care program in part to control costs and here they are giving exclusive monopoly rights to a drug company for a formulation that has been around for years. This is NOTHING but a blatant money grab.

I don’t think so. KV spent $200M for this product. They have costs associated with that. Now, if they spent $200M for an existing formulation and mode of delivery, I think it a stupid business decision since there could be an argument for prior art. I think it problematic that they were granted exclusive production rights to an existing product. But as I understand it, Hologic (not Hologenic as I’ve been typing before) developed a new mode of delivery. But in doing more research, it appears that Makena (as Gestiva previously) has been seeking FDA approval since at least 2006.

Now, I have worked for a medical device company, and I know how long it takes to get FDA approval, even for modifications to an existing product that was previously approved. So, if KV paid $200M to Hologic, and spent millions more in working toward FDA approval, I’m not surprised that there is need of raising the price to recoup the costs.

Nope. The $10 covered a once-a-week treatment. The doctor my wife works for has been using the treatment for years.The price of production in a small pharmacy that doesn’t have the benefits of volume production makes it for less than $10/dose. That should give us a pretty good idea what the price of production is.

Not according to this article:

healthland.time.com/2011/03/10/can-patients-get-around-the-exorbitant-new-cost-of-a-pregnancy-drug/print/

From the article:Already, many patients and doctors may be wondering whether they can use other types of progesterone to lower the risk of premature birth, without paying for Makena. Indeed several types are already on the market. Almost all women who have been through in-vitro fertilization (IVF) have taken some form of the hormone, either as a vaginal suppository or intramuscular injections, which are one of the most uncomfortable parts of the procedure. Those drugs will still be available at their current prices, but they must be used daily, rather than once a week like Makena.
There will still be $10 versions. Makena doesn’t impact existing formulations.

 

[Orogeny]

As I understood it, only insofar as it violates KV’s specific mode of delivery. When I was last discussing this, I found an article that made this claim, but now I can’t find it. Perhaps that article was wrong.

The drug rep for KV has an appointment with my wife’s office on Wednesday. I’m real curious to hear what she has to say. It would appear that the mode of delivery is the same since KV sent out the cease and desist letters. According to the letter, KV claims that the product made by compounding pharmacies is the same and that, since the FDA gave them a monopoly, the pharmacies must stop providing the drug. Here is a copy of the letter.

scribd.com/full/50467907?access_key=key-2lrhb9qzcprg07x7z460

Note that KV’s justification, in part, is that there is now a commercially available compound whereas before there was none.

Now the question is whether pre-existing solutions were prior art. If so, I think the FDA made a grave mistake in granting exclusive rights to a company for an existing formulation.

Again, since they sent out the letters, it would appear that it is prior art. My sense is that the FDA screwed up royally. Read the letter and see if you think that KV really thinks that the drug is prior art.

However, I think it wrong to blame KV for gouging the public since they have at least a $200M cost to recoup, production costs which include higher quality and probably some capital costs, and insurance and indemnification costs. As a sole supplier, they will be the primary target of lawsuits with regard to quality, drug interactions, etc.

It is right to blame them. Them and the FDA. This is outrageous.

I don’t think so. KV spent $200M for this product. They have costs associated with that. Now, if they spent $200M for an existing formulation and mode of delivery, I think it a stupid business decision since there could be an argument for prior art.

Read the letter.

I think it problematic that they were granted exclusive production rights to an existing product.

Read the letter.

Not according to this article:

healthland.time.com/2011/03/10/can-patients-get-around-the-exorbitant-new-cost-of-a-pregnancy-drug/print/

From the article:
Already, many patients and doctors may be wondering whether they can use other types of progesterone to lower the risk of premature birth, without paying for Makena. Indeed several types are already on the market. Almost all women who have been through in-vitro fertilization (IVF) have taken some form of the hormone, either as a vaginal suppository or intramuscular injections, which are one of the most uncomfortable parts of the procedure. Those drugs will still be available at their current prices, but they must be used daily, rather than once a week like Makena.
There will still be $10 versions. Makena doesn’t impact existing formulations.

Those are different drugs and not the $10 versions that were available until now. The $10/dose/week is what KV has sent the letters about. The doctor my wife works for has been prescribing this treatment for 3-4 years. It is (was) a weekly injection. At $10/injection.

Peace

Tim

 

[Orogeny]

However, I think it wrong to blame KV for gouging the public since they have at least a $200M cost to recoup, production costs which include higher quality and probably some capital costs, and insurance and indemnification costs. As a sole supplier, they will be the primary target of lawsuits with regard to quality, drug interactions, etc.

By the way, here is the official KV reason for raising the price:

The cost is justified to avoid the mental and physical disabilities that can come with very premature births, said KV Pharmaceutical chief executive Gregory J. Divis Jr. The cost of care for a preemie is estimated at $51,000 in the first year alone.
“Makena can help offset some of those costs,” Divis told The Associated Press. “These moms deserve the opportunity to have the benefits of an FDA-approved Makena.”

Pathetic. As if the compounded versions didn’t accomplish the same thing for $10/dose.

Peace

Tim

 

[Suudy]

Note that KV’s justification, in part, is that there is now a commercially available compound whereas before there was none.Again, since they sent out the letters, it would appear that it is prior art.

I’m not totally convinced. From that same letter in footnote 1:There may be certain exemptions from FDA’s “new drug” requires for compounding pharmacies in Texas, Louisiana and Mississsippi. However, in order for the exemptions to apply, certain requirement must be satisfied. Notably, the exemption from the FDA’s new drug requirements does not apply to compounded drugs that are essentially copies of commercially available drug products.
So it seems that mode of delivery can make a compounded version other than a copy.

Also, earlier where this footnote is referenced, it says:Indeed, as articulated by the FDA in numerous enforcement actions, FDA has stated that it views compounded drugs to be “new drugs” within the meaning of 21 U.S.C 321(p), and as such, they may not be introduced into interstate without FDA approval.
Given that most compounding pharmacies are generating the treatments for local use, and not for interstate sales, I don’t see how this can apply to most pharmacies. It seems to me that the only compounding pharmacies that would be affected are the ones that sell across state lines, such as mail order pharmacies.

My sense is that the FDA screwed up royally. Read the letter and see if you think that KV really thinks that the drug is prior art.It is right to blame them. Them and the FDA.

This isn’t the first time this has happened. From a year ago:

pipeline.corante.com/archives/2010/04/14/colchicines_price_goes_through_the_roof.php

From the article:URL Pharma, a generic manufacturer, took the time and trouble to get fresh data on colchicine for gout attacks, and was granted a three-year marketing exclusivity period. So far, so good - but they then turned around and ran the price up by a factor of fifteen. They also filed suit against other small companies that were selling colchicine in the generic market, with the result that other domestic sources of the drug might dry up (four of the other companies are fighting back in court).
This move by KV to seek FDA approval and exclusive rights seems to be a common practice. And, the same author explains why this is the case. From another article:

pipeline.corante.com/archives/2011/03/11/makenas_price_what_to_do.php

He says:The company picked its target carefully. I will say this, that 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 $1500 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, that 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.
The point is that this kind of therapy hasn’t been completely vetted, and thus far the only FDA approved use (i.e. on-label use) is Makena. Compounding versions have been off-label and unapproved.

This is outrageous.Read the letter.Read the letter.

The outrage, then, should be with the FDA for granting exclusivity, not KV for creating an FDA approved version. The FDA is the agency forcing compounding pharmacies to not provide “new drugs” without approval, not KV. Also from the letter (emphasis mine):FDA’s approval of Makena ensures physicians and women with a singleton pregnancy who have a history of singleton spontaneous preterm birth have a safe and effective option to reduce the risk of preterm birth.
And this is part of the point I have been making Makena has been demonstrated to be effective. Combined with quality control measures, which may be very different depending upon the compounding pharmacy, Makena is a better option. The investment that KV made in the product (purchase price from Hologenic, further testing, FDA approval process, capital costs for manufacturing, etc) all must be factored into the cost. And that is sure to make it more than $10 per dose.

 

[Suudy]

Pathetic. As if the compounded versions didn’t accomplish the same thing for $10/dose.

They may have achieved the same ends, but did so with perhaps questionable means. Compounding pharmacies have differing levels of quaity and quality control. KV can provide a higher degree of quality and can do so consistently. This lack of quality made it difficult to determine effectiveness since it introduced another variable in the testing.

Now, I want to be clear. If Makena can be demonstrated to have the same quality as the pre-existing compounding versions (perhaps sampled across a wide variety of pharmacies), the same quality control measures are implemented in pharmacies, and the pharmacies are subject to the same kind of process examinations and review, then I think the FDA should rescind such exclusivity. But since I don’t think pharmacies are subject to the same level of scrutiny as pharmaceutical manufacturers, I’m not sure this can be done. Part of the premium for Makena is in the quality of the product.

One commenter on one of the article (link) made a good analogy:
BigSky said: “The previous method was akin to a bartender dispensing beers from a keg only to have a company patent the 13.25 oz. beer, charge 120$ and send cease-and-desist letters to bartenders”
No,
the previous method was akin to a bartender giving out an unknown liquid, telling you that he was completely unsure what it would do to you, that he had no reason to suspect that it was safe or not, and that in fact it had once been pulled from the market, but it was very cheap
vs. the bartender dispensing beers with the full Guiness label, straight from the factory, and properly chilled, with some nuts on the side.
I pick “B” at any price, if I pick anything. If the matter is life and death vs. getting a nice drink, I certainly do choose B and am thankful for having the choice.
The point being is that Makena is a product of known quality whereas compounding versions are unknown.

 

[Orogeny]

I’m not totally convinced. From that same letter in footnote 1:
There may be certain exemptions from FDA’s “new drug” requires for compounding pharmacies in Texas, Louisiana and Mississsippi. However, in order for the exemptions to apply, certain requirement must be satisfied. Notably, the exemption from the FDA’s new drug requirements does not apply to compounded drugs that are essentially copies of commercially available drug products.
So it seems that mode of delivery can make a compounded version other than a copy.

Right. They can’t make a copy of the drug that KV has been given a monopoly on. That footnote doesn’t say that there is/was a different delivery system or formulation. The whole point of the letter is to make pharmacies stop making THE SAME DRUG AS KV.

Also, earlier where this footnote is referenced, it says:
Indeed, as articulated by the FDA in numerous enforcement actions, FDA has stated that it views compounded drugs to be “new drugs” within the meaning of 21 U.S.C 321(p), and as such, they may not be introduced into interstate without FDA approval.
Given that most compounding pharmacies are generating the treatments for local use, and not for interstate sales, I don’t see how this can apply to most pharmacies. It seems to me that the only compounding pharmacies that would be affected are the ones that sell across state lines, such as mail order pharmacies.

Perhaps, but that sure hasn’t stopped KV from threatening to sick the FDA on any pharmacy that continues to make the compound.

The point is that this kind of therapy hasn’t been completely vetted, and thus far the only FDA approved use (i.e. on-label use) is Makena. Compounding versions have been off-label and unapproved.

And they are the same as Makena, which is why KV insists that the pharmacies stop making the compound. Until KV was given exclusivity for an old formulation with a new approved useage, pharmacies were making the same drug and it was just as effective as Makena will be. The 2003 study was conclusive and was the basis for doctors prescribing the drug.

The outrage, then, should be with the FDA for granting exclusivity, not KV for creating an FDA approved version.

I AM outraged at the FDA. How have you missed that in my posts? And I am not upset with KV for creating an FDA approved version. I am upset with them for charging $1,500/dose and insisting that pharmacies that can provide the exact same drug at $10/dose cease and desist because they have FDA exclusivity.

The FDA is the agency forcing compounding pharmacies to not provide “new drugs” without approval, not KV. Also from the letter (emphasis mine):
FDA’s approval of Makena ensures physicians and women with a singleton pregnancy who have a history of singleton spontaneous preterm birth have a safe and effective option to reduce the risk of preterm birth.
And this is part of the point I have been making Makena has been demonstrated to be effective. Combined with quality control measures, which may be very different depending upon the compounding pharmacy, Makena is a better option. The investment that KV made in the product (purchase price from Hologenic, further testing, FDA approval process, capital costs for manufacturing, etc) all must be factored into the cost. And that is sure to make it more than $10 per dose.

Ok, let me say this one more time. IT IS THE SAME DRUG. They are equally safe and effective. THAT IS WHY KV SENT THE LETTERS!!! If the pharmacies products were different, KV would not have any legal standing to try and prevent them from making their product.

The drug company is wrong. They are greedy. They are a great example of what is wrong with healthcare in this country. Shame on them and shame on the FDA.

Peace

Tim

 

[Orogeny]

They may have achieved the same ends, but did so with perhaps questionable means. Compounding pharmacies have differing levels of quaity and quality control. KV can provide a higher degree of quality and can do so consistently. This lack of quality made it difficult to determine effectiveness since it introduced another variable in the testing.

Wow. They have some extremely expensive QA/QC processes to increase the cost by a factor of 150.

Now, I want to be clear. If Makena can be demonstrated to have the same quality as the pre-existing compounding versions (perhaps sampled across a wide variety of pharmacies), the same quality control measures are implemented in pharmacies, and the pharmacies are subject to the same kind of process examinations and review, then I think the FDA should rescind such exclusivity.

You are kidding yourself if you think that this is really the issue. Remember, the FDA didn’t have an issue with pharmacies making the compound prior to giving KV exclusive rights and they don’t stop pharmacies (which, by the way, use licensed people with a minimum of a masters degree in pharmaceutical sciences to do the compounding) from compounding other drugs. This is only an issue of exclusivity. For a drug that has existed for decades.

But since I don’t think pharmacies are subject to the same level of scrutiny as pharmaceutical manufacturers, I’m not sure this can be done. Part of the premium for Makena is in the quality of the product.

One commenter on one of the article (link) made a good analogy:
BigSky said: “The previous method was akin to a bartender dispensing beers from a keg only to have a company patent the 13.25 oz. beer, charge 120$ and send cease-and-desist letters to bartenders”
No,
the previous method was akin to a bartender giving out an unknown liquid, telling you that he was completely unsure what it would do to you, that he had no reason to suspect that it was safe or not, and that in fact it had once been pulled from the market, but it was very cheap
vs. the bartender dispensing beers with the full Guiness label, straight from the factory, and properly chilled, with some nuts on the side.
I pick “B” at any price, if I pick anything. If the matter is life and death vs. getting a nice drink, I certainly do choose B and am thankful for having the choice.
The point being is that Makena is a product of known quality whereas compounding versions are unknown.

Extremely bad analogy. You don’t know too many pharmacists, do you? They are not just some guy mixing stuff in their basements, they are people with advanced degrees in pharmaceutical sciences who are trained to do what they do.

Peace

Tim

 

[Suudy]

Right. They can’t make a copy of the drug that KV has been given a monopoly on. That footnote doesn’t say that there is/was a different delivery system or formulation. The whole point of the letter is to make pharmacies stop making THE SAME DRUG AS KV.

Only drugs that are “essentially” the same. What does the FDA mean by that? Does that mean active ingredients? Or does it mean more than that, like method of deliver or suspension? Why would the footnote mention exemptions if it was just the same active ingredient?

Perhaps, but that sure hasn’t stopped KV from threatening to sick the FDA on any pharmacy that continues to make the compound.

Only insofar as it violates interstate sales. I don’t see anything that limits intrastate sales.

And they are the same as Makena, which is why KV insists that the pharmacies stop making the compound. Until KV was given exclusivity for an old formulation with a new approved useage, pharmacies were making the same drug and it was just as effective as Makena will be. The 2003 study was conclusive and was the basis for doctors prescribing the drug.

It was only conclusive for a specific formulation with the expectation that that formulation would have the same quality as Makena. There is risk with the compounded versions that they maybe compounded incorrectly.

I AM outraged at the FDA. How have you missed that in my posts? And I am not upset with KV for creating an FDA approved version. I am upset with them for charging $1,500/dose and insisting that pharmacies that can provide the exact same drug at $10/dose cease and desist because they have FDA exclusivity.

How have you missed in my posts that KV has spent a considerable sum of money in the creation of Makena? Their pricing is at least partially based upon recouping the costs of getting FDA approval, capital investments for production, and funding for followup studies. All of these are certain to make the cost greater than $10.

What if KV decided to charge $50/dose? Would that still outrage you? But even that cost wouldn’t be enough to recoup the costs they have incurred from the development.

Ok, let me say this one more time. IT IS THE SAME DRUG. They are equally safe and effective. THAT IS WHY KV SENT THE LETTERS!!! If the pharmacies products were different, KV would not have any legal standing to try and prevent them from making their product.

This is unsubstantiated. Not all pharmacies are scrutinized as closely nor subject to the same level of quality as KV. The compounded versions may be just as effective, but there is not nearly the level of oversight as there is for KV.

The drug company is wrong. They are greedy. They are a great example of what is wrong with healthcare in this country. Shame on them and shame on the FDA.

You don’t know their margins. You are assuming the cost basis is $10, but that can’t be accurate. KV has to account for the $200M purchase from Hologenic, costs associated with seeking FDA approval, costs from its further studies, and associated legal costs. KV isn’t realizing a $1,490 profit margin per dose. In fact, it is likely quite less, and we don’t know what it is.

Wow. They have some extremely expensive QA/QC processes to increase the cost by a factor of 150.

It isn’t just the QA/QC. It is also the amortized cost of development and testing.

You are kidding yourself if you think that this is really the issue. Remember, the FDA didn’t have an issue with pharmacies making the compound prior to giving KV exclusive rights and they don’t stop pharmacies (which, by the way, use licensed people with a minimum of a masters degree in pharmaceutical sciences to do the compounding) from compounding other drugs.

You, apparently, don’t know many pharmacists. Very few pharmacists do the actual compounding. Pharmacy techs do the work. And, no, very, very few pharmacy techs have masters degrees. Only an AA is required to be a pharmacy tech (link).

This is only an issue of exclusivity. For a drug that has existed for decades.

It isn’t “only” the exclusivity issue. KV isn’t charging more solely because of its exclusive rights. It is also charging more because of the costs they have sunk into its development.

Extremely bad analogy. You don’t know too many pharmacists, do you? They are not just some guy mixing stuff in their basements, they are people with advanced degrees in pharmaceutical sciences who are trained to do what they do.

I am good friends (I was a groomsman at his wedding) of a PharmD that owns his own pharmacy. His pharmacy does compounding. He does not do it, his techs do. Sources of materials for compounded versions are not uniform in quality (various vendors make materials of various quality), equipment is not always calibrated (and depending on the state, there is no requirement for calibration), and validation of final results is widely variable.

The point is that the quality of compounded, off-label drugs is not guaranteed by any law or professional guidelines. And since KV has much deeper pockets than Stan’s Corner Pharmacy, who do you think has a greater interest in making the highest quality product?

Let me make one final point so you don’t think I’m just trying to be a KV shill. Is KV charging too much? Perhaps. But neither you nor I know KV’s cost basis for Makena. So we can’t know what a fair price is. Is it $100/dose? $250/dose? Using the $10 basis ignores everything that KV has invested in getting Makena to the market, and it is unfair to judge KV’s price against that price.

 

[Orogeny]

It was only conclusive for a specific formulation with the expectation that that formulation would have the same quality as Makena. There is risk with the compounded versions that they maybe compounded incorrectly.

You do understand that the studies used compounded versions, right?

What if KV decided to charge $50/dose? Would that still outrage you? But even that cost wouldn’t be enough to recoup the costs they have incurred from the development.

No, it wouldn’t. I don’t have a problem with KV charging more than $10/dose. At $50/dose, the benefit of the drug being available to everyone versus only being available to those who have a compounding pharmacy justifies a price increase. But that isn’t what KV is doing. They have some large debts that they have to try and pay off and they believe that they have found a mechanism to do so.

This is unsubstantiated. Not all pharmacies are scrutinized as closely nor subject to the same level of quality as KV. The compounded versions may be just as effective, but there is not nearly the level of oversight as there is for KV.

The former CEO of KV just went to prison for violating drug labeling laws and has been banned from participating in federal health care programs because of the actions his company took under his leadership. So clearly, a pharmaceutical company is a much safer bet than a compounding pharmacy.

bizjournals.com/stlouis/stories/2010/02/22/daily52.html
bloomberg.com/news/2011-03-10/ex-kv-pharmaceutical-ceo-hermelin-pleads-guilty-to-drug-label-law-breach.html

You don’t know their margins.

Nor do you.

You are assuming the cost basis is $10, but that can’t be accurate. KV has to account for the $200M purchase from Hologenic, costs associated with seeking FDA approval, costs from its further studies, and associated legal costs. KV isn’t realizing a $1,490 profit margin per dose. In fact, it is likely quite less, and we don’t know what it is.

Wanna bet that it is a whole lot? Hmm??

It isn’t just the QA/QC. It is also the amortized cost of development and testing.

They didn’t develop the drug. I’m not sure why you keep coming back to that.

You, apparently, don’t know many pharmacists. Very few pharmacists do the actual compounding. Pharmacy techs do the work. And, no, very, very few pharmacy techs have masters degrees. Only an AA is required to be a pharmacy tech (link).

One of my best friends is a pharmacist and I am casual friends with 2 other pharmacists. Two MS degrees and one PharmD. Yes, techs put the compounds together, at least occasionally, but they do so under the supervision of the pharmacist. Who do you think works the line at a pharmaceutical plant?

It isn’t “only” the exclusivity issue. KV isn’t charging more solely because of its exclusive rights. It is also charging more because of the costs they have sunk into its development.

Yes, it is only about the exclusivity issue. The difference between $10/dose and $1,500/dose for an established treatment is all about exclusivity.

I am good friends (I was a groomsman at his wedding) of a PharmD that owns his own pharmacy. His pharmacy does compounding. He does not do it, his techs do. Sources of materials for compounded versions are not uniform in quality (various vendors make materials of various quality), equipment is not always calibrated (and depending on the state, there is no requirement for calibration), and validation of final results is widely variable.

Does he question the efficacy or safety of those compounds? If so, why does he sell them?

The point is that the quality of compounded, off-label drugs is not guaranteed by any law or professional guidelines. And since KV has much deeper pockets than Stan’s Corner Pharmacy, who do you think has a greater interest in making the highest quality product?

I, for the first time ever, actually hope that a drug company gets sued for something that their drug does. At least then they will have a justification for their gouging.

Let me make one final point so you don’t think I’m just trying to be a KV shill. Is KV charging too much? Perhaps. But neither you nor I know KV’s cost basis for Makena. So we can’t know what a fair price is. Is it $100/dose? $250/dose? Using the $10 basis ignores everything that KV has invested in getting Makena to the market, and it is unfair to judge KV’s price against that price.

Unfair? Is it unfair to make someone pay up to $30,000 rather than $300 for treatment only because they have a monopoly? Yes, it is.

Peace

Tim

 

[Suudy]

You do understand that the studies used compounded versions, right?

It doesn’t say which pharmacy they used or even if they used a sampling of different pharmacies. I don’t doubt the efficacy of the active ingredient. The issue is the quality of the end product. Did the study identify issues with incorrectly compounded versions?

No, it wouldn’t. I don’t have a problem with KV charging more than $10/dose. At $50/dose, the benefit of the drug being available to everyone versus only being available to those who have a compounding pharmacy justifies a price increase. But that isn’t what KV is doing. They have some large debts that they have to try and pay off and they believe that they have found a mechanism to do so.

Those “large debts that they have to try to and pay off” are the sunk costs in the purchase price of Gestiva, costs associated with seeking FDA approval, further studies, capital costs for manufacturing, setting up distribution and sales networks. This is all the cost of doing business.

Do you think the water company “has found a mechanism” to pay off its debts for capital projects to make clean water and install distribution systems is by gouging its customers? What about farmers and the costs of fuel, planting and harvesting equipment, purchasing land, etc?

The former CEO of KV just went to prison for violating drug labeling laws and has been banned from participating in federal health care programs because of the actions his company took under his leadership. So clearly, a pharmaceutical company is a much safer bet than a compounding pharmacy.

And the CEO and the company can expect much stiffer fines and a much more expensive than the local neighborhood pharmacy.

Nor do you.

I have a pretty good guess it is more than $10. And everyone is comparing Makena’s price to $10, which is an unfair comparison.

Wanna bet that it is a whole lot? Hmm??

Sure, I know from experience in my own business. If I sink $200M into a product, and my rate of return requires recouping that expense in 2 years, my cost basis is going to be much more than the cost per unit. As I pointed out in an earlier post, it appears that KV expects to sell about 133,000 doses per year. But let’s be generous and say they nearly double that amount and sell 250,000 doses per year. At that sales rate, they would have to sell Makena at at $400/dose. And that doesn’t even take into account material costs, production/labor costs, packaging costs, shipping costs, sales costs, etc.

But if the 133,000 doses per year is accurate (and it seems to be, since Makena is only indicated for singleton pregnancies in women with a history of pre-term delivery), then their amortized costs basis is at least $750/dose.

I’m also guessing that you have never worked for a medical device manufacturer or pharmaceutical company. Sure, the reps show up and sell products. But they are almost exclusively sold through a distributor. KV is likely selling Makena to distributors and much less than $1500/dose. This further cuts into the margin.

They didn’t develop the drug. I’m not sure why you keep coming back to that.

You are making the same mistake that EN made. KV purchased the product that another developed. If I hire a carpenter to build a deck to my house, I funded that development. Sure, I didn’t do the actual development myself, but since I paid for it, I am the one responsible for its development.

Somebody is paying for the development, regardless of who did the actual development. So yeah, I keep coming back to that because it is $200M that KV spent on the development.

One of my best friends is a pharmacist and I am casual friends with 2 other pharmacists. Two MS degrees and one PharmD. Yes, techs put the compounds together, at least occasionally, but they do so under the supervision of the pharmacist. Who do you think works the line at a pharmaceutical plant?

Go back and re-read what I wrote. It is about more than just who does the compounding. It is also about the raw materials and equipment. Does the local pharmacy to any QA/QC on the suppliers? How often is the equipment calibrated? I work for a company that manufactures electronics for critical infrastructure and industrial applications. Our QA/QC departments heavily scrutinize suppliers and have a busy calibration schedule (some devices are calibrated daily). Do you think Joe’s Corner Pharmacy has such departments to guarantee quality? We also have trained production experts develop work instructions for both assembly, inspection, and test. Does your friend’s pharmacy have the same?

Yes, it is only about the exclusivity issue. The difference between $10/dose and $1,500/dose for an established treatment is all about exclusivity.

Only if you ignore the other sunk costs. The $1,490/dose difference ignores the other costs KV has incurred.

Again, please do not misunderstand me. I already admitted that perhaps $1,500 is perhaps too high. My entire point in this conversation is that there is guaranteed to be an increase in price once Makena was given FDA approval. Maybe KV is using its exclusivity to rake in an unreasonable profit. Unless we know Makena’s costs basis, we can’t make a judgment on how outrageous it might be.

More below…

 

[Suudy]

Continued…

Does he question the efficacy or safety of those compounds? If so, why does he sell them?

For some yes. He especially refuses to sell injectable compounds since he has concerns about sterility. As for oral medications, he himself has taken steps to ensure their safety. For example, he has a calibration company come once a month. He measures nearly everything by weight, not volume, since there are issues with parallax and eyesight. He has one tech measure out and package individual doses, and another tech that does the compounding. He keeps logs at every step. And he does all this, not at the behest of the FDA or any state agency. He isn’t required by the state to show a calibration log or any established work instructions. In fact, one of his stated long-term goals is to get ISO-9001 certification for his compounding.

How many Joe’s Corner Pharmacies are ISO-9001 certified? I can’t find out if KV is ISO 9001 certified (ISO charges $50 for their survey), but I suspect it is. Any large manufacturing firm would be foolish not to be. Heck, my company only has about 2,000 employees but we are ISO-9001 certified.

I, for the first time ever, actually hope that a drug company gets sued for something that their drug does. At least then they will have a justification for their gouging.Unfair? Is it unfair to make someone pay up to $30,000 rather than $300 for treatment only because they have a monopoly? Yes, it is.

I’m stating it is unfair to assume a cost basis of $10. You are assuming that the cost basis is $10 in this analysis ($300/treatment). It is only gouging if that is their actual cost basis, which it can’t be given that they have already invested at least $200M into the product.

I am not making a statement about the fairness of gouging customers. If indeed, their cost basis is only $10, then yes, they are gouging customers and it is unfair.