The St. Louis drug company lambasted for increasing the price of a pregnancy drug from $20 to $1,500 per dose announced Friday that it's cutting the price by more than half.
The sharp reduction to $690 per dose came two days after the Food and Drug Administration publicly invited competition by announcing that it would continue to allow so-called compounding pharmacies to make and sell a version of the drug.
The drug, a synthetic form of progesterone commonly called 17P and marketed under the trade name Makena, is recommended for women at high risk of delivering prematurely. The drug is administered via injection weekly for about 20 weeks.
Friday's announcement by K-V Pharmaceutical Co. of a 55% price reduction puts the list cost of a full course of treatment at $13,800, effective immediately. That's down from $30,000 under K-V's old price, but still a sharp jump from the $400 a woman could expect to spend if she had the drug made at a compounding pharmacy.
K-V said in a statement that it would expand financial assistance for women who could not afford the drug. It also said that it was expanding rebates for Medicaid programs and believes that its new pricing structure "will deliver net cost savings to Medicaid programs and private insurance plans in one year." The statement did not offer details on how those savings would be achieved.
The price reduction did not immediately tamp down the controversy.
Hours after K-V's announcement, the March of Dimes, which had accepted about $1 million in donations since 2006 from a K-V subsidiary and allowed it to use the charity's logo on its website, said it was severing its relationship with the drug maker. "The company's handling of the launch of Makena, and the initial list price, were highly unsatisfactory and unacceptable to the March of Dimes and the families we represent," the maternal and infant health charity said in a statement.
In addition, a compounding pharmacists trade group reacted to criticism from K-V that compounded versions of the drug might not be safe by noting that the former CEO of K-V pleaded guilty earlier this month to misdemeanor violations connected to K-V's sale of oversized tablets of morphine sulfate.
The price is still too high, according to John Larsen, professor of obstetrics and gynecology at the George Washington University School of Medicine and Health Sciences. At $690 per dose, "they've got to move that decimal point over one more time … $69 per injection would be OK," said Larsen, who said his patients get the drug from compounders for about $30 per injection.
Larsen said he doesn't begrudge K-V a healthy profit. "This is America," he said, "But there's no reason for it to be that high. The ingredients are cheap and they didn't have to do any scientific research."
Until early this year, an FDA-approved version of 17P was not available. So the only alternative for women was to take a prescription for the drug to a compounding pharmacy which produced individual batches of the drug for between $10 and $20 per dose.
In February, the FDA granted K-V Pharmaceutical Co. exclusive rights to make Makena for seven years.
K-V subsequently priced Makena at $1,500 per dose and sent letters to compounding pharmacies warning of a potential FDA crackdown if they did not stop making their versions of the drug.
The company's actions triggered a political and blogospheric furor and put the FDA in an awkward position since it has no direct authority over drug prices.
FDA reacted by announcing on Wednesday that contrary to K-V's assertion, it wasn't planning on blocking compounding pharmacies from making the drug, essentially encouraging patients to go that route to obtain it.
In press statements, K-V has defended its pricing as justified by research and development costs.
But in its announcement, the FDA noted that K-V relied on a study by the federally funded National Institutes of Health to demonstrate the drug's effectiveness.
There was no immediate comment by the FDA on K-V's announcement.
K-V emphasized in its statement that Makena is FDA-approved and suggested that compounded versions of the drug might not be as safe.
That drew a sharp response from David Miller, executive vice president of the International Academy of Compounding Pharmacists. "People in glass houses shouldn't throw stones," said Miller, before emailing a reporter a copy of a Justice Department press release detailing the guilty plea of Marc Hermelin, K-V's former chairman and chief executive.
Hermelin was charged as the "responsible corporate officer" accountable for K-V's actions. Those actions included making and selling morphine sulfate tablets as much as twice as heavy as a normal pill and failing to notify the FDA of the extent of the pill-making problem in its operations in 2007 and 2008, according to the press statement.
Hermelin was sentenced to 30 days in jail, fined $1 million and ordered to forfeit $900,000.
A K-V spokeswoman said via email that Hermelin no longer is affiliated with the company.
The company "continues to move forward as a compliant, quality-driven organization," K-V spokeswoman Jennifer Forst said in an email. "Our commercial operations are backed by a historical and proven marketing capability that we believe will return our Company to revenue sustainability, profitability and value to our shareholders."
Hermelin's case was one of several legal difficulties described in K-V's SEC filings.
In a case related to Hermelin's, a K-V subsidiary pleaded guilty to felony charges of failing to report flawed tablets to the FDA and agreed to pay fines, restitution and forfeitures totaling $27.6 million, according to filings.
And since March 2009, K-V has operated under a consent decree that puts its drug manufacturing under close FDA supervision. Legal and regulatory problems "have had, and are expected to continue to have a material adverse effect on our operations," the company's 2010 annual report states.
If K-V cannot resume selling existing products, "or if our planned [Makena] product is not approved by the FDA on a timely basis, or if revenues from its sale prove to be insufficient, our financial position ? will continue to be materially adversely affected," says the report, which was filed in December 2010, more than a month before Makena was approved.
The compounding pharmacies that make Makena's competitor, 17P, are licensed and regulated by the states.
Drugs made by compounding pharmacies are not FDA-approved – essentially because each prescription is tailor-made and drugs approved by the FDA undergo clinical trials and other lengthy testing that would be impossible to conduct for individual preparations.
But FDA does have broad discretion and can clamp down on compounders if it feels they're competing unfairly with pharmaceutical companies. It was that discretionary authority that K-V referred to in its warning letters to pharmacists.
K-V's price reduction did not impress compounding pharmacist Chuck Leiter of Leiter's Pharmacy in San Jose.
"They're still way out of line," said Leiter.
Leiter said he charges the equivalent of $6.50 per dose to make the drug "and my costs are a lot higher than theirs…. It's an easy thing to make." His price may be lower than other compounders because he also supplies hospitals and makes relatively large quantities, he said.
Leiter said he recently sold an area hospital a several-month supply of the drug in case compounders were forced to stop making it.