Drug company 'exploited' opioid epidemic, raised cost of overdose drug 600%: report

In this Feb. 16, 2017, photo, a discarded syringe sits in the dirt with other debris under a highway overpass where drug users are known to congregate in Everett, Wash. (AP Photo/Elaine Thompson)

While the number of people overdosing on opioids was increasing, so was the cost of a life-saving overdose reversal drug.

A new bipartisan Senate report released Sunday found that the drug company Kaleo Inc. raised the cost of its brand-name naloxone drug more than 600 percent at the height of the opioid crisis. The life-saving drug, Evzio, was brought to market in 2014 for $575 per unit and it is currently priced at $4,100 for two auto-injectors and a training device that provides step-by-step instructions for use.

According to the report, conducted by the Senate Permanent Subcommittee on Investigations, Kaleo "exploited the opioid crisis" by driving up the cost of its drug. At the same time, the company took advantage of loopholes in Medicare and Medicaid programs that cost U.S. taxpayers more than $142 million.

"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," said Sen. Rob Portman of Ohio, the chief Republican author of the report.

The top Democratic author of the report, Sen. Tom Carper of Delaware, accused the company of trying to "profit off of this heartbreaking epidemic." He denounced the price hike as "unacceptable and shameful."

As opioid overdose deaths were on the rise, Kaleo developed an easy to administer naloxone autoinjector. Despite being encouraged to market the drug at a lower price, Kaleo introduced Evzio in 2015 at a steep $575 price point and failed to develop a market.

To fix this problem, Kaleo hired two consultants, Todd Smith and Ben Bove, known for dramatically increasing the price of drugs. By February 2016, Smith and Bove had implemented a new strategy to ensure physicians offices prioritized prescriptions for Evzio over less expensive options and passed the costs onto commercial and government insurers, like Medicare and Medicaid.

By the time the plan was in place, the number of prescriptions increased and Kaleo drove up the cost of their overdose drug from $595 to $3,750 and then finally to $4,100. The two consultants, Smith and Bove, were paid $10.5 million for two years of work implementing the plan.

Kaleo issued a statement in response to the allegations in the Senate report saying the company's opioid overdose drug has saved more than 5,500 lives and that they have never turned an annual profit on the sale of Evzio. "Patients, not profits, have driven our actions," the company stated.

For many patients, the out of pocket cost for Evzio was nothing or virtually nothing. The reason, according to the Senate report, was that Kaleo's model was dependent on government health care programs picking up the wholesale cost of the drug.

Medicare and Medicaid patients accounted for less than one-quarter of the units sold but 75 percent of net sales. While commercial insurers paid an average of $367 for one unit of the overdose drug, Medicare paid $3,522 and Medicaid paid $2,412.

In total, Kaleo's scheme cost U.S. taxpayers more than $142 million.

For many observers, the naloxone price increases recall other recent pharma scandals, like Mylan driving up the cost of EpiPens by 500 percent or "pharma bro" Martin Shkreli driving up the cost of the lifesaving drug Deraprim 5,000 percent overnight.

"Whether it's the pharmaceutical industry, the marketing of Oxycontin or the marketing of this medication, American greed never ceases to amaze me," said Dr. Deni Carise, the chief scientific officer at Recovery Centers of America.

While drug companies deserve to be compensated for their research and innovation, it is almost impossible to justify a 600 percent truprice increase over two years, Carise noted. "I think the company should be paid a fair price for the medication. I also think Medicaid and Medicare should claw back the absolutely excessive charges that have been put to the American public."

According to the report, Congress will be working with the Trump administration to close the Medicare and Medicaid loopholes exploited by Kaleo and to increase transparency in drug pricing. The recommendations are in line with proposed federal rule changes announced last month by President Donald Trump and Health and Human Services (HHS) Secretary Alex Azar. One set of proposed federal rules would give the government more leverage to negotiate lower drug prices. Another rule would increase drug price transparency and require pharmaceutical companies to explain the cost of medications.

Dr. Michael Hufford, co-founder and CEO of Harm Reduction Therapeutics, a nonprofit pharmaceutical company, said the findings of the report on naloxone prices were not surprising. "The price-gouging around naloxone has paralleled the opioid crisis," he explained. "As more Americans die every day from opioid overdose, the prices of naloxone, unfortunately, continue to rise."

For years, Harm Reduction Therapeutics and others working to ensure access to life-saving naloxone have been acutely aware of the "price-gouging" for the overdose reversal drugs approved by the Food and Drug Administration (FDA). Experts have found the problem also exists with Adapt Pharma's Narcan, a safe and easy to use naloxone nasal spray. Narcan contains only a few milligrams of naloxone, worth pennies, and a plastic sprayer and it retails for $125 to $140 per unit. Hufford is working to develop a low-cost, over-the-counter alternative to Narcan.

Emergent BioSolutions, which now owns Adapt and Narcan, defended it's pricing model, noting the majority of patients pay less than $20 for a Narcan prescription and many can access the drug for free. The company has also made Narcan available to government entities, like public health clinics, fire and police departments, at a discount of $75 per unit.

Given the high rates of emergency calls for heroin, fentanyl and prescription opioid overdoses, many municipalities are struggling to pay even the discounted price for Narcan and Evzio — which also offers local government discounts. In 2016, the Centers for Disease Control documented at least 142,000 emergency department visits for suspected opioid overdoses. That number increased by 30 percent in 2017.

The cost of reversing opioid overdoses is simply too high, Hufford emphasized. "At these prices, it means too many Americans will continue to die, some of whom would be reversed if we got access to low-cost naloxone."

The generic injection kit is available for approximately $20 to $40 per dose but is difficult to use without proper medical training. Kaleo boasts a 94 percent success rate for untrained users, roughly on par with Narcan's success rate.

Kaleo's CEO, Spencer Williamson, explained to the Senate investigative committee that the initial $575 price of Evzio was justified because of the high costs of bringing the drug to market. The company spent more than $45 million in research and development, $32 million in education, plus the cost of getting FDA approval, distribution, insurance coverage and accessibility. The company further defended the value of the product, which was intended to be used by non-medical personnel, like the family, friends or caregivers of opioid addicts.

Another Kaleo executive further argued that effective home use would mean cost-savings for the overall health system because fewer people would be showing up to the hospital "in a bad state."

In an interview with 60 Minutes, Williamson offered to lower the price below $575 if insurance companies can ensure patients can access the drug when it is recommended by a physician.

"You have a structure where there's a conflict between one's ability to generate profit and another's ability to access care," explained Seth Denson, a health insurance analyst and the co-founder of GDP Advisors. Historically, the federal government has been unable or unwilling to step in with regulations. He anticipates the Trump administration, specifically HHS Secretary Azar, a former drug company executive, may be well-positioned to strike the right balance between rewarding innovation and reducing prescription drug costs.

There are signs that access to naloxone has been increasing and the spread of the opioid epidemic is beginning to slow. In the past two years, the number of naloxone prescriptions dispensed monthly has increased more than three-fold to 368 percent, according to the HHS.

HHS Secretary Azar reported last month that the rate of drug overdose deaths started to plateau toward the end of 2017 and the beginning of 2018. Recent CDC data showed opioid-related overdose deaths peaked at 48,000 in 2017, up from roughly 10,000 deaths in 2002.

Earlier this year, U.S. Surgeon General Jerome Adams, issued a public health advisory urging more Americans to carry and "get trained" on administering naloxone, particularly if they know someone who is either addicted to opioids or uses a high dosage of prescription opioids.

In the meantime, opioid legislation passed by Congress has made grants available to further equip emergency first responders with naloxone kits, Narcan or Evzio. The drug is also increasingly available over the counter without a doctor's prescription.

Naloxone has been used to reverse opioid overdose and save lives since it was first introduced in 1971. With the use of naloxone, non-medical personnel successfully reversed more than 26,000 opioid overdoses between 1996 and 2014.

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