This blog post was written by Amy Ritter.
Drug maker KV Pharmaceuticals has been in the news concerning pricing of its newly approved drug, Makena. Makena, while newly approved, is a version of a very old drug, synthetic progesterone, which had previously been available to consumers for as little $10-$15 a treatment through specialty pharmacies that compounded the drug on site. On Feb 3, 2011, KV received approval for Makena, an injectable form of synthetic progesterone, under FDA’s Orphan Drug Act, as a treatment for women who are at risk of preterm labor. Under the Act, KV was awarded seven years of exclusive patent protection. When Makena hit the market, KV set the price at $1500 a treatment and informed compounding pharmacies that they would be in violation of their patent if they continued to supply the generic form of the drug.
Progesterone is given as a weekly shot to women who are at risk of preterm labor, so, at KV’s proposed price, the cost of treatment for the average full-term pregnancy could run as high as $30,000. An outcry among physicians, patient advocacy groups, and public health officials ensued, which resulted last week in KV dropping the price by more than half and instituting a series of rebates and assistance programs to ensure that consumers would have access to more affordable treatment. In addition, in response to the public outcry, FDA clarified that in this particular instance, it would not prevent compounding pharmacies from making a generic version available.
Unlike the pricing of consumer goods, drug pricing is completely opaque. In addition to the direct cost of goods, drug companies factor in the large but murky costs of development, which include the costs associated with drugs that don’t make it to market. To make it even less transparent, price for the same product fluctuates depending on regional markets and negotiated pricing. The Makena story might easily be viewed as a story of corporate greed, but I’d rather view it as a story of the power of the marketplace. KV was perhaps overly optimistic in setting the price of their product, but was brought back in line by the realities of the market.