KV-Pharma’s ill-advised pricing of its FDA-approved synthetic progesterone has caused Congress to scrutinize the pricing of other newly-approved versions of old drugs. In an effort to bring such legacy medications into compliance with modern requirements for drug safety and efficacy, FDA offers incentives in the form of patent protection to companies that run older drugs through the appropriate clinical trials and seek FDA approval. URL Pharma markets an FDA-approved gout medication called Colcrys, the active ingredient of which is colchicine, a medication so old that it predated the FDA’s drug safety laws. URL Pharma won approval for their drug in July 2009 and set the price at almost $5 a pill compared with pennies a pill for unapproved versions of colchicine, which FDA ordered be removed from the market once the approved drug became available. URL Pharma vigorously defended their patent after approval and also defended their pricing, saying that it was in line with other approved gout medications and that running the clinical trials provided important safety and dosage information.

On May 23, 2011, Sen. Herb Kohl (D-Wis.), and Reps. Henry Waxman (D-Calif.), Frank Pallone (D- N.J.), and Diana DeGette (D-Colo.) co-authored a letter (available here) to Richard Roberts, President and CEO of URL Pharma, requesting detailed information on costs and revenues associated with the drug, including the cost of clinical trials, manufacturing, and marketing the drug, and projected revenues. The company was given a deadline of June 10 to reply. In the letter, the lawmakers state: “High prices lead to tough choices for patients. Further, the higher price of this treatment will be borne by private health plans and the federal government, and will contribute to the continued overall growth in health spending.”

At the same time, these lawmakers sent a letter with similar requests for information on pricing to Keith Katkin, president and CEO of Avanir Pharmaceuticals. Like URL, Avanir markets an approved version of a legacy drug, in this case a combination of quinidine and dextromethorphane for treatment of pseudobulbar affect (involuntary emotional outbursts) under the trade name Nuedexta. In the case of Nuedexta, the price jumped from $20 for non-approved versions, to $600 for the approved version. In their letter, the lawmakers state: “Although we recognize that we all benefit when FDA approves a new, safe and effective formulation, it is not clear that the significantly higher prices charged for this drug are justified given that it is merely a combination of long-used and inexpensive generic medications.”

The lawmakers’ desire for clarity around drug pricing is admirable. However, cost-of-goods is only a small part of the formula used to determine pricing. A large part of the formula is what the market will bear. In this case, there is value associated with buying FDA-approved, GMP-manufactured products, but companies that venture into the marketing of legacy drugs are still feeling their way around what that value might be.