With Donald Trump’s threats to rein in drug pricing, what would he make of the Syprine situation?

A drug called Syprine has played a starring role in the collapse of Valeant (VRX), the rogue pharmaceutical company that lost 90% of its value after revelations of price-gouging and other questionable tactics. Syprine is used to treat a rare condition, Wilson’s disease, which results in the toxic accumulation of copper in the liver and can lead to death. Wilson’s disease has been diagnosed in only about 2,000-3,000 people in the US, according to the National Organization for Rare Disorders.

Syprine is considered the gold standard for treating Wilson’s, in part because it has relatively few side effects. But from 2011 to 2015, as Valeant hiked the price of Syprine from less than $1000 for 100 capsules to $21,266.80 for the same 100 capsules, according to documents Valeant provided the government, the drug came to have an inordinate impact on the company’s profits—and far more importantly, on the lives of those who suffer from Wilson’s disease. Syprine was featured prominently in the report about price gouging that was released last month by the Senate Special Committee on Aging.

All the negative press doesn’t appear to have done much to change Valeant’s tactics. One patient just received her three-month supply of Syprine at a total cost of $72,338.58, or almost $300,000 a year. The Senate Committee on Aging says that current Valeant CEO Joseph Papa told them that the company had not reduced the price of Syprine and didn’t plan to do so. (Valeant argued to me that it effectively has reduced the price of Syprine by creating patient assistance programs under which commercially insured patients will pay no more than $25 per month for their prescription, and those without insurance whose household income is below 500% of the federal poverty level will get free medication. That, of course, still leaves the insurance system, i.e. all of us, paying for Valeant’s profiteering.)

So it seems heartening that, on December 5, a small drug company called Kadmon filed an application with the FDA to make a generic version. Generic drugs are usually priced as much as 85% below brand names. Kadmon’s chairman is Sam Waksal, the infamous biotech entrepreneur whose actions in his previous company, ImClone, got himself and lifestyle legend Martha Stewart thrown into prison. Regardless of his past, in the matter of Syprine, Waksal looks like a savior.

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But is he? It turns out that Kadmon and Valeant, far from being fierce competitors, have had a long and cooperative relationship. In fact, from 2014 until 2016, Kadmon had a deal with Valeant under which Kadmon was supposed to be paid a percentage of the profits on Syprine. Which means that as Valeant benefited from jacking up the price of Syprine, so, it appears, would have Kadmon. The question is why they made this arrangement. And that’s where things get really interesting.

First, a little history. Maybe it’s not surprising that Waksal would be in the middle of this, because he’s a complicated personality. An immunologist by training, he and his company ImClone were stars of the biotech bubble of the early 2000s. ImClone’s treatment for colorectal cancer, called Erbitux, generated so much excitement that, in 2001, ImClone got $1 billion in cash from Bristol Myers Squibb in exchange for a stake of around 20% in the company. During those glory days, Waksal moved in society circles in New York, throwing celebrity studded parties in his SoHo loft featuring the likes of Mick Jagger and MTV’s Serena Altschul.

But then, his world came crashing down. In December 2001 the FDA sent a letter to ImClone casting doubt on whether Erbitux would be approved. On the actual news, the stock plunged, and it came out that Waksal, along with family and friends, including Martha Stewart, had sold their stock just before the news was public. Waksal ultimately spent 5 years in jail, while Stewart was given a five-month prison sentence and five months of home confinement.

While Waksal was still serving his prison sentence, in early 2008, a small drug company called Three Rivers acquired a drug called Infergen, which helped treat hepatitis C, from Valeant. As a result, Three Rivers owed Valeant $6.9 million. In 2010, Waksal got out of prison and began putting Kadmon together. As part of that, he acquired Three Rivers, along with the debt to Valeant. “We’re meant to use every single experience in our lives to move forward,” he told The New York Times that year. “Because there was that interregnum in my life, I have more of an emphasis to do it very well, without tarnishing, this go-around.”

During that period, there was also a major change at Valeant. In 2008, the company hired Mike Pearson, a former McKinsey executive, to be its CEO. Part of Pearson’s strategy was raising the prices on existing drugs to generate increased revenues and earnings for his shareholders.

In the fall of 2010, Valeant and Kadmon did another, similar deal, this one also involving drugs, now obsolete, to treat hepatitis C. Then came Syprine. In early 2014, Kadmon entered into the agreement with Valeant under which Valeant agreed to pay Kadmon 10% of Syprine’s gross profits above a certain level of sales in order to “co-promote” the drug. Half of the money Kadmon made had to be used to pay down the remaining money it owed Valeant. According to another filing Kadmon made, the agreement would be moot if Kadmon looked like it was going bankrupt — or if it launched a product that competed with Syprine.

“By utilizing our commercial platform to raise awareness of Wilson’s disease through increased education, promotion and distribution of Syprine, we believe we can better serve patients with this rare genetic disorder,” Waksal said at the time. Better serve, indeed. The deal was signed on February 25, 2014 and on February 28 — just three days later — the price of Syprine shot from $10,550.97 per 100 capsules (Valeant had already hiked it considerably) to $13,188.71 per 100 capsules, an increase of 25%. During the term of the deal, the price would again more than double. Another pharmaceutical CEO recalls visiting Kadmon’s offices to discuss a different deal, and being shocked as he listened to Kadmon employees talk about the huge price increases on Syprine.

But was co-promotion the only reason Valeant gave Kadmon some of its Syprine profits?

The Syprine deal is ‘as tough a case as I’ve seen’

View photos Harlan Waksal, (R) CEO of Clinical-stage biotech Kadmon Holdings LLC., rings a bell to celebrate his company’s IPO on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 27, 2016. REUTERS/Brendan McDermid More

In recent years, the Federal Trade Commission has been increasingly aggressive about using antitrust laws to challenge deals between drug companies that may keep a lower-priced drug off the market. In 2013, the Supreme Court ruled, over howls of protest from drug companies, that these deals are subject to antitrust scrutiny. “These business arrangements sometimes serve as a fig leaf to disguise harms to the market and price increases,” says Michael Carrier, an expert on antitrust law at Rutgers Law. But not all such deals are unlawful. Carrier and others say that figuring out whether a deal is legally problematic is extremely complex, and often depends on nuances that aren’t readily apparent.

From what information is available publicly, Carrier says, the Syprine deal is “as tough a case as I’ve seen.” Or as Dean Harvey, a plaintiffs’ lawyer who specializes in pharmaceutical antitrust issues at Lieff Cabraser, a San Francisco law firm, puts it, “There’s both a somewhat benign view of this, and a not so benign view.” In the benign view, Kadmon brought some value and expertise to Valeant’s Syprine sales efforts, perhaps via its existing distribution for its hepatitis C drug. (Both hepatitis C and Wilson’s are liver diseases.) In that case, 10% of the gross profits might be reasonable, and it might explain Kadmon’s agreement not to launch a competing product.

The not-so-benign view is that Valeant gave Kadmon 10% of Syprine’s gross profits so that Kadmon wouldn’t undercut Valeant’s pricing by launching its own competing drug. After all, as one lawyer says, “Kadmon isn’t Pfizer,” meaning that a tiny company that was hemorrhaging money and didn’t have a massive sales force doesn’t seem like a choice partner. “If I were still at the FTC, I would investigate,” says a former FTC lawyer.

In early 2016 when Valeant was beginning its meltdown and the scandal was making headlines in the business press, and Kadmon was preparing in earnest for its IPO, the two companies called off the deal. As part of their agreement, they settled the pre-existing $3.9 million debt.

Both Kadmon and Valeant strongly refute the idea that there was any anticompetitive element to the deal. Valeant says that it “did not have an internal sales force effort of its own that was engaged in promotion of Syprine at that time and that “the co-promotion agreement did not contain a non-compete, was terminated prior to viable competition and as such did not in any knowable way preclude competition, and only provided for Valeant to terminate shared promotional activities should Kadmon launch a competing product.”

For Kadmon’s part, it says the agreement with Valeant to co-promote Syprine was just a means of repaying the $3.9 million debt it owed. “Kadmon co-promoted the drug for about 22 months, had no control over Syprine price adjustments and was not involved in any conversations or decisions with respect to the cost of Syprine to Wilson’s disease patients,” the company says. Kadmon also says that it did not begin work on a generic version of Syprine until late 2014, and did so in order to offer a lower cost option in the face of the price increases.

“If Kadmon’s competitive threat didn’t materialize until after the deal, then that certainly would weigh heavily in favor of the benign view,” says Harvey.

There is another wrinkle. While it would seem that both companies would have benefitted financially from the astronomical rise in the price of Syprine, a source close to Kadmon says that things are not what they seem. After striking the deal, the two companies began to argue about the accuracy of the data used to determine whether or not Kadmon was exceeding the agreed-upon sales level. As a result, says the source at Kadmon, it never got any sales revenue from co-promoting Syprine. (Lawyers say evaluating whether an agreement is anti-competitive doesn’t depend on whether it turned out to be profitable for the firms involved.)

Shortly after the deal with Valeant was struck, in August 2014, Waksal stepped down as CEO because the company started making plans to go public. Under an agreement with the Securities and Exchange Commission, Waksal is barred from serving as an officer of a publicly traded company. His brother Harlan Waksal took over as CEO.

Last summer, Kadmon sold stock to the public, at $12 a share. The share price has since plunged to less than $5 a share. Sales have fallen sharply, and the debt-ridden company is bleeding cash.

For nervous Wilson’s disease patients, it remains to be seen whether or not help is forthcoming. The timing as to when generic Syprine will reach the market depends on the FDA, and the pricing depends on Kadmon. A true savior would price it at least in the vicinity of where it was before Valeant began jacking up the price. Who’s optimistic?

Bethany McLean is a contributing editor at Vanity Fair and bestselling author. Her recent book is “Shaky Ground: The Strange Saga of the U.S. Mortgage Giants,” published by Columbia Global Reports.

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