Drug Manufacturer Kaléo Plans to Take Steps to Lower the Price of its Naloxone Auto-Injector to $178

WASHINGTON, D.C. – U.S. Senators Rob Portman (R-OH) and Tom Carper (D-DE), the chairman and ranking member of the Permanent Subcommittee on Investigations (PSI), today reacted to the news that drug manufacturer kaléo planned to take steps to reduce the price of its naloxone auto-injector to $178, down from $4,100 per unit. Portman and Carper previously led an investigation into the cost of the company’s naloxone product – which is a naloxone delivery device used to revive individuals who overdose on opioids.

“Life-saving drugs should not be out of reach for those that need them most, especially in the midst of a deadly public health crisis,” said Senator Carper. “The news that Kaleo will make their naloxone drug more affordable, following our investigation, is a step in the right direction, and this step should serve as a teachable moment for other drug manufacturers. This move also reinforces the importance of substantive and bipartisan investigations that help to ensure that the public has the full picture when it comes to such important and costly issues. I’m pleased that Senator Portman and I can work together to get at the truth, and I am confident we will continue to do the work necessary to ensure that loopholes in our system cannot be exploited at the expense of patients and taxpayers.”

“This news is a positive step forward and I’m hopeful that it will increase access to naloxone, a critically-important overdose reversal drug that has saved tens of thousands of lives,” said Senator Portman. “The Subcommittee will continue its efforts to lower prescription drug costs and protect taxpayer-funded programs like Medicare and Medicaid.”

On November 18, Portman and Carper released the findings of a new investigative report, which were also highlighted on CBS News’ 60 Minutes, detailing how drug manufacturer kaléo exploited the opioid crisis by increasing the price of its naloxone drug EVZIO by more than 600 percent by 2016 (from the initial price of $575 per unit in July 2014 to $3,750 in February 2016 and then to $4,100 11 months later in January 2017), launching a new distribution model planning to “capitalize on the opportunity” of “opioid overdose at epidemic levels.” The company’s sales force focused on ensuring doctors’ offices signed necessary paperwork indicating that EVZIO was medically necessary, ensuring the drug would be covered by government programs like Medicare and Medicaid. The plan worked, resulting in increased costs to taxpayers, to date, totaling more than $142 million in just the last four years, despite the fact that less costly versions of naloxone exist.

KEY FINDINGS IN THE NOVEMBER 18 PSI REPORT

With sluggish sales of its EVZIO drug at its initial list price of $575, kaléo implemented a new distribution model proposed by consultant Todd Smith that increased the price by more than 600 percent by 2017 (from $575 per unit in July 2014 to $3,750 in February 2016 and then to $4,100 in January 2017 11 months later).

Mr. Smith previously installed his distribution model at Horizon and Novum pharmaceutical companies, where he drastically raised drug prices at those companies.

According to company documents, Mr. Smith’s new distribution model for EVZIO was designed to “capitalize on the opportunity” of “opioid overdose at epidemic levels.”

As part of the distribution model, the company’s sales force focused on making sure doctors’ offices signed necessary paperwork indicating that EVZIO was medically necessary, which ensured the overdose reversal drug would be covered by government programs like Medicare and Medicaid.

Before kaléo increased the price of EVZIO, industry experts recommended a price between $250-$300 for the product, telling the company it would “own the market” at that price.

One of the industry experts advising kaléo to charge a lower price for EVZIO went on to work with Adapt to price Narcan at $125, which has now cornered the market at that price.

Kaléo states its cost for an EVZIO is roughly $174, which includes $52 in manufacturing, $29 in overhead and $93 in “obsolescence.”

Kaléo’s new distribution model worked. EVZIO fill rates jumped from 39 percent to 81 percent. While kaléo said its new model focused on commercially-covered patients, the majority of its initial revenues were from Medicare and Medicaid, and the resulting cost to taxpayers, to date, has been $142 million despite the fact that much less costly alternatives are available.

Kaléo paid Mr. Smith and his partner Mr. Bove (through their consulting firm Underhill) more than $10.2 million for around two years of work. The rate was based on revenue generated by their distribution model.

LEGISLATIVE RECOMMENDATIONS IN THE REPORT