Note on use of Orphan Drug Act to increase price of hydroxyprogesterone caproate from $10 to $1,500 per dose

(Following discussions with Ed Silverman of Pharmalot, this blog was updated at 12 pm on March 22, to add some suggestions as to how to reform the Orphan Drug Act).

This note concerns an increase in the price of hydroxyprogesterone caproate, from $10 to $20 per dose to $1,500 per dose. (Several injections are needed). Long used off label to prevent premature births, the drug will be sold by KV Pharmaceuticals, under a newly granted right under a statutory monopoly, at 150 times the price of the generic product using the trade name Makena.

Below is the press release from Senator Sherrod Brown (D-OH), regarding the letter from U.S. Sen. Sherrod Brown (D-OH) and U.S. Sen. Amy Klobuchar (D-MN) that was sent to Federal Trade Commission about "efforts of KV Pharmaceutical to monopolize a pre-term labor prevention drug for pregnant women." There are news reports about the price hike by Pharmalot, Bloomberg, Time, TechDirt, the WSJ, the LA Times, ABC and this video report from the Associated Press, as well as many other news outlets.

How was KV Pharmaceuticals able to gain a monopoly on an older drug that was widely in use for less than $20 per injection?

According to the FDA Orange Book, there are no patents on the drug. The monopoly is a consequence of the Orphan Drug protection, which will be in effect until Feb 3, 2018.

Drug Name(s) MAKENA (Brand Name Drug)
FDA Application No. (NDA) 021945
Active Ingredient(s) HYDROXYPROGESTERONE CAPROATE
Company KV PHARM
Original Approval or Tentative Approval Date February 3, 2011
Chemical Type 5 New manufacturer
Review Classification P Priority review drug

There are no unexpired patents for this product in the Orange Book Database.

Appl No Prod No Exclusivity Code Exclusivity Expiration
N021945 001 ODE Feb 3, 2018

According to the FDA, KV Pharmaceutical Company received the following Orphan Designation:

Generic Name: Hydroxyprogesterone Caproate
Trade Name: Makena
Date Designated: 01-25-2007
Orphan Designation: Prevention of preterm birth in singleton pregnancies
Orphan Designation Status: Designated/Approved
FDA Orphan Approval Status: Approved for Orphan Indication
Approved Orphan Indication: To reduce the risk of preterm birth in women with singleton pregnancy who have a history of singleton spontaneous preterm birth
Exclusivity Start Date: 02-03-2011
Sponsor: KV Pharmaceutical Company
One Corporate Woods Drive
Bridgeton, MO 63044

The Orphan Drug Act gives a company the automatic right to a 7 year monopoly for a new use for an older drug when the Orphan indication involves less than 200,000 patients per year in the United States, regardless of who paid for the research on drug, how much it cost to develop the drug, or the prices charged to consumers. The relevant legal provisions are available from the FDA here.

SEC. 526 [360bb]. (a)(2) For purposes of paragraph (1), the term "rare disease or condition'' means any disease or condition which (A) affects less than 200,000 persons in the United States, or (B) affects more than 200,000 in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will recovered from sales in the United States of such drug.

The problems with hydroxyprogesterone caproate (Makena) unfortunately are not unique, and indeed, the price hike in this case is actually lower than for many other Orphan Drug products. Some orphan products are priced at more than $100,000 per year, and some generate more than $1 billion per year in sales, for "orphaned" diseases. However, the Makena case is certainly worth examining in more detail.

ClinicialTrials.Gov identifies 28 clinical trials involving hydroxyprogesterone caproate. The total number of patients enrolled in the reported trials was 9,942. A variety of sources of funding were reported for the trials. These are reported in Table 1, by the stage of the trials.

Trials involving hydroxyprogesterone caproate reported in ClinicalTrials.Gov, 21 March 2011
Phases Funded Bys SUM(Enrollment)
No Phase Industry 375
No Phase NIH 169
No Phase Other 416
Phase I Industry 0
Phase I|Phase II Other 40
Phase II Other 295
Phase II Other|NIH 60
Phase II|Phase III Industry 543
Phase III Industry 1707
Phase III NIH 2595
Phase III Other 2519
Phase IV Other 800
Phase IV Other|Industry 375
Phase IV Other|Industry|NIH 20
Phase IV Other|NIH 28

Among the trials identified as funded by Industry, only two were sponsored by KV Pharmaceuticals. One was a Phase III trial involve 1,707 patients, and another was an observational trial involving 375 patients. To the extent that KV Pharmaceuticals invested in these trials, it was eligible for a 50 percent tax credit for the costs of the trials.

Sponsors, Enrollment, and Type of Trial for rials involving hydroxyprogesterone caproate reported in ClinicalTrials.Gov, 21 March 2011
NCT ID Sponsors Phases Enrollment Funded Bys Study Types
NCT00141908 American University of Beirut Medical Center Phase II 290 Other Interventional
NCT01317225 Saint Thomas Hospital Phase III 80 Other Interventional
NCT00809939 Meir Medical Center Phase III 800 Other Interventional
NCT01004029 KV Pharmaceutical Company|PRA International Phase III 1707 Industry Interventional
NCT00163020 Obstetrix Medical Group Phase II|Phase III 321 Industry Interventional
NCT00694967 Lehigh Valley Hospital 92 Other Interventional
NCT00331695 Assistance Publique - Hôpitaux de Paris Phase IV 560 Other Interventional
NCT01119963 Obstetrix Medical Group Phase II|Phase III 222 Industry Interventional
NCT00120640 Yale University|Matria Healthcare Phase IV 375 Other|Industry Interventional
NCT01050647 Stanford University Phase I|Phase II 40 Other Interventional
NCT00439374 Eunice Kennedy Shriver National Institute of Child Health and Human Development (NICHD) Phase III 1000 NIH Interventional
NCT00156000 Obstetrix Medical Group|Adeza Biomedical Phase I 0 Industry Observational
NCT01146990 KV Pharmaceutical Company|PRA International 375 Industry Observational
NCT00099164 Eunice Kennedy Shriver National Institute of Child Health and Human Development (NICHD) Phase III 795 NIH Interventional
NCT01178788 University of Modena and Reggio Emilia Phase III 480 Other Interventional
NCT00135902 Eunice Kennedy Shriver National Institute of Child Health and Human Development (NICHD) Phase III 800 NIH Interventional
NCT00409825 University of Pittsburgh|National Institutes of Health (NIH) Phase II 60 Other|NIH Interventional
NCT00579553 University of Oklahoma 264 Other Interventional
NCT00457886 Georgetown University|Wedgewood Pharmacy|National Center for Research Resources (NCRR) Phase IV 20 Other|Industry|NIH Observational
NCT01154192 University of California, San Diego|University of Virginia Phase III 75 Other Interventional
NCT00989781 University of California, San Diego 60 Other Interventional
NCT00123669 Tata Memorial Hospital|Ministry of Science and Technology, India Phase III 1000 Other Interventional
NCT01062568 University of California, San Diego Phase III 84 Other Interventional
NCT00542841 Office of Rare Diseases (ORD) 99 NIH Interventional
NCT00364949 Eunice Kennedy Shriver National Institute of Child Health and Human Development (NICHD) 70 NIH Observational
NCT00621985 Children's Hospital Boston Phase II 5 Other Interventional
NCT00667498 Yale University|National Institutes of Health (NIH) Phase IV 28 Other|NIH Interventional
NCT00851942 Cardiff University Phase IV 240 Other Interventional

The NIH RePorter Database provides details on 38 NIH grants for the text Search: hydroxyprogesterone caproate, Fiscal Year: All Fiscal Years. Between 2 and 9 NIH grants were awarded each year from 2005 to 2011.

Number of NIH grants for hydroxyprogesterone caproate. Source NIH RePORTER, 21 March 2011.
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Senators Sherrod Brown (D-OH) and Amy Klobuchar (D-MN) have asked the FTC to investigate the abuse of the pricing of the drug now protected by the Orphan Drug Act statutory monopoly. This will be a difficult task for the FTC under current U.S. case law regarding the excessive pricing of drugs protected by statutory monopolies like patents or Orphan Drug Act or regulatory test data exclusivity. At some point, the Congress needs to revisit the Orphan Drug Act itself, and revise the open ended grant of the monopoly for any product used to treat an indication of less than 200,000 U.S. patients.

Note that the Orphan Drug Act operates interdependently from the patent system, or from the exclusive rights in regulatory data, which provide separate legal barriers to competition. When the Orphan Drug Act is most important to a company is when it has no or insufficient claims to patented inventions or regulatory test data to block competition.

How difficult would it be to reform the Orphan Drug Act? Not difficult at all. SEC. 526[360bb]. (a) could be amended to read:

SEC. 526 [360bb]. (a)(2) For purposes of paragraph (1), the term "rare disease or condition'' means any disease or condition which (A) affects less than 200,000 persons in the United States, or (B) affects more than 200,000 in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will recovered from sales in the United States of such drug.

And, procedures could be changed so that:

(X) Before any exclusivity is granted under this Act, the entity seeking the exclusivity shall provide an economic and medical rationale for the grant of exclusivity, including information about the investments that have been or will be made, the prices it will charge, and the mechanisms to address the access needs of persons who cannot afford the drug. The public shall be given notice of and access to such applications, and provided the opportunity to comment on the request for market exclusivity, including to suggest additional safeguards to protect consumers from unreasonable pricing of the product. Any grant to exclusivity under the Act may include at the discretion of the Secretary or a designee of the Secretary, appropriate conditions and limits on the exclusive rights that may be needed to protect to public as consumers and taxpayers.


Senator Sherrod Brown's press release follows:
Brown Leads Effort to Demand Federal Investigation Into Price Gouging of Pre-Term Labor Drug for Expectant Mothers.

Brown, Joined by Sen. Klobuchar, Urges the Federal Trade Commission to Examine Drastic Prenatal Drug Cost Increase

March 17, 2011

WASHINGTON, D.C. – U.S. Sen. Sherrod Brown (D-OH) and U.S. Sen. Amy Klobuchar (D-MN) today sent a letter to Federal Trade Commission Chairman Jon Leibowitz urging a federal investigation into the expected efforts of KV Pharmaceutical to monopolize a pre-term labor prevention drug for pregnant women. The move follows a letter sent last week by Brown to KV Pharmaceutical Company CEO Greg Divis urging reconsideration of the reported massive price increase.

“KV created an overnight monopoly for this lifesaving drug – and then proposed raising the price by 14,900 percent,” Brown said. “Since KV Pharmaceuticals announced the intended price hike, I called on KV Pharmaceuticals to immediately reconsider their decision, but to this date the company continues to defend this astronomical price increase. Price-gouging is never acceptable, particularly not when it undermines public health and fleeces taxpayers. Parents-to-be deserve an investigation.”

At a Senate Appropriations Hearing on Thursday, Brown grilled Food and Drug Administration (FDA) Commissioner Margaret Hamburg on the outrageous price increases of a drug to prevent preterm pregnancy. Last week, Brown sent a letter to the CEO of KV Pharmaceuticals – a company which gained exclusive rights to sell an already existing drug that prevents premature labor – and then increased prices per dose from $10 to $1,500, a 14,900 percent price increase. This week, he’s sent a letter requesting a price-gouging investigation of KV’s practices by the Federal Trade Commission (FTC).

The drug for high-risk pregnant women, which KV Pharmaceutical plans to sell under the brand name Makena, has been produced by compounding pharmacies for years and typically costs between $10-20. Last month, KV Pharmaceutical became the first company to receive FDA approval to sell the product and plans to raise the cost to $1,500 per dosage.

Taxpayer dollars actually helped finance the research and development of this product. Tax dollars funded the first clinical trial in 2003 through the National Institute of Child Health and Human Development (NICHD) at the National Institutes of Health (NIH), as well as subsequent trials in the years following.

This price increase could lead to fewer women being able to afford the drug, increasing our nation’s already too-high preterm birth rate of 13 percent. Higher costs mean that health insurance companies could either stop coverage of the treatment or impose higher premiums on consumers and already stretched state Medicaid programs would be forced to deal with the financial repercussions of the company’s decision.

Last week, Brown sent a letter to KV Pharmaceutical Company’s CEO calling on the company to maintain access of the critical drug and stem an increase in premature births.

Full text of the letter to the FTC is below.

Full text of the letter to the FTC is below.

March 17, 2011

The Honorable Jon Leibowitz
Chairman
U.S. Federal Trade Commission
600 Pennsylvania Ave. N.W.
Washington, D.C. 20580

Dear Chairman:

I am writing to request that the Federal Trade Commission initiate a formal investigation into any potential anticompetitive conduct arising out of KV Pharmaceutical’s actions regarding a dramatic 150-fold increase in price that the company has applied to a proven progesterone treatment.

17-hydroxyprogesterone caproate, sold by KV Pharmaceutical under the name Makena, is a weekly injection of a form of progesterone meant to prevent preterm labor in high-risk pregnant women. This drug, which first came to market over 50 years ago, has recently been used to help prevent early births to women who had a history of spontaneous preterm deliveries. Prior to KV Pharmaceutical’s actions, this product was mixed by compound pharmacies and administered safely for $10 to $20 per injection. Due to the product being given orphan drug status, KV Pharmaceutical has potentially created an anticompetitive market and has indicated they will dramatically increase the cost per injection to $1,500.

While I understand the Food and Drug Administration (FDA) is working to ensure that drugs marketed and sold in the United States are safe and effective, I am concerned that KV Pharmaceutical is taking advantage of FDA’s approval of Makena and orphan drug determination to achieve rights as the sole source for this limited use of progesterone, leading to a monopolization of treatments to address preterm labors.

I appreciate KV Pharmaceutical’s attempt to provide financial assistance to help purchase Makena. However, the financial assistance is not sufficient and does not extend to certain groups of women. In additional to significant costs to individuals, this price increase will place a heavy burden on state Medicaid programs, which cover a majority of high-risk pregnancies. I am extremely concerned that KV Pharmaceutical’s actions will result in diminished access to appropriate health care for women and result in increased preterm births.

Thank you for your attention to my request.

Sincerely,

Sherrod Brown
United States Senator

Amy Klobuchar
United States Senator

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