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Politics & Government

Sen. Carper releases report on probe into opioid drug price hikes

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Delaware Public Media
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Sen. Tom Carper and Ohio Republican Sen. Rob Portman released findings from a probe into a drug company they say exploited the opioid crisis.

Carper said drug manufacturer Kaléo raised the price of its Naloxone auto injector (ENZIO) from $575 dollars to more than $4,000 dollars in less than a year - a 600 percent hike. Naloxone reverses opioid overdoses.

While the company said it focuses on private insurance patients, the investigation found most of its revenue came from Medicare. The investigation was featured on last Sunday's CBS show 60 Minutes.

Carper said Medicare paid $142 million for ENZIO prescriptions at the taxpayers’ expense. He said the company’s actions could be criminal.

“A reasonable question is whether there was collusion along the way between the manufacturer and the doctors who were prescribing it, medical offices prescribing medical necessity for somebody in Medicare to pay $4,000 for a product that’s available for a $125,” he said.

But the recommendations outlined in the report released this week do not include a call for a legal probe into the company or its CEO.

Carper said he hopes to hold an oversight hearing on the findings when Congress returns next year.

“It may be illegal, it may not be illegal," he said. "It sure as hell violates what I think is a sense of right and wrong. Part of what we want to do is expose this kind of behavior, this kind of practice and to try to make sure the company changes it.”

Kaléo said it focuses on patients with private insurance, not those with Medicaid or Medicare. It added that it will pay the copay for the auto-injector for patients if it’s cost-prohibitive.

The company has also donated millions of dollars worth of Naloxone to Delaware and other states.

KEY FINDINGS IN THE 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 2016 (from $575 per unit to $3,750 and then to $4,100 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
 

  • The Centers for Medicare & Medicaid Services (CMS) should review its policies governing physician use of medical necessity formulary exceptions for Medicare Part D to prevent companies from inappropriately influencing prescribing.
  • Congress should mandate a three-day limit on opioid prescriptions, consistent with Centers for Disease Control and Prevention (CDC) recommendations.
  • Congress should require all states to utilize prescription monitoring programs (PDMPs) for opioids and other dangerous drugs that are authorized to freely share data among states. 
  • Congress should require CMS to improve transparency regarding the total amount spent for drugs purchased by government health care programs.
  • Congress should allocate funding for research to develop innovative, more potent opioid overdose reversal drugs and non-opioid pain relief drugs. 
  • Congress should allocate funding for state and local governments to train members of the public on the use of generic and brand name naloxone products.
  • States should consider changing laws to authorize and train emergency medical technicians and other first responders to administer naloxone. 
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