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Mass. lawmakers say US Senate report alleging drug maker 'exploited the opioid crisis' highlights need for federal action

November 19, 2018
In The News

Federal lawmakers this week condemned pharmaceutical company kaleo, Inc. after a U.S. Senate investigation found it "exploited the opioid crisis" by substantially raising the cost of its overdose reversal drug -- leading to millions in charges to taxpayers.

The U.S. Senate Committee on Homeland Security and Governmental Affairs' Permanent Subcommittee on Investigations released a report Sunday looking at how the drug manufacturer raised the price for its naloxone drug, EVZIO, from an initial per unit price of $575 to $4,100 -- a more than 600 percent increase. 

The report further suggests that kaleo launched a distribution model that planned to "capitalize on the opportunity" of opioid overdoses being at "epidemic levels," and had its sales force focused on ensuring doctors' offices signed paperwork indicating EVZIO was medically necessary so it'd be covered by government programs.

Noting that an estimated 72,000 Americans died last year from an opioid overdose, U.S. Rep. Richard Neal, D-Springfield, said it's important that lifesaving drugs, like naloxone, "be made more attainable and affordable to the general public."

"We cannot let companies profiteer during this drug addiction crisis, deny people access to medication and have the taxpayer pick up the bill. These tactics are becoming too much of a financial drain on our public health system," he said in a statement.

Neal, who is expected to become the new House Ways and Means Committee chairman, added that he intends to work with lawmakers on both sides of the political aisle "to make this issue and the subject of rising out-of-pockets costs a priority in the next Congress." 

U.S. Sen. Elizabeth Warren, D-Massachusetts, agreed that Congress "must do more to hold drug companies like kaleo accountable for price gouging life-saving drugs."

The senator noted that she and U.S. Rep. Elijah Cummings, D-Maryland, have "introduced legislation to create a federal Naloxone distribution program, so that overdose-reversal products are always available to first responders, public health departments and the public."

U.S. Sen. Ed Markey, D-Massachusetts, meanwhile, has called on the U.S. Department of Health and Human Services to create a "stockpile" of naloxone so the drug can be rapidly deployed when needed.

The senator, in a May letter, further raised concerns that "the higher naloxone prices and the increase in overdoses, particularly from synthetic opioids, are preventing many communities and their first-responders from procuring naloxone in the quantities necessary to respond to this public health emergency." 

U.S. Sen. Rob Portman, an Ohio Republican and the Permanent Subcommittee on Investigations chairman, said "the fact that one company dramatically raised the price of its naloxone drug and cost taxpayers tens of millions of dollars in increased drug costs, all during a national opioid crisis ... is simply outrageous."

He added that the sub-panel will continue to fight to protect taxpayers "from drug manufacturers that are exploiting loopholes in the Medicare and Medicaid system in order to profit from a national opioid crisis."

The report alleges that kaleo, facing lagging sales of its EVZIO drug at its initial $575 list price, implemented a new distribution model that increased the drug's price to $3,750 and later to $4,100 by 2016. Consultant Todd Smith, who reportedly proposed the model, installed similar plans at Horizon and Novum pharmaceuticals, according to the report. 

It also found that company documents suggested the new model was designed to "capitalize on the opportunity (of) opioid overdose at epidemic levels," and that the sales force focused on having doctors' offices sign paperwork indicating EVZIO was medically necessary so it'd be covered by Medicare and Medicaid.

The report suggests that "kaleo's new distribution model worked" with EVZIO fill rates jumping from 39 percent to 81 percent. The majority of its initial revenues, it further noted, came from Medicare and Medicaid, resulting in more than $142 million in costs to taxpayers in the last four years alone -- even though less costly versions of naloxone exist. 

The company paid Smith's consulting firm more than $10.2 million for about two years of work -- a rate based on revenue generated by the distribution model, the report contends.

The subcommittee further noted that the price increases came despite kaleo stating that the cost for EVZIO is roughly $174 and industry experts advising the company to price the drug between $250 and $300.

The report recommends a series of legislative changes, including that: The Centers for Medicare and Medicaid Services review its policies governing physician use of medical necessity formulary exceptions for Medicare Part D to prevent inappropriately influenced prescribing; Congress require CMS to improve transparency regarding the total amount spent for drugs purchased by government health care programs; and Congress allocate funding for research to develop innovative, more potent opioid overdose reversal drugs and non-opioid pain relief drugs. 

Kaleo, in response to the U.S. Senate's report, said it's "disappointed with the way in which some of the facts are being presented and believe there is much more to this very complex story."

"First, we have received voluntary reports from recipients of donated product that EVZIO has saved more than 5,500 lives since we launched the product in 2014. Second, we have never turned an annual profit on the sale of EVZIO. Patients, not profits, have driven our actions," it said in a statement. "We believe patients and physicians should have meaningful choices. There is no doubt, the complexity of our health care system has had unintended negative implications for everyone involved, but most importantly, for patients. To this end, we explored viable paths within the current health care system to make EVZIO available to patients in a responsible, meaningful and affordable way."

The company added that it agrees "changes need to be made" and believes all patients should have access to products at reasonable prices. 

"We are actively working with stakeholders in the health care system, including insurers, policymakers and government officials, to provide EVZIO at a lower cost while ensuring patients and their loved ones have access to this life-saving drug," it continued. "This issue is personal to all of us at kaleo."