In the latest installment of the high-stakes drama surrounding the Makena medication for premature births, KV Pharmaceuticals has filed a lawsuit against the FDA for failing to prevent some compounding pharmacies from offering lower-cost versions of the controversial treatment. And the move comes as the drugmaker continues to signal investors that the unexpected competition - purportedly caused by the lack of FDA enforcement - may spell financial doom.
Here is the genesis: Early last year, the FDA approved Makena under the Orphan Drug Act, but shortly afterwards, both the drugmaker and the FDA came under fire after KV Pharma set pricing at $1,500, compared with $10 to $20 a week for compounded versions of a med that has been used for decades. In response, the FDA took the unusual step of deciding not to prevent compounders from compounding, and in doing so, inserted itself into an especially heated controversy.
Normally, the FDA would have banned the sale of older, unapproved drugs, and KV, in fact, had already sent letters to compounders threatening legal action. But as reported previously, the Obama adminstration was concerned about the harsh publicity over Makena pricing since a federal agency had allowed a monopoly to develop (read this, this and this). The FDA decision not to pursue enforcement actions against compounders, unless there was a safety issue, was significant because the agency was dragged into a debate over cost.
KV Pharma does not have a patent, but the approval, effectively, eliminated competition, because the drugmaker was granted seven years of market exclusivity. KV Pharma subsequently lowered its price under mounting criticism (back story). But desperate to generate revenue, the drugmaker last fall provided the FDA with samples of active pharmaceutical ingredients and compounded products that the drugmaker alleged raised concerns about potency and purity.
Last month, though, the FDA indicated there were no safety problems with the samples and there was little to no change in the agency position (read this), although KV initially attempted to spin the announcement as a positive step (read here). But a subsequent Q&A from the FDA, which was issued to clarify any misunderstanding about its posture seemed to underscore frustration at the drugmaker (see this and this).
All of which led to the lawsuit in which the drugmaker the US Department of Health & Human Services and the FDA of putting "the supposed interests of Medicaid, other third-party payers and some patients above the medical interests of all patients for whom Makena is indicated," according to the lawsuit. "As a result of the defendants' action, it is difficult or impossible for many of these women to obtain the one drug to treat their condition that FDA has approved as effective, safe, properly manufactured and properly labeled" (here is the lawsuit).
"Instead, these women are being relegated to unapproved compounded versions... of uncertain quality and potency and made from a bulk active pharmaceutical ingredient that the defendants are allowing to be imported into the United States unlawfully," KV charges. The drugmaker then goes on to claim that the actions - or alleged inaction - by HHS and the FDA may lead to its financial demise, a contention that has been disclosed in various filings with the US Securities and Exchange Commission in recent months (see page 22 here and here).
"Under present circumstances, sales of Makena, on which KV is highly dependent, cannot generate the cash KV needs to satisfy its ongoing normal cash operating expenses and the material, near-term payment obligations the company faces beginning in August 2012," KV charges. "Unless FDA publicly signals that it will stop the unlawful competition by non-customized compounded drugs (and thereby gives KV's creditors reason to believe that KV is likely to be able to meet its financial obligations if given more time), KV will not be able to attract new capital at a reasonable cost, is likely to exhaust its working capital within three to six months and be forced to file bankruptcy before then."
This would appear to be a last-ditch attempt to salvage the revamping of the drugmaker, which underwent considerable turmoil before new investors pumped in money and bet on Makena to generate a huge return. For those who may not recall, former chair and ceo Marc Hermelin pleaded guilty to presiding over the production and distribution of oversized tablets. He was banned from participating in federal health care programs, such as Medicare and Medicaid in connection with the violations (see this).
There was still more fallout late last year, when KV Pharma agreed to pay $17 million to resolve allegations that its Ethex defunct subsidiary violated the False Claims Act by failing to advise the Centers for Medicare and Medicaid Services that two of its drugs were unapproved and, therefore, did not qualify for coverage (look here).