April 2011
Typically FDA approval of a new drug is met with great anticipation; however, what happens if an unapproved version of the product, one that is being compounded by pharmacies, already exists? Although the approval of the product may be straightforward, the commercial implications are not. Can pharma rely on FDA regulation to remove the “unapproved” competition? And ultimately, does bringing an already available product to market make financial sense?
FDA Regulation:
Compounded drugs are not FDA approved products, and thus their safety and efficacy are not regulated. However, the FDA has long recognized the important public health function served by pharmacy compounding and thus has not taken enforcement actions against pharmacies engaged in traditional compounding, allowing for the provision of these vital, and otherwise not commercially available drugs.i What the FDA does choose to enforce is explained in Compliance Policy Guide (CPG) which ensures that compounding practices do not violate the new drug, adulteration, or misbranding provisions of the Federal Food, Drug, and Cosmetic Act (FDCA). For human drugs, the FDA will consider enforcement of compounded drugs that are copies, or essentially copies, of commercially available FDA-approved drug products without a documented patient-specific medical need.ii
Makena™ Case Study:
It is for this reason that given the February 2011 FDA approval of Makena, KV Pharmaceuticals sent out a letter informing pharmacies that they could no longer compound hydroxyprogesterone caproate injections.iii However, in a statement on March 30, 2011 the FDA stated that “In order to support access to this important drug, at this time and under this unique situation, FDA does not intend to take enforcement action against pharmacies that compound hydroxyprogesterone caproate based on a valid prescription for an individually identified patient.”Citing that KV "received considerable assistance from the federal government in connection with the development of Makena by relying on research funded by the National Institutes of Health to demonstrate the drug's effectiveness" the lack of FDA support in enforcement seemed to imply that the intended $1,500 cost per dose was unreasonable.iv Although KV has since cut their pricing by nearly 55%v , the American College of Obstetricians and Gynecologists still maintains that the current price continues to be prohibitive given that compounded versions have historically been available through pharmacies for just $10-$20 a dose.vi
Problems With Compounding:
Although compounded products have a preferable price point, at what cost? A 2006 study conducted by the FDA collected samples (both APIs and compounded finished drug products) to explore potential quality issues. Of the samples available for analysis, 33% failed with potency ranging from 67% to 268% of the amount of drug intended. Because all the API samples passed analytic testing this suggests that issues with the finished drug products were likely related to the compounding processes at the pharmacy.vii The repercussions of such inaccuracies can be disastrous. From 1990 to 2005, the FDA learned of at least 240 serious illness and deaths associated with improperly compounded products. Because pharmacists are not required to report adverse events to the FDA these statistics could vastly underestimate the issues associated with compounded products.viii
Branded Products May Not Be A Financially Viable Solution:
KV Pharmaceuticals originally purposed pricing (at $1,500 a dose) was under extreme pressure, given the low cost of compounded alternatives ($10-20 a dose). Had a lower cost compounded product not been available, it is unlikely that the $1,500 price point for a specialty injectable product with an orphan drug status would have fallen under such scrutiny. Orphan drugs typically command price premiums, as insurers traditionally cover these therapies because (in addition to the medical need being addressed) the small populations involved do not usually lead to significant cost exposure. For example, a survey conducted by InVentiv Health found that for almost half of surveyed plans, the threshold for price scrutiny was when an orphan drug was priced at ≥$50,000 per patient per year.iv
According to the prescribing information, Makena is indicated once weekly with treatment beginning between 16 and 20 weeks gestation and continuing until week 37 or gestation or delivery, whichever occurs first. Thus the maximum annual cost per patient is ~$33,000 (22 doses x original $1,500 price point) which for the majority of payors would likely not fall under tight management.x Prior to the revised pricing, analysts projected Makena to be a blockbuster valuing the drug at approximately $1B in US peak year revenuexi, however the reduced price and lack of FDA enforcement in removing the compounded versions from the market severely limit Makena’s ability to reach this projected revenue potential.
Lessons Learned:
Will all branded products that will ultimately compete with a compounded alternative face the same commercial hurdles, thus disincentivizing the development of safer alternatives? The answer may depend on the product.
In January 2010 the FDA approved Ampyra (Acorda Therapeutics), which was also available as an unapproved compounded product, yet according to analysts “Ampyra sales are encouraging.”xii The key to Ampyra’s relative and less controversial success in comparison to Makena indicates important considerations for commercial planning when bringing a product that will compete against compounded competition to market:
Level of compounded product use prior to branded launch:
Compounded 4-AP (Ampyra) was rarely used by physicians prior to Ampyra launch given lack of data and physician awareness. In contrast, compounded hydroxyprogesterone caproate has been relied upon by OB-GYNs for many years, especially after a federally funded trial published in The New England Journal of Medicine in 2003 showed positive results with the compounded product.viii Thus, many physicians felt KV’s clinical trials were just confirming something they already knew, that Makena is just a manufactured version with the same medical indications of a drug they are already comfortable using.xiv
Product Safety:
Potential safety concerns associated with Ampyra may have served as an impetus to strengthen FDA regulations against using the compounded product. As part of the agreed upon FDA Risk Evaluation and Mitigation Strategy (REMS), Acorda sent letters stating that “a pharmacy-compounded formulation of the drug should not be substituted for Ampyra due to the unknown pharmacokinetics of compounded formulations and the potential for overdose and increased risk of seizures.”xv However, because compounded hydroxyprogesterone caproate has been “safely used for years” the FDA made the decision to allow compounding pharmacies to continue to produce valid forms of the medication.
Public Health Importance:
Without question, Ampyra represents an important advance in MS treatment (improvement in walking), but it does not have the same public health implications as the prevention of preterm births. In fact, for every dollar invested in the compounded version of Makena, $8 to $12 in health care costs related to prematurity are saved. In contrast, Makena will require $8 to $12 in drug spending for every dollar in such prematurity costs avoidedxvi …and yet clinical trials have shown that the outcome of both scenarios is essentially the same.
These are just a few of the considerations that must be taken into account in early stage development of a branded version of an established compounded product. Despite the consistency insured by a branded product, the lack of novelty may not justify the increased cost. Any drug brought to market as a “value add” should add significant value in order to be commercially viable.
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About the author: Kate Grady is a Senior Consultant at the Frankel Group. To contact her regarding this post, email blog@frankelgroup.com.
i: FDA “The Special Risks of Pharmacy Compounding” 5/2007
ii: FDA Compliance Policy Guide Sec. 460.200 Pharmacy Compounding (Reissued 5/29/2002)
iii: Letter from KV Pharmaceuticals Dated 2/17/2011
iv: FDA Press Release March 30, 2011
v: KV Pharmaceutical Press Release April 1, 2011
vi: PharmaTimes “KV Hales Price of Makena but Controversy Rages On” April 4, 2011
vii: FDA “2006 Limited FDA Survey of Compounded Drug Products”
viii: Ibid
viv: American Health & Drug Benefits 3:15-23 (2010)
x: Ibid
xi: Imperial Capital (KV Pharmaceutical Company) 3/2011
xii: J.P. Morgan (Acorda Therapeutics) 02/2011
xiii: NEJM 348: 2379-2385 (2003)
xiv: NEJM.org “Unintended Consequences – The Cost of Preventing Preterm Births after FDA Approval of a Branded Version of 17OHP” March 16, 2011
xv: Acorda Therapeutics Letter to Pharmacists
xvi: NEJM.org “Unintended Consequences – The Cost of Preventing Preterm Births after FDA Approval of a Branded Version of 17OHP” March 16, 2011