KV Pharmaceutical suing for survival [St. Louis Post-Dispatch]By Jim Doyle, St. Louis Post-DispatchMcClatchy-Tribune Information Services
Sept. 02--With lackluster sales and dwindling cash, KV Pharmaceutical Co. is turning to the courts in a last-ditch effort to survive.
The Bridgetown-based drug maker, which specializes in women's healthcare products, has filed lawsuits accusing federal and state officials of jeopardizing the safety of pregnant women.
In recent weeks KV Pharmaceutical has sued state Medicaid officials in Illinois, Georgia and South Carolina in hopes of compelling those states to pay for injections of Makena, a drug that aims to reduce the risk of premature births. A federal district judge in Georgia recently ruled in KV's favor.
"Unfortunately, a disparity of care has emerged between commercially insured patients vs. Medicaid patients," said Scott Goedeke, a KV senior vice president. "Our mission is the health and well-being of moms ... We think they deserve to have access to an FDA-approved drug."
He said that more than 300 private insurers have approved prescriptions for Makena, and the average co-payment per injection is only $8. KV also provides Makena at little or no charge to some uninsured patients.
KV Pharmaceutical also has sued the Food and Drug Administration in an attempt to compel the FDA to fully restore the company's market exclusivity on Makena.
"What the company is doing is trying to get the FDA to enforce its existing regulations," Goedeke said. "We've seen progress in this regard, but frankly we'd like to see it happen faster."
The FDA publicly declined in March 2011 to enforce KV's exclusive right to sell Makena -- following public outrage about its price, initially $1,500 per injection. Within hours, the Centers for Medicare and Medicaid Services indicated that states could buy a nonbranded version of the drug, called 17P, from specialty pharmacies -- which typically sells it for about $15 per injection.
KV's price sparked national outrage. Leading national medical organizations and advocacy groups, including the March of Dimes, declared that the company's pricing would make the drug unaffordable to most women.
KV executives have since dramatically lowered Makena's cost, slashing it to $690 per injection in April of last year. A company spokesman now says it has cut the price in three states, through rebates, to less than $300 -- and that Illinois has been offered comparable pricing.
"We believe that we have addressed the price issue," Goedeke said. "We feel that we have taken extraordinary steps."
But so far the company has been unable to demonstrate the market prospects necessary to raise the financing needed to operate during a period of restructuring.
"KV's survival as a going concern is now dependent on Makena's success, with a substantial portion of its potential market being for the treatment of Medicaid patients," KV said in its lawsuit against Illinois officials on Aug. 21. "Unless injunctive relief is ordered, KV's available cash will soon be depleted, KV may cease to exist, and Makena may no longer be available to pregnant women."
KV neither invented nor patented Makena, but agreed to pay Hologic Inc. nearly $200 million for "orphan drug" status -- and seven years of market exclusivity -- for the rights to sell the branded drug.
The company filed for federal bankruptcy protection in early August of this year, listing assets of $237 million and debts of $728 million. The filing came on the same day that KV Pharmaceutical failed to make a $95 million payment it owed to Hologic, a Massachusetts firm that was KV's partner in developing Makena.
Goedeke characterized KV's operations as "business as usual... There have not been disruptions in the supply or availability of our drugs. Doctors are still prescribing our drugs. Patients are still getting our products."
KV's strategy now seems to focus on lawsuits accusing federal health officials of putting the financial interests of state Medicaid programs, private insurers and some patients above the interest of pregnant women who have been prescribed Makena.
According to KV, allowing companies to sell and distribute 17P has resulted in the inability of many women with high-risk pregnancies to obtain the drug in a safe manner. KV says the active pharmaceutical ingredient in 17P is imported from China and is of questionable potency and purity.
Pharmaceutical factories in China are not approved nor regulated by the FDA; and most of these facilities have never been inspected by the FDA.
"There are very few safeguards for compounded drugs, including compounded 17P," Goedeke said. "There is good reason to be concerned about potency, purity, and consistency from dose to dose -- for what is supposed to be a sterile injection."
According to KV, independent laboratory tests have shown that two-thirds of 17P vials failed to met quality standards required for Makena for potency and/or purity -- and one vial contained no active ingredient at all, just glucose.
"Our evidence shows that the active drug ingredient is being produced in facilities that are unregistered and un-inspected by the FDA," Goedeke said. "The FDA itself has confirmed and communicated that there has been variability in the potency and purity from the unregistered facilities."
In June, the FDA publicly disclosed the results of its testing of compounded versions of 17P and its active pharmaceutical ingredient, concluding that it had not identified "any major safety problems." Still, the agency stressed that "FDA-approved drug products, such as Makena, provide a greater assurance of safety and effectiveness than do compounded products."
The FDA also sent a letter to New Jersey-based Wedgewood Pharmacy indicating that enforcement action could be taken against the pharmacy for compounding what it characterized as large volumes of "copies" of FDA-approved Makena.
And the federal Centers of Medicare and Medicaid Services sent a letter in mid-June to state Medicaid programs "to remind states of their responsibility to cover FDA approved products, such as Makena, that qualify as covered outpatient drugs."
In Illinois, Georgia and South Carolina, state Medicaid officials have enacted policies that require "prior authorization" before Makena will be covered. For cost reasons, those states prefer to pay much less for a compounded version of the drug.
On Aug. 9, a federal judge in Georgia issued a preliminary injunction that ordered Medicaid officials in that state to stop denying coverage to women who have a prescription for Makena.
In the Illinois case, KV has accused state Medicaid officials of "the systematic denial of medical care to the poor and vulnerable" by denying coverage for Makena.
According to KV, physicians have attempted to prescribe Makena to 71 women in Illinois but state Medicaid officials have only approved the injections for three women.
"The exorbitant pricing of Makena has drawn universal condemnation from Medicaid agencies, insurance companies and the physicians treating the women for whom this drug is indicated," Mike Claffey, a spokesman for Illinois Healthcare and Family Services.
He said that "to protect taxpayers and conserve resources for necessary medical care," the department "routinely subjects high-cost drugs to an approval process to ensure they are properly used and to make sure less costly alternatives have been considered."
Wall Street analysts are skeptical about the company's chances. At this point, few analysts are bothering to track KV Pharmaceutical's latest moves. The company's Class A common stock -- the most widely traded -- closed at 11 cents a share on Friday.
Kevin Kedra, an analyst at Gabelli & Co., an investment management firm in Rye, N.Y., said that KV's lawsuits "seem pretty futile ... They don't have many options left. Suing those entities is usually an act of desperation. You're usually not going to win those battles."
Kedra said that KV's creditors probably won't recover much from the bankrupt company.
"They have Makena, but it really doesn't have much value," he said. "Whatever value was there, they seem to have destroyed it with their pricing strategy ... I think shareholders are left holding an empty bag."
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