A headline from USA Today came across my desk today “Drug company raised price of life-saving opioid overdose antidote more than 600 percent ” with the simple comment “this is evil” from the person who shared it. My ears immediately perked up, because ‘pharmaceutical pricing’ regularly falls into the category of things the news media is seemingly incapable of reporting on accurately. I was not disappointed.
The story (which has generated all manner of hate-click headlines this morning), is about a company Kaleo implementing a significant (600%) price increase on one of their products, Evizo, two years ago. Evizo is a naloxone autoinjector, which means that it’s essentially an epi-pen for opiate overdoses. It’s a pre-dosed, self-sheathing syringe that delivers naloxone, which is an opiate reversal agent.
Naloxone, patented in 1961, is far outside of any patent protection, which means it’s available from several different manufacturers in both branded (like Evizo and Narcan) and generic variants. Naloxone is sold in a variety of forms, most notably: vials for intravenous administration in hospitals (~$25/dose), and pre-dosed intramuscular autoinjectors (like Evizo), and pre-dosed nasal sprays (like Narcan, ~$125/dose). The pre-dosed auto-injectors and pre-dosed nasal sprays are what is used by police officers, EMTs, and lay-people.
The thing that makes Evizo different from its competition is that the autoinjector pack speaks to the person using it, giving them instructions for administration much like modern AEDs do. This, to begin with, made it a niche luxury product. Even before the price increase, when it was launched at $575, it was still some 300% more expensive than the brand-name naloxone nasal spray Narcan ($125).
I was among the first groups of EMTs to be trained to administer naloxone in NJ in 2014-15. We were trained on the nasal spray. Everywhere I’ve subsequently worked and every public-access program I’ve ever participated in has trained people exclusively on the nasal spray. This is of course anecdotal, but I’ve never seen a naloxone autoinjector in the field.
Which brings me to my gripe with this USA Today article, and most of the news coverage of this price hike today. What people think when they read a headline like the USA Today headline is that “those evil pharmaceutical companies raised the prices again, now it’s going to be impossible to afford the drug that saves peoples lives during ODs” which is not what happened. But USA Today knows that people will think that, and get angry, and share the article.
What happened is that one of at least six companies which manufacture naloxone raised its prices two years ago. This is not like if the only electricity provider where you live decided to triple its prices, this is like if Apple decided its new iPhone was going to cost $6,000. Weird move from a business perspective, but there are still a lot of other options for high-quality phones that don’t cost $6,000.
The Apple comparison isn’t even a particularly good one because unlike Apple, Kaleo represents a very, very, small market share. The latest information I could find was from 2015, but as you can see in the figure below, Kaleo’s market share was that black sliver highlighted in 2014-2015.
So what, exactly, is happening here? Kaleo is a private company, but it appears to have been struggling. A 3rd party audit available from the SEC shows Kaleo was bleeding money between 2014-2016 , posting an average net loss of $32m for the three years.
The price increases were likely a gamut by Kaleo to get pharmacy benefit managers, insurers, and government healthcare programs to pay more for Evizo. A hundred page congressional report on this saga indicates this is the case. This one in particular seem to have ended up being a way of getting Medicare to reimburse thousands of dollars for Evizo while private insurers negotiated lower prices or dropped coverage of Evizo entirely. However, despite the pricing games and seeing some growth in sales, per the report, Kaleo has never turned a profit on Evizo.
This is an important point of clarification to remember any time you see a media report on drug prices: people, individuals, almost never pay the ‘sticker prices’ (also known as the wholesale acquisition cost or WAC). Low-effort ‘news stories’ can get millions of hate-clicks and shares because the American public does not generally understand this. When these stories get reported, the prices quoted are the prices that pharmaceutical companies are charging your insurer for your prescription, it’s not the price you pay at the register in the pharmacy.
The price you pay at the pharmacy is based on your plan, what your insurer covers, how much they cover, and contracts with the drug companies. Especially in a case like naloxone where there are other options, Kaleo’s pricing did not have the overall effect on the price of naloxone that the headlines for this story would imply.
I wrote this little overgrown Facebook comment up during my lunch break and tidied it up after work, I am not a journalist, I do not have an editor. Yet, I was able to find some important clarifications. Reporters, editors, and headline writers: be better. I understand the economics of journalism are a little wonky right now. That said it’d be better if you published nothing rather than put out stories like this that obscure an issue more than explain it.
You know you are misleading people when you say: Drug company raised price of life-saving opioid overdose antidote more than 600 percent. You’re not strictly lying, but you know that that headline will give most people who see it the wrong impression.
You know that people are not going to look at that headline and think “one of a half dozen manufacturers, this one manufacturing a specialty product, raised their prices two years ago”. You know that thousands of people will share the article angry or scared without even reading the article, and even those who skim the article may come away with the wrong impression. Be better. I don’t know how you expect anyone to trust your name or your brand if your headlines are misleading and your articles require additional research to have a full picture of the story.