Kaleo under fire for price hikes on naloxone treatment

A Senate report released Sunday heightened scrutiny of a pricing and prescribing strategy used by Kaleo to hike the price of its opioid overdose reversal autoinjector more than 600% in less than three years.

The Richmond, Virginia-based private drugmaker hired consultants in 2015 that led to development of a plan raising the per unit price of Evzio from $575 in July 2014 to $4,100 by January 2017, according to the Permanent Subcommittee on Investigation's 99-page report.

Kaleo complemented its price increases with a strategy focusing on getting doctors' offices to sign paperwork declaring Evzio medically necessary to ensure coverage by Medicare Part D through a formulary exception. The Senate report found Medicare and Medicaid together paid $142 million for Kaleo's treatment in the past four years, despite the availability of cheaper naloxone treatments.

The report immediately gained national attention, getting the "60 Minutes" treatment by Lesley Stahl on Sunday, in which Kaleo was introduced to the public in the context of past drug price controversies involving Martin Shkreli and Mylan's EpiPen (epinephrine autoinjector).

Sens. Rob Portman, R-Ohio, and Tom Carper, D-Del., the respective chairman and ranking member of the subcommittee that released the report, issued scathing statements about the company Sunday.

"The fact that, in the midst of this crisis, some would take advantage of loopholes in our system to profit off of this heartbreaking epidemic is absolutely unacceptable and shameful," Carper said in a statement.

The report identified Todd Smith and Ben Bove of Valinor Consulting, a small Chicago-based firm, as responsible for developing and implementing Evzio's marketing strategy, which Kaleo's board of directors unanimously agreed to in June 2015.

Evzio launched in July 2014 at $575 per unit, which includes two autoinjectors and a training device. The price spiked in the following years, from $750 in November 2015 to $3,750 in February 2016 to $4,100 in January 2017.

From a sales perspective, the strategy seemed to work. Fill rates for Evzio prescriptions jumped from about 40% in September 2015 to a peak of 82% in March 2016, before dropping modestly to around 70% in January 2017.

The Senate report found the scheme was dependent on government footing the biggest bills. While Medicare and Medicaid bought about one-quarter of units sold in the first quarter of 2017, those sales generated three-quarters of Evzio's net sales, the report stated.

Medicare paid an average of $3,522 per unit and Medicaid paid an average of $2,413, while commercial plans averaged $367 per unit.

Additionally, the report found the company decided to not announce the price hikes in press releases due to the risk of generating coverage on the cost.

The company ended its relationship with Smith and Bove in the summer of 2017, paying a $5.6 million termination fee as part of $10.2 million in total compensation over that time.

In an attempt at damage control, Kaleo CEO Spencer Williamson said on "60 Minutes" the company would lower the price back to $575 "as long as patients won't be blocked when they need it." He added Kaleo has begun conversations with insurance companies on that offer.

The Senate report included a list of recommended actions, including Congress to require all states to have prescription monitoring programs for opioids, institute a three-day limit on opioid prescriptions and charge CMS with reviewing its policies on medical necessity formulary exceptions.