EpiPen alternative to hit market at more than seven times the price

Pharmaceutical company Kaléo – already under fire for raising the price of an overdose antidote – now plans to put an alternative to the EpiPen on the market for more than seven times the cost of the leading $608 drug.

Kaléo’s epinephrine injector, used to stop severe allergic reactions, will go on sale for $4,500 for a pack of two beginning on 14 February. The auto-injector’s innovative audio instructions walk caregivers through administering less than $5 worth of epinephrine.

Remarkably, because of a system of coupons and discounts, Kaléo’s epinephrine injector Auvi-Q may have the lowest out-of-pocket costs for patients, a strategy some critics say may help some customers, but leads insurance companies to redistribute the cost of the drug through insurance fees to remain profitable.

“It’s a brilliant auto-injector – is it fair to say it’s worth $4,000 itself? That’s $3,000 more than your iPhone, and you can only use it once,” said Dr Joseph Ross, an associate professor of medicine at Yale University who has written about drug pricing for the New England Journal of Medicine. “It’s tricky to know what’s the right price, what’s a fair price.”

This is not the first time that Auvi-Q will be on the market. The drug was pulled in 2015 after 26 auto-injectors malfunctioned, and delivered inconsistent doses of epinephrine. In 2015, the cost of Auvi-Q was about $450, according to CNBC. The company has since said publicly that those problems have been fixed. Kaléo did not respond to multiple requests for comment from the Guardian.

Kaléo has patents on just two products – Auvi-Q and Evzio, another auto-injector which delivers the antidote naloxone to people overdosing on drugs like heroin or opiates. Both auto-injectors deliver life-saving generic drugs to patients using audio recordings to walk people through the injection process. Both are now priced at $4,500.

Evzio’s price shot up from $690 beginning in November 2015 – a 552% increase, according to Express Scripts, which helps administer prescription drug benefits for health insurers. Auvi-Q, before it was pulled from the market, was priced in the same range, according to media reports.

The price of both drugs increased just as Kaléo was in the midst of a faltering, multimillion-dollar deal with French drug giant Sanofi. In media reports, however, Kaléo contends that the high list price of its injectors allows it to give greater discounts to patients, lowering out-of-pocket cost while insurance companies foot the bill.

“We believe the prices for Auvi-Q and Evzio are egregious and are another example of how some drug makers try to get around formulary management tools that help save payers and patients money,” said Jennifer Luddy, a spokeswoman for Express Scripts, which excluded the drugs from some of its plans.

Twin brothers Eric and Evan Edwards, now a doctor and an engineer, invented the voice instruction auto-injectors after growing up with severe allergies. Eric Edwards called them the “most allergic children ever”, in a Richmond Magazine article.

After developing the epinephrine injector Auvi-Q, the pair went on to develop the naloxone injector Evzio.

“It’s our hope to play a small role in reversing the tides of hospitalizations and deaths that are plaguing this country,” Eric Edwards told Dr Mehmet Oz, host of the Dr Oz show, in an appearance to promote a donation of 50,000 auto-injectors to US health and human services. Eric Edwards told Richmond Magazine that he considered his and his brother’s pharmaceutical company a way to use his “God given talent”.

However, critics contend Kaléo’s high prices prevent Evzio from reaching the people who need it most. Despite rising drug overdoses, prescription growth for naloxone has been relatively slow, which a group of Yale physicians including Ross attribute to its rising cost.

“To me that seems like a very backwards pricing model,” said Ross. “Why would you continue to charge more and more, pricing the product out of the hands of more and more users, regardless of whether or not they have insurance, essentially justifying, ‘If we charge more we’ll be able to give away more’?”

Wholesale generic naloxone costs between $15 and $17, depending on the dosage. Narcan, a nasal spray, has also raised its price, but still remains in the $120 to $200 range.

“The generic versions of [naloxone] are going to be far cheaper than what they’re charging,” said Jennifer Luddy, a spokeswoman for Express Scripts, about Evzio. “The generic version are probably only around $100.”

“Evzio is the same drug – it’s just the delivery,” Luddy said, referring to Evzio’s talking auto-injector.

Naloxone in particular has been difficult for community-based organizations to share with lay people who might witness an overdose. Between 1996 and 2014, community-based organizations distributed at least 152,000 naloxone doses, according to an article in the Journal of the American Medical Association.

Aimee Dunkle, a mother whose son overdosed, she made it her mission to distribute naloxone – a drug that could have saved his life – far and wide. She told the Guardian in February, simply, that “There’s never enough.”

Notably, Evzio was not always $4,500. The drug was once priced at the comparatively modest $690. Evzio’s price increase followed a faltering deal with Sanofi when the company’s other product, Auvi-Q, was the subject of a broad recall.

Sanofi licensed Auvi-Q in 2009 from Kaléo, a deal worth at least $230m, including an upfront payment of $25m, according to the Richmond Times Dispatch. Auvi-Q became Kaléo’s first FDA-approved product in 2012, and was innovative for its audio recording that talked caregivers through giving an injection. According to CNBC, the drug cost about $450 at that time.

But in October 2015, reports emerged of faulty auto-injectors which could fail to deliver the right dose of epinephrine. Sanofi issued a voluntary total recall, which cost as much as $110m, according to an industry publication. In February 2016, Sanofi ended its agreement with Kaléo.

But Kaléo had already financed the expansion of its second FDA-approved auto-injector, Evzio, using the royalties it expected from Auvi-Q. Kaléo took out a $150m loan from a third company, PDL Biopharma, underwriting the debt with 100% of its Auvi-Q royalties, and 10% of net sales of Evzio, according to PDL’s Securities and Exchange Commission filings.

With Auvi-Q off the market, Kaléo had to rely exclusively on income from Evzio. By the middle of 2016, Kaléo had depleted a $20m reserve, set aside as part of the financing deal with PDL. Meanwhile, from November 2015 to March 2016, Kaléo increased the list price of Evzio 552% to $4,500, according to Express Scripts.

“Evzio business is growing at a very attractive trajectory,” Kaléo’s CEO, Spencer Williamson, told the Richmond Times Dispatch in April 2016. “We have no money coming in from Auvi-Q right now while it is off the market. So we’re working to bring that product back. We’re blessed to be in a strong financial position.”

In the past, Kaléo’s vice-president, Mark Herzog, has claimed to the Guardian that the high price of Evzio is required to ensure anyone with a prescription could obtain the drug. He argues that by keeping the cost of its drug high for insurers, Kaléo can offer a variety of discounts to consumers.

That is because Kaléo is among the many pharmaceutical companies that offer to cover co-pays – typically small out-of-pocket payments customers make at the pharmacy for a prescription. That may sound benevolent, but critics contend it drives up the overall cost of healthcare, and thereby insurance. The practice is considered so detrimental to healthcare costs that lawmakers in California are considering whether to make it illegal.

That is because insurance companies use co-pays to negotiate with drugmakers. How? Insurance companies offer to charge lower co-pays to consumers at the pharmacy for a drugmaker’s product, if the drugmaker provides the product at a lower wholesale cost.

The rationale is that if a drug costs $10 to the customer out-of-pocket, instead of $100 out-of-pocket, people are more likely to fill the $10 prescription.

Drugs with a lower co-pay also give drugmakers more access to the market, which allows them to sell more drugs.

But if drugmakers go directly to consumers and offer to cover these relatively small co-pays, there is no incentive for the company to lower its price for insurers.

That means wholesale drug prices are higher, thereby driving up the overall cost of healthcare when insurers pass these costs on to consumers in premiums and deductibles.

For example, Kaléo provides coupons to make both Auvi-Q and Evzio free out of pocket using a program called “Affordability”, which requires patients to give their personal information in exchange for discounts. The company then covers patients’ co-pays, undercutting the competition in out-of-pocket cost to consumers.

“We are certainly concerned about the list price,” said Tonya Winders, president and CEO of Allergy and Asthma Network, adding: “Our greatest concern is really what this means for patients, and how they’re paying out of pocket,” she said.

She added: “I am concerned about what this means for the overall system. The greater question is – why do pharmaceutical companies feel the need to price these products in this structure?

“And what is the purpose of the list price being so high, if in fact on the back end they offer all of these rebates? It lacks transparency.”