My 2 Cents

After researching this issue with Kaléo Pharma for the past few months, I’ve developed a few questions that I have for the company, and a little bit of advice to give them in regards to public perceptions of their products.

My first question is directed to CEO Spencer Williamson: why not be perfectly clear about the price issue and how Evzio and Auvi-Q will be payed for when asked about the price issue? He has explained numerous times that the co-pay will be nonexistent for those with insurance and those making under $100k without insurance. However, he hasn’t gone in depth as to how that will be paid for, obviously the price doesn’t magically just disappear. Williamson has said that the drug will be paid for through insurance and the “supply chain that makes up our healthcare system.” Much like David Lazarus, mentioned in my last blog, I do not believe that this is a satisfying answer. Kaléo, specifically Williamson, should come out and explain the basics of how the drug maintains a low co-pay and explain who pays for it, rather than be vague about the exact people who pay for it.

The next question is if the co-pay is so low for the patient, why charge the high price to insurance companies anyway? Obviously, the company wants to make as much profit as they can and it is still cheaper than the alternative treatments from Mylan, but doesn’t it make sense to be much cheaper than Mylan and gain market share through a lower price in order to reach more customers? Wouldn’t that earn them huge profits? $4,500 for $5 and $6 worth of life saving treatment seems like far too much to charge if they really do care about the patients that need it, regardless how much they end up paying out of pocket. (Short video to analyze pay here)

I believe that Kaléo Pharma is simply taking the wrong approach to answering the questions raised about their price hike. On their website, they emphasize their customer oriented approach to business, and, by the looks of the $4,500 price tag on their treatment, it doesn’t appear to be that way. Kaléo should try to stick to their approach or the public perception of the company will not be as good as it could be.

In today’s day and age of transparency, it pays to be open and honest about what they are doing and to practice good and ethical business. Once it comes out that something is wrong or questions the ethics of a company, it can turn into a PR disaster or, worse, the downfall of a company. However, fortunately for Kaléo, the nature of the products in the spotlight will always be in high demand.

It seems that Kaléo is trying to practice a Utilitarian framework, yet aren’t really putting the best effort and ideas into it. That being said, I think that the Utilitarian principle is truly the best method to take for this company, so long as they really put some time into it and actually try and enact on that belief. Being a pharmaceutical company, the very nature of the products they sell is to do a great good for a great number of people. Now, to enact on this, they should take into account all facets of the product, including the price. Once they do this by doing everything they can to make this great product readily accessible and easily affordable, they will truly be displaying a the Utilitarian framework that they should have been displaying all along.

The Auvi-Q and Evzio are two innovative and groundbreaking products, that make it easy to save lives. Why not make it easy to afford?

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Public Reactions

As mentioned in the previous post, reactions from people outside of Kaléo have been in-depth and plentiful. In fact, the price hike issue has drawn enough attention that U.S. Officials have noticed. Two Democratic Senators, Claire McCaskill and Amy Klobucher, have sent letters to Kaléo asking for a good explanation of the hike on behalf of Congress, with McCaskill’s letter ending with signatures from 30 other members of the Senate.

McCaskill said in her letter:

“At a time when Congress has worked to expand access to naloxone products and to assist state and local communities to equip first responders with this life-saving drug, this startling price hike is very concerning,” 

Claire McCaskill

Senator Claire McCaskill (D) addressing Congress (Source: aol.com)

Her concern, and the concerns of the 30 other Senators that signed her letter, are centered more around the cost of Evzio, the opioid overdose treatment, but still had complaints toward Evzio’s price tag.

The concerns over Evzio’s price comes at a time when pharmaceutical companies are facing intense scrutiny over “price-gouging”, and as lawmakers struggle with the epidemic of opioid abuse. 

It is estimated that just over 90 people each day experience a opiod overdose, which, according to experts on the issue, blame can be attributed to the lack of affordability of  prescription painkillers like Evzio and other Kaléo products.

Shefali Luthra of Kaiser Health News tries to explain the price hike to NPR’s Scott Simon in a radio interview, giving a different perspective than the popular “corporate greed”.

“Kaleo donates a decent number of these devices to first responder-type groups, police departments, public health and the anti-opiate-overdose community-based organizations. They also have a no-copay program, so if you have private insurance, you can get a coupon, and you won’t see any actual cost when you’re getting the device.”

Luthra continues to say that analysts say that this process is not sufficient. Customers might have no co-pay but it is more than likely that they will see their premiums go up for the medicine, to offset the cost that their insurance company will be paying for providing the drug. You can listen to the entirety of the interview with Luthra here.

auvi-q in court

Kaléo product being presented in Congress. (Source: businessinsider.com)

David Lazarus of the Orlando Sentinel is very unhappy with this issue of high drug prices from Kaléo. He believes that this is a case of a dishonest pharmaceutical company trying to get a huge profit margin by tricking the consumer. In particular, Lazarus takes offense to Spencer Williamson, the CEO of Kaléo saying that the sticker price of Evzio and Auvi-Q is not true to everyone, because of various discounts that are contracted with “the supply chain that makes up our healthcare system”.

“In other words, even though the price tag for his company’s easy-to-use, lifesaving device is ridiculous and indefensible, there’s no need to worry because of backroom deals by assorted players in the healthcare food chain make that price tag meaningless. And that, in a nutshell, illustrates the lunacy of the U.S. healthcare system.”

Nicholson Price, a Law Professor at the University of Michigan, says that this is just a repeat of what happened with Mylan and the epi-pen. However, he believes that right now certain institutional buyers are able to afford the Evzio and Auvi-Q because of public funding meant to combat opioid uses, but acknowledges that taxpayers will still pay for the price of the drug regardless, and that the cost of to maintain access in public funding will be felt very soon. Price notes that the fact that policy makers have not found a solution to the problem of keeping drug pricing in line with value is the root problem itself.

“Epi-Pen happened, and everyone was like, ‘Wow, this is terrible, we shouldn’t allow this to happen, and we haven’t done anything about that, and it’s not clear what the solution is. Now, shocker, it’s happening again.”

https://www.scientificamerican.com/article/massive-price-hike-for-lifesaving-opioid-overdose-antidote1/

http://www.orlandosentinel.com/la-fi-lazarus-drug-pricing-evzio-20170217-story.html

Response

As mentioned in the first blog, Kaléo Pharma’s main ethical issue isn’t about their poor worker conditions or covering an issue up. It is quite the contrary, their issue is very much in the public. Their Auvi-Q, an alternative to the epi-pen, is being sold for $4,500 for two doses of $5 worth of epinephrine, and Evzio is being sold at the same price for $6 worth of naloxone.

One would think that something like this would require a hell of a good answer as to why it costs so much, as well as some explaining from people inside the company. But, there really has not been a ton of information coming from those working for Kaléo. That being said, Kaléo actually appears to have a general plan to make things less expensive for consumers.

“Company executives also said they were taking steps to limit the impact of the high list price on how much patients pay. They said Kaleo had put in place a program so that commercially insured patients, as well as uninsured patients with incomes less than $100,000, wouldn’t pay anything out of pocket and other patients wouldn’t pay more than $360.” (WSJ)

Kaléo appears to trying to take advantage of the disproval with the epi-pen, as Mylan, the owner of the epi-pen, has increased the price of their product 550% since 2007. It seems that Kaléo knows Mylan is having trouble with consumers with the epi-pen, so they are trying to get away with charging a high cost because they still will have a better reputation than Mylan. This is a bold strategy, but is much more thought out than the simple corporate greed that it appears to be.

Kaléo is obviously increasing competition in the pharmaceutical industry, which could end up decreasing the price for epinephrine administers as a whole, something that is much needed. Just two months ago Spencer Williamson, Kaléo’s Chief Executive, said that there is no other epinephrine injector on the market that offers a lower out of pocket cost to commercially insured patients than the Auvi-Q and Evzio, which can make justifying the reason for the high market price a little easier.

spencer williamson

Kaléo Chief Executive Spencer Williamson at a Clinton Foundation Event             (Source:clintonfoundation.org)

Williamson added that Kaléo has donated nearly 200,000 doses to “public health departments, first responders and nonprofits serving patients in need.” He also defends his company, stating that the listed wholesale price, which is for distributors selling to pharmacies, is $4,100, but it’s “not a true net price to anyone, including the distributors or pharmacies, due to numerous discounts and rebates that are negotiated in the supply chain that make up our health care system.”

https://www.wsj.com/articles/rival-to-epipen-allergy-treatment-to-return-to-market-1484855236

http://www.freep.com/story/money/business/2017/02/12/price-drug-overdoses-jumps-more-than-600/97709132/

About Kaléo

The Kaléo Way

Kaléo Pharma is a pharmaceutical company based in Richmond, Virginia. It was founded by twin brothers who suffered from serious allergies, and were forced to carry a dose of epinephrine with them at all times, which led them to create a new way to administer this dose and establish a whole new method of injection.

The company prides itself in being a “new kind of pharmaceutical company” with the intent of saving people from life threatening medical conditions. According to their website, they believe that the most knowledgeable person about how a disease effects a patient is the patient themselves. The company insists that it is patient oriented, a very smart business strategy, as our business world continues to move more and more customer centered.

The company’s mission is to “provide demonstrably superior medical products that empower you and your caregivers to confidently take control in potentially life threatening situations.” Throughout the Kaléo website, they stress patient and customer oriented treatment, as well as their deep catalog of knowledge on various medical conditions. Every product they release is a combination of a proven medicine and a new, innovative way to administer the medicine. This is meant to keep the company ahead of the rest of the industry, as well as create and discover convenient and efficient ways for the patient to get their treatment.

Along with their Mission Statement, Kaléo displays six company values, titled “The Kaléo Way”. The six steps are: Purposeful/Passionate Culture, Personal Integrity, Mutual Respect, Professional Accountability, Winning Teamwork, and Innovation/Excellence.

Some of the products that they produce are Evzio, a naloxone HCL injection used to treat depression and opioid overdoses, and Auvi-Q, a product in direct competition with the epi-pen and the cause of much controversy in regards to its affordability.

The corporate history of Kaléo, founded 2008, actually began as the corporate history of Intelliject, Inc.- the original name of the company before the switch was made in January of 2014. The reason for the name change is because the name itself is meant to align with the company’s vision and mission, as “kaléo” is derived from the Greek word for “purpose”, as the company has always stressed that their mission and goals are patient oriented.

Kaléo is a private company, therefore there is no stock information available. That being said, the pharmaceutical industry rakes in over $1 Trillion worldwide, with the North American market accounting for nearly 49%, or just under $500 Million, of the worldwide revenue. Kaléo is competitive with all of its products, so it is safe to say that they do make money- the exact amount is just difficult to say from an outside position.

 

 

http://www.multivu.com/players/English/7940951-auvi-q-epinephrine-auto-injector-comeback/

https://www.statista.com/topics/1764/global-pharmaceutical-industry/

https://kaleopharma.com

Fair Selling at Kaléo?

Kaléo Pharma, an American pharmaceutical company, is in hot water for raising the cost of an overdose antidote and for selling an epi-pen alternative called the Auvi-Q for $4,500. The Auvi-Q is automatic and offers audio instructions on how to administer the antidote, less than $5 worth, to the patient. In 2015 the Auvi-Q was listed at $450- 10% of the current price.

What is quite interesting is that the Auvi-Q was pulled from the market after malfunctioning- it was delivering inconsistent doses of epinephrine, failing to do precisely what it is designed to do.

Forbes-Timeline-EpipenVsAuviQ-LineGraph-v2

The price increases of both the Epipen from Mylan and the Auvi-Q of Kaléo, before the cease of production in late 2015.

Another intriguing piece of information about the Auvi-Q from Kaléo is that its co-pay, the customer’s out of pocket cost, is quite low relative to the rest of the market for epi-pens. This creates better access to markets for the drug companies, allowing them to sell more drugs. Also, the company says that the high price allows for greater discounts, and the rest of the costs to be shouldered by insurance companies.

This begs the question- how in the world is it ethical or logical to sell a product 10 times the amount of the original price to a customer base that needs the product in order to survive, especially after it had failed previously? This sounds a lot like pharmaceutical greed, something that is not unheard of. The most recent drug related incident of this nature was Martin Shkreli a few years ago, after he jacked the price of an anti parasitic drug from $13.50 per pill to $750 per pill, an action that was clearly unethical.

BeyondEpiPenGraph

The overall price increases of the Epinephrine market.

Kaléo is at a crossroads, the best move for the company could be to keep the price high and reap the benefits of having a very high profit margin. The company could utilize that fact that this product is in such high demand, and people/insurance providers will pay for it if it is needed. However, they could also keep the price lower and still make a profit, though not as high, and keep the price for the Auvi-Q at a much more affordable level for its customers, as well as lower the price of the bill that insurance companies must cover.

Along with the Auvi-Q, Kaléo is under fire for spiking the cost of their opioid overdoes treatment, Evzio. Evzio is also offered for $4,500, and has audio instructions to make it easy for anyone to administer a potentially life-saving injection to themselves or someone else. This administers naloxone rather than epinephrine, still at a very low production cost, allowing Kaléo to reap huge profits from its sale.

https://www.theguardian.com/business/2017/feb/13/kaleo-epipen-maker-alternative-drug-pharmaceutical

https://www.scientificamerican.com/article/massive-price-hike-for-lifesaving-opioid-overdose-antidote1/