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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8 thoughts on “My 2 Cents

  1. Great analysis!
    I can agree that the way Kaleo’s CEO responded was their biggest downfall. It is not new to price gouge but either there is a explanation behind it or the government puts a end to it. For Kaleo, neither happened. A utilitarianism framework is definitely much needed. The greatest good for the greatest many. Not the greatest profits for the few top stakeholders. I am curious to see where this will go and if/when the government will step in before another companies does this as well.

    Liked by 1 person

    • Thank you!
      Williamson just didn’t give a good enough reason, he needs to come out with a step by step reasoning and explanation. The best thing they can do is be transparent and be honest about their business, to prevent future problems as well. Hopefully some kind of change happens before this happens again!

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  2. I completely agree with your point of view. When charging the customers that earn under $100,000 the price of the drug does not vanish and has to be paid somewhere else. By being transparent it allows the public to entrust in their product and not be skeptical of their price point. Having the utilitarian framework, it can facilitate that trust and have many people satisfied with their product.

    Liked by 1 person

    • With this kind of product, I think you have to be transparent in order to be successful. You’re absolutely right that this price doesn’t simply vanish into thin air, someone has to pay for it. The nature of their product demands transparency for effectiveness, and it demands a Utilitarian framework as well.

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  3. I thought you did a great job analyzing this case!
    Although I disagree with how Kaleo is doing business right now, I still believe in their business because it is revolutionary and is dedicated to helping people stay in good health. I think the company is very smart and can rely on their strengths and use them to ethically re-position themselves in comparison to competitors such as Mylan. I understand that dropping prices will reduce their profit margin, but in the long run, it will help retain customers and even bring in more users than before because of lower prices and a good brand reputation. As you said, in this day and age, transparency, public relations, and customer service are all essential. I think Kaleo still has time to fix their mistakes and begin working in a new direction. However, especially in this industry, trust is key. They need to be honest and communicate what changes they plan to make before this turns into a disaster for their company.

    Liked by 1 person

    • I could not agree more, I think that they absolutely have time to recover and do some really good things, they just have to be open and honest about it. Customers reward honesty and they appreciate being informed on things that pertain to them either directly or indirectly. Their products are great, and I hope they are able to turn things around!!

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  4. The dishonesty part of the way Kaleo handled the PR situation is the most angering for me. The CEO is acting like the average American citizen is too stupid to understand how the healthcare system works. And if he is right about the average American citizen being too stupid to understand how the healthcare system works then maybe it is time to change it. Overall, great job breaking down this case and great blog posts.

    Liked by 1 person

    • Thank you, you’re absolutely right, the CEO just doesn’t seem to have the desire to explain his rationale, and doesn’t seem to understand it himself. Like you said, either way, this is not good a good look at all for Williamson. It’s more than due time to change the way our healthcare system operates.

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