The impact of Makena on Medicaid: KV Pharamceuticals’ extortion of tax payers

Makena, KV Pharmaceuticals version of 17 alpha-hydroxyprogesterone caproate or 17OP (for prevention of preterm labor) is priced at $1500 a shot (up from $10 a shot prior to the meddling of the FDA). Considering most women who are eligible will receive 20 shots in their pregnancy, the price hike adds an additional $29,800 price tag to each treated pregnancy. An editorial in the New England Journal of Medicine estimates 136,000 pregnant women will receive the drug adding more than $3.5 billion to the cost of prenatal care. Yes, you read that correctly, $3.5 billion.

And over $1 billion of that money will come from taxpayers, because more than 1/3 of maternity care in this country is funded by Medicaid. While Medicaid is technically a state program, it is funded by both state and federal dollars, which is where things can get sticky. How the federal money is spent is up to the feds. For example, federal funds can’t be used to fund abortions, so in states where abortion services are covered by Medicaid, the state pays out of its own Medicaid budget. There are more federal than state dollars, so states often use creative loophole jumping to shift funding from the smaller state to the larger federal pool (it’s a shame that health care decisions can’t just be based on, you know, sound medical facts and good old common sense).

Until a rather obscure Medicaid law was clarified in July of 2010, 17OP for pregnant women with Medicaid was filled at a compounded pharmacy and paid for out of federal funds. At $200 a pregnancy it was a sound investment for taxpayers. Every $1 spend on 17OP made in a compounding pharmacy saved $8-12 in costs related to the care of premature babies.

However, 17OP isn’t really a pharmaceutical. It is actually a “bulk powder” (because it is not made by Big Pharma, but is a raw hormone that is purchased as a powder and then compounded by a pharmacist into an injection).  However, for some reason in 2010, which I am sure had NOTHING TO DO WITH BIG PHARMA LOBBYING (because the FDA is as pure as the driven snow), this particular Medicaid regulation was reviewed. Lo and behold, the feds now don’t think they should pay for something that is a bulk powder. So, as of January 2011, the State Medicaid dollars have been picking up the tab for 17OP.

However, now that 17OP is available as a real honest to goodness pharmaceutical (meaning it comes off a conveyor belt instead of mixed up one injection at a time), the feds will go back to picking up the tab. Except now the price tag is $30,000. So what do you think a state Medicaid office running on fumes will do? Pay $200 out of their own coffers for compounded 17OP (which will probably still be available, watch this space for more on that), or wash their hands of the whole mess and allow the federal government to pick up the far more expensive tab? And with the Makena model, now we need to spend $8-12 to save $1 in prematurity.

Now KV Pharmaceuticals is quick to say they will have an assistance program. Assistance my ass. That is only a smoke and mirrors PR move. Assistance programs have strict financial eligibility and they are typically not for women who have insurance (Medicaid counts). So, for Makena tab for 45,000 or so pregnancies every year will go to the federal government. Meaning, you and I are funding the bonuses and tasty corporate lunches for our good, caring friends at KV Pharmaceuticals to a tune of more than $1 billion.

And The March of Dimes and every professional society who supported KV Pharmaceuticals’ application to the FDA? These are the things you need to think about before playing lap dog to Big Pharma.

Thanks to @PASlave for your insightful comments, couldn’t have written this without your help.

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7 Responses to The impact of Makena on Medicaid: KV Pharamceuticals’ extortion of tax payers

  1. Tim Walters says:

    “The 2007 Institute of Medicine report Preterm Birth [87] found that the 550,000 preemies born each year in the U.S. run up about $26 billion in annual costs, mostly related to care in NICUs, but the real tab may top $50 billion.”

    The article leaves this fact out. The research done in post trials for this drug can help cut this number down, as weeks in the NICU costs much more than the drug.

    3.5 Billion is ALOT less than 26 Billion

  2. Jennifer Gunter says:

    Tim, you must work for KV Pharamceuticals. The numbers have been run, and Makena is a cost ineffective way to prevent prematurity. To use Makena on all 136,000 pregnancies that are eligible will be $4 billion a year, and as the NEJM article pointed out, that amounts to paying $8-12 dollars to save $1 in prematurity. Remember, Makena/17OP only reduces the risk of delivery by 30% for a subset of women.

    Get your facts straight!

  3. Pingback: A big mess for the March of Dimes | Catching Up With Daphne

  4. Mike Mar says:

    P17 has existed for 50 years and is an effective drug. KV’s 150x price point increase will reduce availability and increase premature births and stillbirths. Its not whether the help this drug will give is worth the money. THis will increase taxpayer burden and stillbirth/premature births. Keep pressure on KV on price point. Ironically its for KVs own good. When their actions lead to increased stillbirths/premature births, it will put their company out of business. They still may understand and shift. We have only started ratcheting up the pressure if they don’t

  5. PAS says:

    The exclusion of bulk powders has little to do with the FDA I’m afraid. Specifically, it has to do with something called OBRA’90 and 1927(k) of the Social Security Act. The law itself can be seen here:

    http://www.ssa.gov/OP_Home/ssact/title19/1927.htm

    Basically, this is the legal definition of a pharmacy drug that Medicaid and Medicare work with. This doesn’t apply to things delivered in a doctor’s office or a hospital, but applies to the pharmacy side of health care. Basically it defines a drug as such

    Either:

    i: a drug licensed in the FD&C act sections:
    505(a ‘brand’ name drug)
    507(defunct, removed in the 1990s. Used to be for ABx)
    505(j) (a ‘generic’ drug)

    ii: A pre-1962 drug which has NOT had the DESI proceedings finished
    iii: A pre-1962 drug that is NOT a DESI drug.
    iv: a biological drug licensed under the appropriate law (think Synagis)
    v: insulin

    Basically, in order for this to be a drug product that fits into Medicare/Medicaid, it has to be in one of those categories. Anything that’s in those categories gets wrapped up into the CMS files and processed as such. But looking at those definitions – bulk powders clearly do not fit into any of them. No question of it.

    The problem is, as long I’ve known, bulk powders have been in those CMS files. The states went to CMS and demanded clarification. I believe the pressing worry was that they’d suddenly get funding pulled out from under them. CMS, effectively said, ‘oops our bad’ and pulled all the bulk products out of their files in an orderly fashion effective in 2011.

    With the notable exception of Makena, the drug companies do NOT win with this answer. They can no longer sell their products to Medicaid/Care – and these folks use a fair number of compounds. Medicaid doesn’t win, CMS doesn’t win, and the patient’s don’t win. Makena, has, however, taken advantage of this situation. I’d be curious to see the pricing would be if this hadn’t happened.

  6. Pingback: The price of a popular drug to prevent premature labor is increased from $10 to $1,500 « Penteract

  7. Pingback: The price of a popular drug to prevent premature labor is increased from $10 to $1,500 at Penteract

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