In an effort to better understand how Makena gained Orphan Drug designation and why KV Pharmaceutical Company feels justified to charge $1500 per weekly injection, I have compiled the following timeline.
June 2003 – A clinical study conducted by the National Institute of Child Health and Human Development (NICHD), one of the institutes of the NIH, concludes that weekly injections of 17-α-hydroxyprogesterone caproate (17P) resulted in a 1/3 reduction in the rate of recurrent preterm delivery among women with a documented history of spontaneous preterm delivery.
May 2006 – Adeza Biomedical Corporation announced the submission of its New Drug Application (NDA) for Gestiva (17-α-hydroxyprogesterone caproate) to the U.S. Food and Drug Administration (FDA) under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, which allows for FDA approval of new or improved formulations of previously approved products. Adeza’s NDA submission for Gestiva included data from the aforementioned clinical study.
10/23/2006 – Adeza Biomedical announced that the FDA has determined that the use of Gestiva for the prevention of preterm birth in women with a history of preterm delivery is approvable subject to the completion of an additional animal study and certain other conditions.
01/31/2007 – Adeza announced that the Office of Orphan Products Development of the FDA has granted Orphan Drug designation covering Gestiva. If Gestiva is approved, Orphan Drug designation provides the opportunity for seven years of U.S. market exclusivity.
04/03/2007 – Cytyc Corporation announced that its wholly-owned subsidiary, Augusta Medical Corporation, merged with and into Adeza Biomedical Corporation, with Adeza continuing as the surviving corporation and as a wholly-owned subsidiary of Cytyc.
October 2007 – Results of a follow-up to the 2003 NICHD study were published. The new NICHD study concluded that 17P seems to be safe for the fetus when administered in the second and third trimesters.
10/22/2007 – Hologic, Inc. and Cytyc Corporation announced the completion of the merger of the two companies, creating one of the largest companies in the world focused on advanced technology in women’s health.
01/22/2008 – Hologic, Inc. announced that it has entered into an agreement to sell full U.S. and worldwide rights to Gestiva to KV Pharmaceutical Company upon approval of the pending Gestiva NDA. The purchase price to be paid to Hologic as a result of the transaction is $82 million in cash, $7.5 million of which is payable at the closing of the transaction and the balance of which is payable upon final approval by the FDA of the Gestiva NDA and the production of a quantity of Gestiva suitable to enable the commercial launch of the product. Jack Cumming, CEO of Hologic, said, “We are pleased to complete this transaction to sell the Gestiva product line to KV Pharmaceutical. We believe women worldwide will better realize the benefits of Gestiva coming from a dedicated pharmaceutical firm. This will also allow Hologic to remain focused in our primary fields of medical devices and cancer diagnostics for women.”
01/26/2009 – KV was notified that the pending new drug application for Gestiva will not be approved by the FDA until further conditions are met. The FDA concluded that an additional condition for approval, among others, will be that a portion of the study subjects for a post-approval clinical trial must be enrolled in the study prior to final approval.
01/11/2010 – KV amended its agreement with Hologic. KV paid Hologic $79.5 million plus reimbursement of expenses related to Makena and worked out a series of other payments to be made over 30 months worth a total of $120 million.
07/13/2010 – Gestiva NDA resubmitted to the FDA with data from the aforementioned 2007 NICHD study.
01/10/2011 – Hologic provided additional information requested by the FDA for the Gestiva NDA.
02/03/2011 – The FDA approved Gestiva, now named Makena, under the accelerated approval regulations. Because the approval was based on surrogate endpoint benefits rather than on the primary clinical endpoint, additional studies are required following Makena’s approval to evaluate the drug’s efficacy in the improvement of outcomes in babies who are born to patients who received Makena. Hologic has initiated this confirmatory study and plans to start another infant follow-up study that is will likely be completed around 2018.
KV paid $200 million for the rights to Makena, has funded some FDA-required follow-up studies and will be funding more clinical trials over the next 7 years. The cost of phase III clinical trials averages around $26,000 per patient, and the FDA-required post-approval study is slated to have 1,700 participants. Therefore, I would estimate that KV’s investment in research for Makena will cost about $50 million. So KV needs to make $250 million in profit to recoup the cost of clinical trials and the amount paid to Hologic for the rights to Makena.
Based on the price of 17P obtained from compounding pharmacies, I’ll estimate that KV can produce and distribute 17P at a cost of $20 per injection. Then, selling Makena for The wholesale aquisition cost of Makena has been set at $1440 per injection, so KV’s net profit is around $1420 per injection – $28,400 per woman woman who uses the drug from week 16 to 36 of pregnancy. But let’s estimate that on average, women prescribed Makena take it for 16 weeks – either because they started the treatment after week 16 or because they gave birth prematurely. That would still come to an average of $22,720 in profit for each woman prescribed Makena.
The American College of Obstetricians and Gynecologists estimates that 130,000 – 140,000 pregnant women each year medically qualify for 17P injections. However, it is likely that only 100,000 of the women who are medically eligible for 17P injections will actually receive a prescription for it and be able to pay for it through insurance or out of pocket. Therefore, KV can expect to make a profit of $22,720 per prescription x 100,000 prescriptions per year = $2.272 billion per year for the next 7 years. The time needed for KV to recoup its $250 million investment in Makena would be 5 to 6 weeks.
If anyone has better estimates of the costs of developing Makena or the profit KV is likely to make from distributing Makena, please share. Based on my numbers, I don’t know who they think they’re kidding when they try to justify 17P’s new price tag.
[I reduced my estimate of the number of women who will be prescribed and able to pay for Makena based on the fact that about 19% of women do not have health insurance. It is not clear to me how much money (if any) KV will make from patients who qualify for assistance through the Makena Cares Connection, which is sponsored by private donations to a chronic disease fund. I also increased my original estimate of the cost of clinical trials funded by KV Pharmaceutical and decreased the net profit per injection of Makena from $1480 to $1420. I’m doing my best to improve my numbers as I gather more information. However, all these tweaks don’t change the final conclusion: it will take KV less than 2 months to recoup its investment in Makena.]