When we first covered K-V Pharmaceutical Co. (NYSE: KV-A) for its Makena drug market exclusivity to prevent premature birth, we knew this was going to be a home run. But earlier in March when it was coming out that K-V decided to hike the price from what had been $15.00 on an off-label use to a whopping $1,500.00, it was immediately clear that a backlash was coming and that it was not going to end pretty for the company.
At issue is not whether Makena works as a treatment aimed at preventing premature births which costs the medical system billions upon billions of dollars each year. The issue is egregious price gouging. We warned that the company would come under political pressure and consumer pressure due to above and beyond unreasonable price hikes.
Shares of K-V have been hit this week after the FDA said that it would take no action against pharmacies formulating treatments similar to K-V’s Makena based on a valid prescription.
Senator Tom Harkin joined others this week and it has been said the company tried to stop pharmacies from compounding the drug claiming legal violations. One of the big issues is that K-V did not fund the initial research for the drug and Hologic transferred the rights to K-V.
The FDA has left some wiggle room here noting that it could reconsider its decision. That could go either way for the company. Then last night came word from K-V’s Ther-Rx subsidiary saying, “We are committed to ensuring that this significant, FDA-approved medication is covered at an affordable cost and accessible to all women who are prescribed Makena. We are finalizing solutions to the concerns, and will announce them by the end of the week.”
Our own initial call earlier this month was that K-V would yell out a “Do-Over” like you would hear in kid games. Look at the statement above. That is about as close to a corporate “Do-Over!” announcement as a company will say.
We are not sure who made the pricing decision inside K-V for Makena, but chances are that they are responsible for killing what had been an exponential rise in shares. Getting market exclusivity from the FDA and after having bought the exclusive rights probably does merit at least a significant price hike. Still, the term being thrown out in the media was a 100-fold price hike. In today’s world where healthcare is under fire from all directions the company should have known better.
When we first highlighted the problems with an impending backlash, shares had been at $11.99. Shares closed on Wednesday at $5.65 after having been at $7.11 on Tuesday and at $8.15 on Monday. The high close last week was $9.95. In pre-market trading shares are indicated up almost 1% at $5.70 on thin volume.
JON C. OGG
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