Kaléo announced on Thursday that its compact Auvi-Q epinephrine auto-injector will return to the U.S. marketplace on Feb. 14. Its CEO is also promising “a bold program” that reduces the out-of-pocket costs to most consumers to zero dollars.
Many patients and parents of kids with severe allergies are welcoming the return of this device with its novel how-to-inject voice instructions, as well as the entry of another competitor in the epinephrine market.
However, there is a hitch. The list price to insurance companies has been set at $4,500 for a two-pack of devices with a trainer. This is about nine times the price of about $500 for a set when the Auvi-Q was voluntarily recalled from the market in October, 2015.
Yet consumers will not face that price at the pharmacy counter, emphasizes Spencer Williamson, Kaléo’s CEO. His company is launching an affordability program in which:
- Consumers with insurance with a remaining co-pay will face no out-of-pocket costs; Kaléo will cover these.
- Consumers without insurance or government coverage who have a family income of less than $100,000 will also have no out-of-pocket costs.
- Those earning a higher income with no insurance or government coverage will pay a maximum price of $360.
“There will be no epinephrine auto-injector – branded or even generic – that will cost the patient less out-of-pocket than Auvi-Q,” says Williamson, alluding to Mylan’s branded EpiPen, its new $300 generic two-pack as well as Impax Laboratories’ generic epinephrine two-pen set, which retails at only $110.
While Kaléo may be protecting the consumers’ bottom line, it was the quickly escalating “list price” of the EpiPen that sparked a firestorm of drug access controversy last summer. The branded EpiPen two-pack of devices retails for $609 compared to Auvi-Q’s newly announced $4,500.
So in this environment of list price controversy, why the whopping number on the Auvi-Q? Williamson lays the blame on the complex U.S. drug pricing system, which has many layers, including pharmacy benefit managers (PBMs) who negotiate on behalf of big insurers and employers. (Collectively, they are known as the payers.) Discounts and rebates manufacturers offer to suppliers and insurers are included in the list figure.
“The payer and drug pricing system is really broken,” says Williamson. “It focuses on stakeholders maximizing their economics, instead of focusing on what’s most important, which is the patient.”
He says that’s why Kaléo is bringing in a program in which the most a patient could be out of pocket is $360. Such patient assistance is costly and helps to drive up the list price. “The list price is not actually paid by anyone,” Williamson says assuringly.
Ronny Gal, an investment analyst with Sanford C. Bernstein who specializes in the pharmaceutical sector, sees it differently. “What Kaléo is arguing is that no one will pay out of pocket much for this. But what they mean is – we’ll all pay for it” through the larger health insurance system. “We all eventually pay for it somehow.”
“It’s a classic pharma strategy of pricing high and hoping insurance will absorb it, and then trying to mollify some patients by subsidizing those who would [otherwise] pay large sums out-of-pocket,” Gal says.
But will industry payers buy into a cost of $4,500 for a set of two auto-injectors? Gal knows at least two large PBMs that are taking a pass on the Auvi-Q product. He notes, however, that the U.S. health insurance arena is enormous and varied, and includes a significant number of employers with policies for employees of not refusing coverage of any approved prescription drug.
For example, “the employees of the City of New York do not have a single drug blocked,” says Gal. “So if you [a drug manufacturer] are able to take those programs and pay patients’ co-pays in them, it makes a lot of sense to do that – because a very high price translates to higher revenue.”
Kaléo says some insurers on board, but is not naming them. Williamson says the company is also working with network of specialty pharmacies that will take Auvi-Q prescriptions, process claims with insurers, pay out co-pay amounts and deliver the auto-injectors to the patient’s home in 24 to 48 hours. “This direct delivery service is the preferred channel,” he says.
As well, the Kaléo officials stress that quality control and inspection on the devices is now state-of-the-art, following the 2015 recall, which related to a suspected dose delivery issue.
Even if patients are satisfied with the out-of-pocket options Kaléo is putting forward, questions are likely to be raised by politicians about that high list price. Among federal lawmakers, drug pricing remains a hot topic. “That’s the risk they are taking with this pricing,” says Gal.
The analyst notes of drug pricing generally, “If you look at what all of pharma did at the beginning of the year, they’ve taken the same kind of prices that we saw last year. The idea that pharma companies will not raise prices again just because there were some bad headlines is proving not to be true.”
Other Epinephrine Device News
- CVS Health has announced that it is partnering with Impax Labs to distribute the low-cost, generic version of the Adrenaclick auto-injector nationally. Read more
- The FDA has accepted Adamis Pharmaceuticals revised submission for approval of its pre-filled epinephrine syringe. Read more