Blaming FDA's Enforcement Discretion, Company Files for Bankruptcy

Posted 06 August 2012 | By Alexander Gaffney, RAC 

Missouri-based KV Pharmaceutical, the manufacturer of pre-term birth prevention compound Makena (hydroprogesterone caproate injection), has filed for bankruptcy in federal court citing the US Food and Drug Administration's (FDA) "lack of enforcement" of the company's marketing exclusivity rights, reports Bloomberg.

The filing could mark a final chapter in a long-running and often controversial saga between KV and FDA.

The entire matter stems FDA's 2011 approval of Makena, also known as 17P. The drug had been used for years to prevent pre-term births, but had not undergone significant clinical testing to see if there were any safety risks associated with its use. KV put the drug through clinical testing, showing it to be safe and effective for its intended use.

As a result of the approval, KV won marketing exclusivity rights for the drug, and ordered competing copies of the drug off the market while simultaneously announcing a substantial price increase. Whereas the drug used to cost $20 per injection, KV set the new price at $1,500 per injection before subsequently lowering it to $690 per injection in the face of a firestorm of bad publicity.

In November 2011 FDA said it would allow compounding pharmacies to continue to manufacture the drug on a small scale as long as they could conform to quality standards and, despite KV's protestations, affirmed this decision again in June 2012.

KV Files Suit Against FDA

The company filed a lawsuit against FDA soon thereafter, saying it faced the prospect of running out of cash and financing because of an unexpectedly adverse reimbursement environment resulting from FDA's compounding exemption

"Unless FDA publicly signals that it will stop the unlawful competition by non-customized compounded drugs … K-V will not be able to attract new capital at a reasonable cost, and is likely to exhaust its working capital within three to six months and be forced to file bankruptcy before then," the company wrote in its complaint. "As a result of FDA's Statement, Makena is being, and will continue to be, widely displaced in the market by compounded version of Makena, known as 17P."

KV said many insurers, including Medicaid, refused to purchase versions of the drug sold by the company, and instead opted for the compounded versions usually made at the hospital. "The lack of enforcement has also led certain state Medicaid agencies to impose barriers to access to Makena on low-income pregnant women at high risk for recurrent preterm birth, despite those states' legal obligation to cover FDA-approved drugs," explained Greg Davis, KV's CEO, in a statement.

FDA has disputed KV's claims, saying the agency's intended actions are legal under existing case precedent, and that the FDA actually did not make any enforcement actions against any entity, making KV's lawsuit meritless. "It would be both inappropriate and contrary to the public interest" to reject FDA's enforcement priorities, the agency concluded.

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