How A Richmond Company Made Big Money Off The Opioid Epidemic

by | Nov 29, 2018 | VIRGINIA NEWS

A Richmond-based pharmaceutical company raised the price of a life-saving opioid overdose antidote by 600 percent between 2015 and 2017, at the peak of the U.S. opioid epidemic, according to a Senate subcommittee report.

The report accused the company, kaléo, of brazenly exploiting the U.S. opioid epidemic, and of capitalizing on government healthcare programs intended for the nation’s elderly and most vulnerable citizens. Kaléo’s misconduct, it said, resulted in more than $142 million in charges to taxpayers in just the last four years.

Kaléo, whose headquarters are located in downtown Richmond, raised the price of the opioid antidote EVZIO from $575 to $4100 within a two-year period. EVZIO, a handheld auto-injection device using the opioid-blocking medication naloxone, was the first treatment specifically designed for non-medical bystanders to use in the event of an opioid overdose.

In 2017, 49,000 Americans died from opioid overdoses, up from 42,000 in 2016. According to the Centers for Disease Control and Prevention (CDC), 115 Americans die every day from an opioid overdose. Naloxone has been recommended by the U.S. Surgeon General and the World Health Organization (WHO) as a potentially life-saving drug, and both the Surgeon General and the WHO have supported policies that would aid in its distribution.

EVZIO’s price hike was part of the company’s sales strategy, which encouraged doctors to route prescriptions through specialty pharmacies that handle prior authorization paperwork for insurance coverage. According to the report, a prior authorization triggers coverage for commercial plans, but also for government programs like Medicare and Medicaid.

Spencer Williamson is the President and CEO of kaléo. He currently serves on the board of directors of Avenu Medical, and the VCU Intellectual Property Foundation, and is on the Board of Trustees of the MCV Foundation. Chris Schools is Chief Financial Officer of kaléo.

Spencer Williamson/via kaléo

According to the report, “Dan Hackman, current Vice President of Patient Access & Affordability Strategy at kaléo, told the Subcommittee that all of kaléo’s pricing decisions are made by the Pricing Committee, ‘with the blessing of Spencer [Williamson].’”

The report found that kaléo hired outside consultants Todd Smith and Ben Bove to orchestrate EVZIO’s price hike, after several other consultants recommended lowering the price of the drug.

Smith and Bove were known to have implemented similar sale strategies at other U.S. pharmaceutical companies. The pair consulted with Horizon Pharma, where the price of a bottle of arthritis medication shot up from $140 to $2,482; and Iroko Pharmaceuticals, where the cost of an arthritis drug called indocin nearly tripled after their pricing model went into effect.

The Senate report states that “sales to patients with insurance coverage for EVZIO were intended to cover kaléo’s cost to send the drug to patients whose insurance did not cover kaléo,” which was the stated rationale for the price increases. However, Vox reporter Dylan Scott focuses on another, more telling section of the Senate report. “With the increased price and new business model,” the report reads, “kaléo sought to ‘[c]apitalize on the opportunity’ of ‘opioid overdose at epidemic levels – a well established public health crisis’.”

While kaléo executives claim that their pricing models were designed with private insurers in mind, the financial hit taken by Medicaid and Medicare as a result of the increases was substantial. Medicare purchased 16 percent of EVZIO units sold over the time period in question, but paid 56 percent of kaléo’s total revenue from the product, while Medicaid purchased 8 percent of units and accounted for 19 percent of revenue.

Williamson has denied any wrongdoing, and has said that EVZIO has not turned a profit since it went on the market. In a statement, the company claimed that “patients, not profits, have driven our actions.”

It’s unclear at this time whether kaléo or it’s leadership will face any consequences for their role in the exploitation of the opioid epidemic. 

Additional reporting by Marilyn Drew Necci; Top image via YouTube

Daniel Berti

Daniel Berti

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