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A US drugmaker is charging almost $300 for a bottle of prescription vitamins that can be bought online for less than $5, in the latest attempt at price gouging in the world’s largest healthcare market.
Avondale Pharmaceuticals raised the price of Niacor, a prescription-only version of niacin, by 809 per cent last month, taking a bottle of 100 tablets from $32.46 to $295, according to figures seen by the Financial Times.
Although niacin, a type of vitamin B3, is available in over-the-counter forms for less than $5 per 100 tablets, some doctors still prefer to use the version approved by the US Food and Drug Administration to treat high cholesterol.
Avondale, a secretive Alabama-based company, put the price of Niacor up shortly after acquiring the rights to the medicine in a so-called “buy-and-raise” deal — a strategy made famous by Martin Shkreli, the disgraced biotech entrepreneur.
It bought the medicine from Upsher Smith, a division of Japan’s Sawai Pharmaceutical, this year, although neither the transaction nor its terms has been announced by the companies.
Buy-and-raise deals involve acquiring a drug that faces little or no competition before sharply increasing the price in an attempt to profit from inefficiencies in the US healthcare market, where the cost of medicines is not controlled by the government.
Price of a 30ml bottle of SSKI, from $11.48
Avondale, which was formed in August, appears to have been set up for the sole purpose of acquiring two products from Upsher Smith.
In addition to Niacor, it bought a second of Upsher’s drugs, a respiratory medicine known as SSKI. The company makes no other medicines, according to FDA records.
Avondale increased the price of SSKI by 2,469 per cent, taking a 30ml bottle from $11.48 to $295, according to the figures seen by the FT.
The increases were confirmed by Truven Health Analytics and Elsevier, which both maintain a database of drug prices.
Almost 19,000 prescriptions were written for Niacor in the US last year, according to Iqvia, the data provider. It is the only prescription version that is absorbed by the body quickly, although there is an extended-release alternative, which disintegrates more slowly.
Most doctors will be unaware that the price of Niacor has risen so sharply because price increases are not routinely made public or telegraphed to the medical profession.
“This is the latest example of an inefficient US market where the consumer, payer and doctor don’t have all of the information available to make a financially sound choice,” said Michael Rea, chief executive of Rx Savings, which makes software to help cut what people spend on medicine.
He added: “They are caught in a web of inefficiency and are being taken advantage of.”
UnitedHealth, the largest health insurer, and Express Scripts, the largest pharmacy benefit manager, said they included the medicine on the list of drugs they will pay for, although neither classes it as a preferred medicine.
The majority of drugmakers have refrained from buy and raise deals since the downfall of Shkreli and other proponents of the strategy, such as the former management team at Valeant, the Canadian pharmaceuticals group.
But the tactic is still being used in some corners of the pharmaceuticals industry. Last year, the FT reported that a little-known Chicago-based drugmaker had acquired the rights to an acne cream and promptly raised the price tag to almost $10,000 a tube.
Avondale has no website or online presence and lists its address as a business park in Alabama, according to state records. The registered agent for the company is Acrogen Pharmaceuticals, which was set up in 2016 by Mark Pugh.
Mr Pugh has held several executive roles in the drugmaking industry, sometimes at companies that have implemented very sharp price increases. A 2014 biography says he has “more than 20 years of industry experience” and a “documented record of success in identifying and capturing new business opportunities to build high-profit, high-growth corporations”.
Acrogen did not return a request for comment made through its website. Emails to the company were returned undelivered. Mr Pugh did not respond to a request for comment through LinkedIn.
A spokesperson for Upsher confirmed it had sold the two products to Avondale, but declined to make the terms of the deal public and did not explain why it did not announce the transaction at the time.
It declined to say whether it continues to manufacture the product on behalf of Avondale, or whether it was aware the new owner planned to raise the price sharply.
David Mitchell, a campaigner at Patients For Affordable Drugs, said Upsher could bear some responsibility if it was aware of Avondale’s intended strategy.
He said: “If they sold the drug knowing that the purchaser was going to jack up the price — and if they received a premium because the seller was willing to do what they were not for fear of blow-back — then it seems to me they hold some responsibility.”