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Ailing system

November 29, 2018
Lehigh Acres Citizen

We are strong free market proponents. Competition between and among private businesses is the bedrock of a sound demand-and-supply economy.

We endorse that predicate.

Note our emphasis, however, on the reference to "private businesses." That is key.

Because when one's business model brings the government - i.e the taxpayers - into the mix, that business, or that industry, invites regulation into the room.

Think of the vampire legend - as a business, you get a benefit, but you give up a slice of your soul when you slide the window open to that proffered partnership with the public checkbook.

For now nationally vilified-as-soulless kalo, Inc. a self-touted "new type of pharmaceutical company," the benefit was big. At least on paper.

According to a Senate investigations subcommittee report released this week, kalo, Inc. ... "exploited the opioid crisis by increasing the price of its naloxone drug EVZIO by more than 600 percent (from an initial price of $575 per unit to $3,750 and then $4,100 eleven months later), resulting in more than $142 million in charges to taxpayers in just the last four years."

According to the report, entitled "Combatting The Opioid Crisis: The Price Increase Of An Opioid Overdose Reversal Drug And The Cost To The U.S. Health Care System." the company hired consultants after its initial business model, which brought kalo's innovative overdose reversal drug autoinjector to market at prices about double what two previous drug-pricing consultants had recommended, failed.

The new distribution model focused on physician authorized paperwork including "paperwork establishing that EVZIO was medically necessary, triggering coverage without first trying a cheaper option (called a "step edit") for commercial plans and coverage by government programs like Medicare and Medicaid for the WAC, less any patient copays."

On the plus side, as kalo points out, more patients got access to the lifesaving overdose remedy, many without having to pay anything out-of-pocket. According to a public statement from the company, more than 5,500 lives have been saved as a direct result. The drug also resulted in lower care costs for those subsequently treated, the firm maintains.

On the downside, commercial and government drug plans paid more - a lot more - with government plans taking the heaviest hit, leading to the subcommittee report's scathing conclusion.

"Kalo's more than 600 percent price increase of EVZIO not only exploits a country in the middle of an opioid crisis, but also American taxpayers who fund government-run health care programs designed to be a safety net for our country's elderly and most vulnerable," the report states.

It also didn't apparently do a whole lot for kalo's bottom line. Although kalo saw prescription numbers increase substantially, with a significant fill rate bump at higher costs, and despite Medicare paying millions upon millions in increased costs, "kalo has still not earned a profit in over four years of the drug being on the market," the report states."

The consultants did, however, receive more than $10.2 million for "about two years work," with the payment rate based on revenue generated by the new distribution model, the report notes.

A couple of things on this pricey cautionary tale du jour.

The subcommittee report contains seven recommendations.

Among them is a review of how physicians use the medical necessity provisions for Medicare Part D. It also calls for more transparency as to drug costs.

The former is a stake sharpened at both ends as, while loopholes that allow cost run-ups for government healthcare payment programs need to be addressed, access to medically necessary drugs and treatments must not be stymied for "our country's elderly and most vulnerable."

Or anyone else with a debilitating or potentially fatal illness.

Hammer this one with extreme care, please.

As for the latter, cost analysis and transparency, that is a given - or should be.

Simply put, it should not take a Senate subcommittee, and four years, to question a 600 percent jump in costs and cry foul.

If there is blame to be had, there's plenty to go around on the health care front.

For what's not in the subcommittee's 99-page report is that the public paid twice - once for the cost shifting to government health care programs but also for the wealth of regulations so complex that requirements have spawned a profitable splinter profession for, in kalo's words, the exploration of alternative "viable paths" for the marketing and distribution of privately developed drugs.

It's the system that's sick.

And what we keep getting are placebos for what ails it.

- Citizen editorial



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