A pharmaceutical manufacturer that the Federal Trade Commission (FTC) says illegally cornered the market on heart drugs for critically ill premature babies may also have improperly circumvented 340B discount prices for at least five of its products, including the two drugs of concern to the FTC.
Ovation Pharmaceuticals, which specializes in acquiring and marketing underperforming niche drugs, provides some of its products to the Medicaid program and is listed by the Office of Pharmacy Affairs (OPA) as a participant in the 340B program. But when Safety Net Hospitals for Pharmaceutical Access (SNHPA) reviewed product price listings from four different wholesalers, there were no 340B prices for at least five Ovation drugs, as required.
Two of the products were Indocin and Neoprofen, which are used to treat the infant heart ailment patent ductus arteriosus – a condition that makes it hard for premature babies to breathe. Nor were there 340B prices listed for the Ovation drugs Cogentin, Cosmegen, or Elspar. Cogentin is used to treat Parkinson’s Disease, Cosmegen to treat certain tumors, and Elspar to treat acute lymphocytic leukemia.
Ovation Treasurer and Vice President of Finance Shelley Paulson told the Monitor that her company makes program pricing available on all of its products, but that 340B pricing is available for the products in question only if the covered entity deals directly with the manufacturer. 340B pricing is not available through wholesalers for those products, said Paulson, who is also the company’s OPA contact for 340B pricing.
Donald Davies, Pharmacy Value Analyst at Clarian Health Partners in Indiana and other SNHPA members confirmed that Ovation products are available from wholesalers at so-called wholesale acquisition prices, but not 340B prices. This may violate federal policy.
“We have not attempted to procure direct,” Davies added.
Federal guidelines give 340B pharmacies level playing field for procurement of drugs
A December 1993 guidance published by the Health Resources and Services Administration (HRSA), “Notice Regarding Section 602 of the Veterans Health Care Act of 1992: Entity Guidelines,” says that a manufacturer may not discriminate against 340B covered entities by imposing restrictive conditions “that would…have the effect of discouraging entities from participating in the discount program.”
OPA Director Jimmy Mitchell confirmed that the 1993 guidance still stands. “Requiring covered outpatient drugs to be obtained directly through a more restrictive process...while other customers have a less restrictive option of purchasing through wholesalers would be prohibited,” he said. It should be noted that Ovation appears also to be denying discounts to group purchasing organizations for inpatient drugs. It’s unclear whether the company requires direct contracting for GPO discounts, but the prohibition against restrictive terms and conditions applies only to outpatient drugs, Mitchell said.
FTC: Ovation “profiteering on the backs of critically ill premature babies”
Ovation, based in Deerfield, Ill., burst onto the scene in 2000 with a bold strategy to adopt struggling specialty drugs and market them globally to “patients with unmet needs.” Ovation is a two-time winner of the prestigious Scrip Award, which recognizes the world’s most innovative and successful pharmaceutical companies, but drew less flattering headlines when taken to court by the FTC in December 2008. The FTC alleged in its lawsuit that the fast-growing company unlawfully acquired rights to the drug NeoProfen prior to the drug’s approval by the U.S. Food and Drug Administration, when the company already held rights to the drug Indocin, used to treat the same infant heart problem. The FTC complaint alleges that immediately after acquiring U.S. rights to NeoProfen in January 2006, the drug company raised the price it charged hospitals for Indocin by close to 1,300 percent,from $36 to $500 per vial.
Once NeoProfen was approved and launched in July 2006, Ovation set a price for NeoProfen at a level that matched the price for Indocin. It has maintained prices for those products – the only drugs approved in the U.S. to treat patent ductus arteriosus – at or above those levels ever since, FTC said.
In its complaint, filed in the U.S. District Court for the District of Minnesota, the FTC notes that the only alternative treatment for the infant heart disease is surgery, which carries a risk of serious complications and high costs. The FTC says the “artificially high prices that hospitals are forced to pay (for the drugs) ultimately raise costs for families, tax-supported programs such as Medicaid, and other public and private purchasers.”
“Ovation’s profiteering on the backs of critically ill premature babies is not only immoral, it is illegal,” FTC Commissioner Jon Leibowitz said in a December statement. The FTC is seeking a court order requiring that Ovation divest itself of one or both products, a permanent injunction prohibiting the company from retaining any maintaining simultaneous legal or beneficial interest in the two products, and “disgorgement” of all unlawfully gained profits.
In a statement issued the day the FTC complaint was filed, Ovation disputed the charges and noted that the NeoProfen drug “is not interchangeable for most premature infants with patent ductus arteriosus” – meaning that the company never monopolized treatment. “Ovation welcomes the opportunity to demonstrate in court in Minneapolis that the FTC allegations and claims are without merit,” the company wrote.
The 340B program policy requires participating manufacturers to provide 340B prices for all product lines, and not just some. Paulson acknowledged the company’s duty to provide 340B prices on all products. But she also suggested that before providing 340B discounts, the manufacturer wanted to be sure that the five products not listed – particularly the two neo-natal medications – are being dispensed in an outpatient setting and not as inpatient drugs.
According to Davies and SNHPA Pharmacy Director Andrew Wilson, however, all five drugs could possibly be used in an emergency room or outpatient surgery setting. The company does appear to provide 340B pricing for some of its products through wholesalers – including Chemet, Tranxene, Peganone, Diuril, and Mebaral.
Mitchell said that OPA has not yet been in contact with Ovation regarding the company’s 340B pricing policy. “Ideally, we’d like to have the parties…contact the manufacturer first to resolve issues like this,” he said. “But if these efforts fail, they may contact OPA in writing with thorough documentation of their complaint included, and we’ll look into the matter.”