Novum Pharma made headlines in 2016 when its price hikes prompted CVS to kick the company’s drugs off its formulary. And now, it’s filed for bankruptcy.
In a Sunday filing in a Delaware court, the company listed “managed care actions” as one reason it's seeking Chapter 11 protection.
“The overall prescription rejection rate for the dermatology products has reached a point that makes it impossible for the Debtor to sustain its business,” Thomas O'Donoghue, Jr. Novum’s chief restructuring officer, wrote.
Novum first captured public attention back in 2016, when CVS put a spotlight on the company's huge price hikes and booted three of them off its formulary. The PBM giant called out Alcortin External Gel, sayings its price had soared by more than 2,800% over the previous three years. It also called prices on Novacort and Aloquin, two Novum treatments for infectious dermatoses, “hyperinflationary.”
Novum stood up for its prices at the time, calling the quoted numbers inaccurate. But that didn’t stop fellow mammoth PBM Express Scripts from following suit. Last August, Novum learned that Express Scripts given Alcortin A the cold shoulder for 2019, too.
While the exclusions hurt, they’re not fully responsible for Novum’s bankruptcy, according to the company. It blamed “a series of manufacturing issues” that began after its 2015 buyout of Primus skin products for a “significant” share of its financial strife.
Novum also cited a dispute with drug distributor Cardinal and CVS—over the price at which they’d hand back Novum’s unused products—as another factor that “materially reduced” its revenues.
Still, the payer pushback may serve as a cautionary tale to other specialty pharmas looking to hike their own prices; that’s certainly the intent the PBMs had when they removed Novum’s drugs in the first place.
And these days, as pharma and payers point the finger at one another for rising drug prices—now more than ever an issue in the public’s view—payers are even less likely to let large price increases slide. The payer industry has sought to characterize its members as high price-fighters, most recently with digital ads touting PBMs as “clamping down on drug price hikes” and “keeping a lid on out-of-control drug prices.”