UPDATED: What's the next pricing uproar? Ariad, Novum and Lannett could be candidates

By Tracy Staton Oct 7, 2016 9:51am

Note to drugmakers: Don’t risk conspicuous price increases. Whether it’s one big jack-up or a series of smaller ones, you’ll get some unwanted attention.

As drug-pricing scandals continue to mount, with Mylan’s EpiPen the most obvious culprit at the moment, pharma watchers and patient groups and politicians and journalists all have their eyes peeled. Example: Earlier this week, Forbes spied an enormous increase at Lannett, a small pharma that made Fortune’s list of fastest-growing companies last year; it was the fastest-growing drugmaker in the industry, in fact.

On Thursday, the spotlight moved to Ariad Pharmaceuticals, which sells a cancer drug called Iclusig. It’s not been shy about pricing the med so far, and even amid the outcry this year, hiked the sticker four times. Highlighted by an investor on Twitter who goes by the handle @AndyBiotech, the individual increases were all in the single digits, but added up to a 39% rise year-to-date.

$ARIA just increased Iclusig price again by 8% effective Oct.1st after
+9% in July
+8% in April
+9% in Jan.

Once per quarter, +39% YTD...
— Andy Biotech (@AndyBiotech) October 5, 2016

And all this follows a kerfuffle over Novum Pharma, which raised its prices so much that CVS Health kicked two of its drugs off its formulary. An acne med, Alcortin A, “saw price inflation of 2,856% over the past three years, CVS said in announcing its latest exclusions.

Let’s start with Lannett: The 73-year-old company is no stranger to profiting off price hikes. Based in Philadelphia, it posted record sales in 9 consecutive quarters and delivered a 3-year annual growth rate, earnings-wise, of 314%, according to Fortune’s 2015 report. Its 2014 revenue amounted to $274 million. Also in 2014, the prices on its cardiovascular and migraine meds more than doubled, with increases of 150% and 124%, respectively.

The latest increase outpaces all that considerably. Over three months last year, Lannett raised the price on a schizophrenia drug, fluphenazine, by 1,650%, Forbes reports. It also hiked up clindamycin by 286%.

And its aggressive pricing had already put Lannett under the Department of Justice's microscope; the company had previously disclosed subpoenas in a federal investigation of potential collusion on pricing.

Ariad’s series of increases are newer--once per quarter this year, at a time when pricing has been a hot-button issue for pharma and lawmakers alike. As The Street reports, the latest 8% increase took Ariad’s price to $16,561 per month, or about $199,000 per year, before discounts or rebates. And this is for a drug with some serious safety problems that caused the FDA to restrict its use to a smaller group of patients than it initially targeted.

When approved in December 2012, Iclusig was priced at $115,000 per year, the pub notes. Now, after the FDA label change, Iclusig has a target market of 1,000 to 2,000 patients--and Ariad uses that fact to justify its price hikes, The Street reported. Drugs for rare diseases often carry big price tags, and payers cover them because the patient populations are so small. But in this case, the market is small, not because it treats a rare disease, but because of those safety limits.

Ariad figures its increases on Iclusig are reasonable. “We have substantial clinical data highlighting the benefits of Iclusig, which addresses an area of high unmet medical need in an ultra-orphan patient population of around 1,000-2,000 patients per year,” the company told The Street. “We believe that our pricing actions also consistently reflect our significant investment in R&D and our ongoing commitment to the patient population we serve through our medicines.”

Meanwhile, there’s Novum. CVS didn’t just exclude Alcortin A for “egregious price increases.” It also kicked off two of its other skin meds, the anti-infective Aloquin--which went up to almost $10,000 per tube, the Financial Times reported, a 3,900% increase since May of last year--and Novacort, a topical anesthetic and steroid.

When the FT highlighted the Aloquin hike, it pointed out that the latest increase had been put through last month--as the EpiPen pricing brouhaha was still in full swing--and that the jack-up amounted to 128%. Novacort went up to $7,142 per tube from $4,186. That’s a 70% increase.

Novum spokesman Rand Walton said the FT's numbers are inaccurate, but it's unclear whether Novum takes issue with the list price, or the net. "The prices are not the prices that Novum charges and are not even close to the actual price Novum ultimately realizes," Walton said in an emailed statement.

Novum also put forth the rebate argument that Mylan has been using to deflect EpiPen criticism, and, like Mylan, cited its copay assistance. "The prices cited in the article include thousands of dollars in extra charges that are added by various third-party middlemen and passed on to patients," he said, adding that the drugs' sales fund "best-in-class access programs" under which insured patients get Novum products for free, and cash patients never pay more than $35.

Novum could still raise some eyebrows among pricing hawks. Aloquin is another instance of buy-and-hike, a strategy called out by Goldman Sachs analyst Jami Rubin in a recent note. Drugmakers doing that sort of thing need a new strategy, Rubin said. Those increases aren’t going to fly in the current environment. Novum bought Aloquin from Primus Pharmaceuticals and raised its price immediately by 1,100%, the FT says.

Novum's "middlemen" argument does hold some weight; there are myriad questions about the pharma supply chain, and with rebates proprietary and negotiations secret, the process is opaque. Mylan CEO Heather Bresch said PBMs, wholesalers and others collected $287 of the $600-plus cost of EpiPen, for instance, but congressional investigators are still waiting for detailed explanations.

PBMs could be next in line for congressional scrutiny. A pharmacists' association has urged two committees to probe the companies. But another newly pricey med could also put another pharma up for interrogation--and further extend a debate that the industry would like to put to rest.

The one-time price increase could have a limited life span in any case, if Hillary Clinton is elected president and can persuade Congress to take some action on pricing. If enacted, one of her proposals would punish drugmakers for “outlier” price increases flagged by a standing board of experts.

Walton, for one, said Novum would welcome a pricing overhaul, pointing to a "broken and unsustainable" system too dependent on rebates. "We believe the discussion about drug pricing must change to find a holistic and sustainable solution to 1) the myriad of obstacles that prevent a patient from getting the drug their physician prescribes, and 2) the tremendous cost of access inherent in the system to get a drug to a patient once it is prescribed," he said.

Editor's note: This story was updated with comments from Novum.

Drug Prices Ariad Lannett Financials