Mylan CEO Heather Bresch is being grilled by Congress Sept. 21 over the pricing of the EpiPen, which has climbed 400% since her company acquired the device in 2007.
She might want to make room at the witness table for Todd Smith, the CEO of Novum. According to the Financial Times (paywall), Novum just hiked the price of its prescription skin cream Aloquin by 128%. A small tube now costs $9,561, or about the price of this home in Detroit.
Aloquin is used to treat acne and eczema, and is made with ingredients that can be bought at a pharmacy for less than $40, according to the FT. The US Food and Drug Administration calls it “possibly effective.”
Novum, based in Chicago, acquired Aloquin from Primus Pharmaceuticals in 2015, when it cost $241.50, then overnight raised it more than 1,000%, the FT reported. It has raised prices twice since then. The company has also jacked up the prices of its two other prescription skin treatments.
Novum was founded last year and focuses on “acquiring and licensing under promoted/mature products,” and so far has the three skin treatments as products, according to its website. Smith, the CEO, has a long history in the pharma industry, and most recently served as chief commercial officer of Horizon Pharma, according to his biography on the website of Vault Pharma, where he serves as a board member.
In an email, Novum’s spokesman Rand Walton said the prices in the FT were inaccurate, without saying what the actual prices are, and that thousands of dollars are added to the price by middlemen, without saying whom they are. Novum also has patient support policies so “all patients with commercial insurance only pay $0 for Novum products, even when their insurance doesn’t cover them. Furthermore, cash-paying patients never have to pay more than $35,” according to the email.
Even if patients aren’t paying out-of-pocket, insurers are still paying Novum for the drug and will be forced absorb the price increase, at least in the short term. Pharmacy benefit managers examine the drugs they cover annually, and some may choose to exclude Aloquin if they conclude there are cheaper alternatives. CVS, which manages the prescription drug plans for more than 80 million Americans, excluded another Novum drug for skin conditions, Alcortin, for 2017, citing its “hyperinflationary” 2856.8% price increase over the last three years.
Ultimately, insurers that do cover Aloquin will pass on the cost to their patients. As drug costs soar, pricing decisions are under increasing scrutiny from lawmakers, insurers and the public. While Mylan is in the spotlight today, Novum’s strategy is similar to the one employed by Turing Pharmaceutical. Under its former CEO Martin Shkreli, Turing hiked the price of AIDS drug Daraprim from $13.50 a pill to $750.
Shkreli once boasted to his board members about the huge windfalls they would realize. His own fortunes have reversed since then. He was called before Congress to testify, and, after his arrest on securities fraud charges, was forced to resign as CEO.
That lesson seems to have been lost on the leadership of Novum.