FDA Rules More Pliable Than Laws of Economics

KV Pharmaceutical Co. developed a version of hydroxyprogesterone caproate with the brand name of Makena. After investing in the drug's development and successfully receiving the desired FDA approval and seven years of marketing exclusivity as an orphan drug, KV priced Makena at a level that would have been reasonable for a such a product if it were completely new. Unfortunately, compounding pharmacies had been charging a price that was one one-hundredth of Makena's price for unapproved hydroxyprogesterone caproate and so KV drew scrutiny from Congress.

The FDA had laid out a deal that KV accepted. Those companies that gave the FDA what it wanted by putting their "outsider" products through the FDA's expensive, risky, and lengthy approval process would be rewarded with seven years of marketing exclusivity. KV was successful at this task and thought it had received its prize. However, under political pressure, the FDA effectively made a mockery of the deal by refusing to take enforcement actions against the remaining compounding pharmacies.

I guess marketing exclusivity isn't what it used to be as the FDA showed that its rules are pliable and subject to the political winds. KV played by the rules but Congress and the FDA didn't oblige. The laws of economics, though, aren't so whimsical and KV has realized that it paid a premium price to develop what is effectively a generic product. Struck by a stark financial future, KV has now filed for Chapter 11 bankruptcy protection. I assume that other companies won't be as credulous.

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