The curious case of the $9,500 skin gel

Even in an age when prescription drugs are increasingly expensive, a $9,500 tube of gel to combat scaly skin can gain notice — especially when the price spikes 128 percent overnight.

That’s what happened earlier this month when a little-known company called Novum Pharma suddenly hiked wholesale prices for all three of its dermatology products by whopping amounts.

We were curious. So we started poking around to learn more about Novum Pharma.

What did we learn? It appears to be a furtive vehicle for scooping up older medicines from other companies and then boosting prices significantly. And its chief executive did the very same thing at a previous job, at Horizon Pharma.

Let’s start at the beginning: Novum bought three gels to treat skin conditions in March of 2015. Two months after it acquired them, it jacked up the prices tenfold. That’s right, tenfold. For instance, the wholesale price for Alcortin A, a gel used to treat dermatitis and eczema, went from $226 to $2,995.

There was another big price hike earlier this year. And this month, Novum boosted prices again. Alcortin A and Aloquin each now list for $9,561 per tube. And the wholesale price for its Novacort gel rose to $7,142 from $4,186 for a small tube, according to Truven Health Analytics.

All three contain pharmaceutical ingredients, but there is a twist — they also include aloe, a common herbal remedy.  (When it bought the gels from Primus Pharmaceuticals, Novum also bought a patent to use aloe for prevention and treatment.) There are no generic versions, so the Novum sales team has an open field to convince doctors to write lots of prescriptions, even though the prescribing information acknowledges that two of the gels are only “possibly effective.”

With an army of mostly young and attractive sales reps (type in “Novum Pharma” on LinkedIn to see for yourself), getting doctors to write scripts may not be too difficult.

Still, we wanted to know more about the rationale for the price hikes, which were first reported by The Financial Times.

A Novum spokesman sent us a statement insisting the prices were inaccurate and saying they include “thousands of dollars in extra charges” added by third-party middlemen and passed on to patients. “This practice reflects one of the many fundamental challenges inherent in the healthcare system today that add to the cost of access for patients,” the statement said.

This is the same explanation Mylan Pharmaceuticals Chief Executive Heather Bresch gave for EpiPen price hikes.

Though its statement blamed middlemen for passing on extra costs to patients, Novum then went on to claim that patients don’t actually pay much for its products. The company said people with commercial insurance “only pay $0” for Novum gels, “even when their insurance doesn’t cover them.” It added that “cash-paying patients never have to pay more than $35.”

We asked for more detailed explanations, but never received a reply.

But getting even this much of an answer proved challenging.

If you visit the Novum web site, there’s not much to see beyond information about its three products. This is a privately held company. There’s no information whatsoever about the management. There are two phone numbers listed: One is for obtaining coupons to reduce the cost of the gels. The other is not answered by a real person, though you can leave a message. Not very helpful.

Since the Novum website says it is a limited liability corporation based in Indiana, we searched a state government site for the filing history. This indicated the company was organized in Delaware in early 2015, and the name of the manager who signed the form was Gavin Toepke.

So we Googled his name along with Novum Pharma. His LinkedIn profile popped up, indicating that he is the cofounder and chief business officer. Okay, but we still didn’t have any contact info. Interestingly, a little further down the Google page, Toepke is listed as a member of the executive team at Avondale Strategic Partners, which is based in Chicago.

That firm describes itself as a business advisory consultant and when we called the phone number, the recorded voice answered by saying we had reached the mailbox for … Novum Pharma. We shouldn’t have been surprised, though, because the address Novum used elsewhere on the Indiana state site matches the Chicago address where Avondale is located.

So we turned our attention to the Illinois state government site to search for Novum and, after poking around, found the names of five people who are listed as managers.

One of them is Todd Smith. His LinkedIn profile describes him as the Novum chief executive and notes that he was once executive vice president and chief commercial officer at Horizon Pharma. He was in that post when Horizon bought the rights to a pain drug from AstraZeneca — and shortly afterward, raised the list price  by 597 percent.

Sound familiar?

Smith did not immediately return a call seeking comment.

Another of the names linked to Novum rang a bell, too — he was an industry contact of ours from many years ago.

So we poked around some more and located his home number. Since it was dinner time, he was there when we called. He put us in touch with Toepke, although the number he gave us actually led us to someone else, who then led us to Toepke. We called Toepke a few times and he finally responded by text. What happened next? We received the statement we mentioned earlier.

In short, Novum appears to be working hard to keep the lowest possible profile. But that may be more difficult now that it’s drawn public attention for huge price hikes. In fact, the company — which contracts with a manufacturer in New Jersey where its gels are actually made — may find itself held up as yet another example of a rapacious purveyor of medicines.

Yes, it does offer patients assistance programs and coupons, but coupons are also controversial, since they effectively shift more of the cost on to insurers.

And high prices can sometimes backfire on a company, not just because of public outrage. A study last year found that the retail prices of seven widely used medications for skin conditions more than quadrupled between 2009 and 2015 as part of a rapid increase in prices across the dermatology sector.

As a result, pharmacy benefit managers are now excluding some dermatology meds from their formularies, which are used to set insurance coverage.