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.
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.
I really value your piece of work, Great post.
Todd,he needs a good ass kicking.That boy better be looking over his shoulder.
I was just prescribed Alcortin A gel by my dermatologist for what I consider to be a mild skin irritation. A compounding pharmacy was supposed to fill the script but let me know that my insurance wouldn’t cover it since they didn’t deem it medically necessary. They let me know that it could be filled for free from the manufacturer. I just received it via FedEx, completely free, including shipping. I’m at a loss. Why would they do this? I price compared and would have to pay about $3,500 to have it filled locally with a manufacturer’s coupon. The logic escapes me.
That’s the beauty of drug pricing. There is no logic to it. Wasting your time trying to figure it out.
How did you contact the manufacturer to get it filled? Wish you would have included those details
pharmvet1, exorbitant drug prices are not beautiful.
Antonio, just go to the manufacturer’s web site. Google (or use some other search website) the drug. For Alcortin you will get http://novumrx.com/alcortin.
I had considered Scopolamine to be the world’s scariest drug until last week when I made the mistake of using Alcortin A that my doctor gave me a sample of. I then spent one of the sickest two days of my life, horrible headache, nausea, vomiting, wet with sweat, and could not sleep.
I just prescribed Alcortin gel and feel angry and foolish ( more angry) , when I found out my patients insurance was billed and PAID $9500 for something I was told was $0. Then to add insult to injury was automatically refilled for another $9500 before the patient caught on and called me. I confronted the rep from Novum, but don’t think she understood why I , the patient and society should be outraged.
I’m curious why you thought the insurance would not be billed the $9500? The pharmacy has to bill someone for the cost of the medication, they can’t dispense it for free. Did the rep say the medication wasn’t to be billed through the patient’s prescription insurance? Did the patient present a discount card? Usually the primary insurance (patient’s insurance) is billed first then the discount card is billed second and picks up the remainder of the copay.
I too resent seeing prices skyrocket for medications that are not expensive to make just because the pharmaceutical company has a monopoly on it and want to pad their pockets.
Thank you DermNP for being concerned. It does not really affect you or your patient, correct? But I totally understand your concern. Americans need to do more. I am no one, I have nothing to do with any of that either. But if it helps you, I just want to say that big business and the drug companies in particular are really complicated. It is really difficult to know who is really paying what. The problem that most concerns me is if all these complications are allowing the big companies to eliminate the small ones. If that is what is going on then people need to do more.
I don’t agree, look at that https://www.washingtonpost.com/news/speaking-of-science/wp/2016/05/09/mit-scientists-made-an-invisible-second-skin-that-hides-wrinkles/
Don’t agree with what?
Don’t agree with what?
How does reimbursement work in the pharma world? Just name your price and third party pays? That would be crazy.
I would assume third party payers get an equity share of the various Pharma companies so they play dumb.
The Kaiser Foundation has prepared a report that will answer all your questions. It’s a complex process as you will see. Open the link and click on the link to the PDF file that contains the 32 page report.
Just to clarify this company is not affiliated with Novum Therapeutics, which is a contract research organization.
Notably these prescription creams aren’t FDA approved, so noone has even incurred that expense. http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/EnforcementActivitiesbyFDA/SelectedEnforcementActionsonUnapprovedDrugs/default.htm. While the FDA does not have any control over prescription drug pricing, it could intervene in a number of other ways–eg, lack of demonstrating efficacy, deceptive advertising (for instance, that bullsh*tty aloe graphic at the Alcortin A website).
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