Avondale, a secretive Alabama-based drugmaker, has gained unwanted national attention after the company increased the price of a bottle of vitamins to almost $300 that can be bought on the internet for $5.
In the latest example of price-gouging in America’s lightly regulated pharmaceutical industry, records show Avondale inflated the price of Niacor, a prescription-only version of niacin, by “809 percent last month, taking a bottle of 100 tablets from $32.46 to $295”, according to the Financial Times.
Niacor is the prescription form of niacin, a type of vitamin B3 that is used to treat high cholesterol and the increased risk of a heart attack. With one easy search on Google, a generic version of Niacor can be bought for $5.75 on Jet.com - meanwhile, if the consumer wants the prescription brand, well, they might have to sell their Apple Watch.
Avondale’s development of price-gouging is certainly bad timing on management’s behalf when considering Martin Shkreli, who in the past year has become the most hated man in America after he bought the rights to a drug, then raised prices by 5,500 percent. In the world of Big Pharma, buy-and-raise schemes are not limited to just Shkreli, but it’s rampant across the industry, such as Valeant Pharmaceuticals who has been accused of raising drug prices by more than 5,000 percent.
The Financial Times said Avondale acquired the rights to Niacor from Upsher Smith, a division of Japan’s Sawai Pharmaceutical, earlier this year. The buy-and-raise scheme was immediately applied to Niacor, as management faced little or no competition among other drugmakers, along with limited government regulation.
Niacor isn’t the first time the company inflated drug prices, management “increased the price of SSKI by 2,469 percent, taking a 30ml bottle from $11.48 to $295,” according to the Financial Times.
According to the data provider Iqvia, there were almost 19,000 prescriptions written for Niacor in 2016. Niacor has been described as a drug with a fast absorption rate, making it popular with the medical community. Most people are oblivious to the sharp increase of Niacor, because of the secrecy surrounding drug prices are not usually disclosed to the public.
Michael Rea, chief executive of Rx Savings said, “this is the latest example of an inefficient US market where the consumer, payer and doctor don’t have all of the information available to make a financially sound choice, which makes software to help cut what people spend on medicine.”
He warned: “They are caught in a web of inefficiency and are being taken advantage of.”
FT could not get in contact with anyone associated with Avondale, which was started in 2016 by Mark Pugh, an executive behind several pharmaceutical companies. A spokesman from Upsher confirmed the sale of products to Avondale, but could not provide further information on the price increase.
Mr Pugh has held several executive roles in the drugmaking industry, sometimes at companies that have implemented very sharp price increases. A 2014 biography says he has “more than 20 years of industry experience” and a “documented record of success in identifying and capturing new business opportunities to build high-profit, high-growth corporations”.
Acrogen did not return a request for comment made through its website. Emails to the company were returned undelivered. Mr Pugh did not respond to a request for comment through LinkedIn.
A spokesperson for Upsher confirmed it had sold the two products to Avondale, but declined to make the terms of the deal public and did not explain why it did not announce the transaction at the time.
It declined to say whether it continues to manufacture the product on behalf of Avondale, or whether it was aware the new owner planned to raise the price sharply.
Avondale only has a small window of opportunity to exploit inflated drug prices, as President Trump back in October said, “Prescription drug prices are out of control” (see: Healthcare Stocks Slide After Trump Says “Drug Prices Out Of Control.)