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Cheap custom-made versions of high-cost drugs spur backlash

The Wall Street Journal. logo The Wall Street Journal. 9/10/2018

A new kind of drugmaker is emerging to meet demand for lower-priced medicines by custom-making drugs, sparking pushback from federal health regulators and legal challenges from traditional pharmaceutical companies.

These companies are marketing cheaper versions of brand-name drugs but they differ from traditional generic-drug makers because they operate much like pharmacies that mix their own medicines, though often in larger quantities. That allows them to skip the regulatory approval process through which traditional drugmakers must prove safety and efficacy of their medicines.

Companies selling custom-made versions of costly drugs—a practice known as “compounding”—say they are meeting demand for alternatives to high-priced drugs.

Athenex Inc. in Buffalo, N.Y., last month began marketing a compounded alternative to blood-pressure medication Vasostrict, which the company said it sells for up to 35% less than the branded version. A typical dose of Vasostrict can list for as much as $836, according to wholesale-acquisition cost data from Elsevier’s Gold Standard Drug Database.

The U.S. Food and Drug Administration is taking steps that could stymie compounders’ push. Laws don’t allow compounders to merely copy medicines. Drugs may only be compounded under limited circumstances: to address a drug shortage or meet medical need, by modifying the custom-made version—such as adjusting ingredients to address an allergy. In January the agency said high prices aren’t a valid reason.

Then last month, the FDA proposed taking some drug ingredients off a list that can be used for bulk compounding. The agency sees no clinical need for compounders to manufacture the drugs from ingredients, FDA Commissioner Scott Gottlieb said in a statement announcing the proposal.

Meanwhile, pharmaceutical companies have filed lawsuits that seek to stop rivals from compounding drugs at large volumes.

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The conflicts underscore a central challenge as policy makers, industry and the FDA itself seek to ease regulation and bolster competition to lower drug prices—balancing access to less-expensive drugs against safety concerns and legal protections for innovative medicines.

“If people start taking compounded drugs because of cost, instead of a generic or new drug, that would undermine the premarket approval system,” Julie Dohm, the FDA senior science adviser for compounding, said. “Those studies and that testing are so critical to knowing that the drug will be safe and effective.”

Drug compounding is a longtime practice, typically done by individual pharmacies to satisfy the specific needs of a patient, such as an allergy to an ingredient in the mass-produced medicine.

Over the years, some compounders grew to produce large quantities of certain drugs to sell to hospitals and clinics. Federal scrutiny intensified after pain drugs mixed by New England Compounding Center in Framingham, Mass., led to an outbreak of fungal meningitis in 2012 that killed at least 64 people. In response, Congress required large-volume outsourcing compounders, known as “outsourcing facilities,” to follow certain manufacturing, quality and labeling standards, though the rules stopped short of requiring FDA approval of compounded drugs.

About 70 facilities are registered with the FDA to compound drugs in bulk, though it couldn’t be determined how many market lower-cost medicines.

UK HealthCare, the University of Kentucky’s hospitals and clinics, last month began buying the blood-pressure drug vasopressin compounded by Athenex. Philip Almeter, the university hospital system’s chief pharmacist, said the deal offers a potential $350,000-a-year savings.

The FDA proposed excluding vasopressin from the list of substances that can be used in bulk-compounding, after Endo International PLC, which sells a version under the brand name Vasostrict, revived a lawsuit over the agency’s compounding policy.

Endo Chief Legal Officer Matthew Maletta said the company was “extremely pleased” with the proposal and optimistic FDA would finalize it. The proposal is open for public comment for 60 days.

“We strongly believe vasopressin is appropriately included on the bulk substances list and we look forward to our active participation with the FDA during the comment period,” Athenex said in a statement.

Pharmacy-benefit manager Express Scripts Holding Co. signed a deal with compounder Imprimis Pharmaceuticals Inc. for a $1 alternative to anti-parasite drug Daraprim after the list price for a tablet soared to $750 from $13.50 in 2015.

The deal gives “members who need an affordable alternative to an egregiously priced medication” another choice, said Jennifer Luddy, an Express Scripts spokeswoman. Daraprim’s price rose after Turing Pharmaceuticals AG, then led by Martin Shkreli, bought the U.S. rights.

Vyera Pharmaceuticals, formerly Turing, didn’t respond to a request for comment.

Meanwhile, an Allergan PLC lawsuit threatens Imprimis’s compounding of an alternative to Allergan’s Restasis dry-eye treatment. Allergan alleges Imprimis is using false and misleading advertising to market its compounded drug.

An Allergan spokeswoman said when a company mass-produces and markets “standardized drugs that are not tailored to an individual patient’s medical needs under the guise of compounding, they may be putting thousands of patients at risk.”

“The facts will demonstrate that Allergan was not out-marketed by us and physicians were not misled by us,” said Imprimis CEO Mark L. Baum. He declined to comment further on the lawsuit.

Regulators should consider drug costs when designating shortages that would enable outsourcing compounders to step in, Mr. Baum said. If you cannot afford a drug it is “effectively in short supply.”

One of the newest ventures seeking to sell cheaper compounded drugs is venture-backed startup Osh’s Affordable Pharmaceuticals, of Littleton, Colo. The company, which is marketing drugs for pulmonary arterial hypertension and rare diseases, doesn’t bulk-produce the drugs but says it has agreements with pharmacies in 30 states to make the low-cost versions. Osh’s says it has begun filling initial orders.

Osh’s markets a compounded version of Syprine, a Wilson disease treatment from Bausch Health Cos. Syprine lists for as much as $21,000 a month for certain patients, according to wholesale-acquisition cost data from IBM Watson Health, and a generic version made by Teva Pharmaceutical Industries Ltd. costs about $18,000. Osh’s version will cost about $120 for the same prescription, said founder Alex Oshmyansky.

Dr. Oshmyansky said Osh’s will satisfy FDA by ensuring patients have prescriptions for a custom-made drug. Bausch and Teva declined to comment.

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