After firing the infamous Martin Shkreli as its CEO, filing for bankruptcy, and getting delisted from the NASDAQ stock exchange, KaloBios Pharmaceuticals, Inc. may now be poised for a comeback—thanks to a Shkreli-inspired plan to jack-up the price of a life-saving drug and exploit a federal voucher system.
On Friday, KaloBios’ bankruptcy court in Delaware authorised the pharmaceutical company to enter into a binding deal to buy the worldwide rights to one of only two drugs used to treat Chagas disease, a neglected and life-threatening parasitic infection. With the deal, which was planned by Shkreli prior to his departure, the company plans to raise the price of the drug possibly by 600-fold or more. It will also use the drug’s status as one that treats a neglected tropical disease to earn a voucher from the Food and Drug Administration. Such vouchers allow drug companies to move through the drug-approval process faster, and they could be sold to other pharmaceutical companies for hundreds of millions of dollars.
When KaloBios and Shkreli first revealed the plan late last year, it sparked outcry from public health experts and infectious disease doctors who feared that the new cost would make it difficult for the millions of patients in Central and South America to get the drug. Those fears were put on ice following KaloBios’ series of troubles stemming from Shkreli’s arrest on fraud charges in December, but Friday’s news is likely to reignite concern as the company moves forward as planned.
“It’s caused a lot of angst in the Chagas community,” Dr. Sheba Meymandi, a professor at the University of California, Los Angeles and director of a Chagas treatment centre at Olive View-UCLA Medical Center told the New York Times in December. “The people with Chagas for the most part are poor.” A dramatic price hike, she added, would be “pretty devastating.” The drug at the centre of the deal, benznidazole, is a standard medication for Chagas in Central and South America. For now it usually costs around £35 to £70 for a course of treatment.
Chagas disease, caused by a parasite that is transmitted to people and animals by blood-sucking bugs, generally causes mild to no symptoms. If left untreated, it can lead to a lifelong infection that causes life-threatening heart conditions. Chagas is endemic in areas of Central and South America. While there are an estimated 300,000 people in the US with the disease, most are thought to have been infected abroad. In early December, Shkreli said that as CEO of KaloBios, he would raise the price of benznidazole to be similar to the cost of hepatitis C drugs, which go for between £43,000 to £70,000 a treatment.
Right now, benznidazole is not approved by the FDA for use in the US; it’s only given out by the Centers for Disease Control and Prevention on an experimental basis. But Shkreli planned to get benznidazole approved, which would require relatively little clinical effort. And because the drug treats a tropical disease, development of benznidazole as a therapy in the US would likely earn KaloBios a Priority Review Voucher (PRV) from the FDA. These vouchers move future drugs through the approval process faster, extending the time a drug is on the market while on patent. The vouchers were designed to incentivise pharmaceutical companies to develop drugs that treat neglected, tropical diseases, but again, they can be sold. One PRV went for $350 million (£250 million) recently. In its motion to the bankruptcy court, KaloBios cited the ability to sell the voucher as a reason to move forward with the deal.
Shkreli is notorious for such schemes and price-gouging. He first made headlines after raising the price of another life-saving drug, Daraprim, that treats a parasitic infection. In that case, he raised the price by more than 5,000 percent—from £9 to £500—virtually overnight. In November, Shkreli paid $3.2 million (£2.3 million) for the majority share of KaloBios, then a struggling California-based pharmaceutical company. With buzz from his benznidazole plans, his holding in KaloBios rose to $48 million (£34.6 million). Shkreli’s business plans came to a halt in mid-December when he was arrested on fraud charges for allegedly running a Ponzi-like scheme relating to two hedge funds he previously managed and another former pharmaceutical company, Retrophin.
KaloBios quickly fired Shkreli as CEO after the arrest, and the company then saw its stock crash, several executives leave, and its stock get delisted from the NASDAQ stock exchange. By the end of December, the company filed for Chapter 11 bankruptcy in Delaware. With the renewed plan to buy the worldwide regulatory rights to benznidazole from Savant Neglected Diseases, LLC, KaloBios is hoping for a comeback. The terms of the deal were sealed, but an initial payment of $3 million (£2.2 million) was revealed in the court documents.
One other drug is used to treat Chagas disease—nifurtimox. However, the drug is not used in children and has more side-effects in adults.
By Beth Mole - Ars Technica/Feb. 28, 2016
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