A Chicago pharmaceutical company that grabbed national attention for raising the price of its skin medications has filed for bankruptcy.
Novum Pharma filed for Chapter 11 in U.S. Bankruptcy Court in Delaware on Sunday, saying in the filing that it has "faced a series of financial and operational difficulties" since buying drugs from Primus Pharmaceuticals in 2015.
Novum hopes to sell "substantially all of its assets" and continue operating through the bankruptcy process, according to the filing. The company has about 50 full-time employees, most of whom are sales representatives who operate in 29 states.
The company gained notoriety in 2016 after raising the wholesale price of skin gel Alcortin A to $7,968 a tube, according to the Elsevier's Gold Standard Drug Database. The medication is used to treat eczema and certain skin infections, and previously had a price of $226, according to a U.S. Senate subcommittee report.
The company also sold another skin medication, Aloquin, for the same wholesale price. And it sold skin medication Novacort for $5,952 a tube, according to Elsevier.
Novum defended its pricing at the time, saying the quoted prices were inaccurate. It also said that most patients with private insurance paid no co-pay for Novum products, and those without insurance never had to pay more than $35.
Novum did not respond to requests for comment by deadline Tuesday.
But in a court filing, Novum Chief Restructuring Officer Thomas O'Donoghue attributed the company's bankruptcy to manufacturing issues, a dispute with a wholesaler and major pharmacy chain, and unauthorized generic alternatives being introduced into the market.
He also wrote that Novum has had a difficult time getting its drugs covered under health insurance plans. Industry middlemen, known as pharmacy benefit managers, have refused to include Novum's drugs on prescription formularies, he wrote, which means insurance plans often aren't covering the medications.
That difficulty "has reached a point that makes it impossible for the Debtor to sustain its business," given other challenges facing it, he wrote. To try to deal with that lack of insurance coverage, the company increased the prices of its medications several times since 2015, he wrote. Those price increases, however, exacerbated the problem, he said.
"These price increases, although necessary to support patient access commitments and ensure a minimum level of profitability for the business, led to public scrutiny regarding the Debtor's business model and further increased prescription rejection rates," O'Donoghue wrote.
The bankruptcy comes amid a continued national focus on drug pricing. President Donald Trump has repeatedly spoken about the issue.
Leaders of the Senate Finance Committee also have invited seven major pharmaceutical company executives to testify at a committee meeting later this month on drug pricing.
Amid the public discussion about drug prices, "I think we're seeing companies sensitive to announcing these price changes. I don't think we're seeing a wholesale change in behavior," said Craig Garthwaite, director of health care at Kellogg School of Management at Northwestern University.
Still, he said, companies selling products for which there are alternatives should be thoughtful when raising prices.
Other, less expensive drugs are available to treat the same skin conditions as the products Novum sells.
"There's this belief that pharmaceutical companies can raise the prices however they want, but if there are substitutes, (pharmacy benefit managers) can shift demand to competing products," Garthwaite said.
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