Congress Sets Bad Precedent With AVANIR

As if AVANIR Pharmaceuticals (Nasdaq: AVNR  ) investors needed another thing to cry about. The chairman of the Senate's Special Committee on Aging and three congressmen are questioning the pricing of the company's pseudobulbar affect drug, Nuedexta.

This seems kind of ridiculous to me. AVANIR got the drug approved for pseudobulbar affect, a disease for which there wasn't any other approved treatment. The company should be rewarded accordingly.

But investors shouldn't ignore the action in D.C. There's at least a small risk that AVANIR could be pressured to lower its average cost, which currently stands at about $4,365 per patient each year. Nuedexta is a mixture of two unpatented drugs. Compounding pharmacies were combining the two before the approval for 1/30th the cost.

KV Pharmaceutical (NYSE: KV-A  ) ran into similar problems earlier this year with preterm labor prevention drug Makena, which was also being compounded before KV gained FDA approval. The company subsequently caved and significantly lowered the cost of its drug.

Congress wants information about how much it costs to develop the drugs from AVANIR and another company, URL Pharma, which is in a similar situation. As if that should have any bearing on what price the market should pay for the drug.

It seems to me that Congress is setting a dangerous precedent that drug investors should keep a close eye on. It starts with already discovered drugs being expanded into new indications, but what's to keep it from extending to patented drugs. High-priced cancer drugs like Dendreon's (Nasdaq: DNDN  ) Provenge and Bristol-Myers Squibb's (NYSE: BMY  ) Yervoy could be the next targets.

Interested in keeping track of AVANIR as it battles with Congress over prices? Click here to add it to My Watchlist, which will help you keep track of all our Foolish analysis on AVANIR.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (3)

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  • Report this Comment On May 26, 2011, at 3:52 PM, pundant wrote:

    It's sad that you would present false information as if you actually know the facts. There was no pharmacy on earth compounding this drug for 1/30th the price.....that is absolutely false and is nowhere near what a few...very few pharmacies were providing.

    You make that statement as if these phamacies knew the combination, at a very specific level, would provide efficacy independent of Avanir's work....that is patently untrue. And to compare the KV Pharma situation to Avanir's indicates a total abscence of any understanding whatsoever.

    How do you yokels get published on here? Apparently no one vets your information.

  • Report this Comment On May 26, 2011, at 5:36 PM, longjon123 wrote:

    The government can pretty much do whatever it wants. In this case, many people bemoan the shady and seemingly questionable way in which our elected representatives have singled out Avanir. Obviously someone very well connected is pulling for Avanir to be worth less than they could be. For that reason, I am not playing this game--I am out of Avanir. Incidentally, it must be nice to have a Congressman or Senator in your back pocket. If Congress thinks a drug that works well costs too much, well that is their prerogative. What I want to know is how much it costs to buy a Congressman that doesn't.

  • Report this Comment On May 26, 2011, at 6:41 PM, getrickqk wrote:

    This is another attempt to sow unwarranted anxiety about Provenge and Dendreon. Every time Brian wanted an example of a "very expensive drug" he never fails to use the $93,000 price tag for Provenge. I am beginning to think that he's shorting DNDN.

  • Report this Comment On May 26, 2011, at 8:32 PM, motleymarty wrote:

    "...pseudobulbar affect drug". As one with MS, I have the issue, infrequently, that Nuedexta treats. I hope I never reach a point where I need said drug, but I have known people with ALS who could've used it, and am invested in ANVR because I know firsthand the "pseudobulbar affect". Let Senators hear from real humans with the issue and there would be no "pricing" issue,

  • Report this Comment On May 27, 2011, at 8:39 AM, emptypock wrote:

    Seriously, If Congress REALLY wants to save consumers (especially the older ones) a big bundle on prescription drug costs, why not investigate the enormous cost of Viagra ?

  • Report this Comment On May 27, 2011, at 2:14 PM, astronut666 wrote:

    "Obviously someone very well connected is pulling for Avanir to be worth less than they could be. "

    Want to see the gathering evidence for yourself? Take a look at this thread - the members of that knuckleheaded committee have received cash contributions from a firm that represents short-selling hedge funds, and also recently defended that FDA employee convicted of insider trading. No joke. This is sickening.....

    http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks...

  • Report this Comment On May 27, 2011, at 4:31 PM, THEMATHISNEAR wrote:

    Once again, Congress sees fit to gouge the ox of someone who goes to the trouble to invent or discover something of value. That ought to create more American jobs. NOT.

  • Report this Comment On December 12, 2011, at 6:20 PM, Mega wrote:

    "Every time Brian wanted an example of a "very expensive drug" he never fails to use the $93,000 price tag for Provenge. I am beginning to think that he's shorting DNDN."

    Right. It couldn't possibly be because Provenge is a great example of a very expensive drug.

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