What happened

Catalyst Pharmaceuticals' (CPRX 1.40%) stock hit the skids once again today. Despite the long-awaited approval for its Lambert-Eaton Myasthenic Syndrome (LEMS) drug Firdapse last Wednesday, the drugmaker's shares fell by as much as 14% today on abnormally high volume.

Catalyst's shares have recovered to some degree from this intraday low but still ended the day down by 8.48%. Since Firdapse's approval, Catalyst's shares have lost 18.8% of their value in just the last two trading sessions.  

A jagged, lit-up arrow trending downwards in front of a red screen.

Image source: Getty Images.

So what

What's causing investors to hit the exits? The key concern is the commercial viability of Firdapse. While Wall Street expects the company to announce a wholesale price of around $300,000 per patient per year by mid-December, there's a good chance that payers will balk at this stately price point. The reason is that LEMS patients have had access to a far cheaper form of a similar drug known as 3,4-DAP from Jacobus Pharmaceutical for nearly four decades.

Although 3,4-DAP was never approved by U.S. regulators, the drug's reported monthly cost of between $300 to $500 may force Catalyst to significantly lower its wholesale price or offer steep rebates for Firdapse in order to appease payers -- not to mention the current generation of LEMS patients who have been using 3,4-DAP.

Now what

The more likely scenario, however, is that Catalyst moves to block non-approved forms of the drug from the market, thereby enabling the company to price Firdapse within the prevailing norms for a newly approved orphan drug.

The bad news is that this strategy will almost certainly draw the ire of many within the LEMS community. Uninsured patients, after all, could see their out-of-pocket costs skyrocket to perhaps tens of thousands of dollars per month if Catalyst takes this more controversial route.

To allay these pricing concerns, Catalyst has been touting its patient-services program that's "designed to assist patients and physicians with education." But so far, the company hasn't released any details on how it actually plans to make this drug's price palatable to payers and those who lack insurance.