What: In the wake of Congressional pushback on pricing for its top-selling cancer drug, shares in Medivation (NASDAQ:MDVN) are slumping 10% at 11:30 a.m. ET today.
So what: A group of 12 Congressman led by Bernie Sanders have sent a note to the Department of Health and Human Services (HHS) and National Institutes of Health (NIH) bashing the price of Xtandi, a fast-growing prostate cancer drug that was co-developed by Medivation and Japan's Astellas Pharma (NASDAQOTH:ALPMY).
Specifically, legislators are lobbying for the NIH to hold hearings to override Xtandi's patent because Xtandi was initially discovered via tax-payer funded research grants at the University of California.
Xtandi, which can cost $129,000 in the United States, has seen its sales steadily increase as its use has expanded to include both second- and first-line prostate cancer patients. Since prostate cancer is the second most common cancer in men, and 181,000 Americans are diagnosed with it every year, Xtandi's U.S. sales jumped 69% to $1.15 billion last year. In overseas markets like Japan, the two companies charge less than $40,000 for the drug.
Now what: Congressional attention on Xtandi marks a shift in Washington.
Previously, politicians have focused mainly on companies that have embraced a buy-reprice-relaunch model, not companies that innovate new and better cancer drugs. Instead, pushback on cancer drug pricing has come predominately from cancer care centers, such as the Memorial Sloan Kettering Cancer Center, and insurers.
The scrutiny of Xtandi is also unique because Xtandi was developed, at least in part, by NIH grant money. Every year, the NIH awards millions of dollars in grants to researchers so they can explore clinical approaches that otherwise might not get funded.
Because the letter could lead to hearings that have a seismic impact on drugmakers marketing drugs that have resulted from federal research funding, investors will want to keep a close eye on this situation to see if any other companies get put on the hot seat.