Faced With a "Shortage" of Adderall, Maker Jacks Up the Price -- and Doubles Sales

Last Updated Sep 5, 2011 9:47 PM EDT

Shire (SHPGY), the company that makes the ADHD drug Adderall XR, has responded to a shortage of the product by jacking up the price and reducing the number of discounts it offers, according to its quarterly 10-Q disclosure with the SEC. That's likely to make the back-to-school season for the parents of the 5.4 million kids who have ADHD a whole lot more expensive.

The shortage began in 2010, according to lawsuits filed against Shire by two companies which have licenses to make the drug. Shire claims the DEA puts limits on the amount of Adderall XR it can make because the drug, an amphetamine, is a controlled substance. The DEA says the supply it allows is "sufficient" for everyone and that's it's the companies themselves who alter the supply through their production quota agreements. The companies, Impax Labs (IPXL) and Teva (TEVA) both claim that Shire is breaking agreements by refusing to supply them with the drug.

In the meantime, despite the fact that it faces competition from cheap generics that would normally wipe out its revenues, Shire's sales of Adderall XR are going through the roof:
  • Adderall XR revenues:
  • Q2 2011: $146.9 million, up 83 percent.
  • Q1 2011: $111 million, up 21 percent.
Shire's Adderall XR sales are up 32 percent sequentially from Q1, when the shortage began in earnest. The company's total revenue was $1 billion in Q2, up 25 percent. Here's Shire's explanation for why its sales are so healthy in an environment in which the company alleges it's hobbled from manufacturing the drug and other companies can make cheap copies:
Product sales grew at a faster rate than US prescription demand due to the effect of significantly lower sales deductions as a percentage of branded gross sales together with the effect of a price increase taken since the second quarter of 2010.
Sales deductions were at 59% in the second quarter of 2011 compared to 74% in the second quarter of 2010, which was notably above the average sales deduction levels experienced in other quarters in 2010.
In other words, Shire put up the price and reduced the number of discounts or rebates it allowed on the drug.

Meanwhile, the shortage is driving patients and pharmacists nuts. This Texas couple drove 80 miles and spent $417 to find a prescription. This South Carolina pharmacist is doubling up lower dose tablets for patients who cannot find the dose they've been prescribed. And the drug just isn't available at all in St. Charles, Ill., according to this dispenser.

Is the shortage real or the result of Shire's greed? The company denies it is manipulating the supply. Nonetheless, it would be nice to know why this strange phenomenon didn't happen back in 2009, when Shire's Adderall XR sales collapsed to just $67.4 million per quarter (from $296 million the year before) after Teva's generic came on the market. At that time, Shire even reduced its revenue guidance on the brand. Since then, the "shortage" has doubled the dollar sales of the drug for Shire.

Related: Image by Flickr user imagexxhearts, CC.

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