Drug companies jacking up the price of life-saving medications can seem arbitrary, cruel, and even scandalous. The infamous CEO Martin Shkreli hiked the price of Daraprim, a drug used by AIDS patients to fend off infections, from $13.50 To $750 for one pill. The company Mylan raised the cost of the Epipen that reverses anaphylactic shock caused by allergies 500%, from $100 to $600.
And now there's the case of Evzio. It's a talking auto-injector with naloxone, the antidote to reverse opioid overdoses. It's easy to use for people with no medical training. The actual drug naloxone can cost as little as a nickel a dose, according to industry insiders. But Evzio costs a lot more: its price tag is over $4,000.
Lesley Stahl: What do you think about, in the midst of a crisis, shooting the price up like that?
Dr. Jennifer Plumb: If you're out there trying to get as far and wide coverage for people and you watch the price escalate, it feels really predatory. And it feels really uncaring.
Dr. Jennifer Plumb, who runs an organization that hands out naloxone in Utah, distributes syringes that cost the least, around $15 each. She says they're just as easy to use as the newer, pricier devices. We decided to try for ourselves.
Lesley Stahl: So hand me the syringe for one sec.
Dr. Jennifer Plumb: Okay.
Lesley Stahl: Here I'm trying to do this thinking that I've got a body in front of me and that I'm a nervous wreck.
Dr. Jennifer Plumb: Sure.
Lesley Stahl: And there's a lot of panic in me. So I've done that. I pull this off-- twist-- oh, okay. Already, I've messed up--
Dr. Jennifer Plumb: No, see.
Lesley Stahl: --by having a nervous break--
Dr. Jennifer Plumb: See, that's okay, though. Just pull.
Lesley Stahl: So you put this down somewhere. Then tip it up?
Dr. Jennifer Plumb: Uh-huh.
Lesley Stahl: And move the needle below the airline.
Dr. Jennifer Plumb: Yeah.
Lesley Stahl: Okay, now I'm having trouble. This is not as easy as you-- keep saying.
Dr. Jennifer Plumb: You don't think?
Lesley Stahl: No.
At least not for me. Next we tried Narcan, the nasal spray. It costs much more than the syringe: $125 for a pack of two.
Lesley Stahl: You peel it. Place it in the nose. And push it.
Lesley Stahl: So I pushed it way up the guy's nose?
Dr. Jennifer Plumb: Uh-huh.
Lesley Stahl: Or the woman's nose?
Dr. Jennifer Plumb: Uh-huh.
Lesley Stahl: And I plunge?
Dr. Jennifer Plumb: Yep.
Lesley Stahl: Oh. There you go!
Dr. Jennifer Plumb: There you go. Now, take into account that you might have to deal with a whole lotta yuck in a nose to be able to make that easy step.
Then there's Evzio, by far the most expensive option. It's an auto-injector that talks you through the process:
EVZIO TRAINER: To inject, place black end against outer thigh...
I used a trainer without naloxone in it.
EVZIO TRAINER: Five, four, three, two, one. (BEEPING) Injection complete.
Dr. Jennifer Plumb: There you go.
Lesley Stahl: Wow.
Dr. Jennifer Plumb: So you get it, easy to use?
Lesley Stahl: I get it.
Dr. Jennifer Plumb: It's there.
Lesley Stahl: Really easy. I think because-- something's talking to you, it's calming.
Dr. Jennifer Plumb: You feel like you have advice.
Lesley Stahl: I can see why it's more expensive, not as more expensive, but--
Dr. Jennifer Plumb: I don't know. I bought a card that talks to me at Walmart for $1.49 yesterday.
"It's 45 to 54-year-old women. That's who's most likely to die today in Utah."
At $4000-plus for a pack of two, even with discounts and donations, Evzio is completely out of budget for organizations like Dr. Plumb's or for first-responders who deal with drug-addicts on the streets. But Evzio's maker has targeted a different at-risk population. It's the group, Dr. Plumb says, that has the most overdose deaths in Utah.
Dr. Jennifer Plumb: Picture who you think that person is today that someone's planning a funeral for. I picture a 22-year-old jobless, shiftless, maybe homeless young man. Well, here's the demographics: It's me. It's 45 to 54-year-old women. That's who's most likely to die today in Utah.
It's a fact that middle age women and men are a large vulnerable population all across the country.
They often die at home from misusing or abusing high-dose prescription pain pills. Also at risk are other household members with access to the medicine cabinet.
Dr. Jennifer Plumb: I can tell you multiple stories of kids, of babies that come in not breathing from--
Lesley Stahl: Babies?
Dr. Jennifer Plumb: --accidental exposures in their homes. If you hang out with kids, they're oral explorers. I love them dearly. But they're buggers. They get into everything, right?
So doctors, who prescribe opioids, are now encouraged
To prescribe naloxone at the same time. It's called co-prescribing, and both the opioid and the antidote are supposed to be covered by insurance. That's the lucrative market Evzio's maker, Kaleo, was going after. It priced the injector high to begin with: $575. And then bumped it up more than 550 percent.
Former Kaleo Employee 1: I began my job search the day after they announced the price hike, because it was greedy and a little unethical, in my opinion.
We talked to over a dozen former Kaleo employees, including these two sales reps, in shadow for fear of being blackballed in the industry.
Lesley Stahl: You'd go into a doctor's office and try to convince him to write a prescription for this medication that has just jumped up to $4000. How did the doctors react?
Former Kaleo Employee 1: The doctors, most of them were disgusted.
Lesley Stahl: And how did you feel?
Former Kaleo Employee 2: I felt slimy. I no longer felt like I'm helping people. Now I feel like I'm taking advantage of people.
Former Kaleo Employee 1: Now, remember, we're talking about naloxone. Kaleo didn't invent or didn't discover naloxone.
Lesley Stahl: Right.
Former Kaleo Employee 2: Naloxone's been around for 50 years.
Lesley Stahl: It's a generic at this point.
Former Kaleo Employee 2: It costs pennies. Just imagine if you took aspirin, been around forever, and you packaged it up in a fancy box and put a bow on there.
The price went up after this man was hired by the company.
Lesley Stahl: Todd Smith. Who is he?
Former Kaleo Employee 1: He was a consultant for Kaleo Pharmaceuticals, and he's been a consultant and had other positions with other pharmaceutical companies. And he's kind of notorious for bringing this pricing strategy to those companies.
Lesley Stahl: So he had done this at other companies-
Former Kaleo Employee 1: Yes--
Lesley Stahl: --before he got to Kaleo?
Former Kaleo Employee 2: Uh-huh.
Lesley Stahl: "This," being hiking the price?
Todd Smith wouldn't talk to us on camera, but here's his résumé: while he was chief commercial officer at Horizon Pharma, this bottle of arthritis pills shot up from around $100 to over a $1000. At a company called Novum he hiked up the price of this skin gel from around $200 to nearly $8,000.
Kaleo was just another drug company he advised. Only it was making a life-saving device in the middle of a worsening health crisis.
Lesley Stahl: You were called greedy, you were called uncaring. It was called profiteering, as you well know. This was the reputation you were getting.
Spencer Williamson: Lesley, that could be nothing farther from the truth.
Meet Kaleo's CEO Spencer Williamson.
Lesley Stahl: You jack the price from the $575--
Spencer Williamson: Lesley, I--
Lesley Stahl: --to $4,000! $4,000!
Spencer Williamson: Lesley?
Lesley Stahl: What?
Spencer Williamson: I don't love that word. We raised the price to improve access to this product.
Lesley Stahl: Okay, now that-- explain that.
Spencer Williamson: Yeah, that--
Lesley Stahl: That's hard to get your head around.
Spencer Williamson: The big misperception is that by raising the price of Evzio we reduce the access to this product. The exact opposite is true.
Lesley Stahl: More people are getting it at that price?
Spencer Williamson: Yeah, the numbers don't lie. So less than 5,000 prescriptions were filled in the first 12 months. In the second 12 months, over 65,000 prescriptions were filled.
How can that be? Well, when Kaleo set the initial price at $575, it was warned that would be too high for middlemen called pharmacy benefit managers, or PBMs that negotiate drug prices for health plans. Kaleo thought that its easy-to-use product would be irresistible in an escalating opioid crisis.
But when it hit the market, Williamson says, the PBMs did try to discourage doctors from prescribing Evzio… piling on cumbersome paperwork.
Spencer Williamson: A physician had to show that a patient had failed with another form of naloxone before they could get this product.
Lesley Stahl: If they failed they'd be dead.
Spencer Williamson: Exactly.
Lesley Stahl: I mean, does that make sense?
Spencer Williamson: No.
Lesley Stahl: No. Were there other hindrances?
Spencer Williamson: Yes, the second hindrance, the other-- the second tool they use is high patient copays. So they make the patient pay a big number outta pocket. Here's a scenario that played out many times. A patient goes into a pharmacy with her opioid prescription, and they go into the pharmacy with their life-saving product prescription.
Lesley Stahl: Co-prescribed.
Spencer Williamson: Co-prescribed. The opioid is prescribed, no problem, a very low co-pay. This gets blocked. The lifesaving product gets blocked.
That's because there were less expensive alternatives: the syringe and then the nasal spray. So, why didn't Kaleo just lower the price? Well, remember Todd Smith, the consultant? He advised them not to lower the price,
But to raise it, a lot. And try to work around the roadblocks put up by pharmacy benefit managers.
Under Smith's scheme, doctors, unhappy with excessive paperwork, are told to send prescriptions to specific pharmacies contracted to handle the forms for them. And these pharmacies mail the devices directly to the patient, making a trip to the drugstore unnecessary.
Kaleo, meanwhile, tries to get as much money out of the insurance companies as it can. But the heart of Smith's model is that while insurance companies are charged a lot, patients with commercial insurance are charged nothing. If your plan agrees to cover it, Kaleo pays your co-pay. And if your plan refuses, Kaleo will give you Evzio, 100% free.
Lesley Stahl: Are you saying that if your insurance company won't pay or they jack up the copay, that you'll pay? So patients don't pay anything?
Spencer Williamson: We will step in and make sure a patient pays nothing out-of-pocket. That's correct.
How can they afford that? The calculation is that even if only a handful of insurance companies agree to pay the high price, Kaleo would still rake in a lot of money, since it costs only about $80 to manufacture a pack of two.
Lesley Stahl: This whole idea was described to us as, and I'm quoting, "a legal shell game to bilk insurance companies."
Former Kaleo Employee 1: That's correct. Yes.
Lesley Stahl: And eventually, then, to bilk the rest of us. Don't we end up--
Former Kaleo Employee 2: Ultimately--
Former Kaleo Employee 1: It raises--the overall health care cost for everybody. You and I, paying our premiums, are the ones paying for it.
Former Kaleo Employee 2: If you think the insurance company's going to be (laughs) stuck with this bill in the long run? No!
You and I are stuck with the bill in another way: as taxpayers. Turns out the bulk of Kaleo's revenue for Evzio comes not from commercial insurance companies, but from Medicare.
This report by the Senate Permanent Subcommittee on Investigations led by Senators Rob Portman and Tom Carper, details how Kaleo made sure that doctors signed forms for Medicare patients, "…indicating that Evzio was medically necessary…" With that language Medicare has essentially no choice but to cover the device at near full price.
That resulted in, "more than $142 million in charges to taxpayers in just the last four years." The report says Kaleo, "…not only exploits a country in the middle of an opiod crisis, but also American taxpayers…" Accusations Kaleo denies.
Lesley Stahl: And you make a profit. You make a profit?
Spencer Williamson: So, we've actually lost money in our first four years of bringing this product to the market. The good news is we're saving lives. More people have access to this product.
Lesley Stahl: Why are you doing it if you're not making a profit?
Spencer Williamson: We're moving in a direction with a model that continues to evolve.
It seems to be "evolving" in the direction of scrapping the high-price plan altogether. Whether it's because the model failed to produce a profit or because they're under Senate investigation for, as the report lays out: exploiting Medicare. Williamson took the opportunity of our interview to make this offer.
Spencer Williamson: We want to reach out to all middlemen, all insurance companies to say, "We will lower this price to less than the original $575 if you will make sure that when a physician decides a patient is at risk, they can get it and they can afford it."
Lesley Stahl: But all the insurance companies have to agree for you to get there.
Spencer Williamson: We will work with one insurance company at a time.
Lesley Stahl: Have you done it yet?
Spencer Williamson: We have started those conversations. But I'm announcing it on 60 Minutes that our hands are out to offer this price for less than $575 as long as patients won't be blocked when they need it.
To see part one of 60 Minutes' report on naloxone,
Produced by Shachar Bar-On.