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How a "Shortage" of Adderall Actually Increased Sales of the ADHD Drug

Shire (SHPGY) is loving every minute of what it claims is a national DEA-imposed shortage of Adderall XR,* the attention deficit disorder drug taken by many of the 5.4 million kids who can't sit still without it.

During the "shortage," Shire's sales of Adderall XR rose 21 percent to $111 million in Q1 2011. The increase came despite three factors that ought to have crushed its sales:

  • What Shire says are DEA-imposed limits on Adderall XR production due to its status as a controlled substance.
  • Lower royalties on the drug's sales to Impax Labs (IPXL) due to a bulk shipment to Impax in 2010 that was not repeated in 2011.
  • Generic competition from the two companies that have been granted licenses to make cheap copies of the drug, Impax and Teva (TEVA).
It's important to understand that it is virtually unheard of for a pharmaceutical company to increase sales of an original branded drug in the face of cheap, generic competition, which Adderall XR has had since April 2009. Usually, branded sales collapse almost immediately as insurers and pharmacists switch all their patients to the cheap, identical version of the drug. In 2009, Shire sold nearly $300 million per quarter of Adderall XR. Sales collapsed to $67.4 million in Q2 2010 after Impax and Teva began their generic supply. Since then, Shire has managed to defy gravity, with Adderall XR sales rising again.

Both Impax and Teva sued Shire, claiming the company is hoarding the product for itself and refusing to supply them per their contracts. Here's Impax's statement of the case, from its redacted lawsuit:

And here's Teva's:

Shire, however, claims the feds have put the brakes on production. On page 22 of its 10-Q, the company said:

Shire's ability to supply this product, however, is limited by quota restrictions that the US Drug Enforcement Administration places on amphetamine, which is the product's active ingredient.
  • UPDATE: A spokesperson for Shire told BNET that the shortage stems from a disagreement between Shire and the DEA on the efficiency with which the drug is distributed down the supply chain to pharmacies. The DEA may believe that there is "enough" active ingredient approved even though the 12-week turnaround from manufacturing to retail, coupled with uneven distribution across all the states, creates gluts in some areas while others go dry."It's not a significant issue in Shire's eyes," said Shire's Matt Cabrey. "Shire has fulfilled those agreement. Teva and Impax gave requested more [but] we're not outside of our obligations to them."
  • Cabrey also said the sales increase came from a mix of price increases, demand for the branded version over the generic, and agreements Shire has with insurers and government payors that favor branded Adderall XR.
To my recollection, this is the first time Shire has ever claimed in an SEC disclosure that the DEA has limited its production of the drug. Teva doesn't believe Shire, saying that there is literally no legal impediment to Shire's ability to supply it with product:

  • UPDATE: The DEA sets limits on the total amount of each controlled substance it allows to be produced, but imposes no limits on the portions of that quota that are available for generic or branded drug production. The DEA told BNET:
DEA does not however, provide quota for specific products nor do we place limits on the amount of branded products they produce or limits on the amount of generic products they produce. Companies make individual business decisions on how they will allocate their quota for specific products.

... Availability of a particular product may also be influenced by wholesale distributors and their distribution activities. However, based upon all of the data that DEA has at this time, manufacturers have sufficient amphetamine quota to provide an uninterrupted supply of products. Manufactures can request additional quota at any time during the year. DEA will review their request and provide additional quota, if warranted.

This isn't the first time that generic competition has magically benefited Shire. Before generic competition set in, Shire jacked up the price of Adderall to force patients to switch to its other branded drug, Vyvanse. The hope was that patients and doctors would not switch back to generic Adderall when it arrived. Now, with a shortage only affecting the generic drug makers, patients have a choice of either expensive drug (indeed Aetna, apparently asleep at the switch on this issue, is telling its patients to go with the branded drug).

*Correction: This item originally referred to Adderall and Adderall XR (the extended release version) as if they were the same drug. They are not. Shire sold all rights to Adderall in 2006. Apologies for the error.

Image by Flickr user imagexxhearts, CC.
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