Infamous pharmaceutical company declares bankruptcy after price increase of 3,900%



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The man wipes a really expensive face cream.
Extend / The man wipes a really expensive face cream.

The Chicago-based pharmaceutical company, which made headlines in 2016 by dramatically raising the price of cheap skin creams, filed for bankruptcy. The archiving cites, in part, the adverse reaction to the gains from price increases, the Chicago Tribune reports.

In September 2016, Ars reported that Novum Pharma had repeatedly raised the price of a cheap and old skin cream, raising its list price from $ 241.50 to $ 9,561 per tube – an increase of 3,900%. The cream, called Aloquin, is "possibly effective" for the treatment of eczema and acne, according to the Food and Drug Administration. It consists of a generic antibiotic and extracts of the aloe vera plant.

Novum increased the price of Aloquin after acquiring the rights to it from Primus Pharmaceuticals in May 2015. The company also raised the price of another skin cream, Alcortin A, to $ 7,142. Financial Times reported at the time.

These price increases stemmed from Novum's difficulty in getting insurers to cover their creams, according to the Chapter 11 bankruptcy filing, filed with the court in Delaware on February 2. Without insurance coverage, Novum's business was in difficulties, the document explains. The price increases were an attempt to rectify the problem, but backfired.

"These price increases, although necessary to support patients' access commitments and ensure a minimum level of profitability for business, have led to public scrutiny [Novum’s] business model and increased prescription rejection rates, "said Thomas O'Donoghue, Director of Restructuring of the Novum Chief, in the document.

The filing also said manufacturing issues, a dispute with a wholesaler and competition from generic creams contributed to bankruptcy.

While bankruptcy may seem like a victory in the battle to reduce high drug prices, Craig Garthwaite, director of health at Kellogg School of Management at Northwestern University, did not have such optimistic views. "I think we're seeing companies sensitive to the announcement of these price changes. I do not think we're seeing a general shift in behavior," he said Grandstand.

In fact, despite the public spotlight on drug prices, more than three dozen drug companies began in 2019 with generalized price increases on hundreds of drugs.

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