For at least the past three years, Todd Smith and Benjamin Bove have crisscrossed the U.S., offering a sure-fire fix for struggling pharmaceutical companies. And wherever they go, the price of prescription drugs tends to skyrocket.
While Martin Shkreli, nicknamed Pharma Bro, became notorious for sharply — and unapologetically — increasing drug prices, Smith and Bove have quietly plied their trade helping to kick-start drug company sales.
The Chicago-based duo has played important roles at no fewer than four companies that have raised prices on life-saving and other drugs by as much as 4,116 percent.
Their strategy is simple and, they say, good for patients: Thwart efforts by health plans to block access to drugs — and serve up what Smith calls their “special sauce” to get those meds into the hands of customers who need them.
The main ingredients include copays that are often zero, even for pricey drugs. Smith, 48, and Bove, 40, also offer the use of so-called specialty pharmacies — one of which they previously owned — to make it hassle-free for doctors and more affordable for patients. Yet critics point out that, over time, everyone might end up paying the price in the form of higher premiums.
“It’s totally a wrong way to frame the issue to say it’s free to the patient,” said Stephen Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota. “It’s ripping people off.”
If nothing else, Smith and Bove’s business strategy illustrates a drug-pricing ecosystem that many agree is deeply flawed. President Donald Trump has accused drug companies of “getting away with murder,” and his Health and Human Services Secretary, Alex Azar, has vowed to bring drug prices down. Yet the system is averse to change because so many of its key players continue to profit from its complexity and lack of transparency. Patients, meanwhile, are faced with fewer choices and higher deductibles and insurance premiums.
“These sophisticated traps are designed to pay off certain members of the supply chain in a way that exploits the employer, the insurance company and the consumer,” said Michael Rea, chief executive officer of Rx Savings Solutions, which has an app that allows patients to find lower drug costs.
Bloomberg News interviewed 19 former employees from seven companies where Smith or Bove have worked or consulted. They spoke about the sales strategies and their interactions with the duo over the course of several years. All requested anonymity, either to protect professional relationships or because they signed nondisclosure agreements.
Both Smith and Bove declined requests for interviews.
Their “patient-access-centered model” is a “creative approach to ensure physicians and patients are not encumbered by the current broken system,’’ said Rand Walton, a spokesman for Novum Pharma LLC, where Smith serves as chief executive officer and Bove is an officer, records show.
Smith and Bove weren’t in positions to make pricing decisions at some of the companies, Walton said. The majority of the drugs that Smith and Bove have dealt with haven’t incurred significant price increases, he added. Walton declined to comment on Smith’s and Bove’s work as consultants.
A 2015 printed sales pitch, reviewed by Bloomberg News, was prepared for Kaleo Inc., a company that sells auto-injectors for severe allergic reactions and opioid overdoses. The document says Smith and Bove’s business model includes “proprietary” tools to increase the “fill rate” for prescriptions.
“It’s totally a wrong way to frame the issue to say it’s free to the patient. It’s ripping people off”
While many details remain murky, one former colleague from another company who is familiar with the business strategy said it involves using data analytics to identify gaps in the insurance system that might allow drugs to be covered, either through generous health plans or through insurers that tend to let price hikes on lesser-used drugs fall under the radar and get approved. They also target doctors likely to prescribe the drugs, former employees said.
“We absolutely do not and have never identified or targeted specific insurance plans,” said Walton.
Even so, once Smith and Bove arrived at a company, huge price increases often followed.
At Novum Pharma, the wholesale price of a tube of the skin gel Alcortin A jumped to $7,968 in 2016, from $189 in 2015, according to Connecture Inc., which tracks drug prices. That’s a 4,116 percent increase.
At Iroko Pharmaceuticals LLC, the cost of an arthritis drug called Indocin nearly tripled in January, to $2,550 for 30 suppositories.
At Kaleo, the wholesale price of a two-pack of a naloxone auto injector called Evzio increased to $4,100 in 2016, from $575 when it was introduced two years earlier at a lower dose.
At Horizon Pharma Plc, the price of a bottle of Duexis, an arthritis medicine, rose to $1,030 in 2014, when Smith left the company, from $140 in 2011.
Walton, speaking on Novum’s behalf, said the wholesale price has no bearing on the cost of its products because it doesn’t consider factors such as patient assistance and rebates. He said the company has improved patient access to its products, resulting in “very low profits,” about $18 per prescription.
Kaleo said Smith and Bove no longer work with the company, and it defended its pricing strategy. “In our view, the most important price is the price to the patient,” Kaleo said in a statement. “Since launching Kaleo’s enhanced patient-access program in 2016, more Americans can obtain naloxone for $0 today than ever before.”
Iroko didn’t return messages seeking comment.
Horizon officials declined to be interviewed.
“First and foremost … I am a sales person. I have held many positions in pharma/biotech but sales is absolutely my passion”
Unlike many other countries, the U.S. doesn’t directly regulate the price of drugs, so companies can charge whatever the market will bear. Nonetheless, huge price hikes in recent years caused outrage among patients and lawmakers. Shkreli — the founder of Turing Pharmaceuticals who’s serving a seven-year prison sentence on unrelated charges — appeared before Congress, where he was asked to explain why his company’s medicine cost so much, as was Mylan NV Chief Executive Officer Heather Bresch and Valeant Pharmaceuticals International Inc. CEO Michael Pearson.
Smith and Bove, however, have maintained low profiles. They tend to work with smaller, privately held companies and rarely post on social media. Patients haven’t raised much of a stink about prices, either, because they pay little or no money at the drugstore to get their drugs.
Some of the largest insurers and pharmacy benefit managers have blocked Evzio and other high-priced drugs from coverage. Others allow exceptions or aren’t closely monitoring all claims. Smith’s and Bove’s approach depends on enough health plans covering the drugs to make a profit.
It was at Horizon that Smith and Bove appear to have honed much of their business strategy. Smith arrived in 2010 as a senior vice president after stints at a half-dozen other health-care companies, according to his LinkedIn page. Bove, a management consultant with two master’s degrees from Northwestern University, came on board the next year. Prior to working at Horizon, the pair played together in a recreational basketball league, according to another former colleague. Their arrival at Horizon coincided with a volatile time for the company. Its first product, Duexis, an arthritis treatment that combines ibuprofen and the active ingredient in Pepcid, was approved in 2011. But a public offering later that year fell flat.
Strapped for cash, Horizon more than doubled the price of a bottle of 90 Duexis pills in March 2013, to $502, according to one former employee and Connecture data. Under the oversight of Smith, who was by then the chief commercial officer, Horizon kept raising the price, the employee said. A bottle of Duexis now costs $2,482.