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Marathon Pharmaceuticals to Charge $89,000 for Muscular Dystrophy Drug After 70-Fold Increase

FDA-approved deflazacort treats rare type of disease affecting boys

A drug to treat muscular dystrophy will hit the U.S. market with a price tag of $89,000 a year despite being available for decades in Europe at a fraction of that cost.

Marathon Pharmaceuticals LLC’s pricing of the drug, which has been available in Europe, is the latest example of a business model that has drawn ire from doctors, patients and legislators in recent years: cheaply acquiring older drugs and then drastically raising their prices.

The practice has prompted congressional investigations and hearings into companies including Valeant Pharmaceuticals International Inc. and Turing Pharmaceuticals LLC, the firm formerly run by onetime hedge-fund manager Martin Shkreli.

The U.S. Food and Drug Administration on Thursday approved Marathon’s drug, a corticosteroid called deflazacort, to treat a rare type of muscular dystrophy that affects some 12,000 boys in the U.S., most of whom die in their 20s and 30s. The drug isn’t a cure, but it has been shown to improve muscle strength, the FDA said in a statement announcing the approval.

The drug wasn’t sold in the U.S. mainly because no company thought it would be profitable enough to warrant the effort of seeking FDA approval. But U.S. patients have been importing it from foreign countries since the 1990s after clinical trials showed its potential to reduce inflammation with fewer side effects than another steroid.

The price set by Marathon, based in Northbrook, Ill., is 50 to 70 times what most U.S. patients now pay to buy deflazacort from an online pharmacy in the United Kingdom, according to advocates for patients with Duchenne muscular dystrophy.

Christine McSherry of Pembroke, Mass., pays about $1,600 annually to buy deflazacort from the U.K. pharmacy for her son, Jett, she said.

But the pharmacy, operated by Masters Specialty Pharma, recently told customers it would stop shipping the drug to the U.S. after Marathon, based in Northbrook, Ill., received FDA approval for its version.

A Masters spokeswoman said in an email that the company is ending shipments to the U.S. “in compliance with U.S. FDA regulations,” which prohibit drug importation except under certain circumstances, such as when a drug isn’t available in the U.S.

Ms. McSherry, who runs Jett Foundation, a nonprofit aimed at Duchenne, said she is “disappointed that Marathon increased my cost for the drug by more than $87,000 a year.” She has health insurance but said she isn’t sure if her coverage will pay for the new drug.

Marathon Chief Financial Officer Babar Ghias defended the price in an interview. He said the company will likely receive much less in net revenue than the $89,000-per-patient list price, after providing discounts to government insurers and financial assistance to patients who can’t afford the drug. Also, more patients will have access to the drug because their health insurers will begin covering its cost now that it has FDA approval, he said.

The company will start selling the medicine in March under the brand name Emflaza, Mr. Ghias said.

Mr. Ghias, a former mergers-and-acquisitions banker, said the company showed restraint in how it priced the drug. Other new drugs for so-called orphan diseases, which by definition affect fewer than 200,000 people nationally, have carried price tags of $300,000 annually and higher, he said.

“It’s modestly priced for an orphan drug,” Mr. Ghias said.

Because Emflaza was approved as an orphan drug, Marathon received a valuable FDA “voucher” that allows it to demand a faster approval decision from the agency on its next drug. Marathon can use the voucher itself, or sell it to another company. The vouchers were created by Congress to promote the development of rare-disease drugs and have fetched as much as $350 million in previous transactions.

Pharmaceutical companies are under mounting scrutiny for their pricing of drugs, many of which now approach or exceed $100,000 annually per patient. Many companies say the prices are necessary to justify their large investments.

Marathon gained clearance to sell deflazacort in the U.S. after licensing the rights to clinical trial data from the 1990s that hadn’t been fully analyzed. The FDA required the company to complete an analysis of the old trial data and conduct some new studies to gain approval, Mr. Ghias said.

Mr. Ghias declined to say how much Marathon spent to acquire the trial data or conduct original research. He said Marathon doesn’t expect to recoup its investment in the drug for several years. Marathon doesn’t have commitments yet from insurers that they will pay for the drug, Mr. Ghias said.

Privately held Marathon is best known for a 2015 deal in which it sold two older heart drugs to Valeant, Nitropress and Isuprel, for $350 million. Valeant raised the drugs’ prices dramatically, moves that were later scrutinized by a congressional committee. The investigation prompted Valeant to say it had been too aggressive in raising prices and that it would moderate its practices. Mr. Shkreli has said raising prices on old drugs funded research and development of new medicines.

Marathon Chief Executive Jeffrey S. Aronin was an early pioneer of a pharmaceuticals-industry model in which companies cheaply acquire older drugs that have lost patent protection and that large pharmaceutical firms are no longer interested in promoting.

The Federal Trade Commission in 2008 alleged that another of Mr. Aronin’s companies, Ovation Pharmaceuticals Inc., had illegally acquired a drug to treat congenital heart defects in babies so that it could raise the price of its competing treatment nearly 14-fold. But the FTC’s complaint was dismissed in 2010 by a court that found the drugs operated in separate product markets.

Marathon estimates it will keep only about 61% of the $89,000 it charges for deflazacort, or $54,000, Mr. Ghias said. The difference will go to rebates the company is required to pay Medicaid, copay coupons and free medicine it gives to patients, as well as a small reduction in revenue from patients who take fewer pills than prescribed and don’t refill their prescriptions on time, he said.

Pat Furlong, a patient advocate, said she hopes deflazacort will be widely covered by insurers now that it is FDA-approved. But she worries that the drug’s price could continue to keep it out of reach for patients with high-deductible insurance or whose insurance won’t pay for the drug at all, she said.

“I worry about what people have to pay out of pocket,” said Ms. Furlong, president of the nonprofit Parent Project Muscular Dystrophy

The FDA approved the first drug aimed at treating Duchenne late last year. The approval was controversial because the drug, called Exondys 51, hasn’t completed late-stage clinical trials needed to prove its effectiveness. The drug’s manufacturer, Sarepta Therapeutics Inc., charges roughly $300,000 annually per patient for the medicine.

Biogen Inc. said last year that it would charge $750,000 per patient for the first year of treatment with its new treatment for spinal muscular atrophy, a fatal genetic disease. The price would drop to $375,000 annually in subsequent years.