Preterm Birth and a Really Sleazy Lawsuit

11/11/2011 01:34 pm ET | Updated Jan 11, 2012

A new group of bad guys are writing the latest chapter in the sordid story of Makena, the FDA-approved version of progesterone used to prevent recurrent preterm births.

Groups of investors are suing KV Pharmaceuticals, essentially accusing them of overstating their capacity to be vicious and greedy.

In case you have forgotten the gory back story: KV Pharmaceuticals got FDA orphan-drug status for a formulation of 17-hydroxyprogesterone, a very, very old drug that was shown in 2003 to prevent recurrent preterm deliveries. Since 2003 the drug has been available from special pharmacies that 'compound' the drug themselves.

KV teamed up with the obstetric community, the NIH, and the March of Dimes, to test an 'official' formulation of the drug, and the FDA then granted KV Pharmaceuticals 'orphan drug,' status.

KV then stuck out its scorpion tail and announced it would charge $1,500 per dose for the drug, a 15,000 percent markup over the $10 going rate for the compounded version, and mailed a letter to all of the compounding pharmacies threatening them with legal action if they continued making the compounded version of the drug.

The good doctors and public health advocates who had worked with KV felt betrayed, and let them know it, along with the U.S. Senate and the Obama administration. Pretty soon, the FDA announced that it wouldn't protect the 'orphan' status, and the obstetric community had turned to the compounding pharmacies with renewed vigor, at least partly because of their fury at KV.

KV reaped the harvest of their greed: a much reduced market for Makena, and a share price that dropped from $6.50 to $1.

One might have thought that the board would have fired the CEO for being a greedy, tone-deaf imbecile, and that would be that.

Enter the shareholders, who, unable to sue the CEO for being an idiot, sued KV for overstating projections before the launch of Makena. Or put another way, KV claimed it was going to gauge pregnant women with a high drug price AND unleash the FDA on the compounding pharmacies to prevent competition. When KV failed to cause obstetric mayhem, the investors sued.

To get some insight into the poor investors whose investment tanked when KV failed to fully exploit the patients and are suing because of it, I called Mary Blasy, an attorney seeking to get a group of investors certified as a class (so she can really take KV to the woodshed). "It's unfortunate that this might look like greedy investors," she said, but went on to explain how most investors in KV are probably individuals who were doing market research and had the wool pulled over their eyes by the crafty KV management team. Presumably, if you read about planned unethical behavior, and the management team doesn't get away with unethical behavior, it's grounds for a lawsuit.

Now here's a real ethical dilemma: which is the worse outcome of this most ridiculous lawsuit: for the scumbags at KV or the scavenger investors to lose.