Avanir: Congress Gripes About Drug Price

WASHINGTON. D.C. ( TheStreet) -- Avanir Pharmaceuticals ( AVNR) has been asked to justify the pricing of its newly launched drug Nuedexta by four members of Congress.

The U.S. Senate Special Committee on Aging, chaired by Wisconsin Democratic Sen. Herb Kohl, sent a letter to Avanir Wednesday in which it expresses concern about the high price of Nuedexta, a drug used to treat pseudobulbar affect, a neurological condition that causes involuntary emotional outbursts.

Avanir shares fell 6% to $4.35 in early Wednesday trading.

Avanir received U.S. approval for Nuedexta last year and launched the drug commercially in January. Nuedexta is a proprietary and higher priced combination of two relatively inexpensive and generically available drugs -- quinidine and dextromethorphane.

"Although we recognize that we all benefit when FDA approves a new, safe and effective formulation, it is not clear that the significantly higher prices charged for this drug are justified given that it is merely a combination of long-used and inexpensive generic medications," the letter to Avanir states.

The letter from the congressional committee goes on to request information from Avanir on how Nuedexta was priced and how much the company plans to spend on marketing, among other items. Avanir has until June 10 to submit the requested information.

Nuedexta treatment costs approximately $5,800 a year, or $4,800 a year with customary discounts.

Avanir executives could not be reached for comment.

Wedbush drug analyst Greg Wade, in a research note to clients, called the congressional inquiry into Nuedexta pricing "a waste of taxpayer dollars" that will have no material impact on Nuedexta sales. He urged investors to buy the stock on any weakness.

"The timing of this inquiry is 'interesting', in our opinion, considering the recent run up in the stock and the high short interest in the name," Wade added.

On May 10, Avanir announced lower-than-expected sales of Nuedexta in the first quarter, prompting analysts, including Wade, to sharply cut sales and earnings forecasts.

The U.S. Senate Special Committee on Aging has oversight responsibility for certain healthcare related matters, including drug pricing. In addition to raising concerns about Avanir's Nuedexta, the committee sent a similar letter to URL Pharma regarding its gout drug Colcrys.

--Written by Adam Feuerstein in Boston.

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