Fayetteville doctor wants to make medical products at lower price

FAYETTEVILLE -- A Northwest Arkansas doctor has a dream of making affordable drugs and creating jobs at a plant on a vacant lot.

Dr. Peter Kohler, an endocrinologist and former vice chancellor of the University of Arkansas for Medical Sciences Northwest Campus, retired for a second time last year and has started his own company, OurPharma. Kohler intends to buy 15 acres in the city's Commerce District, between South City Lake Road and South Armstrong Avenue.

The City Council will take up the proposal Tuesday. Kohler would buy the land for $223,500. The city has owned the tract next to the sewer maintenance facility since 1991, according to property records.

Kohler intends to start with a drug compounding operation in a 10,000-square-foot plant with about a dozen employees. Drug compounding refers to the practice of tailoring medicine to a specific patient's needs, whether because of an allergy or inability to take a certain form of a drug. About three-quarters of independent pharmacists compound, with virtually all hospitals and home-health specialty pharmacies taking part in the practice, according to the International Academy of Compounding Pharmacists.

Kohler will need an estimated $3 million in capital investment to cover design, construction, equipment and the land purchase. He said the company likely will need investors but for now financing will come through bank loans. He estimates it will take two or three years of production to cover the initial costs.

If successful, Kohler's five-year plan would consist of two more phases: delving into generic drug manufacturing and selling to other marketplaces. The idea is to make hard-to-find and expensive drugs cheaper and more available to the places that need them, Kohler said. Employment at OurPharma would expand to about 100 jobs paying an average annual salary of more than $50,000, with higher-up staff making more than $100,000 per year.

An area Kohler would like to explore is insulin. The Marshallese, for example, have a higher propensity for getting diabetes. Three-quarters of people over the age of 50 have diabetes in Majuro, Marshall Islands, and the country's diabetes prevalence is 35 percent, according to the World Diabetes Foundation. The second largest population of Marshallese outside the islands lives in Northwest Arkansas.

The U.S. Census Bureau reports that 7,000 Marshallese people call Northwest Arkansas home, but community leaders and the University of Arkansas for Medical Sciences estimate it's more than twice that.

City officials are excited because the endeavor ties into the economic development plan adopted late last year. Part of the plan targets the specialized technologies sector and competitive wages. Additionally, OurPharma would bring manufacturing. Northwest Arkansas has seen more manufacturing jobs disappear than in any other field, from about 30,000 employees a decade ago to about 25,000 now, according to the U.S. Bureau of Labor statistics.

First, Kohler has to buy the land.

"This should be a very clean industry that's badly needed and can actually lower the price of drugs in the future," he said.

Worthwhile endeavor

Kohler retired the first time about 10 years ago as president of Oregon Health and Science University in Portland. He remembered a cancer drug developed in the state with a price he watched skyrocket over 10 years for no reason other than the company could.

In 2015, Turing Pharmaceuticals and its founder Martin Shkreli raised the price of Daraprim, a drug used to prevent people with HIV/AIDS from getting a form of pneumonia, from $13.50 per pill to $750 after getting the manufacturing license.

It's a story all too common, Kohler said. The price of an EpiPen, a device used to inject epinephrine in patients with a serious allergic reaction, rose 500 percent from $100 in 2009 to more than $600 last year. The sharp rise in price over time was largely attributed to market dominance. A congressional hearing was held with Mylan CEO Heather Bresch and about the same time generic versions of the injector, such as Adrenaclick, emerged onto the market at a fraction of the cost.

OurPharma will have to jump several state and federal regulatory hurdles before it can get to the point of generic drug manufacturing, but to Kohler it's a worthwhile endeavor. The 78-year-old could have lounged after retiring the second time from UAMS Northwest.

"I'm trying to make sure we don't get into a position where somebody can buy us out, because that's one of the things that often happens to generic drug companies that are successful," he said. "Somebody comes over, buys them, then raises the price."

The compounding industry isn't without its risks. In 2012, a fungal meningitis outbreak resulting in 64 deaths hit multiple states, infecting patients who had received contaminated steroid injections from the New England Compounding Center in Framingham, Mass.

Kohler has been looking at a company in Sweden developing clean room technology that uses far less electricity than usual. Automation also would play a role at the facility, and employees would be needed to operate the machinery, he said.

Once Kohler buys the land and gets all the necessary permits, construction could begin by the end of this year.

A unique role

The rising cost of prescription drugs has concerned independent pharmacists across the country, said John Norton with the National Community Pharmacists Association in Alexandria, Va.

As an example of a countermeasure, San Diego-based Imprimis Pharmaceuticals developed a drug similar to Daraprim costing $99 for 100 capsules shortly after the wake of the Shkreli scandal.

"We applaud all efforts to bring relief to rising prescription drug prices," Norton said. "Compounding does represent an area where progress can be made on the most expensive drugs in the marketplace."

Kohler's idea to become a generic drug manufacturer could serve a unique role in the state. Although hundreds of compounders exist in Arkansas, only three sell to markets outside the state and are registered with the Food and Drug Administration -- two in Little Rock and one in Conway, said Scott Pace, CEO of the Arkansas Pharmacists Association.

Pace said as far as he knows, no generic pharmaceutical manufacturers exist in the state.

Kohler also wants to broaden OurPharma's horizons into collaborative research with the Department of Biomedical Engineering at the University of Arkansas. Dr. Raj Rao, department head, said the partnership would serve as part of a push to increase student interaction with biotechnology and biomedical engineering companies.

"It's very preliminary right now," he said. "I think our interactions would be focused more on our students getting opportunities to work on industry-sponsored research."

Real win-win

Under the Fayetteville First economic development plan, the City Council awarded contracts to local group Startup Junkie and the Chamber of Commerce to bring in new businesses and retain the ones already operating in the city. The council has emphasized technology and health care as areas it wants to explore.

The chamber helped Kohler find the site at the Commerce District, work out the logistics of forming the company and explore financial incentives with the Arkansas Economic Development Commission, said Chung Tan, the chamber's director of economic development.

Clusters of developers, manufacturers and consultants support each other in communities all over the country, and Fayetteville should be no different, Tan said. Places like OurPharma would contribute to an overall picture of Northwest Arkansas becoming a destination for medical care, training and health, she said.

"They're trying to see if they can take on the pharmaceutical giants, making an indentation on pricing," Tan said. "It'll be interesting because it's going to be a challenge, but if Pete and his team are successful, it may change our health care."

Mayor Lioneld Jordan said Kohler's company hits nearly every high point of the Fayetteville First economic plan. The city wasn't getting any money owning an empty plot of land in the Commerce District and OurPharma will bring high-paying jobs and tax revenue on top of the benefit to patients, he said.

"I think it's a real win-win for us. I'm real pleased with it," he said. "They brought it in, and I liked it. I didn't waste a whole lot of time; I said, 'Here we go.' We've been trying to move the property out there for a long time. I think it'll be a great fit for us."

NW News on 04/17/2017