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Trump Wants the VA to Get as Much of This Drug as It Can

"I've instructed the top officials to go out and get as much of it as you can from Johnson & Johnson," President Donald Trump said in a speech at the American Veterans National Convention last week, referring to officials at the U.S. Department of Veterans Affairs (VA).

The drug Trump wants to buy in mass amounts is Johnson & Johnson's (NYSE: JNJ) Spravato, a nasal spray that was approved by the Food and Drug Administration in May for treating depression in adults who haven't benefited from other treatments.

The medication didn't exactly breeze through clinical trials. One of the short-term studies showed that the drug, in combination with a new-to-patient oral antidepressant, reduced the severity of depression with some effect seen within two days. In a long-term clinical trial testing Spravato as a maintenance therapy, patients taking the drug plus an oral antidepressant had a longer time before relapse of depressive symptoms, compared with patients on placebo nasal spray plus an oral antidepressant.

But two other short-term clinical trials didn't meet the threshold for showing effectiveness. Spravato still looked like it was working, but so did placebo, resulting in a difference that wasn't statistically significant. It's an issue facing many drugs treating depression and other psychological diseases, since patients report outcomes on how they feel, which can be highly influenced by the placebo effect.

Stethoscope on a camouflage uniform

Image source: Getty Images.

Treatment of last resort

Despite the less-than-perfect clinical trial results, Johnson & Johnson got Spravato approved by the FDA because it appears to work in patients who have run out of options.

Doctors at the VA followed suit, deciding not to put Spravato on its formulary -- the list of drugs that can be regularly prescribed -- so patients will have to try other medications and then jump through hoops to get an authorization to get Spravato from the VA.

Even if it had been approved for a wider population, Johnson & Johnson might have trouble getting patients who are early in their treatment journey to take Spravato since it causes sedation and dissociation. In fact, patients can only get it through doctors trained to prescribe it. And then they have to go to the office to be treated, and monitored until the doctor clears them to go home.

Beyond the side effects, the drug also can't leave the doctor's office because of the potential for abuse since it's related to ketamine, another drug used for depression with a history of abuse as a club drug.

Johnson & Johnson is making good progress on signing up doctors to dispense the medication. On the second-quarter conference call, management noted that there were more than 1,600 sites certified to dispense the medication, about double where it was three months earlier. Unfortunately, the company didn't report sales of Spravato, presumably because they're not meaningful to the conglomerate's overall revenue.

How much?

Trump had high praise of Spravato (he called the results "incredible"), but it isn't clear if Johnson & Johnson can benefit from the president's desire to get Spravato to the VA patients that need it.

"I think they should give it to us for free," Trump said of Johnson & Johnson, noting that the company has "done so well in this country; they've made so much money."

While Trump was likely just pandering to the crowd of veterans in his request for a free drug, the VA does have mechanisms to get the drug more cheaply.

The VA already requires companies to give a 24% discount off the lowest price paid by commercial buyers. And it often negotiates individually with drug manufacturers to get a steeper discount, sometimes teaming up with the U.S. Department of Defense to combine their buying power in negotiations.

Of course, if the VA isn't going to have Spravato on its formulary, which would increase volumes substantially, there's little incentive for Johnson & Johnson to give price concessions.

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Brian Orelli has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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