[Ip-health] Cohen and Raftery: Paying twice: questions overhigh cost of cystic fibrosis drug developed with charitable funding

Jamie Love james.love at keionline.org
Sat Jul 19 16:36:42 PDT 2014

Some people may have seen Joe Noreca's op ed in today's New York Times,
mentioning the $300k price tag for Kalydeco (generic name ivacaftor), a
drug for cystic fibrosis.

Earlier this year Debra Cohen and James Raftery wrote extensively about the
same drug for the British Medical Journal.  The title of the excellent BMJ
article is: Paying twice: questions over high cost of cystic fibrosis drug
developed with charitable funding

I have copied parts of the much longer BMJ report.


Feature Orphan Drugs
Paying twice: questions overhigh cost of cystic fibrosis drug developed
with charitable funding
BMJ 2014; 348 doi: http://dx.doi.org/10.1136/bmj.g1445 (Published 12
February 2014)

Deborah Cohen and James Raftery ask why one of the first drugs to be
developed by a partnership between a charity and a drug company also ended
up being one of the world’s most expensive drugs. Why didn’t such
philanthropy lead to greater patient access?

. . . [snip]

New model of funding

Ivacaftor is the first drug developed through “venture philanthropy”—a
partnership between a charity and a drug company. It’s an emerging trend in
drug development, particularly for rare conditions, whereby a non-profit
organisation helps to finance the development of a treatment in return for
a share in profits.

. .   [snip]

Although the gene that causes cystic fibrosis was identified in 1989 by
publicly funded researchers, drug companies were not interested in
developing a drug that targeted the underlying cause—investing in research
and development was considered to be a high financial risk. That all
changed when a US charity, the Cystic Fibrosis Foundation, entered the
fray. In 2000, the charity established an affiliated research arm to govern
drug discovery aided by a grant from the Gates Foundation. It subsequently
teamed up with Vertex, a small drug company with a successful record with
high risk drugs.

Barry Werth, a US based journalist, was granted access to Vertex when it
was a small start-up in Cambridge, Massachusetts, in the early 1990s. He
went back in 2011 when ivacaftor had started to show promising clinical
trial results, reported in his book, The Antidote.

Werth told the BMJ that the Cystic Fibrosis Foundation had approached lots
of companies to develop a drug that targeted the underlying cause, but
Vertex was the only one willing to give it a go. Over the years, the
foundation has given over $75m (£46m; €55m) to Vertex for research and

In 2006, the partnership bore fruit—VX-770 (later named ivacaftor) entered
clinical trials using the foundation’s network of affiliated medical
centres. An awareness campaign by the foundation buttressed recruitment.3
The drug was approved by the US in January 2012 after only three months of
review and gained an EU licence seven months later.


The Cystic Fibrosis Foundation is one of the most successful fundraising
charities in the US, partly because of the efforts of businessman Joe
O’Donnell, whose son died from cystic fibrosis. In the 30 years since his
son died, O’Donnell has raised around $100m by holding film premieres, “hot
dog safaris,” golf tournaments, and an annual bowling night for financiers.5

According to its financial reports, ivacaftor has been lucrative for the
charity. Its royalty income jumped from under $1m in 2011 to $157m in
2012—or just over half its income—as a result of their stake in the profits
of the drug.6 On top of the royalties agreed, the foundation gets
additional payments for extraordinary sales results.


“Vertex is now a $20bn company,” Werth says. “There is no competition and
ivacaftor is on patent until 2025. It doesn’t have to worry about other
companies. Wall Street loves it.”

But on 9 July 2012, 24 US doctors and researchers involved in the
development of the drug wrote to Vertex to express their dismay at the cost
of the drug.

“We have invested our lives and careers toward the success of these
inspiring therapeutic agents,” the researchers said, adding: “We also write
with feelings of dismay and disappointment that the triumph and honor that
should be yours is diminished by the unconscionable price assigned to

“Yet—notwithstanding all your patient support programs—it is at best
unseemly for Vertex to charge our patients’ insurance plans (including
strapped state medical assistance plans), $294 000 annually for two pills a
day (a 10-fold increase in a typical patient’s total drug costs). This
action could appear to be leveraging pain and suffering into huge financial
gain for speculators, some of whom were your top executives who reportedly
made millions of dollars in a single day.”8


However, since writing the letter and attempts by the doctors to discuss
pricing with Vertex, the annual price of the drug has increased by $13 000
to $307 000 a year. This, said a Vertex spokewoman, took “account our
continued investment in the research and development of other potential
medicines for CF.”


Ivacaftor will probably need to be taken for decades by individual patients
and the total cost may run into many millions of dollars. In an editorial
in JAMA, doctors point out the ethical dimension. “The patients who assumed
the risks of participating in the clinical trials necessary to bring this
drug to market and who devoted countless hours to raising money for the CF
Foundation to underwrite early work are now being asked to pay, most often
through their insurers, an exorbitant price for the product that resulted
from their efforts,” Brian O’Sullivan, a paediatric pulmonologist at the
University of Massachusetts Medical School, and colleagues wrote. 1

Werth told the BMJ that Vertex is interested in working with the cystic
fibrosis community, but won’t discuss pricing.

“They just won’t talk about it. The issue here is that access has been
separated from pricing. They’re setting a high price but making sure that
no one goes without by offering the drug free to any patients who can’t
afford it. So then they charge as much as the market will bear,” he said.

“There’s been no price resistance in the US. Nothing else does what it does
and there are very few people with this mutation,” he added.


UK situation
In England the North of England Specialised Commissioning Group was asked
to examine whether ivacaftor should be funded across the country. In the
run up to the group’s meeting in 2012 Vertex offered ivacaftor free of
charge for a limited period to certain patients. This left hospitals with
the ethical dilemma of giving a drug only to have to withdraw it once the
company stopped providing it free.

Jessica Nickless, vice-chair of the Ivacaftor Patients Interest Group, is
unequivocal about where the blame lies. Commenting on the case of Caroline
Cassin, who was refused free treatment by Birmingham’s Heartlands Hospital,
she told the Daily Telegraph: “If I stood by and witnessed someone being
murdered I would be complicit to that murder, yet doctors can watch someone
die. They are condemning Caroline to a slow, lingering death.9


When ivacaftor was assessed by the North of England Specialised
Commissioning Group in 2012 it put the cost per quality adjusted life year
(QALY) between £335 000 (optimistic scenario) and £1 274 000 (conservative
scenario)—way above the National Institute for Health and Care Excellence

Although the discounted price is commercial in confidence, a report shows
the commissioners negotiated a discount that put the cost per QALY between
£285 000 and £1 077 000—about a 15% reduction.

Given that 320 patients in England have the specific mutation and are
considered eligible, the annual cost to the NHS is around £55m per year—a
sizable sum of money.

In Scotland, however, ivacaftor was initially offered to people on a named
patient basis only and clinicians had to put forward an application for the

Four days after the Scottish Medicines Consortium recommended against
funding the drug, Scottish health secretary Alex Neil said that the health
services would pay for it. He had met with the Ivacaftor Patient Interest
Group. The Cystic Fibrosis Trust also campaigned on the issue.12 13 14


Elsewhere negotiations are tougher. At the start of the year, Vertex told
investors that one of their aims was to get public reimbursement in
Australia and Canada—where the drug is licensed but the cost has yet to be

Australia’s Pharmaceutical Benefits Advisory Committee initially deferred a
decision to fund the drug because of the cost. But just before Christmas,
they agreed that it should be funded—leaving the government to negotiate
the price.

In the run up to the decision, Cystic Fibrosis Australia coordinated a
lobbying campaign concentrating on newly elected members of parliament,
shortly after the federal government elections.

A statement from David Jack, the organisation’s chief executive, suggested
that people should write to their local MP congratulating them on their
election and requesting a meeting to discuss ivacaftor. Campaign materials
were accompanied by the Twitter hashtag #KalydecoforChristmas.

But this campaigning highlights other concerns for those who are watching
such philanthropic schemes unfold—charities may compete against each other
for funding. Decisions about what drugs will be developed will come down to
public sympathy as opposed to clinical need. A recent campaign by
Pancreatic Cancer Action, which featured a young man saying he wishes he
had testicular cancer, has incurred such ire. Other adverts include breast
and cervical cancer.

As one person from the National Institute for Health Research public
involvement scheme put it: “What next, cancer Top Trumps cards?”

Another concern arises when other indications for the drug are developed.

Expanded market
Ivacaftor is not the only drug being developed by Vertex for people with
cystic fibrosis. It has also developed VX-809—called lumacaftor—for people
with the most common mutation in cystic fibrosis, ΔF508. This drug is used
in combination with ivacaftor and is currently in phase III trials, the
results of which are expected later this year.

According to industry reports, success with these trials could expand
ivacaftor’s market to 90% of patients with cystic fibrosis. That, in turn,
could take the drug well past the blockbuster benchmark with peak annual
sales estimated as high as $6bn.16

So will Vertex lower the price for this combination? Werth thinks not. “It
is likely that they will charge the same price as ivacaftor. In the US,
they will charge what insurers will pay,” he said.

And in the short term this might be affordable for health systems, but what
happens when targeted drugs are developed for more conditions if they are
also very expensive and for small populations?

“This move towards personalised medicine raises other serious questions.
This could be used as a test case to see what challenges are there,” he


Evidence for ivacaftor

Three randomised placebo controlled trials are available: one conducted in
people aged over 12 years (n=167); one in children aged 6-11 years (n=26);
and an open label extension study of the two trials. At 48 weeks, there was
a mean difference of 10.5 (95% confidence interval 8.5 to 12.5) in forced
expiratory volume (FEV1) in those aged over 12 and 10.0 (4.5 to 15.5) in

James Love.  Knowledge Ecology International
http://www.keionline.org, KEI DC tel: +1.202.332.2670, US Mobile:
+1.202.361.3040, Geneva Mobile: +41.76.413.6584,   twitter.com/jamie_love

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