[Ip-health] Costly Vertex Drug Is Denied, and Medicaid Patients Sue

Elizabeth Rajasingh elizabeth.rajasingh at keionline.org
Thu Jul 24 07:59:31 PDT 2014

Costly Vertex Drug Is Denied, and Medicaid Patients Sue
July 16, 2014

LITTLE ROCK, Ark.— Vertex Pharmaceuticals <http://quotes.wsj.com/VRTX> Inc.
VRTX -0.70% <http://quotes.wsj.com/VRTX> 's $300,000-a-year cystic-fibrosis
drug has sparked a legal battle here, where the state's Medicaid program is
restricting access to the expensive therapy.

In a lawsuit filed in Arkansas federal court last month, three people
suffering from the fatal lung disease allege Medicaid officials have for
two years denied them access to Kalydeco because of its cost. The
plaintiffs allege state officials have violated their civil rights under
federal law governing Medicaid, the government-run insurance plan for the

The patients all meet the eligibility criteria established by the Food and
Drug Administration when it approved Kalydeco in 2012, including the
presence of a rare genetic mutation it is designed to correct. But Arkansas
officials have said the patients must prove their disease has failed to
benefit from older, less-expensive therapies, a policy their doctors say
contradicts treatment guidelines.

Arkansas officials declined to comment on specific allegations but said
they are mainly restricting access because existing data don't support the
drug's use as a first option. Cost also appears to be a factor: Emails
obtained by the patients' attorneys show officials discussing Kalydeco's
cost, and their worries about the expense of future cystic fibrosis drugs.

The legal flap is the latest example of the pressure expensive new drugs
are putting on cash-strapped government insurance programs. State prison
systems and some Medicaid programs in recent months have limited use of
another expensive new drug—Gilead Sciences <http://quotes.wsj.com/GILD>
 Inc. GILD +0.73% <http://quotes.wsj.com/GILD> 's hepatitis C pill,
Sovaldi, which has a wholesale price of $84,000 for a full course of
treatment—to all but the sickest patients. The American Society of Clinical
Oncology, meanwhile, recently said it would begin publishing a cost-benefit
guide to cancer drugs.

That creates a dilemma for state Medicaid agencies with limited budgets.
New high-cost treatments like Kalydeco and Gilead's Sovaldi are likely just
the "tip of the iceberg" for high-price therapies, said Matt Salo,
executive director of the National Association of Medicaid Directors, a
professional association.And more of these types of expensive, niche drugs
are on the way. A recent report by insurer UnitedHealth Group
<http://quotes.wsj.com/UNH> Inc.UNH -0.06% <http://quotes.wsj.com/UNH>
specialty-drug spending in the U.S. could more than quadruple to about $400
billion in 2020, up from $87 billion in 2012.

"We have this public health mentality that all people have to be cured no
matter what the cost, and also let the innovators charge whatever they
want," said Mr. Salo. "Those are fine theories independently, but when you
combine them together in a finite budget environment, it's not sustainable."

A state spokeswoman said of Arkansas's Kalydeco policy: "Cost alone was not
the determining factor, but how we will pay for it is something we must
consider in advance as we are a state agency with limited funds."

Doctors, patient advocates and Vertex said Arkansas is the only state they
know of that has denied Kalydeco to patients who meet the FDA criteria, and
that the state's policy appears to be unique.

Medicaid benefits cover doctor visits, prescription drugs and other medical
services for more than 70 million low-income people. Unlike Medicare, the
health program for the elderly that is fully funded by the federal
government, Medicaid programs are administered by the states and, on
average, received an estimated 57% of their Medicaid budgets from federal
funds, according to the National Association of State Budget Officers.

Providing the three people with Kalydeco, which has an annual wholesale
cost of $311,000, would have a small impact on Arkansas Medicaid's
prescription drug spending, which totaled $351.28 million in 2013 and
represented 7.5% of the state's total Medicaid spending. But the prospect
of paying for similarly priced drugs for cystic fibrosis and other diseases
in the future appears to have been a factor in the state's policy.

Chloe Jones, a 14-year-old plaintiff in the Arkansas suit, spends several
hours each day undergoing treatment and taking medications. One step
requires her to spend 45 minutes, three times each day in an inflatable
vest that puts pressure on the chest and loosens mucus in the lungs.

William Golden, medical director of Arkansas Medicaid, said that since
Chloe's lung function was normal at the time her doctors prescribed
Kalydeco, the state couldn't justify approving Kalydeco.

The state Medicaid agency denied her doctor's request for Kalydeco in June
2012, stating Chloe hadn't met the requirement of taking older medications
for 12 months, according to a letter Medicaid sent her doctor. The state
denied Chloe subsequent appeals in July and September of 2012, and in
August 2013, according to attorneys at Sufian & Passamano LLP, a Houston
law firm representing Chloe.

"They just don't want to pay for it," Chloe said during an interview in
Little Rock, where she travels for treatment from her home in Walnut Ridge,
Ark. "I feel like they don't care about what's wrong with me, that I'm not
as important as everybody else."

Chloe's physician, Dennis Schellhase, says Chloe has now been taking all of
the medications required by the state for close to a year and the hospital
will soon submit another application for the drug with the state Medicaid

(Arkansas has approved the drug for two patients, Dr. Golden said, but one
left Medicaid and the other hasn't filled the prescription.)

Roughly 27% of Arkansas's population lives in poverty or near poverty, the
second highest rate in the U.S. after Mississippi, according to the most
recent U.S. Census data. Federal funds accounted for more than two-thirds
(70%) of Arkansas's $4.79 billion Medicaid budget in 2013, according to a
state report.

In exchange for having their drugs covered by Medicaid programs, drug
makers are required to provide rebates that are split between the states
and Washington. Last year, Arkansas received rebates totaling $142.97
million, or about 41% of its total drug spending, of which it kept 22%,
with the rest accruing to the federal government.

Some expensive new drugs, including Kalydeco, are more effective than older
therapies because they target specific genes that help cause a disease,
doctors say. Companies say the high price tags reflect the costs and effort
of developing the drugs, as well as their benefit to patients. Rare disease
drugs are priced higher to compensate for the lack of a large patient
population, industry officials say.

Kalydeco is approved in the U.S. for patients aged six years or older with
one of several genetic mutations carried by about 1,100 people in North
America. Globally, about 2,150 people are eligible for the drug, or about
3% of the 70,000 patients world-wide who have cystic fibrosis. Patients
take the pill twice a day for life.

The mutations cause the disease by inhibiting the work of a protein that is
responsible for transporting water and salt through the lungs and other
organs. The disease causes thick mucus to build up in the lungs, which can
eventually lead to respiratory failure. There are more than 1,800 genetic
mutations that can cause cystic fibrosis.

Kalydeco is designed to restore function of the protein, which many doctors
expect will halt or substantially diminish lung damage and extend patients'
lifespan, though long-term studies haven't yet been completed to prove
that, said Robert Giusti, a cystic-fibrosis specialist at NYU Langone
Medical Center in New York.

"It would be the standard of care to offer Kalydeco to all patients who are
within that mutation panel," Dr. Giusti said. Older drugs alleviate
symptoms of the disease, mainly by clearing mucus from the lungs, but don't
treat its underlying cause.

Chloe and the other Arkansas plaintiffs, Elizabeth West and Catherine
Kiger, both 21 years old, also sought financial assistance from Vertex,
which says it provides Kalydeco free to patients without insurance or whose
insurance doesn't cover the drug. The company informed her hospital nurses
that Chloe would have to exhaust the Medicaid coverage appeals process
before Vertex would provide the drug, according to her lawyers and her
doctor. But the company later said the assistance program specifically
excluded Medicaid patients, her doctor said.

"It's been like a yo-yo, and it's devastating every time," said Chloe's
mother, Amie Ledman.

(Kalydeco would be covered by the Medicare drug program if patients lived
into their 60s, but most cystic fibrosis patients die by the age of 40.)

Vertex Chief Commercial Officer Stuart Arbuckle said the company has never
provided free Kalydeco to Medicaid patients. If Vertex gives Kalydeco free
to the Arkansas Medicaid patients, it could lead other states to establish
similar eligibility criteria, Mr. Arbuckle said. The patient-assistance
program, he said, "isn't there to subsidize Medicaid, which is there to
provide medical care to poor families."

State Medicaid programs are required to pay for most FDA-approved drugs,
regardless of their price, unless there are equivalent therapies available.
For drugs like Kalydeco that have no equivalent, states can require
physicians to prove the drugs are being used in a medically accepted way.

One of the main studies Vertex conducted to gain marketing approval for
Kalydeco tested the drug against placebo. Patients in one arm of the study
took Kalydeco in addition to standard cystic fibrosis therapies; the other
group took placebo in addition to standard therapies. Patients taking
Kalydeco had an average lung function improvement of 10.1% after about 11
months, compared with a decline of 0.4% in patients taking placebo,
according to data published in the New England Journal of Medicine in 2011.

Dr. Golden said the study doesn't prove Kalydeco is more effective because
patients weren't taking hypertonic saline, a salt water mist that is one of
several treatments patients take to help clear mucus from their lungs. The
treatment is recommended by the Cystic Fibrosis Foundation and is estimated
to have a moderate net benefit. The Foundation, a nonprofit advocacy
organization also responsible for issuing treatment guidelines and
accrediting medical facilities, also funds pharmaceutical
research—including to Vertex—and receives royalty payments from Vertex on
sales of Kalydeco.

In a series of 2012 emails obtained by Chloe's attorneys and reviewed by
The Wall Street Journal, Arkansas Medicaid officials discussed Kalydeco's
cost. In an email to colleagues discussing a review board's deliberations
about Kalydeco, a pharmacist named Pamela Ford wrote, "the consensus of the
physicians on the board was that none of the prescribers would have a clue
that this will cost AR Medicaid $303,408 per patient per year."

She also noted in a separate email that Vertex was working on a new product
that would combine Kalydeco with another drug, which could treat the
majority of cystic fibrosis patients. The new therapy would be "likely even
more expensive" and a "budget-breaker!" Ms. Ford wrote. "So we will be very
strict in these reviews knowing it will come back even worse the next

Vertex is developing other therapies for cystic fibrosis that it hopes will
eventually treat all genetic mutations.

An Arkansas state spokeswoman said Ms. Ford was unavailable to comment due
to department policy.

Cystic fibrosis experts say Arkansas's criteria conflict with standard
treatment approaches for patients with the genetic mutation. In 2012,
Chloe's lung function was relatively stable at about 90% of what would be
expected in a healthy person, but cystic fibrosis is thought to damage the
lungs even when patients don't have symptoms, said Dr. Schellhase, Chloe's
physician. Since 2013, Chloe has been hospitalized four times for roughly
two weeks each stay after her condition worsened, and her lung function
sank as low as 71%, Dr. Schellhase said. Arkansas Children's Hospital
declined to specify the costs of Chloe's hospitalizations but said the
average annual cost of hospital stays is about $109,000 for a child with
cystic fibrosis.

If Chloe had been given Kalydeco in 2012, "we probably would've avoided
most of the hospitalizations, if not all of them," said Dr. Schellhase, who
doesn't receive any money from Vertex.

Brian O'Sullivan, a cystic-fibrosis specialist at University of
Massachusetts Medical School, said the consensus among doctors is that all
patients with the genetic defect should receive Kalydeco. Dr. O'Sullivan
and other doctors criticized Vertex's pricing of the drug in 2012, saying
the company was "leveraging pain and suffering into huge financial gain."
But he called Arkansas's policy "unconscionable."

*Write to *Joseph Walker at joseph.walker at wsj.com

Elizabeth Rajasingh
Perl Fellow, Knowledge Ecology International
1621 Connecticut Ave. NW, Suite 500
Washington, DC 20009
*elizabeth.rajasingh at keionline.org <elizabeth.rajasingh at keionline.org>* |

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