Feature Orphan Drugs

Paying twice: questions over high cost of cystic fibrosis drug developed with charitable funding

BMJ 2014; 348 doi: https://doi.org/10.1136/bmj.g1445 (Published 12 February 2014) Cite this as: BMJ 2014;348:g1445
  1. Deborah Cohen, investigations editor1,
  2. James Raftery, professor of health technology assessment2
  1. 1BMJ, London, WC1H 9JR, UK
  2. 2University of Southampton, Southampton, UK
  1. Correspondence to: D Cohen dcohen{at}bmj.com

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?

In early 2012, the first drug targeting the underlying cause of cystic fibrosis was approved in Europe and the United States. Ivacaftor’s (Kalydeco) arrival was greeted with a flurry of excitement.

Billed as a “game changer” by industry pundits and “a profoundly exciting development” by National Institutes of Health director, Francis Collins, ivacaftor soon became one of the world’s most expensive medicines—its mode of action considered as exciting as its unique funding model. Ivacaftor was approved for a rare group of patients who carry the genetic mutation, G551D, in the cystic fibrosis transmembrane regulator (CFTR) gene—about 5% of people with the disease.1 Mutations in the CFTR protein, which regulates ion—and therefore water—transport in the body, lead to the formation of thick mucus in the lungs, digestive tract, and other parts of the body. Ivacaftor facilitates increased chloride transport in people with the G551D mutation, and in trials it was found to improve forced expiratory volume. Trial participants also had fewer exacerbations and put on weight (box).

The US Food and Drug Administration was quick to add its support for the drug. “Kalydeco is an excellent example of the promise of personalized medicine—targeted drugs that treat patients with a specific genetic makeup,” FDA commissioner, Margaret Hamburg, said when it was licensed. “The unique and mutually beneficial partnership that led to the approval of Kalydeco serves as a great model for what companies and patient groups can achieve if they collaborate on drug development.”2

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.

A 2007 report in Centerwatch, an industry publication, found that investment through venture philanthropy had risen 10-fold since 2001.3 One of the reasons for this rise, according to representatives of the US Muscular Dystrophy Association and the Juvenile Diabetes Research Foundation, is that although academics may discover important compounds, industry is more adept at clinical translation.3

These organisations are two of several engaging in their own drug research and development. Although this model is gaining attention as a means to bring treatments for rarer conditions onto the market, the concept is nothing new. Over 75 years ago, the US National Foundation for Infantile Paralysis engaged in venture philanthropy. It funded much of the research that led to the development of the polio vaccine and was supported by public donations.4

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 development.

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.

Price concerns

But given the level of public financial investment, does this mean that health services—and the donating public—are getting a better deal and more affordable access to such drugs?

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.

The foundation say that this money will be poured back into research. Indeed, Vertex too has pledged publicly that it will cure cystic fibrosis by 2020.7

“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 Kalydeco.

“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

A spokeswoman from Vertex said that the company’s chief executive, Jeff Leiden had subsequently had a series of conversations with the doctors “to help address their concerns and answer questions. He also met with them in person at a medical meeting and there is an open invitation to regroup as needed.”

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.”

Ed Owen, chief executive of the Cystic Fibrosis Trust in the UK, said that the organisation shared some of the doctors’ concerns.

“We recognise that companies like Vertex should rightly expect a return on the considerable investment that is made in developing drugs like ivacaftor. We do, however, share concerns about the long term impact of high cost drugs on the NHS,” he said.

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.

But the US is not the only country where the cost has been a concern.

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

“For Caroline, it is now or never. We have almost exhausted every avenue.”

Access to the drug was later extended to cover patients without a time limit and Caroline received treatment. A spokeswoman for Vertex told the BMJ that it did this because it wanted to “provide medicine to patients who are in critical need of treatment and meet certain criteria while these discussions are ongoing.”

But, judging by comments on social networking and petitions sites, the reluctance of the health services to pay for ivacaftor has been blamed on governments—not on the pricing decisions made by Vertex and the Cystic Fibrosis Foundation.10 11

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 thresholds.

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 drug.

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

Owen said, “The trust’s fundamental objective is, and will always be, to ensure that all those with cystic fibrosis have access to the most effective drugs as quickly as possible. During the appraisal process for ivacaftor we urged both sides to agree an affordable price and were pleased that an agreement was reached in the four parts of the NHS in the UK to ensure all those who needed ivacaftor had access to it.”

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 agreed.15

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 said.

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 children.17

Ivacaftor was associated with significantly fewer patients having exacerbations (relative risk 0.60, 95% confidence interval 0.41 to 0.85), fewer exacerbations (0.45, 0.38 to 0.52), and fewer exacerbations requiring intravenous antibiotics (0.56, 0.39 to 0.79); a reduction in exacerbations requiring hospital admission was of borderline significance (0.64, 0.40 to 1.00).

Participants’ body weight also increased by an average of about 2.7 kg after 48 weeks (mean difference 2.7 kg (1.3 to 4.1) in those aged >12 and 2.8 kg (1.3 to 4.2) in children). Questionnaires suggested an improvement in quality of life in those aged over 12 but not in children.

Ivacaftor carries a risk of numerous pharmacokinetic interactions that can require dose adjustment, particularly for patients with hepatic impairment and those receiving cytochrome P450 isozyme 3A inhibitors or inducers.

Whether ivacaftor extends life remains to be seen. A review in French publication Prescrire cautioned that the long term effectiveness had been based on a surrogate endpoint of FEV1 and said that it is “not possible to determine the harm-benefit balance of ivacaftor due to the high risk of drug interactions, as well as a possible increased risk of infections and liver toxicity”18


Cite this as: BMJ 2014;348:g1445


  • Competing interests: We have read and understood the BMJ policy on declaration of interests and have no relevant interests to declare.

  • Provenance and peer review: Commissioned; not externally peer reviewed.


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