Will The High Cost Of Vertex’s New Cystic Fibrosis Drug Push The U.S. To European Style Pricing?
Recently, Vertex received approval for a new two-drug therapy called Orkambi, designed to treat 8,500 cystic fibrosis patients over the age of 12 who have the most common mutation for this disease. Vertex has priced this drug at $259,000 per patient annually and, not surprisingly, many are outraged. As reported by the Boston Globe’s Robert Weisman, a group of prominent cystic fibrosis physicians are battling Vertex over the price.
“It’s egregious” said Paul M. Quinton, a professor at the University of California at San Diego who himself has cystic fibrosis. “This is more than five times the salary of an average American family. How can they in good conscience charge that much?”
In justifying the price of Orkambi, Vertex’s chief commercial officer, Stuart Arbuckle, cited four reasons: the small patient population, the clinical benefit of a drug combination that treats the underlying cause of the disease, the time and cost of Vertex’s efforts to bring the medicine to market, and the need to invest in new research to develop therapies to treat the remaining thousands of cystic fibrosis patients with other forms of cystic fibrosis. It should be pointed out that Vertex has been in business for 26 years and only turned a profit once in its history. Clearly, with Orkambi, Vertex is trying to make up some serious financial deficits.
Orkambi is a major breakthrough. Furthermore, it doesn’t come close to being the highest priced new drug. New breakthrough cancer drugs and drugs to treat rare diseases can be priced at almost double the cost of Orkambi. But the enormous publicity generated by the high cost of new drugs is skewing the public’s view of the impact of new drugs on the nation’s overall healthcare bill. This perception is certainly being seized on by payers anxious to drive down their drug costs, even when the costs of these drugs can be readily justified by the overall SAVINGS that breakthrough drugs can deliver thanks to reduced downstream costs and better health for patients in need.
Payers will undoubtedly focus on the fact that these same drugs will be cheaper in Europe, where the price of new drugs is set by negotiations between the innovative company and government regulators. In these negotiations, the country will set the price based on the VALUE it believes that the drug provides. Historically, the European agencies will support a high price for such a breakthrough like Orkambi , but usually the price will be significantly lower than that of the U.S.
This isn’t news to anyone – these practices have gone on for years. However, with the negative reputation of the biopharmaceutical industry and with the increased desire to bring the rising cost of healthcare under control, the public – and then the politicians – will seek to do this by evolving to the European system. The first measure likely to occur will be Congressional passage of legislation that would enable the U.S. secretary of health and human services to negotiate drug pricing. Then, much as happens in Europe, companies will need to justify the price they are seeking based on the value that this new drug brings. Companies already do this when negotiating prices, not just in Europe but also with insurers in the U.S. particularly when insurers have other therapeutic choices. The hepatitis C cure, Gilead’s Sovaldi, was famously launched at $1,000/pill, or $84,000 per patient treated. However, some months later when AbbVie launched its competitor, Viekira Pak, payers now were in position to negotiate with both companies. The result? Suddenly the price of these hepatitis C drugs dropped to European levels. That works when there are options, but that isn’t always the case.
To date, Congress has favored letting market forces set the price of new drugs. This works when there is competition. But when true breakthroughs occur, it can be years before a competitive therapy emerges. Thus, we have the current situation of higher prices in the U.S. It is hard to envision this remaining the status quo over the next five years.
Source: Forbes
