States Take On Soaring Prices of New Drugs
Posted June 24, 2018 10:57 p.m. EDT
Updated June 24, 2018 11:00 p.m. EDT
A wave of breakthrough drugs is transforming the medical world, offering hope for people with deadly diseases despite their dizzying price tags.
But what if it turns out that some of these expensive new drugs don’t work that well?
That’s the quandary over Orkambi, a drug that was approved in 2015 for cystic fibrosis and was only the second to address the underlying cause of the genetic disease. Orkambi, which is sold by Vertex Pharmaceuticals, costs $272,000 a year, but has been shown to only modestly help patients.
Now, in a case that is being closely watched around the country, New York state health officials have said Orkambi is not worth its price, and are demanding that Vertex give a steeper discount to the state’s Medicaid program. The case is the first test of a new law aimed at reining in skyrocketing drug costs in New York’s Medicaid program.
The high price of prescription drugs has ignited a populist furor, and in May, the Trump administration unveiled a set of proposals to address the issue. But while the ideas at the federal level are still mostly theoretical, some states have begun tackling the issue themselves. This year, Massachusetts asked the federal government for permission to limit its coverage of drugs in an effort to secure larger discounts from drugmakers. Other states, like California and Vermont, have passed laws requiring drug companies to turn over certain financial details if they raise prices significantly.
“There’s a number of states that are really trying to push forward and say, we need to be thinking very differently about how we’re paying for drugs,” said Matt Salo, executive director of the National Association of Medicaid Directors. “We need the ability to say that there are some drugs that are just not priced in a rational way.”
Orkambi held great promise for people with cystic fibrosis when it was approved three years ago. A similar drug, Kalydeco, approved in 2012, was viewed as groundbreaking because it was the first to try to counteract the genetic defect that causes cystic fibrosis. The disease, which affects about 30,000 Americans, leads to a buildup of sticky mucus in the lungs and can lead to death by respiratory failure by the time many people are 40.
But while Kalydeco, also known as ivacaftor, was found to be effective, it was only approved for a sliver of patients with the disease — those who had certain genetic mutations. Orkambi, which combines ivacaftor and another drug, lumacaftor, was approved for mutations that covered nearly half of cystic fibrosis patients, but studies showed it was not as effective as Kalydeco.
Since Orkambi’s approval, several countries have balked at paying for it, including Britain, France and Canada.
In the United States, private insurers and Medicare plans have generally covered Orkambi. Medicaid programs, which cover health insurance for the poor, are required to cover all drugs.
Still, many insurers require patients to pay thousands of dollars out of pocket, and even though Vertex offers assistance, not everyone qualifies.
Lora Moser, 40, is covered by Medicare because she is disabled, and said she had to stop taking Orkambi in January because she could not afford the first month’s payment of more than $3,000 required by her insurer, Humana. A spokeswoman for Humana said that for high-cost drugs like Orkambi, the insurer helps patients identify outside assistance programs to cover out-of-pocket costs.
A nonprofit group that had provided assistance the previous year to Moser declined to renew her grant because, she said she was told, her annual household income was too high. She said her income is about $600 above their limit.
“I’ve never felt more destitute and hopeless as I do right now, from a medical standpoint,” Moser said.
A spokeswoman for Vertex, Heather Nichols, said more than 99 percent of cystic fibrosis patients who are eligible to take Orkambi in the United States have “broad access” to the drug.
“Vertex has a long-standing commitment to supporting access for all eligible patients, and we will continue to oppose any attempts to restrict patient access to these transformative medicines,” Nichols said.
Despite its lukewarm reception, Orkambi has been a boon for Vertex. In 2017, the drug was its top-selling product, bringing in about $1.3 billion in sales, a considerable sum for a product that is only approved to treat about 28,000 people worldwide.
Dr. Steven D. Pearson, president of the Institute for Clinical and Economic Review, which evaluates the cost-effectiveness of drugs, said the problem is that in the United States, drug companies control the prices, especially in the case of newly approved drugs like Orkambi.
“Our system is set up not to distinguish very well between those drugs that are fairly priced and those that are not,” he said. Pearson’s institute concluded that Vertex’s cystic-fibrosis drugs should be discounted by as much as 77 percent. “That gives the incentive to the company to overreach, and that’s part of why our system is so out of whack,” he said.
In April, Orkambi became the test case for the New York law when a state board ruled that the drug was not worth its cost, recommending that it be discounted from the list price by roughly 70 percent — an amount that was influenced by work done by Pearson’s institute. New York’s law, passed in 2017, allows the state to ask manufacturers for a deeper discount if the state’s Medicaid drug budget exceeds a certain amount.
Under federal law, state Medicaid programs get a rebate of at least 23 percent. New York officials said that they identified 30 drugs this year that were priced too high, and that those products’ manufacturers agreed to deeper discounts, resulting in about $60 million in annual savings. Vertex, which is based in Boston, was the only company that refused, the state said. New York officials did not identify the manufacturers that agreed to steeper discounts. For now, at least, Vertex appears to have the upper hand because federal law requires the state to cover Orkambi, although the state can limit its use. Under its new law, New York could also demand that Vertex disclose details about how it sets its price, including how much goes toward research and development or to other areas, like marketing. But even if Vertex complied, that information would not be made public because it is considered proprietary.
Nichols, the Vertex spokeswoman, said the company had no plans to agree to a discount below the 23 percent required by law.
And Donna Frescatore, director of New York’s Medicaid program, said she was reluctant to limit the use of Orkambi for those who need it. “It’s certainly a balance with our ability to get fair pricing for this medication,” she said.
But despite the impasse, Salo said big states like New York are major buyers of prescription drugs, and companies may see an interest in taking those states seriously. “I see this as being of very, very widespread interest,” he said. “A lot of other states are kind of watching and saying, ‘How is that going to work?'”
The debate over Orkambi may soon become moot — earlier this year, the Food and Drug Administration approved a new cystic fibrosis drug, also made by Vertex. Symdeko, as the drug is called, treats a similar population as Orkambi, but has been proved to be more effective. It carries a list price of $292,000 a year, and some analysts, including Geoffrey Porges, of Leerink, say they believe Symdeko will eventually replace Orkambi.
Given the arrival of Symdeko, some analysts said New York would be smart to negotiate a package deal for all three of Vertex’s cystic fibrosis drugs, similar to a deal recently made with Ireland. Frescatore said that’s an approach she would consider.
“You don’t want a patient being forced to take Orkambi because it’s cheaper,” Porges said. “You want the right patient to get the right medicine.”