Vertex and orphan drugs test limits of US payers

Vertex Pharmaceuticals’ innovative drugs have been rightly hailed as major medical advances as they are the first to treat the underlying causes of cystic fibrosis. It also turns out that they are some of the most expensive agents that payers have ever appraised.

With a price tag pushing about $1m for every year gained, Kalydeco, Orkambi and Symdeko present a mismatch of cost and clinical effectiveness, according to Icer, a leading third-party evaluator (see tables below). This poses a tough challenge for insurers who are reluctant to exclude rare disease drugs but find increasing numbers of them draining their pharmacy budgets; Vertex’s case will not be so well received the next time it negotiates formulary access.

“When you have a disease like cystic fibrosis, where there were no disease-altering drugs, you can draw yourself up and claim, ‘Look, these are transformative, and therefore we should be able to charge whatever the hell we want,’” says David Mitchell, president of Patients for Affordable Drugs. “If you’re a parent of a kid with cystic fibrosis, you will pay whatever you have to, but we should not ask them to do that.”

Good, but pricey

The three Vertex agents, which aim to help the CFTR protein function better in patients with certain mutations, all increase life expectancy and so-called quality-adjusted life years (QALY) that reviewers use to measure drug effectiveness.

The problem is that their annual charges of between $264,000 and $310,000 do not flatter them when compared with best supportive care, which consists of such interventions as inhaled antibiotics, Pulmozyne, breathing and gastrointestinal devices, and treatments for cystic fibrosis-related diabetes.

Icer, the Institute for Clinical and Economic Research, calculated that on top of best supportive care Kalydeco, Orkambi and Symdeko added between 3.5 and 4.3 life years, depending on the specific cystic fibrosis (CF) mutation and treatment, or between 5.0 and 6.1 QALYs.

Obviously, for a patient, the gain in life expectancy and quality of life is immeasurable, and an Icer official went some way to conceding this point, describing the gains as “small to substantial” in an email to EP Vantage.

But for payers, who are simultaneously trying to budget for rare disorders like CF and common conditions like heart disease, the prices of these three drugs become a problem. The annual wholesale acquisition costs are $309,842 for Kalydeco, $264,086 for Orkambi and $282,656 for Symdeko, Icer says, making the cost per life year gained $1.2-1.5m and the cost per QALY $900,000 to $1m.

Not only are those numbers well above the common cost-effectiveness limit of $150,000 per QALY, they would also make Kalydeco in the population of patients with a gating mutation the second-costliest drug ever evaluated by Icer.

At $1.1m per QALY the tardive dyskenisa drug Austedo is costlier, but with 2022 sales forecast at $575m, according to EvaluatePharma, this represents a small fraction of the budget impact of the Vertex drugs, forecast at $3.5bn in sales altogether.

In biopharma circles Icer has gained a reputation for being unsympathetic to costly new products, but the reality is that the group has acknowledged the cost-effectiveness of such controversial drugs as the hepatitis C pills Sovaldi and Harvoni, and more recently Kymriah and Yescarta, the expensive new CAR-T treatments for haematological cancers (Vantage view – Payers OK with CAR-T? Not so fast, January 5, 2018).

What can payers do?

The three Vertex drugs have not been subject to payment exclusions in the US, a point that Vertex is keen to make when asked about the Icer report. “We’re encouraged that payers across the US recognise the value of and have provided access to these transformative medicines for eligible patients,” said Heather Nichols, a spokesperson.

Part of that is the softer touch of US payers. In the UK, for example, the price-evaluation body Nice decided to reject Orkambi on cost-effectiveness grounds, calculating that even at the discounted price of £104,000 ($148,000) a year it cost £218,000 per QALY. Nice typically only judges a drug to be cost effective if it costs less than £30,000 per QALY.

Another aspect to US payers’ acceptance of the high prices is the small population of CF patients. This means that Vertex’s drugs fade into the background of budget outlays. Indeed, Icer calculates that the addition of Symdeko at its estimated net price does not appear to drive significant overall US health spending increases.

“The price impact gets absorbed more easily because it doesn’t bend the system under its weight,” Mr Mitchell says.

And yet the high prices of orphan drugs like Kalydeco and Orkambi are a growing worry for payers. A survey by the Pharmacy Benefit Management Institute showed that cost is the primary concern for 55% of payers, and 71% do not believe that current prices are sustainable. One payer told surveyors that 500 enrolees taking high-cost speciality drugs accounted for half of the pharmacy spending in a pool of 70,000 people.

These payers are undoubtedly thinking of the orphan conditions that remain untouched by medical innovation – the US FDA estimates that there are 7,000 diseases and 30 million patients – as well as the strong pull of developing drugs in this space. Tax breaks, clinical trial design and flexible regulatory standards make orphan drug development cheaper, giving small biotechs and big pharma alike an incentive to bring orphan products to market – and, in the past, more generous pricing has been a factor.

Icer’s assessment of Vertex’s CF drugs is another warning light on the dashboard of the US's troubled drug reimbursement system. Rare disease drugs are no longer guaranteed to get an easy ride on prices, and for companies like Vertex that have committed themselves to the orphan space this might call for a strategic rethink.

To contact the writer of this story email Jonathan Gardner in Virginia at [email protected] or follow @ByJonGardner on Twitter