A cystic fibrosis (CF) drug has been approved for use in the U.K. since 2016 but is still being denied to patients over its cost. Now, the question over who is really responsible for its costly creation has arisen.
There are lots of complex issues here over drug pricing, with more than a little politics thrown in (we in the U.K. are very close to a potential general election), but the leader of the Opposition and the Labour Party in the U.K., Jeremy Corbyn MP, has taken issue with how Vertex Pharmaceuticals’ cystic fibrosis drug Orkambi (lumacaftor/ivacaftor) has been paid for through its development.
On his official Facebook page this week, Corbyn (what we would call an old-school socialist) said: “No child should be denied treatment because of pharmaceutical companies’ greed. Orkambi is a drug that could extend the lives of thousands of children with cystic fibrosis. But the U.S. drug company Vertex Pharmaceuticals, despite being funded by U.S. taxpayers and charitable donations to develop the drug, decided to ask for £105,000 per patient per year for Orkambi in the U.K.
“Parents should not be forced into setting up buyers’ clubs to access the medicines their children need. That’s why we have a National Health Service. The government must step in and make sure it’s made available for all who need it.”
The discussion over the drug is now set to be debated in Parliament.
Before delving into Corbyn’s remarks, let’s have a look at how we got here. There has been a long-running battle between Vertex and the National Institute for Health and Care Excellence (NICE), England’s health technology assessor, about how much the drug should cost. Vertex wants £105,000 ($138,000) per patient per year for the drug.
The National Health Service (NHS), which is taxpayer funded, doesn’t see this as cost-effective (using NICE’s value-based formula) and is instead offering £500 million over five years for all of Vertex’s approved drugs and any that are approved in the future, with the promise of renewals. The company roundly rejected this.
Things have become bitter, and in a Health and Social Care Committee meeting last summer, it was pointed out that Jeff Leiden, chief executive of Vertex, gets a $17 million annual salary, with his company earning more than $5 billion in sales, all the while paying almost no U.K. corporation tax.
This has not been enough to “shame” the company into lowering its price. NHS England, the top governing body of the NHS, is not giving an inch and Vertex is being unusually aggressive in maintaining its stance.
Given the ongoing stalemate, Robert Long, father of Aidan, who has cystic fibrosis, set up a so-called buyers’ club last week.
Writing in The Guardian, he explained: “I was privileged enough to be able to do something about it for my son. It’s not been easy, but for the past year I’ve been paying Vertex £8,000 every 28 days to ensure Aidan has access. But this is not sustainable in the long term and it isn’t an option for most parents or patients. So, along with a group of other parents, I set about trying to find a better solution.
“And that’s how I ended up in the meeting room in east London. I’d identified a drug company making a generic version of Orkambi—a lower cost but identical copy of the Vertex product—in a country where Vertex does not hold a patent monopoly. Our group reached out to them, got evidence they were reputable, and arranged a meeting. Shortly after the reps walked in, I was able to hold a box of the medicine Aidan needs. For the first time after many frustrating years, it seemed like we had the beginnings of a solution in our hands.
“U.K. law allows importation of medicines for personal use—including generic versions of medicines patented here. This allows patients and families to form buyers’ clubs, as they work together to ensure safety and quality of the medicines, negotiate prices and then buy as individuals. This week we launched a buyers’ club for cystic fibrosis.
“For some the generic price, at about a fifth of the Vertex price, could mean they can get their child access to the life-changing treatment they need. But for most, this price is still far more than they can afford.”
This is what Corbyn was reacting to, but went further, talking about taxpayers and charitable donations to create the drug. While some money outside of Vertex did go into its creation, the vast majority of the R&D costs, and its risks, were taken by Vertex.
Looking at the numbers, Orkambi made $1.26 billion in sales last year, down from the $1.32 billion it made the year before, and Vertex spent $1.41 billion on R&D in 2018, up from $1.32 billion in 2017.
But what does it take to create a drug from scratch? Well, that estimate varies wildly, from $1 billion per drug to more than $3 billion, depending on how you factor in failures and other risks. Either way, it’s not a cheap way to make money, and if it doesn’t pan out, as the majority of experimental drugs don’t, it’s the company and its investors who take the hit, which can be hundreds of millions of dollars, especially if the flop comes in later-stage testing.
Many drugs start life out from a taxpayer-funded or charitable organization such as Cancer Research UK or the National Institutes of Health (NIH). This is almost always at a translational or preclinical stage; if it looks promising, a biopharma can step in and start doing all the heavy lifting to get it through to IND, phases 1 through 3, approval and post-marketing tests.
This is what happened with Vertex, as a company spokesperson tells me: “Our Vertex scientists discovered and developed all of our CF medicines, including Orkambi. While we literally can’t break out spend by product (multiple scientists/equipment/materials cross a number of our CF products) I can tell you that we’ve spent around $7 billion on our CF medicines.
“More broadly, around $11 billion on R&D over the last 20 years or so and about 70% of our operating expenses are spent on R&D each year.”
A nonprofit drug discovery unit out of the Cystic Fibrosis Foundation (CFF) did pay about $200 million in the “early days of the program” for what became Orkambi, with that money coming from charitable donations.
“Vertex initiated its research collaboration with Cystic Fibrosis Foundation Therapeutics, (CFFT) in 2000,” Vertex explains. “Under our collaboration agreement, CFFT provided early support for certain R&D activities.”
The company points out that for its financial investment, totaling approximately $200 million, “CFFT was rewarded when it sold its royalties for $3.3 billion to the investment firm Royalty Pharma (an independent company which has no connection to Vertex) in 2014.” Vertex notes that it “did not buy any patents from the CFFT.”
This is a pretty standard way of developing drugs. Cancer Research UK, for instance, first discovered abiraterone and helped fund its first trials, and it later became marketed by Janssen as its prostate cancer drug Zytiga. It gets royalties from the drug and reinvests this back into its early-stage research. It also has a drug discovery arm much like the CFFT.
Collaboration is king; drugs are rarely made in a vacuum. Any book you have ever read has probably seen around a dozen people work on it, cut it down, edit it, give suggestions, help with rewrites or plotting, and the like. There is no single author who wrote every word without any help.
It’s the same with drugs: Lots of early work is done by a small biotech, the NIH or a charitable R&D organization. Then, they get money from investors, the public, the government and/or healthcare companies. When the money starts to run out, or they need more help, a company with deeper pockets and more scientists step in and takes on much of the development into its early to later stages, which costs a huge amount. Large sums are also needed for sales and marketing teams, building costs, money for M&A and so on, all of which factors into how a drug is found and sold.
These companies also take on huge risk: If it goes wrong, the C-suite can be out the door in days, investors can run a mile and you can lose tens of billions from your market cap or go bankrupt. If it goes well, they make healthy sales and profits. Some of that goes back into more R&D and into royalties, if that’s the deal made, with groups like Cancer Research UK, which can also re-invest into more research.
Having some costs for a drug made by charities or a taxpayer-funded group in its early development doesn’t mean it becomes public property.
Is £105,000 per patient, per drug, the right price tag? That’s a much tougher question, made harder in the U.K. with the NHS, which is taxpayer-funded. If you are paying over the odds for one drug, it means you don’t have enough money for another drug. That’s why NICE exists to help find a balance and ensure what we’re paying has enough value.
Of course, if the drug works and helps many CF patients, then they will require less healthcare intervention, which has its own economy. There are trickle-down “soft” benefits, too, like parents able to go to work and not miss as many days due to their children being in the hospital, and children being able to do more at school and work in the future.
Orkambi isn’t a miracle drug, and undoubtedly better therapies will be developed, but these will be helped by the money coming in from current CF therapies. Biopharma can do a lot of questionable things, but the money they put on the line for R&D isn’t one of them, and not one that should be overlooked. If you spend $1 billion on a drug, you want that $1 billion back, and more. Not just for profits, but to fund the next drug, which could cost $1.5 billion to make or could fail, leaving you with no return on investment.
What none of this does is help patients with CF. Let’s hope that changes soon.