Implications of landmark cystic fibrosis pricing agreements for the wider industry

The last week has seen several significant announcements around the world regarding Vertex’s portfolio of cystic fibrosis (CF) therapies. The FDA approved the first triple combination therapy available to treat patients with the most common CF mutation. In addition, Australia, Spain and the United Kingdom reached agreement with Vertex on the coverage of its CF drugs. These developments are noteworthy not just because of the implications for CF patients, but also because Vertex’s robust pricing strategy and protracted negotiations with payers in many countries have attracted widespread media coverage and criticism from patient advocacy groups, healthcare professionals and politicians—with potential repercussions for the wider industry.

FDA approval of Trikafta

Trikafta (elexacaftor/tezacaftor/ivacaftor) represents a breakthrough in the treatment of CF because it can help 90% of patients. The product is an orphan drug and was granted priority review, fast track and breakthrough therapy status by the FDA. The agency reviewed and approved Trikafta in approximately three months, five months ahead of its review goal date. Vertex has been awarded a rare pediatric disease priority review voucher, which can be redeemed to receive a priority review of a subsequent marketing application for a different product. The company is conducting trials on Trikafta in patients younger than 12, the current age threshold for use of the drug.

Vertex has set a list price for the drug of $311,503 per year—significantly more than the list prices of Orkambi (lumacaftor/ivacaftor) and Symdeko (tezacaftor/ivacaftor and ivacaftor), which are reportedly around $272,000 and $292,000 per year, respectively. Some financial analysts had predicted a lower price for Trikafta on the assumption that the company would rely on volume growth to boost its revenue.

Expanded coverage in Australia

Orkambi (lumacaftor/ivacaftor) has been reimbursed in Australia since October 2018 for children from the age of 6 who have two copies of the F508del mutation in the cystic fibrosis transmembrane conductance regulator (CFTR) gene. From 1st December 2019, this drug will also be covered for patients aged 2-5. In addition, Symdeko (tezacaftor/ivacaftor and ivacaftor) will be reimbursed for CF patients from the age of 12 who are homozygous for the F508del mutation or who have one copy of the F508del mutation and another responsive residual function (RF) mutation in the CFTR gene.

Managed entry in Spain

The Spanish Ministry of Health has announced that, from 1st November 2019, it will reimburse Orkambi and Symkevi (the European brand name for Symdeko). The agreement is the product of four years of negotiation with Vertex. The deal is based on a managed entry agreement that combines a cap on expenditure with payment by results, which reflects “clinical uncertainty,” according to María Luisa Carcedo, the Minister of Health. Vertex had reportedly long resisted the proposed payment-by-results model.

Unlimited access in the United Kingdom

The National Health Service (NHS) in England had likewise struggled for several years to reach agreement with Vertex on terms for reimbursement of Orkambi and Symkevi, although it had covered Kalydeco (ivacaftor) since 2012. NHS England has, however, now agreed terms for full access to all three drugs, with no cap on patient numbers.

Vertex had set a price for Orkambi equivalent to ￡104,000 per year, which was rejected. In summer 2018, NHS England offered the company a deal worth ￡500 million over five years, and potentially ￡1 billion over 10 years, for unlimited access to its portfolio of CF drugs. The proposed payment was reportedly subsequently increased but was still not acceptable to Vertex. The revised deal would have been based on a two-year managed access scheme that would allow for prices to be increased or decreased in line with real-world data collected by the NHS.

The terms of the agreement finally reached by Vertex and NHS England remain commercially confidential. However, Sir Simon Stevens, the Chief Executive of NHS England, has described the deal as “good value for British taxpayers.”

Significantly, the agreement guarantees access to these drugs not just for current indications, but for any future label expansions. In addition, Vertex has agreed to submit its full portfolio—including Trikafta, once approved by the European Medicines Agency (expected in 2020)—for appraisal by the National Institute for Care and Health Excellence (NICE). (The company withdrew from engagement with NICE in August 2018 in protest at the institute’s methodology.)

The NHS in Wales and Northern Ireland will also benefit from the agreement struck with Vertex. Scotland recently announced its own deal with the company, believed to be less favourable than the one negotiated by NHS England. However, Stevens has indicated that it is legally permissible “to share with the Scottish government confidential details of the improved deal we have now negotiated for England.”

Implications for Vertex and the wider industry

Is it a coincidence that all of these developments have happened in the space of less than a week? Possibly, but Vertex has been negotiating reimbursement for several years. The company’s CF drugs are now available in 19 countries, including the United States, Germany and Italy. However, some observers would suggest that this total represents painfully slow progress for drugs that have been approved for three or more years. Is a strategy of holding out for a certain price worth forgoing several years of sales and market exclusivity?

Criticism of Vertex has perhaps been particularly pronounced because of the perception that its success has been built on publicly funded research. In 2014, the British Medical Journal published an article entitled “Paying twice: the ‘charitable’ drug with a high price tag.” The authors described ivacaftor as “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.”

In June 2019, the Association of the British Pharmaceutical Industry (ABPI) took the unusual step of commenting in a blog on the pricing controversy surrounding Orkambi. The blog pointed out that Vertex is not a member of the ABPI, and commercial details of its negotiations with NHS England were not known to the association. The post explained that the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS) sets an annual cap on the growth of branded medicines sales to the NHS and notes that, “if one company is allowed a higher price than its competitors, the rest of the industry would end up paying more through higher payments.” At the same time, the ABPI remarked that, although it did not know the terms of Vertex’s proposed deal with the NHS, “the structure of the offer represents exactly the sort of flexibility industry has been calling for [for] some time.”

In defining their pricing strategies, companies also need to consider the risk of provoking hostile political intervention. For example, the UK Parliament considered whether Vertex could be referred to the Competition and Markets Authority on the grounds of abuse of its monopoly position. Politicians also proposed invoking a Crown use licence—effectively, a compulsory licence—to make generic lumacaftor/ivacaftor available in the United Kingdom. Following the announcement of the deal negotiated by NHS England, the Labour Party (currently the main opposition party in the United Kingdom) renewed its criticism of Vertex and reiterated proposals to use measures such as Crown use licensing and affordability requirements for drugs that have benefited from publicly funded research as ways to curb drug costs.

Politicians often do not—or cannot—implement their threats of punitive action against the easy target of the pharmaceutical industry. Nevertheless, companies would be ill advised to be too quick to dismiss these risks in an increasingly challenging global pricing environment.