Arkansas Medicaid Settles Lawsuit Over Kalydeco Cystic Fibrosis Drug

Arkansas Medicaid has settled a federal lawsuit brought by three cystic fibrosis (CF) patients who were denied the CF drug Kalydeco because of its high cost, according to a report by the Wall Street Journal‘s Joseph Walker.

Kalydeco (generic name Ivacaftor) is an orally administered drug engineered and manufactured by Cambridge, Massachusetts-based Vertex Pharmaceuticals Incorporated to treat a statistically small subset of CF patients whose disease is caused by a particular mutation in the cystic fibrosis transmembrane conductance regulator (CFTR) gene called G551D. Kalydeco works by helping the CFTR protein function more normally once it reaches the cell surface.

Kalydeco is indeed expensive, the main reason being that it is exclusively indicated for treatment of a very small number of potential end-users. The overall CF prevalence rate in the most vulnerable ethnic group, Caucasians, is just one in every 2,500 births, and the proportion of cystic fibrosis cases positive for the G551D mutation in the CFTR gene is very low, with only a subset about three percent of CF patients in all of North America, numbering about 1,100 (about 2,150 globally) being eligible to use Kalydeco. As a whole, the CF demographic is about 30,000 patients overall in the U.S.; and some 70,000 patients worldwide. The Arkansas DHS’s Kate Luck told blogger Leslie Newell Peacock the state estimates that only seven CF patients in Arkansas Medicaid program have CF caused by the G551D gene mutation.

When Vertex was authorized to expand Kalydeco sales in Europe last year, the company noted that just 254 more patients would have access to the drug. Because Kalydeco is indicated only for treatment of such an exclusive and tiny cohort of patients, economies of scale associated with sales of more widely-prescribed drugs don’t obtain, keeping the cost per patient high — estimated at approximately $311,000 (wholesale) annually per patient for two pills a day that will likely need to be taken for decades, potentially running the total cost of the treatment into many millions of dollars.

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Arkansas Times blogger Leslie Newell Peacock notes that the litigant patients, Catherine Kiger, Elizabeth West and Chloe Jones, filed the suit, Kiger v. Selig et al, last year contending that their civil rights had been violated by the state for two years in refusing to pay for the drug.

Peacock cites state Department of Human Services (DHS) spokesperson Kate Luck saying that the settlement included no monetary awards, but that the state, which changed its criteria for eligibility criteria for Kalydeco prior to the settlement, has agreed not to alter them again for two years, and that if it denies the drug to a Medicaid patient, it must provide justification to the court as to why, although courts have no jurisdiction over the decision and can only ask Arkansas Medicaid to outline reasons for denial.

Previously, burden of proof had been on patients to demonstrate failure of less expensive therapies. The WSJ’s Walker notes that under the new policy stipulated in the settlement, patients will be obliged only to show improvement in one of three previously mandated measures (better lung function, weight gain and fewer hospitalizations), or provide other evidence of a clinical benefit.

DHS’s Luck told Peacock the state no longer requires patients to use standard CF therapy (Pulmozyme and hypertonic saline) for 12 months before being considered for Kalydeco, or to show evidence of failure of the standard therapy, and that Arkansas has covered Kalydeco since 2012 and approved its first patient for coverage in 2013. Ms. Luck noted that Kalydeco denials had not all been “necessarily because of cost,” but acknowledges that the drug is “very expensive” and a “lifetime drug.”

Kalydeco was discovered as part of a collaboration with Cystic Fibrosis Foundation Therapeutics, Inc. (CFFT), the nonprofit drug discovery and development affiliate of the Cystic Fibrosis Foundation. Vertex initiated its CF research program in 1998 as part of a collaboration with CFFT, and this collaboration was expanded to support accelerated discovery and development of Vertex’s CFTR modulators. The drug was granted FDA approval in 2012, and will be under patent protection until 2025, prior to which there will be no supplier competition.

Last year Vertex pledged to make the drug available free to patients in the United States with no insurance and a household income of under $150,000. However, the Arkansas Times‘ Peacock reports that the company had declined to provide the drug free through its patient-assistance program to the three individuals who filed the lawsuit.

A major MIT technology review published in 2013 notes that because of medical insurance, co-pay reductions, and expanded access programs for the uninsured, relatively few Americans pay more than a few thousand dollars per year for even the most expensive drugs. Indeed, the Milwaukee Journal Sentinel’s John Fauber cited a Vertex spokeswoman maintaining that the vast majority of patients pay between $15 and $50 a month out-of-pocket for Kalydeco.

The MIT paper’s authors observe that the primary drug customers in the United States are neither patients nor physicians, but rather taxpayers (through Medicare and Medicaid) and private insurance companies — a state of affairs that facilitates companies setting prices that very few individuals could pay. Consequently, this distortion (or near-obliteration) of market-indued checks and balances on cost means that increasing the price doesn’t reduce how much the drugs are used, with prices instead being set and raised according to what the adulterated and dysfunctional market will bear, and with the parties who actually pay the drug companies obliged to pay whatever price is charged for an effective drug to which there is no alternative.

The MIT commentators contend that this is an inherent problem with a system where government is one of the biggest payers, and where doctors, hospitals, insurers, pharmacy benefit managers, drug companies, and investors all expect to profit handsomely from treating sick people — no matter how little real value they add to patients’ lives or to society. They observe that drug companies insist that they need to make billions of dollars on their medicines because their failure rate is so high and because they need to convince investors it is wise to invest money into more research. They acknowledge the truth of those contentions, but also note that the United States, with less than 5 percent of the world’s population, buys more than 50 percent of its prescription drugs, and at prices calculated to subsidize sales to the rest of the industrial world, where the same drugs cost much less, although most poor governments can’t afford them at even those lower prices.

They conclude that ultimately, what matters in pricing a drug is its value, and acknowledge that Vertex succeeded in pricing Kalydeco the way it has because the medicine really works, because the company’s scientists knew the exact genetic profile of the people who would benefit, because they were able to show definitive clinical results in well-designed trials, and because the company ensured that the right patients got the drug and that access was no issue. The drug makes a true difference where nothing else does.

Sources:
Cystic Fibrosis News Today
The Arkansas Times
The Wall Street Journal
Milwaukee Journal Sentinel
MIT Technology Review