EDITORIAL: The CF Foundation Deserves Unending Praise For Its $3.3 Billion Royalty Sale

In this week’s editorial column, Cystic Fibrosis News Today’s Stephen Shannon sounds off on the recent news of the Cystic Fibrosis Foundation‘s recent $3.3 billion royalty sale involving Vertex’s Kalydeco, the ensuing controversy over the deal in some corners of the media, and why he thinks the venture philanthropy model works.

On November 19, 2014 the Cystic Fibrosis Foundation (CFF) sold their royalty rights for CF related drugs developed by Vertex Pharmaceuticals Inc. The sale was largest for pharmaceutical royalties and was purchased by Royalty Pharma for $3.3 billion.

“This is a transformational moment for people with CF and the CF community that will enable us to accelerate our mission as never before,” commented Robert J. Beall, Ph.D., president and CEO of the CF Foundation.

The CF Foundation, under the leadership of Dr. Beall, has pioneered the “venture philanthropy” model, through which Vertex gave a royalty to the foundation for its investment in CF related drugs. In venture philanthropy, non-profits provide funding to pharmaceutical companies to offset the risks of drug development in hopes of accelerating a drug’s progress through the research and clinical phases.

In 2000, the CF Foundation established its non-profit drug discovery and development affiliate, Cystic Fibrosis Foundation Therapeutics, Inc. (CFFT). As described by the Foundation, the Therapeutics Development Program provided by the CFFT “offers matching research awards to scientists, as well as access to a specialized network of CF clinical research centers. These awards provide support for the drug discovery phase through several stages of evaluation to complete the full-length drug development pipeline.”

Pharmaceutical research and development (R&D) programs operate from a risk-reward based system. A press release in November 2014 by the Tufts Center for the Study of Drug Development reported that the cost to develop and win market approval for a new drug is $2.6 billion. Although this number has drawn its skeptics, it represents the significant cost required for R&D.

[adrotate group=”1″]

The pay off for the considerable time and financial risk a company takes in an R&D program comes from the sale of the drug to patients. For a pharmaceutical company, investment in R&D for a drug that can be used by a large patient population represents less of a risk because the more patients who take the drug, the greater the company’s profit.

This often means pharmaceuticals are reticent to invest in R&D for “Orphan Diseases,” which by definition have a patient population under 200,000. Cystic Fibrosis, with an estimated 70,000 effected people worldwide, qualifies as such a disease and has faced considerable challenges in past years to garner support for the investment of R&D by pharmaceuticals in CF related drugs.

The venture philanthropy model was the CF Foundation’s solution to address the problem of underfunded CF research and it has invested an estimated $400 million in R&D in a number of pharmaceutical companies including Pfizer, Genentech and Vertex.

The foundation’s cool $3.3 billion from its sale of royalty rights to CF related drugs, created by Vertex, was a substantial return for their $150 million invested in the company. The CF Foundation made an initial investment of $46.9 million for CF Research in Aurora Biosciences, who was then acquired by Vertex in 2001. The capital provided by the foundation strengthened the development of CF modulators, such as ivacaftor (kayldeco), which proved to be a breakthrough in precision medicine and treatment for CF.

Despite the incredible success of the CF Foundation in the sale of its royalty rights through the venture philanthropy model, concerns have been raised about collaboration between non-profits and pharmaceuticals.

“There is some concern that a profit motive could divert the organizations from their primary mission — helping patients — and create a conflict of interest,” Andrew Pollack comments in his New York Times article. “For instance, the price of the main drug developed through Cystic Fibrosis Foundation’s investment is $300,000 a year.”

The article addresses a serious issue surrounding the high cost of CF modulators that can be cost prohibitive for patients. The high costs begin to enter the ethical dilemma, which asks, how much would you pay to be healthy?

The argument presented in the article is that if non-profits such as the CF Foundation are receiving royalties from the sale of drugs, there is less incentive for them to lobby the company to reduce the costs for the patients. However, Dr. Beall of the CF Foundation has contended that despite their concerns for the high priced ivacaftor (kayldeco) there was little they could do to reduce the cost, which was at the discretion of Vertex.

I am the first to argue that it is an imperative that every person with CF who is eligible for novel CF modulator therapies have access to the drugs. However, it is misplaced to discredit the venture philanthropy model as a result, since the discussion surrounding the affordability of the drug only exists because the CF Foundation invested the capital to have it created.

In addition to a concern for a conflict of interest on the part of the CF Foundation, Llewellyn Hinkes-Jones, in an OP-ED piece for the New York Times, has taken his skepticism for venture philanthropy a step further.

“To make medical advancements truly philanthropic, the profit motive needs to be removed from the equation. If the intent is to cure rare diseases, then we should be increasing the budget for the National Institutes of Health and other research initiatives. Instead of gala balls and donor drives, higher taxes on the same rich benefactors could be used to fund the research that isn’t already being supported.”

Jones furthers his argument, adding:

“Efforts to cure, rather than treat or prevent, obscure diseases can be expensive, diverting investment from more common afflictions. The high costs of focusing on rare diseases are then eventually pushed onto the health care system by way of egregiously high drug prices. Such a choice involves an incredibly complex moral calculus, one that is best processed by democratic public institutions.”

[adrotate group=”1″]

Jones argues that private donors should not have a say in which disease their money is used to further research and that allocation of funding should be left to the government alone. From his perspective, all diseases should form a neat line at the government’s door with the largest patient population at the front. The government would then determine the greatest need for funding based solely on the number of people afflicted, therefore, maximizing the most “bang for their buck.” This would then leave me, and others with Cystic Fibrosis at the back of the line waiting to feed on the few crumbs left by the government.

It is difficult to describe the vitriol I feel toward the sentiment put forward by this article. Jones easily applies his moral calculus to orphan disease because he can comfortably sit behind his laptop without the stinging of disease in his own life. For him, it is an academic exercise to corral all the diseases into a neat line, because he has no thought to stand in the line himself.

I can’t praise the CF Foundation enough for the work that it has done in accelerating the development of therapies that are providing hope to a CF community that has fought for so long. I hope other disease affiliated non-profits continue to follow the lead Dr. Beall and the rest of those working at the CF foundation has set so that an increasing number of precision therapies can continue to heal the sick who are waiting at the back of the line.

It is certain that the work of the CF Foundation and its sale for $3.3 billion represents a strengthening of the CF community and a promise for continued progress. I am eager to see how the increased funding will continue to augment the existing drug-pipeline already in place. However, it is important that the fight doesn’t tire as more therapies surface, but that increased energy is applied until each person with CF no longer has to be labeled by the words, Cystic Fibrosis. It is possible that my life and the 70,000 others with CF can be different than it is now; and so I continue to hold onto the words “dum spiro spero” – while I breath I hope.

The opinions expressed in this article are the author’s own and do not reflect the views of Cystic Fibrosis News Today.