Today, Colorado Center on Law and Policy (CCLP) and the National Health Law Program (NHeLP) filed a complaint with the U.S. Department of Health and Human Services Office for Civil Rights and the U.S. Department of Justice.
Bethany Pray provided testimony for Senate Bill 24-093, Continuity of Health-Care Coverage Change. CCLP is in support of SB24-093.
CCLP Policy Fellow, Milena Castañeda testified at the Medical Services Board meeting regarding emergency rules for the NEMT.
Chaer Robert provided testimony against House Bill 24-1065, Reduction of State Income Taxes. CCLP is in opposition of HB24-1065.
CCLP’s public comment on cystic fibrosis drug, Trikafta
On December 5, CCLP’s Deputy Director, Bethany Pray, provided comments to the Prescription Drug Affordability Board on the drug, Trikafta.
Dear Prescription Drug Affordability Board (PDAB) Members:
I am writing today on behalf of the Colorado Center on Law and Policy, a nonprofit, state-focused advocacy organization that stands with Coloradans in the fight against poverty. We strongly support the PDAB designating Trikafta as unaffordable and identifying an upper payment limit in service of its mandate to help Coloradans afford life-saving medications.
A common-sense assessment of Trikafta, with a list price of over $300,000 per year and lifetime dependence on the drug, leaves no doubt that it is unaffordable to patients, health systems and taxpayers. Any argument that orphan status might exempt Trikafta or other drugs from consideration is misplaced, considering what I might characterize as gaming of a system initially intended to support financially-unsustainable research.
Affordability, Out of Pocket Costs and Patient Assistance Programs
Three hundred thousand dollars is not a sum that any Coloradan, with a few exceptions, could come up with out of pocket. It is understood, then, that any sufferer of cystic fibrosis among the over 250,000 Coloradans who lack coverage could not access Trikafta. Covering out of pocket costs would also be unaffordable when you consider, for example, that in Denver County, eight out of the top ten occupations do not even have wages sufficient to support a single adult caring for a preschooler and one school-age child without public supports.[i]
As Vertex offered in supporting materials, even those with coverage testified that they depend heavily on Vertex’s patient assistance program, which covers some but not all costs and can be curtailed if Vertex so chooses. Vertex offered that the majority enrolled in an assistance program had no costs in the first half of the year, but we know there are limits on those programs, meaning that the financial burden may not land until later in the year. One news outlet reported that Vertex reduced its annual copay assistance program by 80 percent earlier this year.[ii] One parent whose daughter relied on a precursor of Trikafta expressed his frustration. “‘We felt pretty helpless. We talked about what we could do financially, like if we needed to sell our house … but that would only help for so long,’ said Brickey, a hospital nurse in Santaquin, Utah, where he lives with his wife, who is a kindergarten teacher, and their three small children.” Patient assistance programs are not a solution.
Affordability, Public Programs and the Orphan Drug Designation
The impact on insurance premiums as well as public programs – for which all of us pay – is enormous, in part because the cost savings from improved health are nonetheless dwarfed by the cost of the drug.[iii] The impact on ACA premiums from just specialty drugs, of which Trikafta is one, was a substantial seven percent in one state study.[iv] People who pay premiums and the employers who share those costs face affordability issues, and all taxpayers shoulder the cost of the larger federal ACA subsidies that are a downstream effect of higher drug costs.
Coloradans are also key players in financial support for the Medicaid and Medicare programs that cover Trikafta. Of the 20 most costly Medicare-covered drugs in Part B and Part D, more than half were orphan drugs. “In fact, 16 of the 20 highest-expenditure Medicare Part B drugs— drugs that are injected or infused in physicians’ offices or outpatient settings—have been granted at least one orphan designation.”[v] Medicaid is a major payor for Trikafta, according to data from the All Payer Claims Database, and with a state budget constrained by TABOR, higher payments for medications necessarily results in cuts elsewhere. As one parent of a CF patient in England’s public health system noted, “If cystic fibrosis patients get life-extending drugs at too high a price, thousands of other patients will receive less or worse healthcare, because the same money can only be spent once.”[vi]
When Coloradans pay federal taxes, they are paying again for orphan drugs and other excessive health care costs, and entities like the PDAB have potential to help turn the tide. Almost a quarter of the federal budget goes to Medicare, Medicaid, the Children’s Health Insurance Program (or Child Health Plus, as it is called in Colorado) and ACA marketplace health insurance subsidies. In 2023, that was $1.5 trillion dollars.[vii]
Orphan drugs are particularly costly to public programs, and there is good reason for concern that drug manufacturers are inappropriately taking advantage of orphan drug designation because of related financial perks. That special orphan drug designation was created in 1983 under then-president Reagan to counter industry’s arguments that the cost of testing drugs for efficacy and safety made it unsound financially to develop drugs for small markets.[viii] Initially, orphan status was intended to apply only to drugs that would not be financially viable to develop, but that requirement was dropped within a year. Rather than creating a balance between production of drugs with broad uses and drugs for rare diseases, advantageous financial treatment for orphan drugs has led to manufacturers focusing disproportionately on rare conditions and demanding extraordinary prices.
When the orphan designation is made, manufacturers get significant financial incentives: a tax credit equaling 25 percent of qualifying clinical trial costs – which the board should keep in mind when reviewing manufacturers’ description of the costs of doing clinical trials – as well as an exemption from marketing fees and market exclusivity. There has been a race to win this designation. According to a report from the Office of the Inspector General (OIG) in September 2021, the FDA had granted orphan designations to almost 4,200 drugs as of early 2021.[ix] As reported by the OIG, “In total, 615 of these orphan drugs ultimately received FDA approval to treat 938 orphan indications. Sixty percent of these approvals have occurred in the past decade, with more than a quarter of the total approved in the last 3 years alone.”
As stated by authors in one scientific journal, “We suggest that a paradoxical effect of orphan product exclusivity can be reduced patient access to existing drugs. In addition, the costs of each new drug are arguably unsustainable for patients and for the American health care system.”[x] In no way should orphan drug designation suggest the need for an exemption to upper payment limits.
Affordability and public investment
It is also worth asking who pays for drug development. Certainly, Vertex has carried considerable costs, but federal tax dollars have played a fundamental role in developing Trikafta. Dr. Francis Collins, who recently retired as head of the NIH, was the co-discoverer of the cystic fibrosis gene and did that work thanks to funding from the NIH. As described above, the orphan status itself came with financial support and tax credits. In exchange for that public investment, made over decades, the public should not have to face continuing prohibitive costs and ongoing tax burdens so that Vertex can reap extreme profits. The value of the drug to patients is enormous but it is, nonetheless, unaffordable, and Vertex stands to profit handsomely even if Coloradans pay less for it.
This is not a choice between profits and affordability
It would be unconscionable for a manufacturer to threaten to withhold access to protect outsize profits. The ability to make a solid profit and lower costs for patients, public health systems, other insured Coloradans, and Colorado tax payers, however, is well within reach. The cost to manufacturer the drug is estimated to be approximately $6,000 a year [xi] and profit margins are pegged at 35 percent by investment sites.[xii] Unfortunately, Vertex has shown reluctance to prioritize access over profit. Because of Vertex’s refusal to reduce its price for the National Health Service in the UK and the resulting multi-year delay, the company ended up destroying almost 8,000 packets of Orkambi, another cystic fibrosis treatment, that were close to expiring – said to be equivalent to six years of medication for 100 patients.[xiii] Having seen that their profit margin has continued to grow, even with a lower negotiated price for the NHS for one price, Vertex has truly no basis for expressed concerns about financial viability.
Despite being a product of significant public investment for decades, Trikafta is unaffordable when considered at the patient and system level. It is an appropriate candidate for an upper price limit.
Thank you for the opportunity to provide comment.
Very truly yours,
Colorado Center on Law and Policy
[i] Colorado Self Sufficiency Standard, Center for Women’s Welfare, Univ. of Wash., 2022. p. 26. https://copolicy.org/resource/self-sufficiency-standard-for-colorado-2022/
[ii] Silverman, Ed. “’Caught in the middle’: A battle between Vertex and insurers is leaving cystic fibrosis patients with crushing drug costs.” STAT, Feb. 20, 2023. https://www.statnews.com/pharmalot/2023/02/20/cystic-fibrosis-drug-costs-copays-vertex/
[iii] Investigators Spenser Smith, Pharm.D. and Molly Borchardt, Pharm.D., found that 12 months after FDA approval, 77 (68%) Blue Cross NC members with cystic fibrosis were using Trikafta. They found that total costs increased by about $5.8 million (52%) over a 10-month observation period despite notable health improvements. https://www.formularywatch.com/view/cystic-fibrosis-medication-adds-significantly-to-healthcare-costs; https://cysticfibrosisnewstoday.com/news/trikafta-cost-far-exceeds-medical-savings-cf-therapy-provides-analysis/
[v] High-expenditure Medicare drugs often qualified for Orphan Drug Act incentives designed to encourage the development of treatments for rare diseases. Office of the Inspector General, September 2021, p. 9. https://oig.hhs.gov/oei/reports/OEI-BL-20-00080.asp
[vi] My daughter’s life is precious but the NHS must not overpay for drugs. The Guardian; Letters. Feb. 5, 2019. https://www.theguardian.com/business/2019/feb/05/my-daughters-life-is-priceless-but-the-nhs-must-not-overpay-for-drugs
[vii] Where Do Our Federal Tax Dollars Go? Center for Budget and Policy Priorities. Updated September 28, 2023. https://www.cbpp.org/research/policy-basics-where-do-our-federal-tax-dollars-go#:~:text=The%20rest%20includes%20investing%20in,duties%20of%20the%20federal%20government
[viii] Murphy, Sinead M., Puwanant, Araya; Griggs, Robert C. Unintended Effects of Orphan Product Designation for Rare Neurological Diseases. Ann Neurol. Oct. 2012, 72(4): 481-490.
[ix] High-expenditure Medicare drugs, p. 2.
[x] Murphy, Puwanant, Griggs. Unintended Effects of Orphan Product Designation; see also Cote, Andre; Keating, Bernard. What is Wrong with Orphan Drug Policies. Value in Health. Dec. 2012, 15(8): 1185-1191. https://www.sciencedirect.com/science/article/pii/S1098301512041290
[xi] Wexler, Marisa. Trikafta cost in CF seen to far exceed medical savings it provides. Cystic Fibrosis News Today, June 22, 2023. https://cysticfibrosisnewstoday.com/news/trikafta-cost-far-exceeds-medical-savings-cf-therapy-provides-analysis/
[xii] Vertex Pharmaceuticals Profit Margin 2010-2023. Macrotrends. Retrieved Dec 3. 2023. https://www.macrotrends.net/stocks/charts/VRTX/vertex-pharmaceuticals/profit-margins
[xiii] Boseley, Sarah. 600 years’ supply of cystic fibrosis drug destroyed in price row. The Guardian, March 27, 2019. https://www.theguardian.com/society/2019/mar/27/600-years-supply-of-cystic-fibrosis-drug-destroyed-in-price-row