Both the state of New York and NHS England have requested that Vertex Pharmaceuticals Inc. (NASDAQ:VRTX) provide a lower price for its cystic fibrosis drug Orkambi ivacaftor/lumacaftor, but the biotech is unlikely to do so -- at least at the level requested by New York’s Medicaid program.
On Thursday, the New York state Drug Utilization Review (DUR) board voted 10-0 to seek a supplemental rebate from Vertex to bring Orkambi's annual cost for the NY Medicaid program to $83,200 -- a 70% discount to its $273,000 list price.
The supplemental rebate would be in addition to the automatic 23.1% discount off Orkambi’s list price afforded to state Medicaid programs under federal law.
According to the Institute for Clinical and Economic Review (ICER), Orkambi would be cost-effective at an annual price between $71,000 and $83,200.
Steven Pearson, founder and president of ICER, previously told BioCentury the New York State’s Medicaid program uses ICER’s value-based price as a target price and requires drug companies to hit the target through price or supplemental rebates (see BioCentury, March 23).
The New York Department of Health will now have to negotiate with Vertex. However, its negotiating power is stifled because Orkambi is the only drug approved to treat CF patients who are homozygous for the F508del mutation in the CF transmembrane conductance regulatory (CFTR) gene. Under New York state law, the commissioner cannot remove the drug from its formulary or waive a provision that gives prescribers the final say over whether a patient requires the drug.
New York state law established an annual Medicaid drug spending growth target for FY18 equal to medical inflation plus 4% and minus a pharmacy savings target of $85 million. If the state projects spending to exceed the target, the review board can recommend imposing supplemental manufacturer rebates on certain high cost drugs (see BioCentury Extra, April 6).
According to spokesperson Heather Nichols, Vertex believes "this law was never intended to apply to medicines like Orkambi."
The New York DoH said there will be a five day public comment period after the DUR meeting summary is posted. The commissioner will then make the final determination in about a month after the public comment period.
If the state cannot reach an agreement with Vertex for the supplemental rebate, it can compel the company "to provide additional information to ensure transparency in the negotiation process."
Elizabeth Carpenter, SVP at Avalere Health LLC, said that several states continue to pursue similar strategies to New York to control drug spending in Medicaid. These strategies include supplemental rebates, drug price transparency, price controls, coverage and access restrictions.
Jeff Myers, president and CEO of Medicaid Health Plans of America, added that while New York is not the only state to look at controlling drug pricing, "states are really struggling with what tools they have and it turns out they don't have a whole lot."
On Wednesday, NHS England and Vertex met to discuss reimbursement for Orkambi. Vertex said "there is still some way to go to reach an agreement." The meeting follows receipt of a letter from the U.K. Department of Health urging the company to proceed with reimbursement negotiations for the CF drug (see BioCentury Extra, April 20).
Vertex declined to disclose details on the meeting.
European authorities have struggled with Orkambi's cost-effectiveness. NHS England and Vertex have been negotiating reimbursement for Orkambi since 2016 when NICE issued final guidance saying the drug was not cost-effective. Last March, NHS England refused to provide additional room in its budget to fund the CF drug (see BioCentury Extra, March 19).
On Friday, Vertex lost $2.76 to $156.05.