We all get the phone calls from the brain dead solicitors advocating for good charities like the American Cancer Society and the American Heart Association.
I pledge my pittance but I really don’t want to listen to the pitch, even though I know it’s worthwhile.
But not all charities pitch for pennies. The Cystic Fibrosis Foundation just hit the jackpot by playing the fundraising game much differently than its peers. The Foundation, based in a modest office building in Bethesda, Maryland, just landed a $3.3 billion check to pursue drugs and therapies to ease the suffering of the 30,000 people afflicted with the illness in the U.S.
I found it a fascinating and instructive story as recounted in a piece in Bloomberg Business Week. The Cystic Fibrosis Foundation has been collecting data for 50 years on the people who deal with the disease that thickens mucus, which makes it hard to breathe and leaves a person prone to infection. Lifespans were in the early twenties 30 years ago, but today forties are a reasonable expectation.
In the late 1990s when the human genome was identified and drug companies were sprouting up like crocuses, the Cystic Fibrosis Foundation realized it had data in its possession which could be helpful to drug developers.
The problem was that the big drug firms were not very interested in a small disease like CF. But a little drug company called Aurora Biosciences was interested in researching the area. The Foundation did not have much money for the early discovery work, but it had precious data and tissue samples collected over decades.
The CF Foundation had an idea – it could trade information and some seed money for royalties if a viable drug (based on modifying a genetic flaw) emerged from the pioneering work of Aurora Biosciences, which was acquired by the larger Vertex in 2001. This was a 100 to 1 shot at best, as so few drugs work at all, and the drug would have to overcome the bureaucratic hurdles of the incredibly slow FDA process for okaying new drugs.
Despite the odds, Vertex did something heroic. It developed the drug Kalydeco, which was approved in 2012, and Orkambi, approved last week. Both drugs treat the most common genetic mutation behind Cystic Fibrosis.
At the end of 2014, the the CF Foundation sold its royalty rights to an investment firm for $3.3 billion. Now the little Foundation is rich, and two promising therapies are on the market, but a new problem has arisen – the cost of the drugs. Kalydeco costs about $300,000 per year and Orkami will cost $259,000. Health plans are hesitating to pay for the drugs.
The CF Foundation has no control over the pricing of the treatment, though patients are imploring it to subsidize the drug regimen for them.
We see a similar problem with the new Hepatitis C drug Sovaldi, priced around $90,000 for a 12-week course, which for most patients cures the awful illness.
I understand the argument for high prices of the drug makers who say they are looking for needles in a haystack and then face long regulatory and legal slogs. When they finally hit a winner they want it to be a home run.
Now the Cystic Fibrosis Foundation has an enormous bankroll and it wants to leverage the money for more drugs and better outcomes. Researchers and universities are lining up at their Bethesda door to propose new ideas. But perhaps the most useful thing the Foundation can offer is its innovative approach to jumpstarting research into places where nobody else has ventured. Robert Beall, the head of the CF Foundation since 1994, spearheaded what he calls “venture philanthropy,” funding small visionary companies rather than spreading money around to university labs. He started the process by cold-calling firms in 1998. The only one to return his call was Aurora Biosciences of San Diego, which happened to have a scientist on staff who had studied CF.
The CF foundation has since spread money around to drug companies, big and small, but the tiny investment in the first company made the gigantic payoff.
There can be unimaginable payoffs from the lucky cold-call and the shrewdness to bet on the smart horse.
Question: Should the Cystic Fibrosis Foundation use its windfall to subsidize patients whose insurance balks at paying for the new drugs?
7 Comments
This may sound cruel, but No, they shouldn’t use the $3.3 billion to pay for treatment. Do the math – at $300,000 per, that would only serve 1/3 of the 30,000 afflicted, the money will be gone and an opportunity lost. I makes more sense to spread the funds among many other companies to research and develop parallel, competing treatments, which would ultimately bring the price down for all to afford.
You’re assuming that of those 30,000 people, minus the relatively few who can afford the cost of the drug, none are worth the money, to put things in terms of cost/benefit analysis.
The money, after all, isn’t being burned. It’s being used to prolong the lives of people who may themselves be the long shot that comes in. Kind of like Aurora Biosciences.
Of course that leaves the task of trying to decide who lives and who dies
Lloyd, thanks for informing us about this complex problem.
I think the Cystic Fibrosis Foundation should use its $3.3 billion to fund more research and development to generate more and better therapies. I think having a range of competing therapies is the best way to drive the price down.
I think the pharmaceutical companies have a legitimate right for a return on their investment and profit beyond that, but it is the mission of the CF Foundation to create a cure and perhaps eradication of the disease. I think it is short-sighted for the CF Foundation to subsidize high-cost treatments today if that means that they would not reach a goal of an effective, low-cost treatment for all future time, essentially eliminating the disease entirely at near zero cost. This attitude would be bad news for those who are afflicted today, but I think this practice would deliver the greatest good to the greatest number of people.
I see the $300,000 therapies as temporary solutions, and the $3.3 billion as the seed corn to create a truly affordable therapy for all. I do hope the pharmaceuticals get their ROI.
The drug has a cost of $300,000 per treatment partly due to selling the royalty rights for $3.3 billion. How much could they have helped current patients if they didn’t cash in for the very largest possible return, just like the drug companies? If they had used their influence, their percentage for the benefit of those they claim to represent? There is always a lament that the “Health Plans” are reluctant to pay these exorbitant prices. It is the general public that ends up paying in the end through higher insurance premiums.
I see the insurance companies holding out for a public outcry to take the CF group down.
They should step up to the plate and start serious negotiations with the drug companies to set up reasonable return rates.
It would be nice to use the money to find the cure, but there is no profit in cures only treatments. The money will only be used to find more treatments that cost hundreds of thousand dollars that insurance company’s will bulk at paying. My wife suffers from RA, and there are many drug treatments, some found by treating the side effects of the original drug therapy and the cost is still outrageous. I will give some credit to the companies that help with the patients deductible, or copay, but really when you are reeling in the profits at the cost of the suffering it is the least you can do. I hope that none of your readers have to find out first hand, because it will surely open your eyes.
I don’t know enough about this disease and the trade-offs associated with providing relief for patients to answer your question, Lloyd, but disclosure should accompany whatever actions the Cystic Fibrosis Foundation takes.