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?