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Vertex gets tangled in Medicaid lawsuit

July 17, 2014, 12:36 PM UTC
Dollar Sign made of pills
Photograph by Dwight Eschliman—Getty Images

Arkansas Medicaid patients are fighting to get the drugs they need, and at the heart of the matter is Vertex Pharmaceutical’s (VRTX) $300,000-a-year cystic-fibrosis drug.

Three people suffering from cystic fibrosis have brought a case against state Medicaid officials, alleging that they were denied access to Kalydeco due to it’s high cost. The denial is a violation of their civil rights under federal laws governing Medicaid, the claimants say.

To have a drug covered under Medicaid, patients must meet all the eligibility requirements outlined by the Food and Drug Administration when it approved the drug. State Medicaid programs must cover the cost for most FDA-approved drugs, unless there is an equivalent–and less expensive–option available.

A drug like Kalydeco, which targets a gene that causes cystic fibrosis, has no equivalent. In such cases, states can demand proof that doctors are using the medicine in medically appropriate ways.

However, Arkansas state officials have gone a step further and said patients must prove their disease has failed to improve from older, less-costly therapies. Doctors say that requirement goes against treatment guidelines.

The denied cystic-fibrosis patients are saying state officials are preventing coverage of Kalydeco because of cost. The drug, which is taken twice a day for the duration of a patient’s life, has a wholesale cost of $311,000 annually.

“Cost alone was not the determining factor,” an Arkansas state spokeswoman told The Wall Street Journal. “But how we will pay for it is something we must consider in advance as we are a state agency with limited funds.”

Specialty drugs like Kalydeco are becoming increasingly common. Spending on specialty drugs could reach $400 billion in 2020 from $87 billion in 2012, according to a UnitedHealth Group (UNH) report.

The rise in specialty drugs will add to the strain on government-funded insurance programs. Unlike Medicare, the federally-funded insurance program for the elderly which covers Kalydeco and many other high-price drugs, Medicaid is overseen by the state and only partially funded by the federal government.

These drugs are often more costly because of the money and effort required to develop the targeted treatment, and drugs for rare conditions are also more expensive due to the smaller patient population, industry officials say. But such medicines can often be more effective than older options because they target the specific genes that cause the disease.