The pharmaceutical industry plays a major role in the United States' economy with both the production and consumption of its products. The availability of new drugs and biological products often means new treatment options for patients and advances in health care for the general public. Billions of dollars are being spent on drugs that will not only improve short-term illnesses, but also terminal diseases. In 2012, Vertex Pharmaceuticals created Kalydeco, a drug that is said to cure a specific gene mutation in cystic fibrosis; however, this drug is priced at over $300,000 per year, which can lead to millions of dollars spent over a lifetime. Even though it has had great results, Kalydeco is one of the most expensive medicines in the world. This drug's high cost has brought up the debate of whether or not pharmaceutical companies, like Vertex, should be allowed to put such a high price on their pharmaceutical drugs. It is evident that there are pharmaceutical drugs, such as Kalydeco, that have extremely high price tags. While many people believe that the high drug prices are unreasonable and that no individual or the government should have to foot the bill, when it comes to Kalydeco, the high price is necessary due to the small patient population, the research and development, and the overall value of the drug.

Before discussing why the price of Kalydeco is necessary, one must first understand what it is treating. Even though cystic fibrosis affects only a small percentage of the population, for those living with the disease it is detrimental to their everyday lives. Cystic fibrosis is the most common fatal-inherited illness that affects about 70,000 patients worldwide. According to CBS News, "About 30,000 Americans live with cystic fibrosis, a disease that causes sticky mucus buildup in the lungs and other organs, leading to infections, digestive problems, and death in young adulthood. The average life expectancy for people with the disease is about 37 years" ("CF Drug Approved"). In January of 2012, The U.S. Food and Drug Administration (FDA) approved Kalydeco, a new oral medication for the treatment of cystic fibrosis. Kalydeco benefits patients who have the G551D mutation. In people with this mutation, the CFTR (the defective protein) does not work correctly. It acts as a locked gate and prevents the flow of salt and fluids in and out of the cell, which causes there to be a build up of internal mucus. Kalydeco helps unlock the gate and restore the function of the CFTR protein ("Kalydeco"). According to the New York Times, "It is the first drug that attacks not just the symptoms but the underlying cause of cystic fibrosis" (Nocera). However, since the G551D mutation affects only about 2,000 people of the cystic fibrosis population in the United States, only that small percentage will directly benefit from taking the drug.  

Cystic fibrosis is a disease that scientists have been studying for over two decades and put many resources and funds into finding its cure. The gene that causes cystic fibrosis was not discovered until 1989, but it took more than two decades and $75 million dollars in outside funding from the Cystic Fibrosis Foundation to develop a drug that would be able to treat the disease. In 1998, the Cystic Fibrosis Foundation approached Aurora BioSciences, which is now a part of Vertex Pharmaceuticals, because they wanted their help to screen potential drug candidates for a cystic fibrosis drug (Perrone). Two years later, the foundation awarded the company over $45 million to study and commercialize an experimental drug for cystic fibrosis, which was the largest grant of its kind by a nonprofit disease group (Perrone). By 2012, Vertex had received over $75 million in research and development funding from the Cystic Fibrosis Foundation. Drug companies, like Vertex, insist that they need billions of dollars for their medicines due to their high failure rate. They also need to have a lot of money go into the development process of the drug in order to better convince investors that it is wise to sink money into their research. Aside from the money received from the Cystic Fibrosis Foundation and other investors, Vertex had also spent hundreds of millions of dollars of their own money towards the research and development of this drug (Perrone). This money went towards not only all of the research and development of Kalydeco but also all of the company's research and development. Besides the research done by Vertex, the Cystic Fibrosis Foundation provided significant scientific and clinical support that would only help further enhance the development of Kalydeco.

While Kalydeco was in its approval process, many studies were being done on patients with the G511D mutation. Dr. Drucy Borowitz of the State University of New York at Buffalo, director of the cystic fibrosis program said, "Even though this drug isn't for the majority of people, it proves that you can look at the mistake in the genes and design a drug in a rational way that will fix the problem" (Perrone). Borowitz enrolled many of her patients in Vertex's key study for Kalydeco.  This particular study showed that the patients taking Kalydeco increased their lung strength by ten percent compared to those patients who were taking the placebo drug, and the patients began to have fewer infections. One of the significant results noted in the study was patients began to gain an average of seven pounds, which is a significant amount especially for those patients who typically struggle with retaining weight. Nick Mangano, a seventeen-year-old who was one of Dr. Borowitz patients, had been taking Kalydeco for two years. Mangano said, "Two weeks after using the drug my lung tests were above average for a healthy 15-year-old who didn't have cystic fibrosis," (Perrone). Prior to taking Kalydeco, Mangano had been hospitalized for lung infections five times in just four years. Now, after taking Kalydeco, he is able to recover from a cold in just one to two weeks. After taking the drug, Mangano is now able to live a normal life and is planning on going off to college, which is something that could not be feasible due to his dependence on his family and doctors (Perrone). The study done on Nick Mangano is a prime example of how Kalydeco is able to change an individual's life and therefore is necessary despite its controversial price. 

Although Kalydeco brings many benefits to the G551D cystic fibrosis population, it has a hefty price tag. When Kalydeco was released to the market in 2012, each pill was priced at $408.33. The pill is to be taken twice a day, which leads to $816.66 a day spent on the drug, $24,500 a month, and $294,000 a year. Today, Kalydeco is priced at $512.06 per pill, which makes it $368,683.20 per year ("Information"). The drug is to be taken every day and patients are said to have to take the pill for decades in order to achieve the best results. This can lead to millions of dollars being spent over the course of a lifetime. Kalydeco is one of the most expensive prescription drugs sold in the United States. However, Vertex provides the drug for free to patients who do not have any insurance, who have a household income of under $150,000, or those whose insurance companies will not cover the drug (Werth). The company also covers some of the copay costs for patients that do have insurance. So when it comes to who picks up the hefty bill for this life-changing drug, it is left to the government and the insurance companies. 

Since the insurer or government is picking up the check for pharmaceutical drugs, like Kalydeco, companies, like Vertex, can and do set prices that few individuals could pay on their own. In the United States, the primary customers in the pharmaceutical drug industry are not the patients or individual physicians; rather, the customers are the government (through Medicare and Medicaid) and private insurance companies. Insurers and the government readily paid Kalydeco's high price because the doctors and patients enthusiastically welcomed Kalydeco due to its life-saving health benefits and because there is no other treatment available. Because of medical insurance, co-pay reductions, and expanded access programs for the uninsured, relatively few Americans pay more than a few thousand dollars per year for the most expensive drugs. However, many people think that there are inherent problems with a system where the government is one of the biggest players, and where doctors, hospitals, insurers, pharmacy benefit managers, drug companies, and investors all expect to profit from helping/ treating sick people.  The prices in the drug market are set and raised according to what the market will bear, and the parties who actually pay the drug companies will meet whatever price is charged for an effective drug to which there is no alternative. This is due to the fact that the demand for therapeutic drugs is "price inelastic": increasing the price does not reduce how much the drugs are used (Werth). With the price of pharmaceutical drugs, like Kalydeco, continuing to increase, the question arises of whether or not it is necessary for the government to foot the bill of these pharmaceutical drugs due to their cost.

Since the government is one of the major customers that are responsible for footing the bill of Kalydeco, there have been some legal battles over states restricting cystic fibrosis patient's access to this drug therapy because of its expenses. In July of 2014, the Wall Street Journal released an article about three Arkansas natives who suffer from the fatal lung disease of cystic fibrosis (Walker). The three alleged that Medicaid officials had denied them access to Kalydeco for two years simply because of its cost. The patients had alleged that state officials had violated their civil rights under federal law governing Medicaid, which is the government-run insurance plan for the poor (Walker). The three patients all met the eligibility criteria that was established by the Food and Drug Administration when it approved Kalydeco in 2012. They all also appeared to have the presence of the rare genetic mutation that Kalydeco was designed to correct. However, Arkansas officials had said that the patients must prove their disease had failed to benefit from older, less-expensive therapies and that cost was not the main issue when it came to not providing patients the drug. According to an Arkansas state spokeswoman, "Cost alone was not the determining factor, but how we will pay for it is something we must consider in advance as we are a state agency with limited funds" (Walker). Matt Salo, executive director of the National Association of Medicaid Directors, said, "We have this public health mentality that all people have to be cured no matter what the cost, and also let the innovators charge whatever they want. Those are fine theories independently, but when you combine them together in a finite budget environment, it's not sustainable" (Moore). In the months following the Wall Street Journal article that was published, the state approved having the three Arkansas patients receive Kalydeco after they showed that their health deteriorated after taking the older, less expensive drugs (Walker). In order to continue to receive Kalydeco in Arkansas, the patients would have to document that they have benefitted from the drug by showing stabilization or improvement in lung function. Kalydeco approvals and renewals will now be made on a case-by-case basis, and the new documentation requirements would give Medicaid officials "a more complete picture" of patients' progress on the drug (Walker). Even with Kalydeco's high price, the Arkansas government had to give in and pay the price because no other drug could provide the three patients with better results.

With there being much discussion about the high cost of Kalydeco, Vertex pharmaceuticals justified their reasoning behind the price. Vertex knew that they could set a high price for Kalydeco because their clinical trials showed striking results. "Vertex reviewed actuarial studies and models of how much Kalydeco might be worth, given that people with cystic fibrosis have to take up to a dozen other medications daily, require frequent hospitalization, deteriorate substantially as they get older, and sometimes can only be rescued with a double lung transplant" (Werth). The company projected that by significantly increasing a patient's breathing measurements and improving other risk factors like absorption of calories, Kalydeco "may double the residual life for appropriate cystic fibrosis patients" (Werth). After taking Kalydeco, many patients left feeling dramatically better and harboring new hope for the future, since declining breathing and more infections are the surest signs that a cystic fibrosis patient is nearing the end of their life. 

Kalydeco's high price is also due to the fact that there is little drug competition which could be due to the U. S. Food and Drug Administration (FDA) and its long approval process of drugs. When it comes to innovation in the development of new drugs and therapeutic biological products, FDA's center for Drug Evaluation and Research (CDER) supports the pharmaceutical industry ("New Drugs at FDA"). The CDER's mission is to ensure that drugs marketed in the United States are safe and effective ("How Drugs"). However, the process of getting drugs approved in this market can take a while. In order to get a drug approved, companies must submit a new drug application (NDA) to introduce a new drug into the U.S. market. A team of CDER physicians, statisticians, chemists, pharmacologists, and other scientists review the sponsor's NDA containing the data and proposed labeling. Then it is up to CDER and ultimately the FDA on whether or not the drug will be approved ("How Drugs"). Kalydeco was one of the quickest drugs to be approved in just three months, but there are no other drugs that have been approved that are said to provide the same benefits that Kalydeco does. 

Vertex had to put a high price tag on Kalydeco, due to the fact that the drug reaches only a small population of those with cystic fibrosis. With the drug only reaching four percent of the cystic fibrosis population, there has to be a high price. If the drug reached the majority of the cystic fibrosis population, the price of the drug would be significantly lower. Since only about 2,000 people are able to take Kalydeco, Vertex has to charge a hefty amount to make up for all of the money that was used for the development of the drug and to sustain the company so that they can develop new drugs. Advancing a drug that doesn't help most cystic fibrosis patients put both Vertex and the Cystic Fibrosis Foundation in an awkward position due to the fact that they were targeting a tiny population, while the vast majority of sufferers had to wait for the company to introduce a drug that could correct for folding mutations (Werth). But given the state of the science of Cystic Fibrosis, Kalydeco seemed to offer the quickest route to saving at least some of the Cystic Fibrosis patient population.

Ultimately, the factor that matters most in determining the price of a drug is its value. Vertex succeeded in pricing Kalydeco this way because the medicine truly works. The scientists that were behind Kalydeco as it was being developed knew what genetic profile of people would directly benefit from the drug. Through the company's trials of the drug, they were able to show definitive clinical results. The company also insured that the right patients received the drug and that getting those patients access to the drug would be no issue. "'We talk about the value of Kalydeco in four ways,' Vertex's chief pharmacoeconomist, Kyle Hvidsten, explains: 'severity of disease, effectiveness, safety, and "estimated magnitude of benefit'" (Werth). Kalydeco is able to benefit those suffering with the G551D mutation in a way that no other drug can.

The pharmaceutical industry will continue to play a major role in the United States' economy with both the production and consumption of its products. With Kalydeco showing significant results for those with the cystic fibrosis G511D mutation, it is difficult to try and stop Vertex from pricing the drug so high. Since the development of Kalydeco and all of the success of the drug, there has been work on the development of a new drug that could potentially treat another forty-five percent of the cystic fibrosis population. Kalydeco has also enabled other companies and researchers to begin developing drugs for smaller subsets of people. If current research is successful, we're likely to see more and more cancer drugs that are highly effective for a limited and defined group of patients, as Kalydeco is for a small subset of people with cystic fibrosis. That's good news for those patients who are suffering with those diseases, but it will continue to drive the costs of drugs up even more. Since the availability of new drugs and biological products often means new treatment options for patients and advances in health care for the general public, the government will end up spending billions of more dollars annually. At the end of the day, the government and individuals will have to decide how much is too much for their health.

