The Shady Overlap of Disease Charities and Drug Companies

Monday, June 10, 2013
Robert J. Beall, president and CEO of Cystic Fibrosis Foundation

Nonprofits dedicated to fighting diseases are now providing seed money to pharmaceutical manufacturers in an attempt to get new treatments on the market for patients to use. But these new partnerships, known as “venture philanthropy,” have raised concerns over what the financial investments might do to the impartiality of disease charities when they have a stake in how well the new drugs perform and sell.


Despite their nonprofit status, organizations like the Cystic Fibrosis Foundation stand to make millions of dollars from helping a drug company add a new remedy to its stable of therapies.


In the case of the Cystic Fibrosis Foundation, it gave Vertex Pharmaceuticals $75 million to develop Kalydeco, considered a “breakthrough” drug that could reap big profits.


The foundation has already enjoyed a big return on its investment, collecting royalties on sales of the drug before selling its rights to future royalties to an investment firm for twice the amount it gave Vertex. Vertex, meanwhile, charges $307,000 a year for Kalydeco, with much of the money coming from Medicaid and other government-funded programs.


A group of 24 doctors who treat cystic fibrosis wrote a letter to Dr. Jeff Leiden, the president and CEO of Vertex, stating that the overpricing of Kalydeco “could appear to  be leveraging pain and suffering into huge financial gain for speculators,  some of whom were your top executives who reportedly made millions of dollars in a single day.”


In May 2012, Vertex and the Cystic Fibrosis Foundation released test results that showed positive results for patients who used Kalydeco in combination with another drug. Vertex’s share price shot up by 70%. According to an excellent investigation written by John Fauber of the Milwaukee Journal Sentinel, “Five [Vertex] executives and two directors sold off more than $35 million in shares, mainly at prices from about $55 to $64 a share….Three weeks later, the company said it overstated the effectiveness of the drug in that trial and the stock dropped about $7 a share, ultimately falling back under $40 by December.”


Meanwhile, doctors who care for cystic fibrosis patients are now being instructed in new treatment guidelines—that were funded by the Cystic Fibrosis Foundation—to recommend Kalydeco, which only helps the 4% of cystic fibrosis patients who carry a rare genetic mutation.


As for the Cystic Fibrosis Foundation, according to Fauber’s report, it will be investing another $75 million in Vertex, $58 million in Pfizer and $10 million in Genzyme, which is owned by Sanofi-Aventis.

-David Wallechinsky, Noel Brinkerhoff


To Learn More:

When Disease Charities Partner with Drug Companies, Where Does that Leave Patients (and Reporters)? (by Brenda Goodman, Association of Health Care Journalists)

Charity's Investment a Prescription for Profits for Drug Maker (by John Fauber, Milwaukee Journal Sentinel)


Sam 6 years ago
This article is simply trying to reinforce short sellers on the stock market. The authors or their ilk are probably are involved in short selling Vertex.
Fight Evil 6 years ago
The CF Foundation receives zero research dollars from the government, despite half of all CF victims being American. I don't know why this article appears here.
ma mo 6 years ago
My son has CF. Some of your facts are wrong. Your opinion is deeply flawed. You clearly know very little about this topic, and you are attempting to damage the only source of hope in our lives.
Saulty 6 years ago
That article you reference was missing basic facts about what treatment options and their respective costs for ppl w CF WITHOUT Kalydeco. Without providing that context, it is impossible to provide the proper critical view of 'venture philanthropy.' There are reckless assumptions being made about the CFF & Vertex. The Woodward/Bernstein approach of 'follow the money' does not always yield effective journalism. Kalydeco has been on the market for over a year; VRTX has been on the cutting edge of advancing dream-type outcomes for ppl w CF for years. Where were all the articles and journalists at those times questioning the role of the CFF or articulating what these breakthroughs mean to the CF Community? This is not a story that happened over-night; there is even a *book* that was written specifically about this company DURING it's inception, what the mission statement was, detailing the players involved but all of these basic, researchable facts somehow escaped John Fauber, David Wallechinsky & Noel Brinkerhoff. How do I get a gig like yours where I don't have to do any research and still collect a paycheck????

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