KEY TAKEAWAY: Vertex, who is based in downtown Boston, got the kind of headlines that pharma has been trying to avoid. Three stories, talk about the high price of their new CF drug and the urges shareholders to reject compensation packages for senior executives.
Vertex won US approval for a two-drug therapy called Orkambi that eventually could treat roughly half of the 30,000 Americans with cystic fibrosis but the price the drug at $259,000 per patient annually which is steep.
According to the Boston Globe “the question resonates with health insurers and consumer groups that have raised alarms about the soaring prices of specialty therapies for everything from cancers to rare genetic disorders. Vertex’s prices have come under scrutiny, initially in a 2013 article in a leading medical journal, partly because they seemed to crystallize the broader debate over how to hold down health costs while rewarding makers of treatments for relatively small numbers of patients.” But that’s not the end of it.
Another story in the same edition of the paper said “two leading advisory firms are recommending that shareholders of vote against executive pay packages at Vertex Pharmaceuticals Inc., calling aspects of last year’s compensation at the Boston biotech company “excessive” and “exorbitant.”
The firms, which advise large shareholders how to vote on questions presented at companies’ annual meetings, were particularly critical of $29 million in one-time retention bonuses awarded to Vertex’s top five executives last year. Glass Lewis termed the retention bonuses “exorbitant,” suggesting that “the simple hurdle goal and the multiple opportunities for it to be achieved reflect a mediocre design not fully commensurate with the magnitude of the grants.”
Vertex doesn’t fit the typical mold of a Wall Street darling. The company has lost money consistently for decades, and its sole drug now on the market treats fewer than 2,000 people suffering from cystic fibrosis.
When will they learn?
To Vertex’s credit they are saying that everyone who needs the medicine will get it despite cost barriers, but that’s not going to be enough. This is going to add fuel to the fire over drug pricing which is sure to be a hot political issue in the upcoming election.
As for the compensation of Vertex’s CEO and other executives, I believe it’s beyond excessive for a company that has been losing money and just built a new $800 million building on Boston’s waterfront.
I hope that shareholders reject the current compensation package of Vertex’s senior executives and instead find a way to retain and compensate the mid-level people who did a lot of the ground work in developing this new drug. I’m sure they put in a LOT of hours and they can only wonder how their CEO is worth so much more when they were concentrating on helping CF patients live a better quality of life?