SAN FRANCISCO (CBS/AP) — A newly-approved drug is being hailed as a major advance in treatment of cystic fibrosis, a life-threatening genetic disease that clogs the lungs with mucus and forces patients to struggle to breathe. But it comes with a punishing price tag — about $710 per patient per day.

The treatment takes a bite out of Medicaid programs that are already facing big budget problems, and a small state like Vermont will be on the hook next year for $3.6 million for a drug expected to treat only 40 people.

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Orkambi — taken as two pills, twice daily — is a combination of two cystic fibrosis drugs that won approval from the Food and Drug Administration on July 2. Federal law requires Medicaid programs to cover FDA-approved drugs, and the U.S. government picks up more than half the tab.

But what’s left over will make up nearly 7 percent of Vermont’s estimated $54 million Medicaid budget deficit next fiscal year.

“States that have small budgets in their Medicaid also can’t afford … to pay for 40 people in their state when they’ve got many others who need diabetes drugs and whatever other drugs,” said Dr. Brian O’Sullivan, who specializes in childhood lung disorders at the Dartmouth-Hitchcock Medical Center in New Hampshire and has written on drug pricing. “So yes there is a breaking point. As more and more expensive drugs come out, we’re reaching that breaking point.”

Expensive Drugs

Harvoni, made by Foster City, Calif. biotech company Gilead Sciences, is a treatment for Hepatitis C. (Lloyd Fox via Getty Images)

Orkambi’s arrival follows on the heels of last year’s introduction of Harvoni, a new hepatitis C drug from Foster City, California-based Gilead Sciences, which took the record for most-expensive drug purchase by Vermont Medicaid. About 70 Medicaid patients received it in Vermont last fiscal year, leaving the state with a bill of nearly $5.9 million, said spokesman Sean Sheehan of the Department of Vermont Health Access.

One patient who has taken Orkambi and is now involved in tests on a second generation of it is Brian Callanan, 39, who moved from Vergennes, Vermont, to Florida two years ago.

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“It feels like new lungs … You no longer feel this daily rattle or tightness that you wake up to every morning … The other major, major component is the psychological and emotional impact of this of reducing anxiety and depression and fear” that can come with limited breathing, he said.

Callanan is founder of the Cystic Fibrosis Lifestyle Foundation, whose aim is to help patients stay as healthy as possible. The foundation gets more than a fifth of its $350,000 annual budget from Vertex Pharmaceuticals, the maker of Orkambi.

A spokesman for the Boston-based firm, Zach Barber, defended the retail price of $259,000 per patient per year, which is reduced with Medicaid rebates to about $200,000 per patient. Barber said Orkambi resulted from more than 15 years of research costing billions of dollars.

“We have a tremendous amount of work still to do to help the patients who don’t have a medicine today to treat the cause of their disease,” Barber said. “And that work’s going to take a very long time, measured in years. It’s going to take a very significant amount of money that’s measured in billions.”

Biotech Research Company Gilead Sciences

Biotech leader Gilead Sciences headquarters in Foster City, Calif. photographed in 2007. (Kimberly White/Getty Images)

Matt Salo, executive director of the National Association of Medicaid Directors, said absorbing a big new cost causes state Medicaid programs around the country to scramble to find savings elsewhere.

“It’s always resource-constrained. Anytime you see one part of it, the costs of it, balloon, it’s going to put immediate pressure on everything else,” Salo said.

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