G

ene therapy has the potential to be a one-shot treatment that could reverse blindness, restore blood-clotting function to hemophiliacs, or even cure rare diseases outright. But what kind of price tag comes with that promise — and who will pay for it?

The question is no longer academic: On Thursday, Spark Therapeutics won unanimous support from a Food and Drug Administration advisory panel for its gene therapy drug, Luxturna. It seems likely to win FDA approval in the coming months. But the cost will be hefty: Analysts estimate that Luxturna, which has been shown to restore vision in children with an inherited form of blindness, could cost $1 million per patient.

Will private insurers be willing to pay? What about taxpayers, via Medicaid and Medicare? And, importantly: What happens if patients — or insurers — do foot a hefty bill, only to find out the drug simply did not work for them?

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“These one-shot cases are potentially transformative — but not every patient responds to the same extent with gene therapy,” said Dr. Mark McClellan, a former FDA commissioner who now leads the Duke-Margolis Center for Health Policy. “We’re definitely not all the way there yet.”

So McClellan has formed a consortium at Duke to brainstorm better ways to cover the costs. He’s bringing gene therapy companies like Spark, Bluebird Bio, and Pfizer to the table — along with insurers like Harvard Pilgrim and Anthem.

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“The fact is, we need to move our 20th-century health care system to meet 21st-century scientific and medical breakthroughs,” said Jeff Marrazzo, CEO of Spark Therapeutics.

Gene therapies work by infusing a patient with engineered viruses armed with DNA that helps correct the molecular processes that go awry in an inherited disease. It’s costly, in part, because these viruses are more difficult and time-consuming to manufacture than a standard pharmaceutical drug.

On top of that, companies typically spend years in costly research and development before finding an approach that works and can win FDA approval. And in most of these diseases, there’s just a relatively small patient pool.

What’s more, when they work, the therapies can save patients and insurers big money down the road. Current hemophilia drugs, for instance, cost hundreds of thousands of dollars each year. If a patient could be cured with a one-time infusion — even one that costs $1 million — that might actually be quite cost-effective.

Given all that, companies do have good reason to charge a premium for their gene therapy products, McClellan said.

On the other hand, scientific breakthroughs mean nothing if they’re not accessible to patients.

“The concern is that if you get enough of these types of expensive therapies to hit the market, they’ll perhaps make the premiums unaffordable,” said Dr. Michael Sherman, chief medical officer of Boston-based insurer Harvard Pilgrim Health Care. “So we have to be creative to find the right balance of access and affordability.”

“The concern is that if you get enough of these types of expensive therapies to hit the market, they’ll perhaps make the premiums unaffordable.”

Dr. Michael Sherman, Harvard Pilgrim Health Care

The main concept the consortium is kicking around: value-based payments. They’re a form of money-back guarantee, in that patients or their insurers pay for the therapy only if it actually proves effective in reversing or managing their disease.

And to make the cost burden lighter, one idea gaining steam is to break these costs into incremental payments over several years — and make those contingent on a patient’s sustained response. That way, if the treatment stops working for a given patient, he or she might not have to pay the full amount.

Novartis is taking a baby step in this direction with its newly approved CAR-T cancer drug, Kymriah. It’s priced at $475,000, but Novartis struck a deal with the Centers for Medicare and Medicaid Services: It gets paid only if Kymriah appears to be sending a patient’s cancer into remission a month after treatment.

“Paying for a gene therapy for as long as it’s working makes a tremendous amount of sense — but it comes with some challenges,” said Nick Leschly, CEO of Bluebird Bio, which is working on gene therapies for several rare diseases.

“Paying for a gene therapy for as long as it’s working makes a tremendous amount of sense — but it comes with some challenges.”

Nick Leschly, CEO of Bluebird Bio

Among those challenges: What if the patient changes insurance companies a couple years after her gene therapy? Who foots the bill for the remaining payments? Would she even be able to get a new insurance plan with that kind of bill following her around?

Also: What if a patient fails to show up for checkups to determine if the drug is still working? That could be a way for him to evade the installment payments.

“If a patient decides not to come in, who shoulders that payment?” Leschly said. “Is it on the insurer to make sure the patient shows up?”

Still another challenge: What if a drug like Kymriah seems to be working after a month, triggering the insurer to pay the full amount — but then the next week, the patient’s cancer again gains the upper hand? Is there any mechanism for the insurer to claw back some of its payment?

The overarching problem is systemic, experts said: There’s simply no mechanism now for a company to spool out a million-dollar bill over several years while assessing the patient’s health and response to therapy at regular intervals.

“If we were to propose a model like this to a single commercial insurer, the financial penalties would be significant,” said Marrazzo, the Spark CEO. “The government’s existing price reporting mechanisms are too rigid — so we can’t financially make sense of doing it.”

Marrazzo wouldn’t tip his hand as to the price Spark will set for Luxturna. Typically, that comes only after FDA approval. He also declined to give specifics on potential payment models. But some analysts are predicting a fairly old-school approach: a one-time charge in the high six or seven figures for a one-time treatment.

As more gene therapies come on the market, experts say it will take a new level of cooperation between policy makers, drug companies, and insurers to come up with rational payment models.

“But we’re confident we can figure it out,” Leschly said. “Because if someone has a very serious disease, and we can cure it, the system will find a way to reward that.”

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    • The public bears the cost to discover all of the breakthroughs that are subsequently claimed by pharma. It is called the NIH whose budget is constantly being attacked particularly by Republicans. Then we get the fairy tales from the pharma business about the development costs at $2.5B. Taxpayers paid for these breakthrough therapies with their dollars and are rewarded with price tags of $400k.

  • The real question is that why is Gene Therapy so much cheaper in foreign countries? I know two people who have flown overseas to have This done, one in Israel, the other in Russia. average cost for self pay : 50k

  • This won’t be the first million dollar drug. It will be the first drug of unknown cost, incurred by unknown parties, which someone prices at a million dollars.

  • Rationing. It happens here already, it happens in socialized medicine. The only reason the drug companies are going after these is the profit. Once you put a cost limit on drugs, that will solve the issue. I can see going to crowd funding, but you are going to have a problem (like with Medicaid) in that you can’t always get what you want/need. That’s just a fact and although it isn’t pretty, downright ugly, that’s simply the way it is going to be.

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