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A Brave (Expensive) New World for Payers

We are in an era of million-dollar drugs. As expensive gene therapies become available, concerns among payers and physicians turn to cost sustainability.

Doctors do not generally know how much drugs cost at the time they prescribe them. That is a result of both marketing – Big Pharma is very good at it – and of our system of employer-based coverage. A drug that is free to one patient might cost another (and his health plan) thousands of dollars per fill.

Dr. Paul S. Bradley and other doctors who do know how much drugs cost greet each new record-setting price tag with trepidation. We know that patients will cut corners on medications they can’t afford, jeopardizing treatment programs, which means chronic conditions go unmanaged and little problems become big, expensive problems.

At the same time, it is hard not to get excited about the new wave of genetic therapies. The latest, Zynteglo, was approved for patients aged 12 years and older that suffer from a rare form of anemia. The pricetag: $1.8 million dollars.

“I’ve been following with fascination,” Dr. Bradley says. “It used to be that drugs were priced so the average guy could afford them, and in recent years maybe afford them with a bake sale. Now even if the entire community wanted to help, you probably couldn’t afford these treatments.” (More on crowdfunding below.)

Dr. Bradley is a realist: “These are miracle drugs, albeit with no guarantee and very short track records. The news that Novartis manipulated data before approval is concerning to say the least. Regardless, we are going to have to make some hard choices and do some difficult math if we are going to be able to afford these new gene therapies.”


Imagine a therapy that can spare a child a lifetime of blindness?

Spark Therapeutics received FDA approval in 2017 for Luxturna, the first gene therapy to treat an inherited disease, a form of congenital blindness. The price for the one-time treatment is $850,000.

Few health plans can take that kind of hit – but what benefits manager would refuse treatment to a child, or to new parents or prospective new parents who’ve just learned that a child suffers from a rare genetic disorder?

In May, Novartis won FDA approval to market its gene therapy Zolgensma for spinal muscular atrophy (SMA), the leading genetic cause of death in infants. The one-time treatment will cost a record $2.125 million, payable at $425,000 per year over five years, and Wall Street analysts have forecast sales of $2 billion by 2022 (via Reuters).

This is just the beginning.

According to research by MIT, 15 to 30 new gene therapies are expected to launch within the next five years. Besides fixing the genomes of embryos, editing the genome of adults has now also been attempted to fix small but devastating genetic errors. And the pipeline is full. lists 432 active studies for gene therapies, not to mention those studies that are recruiting and not yet recruiting for trial.


The questions of how these treatments are going to be covered, who will be paying for them, and how our healthcare system can adapt to support getting these cures to those who desperately need them – are not easy questions – but everyone, including the drug companies, are asking them.

In a recent opinion piece in The Hill, Steve Pociask president of the American Consumer Institute (ACI), attempts to get beyond “salacious” headlines about Zolgensma, suggesting that the current debate about upfront costs for gene therapies fails to account for the high cost of chronic care our system already supports.

Keeping in mind the source (ACI purports to represent consumer interests but is funded by the corporations that rely on their trust), he has a point: “gene therapies certainly are in many cases more affordable when weighed against costly, long-term treatments.” With that said, the up-front costs pose a risk to the solvency of even the most robust benefits plan.

Senator Bill Cassidy (R-LA) is a gastroenterologist by trade. Writing in Stat News, he warns, “Although [gene therapies] may actually save money in the long run compared to the health care costs associated with the diseases they treat, those savings might not accrue to the initial payer because patients often change health insurers.”

In sum: “These expensive treatments are entering a market structure that was not built to price them.”

And if Senator Cassidy is telling us that gene therapy may not be affordable for federal and state government budgets, how are self-funded payers expected to handle them?


Bluebird aims to begin selling Zynteglo in the US in 2020, and will likely follow Novartis’ lead, establishing “outcomes-based agreements” with insurers, thereby tying price to performance—in the near term.

As with Zolgensma, the cost of Zynteglo in the EU will be spread over five years based on its continued effectiveness. That’s $350,000 annually.

According to Richard Mark Kirkner, writing for Managed Care Magazine, the outcomes-based deal that saw Harvard Pilgrim become the first health plan to cover Luxterna, “pays Spark full freight only if the drug works after 30 months, with an interim payment made upon a ‘look-in’ period at 30 to 90 days. Spark is also on the hook for rebates if the drug fails.”

“Reality, however utopian, is something from which people feel the need of taking pretty frequent holidays….” ― Aldous Huxley, Brave New World

Discussing the rationale for outcomes-based pricing, Harvard Pilgrim Chief Medical Officer Michael Sherman, MD says, “It isn’t the solution, but it’s part of the solution for managing the drug expense and helping align our spend with the value the drugs create.”

$2.2 million of value? Desperate parents and suffering patients have blank-check expectations when it comes to life-saving therapies. Any glimmer of hope is meaningful, urgent, even if these drugs are unproven. Consider a recent crowdfunding effort that inspired more than 23,000 people to raise more than $2.2 million to help a little girl that very few of them knew to receive Zolgensma. She was approaching her second birthday, after which she would no longer have been eligible for treatment. The campaigns succeeded in just four days.

On the other hand, financial incentives drive business, industry—and innovation. So far, four gene therapies have been pulled off the market, apparently because no one could or would afford them. So there is a world where it makes no commercial sense for drug companies to make and sell these “miracle drugs.”

Payers are stuck in the middle—we want to take care of our people, but we have to be able to do so sustainably. As Express Scripts’ Chief Medical Officer Steve Miller so aptly told Managed Care Magazine, “We on the payer side have got to be just as innovative as the scientists have been on the discovery side.”


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