Solving the Gene Therapy Cost-Effectiveness Conundrum
By Rich Durante, Managing Director, Pharmaceuticals and Medicines | January 6, 2020
Gene therapy is one of the most exciting new frontiers in modern medicine. Gene therapies have demonstrated their tantalizing potential to successfully address extremely rare and difficult-to-treat disorders. But they are exceptionally costly, and the healthcare system is struggling with their cost-effectiveness and how to price and pay for them. This has reignited the conversation around the need for a shift towards pricing a medication based on its value to a patient and the healthcare system.
Gene therapy is a promising—and costly—field
Gene therapy’s tremendous promise lies both in how it works and its impact on disease. Gene therapy works by targeting the defective gene in the patient’s DNA that is responsible for the disorder or disease, and compensates for or adjusts the genetic abnormality. Once the defect is repaired, the patient can be effectively cured. At the moment, researchers are focused on monogenic diseases, which are caused by a mutation to a single gene; in time, the expectation is that gene therapies will be developed to treat more genetically complex conditions.
Since 2017, the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) have approved three gene therapies between them. The FDA and EMA approved Spark Therapeutics’ Luxturna for biallelic RPE65 mutation-associated retinal dystrophy; the FDA approved Novartis’ Zolgensma designed to treat spinal muscular atrophy; and the EMA provided conditional approval for bluebird bio’s Zynteglo for beta-thalassemia.
The FDA has also recently approved two chimeric antigen receptor T-cell (CAR-T) treatments—Novartis’ Kymriah for childhood B-cell acute lymphoblastic leukemia and Gilead’s Yescarta for aggressive B-cell non-Hodgkin lymphoma. These treatments activate the patient’s immune cells in such a way that they recognize and fight cancer cells in the body. They are similar to gene therapies in that they rely on replacing a gene within a cell.
Gene and CAR-T therapies are noteworthy for their steep costs as well as their effectiveness in treating or even curing diseases once considered incurable. Gene therapy costs range from $373,000 for a single dose of the CAR-T therapy Yescarta to $2.1M for Zolgensma. Moreover, these prices are only for the therapies themselves—hospital stays, complications, and other medications can easily increase the overall cost of treatment.
Several factors contribute to the high cost of gene therapies. Pharmaceutical companies make massive investments in gene therapy research and development and, understandably, aim to recoup those costs once the treatment is brought to market. Yet, according to the MIT Technology Review, the market for gene and CAR-T therapies can be incredibly small: Novartis estimates 300 people per year would be eligible for Kymriah, while Spark suggests 1,000 to 2,000 people in the U.S. could be eligible for Luxturna. Gilead’s Yescarta, by comparison, could be used to treat up to 7,500 people. In addition, these therapies are often single treatments, rather than a long-term course of action. In the end, economics weighs in—and the smaller the market, the more costly the treatment.
The other pressure on the cost of gene therapies is what insurers and other healthcare payers are willing to pay for these treatments. Healthcare systems in the U.S.—and other countries—are not necessarily designed to deal with the sort of costly “one-shot” treatments gene therapies represent. It takes time for insurers, governments, patients, and other payers to determine how to fund these expensive therapies, necessitating discussions about the trade-off between a treatment’s cost and its benefits. Given how much gene therapy costs, it does not take long for such conversations to become mired in murky ethical waters: after all, how much is a human life worth?
The complexities of determining gene therapies’ cost-effectiveness
Navigating the medical, commercial and ethical issues created by the high cost of gene therapies is not easy. The critical question is how insurers, governments, healthcare decision-makers and other stakeholders determine whether gene therapies are truly cost-effective, especially given the fact that they’re so new.
The Institute for Clinical and Economic Review (ICER), for one, is inclined to think the costs are reasonable. ICER evaluates the value of a medication or treatment through a multistep process that considers several factors:
● Comparative clinical effectiveness—the magnitude of the comparative net health benefit and its level of certainty;
● Incremental cost per outcomes achieved (expressed in cost per aggregated quality-adjusted life year (QALY);
● Potential budget impact—the estimated net change in total healthcare payer costs over an initial two-year time frame;
● Other benefits / disadvantages of the treatment and additional contextual considerations (e.g., ethical or legal issues).
ICER has indicated that, given their benefits, Kymriah’s and Yescarta’s prices fall within common thresholds of cost effectiveness. ICER had a different perspective on Luxturna, suggesting that the price of the therapy needed to be halved to better align with its long-term health benefits.
There does appear to be at least a general sense that treatments for extremely rare conditions, such as those current gene therapies address, should be judged against a higher cost-effectiveness threshold (CET) than “regular” treatments. In the U.S., ICER has explored a range of up to $500,000 per QALY gained; in the U.K., the National Institute of Health and Care Excellence had discussed a threshold of up to £300,000 per QALY, depending on health gains (as reported in JMCP). To put this into context, emicizumab prophylaxis, a breakthrough treatment for hemophilia A, costs $21 million for lifetime treatment, while a heart-lung transplant costs $2.53 million. The cost of Luxturna, on the other hand, is $853,000.
Determining gene therapy’s value: Lessons from oncology
In many ways, the considerations surrounding the value and cost-effectiveness of gene therapies are similar to those involving cancer treatments—which, like gene therapies, can have a dramatic impact on a patient’s quality of life, can mean the difference between life and death itself, and are typically extremely costly.
Because of this, oncologists have long had to balance the trade-offs between medication effectiveness and cost. Our own qualitative research, in which we asked 32 oncologists to identify the minimally acceptable benefits of a hypothetical colon cancer treatment, shed an interesting light on practitioners’ priorities [1].
The exercise deliberately encouraged the participants to actively make trade-offs and think about patient needs in a holistic fashion. Overall effectiveness of the treatment (in terms of overall survival and progression-free survival) was by far the most important feature—but there was a clear “floor” to what they would accept given the significant costs of typical cancer therapies at the time: four months’ additional overall survival was the minimum threshold. Clearly, oncologists were not inclined to proceed with a new treatment without a deep consideration of its actual benefits, its downsides, and its cost.
Traditional “pay per pill” thinking does not suit a gene therapy world
The high costs associated with gene replacement and CAR-T therapies—and questions as to their cost-effectiveness and affordability—are driving renewed interest in changing the paradigm around how we both value and pay for medical interventions.
In a recent interview with Bloomberg, Pfizer’s Angela Hwang discussed this, noting that the traditional, product-focused, “pay by pill” model is a poor fit in a world of costly one-treatment cures. She asserted that an approach focused around determining the value of the treatment outcome, rather than the treatment itself, may well be what is required.
This basic way of thinking about the value of gene therapy is aligned with value-based reimbursement, which is a critical pillar of the 2010 Patient Protection and Affordable Care Act (ACA). The basic premise of this component of the ACA was that healthcare providers should be reimbursed based on the quality and efficiency of the care they deliver and not based on the number of services they provide. A byproduct of this is that many in the healthcare industry are calling for pharmaceutical manufacturers to link drug prices to the value these drugs provide to patients. The advent of gene therapies may speed up the move to this type of pricing model.
The QALY-based factors described earlier may be just the starting point for assessing the value of gene therapies in a value-based or “pay-by-outcome” model. “Value of life” or “value of a statistical life” measures can be useful, especially in situations where gene therapy cures a condition that is typically fatal early in life; the U.S. Department of Transportation updated its value of a statistical life to $9.6 million. Decision-makers may also need to factor in such considerations as the severity of the illness, the chance that a therapy would permit a patient to benefit from new treatments in the future, the financial risk, and the patient’s willingness to mitigate that risk. From a broader economic perspective, it may also be worth considering that curing a disease could enable a patient to make a more substantive financial, social, or cultural contribution to his or her society—a contribution that would carry an associated value.
Costly healthcare innovations demand we rethink how we value and pay for medical treatment
We are at the beginning of the gene therapy revolution.
According to MIT’s New Drug Development Paradigms Financing and Reimbursement of Cures in the US team, we could see up to 40 new gene therapies launched in the next five to seven years. In time, researchers will move from monogenic diseases to polygenic conditions—discovering more gene therapies for diseases affecting more substantial patient populations in the process. This will only intensify the pressure on insurers, health systems, governments, pharmaceutical firms, and patients alike to develop a workable framework for determining when to proceed with treatment and how to pay for it. It seems clear that these decisions will require a new way of thinking about disease, treatment, and the value of life—and the movement towards a value-based, “pay-for-outcome” approach to pricing new medications.
We may have little choice but to change.
Contact our healthcare team tp help your organization gain industry insights and trends.
[1] Richard Durante, Don Stark, Michael Feehan, “How do Oncologists Judge Potential Efficacy Thresholds for New Agents in Colorectal Cancer?” PBIRG Perspective, Fall 2013.